2008
UNIVERSITY OF KENT
FINANCIAL STATEMENTS FOR THE YEAR TO 31 JULY 2008
CONTENTS
PAGE
Membership of the Council 2007/08
2
University
Status
and
Mission
3
Operating and Financial Review
4 - 13
Corporate
Governance
Statement
14
-
16
Statement of the Responsibilities of the University’s Council
17
Independent Auditor’s Report to the Council of the University of Kent
18 - 19
Consolidated Income and Expenditure Account
20
Statement of Consolidated Total Recognised Gains and Losses
21
Balance
Sheets
22
-
23
Consolidated
Cash
Flow
Statement
24
Statement of Principal Accounting Policies
25 - 29
Notes to the Accounts
30
-
52
FINANCIAL STATEMENTS 2007/08 1
MEMBERSHIP OF THE COUNCIL 2007/08
Chair of the Council:
Valerie Marshall
Deputy Chair of the Council/
Chair of the Finance and Resources Committee:
John Simmonds
Chancellor:
Sir Robert Worcester
Vice-Chancellor:
Professor Julia Goodfellow
Senior Deputy Vice-Chancellor:
David Nightingale
President of the Students’ Union:
Achike Ofodile
External members:
Judith Armitt
Colin
Carmichael
Julia
Casson
Dr
Eliot
Forster
Marcia Fry
Stephen
Grix
Sally
Muggeridge
Richard
Oldfield
Vicky
Pryce
Anthony
Quigley
Mark
Watts
His Honour Judge Anthony Webb
The Very Reverend Robert Willis
1
Vacancy
Staff and Student representatives:
Tom Christian
Professor
Joanne
Conaghan
Dr
Konstantinos
Sirlantzis
Juliet
Thomas
Michael
Woods
Total Membership:
25
Secretary of the Council:
Karen Goffin
The Chairs of Council committees were as follows:
Audit Committee:
Anthony Quigley
Finance and Resources Committee:
John Simmonds
Lay Nominations Committee:
Valerie Marshall
Remuneration Committee:
Valerie Marshall
Safety, Health and Environment
Executive Committee:
David Mee (to 27 April 2008)/Professor
Keith Mander (from 28 April 2008)
Staff Policy Committee:
Marcia Fry
As prescribed in University Ordinance the Vice-Chancellor chairs the Joint Committee for
Honorary Degrees, a joint committee of Senate and Council.
2
UNIVERSITY OF KENT
UNIVERSITY STATUS AND MISSION
STATUS
The University was incorporated by Royal Charter in 1965 and is an exempt charity within the
meaning of the Charities Act.
MISSION
The University of Kent:
• Provides higher education of excellent quality
o
characterised by flexibility and interdisciplinarity
o
informed by research and scholarship
o
meeting the lifelong needs of a diversity of students
• Enlarges knowledge by research
o
to standards achieving international recognition
o
throughout its subject range
• Is an intellectual and cultural focus for Kent and Medway
• Supports national and regional economic success
• Builds vigorously on its close ties within Europe and continues to develop wider
international relationships.
The main enabling activities to facilitate achievement of the Plan are:
• Effectiveness
o
Communicate effectively, internally and externally
o
Provide appropriate and well-equipped teaching, learning, research and
support space for staff and students
o
Use interoperable administrative systems efficiently and effectively to support
the University’s objectives
• Sustainability
o
Generate net income for medium- and long-term survival
o
Recognise and control risk
o
Adopt an ethical approach to the use of resources
• Professionalism
o
Attract and retain good staff
o
Support staff to act professionally and confidently
o
Ensure sound management of the University.
