The University of Dundee’s financial collapse has become a defining moment for the UK higher education sector. But beyond the headlines lies a deeper story – one of missed signals, governance breakdowns and cultural challenges. In this article we explore how audit insights, including those from EY and the Gillies Report published 19 June 2025, offer a roadmap for resilience, reform and renewed confidence across the sector.

The financial collapse at the University of Dundee has sent ripples across the UK higher education sector. As the only institution among 19 Scottish universities to face such a crisis, Dundee’s experience offers a sobering – but instructive – lesson in the consequences of weak financial governance, opaque leadership and missed opportunities for stakeholder engagement.

But it also presents an opportunity: to engage with and use emerging risk and audit insights not just as a retrospective assessment, but as a strategic tool for informed transformation.

Auditor findings: EY review of University of Dundee

EY’s April 2025 letter to the University Court laid bare a series of serious concerns:

• Inaccurate going concern assessments unsupported by internal evidence.
• Misrepresentations around financial status and loan covenant negotiations.
• Suppressed disclosures and delayed responses to audit inquiries.
• Governance breakdowns, including infrequent Audit and Risk Committee meetings and flawed financial reporting.

These are not just technical issues – they reflect a deeper cultural and structural malaise. EY’s message is clear: transparency, responsiveness and integrity are non-negotiable in financial governance.

What the Gillies Report revealed

The Gillies Report complements EY’s findings with a broader institutional diagnosis:

• Poor financial judgment and unrealistic targets.
• Inadequate management and reporting.
• Inappropriate investment decisions made without awareness of effects on financial sustainability and weak cash management.
• Weak governance in relation to financial accountability.
• A hierarchical culture that discouraged challenge and transparency.

Its action points were to improve financial reporting, strengthen governance, foster a values-led culture and engage stakeholders meaningfully.

4 lessons for UK higher education providers

Together, these reports highlight the need for technical audit rigor and strategic institutional reform. For other institutions, the message is clear: don’t wait for a crisis to act. So, what should institutions do to heed the warning and sharpen their management?

1. Budgeting and forecasting: from optimism to realism

UK auditing standard on going concern (ISA 570) requires auditors to evaluate whether management’s assumptions are appropriate within the financial reporting framework and consistent across business activities and historical data. Dundee’s assumptions were neither, and there are learnings institutions can take from this shortcoming to protect themselves.

Institutions must:

• Set budgets that are in line with future plans, strategy and sector risks.
• Stress-test budgets against downside scenarios to assess the impact of changes in the key assumptions.
• Align forecasts with operational realities and emerging risk.
• Ensure that reporting and monitoring is timely, consistent and clear, especially for difficult issues.
• Integrate loan covenant compliance into financial planning and reporting.
• Make cashflow forecasting central to planning and reporting.

2. Governance: from oversight to insight

EY flagged incomplete responses to governance inquiries, inaccurate minutes and misrepresented audit status. The Gillies Report calls for:

• Questioning that is safe and valued at every level to create a culture of fearless inquiry.
• A culture of curiosity to drive clarity – one question can unlock deeper understanding and expose hidden risks.
• No ambiguity or delay, to make sure committees have early, clear communication on university-wide key issues and risks, along with visibility and assurance over how these are being addressed.
• Minutes that tell the full story, capturing challenge, avoiding bias and showing how decisions were made.

3. Culture and stakeholder engagement: from silence to voice

Both reports highlight a culture where challenge was discouraged, which damaged transparency. To rebuild trust, action must match principle. When put into practice, this involves:

• Embedding psychological safety, with leaders actively welcoming challenge and rewarding honest questioning (this requires genuine commitment, not token gestures).
• Normalising curiosity by creating space for open dialogue, where asking ‘why’ or ‘how’ is seen as strength, not disruption.
• Early communication, not retrospective, so that key issues and risks reach committees before decisions are finalised.
• Making minutes matter by recording differing views, substantive debate and decision rationale (not just conclusions).

Trust isn’t restored by words. It’s rebuilt through consistent action, visible change and reflection.

4. Going concern and covenant compliance: from compliance to confidence

ISA 570 requires that management’s going concern assessments are evidence-based, consistent across the business and responsive to change.

Institutions must embed early warning systems into their reporting and monitoring systems for covenant breaches, liquidity risks, emerging risks and operational shocks.

Covenant compliance needs to be assessed throughout the year and across all forecasts, with findings reported to those charged with governance. This includes evaluating sensitivities and material risks that could lead to non-compliance.

Conclusion: turning audit into action for higher education providers

The University of Dundee’s experience is a stark reminder that financial collapse is rarely sudden – it’s the result of ignored signals, weak governance and cultural inertia. But it also shows the power of audit and risk management to drive change.

By embracing the insights of auditors and strategic innovators alike, the education sector can move from compliance to confidence, from oversight to foresight, and from crisis to resilience.

To learn how we can help your Institution strengthen governance, improve financial resilience and turn audit insights into action, please get in touch with Richard Lewis or your usual RSM contact.

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