Higher Education Funding Council for England Title Value for Money reporting To Heads of HEFCE-funded higher education institutions Of interest to those responsible for Finance; Governance Reference Circular letter 23/2016 Publication date 17 August 2016 Enquiries to Will Dent, tel 0117 931 7437, email [email protected]Matthew Davey, tel 0117 931 7013, email [email protected]Dear Vice-Chancellor or Principal Value for Money reporting 1. This letter sets out our requirements for the submission of a Value for Money (VFM) report as part of the Annual Accountability Return due in December 2016, and our plans for next year’s submission. In summary, the changes are as follows: all institutions are required to submit a VFM report in 2016, with no prescribed format the VFM report in 2016 must be presented to an institution’s governing body, or to a delegated subcommittee responsible for assurance on VFM we are asking for feedback from the sector on VFM reporting guidance for the December 2017 submission, guidance on VFM reporting will be issued. Background to the redevelopment of VFM reporting 2. HEFCE’s grant letter received in March 2016 from the Department for Business, Innovation and Skills (www.hefce.ac.uk/news/newsarchive/2016/Name,107598,en.html) asks us to collect annual reports from institutions on how they are becoming more efficient and productive over time. The intention is that these reports become a useful tool for institutions to monitor their efficiency performance. We have since been in discussion with Universities UK (UUK), GuildHE, the British Universities Finance Directors Group, and other professional bodies in the sector about how this requirement should be met. 3. There is an increasing expectation for the sector to provide more evidence to demonstrate how value for money in higher education is being achieved. Reporting from institutions is fundamental to supporting any case for investment in English higher education. HEFCE requires information to produce a forthcoming annual report on the aggregate efficiency of the sector (a further requirement of our recent grant letter and in keeping with the recommendations of the 2015 UUK review of efficiency, effectiveness and value for money led by Professor Sir Ian Diamond, available at www.universitiesuk.ac.uk/policy-and-analysis/reports/Pages/efficiency- effectiveness-and-value-for-money.aspx). 4. Furthermore, the consideration of value for money is a necessary and central part of institutional governance. Governors and trustees across the sector (including student representatives) should be presented with information that will allow them to understand VFM at
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Higher Education Funding Council for England · 2019-04-09 · Higher Education Funding Council for England Title Value for Money reporting To Heads of HEFCE-funded higher education
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Higher Education Funding Council for England
Title Value for Money reporting
To Heads of HEFCE-funded higher education institutions
Annex A: Value for Money reports – definition and possible content
Definition of value for money
1. When developing their value for money (VFM) reports it may be appropriate for institutions
to consider a broad definition of value for money, based on the three elements considered by the
National Audit Office when assessing the value for money of government spending:
a. Economy – minimising the cost of resources used or required (inputs) (‘spending
less’)
b. Efficiency – the relationship between the output from goods or services and the
resources to produce them (‘spending well’)
c. Effectiveness – the relationship between the intended and actual results of
spending (outcomes) (‘spending wisely’).
2. As shown in Figure 1, these three Es, taken as a whole, encompass a definition of value
for money that is about the optimal use of resources to achieve intended outcomes, also
described as cost-effectiveness. An institution’s value for money report should include
information on all three Es. It is important to note that achieving value for money is not simply
about cutting costs or reducing inputs but also about improving the volume and quality of outputs
and outcomes.
3. In addition, a fourth E is sometimes considered:
d. Equity – the extent to which services are available to and reach all people for which
they are intended (‘spending fairly’).
If an institution wishes to include this element in the definition of value for money, then it may feel
it is appropriate to report progress with widening participation and fair access.
Figure 1: The three Es of value for money
Source: National Audit Office
VFM report content
4. VFM can be considered across a broad range of institutional activity. The following
headings might be included in the report:
Teaching
Research
Knowledge exchange
Workforce
Estates
Procurement
Financial performance
Collaboration and sharing
Information technology
Learning resources.
