Financial Strategy 2012

Transcription

1 UNIVERSITY OF STIRLING Financial Strategy 2012 jn12 This document presents a revised and updated financial strategy for the University of Stirling. It defines what a financial strategy is and how it fits with University s wider strategic plan. It also sets out a set of guiding principles and key objectives that underlie and underpin the financial strategy. N.B. All references to financial information specific to the University of Stirling have been removed from the document and treated as Commerical in Confidence. Page 1 of 12

2 University of Stirling Financial Strategy: Executive Summary Section 1: Introduction -financial strategy defined Section 2: Underlying principles Section 3: University of Stirling s strategic plan Section 4: University of Stirling -current financial situation Section 5: Strategic financial objectives and their implementation Appendices (these have been removed from the document and treated as Commercial in Confidence) 1. Key financial analysis Ten year capital development plan 3. Contribution from trading activities 4. Capital finance: borrowing constraints and debt service capability 5. Revolving credit facilities: covenants 6. Operating cash flow movements 2009/10 7. Cash flow forecast 2010/11 8. CUC Sustainability trigger metrics 9. Current Strategy Documents Page 2 of 12

3 Executive Summary The over-riding objective of the Financial Strategy (FS) is to provide the Court, Principal and USPG with a framework through which the University s financial sustainability in the long term will be secured. The FS is in support of the overall University Strategic Plan and underpinned by four key principles which are explored further in the strategy. These are:- Integration with other University Strategies Relevant to resource managers throughout the University Long term focus while allowing flexibility Robust framework for investment The FS is set in the context of the challenging external environment where one of the major sources of income, grant support from the government is subject to significant reductions. The FS outlines the need to generate a surplus of 6% of its turnover to deliver sustainability. requirement to deliver sustainability is supported by three principle objectives:- The Secure planned level of operating surpluses on recurrent activities driven by and linked to investment plans and a target level of reserve. Ensure appropriate levels of working capital for day to day operations and finance for capital investment in accordance with the capital program and the University s wider strategic plan; and Establish and maintain effective and commercially focused financial stewardship arrangements and embed throughout the University. The actions required for each objective are then outlined in detail supported by an action plan for delivery. Page 3 of 12

4 Section 1: Introduction -financial strategy defined 1. The University s extant financial strategy (FS) was approved by Court in With the elapse of time and with a significantly changed operating environment for the University since the current strategy was prepared, it is now timely that this key document is revised and updated. The University s FS is the expression in financial terms of the University s overall strategic plan and is critically important to the strategic management of the University. The FS therefore needs to be set in the context of, and integrated with, the University s wider strategic goals and aspirations. 2. It is an enabling strategy, concerned with identifying and securing essential financial resources on which many of the University s strategic objectives will depend. At the same time the FS will sometimes also act as a practical constraint or moderating factor on the University s wider strategic plans. Thus, the FS will have a direct bearing on which strategic objectives are pursued, how and to what extent they are pursued and also the timeframe over which they are pursued 3. The overriding objective of the FS is to provide the Court, the Principal and USPG with a framework through which the University s financial sustainability in the long term can be secured. Sustainability in this context is defined and discussed more fully in section 5 which addresses the objectives of the FS. This FS creates a focal point and a platform from which a culture of strong leadership, sound governance and effective stewardship in all aspects of financial management will be driven forward and culturally embedded throughout the University. 4. At its most basic the FS needs to articulate the resources implications of the strategic plan and its associated priorities which typically will be set out in: Financial forecasts and revenue budgets for income and expenditure; Capital expenditure plans; Goals and targets in respect of underlying financial strength particularly reserves as part of a set of financial key performance indicators ((f)kpis); Cash flow forecasts and projections of the availability of and need for finance in accordance with resource plans; and Financial appraisals of existing activities as well as of new potential ventures and new projects. Page 4 of 12

