Contents

• Introduction 3
• Part A 3
• Strategies adopted by universities to finance capital expenditure 3
• Comparison of financial health between two universities 4
• Horizontal analysis 4
• Ratio analysis 5
• Conclusion 6
• Part B 7
• Finance function in budgeting and the control process in organization 7
• References 10
• Appendix 11

Description

This report is based on the following requirement -
PART A 60% (1,200 words approximately)
The University sector in the UK is in a time of uncertainty. The introduction of a new tuition fee system and the lifting of student number limits mean that there is increased competition for UK/European Union students. Potentially the new fee system may mean that fewer students from the UK and/or European Union decide to attend university. Political, social and economic unrest in different parts of the world also brings uncertainty to global markets. League table results have become very important; universities are measured on the standard of their teaching and research, the employability of graduates but also the quality of buildings (estates) and facilities provided to students. The first students on the new tuition fee system attended university in the 2012/13 academic year and in 2013/14 the income at the University of Heraldfield began to drop for the first time in a long time. This trend continued in 2014/15 and although the drop in income was only slight (2%) it has led to worries that past results may not necessarily be an indication of future performance and income may drop further if no action is taken.It would be difficult to further control costs in the short term. Infact, although the 2015/16 financial year has not finished as yet, initial indications are of a further 2% drop in income and 2% increase in staff costs and other operating expenditure.
The University is located in the North West of England; and would traditionally have considered its competitors to be universities located in local cities: Leeds, Manchester, Sheffield, Bradford and York; but in the new environment the Senior Management Team now consider that the competition could be located anywhere in the UK.
Traditionally universities have received significant levels of government grants to help fund capital expenditure on new buildings and estates but generally now these opportunities are no longer available. In order to fund capital requirements on a standalone basis, some universities are looking to debt to finance capital investment in the estate whilst others are funding the investment via their own resources by retaining an adequate level of surplus to generate the cash required for these major investments.
In a quest to remain competitive in this new marketplace the University of Heraldfield is considering investing in capital expenditure. The Senior Management Team believes that the University of Heraldfield will attract and retain a larger market share of students if it builds new state-of-the-art teaching and learning, and sports and leisure facilities. The facilities could cost in the region of £40m which represents a major investment for the university.
As the Finance Director advising the Senior Management Team (Vice-Chancellor, Deputy Vice Chancellor, Director of Teaching and Learning, Director of Human Resources, Director of Estates, Director of International Recruitment) you are tasked with preparing a report as follows:
You are requiredtoprepare a report to the Senior Management Team which critically evaluates the options for financing the funding of the new facilities. Your evaluation needs to include:
• Research into two other UK universities to identify their strategies for investing in capital expenditure (estates, buildings and facilities) including how they are funding them. You will find this information in the narrative sections of universities’ annual reports.
• Calculation and explanation of relevant ratios and/or use of horizontal analysis techniques on relevant figures for your selected two universities for five consecutive years to discuss what you consider as influencing factors upon the financial performance/position.This should be undertaken for the five years up to and including themost recent publicly available published financial statements which will be available on-line.
• Page references to the published financial statements should be made to indicate where the information used was taken from.
• Clear mention of any assumptions that you have made.
The introduction to the report and your concluding recommendations are included in the word count.
PART B 40% (800 words approximately)
You are required to critically evaluate the role of the finance function inbudgeting and the budgetary control process inorganisation/organisations of your choice.
The introduction and conclusion to the question are included within the word count.
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