Financial Reporting and Financial Management

The Gillies Report highlighted the collapse in revenue, which resulted from the international student recruitment crisis, the impact of Brexit and other external factors. In tandem, there was a complete breakdown in cash management and expenditure control at the senior level of the organisation. Staff costs spiralled, the student-to-staff ratio fell, and operating costs grew by 43%, the Exscientia funds intended for future strategic investment were depleted and banking covenants breached. 

The situation was exacerbated by over-reliance on the Director of Finance for strategic financial decisions, without sufficient independent challenge. Furthermore, members of the University Executive Group (UEG) were focused on their own portfolios, with limited cross-functional financial accountability.

Financial Stabilisation

The University is grateful for the additional financial support that has been provided by the Scottish Funding Council. This includes a £10m grant received in May 2025 and a further £12m loan facility that has been made available. 

To immediately stabilise the financial situation, the University has taken the following actions:

Rigorous cost controls have been implemented:

• Since November 2024, a staff recruitment freeze has been in place across all areas with an exceptions process managed by UEG for mission critical roles.
  • Since November 2024 additional controls have been implemented to reduce all non-essential spending, including:-
    • additional intervention by the finance team to review requisitions and expenses;
    • additional scrutiny of all requisitions over £25k by UEG members. This threshold will come down to £10k from September/October.
  • Since December 2024 staff expenses are being actively managed. Further controls will be implemented by September 2025, including:-
    • changes to staff expenses approval pools with approvers who are trained specifically in the relevant polices and who have the authority to deny expenses applications.
    • In addition, new system changes from September will remove auto-approval on low value expenses, requisitions and purchase cards, in favour of manual approval.
• On 6 June 2025, a Voluntary Severance Scheme was launched with a closing date of 25 July 2025. The response is giving us confidence that the proposed targets will be achieved.
• The University’ s Recovery Plan is being developed and will be presented to the SFC by 11 August 2025.
• Existing bank covenants are being closely monitored and reported in the management accounts to the UEG, Court, SFC, Bank of Scotland and other banking partners e.g. RBS. Regular dialogue is taking place between the University and the Bank of Scotland. It is our intention to cancel the existing revolving credit facility with the Bank of Scotland as soon as possible. To note, the University is not presently able to access the facility, which costs £160k per annum, due to current situation. This will remove all banking covenant requirements going forward until new commercial lending is secured.
• Close management of cash flows is taking place. This includes daily monitoring of significant cash movements that builds to weekly retrospective reporting to UEG, Court and the SFC. The short-term cash flow forecast has been extended to 24 weeks from the previous 12 weeks.
• A new monthly management reporting process has been implemented to ensure that management accounts are formally presented to the UEG and the Court. This includes year-to-date and full year forecast budget vs actual variance analysis and commentary. The reporting also includes monthly updates to the Income & Expenditure statement (“I&E”), cash flow report and capital expenditure forecast. The University Balance Sheet is updated quarterly.
• The new suite of monthly management accounts has been issued to UEG and Court and will be considered as a standing agenda item for discussion, questions, and challenge at each meeting. 

Actions:

In the short-term (0-6 months) we will continue with key actions under the following categories:

Cash flow management and reporting

• Daily cash flow monitoring - produce weekly retrospective cash flow reports that spotlight significant movements and manage an extended cash flow forecast to 24 weeks.
• Identify and prioritise critical payments e.g. payroll, utilities, and key suppliers.
• A new process to ensure that all recruitment proposals outside of the agreed budget require a formal business case approval. This process includes: a financial affordability test, a legal risk test, impact on staff cost-to-income ratio, downside scenario modelling impact (e.g., if income drops further), and long-term cost implications of contract type (e.g. one-off cost vs recurrent).
• UEG will interrogate the totality of short, medium, and long-term operations through the presentation of integrated income & expenditure, cashflow & balance sheets, with transparent treasury management. Where possible, integrated financial planning will include forecasts and relevant scenarios for a minimum of three future financial years.

Revenue protection and enhancement

• Secure early payment of critical revenue streams where possible.
• Review and accelerate collection of outstanding receivables.
• Continue engagement with major research funders to provide appropriate assurance and secure ongoing commitments.

Cost management 

• Implement further cost controls to reduce discretionary spending, non-essential projects, and non-payroll operating expenses (e.g. travel, events, consultants).
  These include system changes for auto approval and thresholds on low value requestions and expenses; a process whereby budget holders will review and approve non-payroll spend; and training for budget holders in best practice financial management and empowered to act.
• Review procurement practices across the organisation and seek to establish consistent good practice in delivering value for money and adherence to all applicable laws.
• Cancel or defer non-essential capital projects, i.e. anything apart from compliance, health and safety or essential for continuation of core activities.
• UEG will establish a rigorous process to ensure that all major executive decisions are supported by an assurance framework, which will include (i) the source of data used, (ii) a risk assessment, (iii) evidence of alignment with strategic objectives, and (iv) an equality impact assessment where appropriate.

Forecasting and long-term financial sustainably 

• Use integrated financial modelling to underpin five-year rolling budget forecasts for the I&E, cash flows, long-term capital planning, regular financial scenario planning and stress testing.
• Scenario planning and stress testing will focus on input assumptions that may have the greatest impact on financial sustainability, either in isolation or collectively, e.g. student recruitment figures which will be regularly fed into the reports to committees.
• Build further relationships with banks with a view to future financing opportunities on a commercial basis.
• Develop a training plan for financial and budget management to be rolled out in phases to all University budget holders over the next 12 months.

Ownership: Director of Finance.