5 Section 2: Underlying principles 5. The FS is underpinned by four key principles which should govern all financial activity and provide a reference point to guide strategic financial management within the University. These are: integration with other University strategies relevant to resource managers throughout the University long term focus while allowing flexibility robust framework for investment Integration with other University strategies 6. The FS must integrate with and support the achievement of the University s broader strategic aims. It must therefore be demonstrably compatible with the University s Strategic Plan and with other resource and delivery/output strategies. Similarly, those other plans and strategies must take account of the University s financial position in their formulation and development. 7. The FS is a key factor to be taken into consideration in the University s approach to strategic risk management. Relevant to resource managers throughout the University 8. The FS is relevant to the management and use of all of the University s resources but particularly to finance and tangible assets that have direct financial value or economic worth. It is also relevant to intangible items such as reputation and competitive edge or niche distinctiveness as they too have financial implications depending on how they are managed. As well as management s approach to running existing activities the FS s pervasiveness extends to assessing potential new developments. 9. Managers at all levels across the University must be aware of and understand the specific financial objectives that apply to their areas of responsibility as these will be derived from the FS. Specifically, as well as service outcomes, managers need to understand clearly what financial outcome is expected in relation to the assets and resources under their control. Long term focus while allowing flexibility 10. By its nature financial sustainability is a long term goal and thus the FS will have a long term focus (see section 5 for fuller explanation of sustainability). In that context, the long term financial requirements for delivery of the University s wider Strategic Plan will normally take precedence over short term or non strategic concerns. However, there may be instances where it is desirable to take advantage of some short term opportunities that are presented. The FS must be sufficiently flexible so as not to unduly constrain such beneficial opportunism. To secure such benefits will require the strategy to allow a degree of organisational agility and resource mobility. 11. Similarly, where, inevitably, there are changes to either the University s internal circumstances or to external market or economic conditions that are not yet reflected in formal strategies, then financial priorities must be capable of being flexed accordingly. Page 5 of 12

6 Robust framework for investment 12. All investment proposals must be supported by business cases and comprehensive and rigorous investment option appraisals, including the cost of not investing, together with an identification and quantification of all material risks: financial and non financial. Similarly, all benefits and costs associated with an investment should be realistically and objectively quantified and valued. Typically a business case must: Identify the need to be satisfied or the problem to be solved or the opportunity to be exploited with reference to the Strategic Plan and other University Strategies; State the objectives and define the scope of the investment (what will and will not be achieved) and provide criteria against which success will be evaluated (e.g. time, cost and quality objectives); Indentify the realistic options including a do nothing or minimal action option as a baseline, select a short list of solutions and after testing indicate a viable preferred solution based on expected satisfaction of the project objectives; Assess viability of solution with reference to outline costs, benefits, risks and uncertainties over the lifetime of the project not just the initial investment; and Consider sensitivity analysis to identify the key assumptions critical to the project s success. 13. For larger investments or complex projects several iterations of the assessment of business cases may be required. Page 6 of 12

7 Section 3: University of Stirling s strategic plan Strategic Plan 14. The Strategic Plan is a high level document designed to guide the institution in its future direction. Academic School and Service Department plans will align with the institutional plan to ensure implementation. The strategic plan will be used as: a means of prioritising future activities; a blueprint for future activity; a resource deployment tool; a means by which to involve and engage all colleagues in our future direction. The Strategic Plan defines our origins and history, establishes our vision, mission and goals, and defines our strategy in respect of core under-pinning principles and strategic drivers Who We Are 15. The University of Stirling is a pre-1992 campus-based university located in the geographical and historical heart of Scotland. We research and teach in the areas of health and wellbeing; culture and society; environment and people; enterprise and the economy; and sport. We also deliver academic programmes in healthcare on two other campuses in Inverness and Stornoway, and we hold the designation of Scotland s University for Sporting Excellence. Our Vision, Mission and Goals 16. The University of Stirling s vision is to be recognised nationally and internationally as a place of excellence enabling individuals to fulfil their potential and contribute to the creation of prosperous, healthy, wealthy and sustainable communities. 17. Our mission is to pursue world-class research, scholarship and learning in order to inspire, challenge and support motivated individuals who want to shape our world. 18. To achieve our vision and deliver on our mission, our strategic goals are to be: Excellent and Professional: in all that we do; Sustainable and Resilient : in financial and environmental terms; Distinctive and Effective: in contributing to the prosperity of our stakeholders; Committed and Connected: through engaged intellectual leadership and national and international networks; Performance Driven: to significantly enhance our research performance and to deliver excellence in learning. Our Strategy 19. The next few years will bring ever increasing challenges to universities, and our ability to develop and thrive as an organisation will depend on our capacity to engage proactively and flexibly with a rapidly changing environment. As we face a changing context for the delivery of our mission, we have established a set of core principles that underpin our future strategy and our decision-making: Quality: we will strive for the highest standards and excellence in all we do; Page 7 of 12

