Financial Statements Year Ended 31 July 2013 1

Transcript

Financial Statements Year Ended 31 July 2013 1 Contents Page List of Members of Council 3 Vice - Chancellor’s Statement 5 Operating and Financial Review 6 Statement of Council Primary Responsibilities 22 Corporate Governance Statement 23 Statement of the Council’s Responsibilities and Internal Control 25 Independent Auditor’s Report to the Council of the University of Salford 27 Consolidated Income and Expenditure Account 29 Consolidated Statement of Historical Cost Surpluses and Deficits 29 Consolidated Statement of Total Recognised Gains and Losses 30 Consolidated Balance Sheet 31 University Balance Sheet 32 Consolidated Cash Flow Statement 33 Statement of Principal Accounting Policies 34 Notes to the Accounts 39 2 Membership of the Council 2012/13 Independent Members Dr A Mawson [2 3 4] (Chair of Council, Chair of Nominations and Governance Committee. Chair of Council Advisory Group) Mr W Smith [2 4] (Deputy Chair of Council) Mr M Amin [2] Cllr D Antrobus [1] (Lead Member for College of Science and Technology) Mr M Appleton [3 4 5] (Lead Member for Estates) Mr K Brady [1] Mr T Britten [1 4] (Lead Member for Information Technology) Dr M Burrows [3 4 5] (Lead Member for Finance) Mr N Collins [2 4 5] (Lead Member for Human Resources) Mr P Crompton [1] (Lead Member for College of Health and Social Care) Ms J Fawcett (Lead Member for College of Arts and Social Sciences) Mr E Healey [1 4] (Chair of Audit Committee) Mr M Johnson [3] (Chair of Remuneration Committee) Ms J Luca Ms C Moreland [2] Mr S Sorrell (Lead Member for College of Business and Law) Ms R Turner (Lead Member for Equality and Diversity) Internal Members Professor M Bull [2] Ms C Kennedy (student nominee) Mr T Doyle (student nominee) Professor M Hall [2 3 4] (Vice-Chancellor) Professor G Murphy Ms A Mullan Notes (a) The number after a member denotes membership of one of the following Committees or Groups during 2012/13; 1. 2. 3. 4. 5. Audit Committee Nominations and Governance Committee Remuneration Committee Council Advisory Group Budget Review Group (b) During 2012/13 there were two co-opted members of the Audit Committee who were not members of Council: Mr B Wilkinson and Ms K Smith. (c) Other members of Nominations and Governance Committee who were not members of Council during 2012/13 were; Mr K Barnes, Prof H Morris, Prof G Murphy, Prof J Yip and Ms J Redfearn (the first four named were members only for the consideration of candidates for the award of Honorary Degrees). The following page indicates member attendance at Council meetings during 2012/13. 3 UNIVERSITY COUNCIL – Attendance Register 2012/13 ATTENDANCE BY MEMBERS 2012/13 02 Oct 2012 22 Nov 2012 07 Feb 2013 21 Mar 2013 16 May 2013 4 July 2013 (max = 6 this academic year unless otherwise stated)       6    X     X  X X X      X X  X X       X    X         X X   X              X   X    X     X X  X     X   X    X   X   X X    6 5 (max 5) 5 4 5 5 4 6 4 2 6 4 3 (max 5) 2 (max 5) 5 5 (max 5) 1(maternity leave)                            X   6 6 5 6 6 Ex-officio Prof M Hall INDEPENDENT MEMBERS Dr A Mawson (Chair) Mr M Amin* Cllr D Antrobus Mr M Appleton Mr K Brady Mr T Britten Dr M Burrows Mr N Collins Mr P Crompton Ms J Fawcett Mr E Healey Mr M Johnson Ms J Luca* Ms C Moreland* Mr W Smith Mr S Sorrell* Ms R Turner INTERNAL MEMBERS Prof M Bull Mr T Doyle Ms C Kennedy Ms A Mullan Prof G Murphy = Present X = Absent Overall attendance rate by members on 2012/13 was 83% * - joined Council on 22 November 2012 4 Operating and Financial Review 2012/13 Context and Introduction 1. Council adopted the current version of the University’s Strategic Plan (covering the period 2009/10 to 2017/18) in November 2009. This plan set out clear objectives which, as outlined in previous versions of the Operating and Financial Review, have been pursued vigorously over the past four years. 2. Outcomes have included: • significant improvements in the quality of the student experience; • notable achievements in research and international partnerships; • the successful completion and launch of the MediaCityUK campus; and, • transformation of professional services across all parts of the University. 3. It is, however, undeniable that there have been fundamental changes in the external environment in the four years since the Strategic Plan was launched. 4. It is now generally accepted that the next decade will be a period of low economic growth in Britain, with lower demand for conventional Higher Education qualifications and sharper distinctions between non-profit and for-profit institutions. At the same time, there will be new and significant global opportunities in the east and the south. The digital revolution will continue to transform educational opportunities and their accessibility and the range of organisations that provide them. 5. Specifically for Higher Education, the shift of almost all tuition costs to the student through fees and loans has altered the profile of demand for places by British and European Union students. There is now greater demand for programmes of study that lead directly to good employment prospects (for example, in the health disciplines and in science and technology). There are greater advantages in institutional distinctiveness (in the University’s case, for example, programmes associated with MediaCity), and in maintaining and improving the quality of our provision. Accompanying this has been a significant decline in demand for conventional taught post-graduate programmes and for part-time study. For international students, the maturing of Higher Education systems in countries enjoying sustained economic growth, coupled with increased visa and immigration controls by the United Kingdom requires new and imaginative approaches from universities like ours. 6. Locally, the University faces increased competition from existing and new higher education providers, exacerbated by a demographic decline in 18-year olds looking for university places. Some 80% of our undergraduate students live in the north-west, and more than 50% join us with vocational qualifications from the Further Education (FE) sector. Our approach to student recruitment will be revised to take account of the continuing, long-term, significance of our partnerships with schools and colleges and the opportunities for working together with other universities in our region. 7. Further, the premises of research funding have changed. Whereas our previous Strategic Plan could focus on maximising block research funding through successive research assessment exercises, funding from this source has diminished and has been increasingly directed to a small, elite, group of universities. Funding from research councils has also declined. While research assessment exercises and research council funding will continue to remain vital, the benefits may be more reputational than financial. If we are to continue to be a research-led University, we need new and effective forms of funding for research and innovation. 8. In March 2013 the University Council considered and accepted the Executive Board’s recommendations for ensuring the sustainability of the University in the world as outlined above. These recommendations were designed to build on established strengths in science, technology and health, with a distinctive identity founded in the knowledge and digital economies, creative industries and business. Our investment in MediaCity is central to these areas of strength, and to future opportunities. In endorsing Executive Board’s recommendations, the Council recognised that the following measures were essential for the future success of the University: • the discontinuation of academic programmes that either fail to achieve required quality standards, or which no longer attract sufficient student registrations to be financially viable; • the reduction, where required, in academic staffing to appropriate levels, as measured in staff to student ratios and taking account of professional body requirements when appropriate; 6 9. • the continuing re-alignment of professional and administrative staffing levels against appropriate sectorial benchmarks; • a strengthened and expanded College of Health and Social Care, including the Social Sciences; • the continued strengthening of Arts and Media as a distinctive, widely recognised asset of the University; • the continuation of reforms and consolidation in the Salford Business School, with a clear identity based on core business studies and alignment with areas such as health and the creative economy and the built environment; • the re-alignment of teaching, professional enhancement and research in Law, matching our focus areas of Business, Media, Health and the Built Environment with appropriate legal expertise; • the strengthening and focusing of provision in science and engineering, with an emphasis on integration with the opportunities offered by MediaCity; • the continuation of current initiatives in Environment and Life Sciences, to ensure a distinctive and differentiated suite of academic programmes that can maintain appropriate student recruitment levels; • the reform of the School of the Built Environment, to enable it to maintain its leading position by adapting to significant changes to the areas in which it operates while achieving an acceptable minimum threshold of financial contribution; • the continuing reform and strengthening of our Professional Services in the areas of marketing activity, student administration, academic development, library consolidation, information technology, financial management, procurement and purchasing systems and human resource management across the University. The overall outcome of this process of realignment to strength will be a University comprising five key areas: Health and Social Sciences, Science and Technology, the Built Environment, Business, and Arts and Media. Each of these must achieve consistency in the quality, and relevance, of their undergraduate and postgraduate academic programmes, and for their applied, industry, business and professionally-oriented research. 10. Changes such as those we have encountered over the past few years are not new; given that our history reaches back into the nineteenth century and the industrial revolution, the University has often adapted to changing circumstances and opportunities. In this, our present community of students and staff has the responsibility and privilege of custodianship, looking forwards to the needs of the future. 11. At the end of 2012/13, the University had embarked upon an extensive consultation exercise to ensure that its new Strategic Plan (which was finalised and submitted for approval by Council at its November 2013 meeting) addresses these changed circumstances from the foundations of our previous achievements and within the framework of our overall Mission of an enterprising University that transforms individuals and communities through excellent teaching, research, innovation and engagement. 12. Much of the University’s activity over the past twelve months reflects its recognition of the changed circumstances in which we are now operating and, in particular, the need to develop a distinctive position in the Higher Education marketplace based on the University’s heritage of education for capability; through research-led teaching, innovation and enterprise, the University intends to create distinctive opportunities in business, science and engineering, the built environment, arts and media and in health and social services and their applications. This work will empower and enrich the University’s community of students, staff and partners in the public and private sector. Through its international reach, the University will develop the synergies between the Greater Manchester region and complementary places, responding to the imperatives of a digitally connected world. 13. Alongside the initiation of its new Strategic Plan, the University refreshed its senior leadership through the establishment of new and separate roles of Deputy Vice-Chancellor, Registrar and University Secretary; these roles will assure refocused, dedicated and integrated academic, professional services and governance leadership. Developments in 2012/13 14. 2012/13 can therefore be seen as the year in which the University embarked on the journey towards a new strategic direction to ensure its long term sustainability and viability. The financial statements which follow this review confirm the University’s achievement of a £4.6 million surplus in 2012/13 in line with the financial forecast returns made to the Higher Education Funding Council for England in December 2012.During 2012/13, in order to ensure continued academic and financial sustainability in the years ahead, the University completed a systematic and forensic review of programmes focusing on key metrics for programme performance in the areas of strategic fit, student demand, academic quality, student experience and financial performance. This frank appraisal of strengths and weaknesses 7 and areas of potential growth resulted in the set of recommendations referred to in paragraph 8 and set the framework for the reshaping of the University. In accepting these recommendations, the University Council recognised, albeit reluctantly, that future growth would need to be at the expense of some programmes where the University was unlikely to recover student demand. Success and sustainability in the future is therefore predicated on the need to rationalise activities which were no longer thriving and where meaningful recovery is unlikely. 15. Accordingly, the University has begun to restructure and reposition its academic offer as outlined in paragraph 8. This process included the disestablishment of the current School of Humanities, Languages and Social Sciences and the phasing out of current academic programmes in Modern Languages over the next four years. Other restructuring measures saw the disciplines of English and Creative Writing and Politics and Contemporary History forming part of the School of Arts and Media, with Sociology and Criminology joining Social Policy in moving to the College of Health and Social Care. In a parallel exercise, to ensure both the optimisation of resources and that staffing resources reflect sector norms, restructuring of professional services areas continued, with change in the areas of IT Services, Change and Planning, Governance, Human Resources, the Library, Finance and Student Life and Student Information Directorates. Developments: Teaching and Learning 16. The University has continued to progress implementation of its Learning and Teaching Strategy, encapsulated under the acronym of ASPIRES: Accessible Higher Education Student Focussed Pedagogically Excellent Internationally Orientated Research Informed Employability and Enterprise Sustainability ASPIRES will be the vehicle for the University’s transformation of teaching and learning going forward, with an emphasis on maximising the value of technological innovation and face to face contact and synchronous learning. 17. Key developments in the development of the Strategy in 2012/13 included: • movement to a published tariff range for each programme with the minimum entry level being 220 points; • the University continuing to exceed its benchmark targets for widening participation (both in terms of participation for lower participation neighbourhoods and mature students with no previous experience of higher education); • development of a project to implement timetabling improvements for 2013/14; • development of standard operating procedures for the administration of the personal tutoring system; • approval of a revised Academic Staff Development Policy that supports the alignment of the other relevant plans, policies and strategies; • establishment of a University-Students’ Union working group to strengthen the Student Representative System; • more systematic and effective reporting outlining professional service areas contribution to the learning and teaching strategy; • development of an Academic Staff Development policy; • increased focus on the postgraduate research student journey; • lead higher education institution in the BBC Technology Apprenticeships Scheme, funded by The Department for Business, Innovation & Skills, the Scheme aims to deliver 100 new graduate Broadcast Engineers by 2020; • approval and dissemination of academic role descriptors to all staff; • launch of the Salford prequel, a series of bespoke taster events for undergraduate offer holders to improve conversion rates; • further strengthening and embedding of employability and enterprise activities into academic programmes; 8 • granting of accredited College status to Blackpool and the Fylde College following the granting of this status to The Manchester College in 2011/12; • approval of affiliations with a range of other local FE partners (including Salford, Bury and Carmel), further cementing pathways to progression to the University; • award of a HEA National Teaching fellowship to Mary Oliver, Lecturer in Performance in the School of Arts and Media; • organisation of a successful Learning Technologies Summer School attended by over 270 staff; • development of a series of programme and academic leader colloquia with a particular emphasis on improving the management and delivery of teaching and learning; • the establishment of Postgraduate Research Student Consultation Committees in each School, alongside the establishment of a Postgraduate Research forum; • continuation of the successful Salford Student Advantage programme (the programme provides voluntary workplace experience or equivalent opportunities for all students). 18. The University has systematically measured its performance in transforming Teaching and Learning; the application to acceptance ratio has shown modest improvement over the past two years (currently 4.81 against 4.40 in 2010/11 and 4.79 in 2011/12) and improvement over the past two years has been seen in average score for UCAS points (or equivalent) on entry (currently 298 against 283 in 2010/11 and 291 in 2011/12). However, the University’s overall satisfaction score in the National Student Survey fell by 2% compared to 2012 (from 81% to 79%). Whilst there was an improvement in the scores for Learning Resources (an increase of five percentage points to 81%), the University is aware that a delay in the issuing of timetables had an adverse impact on the scores for organisation and management (a decrease of four percentage points to 69%) and action to address this is already underway. Whilst some programmes achieved 100% satisfaction rates, attention will focus in 2013/14 on those programmes with the lowest overall satisfaction scores. 19. In relation to the Key Performance Indicators of student continuation and progression, the steady improvement in performance from 2010/11 to 2011/12 continued in 2012/13 (improvement of 3.1 percentage points for completion, to 87.2%; improvement of three percentage points for progression, to 81.1%). 