Governing bodies also need to be clear that there is a schedule of delegated powers in place.
As charities receiving substantial public funding, universities and colleges must account for how they use their funds. Moreover, the financial memorandum with the funding council imposes a requirement to show that council grants have been applied for the purposes intended. Charity law imposes an obligation to show that all expenditure has been directed towards realising the institution's charitable objectives. Ensuring that these obligations can be met is the role of the financial accounting team, and it is their job to demonstrate the necessary probity, compliance and accountability through the preparation of the annual financial statements and other statutory returns as required to the satisfaction of the external auditors.
The management accounting team is responsible for preparing budgets and forecasts and producing regular reports during the year. The budgeting process usually starts in earnest when the annual grant letter is received from the funding council in March. A major update is normally required when student numbers become clearer much later in the year. Pay settlements may also have a major impact on budgets. During the autumn financial forecasts for the next few years are prepared and submitted to the funding council. The assumptions underpinning these forecasts and the information they contain are important issues for consideration by governors.
Treasury management (the management of cash, both borrowed and deposited) will require a strategy and associated policies. Substantial cash flows occur at various times of the year and can be traps for the unprepared leading to major risks if not effectively controlled, especially in relation to interest rates and the reliability of deposit-takers. The involvement of the finance committee (or equivalent) is essential, and the full board should approve the overall treasury strategy.
Substantial work is now being undertaken on costing and pricing, and institutions have been given strong encouragement to think in terms of 'full economic costing' - looking at all the costs which an activity incurs, including a fair allocation of overheads. The method for doing this is known as the Transparent Approach to Costing (TRAC), and has been designed with the aim of helping institutions to manage their affairs better, as well as providing accountability for spending. A report on financial management and the role of TRAC provides more background information.
Governors also need to monitor capital developments whose financial impact may be spread over several years, in particular to make sure that spending plans are compatible with probable funding.
More information on financial management [PDF, 51Kb]. More information on capital expenditure [PDF, 47Kb].