FINANCIAL STATEMENTS 2007/08 3
OPERATING AND FINANCIAL REVIEW
Introduction and Scope of the Financial Statements
The Financial Statements for the year ended 31 July 2008 have been prepared on a
consolidated basis and include all the recommendations outlined in the revised Statement of
Recommended Practice (SORP): Accounting for Further and Higher Education effective from 1
August 2007. All subsidiary undertakings have been consolidated but only Kent Enterprise
Limited was trading during the current and prior financial years. As a result of new and revised
requirements set out in the SORP, these accounts contain a prior year adjustment relating to a
change in the accounting for certain gifts and donations that had previously been classified as
endowments but no longer meet the definition and also a change in the required treatment of
donated assets. Details of the prior year adjustment and the impact on the current and previous
financial years are given in Note 15 to the Statement of Principal Accounting Policies.
The University has had another successful year financially and academically, and continues to
improve its results and facilities. Income has risen by 14% reflecting a further increase in
student numbers and the final year of the introduction of variable fees. The University has
exceeded its budget and generated a surplus of £5.7m. Continuing growth in teaching activity
and strategic investment into research has meant 21% more staff have been submitted in the
2008 Research Assessment Exercise. Despite this, and in common with all universities, the
University faces a number of challenges in the coming years, both in terms of the need to
continue to grow income and to contain costs at a sustainable level. Specific pressures arise
from:
• The need to replace income lost following the removal of funding for students registering
for a lower or equivalent qualification;
• Pay costs that have risen at rates well above inflation, as a result of the national pay
agreement for 2006-09;
• Potential increases in pension costs in future years;
• Predicted demographics of the Home/EU population and its impact on student demand;
• Continuing increases in student expectations;
• An uncertain world economic climate and possible constraints on the availability of
capital;
• Increased global competition.
Financial Highlights for the Year to 31 July 2008
• Operating surplus of £5.7m;
• Residences and catering income up £3.3m largely due to successful conference activity
and improved occupancy levels following refurbishment of study bedrooms;
• Effective cost control with favourable performance against budgeted expenditure;
• Improvement in Net Current Assets to £4.2m with strong liquidity levels at the year-end;
• Net increase in Tangible Assets of £8.8m.
Kent’s Mission
The University’s vision, looking forward to 2015 is that “the exceptional student experience,
internationally recognised research and strong partnerships of the University of Kent - the UK’s
European University - will make Kent one of the UK’s outstanding universities”. The strategy in
place to achieve this is based on three core values of Excellence, Engagement and Enterprise,
which are enabled by the partnerships between staff and students in academic schools and the
staff in professional service departments that ensure that the University is run in an effective,
efficient, sustainable and professional manner.
4
UNIVERSITY OF KENT
OPERATING AND FINANCIAL REVIEW
Inspiring and Supporting Students to Develop their Full Potential
Key to the University’s continuing financial strength is the desire to provide an excellent
experience for its students. The University is proud to have been voted top University in London
and the south-east for the second year running and is one of the top ten multi-faculty
universities in the UK as shown in the results of the 2008 National Student Survey. The survey
also revealed that over 90% of final year students were satisfied with the quality of their course.
Student numbers in the year grew by 6% and were consistent with growth levels in the past
three years, another indication that Kent remains a popular choice for students in this
competitive era of variable tuition fees. The number of overseas students fell marginally in the
period but followed a year in which overseas students had leapt by over 6%.
Total Student Numbers Over the Last Five Years
18000
16,886
15,992
16000
15,165
1,732
14,280
1,735
13,803
1,630
14000
1,610
1,705
12000
10000
8000
15,154
14,257
13,535
12,670
6000
12,098
4000
2000
0
2003/04
2004/05
2005/06
2006/07
2007/08
Home
Overseas
The sustained increase in the number of undergraduate students over the past 10 years has not
been matched by levels of postgraduate recruitment and the University will, over the coming
years, seek to re-balance its mix of provision. Approximately 12% of Kent’s student population
are postgraduate students and in 2007/08, the number of full-time postgraduate students was at
1,266, its highest point to date. In total, over 1,450 students were studying for a postgraduate
taught award and a further 612 were preparing for research degrees. Specific targets are in the
process of being set during the formulation of the Institutional Strategy for the period 2009/10-
2011/12, but significant growth is expected in postgraduate provision during that period.