20. Following an Institutional Review carried out by the Quality Assurance Agency in June 2013, the University received confirmation that it fully met all dimensions of academic standards for higher education in the UK; threshold standards for awards, the quality of information provided and the quality and enhancement of student learning opportunities. The report noted two areas of good practice (the integration of student employability into student services and curricula and ASPIRES), affirmed the value of five areas of work underway or planned (for example, the embedding of the Assessment Handbook in staff development activities) and made three recommendations for short-term improvements (for example, that, by the end of the 2013/14 academic year, we should revise our approach to the design and implementation of large scale developments in information technology in order to further prioritise the interests of students). Developments: Research 21. Research has been and will continue to be central to the University; the revised Strategic Plan will articulate the University’s approach as research and inquiry focused and teaching resourced. Research leadership in the University’s areas of expertise directly informs the content and quality of teaching, providing students at all levels with inspiration from the leading edge of discovery and innovation. The comprehensive review of strengths and weaknesses carried out during 2012/13 confirmed areas of strength and potential that align with key growth sectors for the City region and the North West, for example, creative and digital industries, advanced manufacturing, energy, life sciences and health and social care. Moreover, the University’s areas of strength and expertise map against seven of the eleven industrial strategy sectors that are shaping government policies for economic growth, e.g. aerospace, oil and gas, education exports, the information economy, construction, professional and business services and the life sciences. 22. These areas for development and growth build on the University’s heritage and include areas of existing established research capacity. Coupled with the University’s capacity for interdisciplinary research (exemplified by the establishment of an Institute for Dementia Studies, involving colleagues in the College of Health and Social Care and the School of the Built Environment) and investment in MediaCity, the University is well positioned for the future. However, there is recognition that performance against key indicators as set out in the current strategic plan is mixed and there is scope for improvement. 9 23. This mixed performance is exemplified by an increase in the value of bids submitted (£10 million or 15.8% annual increase), a slight reduction in conversion rates (excluding partner payments (10.4% success rate against 11.1% in the previous year), a slight increase in the value of awards won (£7.8 million, an annual increase of £0.6 million) and a decline in research income (c£6.6 million, 21% annual reduction). Similarly, whilst research grant contract income has declined, research grant and contract income per academic FTE has increased as staff numbers have fallen. 24. The University has concentrated on improving postgraduate research completion rates to ensure completion within four years for full-time and seven years for part-time students. Rates continue to improve steadily (30% compared to 11% 3 years ago), although further work is required to bring this in line with the sector average. The University’s Programme Learning Experience Survey (SUPLE) showed a healthy return from PGR students (52% - 20% higher than a comparable national survey) and good engagement; the quality of course rating of 82% masked very healthy scores of 86% for employability and academic support and areas evidently requiring further attention (66% for Organisation and Management and 70% for Learning Resources). These results are being analysed to enable initiatives and action plans to be developed in 2013/14. 25. The number of new PGR students per academic FTE has increased slightly; the percentage of academic staff with a doctorate is currently over 45%, with the University on course to achieve its target of 50% by 2017. The University’s Research Excellence Framework submission will include around 250 staff. Research support costs as a percentage of Research and Innovation income has achieved the target of 10% following a major restructuring of research support staff. 26. The University’s performance in relation to the establishment of Knowledge Transfer Partnerships (KTP) continues to be healthy, with 12 live projects out of a total of over 600 live KTP projects. This means that the University has almost th 2% of the national total, currently ranked joint 12 in the UK. Developments: Enterprise and Engagement 27. The University (excluding subsidiaries) generated over £5.3 million in enterprise income in 2012/13, slightly exceeding its target. Realignment of subsidiary companies, under the aegis of University of Salford Enterprises, has continued, with disposal of some activities achieved or in train. Salford Professional Development Limited was established as a wholly owned spin out company to manage non-accredited CPD programmes for the University and has already generated profit of over £180,000 since start-up in January 2013. Orders for the new financial year (approaching £400,000) are already above target. 28. Worthy of specific mention are both the low carbon aerosols project which, in addition to a major contribution to the sustainability agenda, has the capacity to deliver significant financial contributions to the University over the next four years (circa £3 million) and Optimum, the polarisation microscopy project. Optimum offers the potential to deliver a more comprehensive visible light microscope with the capability to gather more information than current products from biological material. 29. The University’s Destination of Learners in Higher Education return shows that approximately 86% of University of Salford students go on to graduate employment, study or a combination of work and study following graduation in 2013. Whilst recognising some of the limitations of the current DLHE methodology (which included the University challenging the categorisation of specific occupations, particularly in the creative entrepreneurial industries, as non-graduate), the University has continued to take action to promote graduate employment. For example, following a survey of graduates in autumn 2012, targeted support and advice was offered to those likely to define themselves as unemployed in January 2013 (“Graduate Boost” on-campus training programmes were held early in 2013). In addition, a careers mentoring scheme matches students who perceive themselves as having barriers to access the labour market with mentors from workplace sectors they aim to enter. The Enterprise Academy also provides training, support, guidance and start-up funding for students who want to set up their own businesses. 30. The University has continued to develop the Salford Advantage programme, a “co-curriculum” initiative which provides opportunities for student engagement to grow employability skills and experience. This can be achieved through a range of activities which include work placements, work experience and volunteering. The Salford Advantage and Leadership Awards provide the formal recognition of skill development and through this, students can build their curricula vitae and reflect upon practice gained through other activities such as mentoring, the international programme and sports. Students are able to access opportunities and record their achievements through a centralised IT system. College and Business Partners support a hub and spoke delivery of student engagement, employability and support services. This has seen a significant increase in student participation with these services, for example, engagement with study skills has more than doubled in the first year of the College teams. (see reference also in paragraph 48) 10 Developments: Our People 31. The reshaping of the academic portfolio outlined above has resulted in some further staff restructuring programmes, building on initiatives referred to in previous Operating and Financial Reviews. Some mitigating measures are described in paragraph 15 above and, along with vacancy controls and the use of redeployment where appropriate, these measures eliminated the need for compulsory redundancies in 2012/13. 32. Whilst these staffing changes will better equip the University for the future environment and assist it in assuring future sustainability, there is recognition that cumulative changes over the past few years have been difficult for staff. In addition to those directly affected, staffing reductions significantly impact on working environments and institutional culture; going forward, the University is committed to transparency about change and the consequence of change. The University’s commitment to a constructive industrial relations climate was exemplified by an extension of the period for collective consultation, which began in April 2013. This included thorough consideration of counter proposals put forward by staff in affected areas (via the trade unions) to mitigate some of the financial challenges they were facing. As a result positive variations were agreed in relation to English Language, Politics and Contemporary History where new programmes will be developed in the School of Arts and Media that will complement existing offerings in Creative Writing, English Literature and Journalism. The University is also committed to supporting a strong international agenda with appropriate language provision for our students studying other disciplines who wish to also explore foreign language skills. The University has appointed an independent chair to lead a review as to what this appropriate provision might be going forward. 33. The University is committed to developing policies, procedures and capacity to recruit and retain the best people at all levels of the organisation and to offer appropriate support and development opportunities. Furthermore, implementation of effective performance development and review (PDR) processes at all levels will help to ensure both consistent contribution to institutional objectives and recognition of the contribution of individuals. During 2012/13, the University made significant progress in relation to PDR, with a completion rate of over 80%. The development of further appropriate robust performance indicators will continue in 2013/14, allowing effective measurement of relevant elements of the revised Strategic Plan. Developments: Infrastructure and Services 34. The development of the University’s estate proceeded with Council approval of the new “Gateway” building on the Peel Park campus and, subject to the satisfactory conclusion of some conditions, the construction of new student residences. Both of these developments are essential to realising the University’s ambition to improve the student experience and create contemporary, vibrant spaces for living and learning on campus. The Gateway Building will be designed to provide a mixture of specialist space (for example, to accommodate the requirements of programmes in the School of Arts and Media) and flexible space to optimise usage; construction of the Gateway Building will enable the University to divest itself of sub-optimal buildings and significantly improve on efficiency of use. The University’s current performance in relation to space utilisation and building quality is poor as defined by HEFCE (12%) space utilisation; 74% of buildings in conditions A and B (where condition “A” is “as new condition” and “B” is “Sound and exhibiting only minor deterioration”) and significantly below the sector average. Whilst the University’s performance in relation to carbon emissions is much better (15,748,000kg CO 2 ) and in line with internal targets, moving out of inefficient buildings into purpose built, environmentally sustainable structures will have a further beneficial impact. As th testament to its focus on ensuring environmental sustainability, the University achieved 17 place in the People and Planet green league table of Universities, a rise of 34 places. The league table measures factors such as water use, carbon emissions and recycling on all UK University campuses. Contributing factors to this improvement included a student suite switch off scheme that saved £12,000 (100 tons of CO 2 ), a composter to reuse food waste and a generator powered by waste food oil/fat. 35. Both the Gateway and Residences projects are due to open in 2015/16; in the meantime, a number of smaller projects which will have a positive impact on the experience of existing students have been completed in time for the start of the 2013/14 session. These include: • renovation and reopening of Chapman Building at a cost of £8 million; • creation of a new training and conference facility at MediaCity at a cost of £675,000; • the refurbishment of the Lady Hale Building to provide a new home for the Business School; • the refurbishment of the Sports Centre. 36. Previous Operating and Financial Reviews have referred to the University’s investment in IT infrastructure and this investment means that the University is well placed to provide innovative approaches to academic delivery. Work this 11 year has strengthened failure and resilience testing and has enabled enhanced business recovery planning processes. The development of an IT Self Service Portal, a “Salford App” for mobile devices and a project to facilitate participation assurance were all in train as the academic year concluded. The University is committed to ensuring that its further IT investment and development is cognisant of current student practice and expectation about the way they learn and access information; we are already aware that there is insufficient demand for the current volume of open access personal computers and appropriate action is being taken to rationalise the provision. 37. The University continued the process of redesigning and streamlining key processes to ensure that the benefits of the model College and School administrative structures were realised (the model School structure was implemented in September 2012, following the launch of the model College in 2011/12). This process included improvements to processes supporting the academic journey, including student electronic submission of Personal Mitigating Circumstances details, online module enrolment and electronic provision of information for Examination Boards. In view of the realignment of the academic portfolio referred to elsewhere in the review, the University will take stock of current administrative structures in 2013/14, ensuring that they remain optimal and continue to deliver the benefits realised from earlier reconfigurations. Developments: International 38. The University’s focus on fostering a strong, embedded culture of internationalisation and extending international engagement has continued in 2012/13. Internationalisation is a significant determinant of the quality and relevance of learning and teaching. International students contribute the richness and diversity of their perspective, experience and ambitions whilst home students (drawn mainly from the north-west region), by joining an international community on campus, broaden their perspective and gain experience that will be particularly valuable to them in their future careers. 39. Much of the University’s experience and heritage in research, innovation and enterprise has an international dimension. For example, research in the biological sciences and specifically in the field of parasitic infection, has resulted in long standing and well established links with China. The University’s lead role in disaster resilience has involved research and innovation activities in Sri Lanka; the University also has a joint research centre in Basra, assisting in the reconstruction of Iraq (as a result of its work in post-war disaster recovery, the University was awarded runner-up position in the Times Higher Education award in the international collaboration of the year category). The University is clear that its ability to grow and diversify student enrolment, offer distinctive programmes and build on existing research and enterprise profiles is dependent on the development of strong international partnerships – international priorities will shape and strengthen the University’s local and regional identity. 40. The University will ensure that the status of internationalisation as an integral element of University strategy is reflected in the development of insightful metrics and performance indicators. Current indicators show that performance in relation to the applications to acceptance ratio is strong (over 10:1) although more work is required to assure consistent quality of applications. International student recruitment has been impacted by national policy changes on immigration and post study work opportunities which has seen certain key markets (e.g. India) disproportionately affected. Targeting of other markets (for example, the Middle East) is helping to mitigate the impact; whilst there has been a reduction in undergraduate student numbers (838 in 2012/13 against 994 in 2011/12), and a slight reduction in postgraduate taught admissions (1,026 in 2012/13 compared to 1.037 in 2011/12) there has been a significant increase in postgraduate research students (253 in 2012/13, compared to 216 in 2011/12). 41. The development of partnerships and programme developments continued throughout the year including institutes in Malaysia, Singapore, Brazil, India, the UAE and the USA. 42. Risk to Institutional Strategy The University has continued to develop and mature its approach to the assessment and management of risk and the measurement and analysis of performance. Both the corporate risk register and the key performance indicator (KPI) framework (the latter modelled on CUC guidance) are aligned to the Strategic Plan and its constituent goals. KPI metrics are being refined in the light of the development of the revised Strategic Plan and the University is cognisant of developments in this area arising from the work of the Financial Sustainability Strategy Group. The University Executive monitors and reviews the risk register and KPIs on a regular basis; the most significant corporate risks are considered at each meeting of Audit Committee and Council, with the risk reporting framework allowing for the escalation of risks, depending on the internal and external environment. This process of escalation, refinement and emergence of new risk is informed by local risk registers at College, School and Professional Services level, as well as those held by major cross institutional improvement projects such as capital programmes. KPIs are reviewed by Council at each meeting, informed by a management report which highlights key movements and the development of new indicators as definition of some projects/activities to deliver the strategic goals matures. 