15 and collaboration, continuing challenges around managing staff and estates costs, and driving efficiencies using complex, aging and often disconnected digital estates. The OfS acknowledges this in its latest reporting10, noting that home and international recruitment remains below aggregate sector forecasts and that there is a risk that 46% of institutions could be in a deficit financial position at the end of 2025/26. The OfS notes that: “although some institutions are undergoing significant transformation to deliver sustainable long-term business models, others are still taking short-term cost-saving measures to respond to recruitment challenges, or are undergoing transformation that does not go far enough.” In the post-16 education and skills white paper, the government has signalled that it wants English institutions to move away from a “one size fits all” model for teaching and research because it believes that there are too many institutions with similar course offerings chasing the same students. Institutions are encouraged to “specialise in areas of strength”, with the government outlining a vision for greater collaboration between HE and further education providers, aligned to regional economic and skills requirements. The government believes that this could result in more consolidation and formal collaborations to strengthen financial sustainability, and the OfS has asked governing bodies to consider strategic change alongside cost reduction activities. While financial sustainability will primarily be a concern of the governing body and finance committee, we recommend that audit committees should: • Satisfy themselves that risks to financial sustainability and core controls are identified and documented at an appropriate level of detail, and that it is clear where and how second and third line assurance is obtained on the effectiveness of controls. The committee should have the opportunity to regularly discuss financial sustainability risks and challenge underlying assumptions, stress tests and scenarios; • Seek assurance that student number and financial forecasting is informed by detailed analysis of domestic and international competitors, markets, and student insight data rather than using solely historical institutional data; • Ensure that risk appetite is discussed and reviewed annually, and that risk appetite and a detailed risk analysis informs all scenarios for transformation, collaboration, consolidation or structural change; • Review the information published about HE regulatory and fraud cases, and seek assurance and evidence of a robust counter-fraud culture; and • Consider the benefit of a joint annual meeting with the finance committee and the external auditors to discuss the draft report from the external audit of the financial statement and accounts. 10 https://www.officeforstudents.org.uk/for-providers/finance-andfunding/financial-pressures-and-financial-sustainability/
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