Cash-strapped Dundee University is to receive a further £40 million from the taxpayer to help in its recovery.

Education Secretary Jenny Gilruth has agreed to provide the additional finance to the Scottish Funding Council (SFC) over two academic years or three financial years.

It is in addition to the £25m announced by ministers in February for the SFC to support all universities facing financial challenges. Dundee received £22m of that money after revealing a £35m deficit.

The SFC and Scottish Government will work together to develop appropriate conditions for the funding, which is subject to further due diligence.

Funds will only be released once a sustainable, long-term recovery plan is put in place by the University that leverages commercial and private investment.

Ms Gilruth’s decision follows Professor Pamela Gillies’ Independent Review into the University of Dundee’s finances, which highlighted that it had failed to operate in line with the SFC’s Financial Memorandum and Code of Good Higher Education Governance. The university’s interim principal and two members of its governing body resigned.

Ministers have held early discussions with SFC to consider options to strengthen governance in institutions.

Confirming the funding in a statement to parliament, Ms Gilruth said: “The Scottish Government is determined to do everything we can to secure a positive and thriving future for Dundee University.

“Since issues at the University came to light in November, the thoughts of Ministers have continued to be with staff and students who have faced a period of real anxiety and uncertainty. This additional £40m funding support will help return the university to the thriving institution it should be.

“Scotland’s universities are independent and autonomous institutions. In normal circumstances, decisions on the allocation of funding to individual institutions are the responsibility of the SFC. However, this is a unique and unprecedented set of circumstances, which requires a unique and unprecedented response.

“It is vitally important that the University works to secure a sustainable, long-term plan which will allow for commercial lending to support some, or all of the remaining liquidity ask. We will consider all avenues and other support we can provide to achieve that end.”

Scottish Ministers have powers under section 25 of the Further and Higher Education (Scotland) Act 2005 to direct the Scottish Funding Council Ministers to target a direct settlement to the University of Dundee, and to place specific conditions on that funding. This is the first time that these powers have been used. Ministers will work closely with the SFC on the provision of the funding.

The Scottish Government is in the process of procuring expert auditors to assist with due diligence, which is due to conclude in the coming days.

Additional funding provided to the SFC for Dundee University will not impact on the funding available from the SFC to other institutions.

The Strategic Advisory Taskforce established by Ministers is now undertaking a series of workshops to engage in detail on themes including income generation, shared services and the city, region and community.