The responsibilities of the governing body as they relate to financial matters, typically include:
- Ensuring the solvency of the institution and safeguarding its assets
- Approving the financial strategy, and being mindful of the institution's longer-term sustainability
- Approving annual operating plans and budgets
- Ensuring that funds provided by external funding bodies are used in accordance with the terms and conditions specified by the provider of the funds
- Ensuring the existence and integrity of risk management, control and governance systems and monitoring these through the audit committee
- Receiving and approving annual accounts (audited financial statements)
- Monitoring financial performance
For accounting periods starting after 1 January 2015, higher education providers have been required to adopt FRS 102, the reporting standard for the United Kingdom (UK). Alongside FRS 102 a new Statement of Recommended Practice (SORP): Accounting for Further and Higher Education 2015 was issued. The SORP recommends particular accounting treatments and disclosures in relation to a narrower area of activity. Regulators in each of the national jurisdictions expect higher education providers to prepare their financial statements with regard to the SORP.
Following the Triennel Reveiw of FRS 102, an updated version of the SORP applying to Further and Higher Education was published in September 2018.
Although not containing major changes when compared to the previous edition, the updated SORP provides helpful information for governors and governance professionals not just about technical aspects of accounting, but also on helpful information on the following topics:
- the additional disclosures over-and-above those detailed in FRS102 required by the SORP (see paras.1.9 and 1.10)
- the relationship between the SORP and the Accounts Direction issued by the higher education ‘regulator’ in each of the national jurisdictions of the UK (see paras. 1.16 and 1.17)
- the definition of a public benefit entity (see para. 3.14 and 3.15), and public benefit reporting (see paras.3.18-3.22)
- and on what a governing body should consider when making an assessment of whether the institution can be deemed to be a 'going concern', namely:
‘In making this assessment an institution’s governing body must take into account all available information about the future for at least, but not limited to, 12 months from the date on which the accounts are prepared.’ (para. 3.27)