FINANCIAL STATEMENTS 2007/08 5
OPERATING AND FINANCIAL REVIEW
Five Year Analysis of Student Population
16000
U
U
U
14000
U
U
12000
10000
8000
6000
4000
2000
T
T
T
T
T
R
R
R
R
R
0
2003/04
2004/05
2005/06
2006/07
2007/08
Academic Year
Postgraduate - Research [R]
Postgraduate - Taught [T]
Undergraduate [U]
In the period from 2004 to 2008, the University has spent £102m on new facilities and
refurbishment of older academic and residential buildings, of which £34m has been funded by
capital grants. The University is currently developing a new Estates Strategy to underpin the
University’s strategic ambitions over the next 15 years. Spend during 2007/08 is detailed below
under Capital Projects.
Research
Research income has grown from £9.5m in 2003/04 to £13.0m in 2007/08, a rise of 37% and
postgraduate research student numbers have increased from 498 to 612 (a rise of 23%). This is
part of the University’s strategy to increase its share of income from research. In addition, the
University has put in place 90 university-funded postgraduate research scholarships. A Dean of
the Graduate School has been appointed to lead the new strategy and a new Postgraduate
College (Woolf College) providing 544 ensuite study bedrooms, a 496 seat lecture theatre and
six seminar rooms will be completed by Christmas 2008. Recent grant awards are encouraging
and have reflected a policy of applying for higher value grants. The 2008/09 budget shows a
further increase in research income to £13.9m.
Enterprise and Innovation
During the year, planning permission was granted for the £6.5m development of a new 3,638m2
Innovation Centre on the Canterbury campus, forming the first phase of a technology park,
scheduled to open in the summer of 2009. The development is funded by SEEDA and follows
work by the University and its local stakeholders, including Canterbury City Council.
The final allocation of the third round of the Higher Education Innovation Fund (HEIF 3) was
received in the year and the 2008/09 year commenced with the successful announcement of a
further £4.5m in HEIF 4 funding for the three year period to 2011. The Enterprise and Innovation
Strategy has a significant strand of improving the opportunities for students to engage in
innovation and enterprise as well as growing income from enterprise activities in thematic areas.
During 2008/09, the University will carry out a format audit of its Intellectual Property with a view
to improving support for academics and increasing exploitation.
6
UNIVERSITY OF KENT
OPERATING AND FINANCIAL REVIEW
Kent’s International Profile
The University of Kent continues to grow its activity at its campus in Brussels and has entered
into various collaborative or cooperative ventures with institutions in China and other fast
developing countries. Many of our students are given the opportunity to spend a year abroad in
either study or a work-based placement. A new Internationalisation Strategy has been agreed
during the year and additional resources allocated to implement it.
Kent’s contribution to the local and regional community
The 2007/08 academic year started well with the Kent Law Clinic, part of the University’s Law
School, achieving both the Queen’s Anniversary Prize for Higher and Further Education and the
Times Higher Education award for Outstanding Contribution to the Local Community in
recognition of the service it delivers to the local community whilst “enriching the academic study
of law” and providing a first class education to its law undergraduates.
Kent’s commitment to its campus in Medway and in delivering its objectives in relation to the
sector-wide Widening Participation Strategy was strengthened further during the year by the
appointment of a new Pro-Vice-Chancellor for Medway activities.
Student numbers at Medway grew by an overall 26% in the year and in response to this
increased demand, the University has now entered into an agreement with Berkeley First for the
provision of student residences offering accommodation to more than 600 students as well as
plans for an express-style supermarket and a café, to be completed by August 2009.
Major academic developments at the Medway campus include a new Centre for Work and
Learning. A new Centre for Journalism has also been established with the first cohort of
students being recruited in September 2008. This is an exciting course providing a practice-
based, innovative curriculum taught by staff that have substantial experience at a senior level
within the industry.
In addition, the University’s School of Physical Sciences has become an important part of the
South East Physics Network and is one of six departments in the south east to benefit from a
£12.5m HEFCE-funded initiative. Acting together the Network will promote and sustain physics
provision in the south-east and is part of a series of collaborative projects designed to
strengthen research, teaching and knowledge transfer in science.
