How we regulate financial sustainability within higher education
What we require providers to do
Registered providers must meet our regulatory requirements relating to financial sustainability.
The Higher Education and Research Act 2017 gives us a statutory duty to monitor and report on the financial sustainability of registered higher education providers.
We fulfil this duty by requiring providers to submit an annual financial return which includes data about recent and forecast financial performance.
We impose the same minimum data requirements on all relevant providers. This ensures there are common definitions and reporting conventions that give us a consistent and comparative view of key financial information across the sector. It also means we can use the data most effectively, including modelling a range of scenarios and financial risks and processing financial and other data efficiently.
Much of the data is structured in a way that is consistent with the format adopted by many providers in their financial statements.
We regularly review whether the information and data we collect is appropriate for our needs while limiting the burden placed on providers.
Condition D: financial viability and sustainability
Our regulatory framework explains how we perform our functions and sets out a number of conditions of registration.
Condition D requires each provider to be financially viable and sustainable. Providers are required to satisfy this condition when they register with us and on an ongoing basis.
By ‘viable’ we mean that there being no reason to suppose the provider is at material risk of insolvency within a period of three years.
By ‘sustainable’ we mean that the provider’s plans and projections show that, over the period of five years, it has sufficient financial resources to:
- provide and fully deliver the higher education courses as it has advertised and as it has contracted to deliver them
- continue to comply with all conditions of its registration
It must also be likely to be able to operate in accordance with these plans and projections over this period.
We routinely monitor the financial viability and sustainability of providers, identifying those exposed to financial risks, and intervening to protect the interests of students should there be a material risk of market exit.
A number of elements of our work combine to allow us to do this:
- identifying and monitoring system-level risks and trends
- assessing the financial information providers submit to us in the context of these risks
- assessing the financial viability and sustainability of providers on the basis of information from the annual financial return, reportable events, notifications and other intelligence we gather
- modelling the potential impact of risks on the sector and individual providers
- intervening when providers are at risk of market exit.
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