Discretionary accounts at UCL - what are they and how are they managed?
25 May 2016
Staff at UCL have raised a number of questions about the use of discretionary accounts at UCL. The purpose of this note is to respond to these questions and to offer a brief guide to the purposes and use of discretionary accounts.
What are discretionary accounts used for?
Discretionary accounts, or other related arrangements (see the note on the IOE below) play an important part in supporting UCL’s academic endeavour. Funds are typically used for supporting research staff between grants, paying for conferences, travel and training, funding scholarships and prizes, purchasing equipment and computers.
Some of these are individual discretionary accounts, which are used to support the academic activity of the staff member in whose name the account sits. Some discretionary accounts are used for other purposes, for example in respect of trading.
In what cases does UCL set up discretionary accounts?
Discretionary accounts are set up for non-core, non-grant funded, atypical income that does not fit into other categories. These accounts enable UCL staff to give earnings gained from activities such as consultancy, royalties and prizes to UCL.
Money in discretionary accounts belongs to UCL. The funds are not transferable if a member of staff leaves UCL, and staff do not pay income tax on earnings transferred to discretionary accounts.
UCL’s Financial Regulations define discretionary accounts as all funds excepting those funded by:
· HEFCE or other government departments
· student fees
· research grants, contracts, consultancy agreements or other such agreements administered by Finance & Business Affairs
· endowment or other trust administered by Finance & Business Affairs
· short courses
· any internal funding, for instance the Provost’s Strategic Development Fund
· any other income which is classed as ‘Core’ rather than ‘Other’.
Are discretionary accounts the same across UK higher education?
Most, if not all, UK universities have arrangements for discretionary accounts, or other ways of meeting the same needs. Within UCL, the Institute of Education has a different approach. The IoE has development accounts rather than discretionaries. Each academic department receives 0.33% of their previous year’s total income, which is held by the head of department to be spent at their discretion on staff development, including conferences and small incentives to guide academics towards areas of work in support of the department’s strategy.
What is the policy for discretionary accounts and how do these accounts relate to other UCL policies?
Spend from discretionary accounts is subject to relevant UCL policies and procedures. This has always been the case and is the same for any publically accountable institution. Staff generally need to refer in particular to UCL policies on recruitment and procurement when it comes to spending funds from discretionary accounts.
There have not been any recent changes of central UCL policy with respect to discretionaries, but faculties do need to consider discretionary accounts as part of their planning and budgeting processes.
Does spending from discretionary accounts need to be managed at a faculty or institutional level?
Yes, but only for a set of clearly defined reasons. Generally, academics are free (as they have always been) to spend income coming into discretionary accounts within the budget year. However, this answer deserves some further context.
In order to sustain academic excellence, UCL needs to be able to invest in facilities and services that will secure our future. Projects such as 22 Gordon Street (formerly Wates House), Bentham House and the Kathleen Lonsdale Building are well under way. The opening of new facilities at Here East and Canary Wharf for the UCL Bartlett and UCL Engineering are just around the corner, and future projects include the Student Centre, the replacement of Queen Square House and UCL East. We are also investing in IT and Library facilities to support both research and teaching and in academic posts to support new initiatives.
Discretionary funds will not be used to support any of this university-level investment. However, to support this investment, we do need to achieve our planned surpluses. We also need to be able to forecast our financial position accurately and balance income with expenditure within any given financial year.
In addition, spend from discretionary accounts can incur additional costs which faculties need to understand and manage. For instance, employing a member of staff using discretionary funds will incur related overhead costs to a faculty in order to provide facilities and support for that staff member - including space, power and IT services.
This is why it is reasonable that deans have oversight of the expenditure from discretionary accounts and to ask that spending is planned wherever possible. However, this oversight should focus on achieving a reasonable balance, ensuring that discretionary funds continue to offer the flexibility that an academic community needs, but in a way that allows faculties to budget within reason for such expenditure.
Will discretionary funds ever get diverted to other purposes?
The short answer is no. Discretionary accounts are and will remain dedicated to the purpose for which they exist – which is to support academic activity related to the discretionary account.
To respond to some particular concerns raised by staff, discretionary accounts won’t be diverted for other purposes and are not being used as collateral for UCL’s debt. If funds are left in a discretionary account at the end of a budget year, they are simply rolled over to the next budget year (though this is not the case with IOE development accounts).
How can I find out more?
You can find policies and procedures related to finance at UCL’s Finance and Business Affairs website. In addition, discussion about discretionary accounts will continue at a school and faculty level as part of your financial planning processes.
A special meeting of Academic Board has been requested to discuss discretionary accounts. This article serves to provide background information to inform discussions.
Phil Harding, Director, UCL Finance & Business Affairs