The Office for Students and financial resilience

The OfS is required by law to monitor the financial sustainability of most registered higher education providers in England, and to report on patterns, trends and other relevant matters in its annual report.

The 2022/23 report comments that “There has, rightly, been significant scrutiny of financial sustainability in higher education. Our own analysis and intelligence gathering has found the sector in good shape overall, but with variations for individual providers”.

This assessment was criticised by the House of Lords Industry and Regulators’ Committee, which has called on the OfS and Government to clarify who has strategic oversight for long-term financial sustainability.

To date in our experience the OfS’s regulatory oversight and intervention on financial sustainability has tended to be conducted behind the scenes, with a rare public example being the closure of a drama school, ALRA.  The OfS confirmed that ALRA’s 284 students were offered the chance to complete their studies at Rose Bruford College, with over 90% taking up the offer.  

The regulatory framework

The framework includes a general ongoing condition of registration that concerns financial sustainability, including requirements that a provider:

  • is financially viable and sustainable;
  • has the financial resources to provide and deliver courses as advertised and contracted; and
  • has the financial resources to continue to comply with all of a provider’s conditions of registration.

Assessing compliance with these conditions can involve consideration of a wide range of matters relevant to a provider’s financial position, including the terms and details of any available financial facilities.  The OfS may consider that certain behaviours are indicative of non-compliance with these requirements, such as not meeting financial forecasts or having more onerous terms imposed on existing financial facilities.

The regulatory framework also requires providers to have, publish and take reasonable steps to implement an OfS-approved student protection plan.  The SPP must address a number of matters, including measures put in place to mitigate risks that are considered reasonably likely to materialise.

The OfS has a range of other regulatory tools, including powers to impose specific conditions of registration.  Where the OfS reasonably considers a provider is at material risk of fully or substantially ceasing to provide higher education, it may also issue a provider with student protection directions.  Such directions might require implementation of a range of matters, such as requiring teach out or transfer of students, or offering refunds or compensation.

One aspect of the regulatory framework is a requirement to notify the OfS of a range of “reportable events”.  We will consider this further in our next blog in the series.

Further, while the OfS is the principal regulator of registered higher education providers in England, when considering issues of financial sustainability it will be necessary to consider a broad range of stakeholders, not least an institution’s students and staff as well as the various other regulatory bodies, funding organisations and other third parties that institutions have relationships with.  It is also important to involve professional advisers at an early stage so that a full range of options can be explored, at the same time as meeting relevant regulatory and legal obligations.

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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