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Soas auditors express ‘significant doubt’ on finances

Image: Philafrenzy [CC BY-SA 4.0], via Wikimedia Commons

Latest accounts include going concern warning amid pandemic income fears

The impact of the Covid-19 pandemic on student recruitment has “cast significant doubt” on the financial future of Soas, University of London, according to the institution’s auditors.

The university’s 2018-19 financial statement, published this week, revealed a total deficit for the year of £19.1 million—an increase of £17.9m on 2017-18.

“This deficit is broken down into a surplus of £4.2m on our endowments and a deficit of £23.3m on our unrestricted activities,” the accounts say. “It is important to note that the latter includes a negative movement of £17.7m for USS pension liabilities using the March 2017 pension valuation available at the reporting date of 31 July 2019. The pension deficit is outside of the institution’s control as contribution rates are set at the national level.”

If the pension movement is excluded the unrestricted deficit for 2018-19 is £6.5m in the table above. “This, when adjusted for restructuring costs of £2.5m, which are not part of ongoing operating activity, results in an operating deficit of £4.0m,” the accounts state.

Before endowments and donations, Soas income grew by £0.2m from 2017-18, with tuition fees providing the majority of income (71 per cent). The accounts also confirm that the university “decided in April 2020 to sell its Russell Square terraces, which were surplus to requirements”, and had implemented “income improvement initiatives and robust cost control measures in order to forecast reducing deficits on unrestricted funds and a return to surplus in 2021-22”.

The accounts add that “this forecast was prior to the Covid-19 pandemic and the consequent uncertainty in future student recruitment which affects our whole sector”. Nonetheless, “the School has adequate resources to continue in operation for the foreseeable future and for this reason the going concern basis continues to be adopted in the preparation of Financial Statements,” the institution says in its corporate governance statement.

However, according to the Independent Auditor’s Report to the Trustees of Soas, published alongside the accounts, there is “material uncertainty relating to going concern”.

“[As] a result of Covid-19 the expected student numbers cannot be predicted with certainty, therefore indicating that a material uncertainty exists that may cast significant doubt on the School’s ability to continue as a going concern,” the auditors, BDO LLP, write.

A spokesperson for Soas said the accounts “make clear that Soas is projecting, in our internal forecasts, to reduce this deficit further by continuing to deliver new income streams and proactively manage our cost base”.

“The accounts also make clear that the Covid-19 pandemic has made forecasting income levels very uncertain for all institutions in the UK HE sector and restricted the available sources of finance,” the spokesperson added. “The new challenges created by Covid-19 intensify our financial pressures significantly as they do for all UK HEIs.

“Soas, like many other HE institutions in the UK, is facing uncertainty with respect to student recruitment in the new academic year. If other universities were publishing their accounts now auditors would be making similar statements about material uncertainty. These are sector-wide not Soas-specific risks.”

In April last year, Research Professional News revealed that Soas had been placed under “enhanced monitoring” by the Office for Students because of its “weak operating cash flow”. As a result, the university was required to “notify the OfS immediately of any material change in the school’s projected financial performance or position”, university minutes showed.

“In January this year, Soas confirmed that for the 2020-21 academic year all research leave must be either contractual or externally funded, suggesting that research leave outside of these categories would be refused. At the time, a spokesman for Soas said: “Like all institutions, we are looking at how to ensure we make best use of our funds as we review departmental budgets for 2020-21.”

As part of its response to the Covid-19 pandemic, the Office for Students has asked universities to flag financial concerns at an early stage. At the commons education committee on 18 May, OfS chief executive Nicola Dandridge said that the regulator was monitoring the financial health of providers on a weekly basis.