12 Risks under the closest scrutiny at the end of 2012/13 were as follows; • Strategy and Policy; failure to recruit to 95% of its Student Number Control (SNC) target and potential permanent reduction of SNC figure, impacting on future growth aspirations. Indications at the start of 2013/14 were that the University had comfortably exceeded the 95% target and indeed had exceeded its actual target; • Financial; challenges around student recruitment remain, although as mentioned above 2013/14 recruitment is healthy. Contingency plans had been built into the budget however subsequent recruitment has shown a contingency is only required in one school. • Reputational; given recent staff restructuring and reshaping of the academic portfolio, the University has invested significant time in communicating with existing and prospective students, and affected staff and Trade Unions to explain the rationale for the changes being proposed and provide reassurance that the University remains an attractive place to study and work. The closure of collective consultation at the end of 2012/13 helped to mitigate this risk. The University is mindful of the potential impact of student satisfaction and teaching quality on reputation and measures to address issues arising from the National Student Survey are described in an earlier section of the review; • Operational; the risk of failure to retain key staff has reduced following the conclusion of restructuring. Estates and capital investment risks continue to be scrutinised carefully in light of developments outlined above. Student Actual Numbers 43. Student Numbers in 2012/13, compared to 2011/12 are set out below 2012/13 International Total HEFCE Fundable Non-HEFCE Fundable International Total Non-HEFCE Fundable Undergraduate Postgraduate – Taught Postgraduate – Research Total HEFCE Fundable Student Type and Funding Source 2011/12 10,777 2,466 - 3,397 173 367 838 1,026 253 15,012 3,665 620 12,026 2,469 - 3,484 181 385 994 1,047 216 16,504 3,697 601 13,243 3,937 2,117 19,297 14,495 4,050 2,257 20,802 Public Benefit 44. The University is an exempt charity under the terms of the Charities Act. The Council and Executive of the University has paid due regard to the Charity Commission’s guidance on the reporting of public benefit, and particularly to the supplementary guidance on the advancement of education, in accordance with the requirements of the Funding Council as the principal regulator of English higher education institutions under the Charities Act 2011. 45. The University’s objects, as set out in its Charter, reflect institutional commitment to public benefit: “The objects of the University shall be to advance education and knowledge by teaching and research, and in doing so to foster an academic environment which is enterprising and applied to business and the professions, and for the benefit of society at large.” 46. The University’s current Mission, Vision and Values also reflect this commitment to public benefit with their emphasis on the transformative impact of the University (on individuals and communities) and service and benefits to society. It is clear that the University’s students derive direct benefit from the quality of the education, the opportunity this affords them for fulfilling and rewarding careers and to make a wider contribution to society. The vocational and applied nature of much of the University’s undergraduate and postgraduate portfolio (for example in the College of Health and Social Care) enables the University to supply graduates that meet local, regional and national workforce demands and to carry out research of direct benefit to service users and society at large. 47. The University’s revised Strategic Plan reemphasises the University’s role as a public benefit organisation, taking advantage of enterprise opportunities to reinvest in support for our students and facilities for learning, research and innovation. Over the next five years, the University is committed to widen its impact on public benefits by establishing a Social Enterprise Fund that will address social and economic inequalities in Salford and across the Manchester City 13 Region. This approach will require effective and appropriate partnerships with third sector organisations sharing similar objectives. It will also require a continuum between research, teaching and professional development in areas of expertise and the deployment of expertise to public advantage. The University is also committed to enhancing the public realm in and around the Peel Park campus, recognising its reputational significance for the University, and its significance for the City of Salford and its urban regeneration priorities. 48. The University’s focus on employability and broader social benefit is illustrated by the Salford Advantage programme which was approved in May 2012, comprising an enhanced curriculum, co-curricular activities and opportunities for engagement. The University has set a target of all students being engaged in either work experience or placement activity by 2014, with the definition of placements encompassing community engagement and volunteering. Progress in this area in 2012/2013 can be summarised as follows; • The Salford Advantage Programme Board was established to embed employability across the University. In its second year of implementation, the Board focused upon increasing student contact, particularly through the bespoke programme and additional, localised provision developed in partnership with College Teams. The success of this approach to student engagement has been evidenced through the increased numbers of students participating in employability and support sessions, with Study Skills, for example, reaching 5,000 students compared with 2,000 in the previous year. The key thematic areas have remained Student Engagement (curriculum and co-curriculum), External Engagement (employers etc), Communicating the Salford Advantage, and Evidencing and Sustaining the Salford Advantage. • The Student Channel provides online opportunities, learning guides and toolkits for students. This enables students to access learning support at the time that suits them and includes a series of targeted careers information advice and guidance at http://www.careers.salford.ac.uk/diversity. 16,843 vacancies were promoted to students in 2012/13, all available on-line. • The Enterprise Academy supported a number of students and graduates who wanted to explore and pursue their own enterprises and this is particularly important for students who are more likely to be self employed. Enterprise is embedded in bespoke employability programmes. In 2012/13, the Make the Difference project supported the establishment of 22 new social enterprises and 15 students or graduates were supported through the Business Bootcamp to set up their own businesses. • A model of”Industry Insights” has been delivered with the Business School on a weekly basis which will be rolled out across the University in 2013/14. The model includes the weekly engagement with employers and preparatory sessions beforehand to ensure students can make the most of these opportunities. • Through the embedding of employability, including placements and work experience, in the Learning and Teaching Strategy, ASPIRES, this activity is now recognised as a critical element of programme development. ASPIRES was cited as good practice within the QAA Institutional Review held in 2013. • The Salford Advantage Award encourages students to develop and reflect upon their employability. Originally to recognise student volunteering, the Award now recognises activity and employability skills developed in paid work, sports, enterprise, creative activity, mentoring, international work and leadership. This increases accessibility as students have to balance work and study alongside other commitments and thus have limited opportunities to take up volunteering activities. The University’s Admissions and Retention and Widening Participation Policies support and underpin its objective to widen access to higher education for all people who have the potential to succeed and to increase participation from people from lower socio-economic groups and disadvantaged backgrounds. The University’s commitment to widening participation is demonstrated by the composition of its student body, e.g.: • 97.84% of young full time undergraduate entrants are from the state sector (compared to location adjusted benchmark of 96%). • 45.2% of young, full time undergraduate entrants are from socio-economic groups 4-7, as defined by the National Statistics Socio Economic classification (compared to the location adjusted benchmark of 38.2%). • 20% of young full time undergraduate entrants whose home area (as defined by their postcode) is known to have a low proportion of 18 and 19 year olds in higher education (compared to location adjusted benchmark of 17.6%). • 19.3% of mature full time undergraduate entrants whose home area (as defined by their postcode) is known to have a low proportion of HE qualified adults and have no HE entry qualifications (compared to location adjusted benchmark of 18.6%). 14 • 6.9% of all full time undergraduates in receipt of Disabled Students Allowance (compared to sector average of 5.9%). • 3.7% of all part time undergraduates in receipt of Disabled Students Allowance (compared to sector average of 3.4%). • In order to encourage students from non traditional backgrounds to study, the University has reviewed its Accreditation of Prior Experiential Learning entry scheme and implemented the Salford Alternative Entry Scheme pilot for a number of programmes. Prospective students are able to attend a training workshop ahead of an assessment to gain access to study. Students who are able to pass the test are then offered a bridging programme to address any fears or concerns they may have and to prepare them for university learning. • In addition to the Vice Chancellor’s Excellence Scholarship, students from the Greater Manchester area with a household income of less than £25,000 were eligible for a £2,000 fee discount and a £1,000 cash award in their first year of study. Financial advice and budgeting have been integrated within delivery at College level to ensure that more students are engaging with support available and that they also have access to part-time work to support them financially through their studies. The University recruited three new students through the Article 26 project and, in 2013/14, will be working to deliver this in-house when the Helena Kennedy Foundation’s support is due to come to an end. • The Salford CAN (the strategic partnership in Salford for young people in care and care leavers) has developed a new mentoring project for implementation in 2013/14 to raise aspirations and to support Looked After Children through positive transitions in to work and Higher Education (HE). Students, who themselves may be Care Leavers, will provide mentoring support to Salford’s Looked After Young People who have aspirations towards HE. Salford CAN has also been successful in a bid to secure Traineeships and the University will be a partner in this for 2013/14. • The BEAMs mentoring projects, supporting students who face barriers to employment was originally developed as a mentoring scheme where Alumni provided mentoring support for students. This has expanded now to other employer contacts to meet the demand from students. The LGBT mentoring scheme works on the same basis. • In February 2012, the University approved its Community Benefits policy. This provided a framework to include additional benefits through large capital contracts. The policy was applied to the procurement of the Gateway project and during 2012/13, the University negotiated a plan to provide work experience, placements, career talks, mentoring opportunities and lectures both to students and to local schools and FE Colleges in order to raise aspirations and enhance employability. The plan will go live in 2013/14. The University has maintained its commitment to a range of pre-entry activity to support its access and widening participation objectives. This has included work with five further education colleges to support and develop learners at level three from a widening participation background with the potential to succeed in higher education (this includes the Skills for HE module designed to prepare students for higher education and bridge the learning gaps between further and higher education). Following a successful pilot, this work is now embedded as a key element of the University’s post outreach provision. In relation to pre-16 learners and mature students at pre-entry level (one and two), the University has worked with further education partners to offer outreach interventions, raise aspirations and offer a clear pathway for students to progress into further and higher education. The University’s post entry support continues to focus on study skills development, close and targeted mentoring of retention and progression (strengthened by the recent implementation of a Participation Policy which tracks students attendance during the initial, vulnerable six week period after registration), a reformed Academic Portfolio with standardisation and regularisation around feedback and assessment strategies and maximisation of electronic learning resources. The University is committed to the creation of a variety of opportunities for students to develop themselves and enhance employability through active engagement with the community. 49. 2012/13 saw the initiation and implementation of a number of key developments which contribute to the public good, for example: • the launch of the Salford Trust, and its subsidiary, the Salford Academy Trust; this partnership with the City of Salford and Salford City College, which is endorsed by University Council, provides governance and support for a group of Central Salford academies -initially one secondary school, Albion, and two primary schools, Marlborough 15 Road and Dukesgate. (The University’s role is one of membership of the Salford Trust but the University has no overall control of it.) An example of the benefits of this relationship can be seen at Marlborough Road where the Headteacher sought University support for the development of sports and arts teaching and activities, and for international students to help pupils with Maths in their own language – 39 languages are spoken at Marlborough Road, which has a c30% pupil turnover rate per year because of the high proportion of refugee and asylum seeking students. Discussions about inclusion of student involvement at Marlborough Road within the Salford Advantage programme are ongoing; • continued membership of and active participation in the MediaCityUK Technical College Project Steering Group; • partnership work with the Salford Forum for Refugees and People Seeking Asylum; this launched with engagement across the first year of our undergraduate Social Work programme. The partnership will enable The Forum to make a major contribution to the University’s celebration of Black History Month in October; • hosting the Chief Constable of Greater Manchester Police for a full day Salford Division meeting and panel interaction with a range of Salford students; • partnerships with three youth mentoring programmes: Girls Out Loud, Uprising, and Reclaim; The “Salford Girls Out Loud” project has focused on girls who need encouragement to focus on education and career goals and involves women in senior positions as role models and mentors for the girls over the 12 month lifespan of the project; • the launch of a joint archives development project with the City of Salford, under the leadership of Councillor Derek Antrobus (also a University Council member); • the University’s Pro-Vice-Chancellor for Public Benefit, Prof Maggie Pearson, chairs the Salford Dementia Action Alliance. 