5. Not all these headings will be appropriate for every institution, and some will be more
relevant than others depending on the type and mission of the institution in question. Institutions
may also wish to include additional headings of their choosing.
6. There is a wealth of quantitative and qualitative information that could potentially be used
as evidence in an institution’s VFM report. Table 1 provides an overview.
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Table 1: Types of information that can be used in VFM reports
Quantitative information Qualitative information
Statistics from national data collections (such
as the Higher Education Statistics Agency
(HESA), the Transparent Approach to Costing
(TRAC) or the National Student Survey).
Efficiencies (expressed in terms of cost, time,
space or energy) or other benefits realised
through value for money initiatives, business
process improvements, and approved business
cases reported to management committees
and governors1.
Data from surveys run by professional bodies
in the sector (such as the Universities and
Colleges Employers Association sickness
absence survey or Society of College, National
and University Libraries statistics).
Institution-specific quantitative data (such as
performance against budget or detailed
benchmarking studies).
Contextual narrative explaining the results of
the quantitative information.
Description of the institution’s value for money
activities and initiatives.
Information about the institution’s value for
money strategy and future plans2.
Institution-specific qualitative information (such
as results from staff and student surveys).
7. Table 2 notes some questions to consider when thinking about VFM and lists the possible
sources of evidence, mainly quantitative, that most institutions could present in a VFM report
under each of the suggested headings given above. For this year, each institution must decide
what information is appropriate for its context.
8. We recommend that, where possible, an institution’s performance is either benchmarked
against the results for a comparative group of other institutions, or compared to the institution’s
own prior performance.
9. The list of possible sources of evidence has been developed in discussion with
representative organisations and contacts in the sector. We are keen hear further views on what
is useful for VFM reporting so that we can develop more specific guidance. Please contact Matt
Davey (tel 0117 931 7013, email [email protected]) with your feedback.
1 For this year we are not providing a detailed methodology of how efficiencies resulting from value for money initiatives or business process improvement should be calculated, but institutions may wish to refer to guidance developed and published by the University of Strathclyde on his matter (available online at www.strath.ac.uk/hr/businessimprovementteam/aguidetoevidencingthebenefitsofbusinessprocessimprovementinhighereducation/). Further help in realising the benefits of strategic change in higher education is available in guidance produced by Provelio Strategic Management Consultancy (available online at www.provelio.com/ResearchAndDownloads/Show/2?title=Guide-to-the-Realisation-of-Strategic-Change-and-Benefits-A-challenge-to-current-thinking-and-practice) 2 We have asked Universities UK and the Committee of University Chairs to prepare good practice guidance on developing and implementing value for money strategies in institutions.
To what extent does the institution make optimal use of its resources in creating and
disseminating new knowledge?
Can data on the volume and quality of research outputs, when considered against the resources
invested to produce them, provide an indication of the institution’s efficiency in research?
Is it also relevant to consider the impact of the institution’s research?
How are better management and use of technology enhancing research efficiency and
effectiveness?
Possible sources of evidence
Efficiencies (expressed in terms of cost, time, space or energy) or other benefits realised through
value for money initiatives and business process improvements related to research.
Annual TRAC return (www.hefce.ac.uk/funding/finsustain/trac/), particularly the recovery of costs
against research activity by sponsor benchmarked against peer group.
Total research income per total academic full-time equivalent (FTE), from HESA finance and staff
records3.
REF 2014 results (http://results.ref.ac.uk/), and comparison with RAE 2008
(www.rae.ac.uk/results/).
Journal article publication and citation statistics4.
Research Council grant application success rates.
3 There are differences between disciplines in terms of both the cost of research and the availability of funding, and it is essential that these differences are reflected in the presentation of research income per FTE data. 4 In the use of journal article and citation data, we strongly recommend the adoption of the principles of responsible research metrics as set out in 2015 in ‘The metric tide: Report of the independent review of the role of metrics in research assessment and management’ (www.hefce.ac.uk/pubs/rereports/Year/2015/metrictide/).