The University of Gloucestershire looks to have suffered another large deficit last year, and one that could be made worse by a clawback of cash from the funding council.

According to internal figures, the institution, which this week published details of a ?5 million relocation project to mothball its Pittville campus in Cheltenham, was heading for a shortfall of around ?3.5 million for 2009-10.

Gloucestershire did move to an operating surplus of ?3.5 million last year, but "exceptional items" on the accounts are expected to push it into the red for the second year in a row. In 2008-09 its overall deficit was ?6.3 million.

Final figures for 2009-10, unlikely to be available publicly before 2011, may be even worse depending on the size of a clawback from the Higher Education Funding Council for England following a routine audit of student numbers.

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The audit, carried out by KPMG, included an examination of whether Gloucestershire was being funded for students who had dropped out. Notes from a university council meeting reveal that Hefce wrote to Gloucestershire in June with figures on non-completion "higher than that received in the initial feedback" from the auditors. The minutes say the outcome of the audit is among "risks to the university".

The institution has been fighting to return to financial health after a turbulent year that saw the departure of key staff members, including vice-chancellor Patricia Broadfoot.

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Accounts from 2008-09, published earlier this year, revealed long-term borrowings of ?31.6 million and a debt-to-income ratio of 56 per cent - substantially above the sector average of 35 per cent.

It is thought that up to ?4 million of the debt has been paid off, but some staff are angry that some of the ?9.7 million from the sale of its London campus will go to restructuring rather than debt repayment.

This week the university unveiled detailed plans around the move out of Pittville Studios, which will be sold. They involve turning a sports hall at another site into a fine art studio and transforming the main Student Union bar into a media hub.

A review of Gloucestershire's governance and constitution is being carried out at the "expectation of Hefce", according to council minutes, and will report next February.

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It follows concerns over the membership of the university council, which has been criticised for lacking expertise and for being too influenced by a Church of England foundation.

More details of budget woes may emerge in an employment tribunal brought by a business manager under whistle-blowing legislation scheduled for next week in Bristol.

Witnesses called to give evidence include former deputy vice-chancellor Paul Bowler, who left his post in December after a period of suspension. He had been in the role for seven months and was said to have publicly blamed Professor Broadfoot and other senior managers for the state of the finances.

In a separate case, the university faces an employment tribunal in November over a claim for unfair dismissal by a former lecturer.

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simon.baker@tsleducation.com.