50. A great deal of the research and enterprise activity carried out by University staff provides a range of public benefits and examples of this (in addition to the low carbon aerosols and Optimum projects described in 28 above) are cited below. For example, Professor Trevor Cox, an acoustics specialist, is a regular contributor to radio and television and in the past year has featured on the BBC Radio 4 PM programme and the Science Club programme on BBC 2 discussing the interaction of sound and the environment and the human perception of and reaction to sound. In addition, Prof Lars Berger, Senior Lecturer in Middle Eastern Politics, has contributed to Radio 5, commenting on the political situation in Egypt and Syria. Further examples of research which has contributed to the public good include: • the work of the Design Against Crime Solution Centre, led by Dr Caroline Davies and Andrew Wootton. Established in 2003, the Centre provides leadership in design-led and sustainable practice to improve crime prevention and community safety. The Centre works in partnership with police forces, governments, planning authorities, the voluntary sector, service users and communities; • partnership work with the Greater Manchester Fire Service, including the development of 3D modelling to assist with incident management and fire fighting and the potential use of robotics and artificial intelligence to assist firefighting. The partnership has also included the development of specialised fitness programmes for firefighters (as well as specialised rehabilitation and occupational health services) and cultural and community mapping, in order to identify traditional cultural issues which may make certain communities more vulnerable to the dangers of fire; • the work of the Salford Centre for Applied Archaeology and, in particular, the Dig Greater Manchester project, the largest community archaeology programme in England; over 6,000 local people have already been involved in the project which has carried out excavation evaluations across the Greater Manchester region; • leadership of a major ESRC funded project (£2.5 million) involving four other universities looking at the conditions attached to welfare benefits and whether they are successful in changing the behaviour of claimants; • in partnership with the Association of Greater Manchester Authorities, staff from the Housing and Urban Studies Unit and Salford Business School are using innovative ways of tracing the absentee owners of 900 empty houses in the region to encourage them to bring their property back into use; • leadership of a Europe-wide research project designed to reduce discrimination against Roma people and encourage better integration of this marginalised group with the rest of society; 16 51. • using its THINKLAB facilities, the University has worked in conjunction with BBC Learning to explore how interactive digital media could be used to introduce scientific and nature subjects in a more exciting and accessible manner. As a result, the THINKLAB team has provided an interactive learning platform to introduce the science behind volcanic explosions; • addressing concerns about the worldwide mislabelling of fish and potential impact on sustainability, a team led by Professor Stefano Maraini has investigated how to optimise and standardise the way in which seafood products are genetically identified and ultimately make it easier to prosecute mislabelling offenders. This work featured heavily in national media, including the BBC; • an ESPRC study by the University and architects, Nightingale Associates, in seven primary schools in Blackpool which concluded that classroom environment can affect a child’s academic progress over a year by as much as 25%; • the design by a doctoral researcher, Antonio Espingardeiro, of an interactive care robot to assist in the care of elderly people; • an ESPRC funded three year study to improve the mobility of amputees. A team of engineers and prosthetists are exploring the potential for using hydraulic technology to harvest and store energy from the parts of the prosthesis that absorb power and return that energy to the parts that do useful propulsive work. The results will be used to develop new prosthetic leg designs which have increased functionality and require less energy from the amputee; • Nobel Peace Prize laureate and recipient of the Presidential Medal of Freedom, Muhammad Yunus, visited the University in May where, in addition to receiving an honorary degree, he led a summit on social businesses, and opened the Salford Centre for Social Business. Financial review Scope of the financial statements The Financial Statements comprise the consolidated (Group) results of the University of Salford (University) and its subsidiary undertakings. The Group structure is set out in Note 13 of the accounts. Five Year Trend Analysis Extracts from the Income & Expenditure Account 2008/9 2009/10 2010/11 2011/12 £m £m £m £m 2012/13 £m Income 180.5 189.6 187.4 184.7 177.4 Staff Costs 106.0 108.3 109.8 107.0 99.4 Historical Cost Surplus/(Deficit) excluding all Exceptional items and Revaluation Gains/(Losses) 2.4 4.8 2.8 (4.3) 6.0 Historical Cost Surplus/(Deficit) including all Exceptional items 1.3 4.8 0.3 (9.1) 4.6 Sector information is only available until 2011/12. Historical Cost Surplus/(Deficit) as a Percentage of Total University Historical Income 2008/09 2009/10 2010/11 2011/12 -6 2012/13 Cost Surplus/(Deficit) as a Percentage of Total Income Sector Mean Historical Cost Surplus as a Percentage of Total Income In the last twelve months significant progress has been made in moving towards the sector mean level of surplus. This follows the significant restructuring of professional and academic services undertaken in the final quarter of 2011/12. 17 During 2012/13 the University management has undertaken a strategic review of its academic offering and a further review of its professional services - in the light of this review the University is targeting a Historical Cost surplus of 5% in 2015/16 which is the minimum level of surplus that the University requires to be financially sustainable so that it can service its borrowings and continue to invest in both its estate and staff. Staff Costs as a Percentage of Total Income 60 58 56 University Staff Costs as a Percentage of Total Income 54 Sector Costs as a Percentage of Total Income 52 50 48 2008/09 2009/10 2010/11 2011/12 2012/13 The University recognises that its staff costs as a percentage of total income are above the sector average but progress is being made towards the sector mean. By 2015/16 the University is targeting a ratio of 52% which would be comparable with the current sector mean – following the academic review it is anticipated that this can be achieved through income growth rather than significant further restructuring. Net Cashflow as a Percentage of Total Income 10 8 University Net Cashflow as a Percentage of Total Income 6 4 Sector Net Cashflow as a Percentage of Total Income 2 0 2008/9 2009/10 2010/11 2011/12 2012/13 The net cashflow as a percentage of total income has been very volatile over the five year period due to a relatively poor financial performance which has required a number of restructurings. In 2012/13 the net cashflow has improved following the return to historic cost surplus. Further progress is targeted over the next two years with the University looking to achieve a ratio above 10% during 2015/16. This higher net cashflow as a percentage of income will be required to service the increased borrowings as the University is due to draw down a further £38.5m by October 2014 to fund capital additions. Extracts from the Balance Sheet Cash and Short Term Deposits Net Current Assets 2009 2010 2011 2012 2013 £m £m £m £m £m 39.2 39.5 51.3 36.8 41.3 8.7 18.8 13.6 6.8 14.4 22.9 21.8 39.8 44.6 42.7 Total Funds Excluding Pension Deficit 125.0 131.5 159.6 137.0 130.8 Total Funds Including Pension Deficit 86.4 103.8 136.2 93.0 97.8 Borrowings: Bank loans and Mortgages 18 Current Asset Ratio 1.6 1.5 1.4 1.3 University Current Asset Ratio 1.2 Sector Current Asset Ratio 1.1 1 2008/09 2009/10 2010/11 2011/12 2012/13 During 2012/13 as a result of the return to historic cost surplus and a fairly low level of capital expenditure, progress has been made in moving towards the sector mean for the current asset ratio. Over the next few years the University is looking to further improve this ratio so that it can finance a greater level of capital expenditure from internal resources and to invest in the student experience. External Borrowing as a Percentage of Total Income 30 25 20 University External Borrowing as a Percentage of Total Income 15 Sector External Borrowing as a Percentage of Total Income 10 5 0 2008/09 2009/10 2010/11 2011/12 2012/13 The University’s borrowing has steadily risen over the 5 year period as the University has borrowed in order to improve the University’s estate. The borrowing is currently in line with the sector but the University has a further agreed facility in place of £38.5m to be drawn down by October 2014 (see Note 20 of the accounts) which will increase the external borrowing percentage to 46% based on 2012/13 income levels. The purpose of the facility is to fund the construction of the Gateway building. Whilst this level of borrowing is above the sector average the University is forecasting to be generating surpluses that are more than sufficient to service this level of borrowing. 2012/13 Financial Headlines • • • • • • • Historical cost surplus of £4.6m, after net exceptional costs of £1.4m, which is an improvement of £13.7m since last year’s deficit. Income fell by £7.3m (3.95%) to £177.4m. Staff costs fell by £7.5m (7.0%) to £99.5m. Other operating expenses fell by £11.2m (17.1%) to £54.1m. Short- term deposits and cash increased by £4.5m to £41.3m. Net current assets increased by £7.6m to £14.4m. Pension deficit fell by £11.0m to £33.0m. The return to surplus follows the restructuring of professional services and academic services undertaken in the final quarter of 2011/12. During 2012/13 costs have continued to be tightly controlled with an in year review of all academic areas and a further restructuring of professional services to ensure that the University’s cost base is in line with the level of budgeted income in future years. 19 Income and Expenditure Total income fell by £7.3m (3.95%) to £177.4m. HEFCE income fell by £12.4m which was due to a fall in HEFCE teaching grants of £12.6m. This follows the change in government policy with the introduction of higher fees for the first year students with a corresponding reduction in HEFCE grants for these students. Tuition fees increased by £10.6m with this rise concentrated in home full time students - £10.6m. Overseas student income and Part Time Students fell by £0.5m and £1.0m respectively which was compensated for by an increase in Other Teaching Contracts of £0.8m and short courses of £0.5m. Research income fell by £1.75m with the fall concentrated in Research Council and Central Government grants. Other income fell by £3.9m with the fall concentrated in Residencies, Catering and Conferences (£2.2m) and Other services rendered income (£1.7m). The fall in Other Services Rendered was due to a fall in income for the subsidiary company Salford Software of £2m. Total expenditure fell by £18.5m – 9.4%. Staff costs continued to fall (excluding early retirement, voluntary severance and pension costs) decreasing by 7.5m (7.0%) reflecting the restructuring of both academic and administrative functions in the summer of 2012. Recurrent Staff costs accounted for 56.1% of income (last year 57.9%) which is an improvement but is still above the sector average. Other operating expenses fell by £11.2m – 17.1% to £54.1m. Savings have been made in most areas of expenditure and in particular professional fees (£3.2m), Premises, Maintenance and Repairs (£1.8m) and Scholarships, Bursaries & Other Student Expenses (£1.6m). Depreciation has fallen by £0.6m. The University continues to accelerate depreciation on certain elements of the estate (Adelphi Campus and Student residencies at Castle Irwell and Peel Campus) as the remaining working life of these buildings has been reduced as the University looks to implement the estate campus plan. Subsidiaries Performance The University’s main trading subsidiary Salford Software Limited made a loss of £0.8m in the year. The company is currently developing a range of new products that are now ready to be marketed. Advance orders and interest for these have been very encouraging and it is believed the company will return to surplus towards the latter part of the 2013-14 financial year. Salford Professional Development Limited delivered a surplus in its first year of operation. It is forecast to improve on this result in the current year and is showing good signs of continued expansion. The University disposed of its interest in CVD Technology Limited realising a gain of £0.24m. Balance Sheet The University has continued to invest in its estate spending £4m on land and buildings and equipment. This included a further £1.4m to complete the refurbishment of the Chapman building and £1.4m on additional design and preliminary works in respect of the Gateway Building – a contractor was appointed in 2012/13 and construction of this building commenced in autumn 2013. In the final quarter of 2012/13 the University commenced the refurbishment of the Brian Blatchford building spending £0.4m with the refurbishment completed for the start of the new academic year. At 31 July 2013 the group’s total net assets excluding pension liability was £130.8m, which is £6.2m down on last year and the fall is primarily due to the accelerated depreciation noted earlier. Net current assets have increased in the year by £7.6m to £14.4m which is due to the return to surplus in 2012/13. The Net Pension Liability has fallen by £11m to £33.0m with the growth in assets exceeding that of the liabilities due to a combination of an increase in discount rate used to calculate the liabilities and an improvement in the stock market since July 2012. Cash Flows The University increased its cash holdings by £4.5m to a balance of £41.3m as at 31 July 2013. This is the combined effect of cash inflows of £13.2m from operating activities, less net capital expenditure of £5.3m, repayments of £1.9m and servicing of loans of £2.0m, income from short term investments of £0.5m and a further instalment of proceeds from the sale of the subsidiary FE procurement division (the company was sold in November 2009) of £0.25m. Payment of creditors The Late Payment of Commercial Debts (Interest) Act 1998, which came into force on 1 November 1998, requires institutions, in the absence of agreement to the contrary, to make payments to suppliers within 30 days of either the provision of goods or services or the date on which the invoice was received. The University endeavoured to adhere 20 Statement of Council Primary Responsibilities The Council is the University’s governing body responsible for the finance, property, investments and general business of the University and for setting the general strategic direction of the institution. Its primary responsibilities may be summarised as follows:1. Strategic planning a) Considering and approving the vision, mission and strategic plans of the institution, longer-term business plans, key performance indicators and annual budgets, and ensuring that these meet the interests of stakeholders. 2. Monitoring effectiveness and performance a) Ensuring that there are in place appropriate arrangements for the management of the University, particularly through appointment of the Vice-Chancellor and other designated senior positions. b) Ensuring the establishment and monitoring of systems of control and accountability, including financial and operational controls and risk assessment. c) Monitoring institutional performance against plans and approved key performance indicators which, wherever possible and appropriate, are benchmarked against other institutions. d) Monitoring its own effectiveness as a governing body and reporting thereon. e) Putting in place suitable arrangements for monitoring the performance of the Vice-Chancellor and other designated senior positions. f) To conduct its business in accordance with best practice in corporate governance and with the principles of public life drawn up by the Committee of Standards in Public Life. 3. Finance a) Ensuring the solvency of the University and safeguarding its assets. b) Approving the financial strategy and the overall annual budget. c) Ensuring that the funds provided by the Funding Council are used in accordance with the terms and conditions specified in the HEFCE Financial Memorandum. d) Receiving and approving annual accounts. 4. Audit a) Directing and overseeing the University’s arrangements for internal and external audit. This includes reviewing the effective risk management, control and governance (including ensuring the probity of the financial statements and the effective management and quality assurance of data submitted to funding bodies). 5. Estate management a) Approving and keeping under review an estates strategy that identifies the property and space requirements needed to fulfil the objectives of the University’s strategic plan. b) Providing for a planned programme of maintenance for the University’s estate. c) Considering and approving all acquisitions and all disposals of land and property. 6. Human resource management a) Approving the University’s human resources strategy and policies, including remuneration policy. b) Ensuring the University has clear procedures for handling internal grievances and for managing conflicts of interest. c) Appointing the Vice-Chancellor and other senior designated positions and setting the terms and conditions for these posts. 7. Equality and diversity a) Ensuring that the University fulfils its statutory duties in relation to equality and diversity, including the obligation to promote equality of opportunity for staff and students. b) Approving the University’s Equality and Diversity Strategy. c) Approving the University’s access agreement with the Office for Fair Access and monitoring institutional performance. 8. Health and safety a) Oversight of the University’s arrangements for ensuring the health and safety of staff, students and other individuals while they are on the University’s premises and in other places where they may be affected by its operations. b) Ensuring that the institution has a written statement of policy on health and safety. 9. Students’ Union a) Ensuring that the Students’ Union operates in a fair and democratic manner and is accountable for its finances. 22 Corporate Governance Statement 1. The University is committed to best practice in all aspects of corporate governance and seeks, in particular, to apply the principles set out in Part 1 of the Committee of University Chairmen (CUC) Guide for Members of Higher Education Governing Bodies in the UK first published in November 2004 and reissued in February 2009. The purpose of this summary is to help the reader of the financial statements understand how the principles have been applied. 2. In the opinion of the Council, the University complies with the principles set out in the Guide. The Council operates with a maximum membership of 24 in accordance with the benchmark of good practice as set out in the Guide. The constitution ensures an independent/lay majority and adequate representation of internal stakeholder groups, management, staff and students. 3. The University is an independent corporation, whose legal status derives from a Royal Charter originally granted in 1967. Its objects, powers and framework of governance are set out in the Charter and its supporting statutes, the latest version of which, as mentioned above, was approved by Privy Council in 2008; further amendments were agreed in 2010 and 2012. 4. The revised Charter and Statutes require the University to have two separate bodies, each with clearly defined functions and responsibilities, to oversee and manage its activities as follows; a) The Council – is the supreme governing body, responsible for the finance, property and investments and general business of the University, and for setting the strategic direction. A statement of the primary responsibilities of the Council is set out on page 25. It has a majority of members from outside the University described as independent members, from whom the Chairman and Vice-Chairman must be drawn. A full statement of the membership for year 2012/13 is provided on page 3. None of the independent members receive any payment, apart from the reimbursement of expenses, for the work which they do for the University (details of expenses paid to or on behalf of trustees are contained on page 41). b) The Senate – is the academic authority of the University with responsibility for monitoring the academic quality and standards of the University and draws its membership from the academic staff and students of the institution. Council delegates to Senate functions relating to the planning, co-ordination and supervision of the academic work of the University. 5. The principal academic and administrative officer of the University is the Vice-Chancellor who has a general responsibility to the Council for maintaining and promoting the efficiency and good order of the University. Under the terms of the Financial Memorandum between the University and HEFCE, the Vice-Chancellor is the Designated Officer of the University and in that capacity can be summoned to appear before the Public Accounts Committee of the House of Commons. 