Measurement of Past and Future Performance
The University measures its performance with reference to a number of approved key
performance indicators which are reported to Council at the end of each year. These measure
performance and monitor progress in a number of areas, including institutional sustainability,
student experience, financial health, knowledge transfer and relationships, staff development
and estates and infrastructure. At its June 2008 meeting, the University reported good overall
results in a number of these areas, with just under half the supporting indicators being reported
as green and showing excellent performance in relation to progress on institutional projects.
Further work was identified as being required to improve areas such as estates costs, conditions
and utilisation levels, together with a further drive on research and postgraduate activities in line
with the University Plan. Activities are already underway to address these issues with provision
having been made in the current year budget for capital and strategic investments in these
areas.
FINANCIAL STATEMENTS 2007/08 7
OPERATING AND FINANCIAL REVIEW
The Council reviewed the University’s ongoing achievements against key targets at its July
meeting and approved the 2008/09 budget in the context of key performance indicators set out
in the University’s Financial Framework. The budgeted surplus for 2008/09, at 2% of income, is
consistent with the framework and has been set to ensure that continuing investment can be
made both in strategic academic developments and in the University’s estate. This is despite
increased staff costs which are anticipated to rise to almost 58% of income as a result of the
national pay settlement and further pressure from rising utility costs.
High planned levels of capital expenditure budgeted for 2008/09, to ensure that facilities and
accommodation meet both the needs and expectations of our students will put pressure on cash
reserves, but it is still expected that the target of 40 days expenditure will be achieved.
Growth in overall student numbers is expected to slow down, due to the availability of fewer
additional funded full-time undergraduate student numbers across the sector; however, one of
the University’s key strategic goal is to expand postgraduate activity, with a higher than average
budgeted increase in postgraduate student numbers.
The overseas student market, however, remains highly competitive and therefore future
overseas numbers are expected to remain at levels achieved in 2007/08. It is anticipated that
the implementation of the University’s Internationalisation Strategy will ensure these levels are
maintained and provide further means of expansion in this area in the medium term.
Financial Summary
The University’s consolidated results for the years ended 31 July 2008 and 31 July 2007 are
summarised
as
follows:
Restated
2007/08
2006/07
Change
£000 £000
%age
Income
145,345
127,656
13.9
Expenditure
(139,745) (124,935) 11.9
Transfer in respect of Specific Endowments
92
83
Surplus for the Year
5,692
2,804 103.0
2007/08 has been another successful year resulting in a surplus of £5.7m (2006/07: £2.8m)
which substantially exceeds the budget of £2.0m and has been once again been achieved by
the continuation of positive income growth combined with effective budgetary control over
expenditure.
8
UNIVERSITY OF KENT
OPERATING AND FINANCIAL REVIEW
Income
Analysis of Income 2003/04 to 2007/08
60,000
A
A
50,000
A
B
A
40,000
A
B
B
00 30,000
B
B
£0
D
20,000
D
D
D
C
C
D
E
E
C
C
C
E
10,000
E
E
F
F
F
F
F
0
2003/04
2004/05
2005/06
2006/07
2007/08
Key:
A - Funding Council Income
D - Residences, Catering and Conferences
B - Tuition Fees and Education Contracts
E - Other Income
C - Research Grants and Contracts
F - Investment Income
The growth in income follows another good year of recruitment, specifically of full and part-time
Home/EU undergraduates together with encouraging growth in the number of full-time
postgraduate students, particularly from overseas. The level of funding from the Higher
Education Funding Council for England (HEFCE) was greatly improved by the allocation of
funding for additional Home/EU students and £50.9m (2006/07: £46.6m) was received by way of
block grant. In comparison to 2006/07, the second year of variable fees brought in an additional
£4.7m net income after payments for a generous bursary scheme to assist students from less
advantaged backgrounds.
