Auditors for the private University of Buckingham said in its 2019 accounts there was “material uncertainty” over the institution’s ability to keep running, while it recorded a £17 million deficit that year and a potential £119,000 fine for late filing of accounts.
The university, fostered by Margaret Thatcher in its early days, has belatedly filed its financial statements for the year ended 31 December 2019 after a lengthy delay – but is yet to file its 2020 or 2021 statements.
The accounts show that Buckingham’s taking-on of a lease on the former Manchester Metropolitan University campus in Crewe – creating a health science campus offering biomedical and podiatry degrees in partnership with an Indian healthcare provider – was a factor in financial problems.
A Buckingham spokeswoman insisted that the university was now “in a very sound financial position” and that the issues flagged in the accounts were “historical”.
The university’s auditors, PricewaterhouseCoopers, say in their report on the 2019 financial statements that the university was forecast “to breach its debt service covenants in the next 12 months [after 2019] based on its current forecasts, albeit has the ability to repay its borrowings to cure any breach if it were to arise. However, the university has been exposed to a number of unexpected significant one-off cash outflows in recent periods, and is currently negotiating to lower the contracted cost of a significant lease.”
In the case of the “severe but plausible downside forecast, the university would not have sufficient liquidity to repay the related debt and cure a covenant breach”, the firm adds.
These factors indicated “the existence of a material uncertainty which may cast significant doubt about the group’s and the university’s ability to continue as a going concern”, the auditors say.
Audit firms have to decide whether to sign off an organisation’s accounts with a statement that it is a “going concern” – able to meet its obligations over the following 12 months – and Buckingham’s 2019 accounts were approved on that basis.
But if there are “material uncertainties” that put significant doubt on an organisation’s ability to continue as a going concern in the longer term, auditors are required to check that accounts disclose these uncertainties.
The Buckingham accounts also stated that the Charity Commission asked questions of the university in 2020 “related mostly to the joint venture around the Crewe campus, as well as a small number of other governance and management issues”.
The university undertook its own “investigative work” that found a “former senior staff officer having placed themselves in a position of conflict of interest with that of the university”.
Plus, it found “significant and previously unidentified VAT liabilities dating back to late 2017 and early 2018 within Medical Property Management Limited” – the university subsidiary to be “licensed to support podiatry teaching” at the Crewe campus.
The investigation also found “insufficient engagement by the governing body as a whole in decision-making on strategic level issues”.
On the Crewe campus, the trustees’ report on the financial statements says that starting academic provision there, “especially in context of the Covid lockdown, proved challenging”. The trustees add: “Our medical school provision at Crewe is now working well, with strong student recruitment, and we are exploring commencing podiatry plus other allied health sciences provision at Crewe in future.”
The 2019 accounts also include an “onerous lease provision of £6.4 million” on the Crewe campus, “as the expected net revenues to the university from all relevant activities at Crewe is materially less than the operating lease costs over the lease period”.
In total, the Buckingham group recorded a deficit of £17.5 million in 2019, compared with a £6.4 million surplus in 2018.
The 2019 financial statements also showed that the Office for Students, the English regulator, wrote to the university “to give a provisional decision that they would impose a regulatory penalty of £119,000 for the period up to September 2021 due to the late submission of financial statements”.
The OfS was yet to make a financial decision, while “additional penalties for periods beyond September 2021 are possible”, the financial statements added.
The Buckingham spokeswoman said: “The University of Buckingham is a going concern [and] is in a very sound financial position. The financial statements just published are historical, dating back to 2019 and earlier. They reflect substantial investment in the new campus in Crewe.
“Financial returns after 2019 show a healthy financial position. In fact, student numbers were up 8 per cent in September 2021 compared with the previous year, which was especially pleasing given the sector was still being impacted by lockdown.”
The spokeswoman added: “Part of the reason for the delay in submitting the return has been due to Covid and lockdowns. Also, a very thorough investigation of our financial and governance processes uncovered that there were some issues over three years ago prior to the new administration taking over. These have now all been fully dealt with.”