6. The Council met six times in 2012/13 and was supported by three Committees, Audit, Nominations and Governance and Remuneration. The decisions and recommendations of these committees were reported to the Council. These committees were formally constituted with written terms of reference and specified membership, including a majority of lay or independent members (from whom the Chair for each Committee was selected). In addition, between Council meetings a Council Advisory Group comprising members of the University Executive and senior Council members met providing a regular and effective means of communication between senior management and Council. The Group ensured that there was consideration and coordination of Council business between meetings and that business was presented to Council in the most effective way. Further details of the three standing committees is set out in paragraph 8 below. 7. In other business areas, Council appoints independent members to act as lead members. Lead members have the responsibility for working with relevant members of the Executive in their portfolio area to ensure that the area is well managed, that decisions are evidence based, have followed appropriate processes and are aligned to institutional and local strategy. Lead members report to Council on areas of responsibility assigned to them. The role of the lead member is not to manage the business area but to ensure that it is being well managed and that managers are making appropriate, well-informed decisions and following due process. Key questions which the lead members report on to Council include: a) to what extent are the objectives in the strategy/plans relating to the business area being delivered? b) are the risks relating to activity in the business area being well managed? c) is communication between the lead member and the management lead sufficient? 23 In 2012/13 Lead Members operated in the following portfolios; Estates, Finance, Human Resources, Information Technology and Equality and Diversity and each of the four Colleges. The Lead Member Finance was assisted throughout 2012/13 by a small Budget Review Group (chaired by the Lead Member) which enabled ongoing scrutiny and review of budget proposals before they were submitted to Council for approval. 8. The Audit Committee met four times in 2012/13 with the University’s external and internal auditors in attendance. Whilst senior officers attend meetings of the Audit Committee, they are not members of the Committee, and the Committee is able to meet the external auditors and internal auditors for independent discussions. The Committee considers detailed reports together with recommendations for the improvement of the University’s systems of internal control and management’s responses and implementation plans. It also receives and considers reports from HEFCE as they affect the University’s business and monitors adherence to regulatory requirements. The Remuneration Committee determines the remuneration of the Vice-Chancellor and a small number of other senior staff as well as setting the remuneration policy for senior staff. The Nominations and Governance Committee advises Council on its membership and representation on other internal and external bodies and the operation and effectiveness of corporate governance arrangements. 9. As Principal Officer of the University, the Vice-Chancellor exercises considerable influence upon the development of strategy, the identification and planning of new developments and the shaping of the ethos of the institution. The ProVice-Chancellors and other senior managers who comprise the Executive all contribute in various ways to this aspect of the institution, but the ultimate responsibility for what is done rests with the Council. The Executive Committee and the Audit Committee receive regular reports from the internal auditors, which include recommendations for improvement. 10. The University maintains a register of interests of members of the Council and Senior Officers, which is published on the University’s website. Any enquiries about the constitution and governance of the University should be addressed to the University Secretary. 11. The effectiveness of governance arrangements is regularly assessed by the University’s internal auditors and, following an independent effectiveness review of Council in 2010/11, a further review is planned to take place in 2014. 24 Statement of the Council’s Responsibilities and Internal Control 1. As the Council of the University of Salford, we have responsibility for maintaining a sound system of internal control that supports the achievement of policies, aims and objectives, while safeguarding the public and other funds and assets for which we are responsible, in accordance with the responsibilities assigned to the Council in the Charter and Statutes and the Financial Memorandum with the Higher Education Funding Council for England (HEFCE). 2. The Council is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable it to ensure that the Financial Statements comply with the University’s Charter of Incorporation, the 2007 Statement of Recommended Practice on Accounting in Further and Higher Education Institutions and other relevant Accounting Standards. In addition, within the terms and conditions of the Financial Memorandum agreed between the HEFCE and the Council of the University, the Council, through its designated officer, the Vice-Chancellor, is required to prepare Financial Statements for each financial year. Under those terms and conditions, the Council must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the University and Group and of the surplus or deficit, and cash flows for that year. 3. In preparing these Financial Statements the Council ensures that:a) suitable accounting policies have been selected and applied consistently; b) judgements and estimates have been made that are reasonable and prudent; c) applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; d) Financial Statements have been prepared on the going concern basis, unless it is inappropriate to presume that the Group will continue in operation. The Council is satisfied that it has adequate resources to continue in operation for the foreseeable future: for this reason the going concern basis continues to be adopted in the preparation of the Financial Statements. 4. The Council takes reasonable steps to:a) ensure that funds from HEFCE are used only for the purposes for which they have been given and in accordance with the Financial Memorandum with the Funding Council and any other conditions which HEFCE may from time to time prescribe; b) ensure that there are appropriate financial and management controls in place to safeguard public funds and funds from other sources; c) safeguard the assets of the Group and prevent and detect fraud (including compliance with anti-bribery legislation); d) secure the economical, efficient and effective management of the University’s resources and expenditure. 5. The key elements of the Group’s system of internal financial controls, which is designed to discharge the responsibilities set out above include the following:a) clear definitions of the responsibilities of, and the authority delegated to, heads of academic and professional support service departments; b) a medium or short term planning process supplemented by annual budgets; c) regular reviews of academic and professional support service performance; d) clearly defined and formalised requirements for approval and control of expenditure, with capital expenditure being subject to formal detailed appraisal and review according to approval levels set by the University Council; e) comprehensive Financial Regulations, detailing financial controls and procedures, approved by the University Council. 6. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve policies, aims and objectives. It can therefore only provide reasonable and not absolute assurance of effectiveness. 25 Independent auditor's report to the Council of the University of Salford We have audited the financial statements of the University of Salford (the 'University') for the year ended 31 July 2013 which comprise the statement of principal accounting policies, the consolidated income and expenditure account, the consolidated statement of historical cost surpluses and deficits, the consolidated statement of total recognised gains and losses, the consolidated and University balance sheets, the consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the University's Council ('the Council'), in accordance with the Statutes of the University. Our audit work has been undertaken so that we might state to the Council those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the University and the Council, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Council and auditor As explained more fully in the Statement of Council's Responsibilities set out on pages 25 and 26, the Council are responsible for the preparation of the financial statements which give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion the financial statements: • • give a true and fair view of the state of the Group's and the University's affairs as at 31 July 2013, and of its income and expenditure, recognised gains and losses and cash flows for the year then ended in accordance with United Kingdom Generally Accepted Accounting Practice; and have been properly prepared in accordance with the 2007 Statement of Recommended Practice: Accounting for Further and Higher Education. Opinion on other matters In accordance with HEFCE's Financial Memorandum dated July 2010 and the funding agreement with the National College for Teaching and Leadership, we are required to report to you whether, in our opinion, in all material respects: • • funds from whatever source administered by the institution for specific purposes have been properly applied to those purposes and managed in accordance with the University's statutes; and funds provided by HEFCE and the National College for Teaching and Leadership have been applied in accordance with the funding council's Financial Memorandum, the funding agreement with the National College for Teaching and Leadership and any other terms and conditions attached to them. 27 Consolidated Income and Expenditure Account for the Year Ended 31 July 2013 Note 2012/13 £’000 2011/12 £’000 Funding Body Grants 1 46,084 58,455 Tuition Fees and Education Contracts 2 103,015 92,443 Research Grants and Contracts 3 6,722 8,470 Other Income 4 21,028 24,898 Endowment and Investment Income 5 526 456 177,375 184,722 Income Total Income Expenditure Staff Costs 6 99,490 106,990 Other Operating Expenses 7 54,101 65,286 Depreciation of Tangible Fixed Assets 12 21,458 22,031 Interest and Other Finance Costs 8 3,459 2,658 Total Expenditure 9 178,508 196,965 (1,133) (12,243) - - (1,133) (12,243) Deficit after Depreciation of Tangible Fixed Assets at Valuation and Before Tax Taxation 10 Deficit before Exceptional items Exceptional Items: Profit / (Loss) on Disposal, Impairment Loss on Anticipated Disposal and Demolition of Fixed Assets 11 188 (1,787) Restructuring Costs 11 (1,559) (5,222) (2,504) (19,252) (3) 38 (2,507) (19,214) (2,504) (19,252) 7,139 7,858 - 2,319 4,635 (9,075) Deficit on Operations After Depreciation of Assets at Valuation, Disposal of Assets and Tax (Deficit)/ Surplus for the year transferred to accumulated income in endowment funds Deficit for the Year Retained within General Reserves Consolidated Statement of Historical Cost Surpluses and Deficits Deficit on Continuing Operations before Taxation Difference between Historical Cost Depreciation and the Actual Charge for the Year calculated on the Revalued Amount 24 Realisation of Property Revaluation Gains of Previous Years Historical Cost Surplus/(Deficit) for the Year after Taxation 29 Consolidated Statement of Total Recognised Gains and Losses for the Year Ended 31 July 2013 Note 2012/13 £’000 2011/12 £’000 (2,504) (19,252) 12,871 (20,186) - (2,254) 1 - 10,368 (41,692) Opening Reserves and Endowments 62,897 104,589 Total Recognised Gains/ (Losses) for the Year 10,368 (41,692) Closing Reserves and Endowments 73,265 62,897 Deficit on Continuing Operations after Depreciation of Assets at Valuation and Disposal of Assets and Tax Actuarial Gain/ (Loss) in Respect of Pension Scheme 33(b) Impairment in respect of Ashworth, Wakefield & Myers Building 24 New Endowments 23 Total Recognised Gains/ (Losses) relating to the year Reconciliation 30 Consolidated Cash Flow Statement for the Year Ended 31 July 2013 Note 2012/13 £’000 2011/12 £’000 Net Cash Inflow from Operating Activities 27 13,247 3,010 Returns on Investments and Servicing of Finance 28 (1,713) (1,836) Capital Expenditure and Financial Investment 29 (5,338) (20,275) Acquisitions and disposals Proceeds from sale of FE procurement division 250 Net Cash Inflow/ (Outflow) before Use of Liquid Resources and Financing 250 6,446 (18,851) Management of Liquid Resources 30 (6,100) 14,417 Financing 31 (1,903) 5,072 (1,557) 638 638 (Decrease)/ Increase in Cash in the Year Reconciliation of Net Cash Flow to movement in Net (Debt)/ Funds for the year ended 31 July 2013 (Decrease)/Increase in Cash in the Year 32 (1,557) Increase / (Decrease) in Short Term Deposits 32 6,100 (14,417) Drawdown of Loans 31 (130) (7,036) Repayment of Loans and Leases 31 2,033 1,964 Change in Net (Debt)/Funds 32 6,446 (18,851) Net (Debt)/Funds at Beginning of Year 32 (8,403) 10,448 Net Debt at End of Year 32 (1,957) (8,403) 33 Statement of Principal Accounting Policies 1. Basis of Preparation These Financial Statements have been prepared in accordance with the Statement of Recommended Practice (SORP): Accounting for Further and Higher Education 2007 and in accordance with applicable Accounting Standards (United Kingdom Generally Accepted Accounting Practice). They conform to guidance published by the Higher Education Funding Council for England (HEFCE). 2. Basis of Accounting Following a review of the University’s operations and forecasts over the period to July 2016 and in particular the return to realising a historical cost surplus and the positive student recruitment experience in September 2013 the Financial Statements continue to be prepared on a going concern basis in accordance with the historical cost convention modified by the revaluation of certain fixed assets. 3. Basis of Consolidation The consolidated Financial Statements include the University and all its subsidiaries for the financial year to 31 July 2013. The results of subsidiaries acquired or disposed of during the period are included in the consolidated income and expenditure account from the date of acquisition or up to the date of disposal. Intra-group transactions are eliminated on consolidation. The consolidated financial statements do not include those of the Students’ Union because the institution does not control those activities. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements: 4. Income Recognition Funding council block grants are accounted for in the period to which they relate. Fee income is stated gross and credited to the income and expenditure account in the period in which it is earned. Where the amount of the tuition fee is reduced, by a discount for prompt payment, income receivable is shown net of the discount. Bursaries and scholarships are accounted for gross as expenditure and not deducted from income. Recurrent income from grants, contracts and other services rendered are accounted for on an accruals basis and included to the extent of the completion of the contract or service concerned; any payments received in advance of such performance are recognised on the balance sheet as liabilities. Donations with restrictions are recognised when relevant conditions have been met; in many cases recognition is directly related to expenditure incurred on specific purposes. Donations which are to be retained for the benefit of the institution are recognised in the statement of total recognised gains and losses and in endowments; other donations are recognised by inclusion as other income in the income and expenditure account. Non-recurrent grants received in respect of the acquisition or construction of fixed assets are treated as deferred capital grants. Such grants are credited to deferred capital grants and an annual transfer made to the income and expenditure account over the useful economic life of the asset, at the same rate as the depreciation charge on the asset for which the grant was awarded. Income from the sale of goods or services is credited to the income and expenditure account when the goods or services are supplied to the external customers or the terms of the contract have been satisfied. Endowment and investment income is credited to the income and expenditure account on a receivable basis. Income from restricted endowments not expended in accordance with the restrictions of the endowment, is transferred from the income and expenditure account to restricted endowments. 5. Access Funds Access funds the institution receives and disburses as paying agent on behalf of the Funding Council are excluded from the income and expenditure of the University. 34 6. Leases Costs in respect of operating leases are charged on a straight-line basis over the lease term. Operating leases are those where the benefits and risks of ownership have not been substantially transferred to the University. Lease incentives are recognised on a straight line basis over the term of the lease. 7. Taxation The University is an exempt charity within the meaning of schedule 3 of the Charities Act 2011 (formerly schedule 2 of the Charities Act 1993), and is considered to pass the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by section 287 CTA2009 and sections 471, and 478-488 CTA 2010 (formerly s505 of ICTA 1988) or section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied to exclusively charitable purposes. The University receives no similar exemption in respect of Value Added Tax. Irrecoverable VAT on inputs is included in the costs of such inputs. Any irrecoverable VAT allocated to tangible fixed assets in included in their cost. Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent they are regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. 