Spending watchdog warns of risk from business sponsorship, funding cuts and few measures to detect short-term cash problems
The number of universities at risk of going bust is likely to rise over the next few years, the government's spending watchdog has warned.
The National Audit Office (NAO) has found there are insufficient measures in place to detect universities with short-term money problems.
Its report on the checks and balances of universities' finances calls for public disclosure of institutions at high risk of financial failure.
At the moment the Higher Education Funding Council for England (Hefce), which distributes public funds to universities on the government's behalf, waits for three years before it publishes a list of universities at high risk of financial failure. This delay, it argues, is to help the institutions recover.
But Margaret Hodge, chair of the House of Commons's cross-party public accounts committee, said students deserved to know if the place they chose was at risk, "particularly in the brave new world where the student holds the purse strings".
The NAO said the rise in permissible tuition fees from £3,335 to £9,000 a year, multimillion-pound cuts to higher education and an influx of companies providing degree courses would raise the risk of universities going bankrupt.
In recent years there has been a steady growth in public funding of higher education, but the watchdog said universities now face a "transition to a different financial environment". "The new funding framework for the sector is likely to increase the level of risk," its report argues. Between 2007 and 2010 the number of universities at higher risk grew from 10 to 43.
Hefce relies on universities to tell them if they are worried about their short-term finances. This may not be a sufficient check, the watchdog said.
Its report said that 5% of universities in receipt of public funds – equivalent to about six universities – are considered to be at a higher financial risk. All of these have been in this category for at least four years and one – Thames Valley University – has been of concern for 12 years.
In 2009-10 a quarter of universities were underperforming financially in at least one of Hefce's measures and 9% had run a deficit for at least three years. One made an "urgent and unexpected" request for a Hefce grant to be paid early because it was short of funds.
Sir Alan Langlands, chief executive of Hefce, said the organisation would draw on the lessons in the report and ensure the recommendations were implemented.
Sally Hunt, general secretary of the lecturers' union, the University and College Union (UCU), said the report showed the consequences of higher fees and reduced public funds. "While there might be a handful of winners, many institutions will struggle to cope financially with the new regime. If the government is happy for some universities to go to the wall, then it should be upfront about it."
Meanwhile, lecturers at 63 universities are likely to strike later this month over changes to their pensions.
Some 65% of members of the UCU backed strike action in a ballot on proposed changes to lecturers' pension scheme – the Universities Superannuation Scheme. Some 82% backed action short of a strike. Turnout was 34%.
The strikes are expected to take place on 21 March for two days.