It is well known that ESOS applies to large organisations with:
- More than 250 employees OR
- A turnover of more than £38,937,777 AND
An annual balance sheet total of more than £33,486,489
Yet although ESOS came into force over a year ago in July 2014, many questions are still asked as to whether or not universities must comply with the scheme.
When must a university comply with ESOS?
Ultimately, it is how a university is funded that determines whether it must comply. On the whole, ESOS does not apply to public bodies that are subject to the Public Contracts Regulations (PCR) 2006, though differences in a university’s funding could mean that it is classed as a private, rather than public, organisation. In such cases a university will then have to comply with ESOS.
To clear up this confusion, Utilitywise asked the Environment Agency (EA) to outline when a university must comply with ESOS.
The EA said universities need to assess their funding and find out if the majority is sourced from a contracting authority. They pointed us to Regulation 3 of the PCR, which states that a body is a contracting authority where:
(w) a corporation established, or a group of individuals appointed to act together, for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and –
- i. financed wholly or mainly by another contracting authority;
- ii. subject to management supervision by another contracting authority; or
- iii. more than half of the board of directors or members of which, or, in the case of a group of individuals, more than half of those individuals, are appointed by another contracting authority.
As stated by the EA in their May 2015 ESOS newsletter, student loans are treated as private financing. Therefore, universities must consider whether they receive other public funding which amounts to more than half their total funding or if they meet criteria (ii) or (iii) above. Unless a university meets one of these three criteria they are not a contracting authority for ESOS purposes. As such, a university will then need to assess whether they meet the standard ESOS qualification criteria regarding employee numbers, turnover and balance sheet.
Why student loans are not public funding
A student loan is a contractual agreement between a student and the Government – with any public subsidy benefiting the student and not the institution. Therefore the agreement between the student and the university to pay a fee in return for teaching is not public funding. The status of student loans as private financing applies even where tuition fees are paid straight from the applicable government owned loan company to the university.
Universities need to determine the different funding streams they get money from including student fees, grants and funding for other research. It’s worth noting that grants are treated as public funding.
Jo Scully, ESOS Project Manager for the Environment Agency, said during our ESOS webinar in May that if assessing and analysing all funding sources could be too time consuming it may be cheaper to go ahead and comply with the scheme anyway. There’s not much time left until the 5 December deadline and there are fines in place for non-compliance.
Utilitywise can help
To find out whether your university falls within the scope of ESOS, you should contact your Finance Director or equivalent Head of Finance in the first instance. If you find the university is subject to the PCR, they should provide a formal statement from a responsible officer in the university as evidence of your ESOS exemption. This should be saved in case it is called upon by the EA as part of an ESOS regulator audit.
If your university is not subject to PCR, then you may have to comply with ESOS. With just over 4 months to go until the compliance deadline you need to act quickly to find out your requirements under ESOS. For information on how Utilitywise can assist you with ESOS compliance visit our website, call 01527 511 757 or email email@example.com.