8. Land and Buildings Land and buildings are stated at valuation, the basis of valuation is a combination of depreciated replacement cost, existing use and open market value. Full valuations are carried out every 5 years by independent Chartered Surveyors. Interim reviews are carried out every 3 years by an appropriately qualified member of the Estates Department. Land and Building additions since the last valuation on 31 July 2011 and assets in the course of construction are valued at cost while all other Land and Buildings are based on the valuation at 31 July 2011. Assets under the course of construction does not include any interest costs incurred during construction. Refurbishment costs incurred in relation to a tangible fixed asset, after its initial purchase or production, are capitalised to the extent that they increase the expected future benefits to the University from the existing tangible fixed asset beyond its previously assessed standard of performance; the cost of any such enhancements are added to the gross carrying amount of the tangible fixed asset concerned. Depreciation Freehold land is not depreciated. Freehold buildings are depreciated over their expected useful economic life to the University of up to 50 years on the amount at which the tangible fixed asset is included in the balance sheet less their estimated residual value. Where material, a depreciable asset’s anticipated useful economic life is reviewed annually and the accumulated and future depreciation adjusted in accordance with FRSI5. Refurbishment costs are depreciated over 10 years. Assets while in the course of construction are not depreciated. Impairments of Assets Impairments of assets are calculated as the difference between the carrying value of the asset and its recoverable amount if lower. Recoverable amount is defined as the higher of fair value less costs to sell and the estimated value in use at the date the impairment review is undertaken. Material impairments are recognised in the income and expenditure account as exceptional items. Acquisition with the aid of specific grants Where buildings are acquired with the aid of specific grants, they are capitalised and depreciated. The related grants are credited to a deferred capital grant account and released to the income and expenditure account over the expected useful economic life of the related asset on a basis consistent with the depreciation policy. Repairs and maintenance Expenditure to ensure that a tangible fixed asset maintains its previously recognised standard of performance is recognised in the income and expenditure account in the period it is incurred. The University has a planned maintenance programme, which is reviewed on an annual basis. 35 9. Equipment Equipment costing less than £20,000 per individual item or group of related items is written off to the income and expenditure account in the period of acquisition. All other equipment is capitalised at cost. All assets are depreciated on a straight line basis over their expected useful life of between 2 and 20 years. Where equipment is acquired with the aid of specific grants, it is capitalised and depreciated in accordance with the policy set out above, with the related grant credited to a deferred capital grant account and released to the income and expenditure account over the expected useful economic life of the related equipment. Where equipment is acquired with the aid of a research grant the equipment is capitalised and depreciated over the period of the research grant. The related research grants are treated as deferred capital grants and released to income over the life of the research grant. 10. Investments Fixed asset investments are carried at historical cost less any provision for impairment in value. Investments in subsidiary undertakings are shown at the lower of cost or net realisable value. Investments in trade investments are stated at cost less provision for permanent diminution in value. The terms of investment are such that the University group often has the right, directly or indirectly, to influence the overall direction of an investee company. However, the University group does not participate in the day to day management of such companies. Listed investments are held as fixed assets and are shown at market value. 11. Endowment Assets Endowment assets are held in the form of long term equity based collective investments and are included in the balance sheet at market value. In the previous year the endowment assets were held in the form of cash and liquid resources. 12. Stock Stock is stated at the lower of cost and net realisable value. Where necessary, provision is made for obsolete, slow moving and defective stock. 13. Cash Flows and Short Term Deposits Cash flows comprise increases or decreases in cash. Cash includes cash in hand, cash at bank, and deposits repayable on demand. Deposits are repayable on demand if they are available within 24 hours without penalty. No other investments, however liquid, are included as cash. Liquid resources comprise assets held as readily disposable store of value. They include bank certificates of deposit held as part of the University’s treasury management policy which may be only withdrawn at more than 24 “working” hours notice. 14. Foreign Currency Translations Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rate of exchange ruling at the balance sheet date, with all resulting exchange differences being taken to the income and expenditure account in the period in which they arise. 15. Financial Instruments The University uses derivative financial instruments called interest rate swaps to reduce exposure to interest rate movements. Such derivative financial instruments are not held for speculative purposes and relate to actual assets or liabilities or to probable commitments, changing the nature of the interest rate by converting a fixed rate to a variable rate or vice versa. Interest differentials under these swaps are recognised by adjusting net interest payable over the periods of the contracts. A financial asset and a financial liability are offset when there is a legally enforceable right to set off the recognised amounts and an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. 36 16. Intra-group Transactions Gains or losses on any intra-group transactions are eliminated in full. Amounts in relation to debts and claims between undertakings included in the consolidation are also eliminated. 17. Accounting for Charitable Donations Unrestricted Donations Charitable donations are recognised in the accounts when the charitable donation has been received or if, before receipt, there is sufficient evidence to provide the necessary certainty that the donation will be received and the value of the incoming resources can be measured with sufficient reliability. Endowment Funds Where charitable donations are to be retained for the benefit of the University as specified by the donors, these are accounted for as endowments. There are two main types: • Restricted expendable endowments – the donor has specified a particular objective other than the purchase or construction of tangible fixed assets, and the University can convert the donation sum into income. • Restricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream to be applied to a particular objective. Donations for fixed assets Donations received to be applied to the cost of a tangible fixed asset are shown on the balance sheet as a deferred capital grant. The deferred capital grant is released to the income and expenditure account over the same estimated useful life that is used to determine the depreciation charge associated with the tangible fixed asset. 18. Accounting for Retirement Benefits The University contributes to the Universities Superannuation Scheme (USS), the Local Government Superannuation Scheme (LGPS) and the Teachers Pension Scheme (TPS). All schemes are defined benefit schemes which are contracted out of the Second State Pension (S2P). The assets of the USS and TPS are held in separate trusteeadministered funds. Because of the mutual nature of the schemes, the schemes’ assets are not hypothecated to individual institutions and scheme-wide contributions are set. The University is therefore exposed to actuarial risks associated with other universities employees and is unable to identify its share of the underlying assets and liabilities of these schemes on a consistent and reasonable basis and therefore as required by FRS17 “ Retirement benefits”, accounts for the schemes as if they were defined contribution schemes. As a result, the amount charged to the income and expenditure account represents the contributions payable to the schemes in respect of the accounting period. The University is able to identify its share of assets and liabilities of the LGPS and thus the University applies the requirements of FRS 17 for defined benefit schemes. This means assets are included at market value, measured on a bid price basis where applicable, and scheme liabilities are measured on an actuarial basis using the projected unit method; these liabilities are discounted at the current rate of return on AA rated corporate bonds. The post retirement deficit is included on the University’s balance sheet. The current service cost and any past service costs are included in the income and expenditure account within operating expenses and the net impact of the expected charge on unwinding of the discount on scheme liabilities less the expected return on scheme assets is included within interest payable. Actuarial gains and losses are reported in the statement of total recognised gains and losses. 37 19. Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised in the financial statements when the University has a present obligation (legal or constructive) as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is discounted to present value where the time value of money is material. The discount rate used reflects current market assessments of the time value of money and reflects any risks specific to the liability. Contingent liabilities are disclosed by way of a note, when the definition of a provision is not met and includes three scenarios: possible rather than a present obligation; a possible rather than a probable outflow of economic benefits; an inability to measure the economic outflow. Contingent assets are disclosed by way of a note, where there is a possible, rather than present, asset arising from a past event. 38 Notes to the Accounts 2012/13 £’000 2011/12 £’000 Teaching Grants 30,676 43,243 Research Grants 6,941 7,179 Other Specific Grants 3,573 3,051 Buildings (Note 22) 2,095 2,179 Equipment (Note 22) 2,799 2,803 46,084 58,455 2012/13 £’000 2011/12 £’000 Full-time Students Charged Home Fees 50,091 39,449 Full-time Students Charged Overseas Fees 18,789 19,335 5,085 6,094 26,766 25,942 1,500 1,008 784 615 103,015 92,443 2012/13 £’000 2011/12 £’000 2,290 3,037 721 842 1,073 1,566 483 700 1,050 1,159 429 326 79 97 Knowledge Transfer Partnerships 495 619 Deferred Equipment Grants released in year (Contained within Note 22) 102 124 6,722 8,470 1. Funding Body Grants Higher Education Funding Council for England Deferred Capital Grants released in year : 2. Tuition Fees and Education Contracts Part-time Students Other Teaching Contracts Short Courses Research Training Support Grants 3. Research Grants and Contracts Research Councils UK Charities Central Government Industry European Union Central European Union Other Other Overseas 39 Notes to the Accounts 2012/13 £’000 2011/12 £’000 Residencies, Catering and Conferences 5,552 7,717 Other Services Rendered 8,878 10,603 Other Income Generating Activities 5,682 5,602 835 874 81 102 21,028 24,898 2012/13 £’000 2011/12 £’000 526 456 526 456 2012/13 Number 2011/12 Number 879 979 1,253 1,332 2,132 2,311 2012/13 £’000 2011/12 £’000 76,862 82,755 612 507 6,547 6,994 15,089 15,166 99,110 105,422 380 1,568 99,490 106,990 4. Other Income Deferred Capital Grants released in year : Buildings (Note 22) Equipment (Contained within Note 22) 5. Endowment and Investment Income Investment Income and Other Interest Receivable 6. Staff Costs The staff numbers by major category (including senior post holders) employed by the University during the year, expressed as full-time equivalent:Academic Administrative, including clerical and manual Wages and Salaries Enhanced Pension Charge Social Security Costs Other Pension Costs (Note 33) Early Retirement and Voluntary Severance 40 Notes to the Accounts Staff Costs (Continued) 2012/13 £’000 2011/12 £’000 203 201 Benefits in Kind 6 8 Merit Award - 8 209 217 33 33 242 250 2012/13 Number 2011/12 Number £100,001 - £110,000 4 3 £110,001 - £120,000 2 2 £120,001 - £130,000 5 3 £130,001 - £140,000 2 1 £140,001 - £150,000 1 - £180,001 - £190,000 - 1 Emoluments of the Vice-Chancellor Salary u Total Pension Contributions Total Emoluments Remuneration of Other Higher Paid Staff Over £100,000 (Excluding employer’s pension contributions, but including pension contributions paid by the employer under the salary sacrifice scheme introduced March 2009). Trustee Expenses Payments to Council members for serving as a Council member No payments were made in 2012/13 to Council members for serving as a Council member. (2011/12 Nil) Expenses paid to and on behalf of Council members The total expenses paid to or on behalf of the 17 Council members was £6,831 (2011/12: £8,056). This represents travel, subsistence and course costs incurred in their role as Council member. Payments to Council members for serving as a Director of a subsidiary company One Council member is to be paid £4,167 in respect of services as a Director of Salford Professional Development Limited during financial year 2012/13. 41 Notes to the Accounts 2012/13 £’000 2011/12 £’000 10,084 11,636 Catering 908 960 Student Union Grant 824 830 IT Supplies and Lease Costs 4,670 4,472 Books and Periodicals including Online Access 2,417 2,549 Printing Stationery and Office Expenses 1,372 1,563 Licences/Insurance/Subscriptions 1,421 1,459 275 379 1,738 2,353 Financial Charges 428 959 Consumables 549 603 Vehicle and Transport Costs 533 594 Professional and Other Fees 6,216 9,401 Agency and Contract Staff 4,327 5,505 Staff Travel & Subsistence Costs 2,170 2,814 Marketing 1,321 1,351 298 672 Premises, Maintenance and Repairs 5,264 7,062 Rates, Rents and Utilities 6,539 6,504 342 546 2,405 3,074 54,101 65,286 External auditors remuneration in respect of audit of the University 46 47 External auditors remuneration in respect of audit of the University’s subsidiaries 15 13 External auditors remuneration in respect of other audit services 33 37 150 112 - - Operating lease rentals land & buildings 2,848 2,443 Operating lease other 1,585 1,749 7. Other Operating Expenses Scholarships, Bursaries & Other Student Expenses Telephones Equipment and Furniture including Hire and Maintenance Staff Recruitment & Welfare Security Subsidiary Company Expenditure Fees and Expenses includes: Internal auditors remuneration in respect of internal audit services Internal auditors remuneration in respect of non – audit services 42 Notes to the Accounts 2012/13 £’000 2011/12 £’000 Repayable wholly or partly in more than 5 years 2,235 2,287 Net Charge on Pension Schemes (Note 33b) 1,220 366 4 5 3,459 2,658 8. Interest and Other Finance Costs On Bank Loans, Overdrafts and Other Loans : Students’ Union Deposit Interest The Students’ Union deposits funds with the University for onward investment and the University pays the Students’ Union the interest earned. 9. Analysis of Expenditure by Activity (Excluding exceptional restructuring costs and costs on the disposal of fixed assets) 12/13 £’000 11/12 £’000 Other Operating Expenses 12/13 11/12 £’000 £’000 Academic Departments 54,507 62,072 9,327 11,270 1,165 3,417 - - 64,999 76,759 Academic Services 7,016 5,375 7,760 6,162 4,609 1,992 - - 19,385 13,529 Administration & Student Services 19,912 23,113 15,028 21,637 352 672 - - 35,292 45,422 Premises 5,960 6,360 12,020 9,948 10,432 10,959 2,235 2,279 30,647 29,546 Residencies, Catering and Conferences 1,124 674 4,056 4,679 4,740 4,769 - - 9,920 10,122 Research Grants and Contracts 3,757 3,838 1,634 3,786 102 129 - - 5,493 7,753 7,214 5,558 4,276 7,804 58 93 1,224 379 12,772 13,834 99,490 106,990 54,101 65,286 21,458 22,031 3,459 2,658 178,508 196,965 Staff Costs Other Expenses Depreciation Interest Total 12/13 £’000 11/12 £’000 12/13 £’000 11/12 £’000 12/13 £’000 11/12 £’000 10. Taxation There is no UK Corporation tax payable by the various organisations within the Group. 43 Notes to the Accounts 2012/13 £’000 2011/12 £’000 240 - Loss on the sale of Bramhall student residencies - (1,503) Impairment loss on the demolition of Ashworth building - (104) Impairment loss on the demolition of Wakefield building - (39) Impairment on the anticipated demolition of Myers building - (14) (52) (127) (1,559) (5,222) (1,371) (7,009) 11. Exceptional Items Profit on the sale of CVD Technology Ltd Loss on disposal of equipment Reorganisation costs in respect of Academic Departments and Professional Support 12. Tangible Assets Land and Buildings Equipment Total £’000 Assets in the Course of Construction £’000 £’000 £’000 164,475 11,867 64,162 240,504 Additions - 3,036 926 3,962 Transfers 7,537 (9,433) 1,896 - Disposals (1,835) - (96) (1,931) 170,177 5,470 66,888 242,535 At 1 August 2012 17,787 - 38,769 56,556 Charge for the Year 14,556 - 6,902 21,458 Disposals (1,835) - (44) (1,879) At 31 July 2013 30,508 - 45,627 76,135 At 31 July 2013 139,669 5,470 21,261 166,400 At 1 August 2012 146,688 11,867 25,393 183,948 Consolidated Historical Cost/Valuation At 1 August 2012 At 31 July 2013 Depreciation Net Book Value The “Land & Buildings” disposals are in respect of the demolition of the Ashworth and Wakefield buildings so that the new Gateway building can be constructed. The “Assets in the course of Construction” includes the design of the new Gateway building and refurbishment of the Brian Blatchford building and creation of a new training and conference facility at Media City. The transfers to Land and Buildings are in respect of the refurbished Chapman building and to Equipment in respect of the creation of a new HV Switch facility for the Peel Park Campus and IT visualisation. 44 Notes to the Accounts 2013 £’000 2012 £’000 8,079 8,474 2011 Valuation Depreciated Replacement Cost (Primarily educational buildings and halls of residence) 106,952 120,017 Historical Cost (Including the Land and Building element of Assets in the Course of Construction) 29,915 28,168 144,946 156,659 Equipment Total £’000 Assets in the Course of Construction £’000 £’000 £’000 164,475 11,867 63,732 240,074 Additions - 3,036 920 3,956 Transfers 7,537 (9,433) 1,896 - Disposals (1,835) - (86) (1,921) 170,177 5,470 66,462 242,109 At 1 August 2012 17,787 - 38,395 56,182 Charge for the Year 14,556 - 6,867 21,423 Disposals (1,835) - (34) (1,869) At 31 July 2013 30,508 - 45,228 75,736 At 31 July 2013 139,669 5,470 21,234 166,373 At 1 August 2012 146,688 11,867 25,337 183,892 12. Tangible Assets (Continued) The University has valued land and buildings using three valuation bases as detailed in the Principal Accounting Policies. The net book value of the Land and Buildings and the Land and Buildings included within the Assets in the Course of Construction can be analysed as:2011 Existing Use Value (Primarily office type buildings) Land and Buildings University Historical Cost/Valuation At 1 August 2012 At 31 July 2013 Depreciation Net Book Value The “Land & Buildings” disposals are in respect of the demolition of the Ashworth and Wakefield buildings in order that the new Gateway building can be constructed. The “Assets in the course of Construction” includes the design of the new Gateway building and refurbishment of the Brian Blatchford building and creation of a new training and conference facility at Media City. The transfers to Land and Buildings are in respect of the refurbished Chapman building and to Equipment in respect of the creation of a new HV Switch facility for the Peel Park Campus and IT visualisation. 