The high levels of research income seen last year have been maintained with good margins
continuing to be reported. Income from student residences has risen significantly with good
control over associated costs and will continue to provide funds for refurbishing accommodation,
catering and social facilities. Returns on investments and cash balances once again improved.
Income from Kent Hospitality, the University’s residential and catering division, exceeded budget
by £1.7m as a result of a very successful year in the conference trade, an area that has
developed well in past years and looks set to continue albeit at slightly lower levels. It is part of
the University’s strategy to pursue the growth and diversity of income levels as a means of
ensuring sustainability for the future.
FINANCIAL STATEMENTS 2007/08 9
OPERATING AND FINANCIAL REVIEW
Management of Resources
Analysis of Expenditure 2007/08 (£000)
Interest Payable
4,158
Depreciation 8,817
Other Operating
Expenses 43,421
Staff Costs 82,704
Exceptional
Restructuring Costs
645
Staff Costs rose by 11.1% in the year, following investments in academic departments to
enhance further the research and teaching functions, with a number of new posts in
departments within the Social Sciences faculty, together with an increased focus on the
University’s academic service provision and on enterprise activities. The implementation of the
nationally negotiated pay settlement also continued to have an effect with a much larger impact
anticipated for the coming year. During the year, the University reviewed the operations of one
of its smaller academic departments, the Kent Institute of Medicine and Health Sciences, and
made a decision to close down the department, resulting in the redeployment of 23 staff and 6
staff who opted to take voluntary severance. A new strategy for health-related activities is being
developed and a closer working relationship with local NHS Trusts is being developed.
Average staff numbers increased by 103 full-time equivalents in the year, primarily in academic
departments.
Other Operating Expenses increased by £5.3m (13.9%) but were well within budgeted levels
and once again is evidence of effective cost control in a period of higher than anticipated
inflation. Academic departments accounted for a further £1.2m, with planned strategic
investments being made in the new Centre for Journalism and in providing new studentships. In
Academic Services, an additional £0.3m was spent largely on e-strategy and systems software
developments and on increasing and updating library stocks, together with an extra £0.2m on
JISC-funded projects. Residences and catering costs increased by £1.0m as a result of
increased conference activity.
Central administration costs also rose during the year by £2.5m which included an additional
£1.0m payments to students in the form of bursaries, providing a total of £2.0m financial
assistance to those students affected by variable tuition fees, the further development of the
University’s Medway and Brussels campuses and expansion of the University’s Development
Office to increase its capacity for fundraising. Research non-pay costs were well controlled and
reduced by £0.8m in response to rising staff costs and helped push margins earned on these
activities up to 18.5%.
10
UNIVERSITY OF KENT
OPERATING AND FINANCIAL REVIEW
Depreciation charged in the year increased by £1.0m following high levels of capital investment
in refurbishing study bedrooms within Darwin College and revamping Mungo’s Bistro. Work was
also completed on the £1.5m refurbishment of the Rochester Building at Medway, incorporating
a second Gulbenkian Café bar and a meeting and conference venue for University of Kent
visitors.
Balance Sheet
Net Current Assets increased to £4.2m from £3.5m. Endowments decreased by just under
£0.1m as a result of reclassifications required in accordance with the revised SORP for Higher
and Further Education. Loan capital repayments led to a reduction in long-term creditors as
expected but was offset by the reclassification of a long-term lease premium received in
advance. Restructuring provisions increased slightly as a result of the closure of a department at
the end of the year. The University’s main pension schemes are USS and SAUL and are multi-
employer schemes and continue to be accounted for as defined contribution schemes. The
University follows the requirements of FRS17 in relation to the accounting for the Local
Government Pension Scheme for which it has one remaining member and the pension deficit
can be seen on the balance sheet; during the year, the deficit increased by £149,000 and now
stands at £474,000. Full details of the pension schemes can be found in Note 28 to the financial
statements.
Investment Management
The University’s current asset and endowment investments are invested in Common Investment
Funds managed by CCLA Investment Management Limited (CCLA).
During the year the Investment Advisory Group monitored the returns from both the Common
Investment Funds and the high interest bearing deposit accounts. The COIF and CBF
Investment Funds reflected weak market trends and produced negative returns over the period.