8 Resourcing: we will allocate resources to those who generate them and set parameters to minimise cross-subsidy; Selectivity: we will selectively support activities where investment can be maximised; Targets: we will monitor and benchmark ourselves against a group of high performing comparator universities. 20. We will seek to achieve our vision through four strategic drivers around which we define our ambitions, identify how we will achieve these ambitions, and determine how we will measure our success. These drivers are: Research Excellence which Generates Fundamental Knowledge Research excellence underpins all that we do. We are committed to being a research-led university which is concerned with the generation of new knowledge and ideas through which we sustain our intellectual energy. Research excellence is the key to success in all our activities, and in particular the quality of our programmes of learning and teaching depend on the strength of our research and scholarship and the intellectual capacity of our academic staff. Our research engages with real world issues and impacts on the mental, physical, economic, environmental, cultural and intellectual condition of individuals and their communities and has a resonance that transcends nationalities and continents. We are committed to our research having an impact internationally, nationally and locally. Graduates Who Make a Difference From inception, we have created a distinctive learning environment which avoids compartmentalisation and strongly encourages study of a combination of subjects cutting across conventional divisions, providing breadth of study and qualifications which are recognised internationally. Our curricular flexibility, relevance and emphasis on student choice are as relevant to today as they were in previous years. The integration of research into our teaching develops graduates who are confident, critical, and willing to act to shape their worlds. We are committed to strengthening a culture of critical reflection and anticipatory action which informs all aspects of learning and scholarship. We engage positively with students on their learning journey, maintaining a high quality student experience, providing curricula which are relevant, distinctive, affordable and inclusive, and engaged with the world outside academia. A Globally Connected Institution We believe that encouraging and developing robust relationships between researchers and users are crucial and that knowledge is created through a collaborative process between research, theory and practice. We therefore value our role in supporting the stakeholder communities in which we operate and with whom we interact to foster economic and societal development. We have a global perspective in how we think whether through research and curriculum design or the composition of our student population and staff base. Engagement and collaboration with other universities and colleges, and user communities allow us to harness our expertise and skills and maximise the economic and social impact of our research. Page 8 of 12

9 A Vibrant and Intellectually Stimulating Environment A vibrant and intellectually challenging environment in which individuals both staff and students - are encouraged to develop and realise their potential, and to achieve their personal ambitions, is crucial to us achieving our institutional ambitions. We are The University of Stirling and are committed to creating a sustainable and supportive environment, in which to work and study, for all our staff, our current and former students and our local community. Lifelong relationships, and life-shaping experiences are nurtured at University, and a high quality intellectually stimulating environment is part of this process Page 9 of 12

10 Section 4: University of Stirling - current financial situation This section is Commercial in Confidence. Page 10 of 12

11 Section 5: Strategic financial objectives and their implementation Sustainability 21. As stated in the introduction, the overriding objective of the FS is achieving the University s sustainability. It is critically important therefore that there is a common understanding of what is meant by sustainability. In this context sustainability has a forward looking long term focus -at least 10 years ahead- and, it is holistic, that is linked to and integrated with other strategies particularly learning and teaching, research, estates and human resources. Thus, while institutional sustainability is concerned with more than financial matters financial sustainability is nevertheless a critical factor in institutional sustainability. 22. In this light to be financially sustainable means that the University can finance its long run costs in such a way that it is not causing unmanageable liabilities for future generations. Two useful definitions are provided in the CUC Guide The Monitoring of Institutional Performance and the Use of Key Performance Indicators: operating today in a way which does not inhibit our ability to do so tomorrow ; and managing key resources so as to at least maintain the current capacity of the institution to respond effectively to changing demands. Financial sustainability therefore is concerned with more than short term issues of financial health or even financial survival. 23. Against that background, three principal objectives provide the focus for and to a large extent define the FS. These objectives need to be achieved to facilitate effective delivery of the University s long term sustainability Secure planned levels of operating surpluses on recurrent activities driven by and linked to investment plans and a target level of reserve; Ensure appropriate levels of working capital for day to day operations and finance for capital investment in accordance with the capital program and the University s wider strategic plan; and Establish and maintain effective and commercially focused financial stewardship arrangements and embed throughout the University. 24. These objectives are considered more fully in the remainder of this section and supported by an Action Plan which sets out tasks required to be implemented and monitored, relevant success measures and the persons responsible for each task. Page 11 of 12

12 Objective One - Securing planned levels of operating surpluses on recurrent activities Objective Two - Ensure appropriate levels of working capital and finance for capital investment Objective Three - Commercially focused financial stewardship Objectives One to Three have been excluded on the grounds that they are Commerical in Confidence. Detailed implementation, monitoring and measuring success Action planning and reporting 25. Detailed action plans will help facilitate the strategy s implementation. It is suggested that reporting against the action plan to USPG and to Court and its Committees is carried out formally on a quarterly basis. This should also be carried out in conjunction with monitoring of the strategic plan. 26. In terms of financial key performance indicators (fkpis) the sustainability metrics put forward by the CUC in its Guidance provide a useful starting point and are included for reference as Appendix 8. It is proposed that building on the CUC s recommendations a bespoke set of fkpis is developed. Page 12 of 12