A major British university is in a financial and governance crisis, having reported itself to regulators over a £121m loan.
The University of Reading has confirmed to the Guardian that it is investigating whether it improperly benefited from the sale of land belonging to the National Institute for Research in Dairying trust, with the £121m from the sales having been spent by the university and replaced with the equivalent of IOUs in the trust’s accounts.
The university said it had launched an inquiry into a potential conflict of interest and admitted that its actions did not meet the standards of governance expected as the sole trustee of the charity intended to fund agricultural research.
Prof Robert Van de Noort, the university’s acting vice-chancellor, said: “Our financial statements set out the handling of the sale of land held by the National Institute for Research in Dairying trust. We are confident that appropriate governance arrangements are now in place relating to the university’s management of the trust, and the designation of the money as a loan has no wider implications for the university’s ongoing financial position.”
Reading is not in a position to easily repay the £121m converted into a loan, which would take its debts to £300m. Its recent financial struggles include large losses from an overseas venture, falling undergraduate student numbers and operating deficits totalling more than £40m over the past two years.
#Reading achieved university status in 1926, and has grown to have 15,000 students and 4,000 staff, with annual spending of nearly £350m. Last year it was ranked 195th in the QS world university rankings, making it the the 26th highest UK university.
The revelations are the latest symptom of the financial pressures facing those #universities among the losers from the UK’s boom in higher education, fuelled by higher borrowing and lax administration based on over-optimistic forecasts of student numbers.
The higher education sector in England already faces looming threats from Brexit cutting off the EU as a source of students, staff and research funding, while a review of funding ordered by Theresa May last year is expected to recommend undergraduate tuition fees be cut from £9,250 a year to less than £7,000.
Reading’s precarious balance sheet will be an early test of the Office for Students as the higher education regulator in England. Its chairman, Michael Barber, has publicly declared that the OfS will not bail out struggling universities.
Reading said it had informed the Charity Commission and the OfS, and had set up two teams with separate legal representation to attempt to unravel the complex issues involving the university’s potential conflict of interest as a trustee and beneficiary of the loans.
Charity Commission guidance explains: “A conflict of interest exists where there is the possibility that a trustee’s personal or wider interests could influence the trustee’s decision-making.”