45 Notes to the Accounts 2013 £’000 2012 £’000 Investments in trade investments 67 55 Listed Investments 41 - Total Investments 108 55 100 - 5 - Listed investments 41 - Total Investments 146 - 13. Investments Consolidated University Investments in subsidiary companies Investments in trade investments At the 31 July 2013, the University of Salford owned the following subsidiary companies which are all registered and operating in England and Wales: Company Name Principal Activity Class of Shares Percentage Held % University of Salford Enterprises Limited Business Development, Consultancy and Investment Management Ordinary 100.0 % University of Salford (Health Services Training) Limited Training Ordinary 100.0% Skyscope Limited Management of a Representative office in China Ordinary 100.0% Salford Professional Development Limited Delivery of training Ordinary 100.0% At the 31 July 2013 the University of Salford Enterprises Limited owned the following subsidiary companies which are all registered and operating in England and Wales : Salford Software Limited Software Marketing Ordinary 100.0% Salford University Purchasing Services Limited Purchasing Services Ordinary 100.0% Salford Digital Futures Limited Commercialisation of digital technology (Dormant at 31 July 2013) Ordinary 100.0% At the 31 July 2013, the University of Salford owned the following trade investments which are all registered and operating in England and Wales : NFAB Limited Nanotechnology 46 Ordinary 8.0% Notes to the Accounts 13. Investments (Continued) The University also had a small shareholding in CVCP Properties plc, a company set up by Universities UK to own its head office building in central London. Health Education Co operative Limited Development of ‘e’ learning materials The University is one of the 4 founding members & has provided a working capital facility of £5000 At the 31 July 2013, the University of Salford Enterprises Limited owns the following trade investments which are all registered in England and Wales: Company Name Principal Activity Class of Shares Percentage Held % Photonics Research Systems Limited Fluorescence & luminescence products & services Ordinary 24.0% The Protocol Lab Limited Process protocol software for construction industry Ordinary 20.0% One Central Park Limited Property management services Ordinary 20.0% Lacerta Rehabilitation Limited Orthotic & prosthetic clinical & manufacturing services Ordinary 15.0% BioeMech Technologies International Limited Medical Insole Products Ordinary 15.0% Carbon Air Limited Exploitation of activated carbon materials Ordinary 23.82% Onco-NX Limited Exploitation of innovative anticancer agents Ordinary 49.33% Optimum Imaging Limited Imaging Technology Solutions Ordinary 49.0% The investments in Carbon Air Limited, Onco-NX Limited, Optimum Imaging Limited, Photonics Research Systems Limited, The Protocol Lab Limited and One Central Park Limited are all treated as trade investments as the University does not have significant influence over these companies as it does not participate in the day to day running of the companies. As such no trading results have been consolidated except to the extent of any dividends being received. The University of Salford owns £450,000 of Jupiter Growth and Income fund Unit Trusts at the 31 July 2013 of which £409,000 of has been allocated to the endowment assets with the remaining £41,000 shown as a Trade investment holding. 2013 £’000 2012 £’000 405 443 4 (38) 409 405 14. Endowment Asset Investments Consolidated and University Balance at 1 August 2012 Increase/ (Decrease) in Balances Balance at 31 July 2013 All the endowment funds are invested in Jupiter Growth and Income fund. 47 Notes to the Accounts 2013 £’000 2012 £’000 76 79 76 79 76 79 76 79 2013 £’000 2012 £’000 Trade Debtors 4,651 5,223 Amounts Due on Research Grants and Contracts 1,104 1,649 Accrued Income 1,717 2,021 Other Debtors and Prepayments 3,639 2,962 11,111 11,855 Trade Debtors 3,671 4,311 Amounts Due on Research Grants and Contracts 1,104 1,649 Accrued Income 1,613 1,711 Other Debtors and Prepayments 2,925 2,254 Amounts Owed by Subsidiary Undertakings 1,228 1,049 10,541 10,974 375 625 375 625 2013 £’000 2012 £’000 38,881 34,223 - (405) 38,881 33,818 15. Stock Consolidated Building and Engineering Stores University Building and Engineering Stores 16. Debtors Consolidated Amounts Falling Due Within One Year: University Amounts Falling Due Within One Year: Debtors Consolidated Amounts Falling Due After One Year Other Debtors 17. Short Term Deposits Consolidated and University At 31 July Allocated to Endowment Investments (Note 14) 48 Notes to the Accounts 2013 £’000 2012 £’000 Bank and Other Loans 4,144 2,016 Research Contract Payments Received on Account 1,717 2,313 Trade Creditors 8,413 8,948 Social Security and Other Taxation Payable 2,508 2,705 Other Payroll Creditors 1,299 1,376 10,619 15,701 53 50 9,477 9,163 260 297 38,490 42,569 Bank and Other Loans 4,144 2,016 Research Contract Payments Received on Account 1,717 2,313 Trade Creditors 7,858 8,546 Social Security and Other Taxation Payable 2,154 2,412 Other Payroll Creditors 1,299 1,376 10,179 15,416 53 50 7,851 7,431 Amounts Due to Subsidiary Undertakings 919 419 Students’ Union Deposit 260 297 36,434 40,276 18. Creditors: Amounts Falling Due Within One Year Consolidated Accruals Other Creditors Deferred Income Students’ Union Deposit University Accruals Other Creditors Deferred Income The Students’ Union deposit is money invested with the University of Salford so that Salford Students’ Union can take advantage of the better investment returns achievable by the University of Salford. These investment returns are then paid over to Salford Students’ Union. 49 Notes to the Accounts 2013 £’000 2012 £’000 38,478 42,590 300 300 81 - 38,859 42,890 38,478 42,590 300 300 81 - 38,859 42,890 2013 £’000 2012 £’000 Amounts Falling Due Within 1 Year 4,144 2,016 Amounts Falling Due between 1 to 2 Years 2,641 2,423 Amounts Falling Due between 2 to 5 Years 7,678 7,949 Amounts Falling Due After 5 Years or More 28,240 32,218 42,703 44,606 Year Repayable Interest Rate Balance Outstanding £’000 19. Creditors: Amounts Falling Due After More Than One Year Consolidated Bank and Other Loans HEFCE Loan Salix Loan University Bank and Other Loans HEFCE Loan Salix Loan 20.Borrowings: Bank Loans and Mortgages University and Consolidated Analysis of Loans Inception of loan Security 1996 Centenary Building 2017 Variable on Libor 2,030 2004 Mary Seacole Building 2030 Fixed at 5.86% 11,730 2007 Law Building 2032 Fixed at 5.18% 4,560 2010 None 2035 Fixed at 5.18% 17,800 2012 Newton Building 2027 Fixed at 4.47% 6,470 2013 None 2016 Nil 113 42,703 The £6,470,000 facility drawn down is part of a £10,000,000 facility with the remaining £3,530,000 drawn down in October 2013. The University has also arranged a further £35,000,000 loan facility fixed at rate of interest of 5.83% that is to be drawn down by October 2014. 50 Notes to the Accounts 21. Provisions for Liabilities Consolidated and University As at 1 August 2012 Utilised in Year Interest on Funds Net Transfer from/ (to) Income and Expenditure Account Transfer from accruals As at 31 July 2013 (a) (b) (a) £’000 (b) £’000 £’000 1,190 10,151 11,341 (27) (627) (654) - 395 395 (337) 244 (93) - 667 667 826 10,830 11,656 The provision is for the standardisation of pension benefits for former University College Salford Staff. The provision is for the enhanced pension benefits payable to retired staff who were members of the Teachers pension scheme. The provision for the enhanced pension benefits payable to retired staff has been calculated using a net interest rate of 2.50% ( 2012- 2.50%.) The Interest on funds has been calculated using an interest rate of 3.89% (2011/12: 5.36%). 22. Deferred Capital Grants Funding Council £’000 Other Total £’000 £’000 14,324 5,024 19,348 9,983 736 10,719 24,307 5,760 30,067 - - - 333 15 348 95 (95) - 428 (80) 348 Buildings (Notes 1 & 4) 2,095 835 2,930 Equipment (Notes 1, 3 & 4) 2,799 183 2,982 Total 4,894 1,018 5,912 12,229 4,189 16,418 7,612 473 8,085 19,841 4,662 24,503 Consolidated and University At 1 August 2012 Buildings Equipment Total Cash Receivable Buildings Equipment Equipment transfers Total Released to Income and Expenditure At 31 July 2013 Buildings Equipment Total 51 Notes to the Accounts 23. Endowments Consolidated and University £’000 £’000 £’000 Restricted Restricted Restricted Expendable Permanent Total 147 129 276 32 97 129 179 226 405 New Endowments 1 - 1 Income for the year 3 3 6 (3) - (3) 180 229 409 148 129 277 32 100 132 180 229 409 University £’000 Consolidated £’000 At 1 August 2012 64,710 64,710 Transfer to Income and Expenditure Account (Note 25) (7,139) (7,139) At 31 July 2013 57,571 57,571 Opening Balances: Capital Value Accumulated Income At 1 August Expenditure for the Year At 31 July 2013 Represented by: Capital Value Accumulated Income 24. Revaluation Reserve 25. Income and Expenditure Reserve University £’000 Consolidated £’000 42,230 41,785 Transfer from Revaluation Reserve (Note 24) 7,139 7,139 Transfer from Pension Reserve (Note 26) 1,880 1,880 Loss for the Financial Year (1,940) (2,507) As at 31 July 2013 49,309 48,297 Balance at 1 August 2012 The £7,139,000 transfer from the revaluation reserve is the difference between the historical cost depreciation and the actual charge for the year calculated on the revalued amount. 52 Notes to the Accounts Restated University £’000 Restated Consolidated £’000 Balance at 1 August 2012 (44,003) (44,003) Actuarial Gain (Note 33b) 12,871 12,871 Transferred to Income and Expenditure Reserve (Note 25) (1,880) (1,880) Pension Reserve at 31 July 2013 (33,012) (33,012) 27. Reconciliation of Consolidated Operating Deficit to Net Cash Inflow from Operating Activities 2012/13 £’000 2011/12 £’000 Deficit on Operations After Depreciation of Assets at Valuation and Disposal of Assets and Tax (2,504) (19,252) Depreciation (Note 12) 21,458 22,031 52 1,684 (5,912) (6,082) Investment Income (Note 5) (526) (456) Interest and Other Finance Costs (Note 8) 3,459 2,658 3 15 744 865 (4,502) 886 Increase in Provisions 315 623 Pension Costs less Contributions Payable 660 38 13,247 3,010 2012/13 £’000 2011/12 £’000 26. Pension Reserve Loss on Disposal of Fixed Assets Deferred Capital Grants Released to Income (Note 22) Decrease in Stocks Decrease in Debtors (Decrease)/Increase in Creditors Net Cash Inflow from Operating Activities 28. Returns on Investments and Servicing of Finance Income from Short Term Investments (Note 5) 526 456 Interest Paid (Note 8) (2,239) (2,292) Net Cash Outflow (1,713) (1,836) 53 Notes to the Accounts 29. Capital Expenditure and Financial Investment 2012/13 £’000 2011/12 £’000 (5,631) (22,509) (409) - - 1,250 (53) (54) 1 - (3) 38 Proceeds from realisation of endowment assets 409 - Deferred Capital Grants Received 348 1,000 (5,338) (20,275) 2012/13 £’000 2011/12 £’000 (37) (792) Withdrawal/ (Placement) of Short Term Deposits (6,063) 15,209 Net Cash (Outflow) / Inflow (6,100) 14,417 2012/13 £’000 2011/12 £’000 44,906 39,834 130 7,036 Repayments of Amounts Borrowed (2,033) (1,964) Net Amount (Repaid)/Draw down during the year (1,903) 5,072 Closing Balance 43,003 44,906 1 August 2012 £’000 Cash Flow £’000 31 July 2013 £’000 33,818 6,063 39,881 (297) 37 (260) 33,521 6,100 39,621 Cash at Bank and in Hand 2,982 (1,557) 1,425 Debt Due Within One Year (2,016) (2,128) (4,144) (42,890) 4,031 (38,859) (8,403) 6,446 (1,957) Purchase of Tangible Fixed Assets Payments to acquire endowment asset investments Proceeds from Sales of Fixed Assets Investment (Acquisition)/ Disposal Endowment Received Endowment Assets (Acquired) /Disposed 30. Management of Liquid Resources Movement in Students’ Union Deposit 31. Analysis of Changes in Consolidated Financing Opening Balance New Loans 32. Analysis of Changes in Consolidated Net Debt Short Term Deposits Students’ Union Deposit Debt Due Over One Year 54 Notes to the Accounts 33. Pension Schemes The three principal schemes for the University’s staff are the Universities Superannuation Scheme (USS), the Teacher’s Pension Scheme (TPS) and the Greater Manchester Pension Fund (GMPF). The total pension cost for the University and its subsidiaries was: 2012/13 £’000 2011/12 £’000 USS -Note 33(a) 11,045 11,258 GMPF-Note 33(b) 3,471 3,145 522 718 51 45 15,089 15,166 717 831 95 424 (40) 810 15,861 17,231 The University contribution rates at 31 July were: 2013 % 2012 % USS 16.0 16.0 GMPF 16.8 16.1 TPS 14.1 14.1 TPS -Note 33(c) Other Pension Schemes (Note 6) USS Early Retirement Costs GMPF Curtailments and Settlements and Past Service Costs TPS Curtailments and Settlements Total Pension Costs The outstanding pension contributions at 31 July 2013 were £1,349,000 (31 July 2012: £1,413,000). 33(a). Universities Superannuation Scheme (USS) The University participates in the Universities Superannuation Scheme (USS), a defined benefit scheme, which is externally funded and contracted out of the State Second Pension. The assets of the scheme are held in a separate fund administered by the trustee, Universities Superannuation Scheme Ltd. The appointment of directors to the board of the trustee is determined by the trustee company’s Articles of Association. Four of the directors are appointed by Universities UK; three are appointed by the University and College Union, of whom at least one must be a USS pensioner member; and a minimum of three and a maximum of five are independent directors appointed by the Board. Under the scheme trust deed and rules, the employer contribution rate is determined by the trustee, acting on actuarial advice. The latest triennial valuation was at 31 March 2011. This was the second valuation for USS under the scheme – specific funding regime introduced by the Pensions Act 2004, which requires schemes to adopt a statutory funding objective, which is to have sufficient and appropriate assets to cover their technical provisions. The actuary also carries out regular reviews of the funding level each year between triennial valuations and details of his estimate of the funding level at 31 March 2013 are also included in this note. The triennial valuation was carried out using the projected unit method. The assumptions which have the most significant effect on the result of the valuation are those relating to the rate of return on investments (i.e. the valuation rate of interest), the rates of increase in salary and pensions and the assumed rates of mortality. The financial assumptions were derived from market yields prevailing at the valuation date. An “inflation risk premium” adjustment was also included by deducting 0.3% from the market-implied inflation on account of the historically high level of inflation implied by government bonds (particularly when compared to the Bank of England’s target of 2% for CPI which corresponds broadly to 2.75% for RPI per annum). 55 Notes to the Accounts 33(a). Universities Superannuation Scheme (USS) (Continued) To calculate the technical provisions, it was assumed that the valuation rate of interest would be 6.1% per annum, salary increases would be 4.4 % per annum (with short-term general pay growth at 3.65% per annum and an additional allowance for increase in salaries due to age and promotion reflecting historic scheme experience with a further cautionary reserve on top for past service liabilities) and pensions would increase by 3.4% per annum for three years following the valuation, then 2.6% per annum thereafter. Standard mortality tables were used as follows: Male members’ mortality S1NA [“light” YOB tables] – No age rating Female members’ mortality S1NA [“light” YOB] tables – Rated down one year Use of these mortality tables reasonably reflects the actual USS experience but also provides an element of conservatism to allow for further improvements in mortality rates. The CMI 2009 projections with a 1.25%pa long term rate were also adopted. The assumed life expectations on retirement at age 65 are: Males (females) currently aged 65 23.7 (25.6) years Males (females) currently aged 45 25.5 (27.6) years At the valuation date, the value of the assets of the scheme was £32,433 million and the value of the scheme’s technical provisions was £35,343.7 million indicating a shortfall of £2,910.2 million. The assets therefore were sufficient to cover 92% of the benefits which had accrued to members after allowing for expected future increases in earnings. The actuary also valued the scheme on a number of other bases as at the valuation date. On the scheme’s historic gilts basis, using a valuation rate of interest in respect of past service liabilities of 4.4% per annum (the expected return on gilts) the funding level was approximately 68%. Under the Pension Protection Fund regulations introduced by the Pensions Act 2004 the scheme was 93% funded; on a buy-out basis (i.e. assuming the Scheme has discontinued on the valuation date) the assets would have been approximately 57% of the amount necessary to secure all the USS benefits with an insurance company; and using the FRS17 formula as if USS was a single employer scheme, using a AA bond discount rate of 5.5% per annum based on spot yields, the actuary estimated that the funding level at 31 March 2011 was 82%. As part of this valuation the trustees have determined, after consultation with the employers, a recovery plan to pay off the shortfall by 31 March 2021. The next formal triennial actuarial valuation is at 31 March 2014. If experience up to that date is in line with the assumptions made for this current actuarial valuation and contributions are paid at the determined rate or amounts, the shortfall at 31 March 2014 is estimated to be £2.2 billion, equivalent to a funding level of 95%.The contribution rate will be reviewed as part of each valuation and may be reviewed more frequently. The technical provisions relate essentially to the past service liabilities and funding levels, but it is also necessary to assess the ongoing cost of newly accruing benefits. The cost of future accrual was calculated using the same assumptions as those used to calculate the technical provisions but the allowance for promotional salary increases was not as high. Analysis has shown very variable levels of growth over and above general pay increases in recent years, and the salary growth assumption built into the cost of future accrual is based on more stable, historic, salary experience. However, when calculating the past service liabilities of the scheme, a cautionary reserve has been included, in addition, on account of the variability mentioned above. As at the valuation date the Scheme was still a fully Final Salary Scheme for future accruals and the prevailing employer contribution rate was 16% of Salaries. Following UK government legislation, from 2011 statutory pension increases or revaluations are based on the Consumer Prices Index measure of price inflation. Historically these increases had been based on the Retail Prices Index measure of price inflation. Since the valuation effective date there have been a number of changes to the benefits provided by the scheme although these became effective from October 2011.These include: New Entrants Other than in specific, limited circumstances, new entrants are now provided on a Career Revalued Benefits (CRB) basis rather than a Final Salary (FS) basis. 56 Notes to the Accounts 33(a). Universities Superannuation Scheme (USS) (Continued) Normal pension age The normal pension age was increased for future service and new entrants, to age 65. Flexible retirement Flexible retirement options introduced. Member contributions increased Contributions were uplifted to 7.5% p.a. and 6.5% p.a. for FS Section members and CRB Section members respectively. Cost sharing If the total contribution level exceeds 23.5% of Salaries per annum, the employers will pay 65% of the excess over 23.5% and members would pay the remaining 35% to the fund as additional contributions. Pension increase cap For service derived after 30 September 2011, USS will match increases in official pensions for the first 5%. If official pensions increase by more than 5% then USS will pay half of the difference up to a maximum increase of 10%. The actuary has estimated that the funding level as at 31 March 2013 under the scheme specific funding regime had fallen from 92% to 77%. This estimate is based on the results from the valuation at 31 March 2011 allowing primarily for investment returns and changes to market conditions. These are sighted as the two most significant factors affecting the funding positions which have been taken into account for the 31 March 2013 estimation. On the FRS17 basis, using an AA bond discount rate of 4.2% per annum based on spot yields, the actuary calculated that the funding level at 31 March 2013 was 68%. An estimate of the funding level measured on a historic gilts basis at that date was approximately 55%. Surpluses or deficits which arise at future valuations may impact on the institution’s future contribution commitment. A deficit may require additional funding in the form of higher contribution requirements, where a surplus could, perhaps, be used to similarly reduce contribution requirements. The sensitivities regarding the principal assumptions used to measure the scheme liabilities on a technical provisions basis at the date of the last triennial actuarial assumption as set out below: Assumption Investment return Change in assumption Decrease by 0.25% Impact on shortfall Increase by £1.6 billion The gap between RPI and CPI Decrease by 0.25% Increase by £1 billion Rate of salary growth Increase by 0.25% Increase by £0.6 billion Members live longer than assumed Equity markets in isolation 1 year longer Increase by £0.8 billion Fall by 25% Increase by £4.6 billion USS is a “last man standing” scheme so that in the event of the insolvency of any of the participating employers in USS, the amount of any pension funding shortfall (which cannot otherwise be recovered) in respect of that employer will be spread across the remaining participant employers and reflected in the next actuarial valuation of the scheme. The trustee believes that over the long-term equity investment and investment in selected alternative asset classes will provide superior returns to other investment classes. The management structure and targets set are designed to give the fund a major exposure to equities through portfolios that are diversified both geographically and by sector. The trustee recognises that putting the issue of USS funds size and scale to one side for a moment, it might be theoretically possible to select investments producing income flows broadly similar to the estimated liability cash flows. However, in order to meet the long-term funding objective within a level of contributions that it considers the employers would be willing to make, it is necessary and appropriate for the trustee to take on a degree of investment risk relative to the liabilities. This taking of investment risk seeks to target a greater return than the matching assets would provide whilst maintaining a prudent approach to meeting the fund’s liabilities. 57 Notes to the Accounts 33(a). Universities Superannuation Scheme (USS) (Continued) Before deciding what degree of investment risk to take relative to the liabilities, the trustee receives advice from its internal investment team, its investment consultant and the scheme actuary, and importantly considers the ability of the sponsoring employers to support the scheme if the investment strategy doesn’t deliver the expected returns of the employers. The positive cash flow of the scheme means that it is not necessary to realise investments to meet liabilities and the scheme actuary has confirmed that it is likely to remain the position for the next ten years or more. The trustee believes that this, together with the ongoing flow of new entrants into the scheme and most critically the ability of the employers to provide additional support to the scheme should additional contributions be required, enables it to take a long-term view of its investments. Some short-term volatility in returns can be tolerated and need not feed through immediately to the contribution rate. However the trustee is mindful of the difficult economic climate which exists for defined benefit schemes currently, and the need to be clear about the responses that are available should the deficits persist and a revised recovery plan becomes necessary following the next actuarial valuation of the scheme as at March 2014. The trustee is making preparations ahead of the next valuation to compile a formal financial management plan, which will bring together – in an integrated form – the various funding strands of covenant strength, investment strategy and funding assumptions, in line with the latest guidance from Pensions Regulator. At 31 March 2013, USS had over 148,000 active members and the University had 1,051 members participating in the scheme. 33(b). Greater Manchester Pension Fund (GMPF) The University participates in the GMPF, which is an externally funded defined benefit pension scheme, which is contracted out of the State Second Pension, where contributions payable are held in a trust separately from the University. The following information is based upon a full actuarial valuation of the fund as at 31 March 2010 updated to 31 July 2013 by a qualified independent actuary (Hymans Robertson). Under the definitions set out in FRS 17, the GMPF is a multi-employer defined benefit pension scheme. In the case of the GMPF, the actuary of the scheme has identified the University’s share of its assets and liabilities as at 31 July 2013. The pension scheme assets are held in a separate Trustee-administered fund to meet long-term pension liabilities to past and present employees. The trustees of the fund are required to act in the best interest of the fund’s beneficiaries. The appointment of trustees to the fund is determined by the scheme’s trust documentation. The trustees are responsible for setting the investment strategy for the Scheme after consultation with professional advisers. The material assumptions used by the actuary for FRS 17 at 31 July 2013 were: 31 July 2013 31 July 2012 % p.a. % p.a. 2.8 2.2% 4.6 (a) (a) 4.0% Expected Return on Assets 5.8 4.7% Discount Rate 4.6 4.1% Pension Increase Rate Salary Increase Rate (a) The salary increase assumption is 1% pa until 31 March 2015 reverting to the long term assumption shown thereafter. Life expectancy is based on the Fund’s VitaCurves with improvements in line with the Medium Cohort and 1% underpin from 2010. Based on these assumptions, the average future life expectancies at age 65 are summarised below Males Females Current Pensions 20.1 years 22.9 years Future Pensions 22.5 years 25.0 years Future pensioners are assumed to be 45 at 31 March 2010. 58 Notes to the Accounts 33(b). Greater Manchester Pension Fund (GMPF) (Continued) Historic mortality Life expectancies for the below year ends are based on the Fund’s VitaCurves. The allowance for future life expectancies is shown in the table below. Year Ended Prospective Pensioners Pensioners 31 July 2013 Year of birth, medium cohort and 1% p.a. minimum improvements from 2010 Year of birth, medium cohort and 1% p.a. minimum improvements from 2010 Commutation – An allowance is included for future retirements to elect to take 50% of the maximum additional tax-free cash up to HMR&C limits for pre-April 2008 service and 75% of the maximum tax –free cash for post-April 2008 service. The breakdown of the expected return on assets by category: Long Term Rate of Return Expected at 31 July 2013 Long Term Rate of Return Expected at 31 July 2012 Equities 6.5% 5.5% Bonds 3.7% 3.3% Property 4.6% 3.7% Cash 3.4% 2.8% The expected return on assets is based on the long term rates of return on the market value of equities, bonds, cash and other assets at 31 July. The fair value of employer assets were: 31 July 2013 £’000 31 July 2012 £’000 Equities 86,034 65,919 Bonds 21,509 20,974 Property 7,170 4,994 Cash 4,780 7,990 119,493 99,877 31 July 2013 £’000 31 July 2012 £’000 119,493 99,877 Present Value of Funded Liabilities (148,342) (139,583) Net Underfunding in Funded Plans (28,849) (39,706) (4,163) (4,297) (33,012) (44,003) The following amounts were measured in accordance with FRS17: Analysis of the Amount Shown in the Balance Sheet Fair Value of Employer Assets Present Value of Unfunded Liabilities Net Liability 59 Notes to the Accounts 33(b). Greater Manchester Pension Fund (GMPF) (Continued) Analysis of the Amount Charged to Staff Costs within Operating Deficit 2012/13 £’000 % of Pay 2011/12 £’000 % of Pay 3,471 20.3 3,145 17.2 14 0.1 11 0.1 268 1.6 296 1.6 Service Cost Past Service Cost in respect of efficiency and other early retirements Curtailments and Settlements Total Operating Charge 3,753 Analysis of Net Charge on Pension Scheme 3,452 2012/13 £’000 % of Pay 2011/12 £’000 % of Pay (4,685) 27.4 (6,027) (33.0%) Interest on Pension Scheme Liabilities 5,905 34.5 6,393 35.0% Net Charge 1,220 366 19,993 2,553 Expected Return on Pension Scheme Assets The actual return on Pension Scheme Assets was Amounts Recognised in the Statement of Total Recognised Gains and Losses 2012/13 £’000 2011/12 £’000 15,240 (3,442) (17) (1,888) Change in Financial and Demographic Assumptions Underlying the Scheme Liabilities (2,352) (14,856) Actuarial Gain/(Loss) recognised in Statement of Gains and Losses 12,871 (20,186) 31 July 2013 £’000 31 July 2012 £’000 (143,880) (120,586) Current Service Cost (3,471) (3,145) Interest Cost (5,905) (6,393) Contributions by Members (1,110) (1,186) Actuarial Losses (2,369) (16,744) (14) (11) (268) (296) 309 294 4,203 4,187 (152,505) (143,880) Actual Return Less Expected Return on Pension Scheme Assets Experience Gains and Losses Arising on the Scheme Liabilities Changes in the Present Value of the Defined Benefit Pension Obligations are as follows: Opening Defined Benefit Obligation Past Service Costs Losses on Curtailments Contributions in Respect of Unfunded Benefits Paid Estimated Benefits Paid Closing Defined Benefit Obligation 60 Notes to the Accounts 33(b). Greater Manchester Pension Fund (GMPF) (Continued) Changes in the Present Value of the Fair Value of Assets are as follows: 31 July 2013 £’000 31 July 2012 £’000 99,877 97,173 Expected Return on Assets 4,685 6,027 Contributions by Members 1,110 1,186 Contributions by the Employer 2,784 3,120 309 294 15,240 (3,442) (309) (294) (4,203) (4,187) 119,493 99,877 Opening Fair Value of Employer Assets Contributions in Respect of Unfunded Benefits Actuarial Gains/(Losses) Estimated Unfunded Benefits Paid Estimated Benefits Paid Closing Fair Value of Employer Assets History of Experience Gains and Losses Year Ended 31 July 2013 £’000 31 July 2012 £’000 31 July 2011 £’000 31 July 2010 £’000 31 July 2009 £’000 Fair Value of Scheme Assets 119,493 99,877 97,173 90,334 77,473 (152,505) (143,880) (120,586) (118,051) (116,137) (33,012) (44,003) (23,413) (27,717) (38,664) 15,240 (3,442) 828 7,090 (6,946) 17 (1,888) 3,518 589 (81) Present Value of Defined Benefit Obligation Deficit in the Scheme Experience Gains/(Losses) on Assets Experience Gains/(Losses) on Liabilities Changes in the Amounts Recognised in the Statement of Total recognised Gains and Losses (STRGL) are as follows: 2012/13 £’000 2011/12 £’000 Opening Cumulative STRGL (20,379) (193) Actuarial Gain/ (Loss) 12,871 (20,186) Closing Cumulative STRGL (7,508) (20,379) The estimate for the contribution by the employer to the Local Government Pension scheme for 2013/14 is £2,954,000. 61 Notes to the Accounts 33(c).Teachers’ Pension Scheme (TPS) Under the definitions set out in FRS 17 (Retirement Benefits), the TPS is a multi-employer pension scheme. The University is unable to identify its share of the underlying assets and liabilities of the scheme. Accordingly, the University has taken advantage of the exemption in FRS 17 and has accounted for its current service contributions to the scheme as if it were a defined contribution scheme. The TPS is an unfunded defined benefit scheme. Contributions on a “pay as you go” basis are credited to the Exchequer under arrangements governed by the Superannuation Act 1972.The pension cost is assessed every four years in accordance with the advice of the Government Actuary. The assumptions and other data that have the most significant effect on the determination of the contribution levels are as follows: Latest actuarial valuation 31 March 2004 Actuarial method Prospective Benefits Gross Investment returns per annum 6.5% Real rate of return in excess of: Prices 3.5% Earnings 2.0% Rate of real earnings growth 1.5% Present Value of notional assets at date of last valuation £163,240m Present Value of notional liabilities at date of last valuation £166,500m Net deficit £3,260m Scheme Changes From 1 April 2012 to 31 March 2013 a revised eight tier salary and employee contribution rate structure was introduced with the employee contribution rate ranging between 6.4% and 8.8%, depending on a member’s Full time Equivalent salary. Further changes to the employee contribution rate have taken place with the employee rates for 2013-14 now ranging between 6.4% and 11.2%. The employer contribution rates remain at the current rate of 14.1%. Actuarial scheme valuations are dependant on assumptions about the value of future costs, design of benefits and many other factors. Many of these are being discussed in the context of the design for a reformed TPS, as set out in the Department for Education’s Proposed Final Agreement, and scheme valuations are, therefore, currently suspended. The Government, however, has set out a future process for determining the employer contribution rate under the new scheme, and this process will involve a full actuarial valuation. 62 Notes to the Accounts 34. Operating Lease Commitments 2013 £’000 2012 £’000 59 167 154 106 2,525 2,544 2,738 2,817 Within One Year 330 403 Between Two and Five Years 654 919 984 1,322 2013 £’000 2012 £’000 Within One Year 59 167 Between Two and Five Years 82 84 2,525 2,544 2,666 2,795 Within One Year 330 403 Between Two and Five Years 654 919 984 1,322 At 31 July the annual commitments due in respect of non-cancellable operating leases expiring in the following periods were as follows: Consolidated Land and Buildings Within One Year Between Two and Five Years Over Five Years Other University Land and Buildings Over Five Years Other 35. Capital Commitments 2013 £’000 2012 £’000 1,434 1,501 48,823 48,844 Consolidated and University Commitments Contracted at 31 July Authorised but not Contracted at 31 July 63 Notes to the Accounts 36. Access Funds 2013/12 £’000 2011/12 £’000 42 87 HEFCE Grants 521 601 Interest Earned 4 2 (7) (10) (519) (638) 41 42 Balance Brought Forward Administration Costs Disbursed to Students Balance Carried Forward Funding Council grants are available solely for students and the University acts only as paying agent. The grants and related disbursements are therefore excluded from the Income and Expenditure Account. 37. Related Party Transactions Due to the nature of the University’s operations and the composition of the Council, being drawn from local public and private sector organisations it is inevitable that transactions will take place with organisations in which a member of the Council may have an interest. In accordance with FRS8 “Related party transactions” these are disclosed where members of the University of Salford’s Council members disclose an interest in a body with whom the University undertakes transactions which are considered material to the University’s Financial statements and /or the other party. The University undertook transactions with the following public sector bodies, charities and not for profit organisations to which Council members had connections – European Consortium for Political Research, The Manchester College, Manchester Chamber of Commerce, Manchester Library Theatre, Salford City Council, Addiction Dependency Solutions, Henshaws Society for the Blind, Salford Lads and Girls club and various NHS bodies as well as the following Universities, Manchester University and The Open University . The University also undertook transactions with a number of commercial profit making organisations to which Council members had connections – Eversheds LLP, Greater Manchester Arts Centre Limited, The Lowry and ITV. All transactions involving organisations in which a member of the Council may have an interest are declared and conducted at arms’ length, in accordance with the University’s Financial Regulations and normal procurement procedures. The University has taken advantage of the exemption allowed by FRS 8 not to disclose transactions between wholly owned group companies. The Salford University Students’ Union is an independent organisation largely funded by the University. The financial transactions between the two organisations can be summarised as:2012/13 2011/12 £’000 £’000 Annual Grant Paid to Students’ Union from University Payments made to the Students’ Union from the University for Services provided Payments made to the University from Students’ Union for Services provided 824 830 12 25 (49) (64) At the 31 July 2013 Student’s Union had £260,000 (2012: £297,000) invested with the University of Salford as detailed in Note 18. At the 31 July 2013, the University had a creditor with the Students’ Union of £254 (2012: Nil) and a debtor with the Students’ Union of £6,350 (2012: £12,000). 64