The bias towards long-term assets such as equities and property in these funds meant that they
underperformed the WM Co. Charity Fund Universe. The COIF and CBF Fixed Interest Funds
produced positive returns and outperformed the benchmark.
As a result of the above and in line with the general economic downturn, the market value of the
University’s Endowment Assets fell by £0.6m and now stand at £4.4m whilst the market value of
Current Asset Investments fell to just above cost.
Cash Flow
The University’s cash position at the end of the year remains strong and was better than
planned due to the higher than budgeted surplus in the period, some timing delays of major
capital projects and the advance payment of certain grants. Plans are still in place to invest just
over £110m into the estate over the next five years, of which circa £60m will be required to be
self or loan funded and Council has agreed that it is appropriate for cash holding levels to
reduce to finance this investment as new facilities are built or refurbished to meet rising student
expectations.
Total Cash, Short-Term Deposits and Current Asset Investments at market value have
increased by £3.2m as follows:
Restated
2008
2007
Change
£000 £000
%age
Cash Deposits and Short-Term Deposits
15,217
11,995
26.9
Current Asset Investments at Market Value
3,574
3,614 (1.1)
18,791 15,609 20.4
FINANCIAL STATEMENTS 2007/08 11
OPERATING AND FINANCIAL REVIEW
Capital Projects
Capital expenditure amounted to £17.6m in the year, of which £4.6m was spent on the
construction of a 496 seat lecture theatre and new seminar rooms as part of the Woolf College
development. Work will continue into 2008/09 with an expected total cost of £6.7m. The
refurbishment of the Rochester Building at Medway, with catering and conference facilities for
University of Kent staff, students and visitors, was completed with additional costs this year of
£0.8m. Other developments in Canterbury included a £3.8m series of lecture theatre, seminar
room and laboratory refurbishments, mainly funded by 2006-08 HEFCE teaching and learning
capital grants, and the continuation of a rolling programme of refurbishing student residences at
a cost of £2.0m, including the completion of refurbishments of bedrooms within Darwin College
started in 2007/08. Planning approval was eventually granted for the construction of a landmark
new building for the School of Drama, Film and Visual Arts and work commenced in October
2008 with expected completion in December 2009. This will offer considerably improved
facilities and performance space and is a project that is part-funded from HEFCE Teaching and
Research Capital Grants.
Gearing
Long-term bank loan debt has fallen by £2.0m in the year with gearing levels now reduced to
42% as a percentage of income as earlier investments are now generating income. Further loan
funding is being considered as part of the overall capital investment plan.
Equal Opportunities and Diversity
In line with the general intention of its Charter and the law, the University confirms its
commitment to policies of equality and diversity, and to the implementation of these policies.
Equality and diversity issues, relating both to staff and students, are regularly considered by the
Staff Policy and Student Services Committees. The University employs an Equality and Diversity
Manager who acts as a focus for work in these areas on a day-to-day basis.
Employee Involvement
The University places considerable value on the involvement of its employees and on good
communications. Newsletters are produced during the year for all staff and information and
regular news updates are also available via ‘Campus on-line’ and ‘News’ on the University
website and from heads of departments reporting back from Monthly Managers’ Meetings. Staff
are also encouraged to participate in formal and informal consultation at University, faculty and
departmental level and have regular opportunities to interact with the Vice-Chancellor at
departmental and informal meetings and social occasions. In addition there are termly meetings
with the recognised Trades Unions and representatives of non-union staff and managers. There
are four elected staff representatives on Council.
During 2007/08, a staff engagement survey was undertaken to which 66% of staff responded
and results disseminated and discussed widely within the University. While identifying specific
areas for improvement that will be addressed, the overall feedback was that 86% of staff were
proud to work for the University. In addition, a new survey studying the quality of life for staff in
Higher Education ranked Kent as one of the best in the country, with a rank of 13 out of 121 in
the first-ever Halifax Times Higher Education university quality of life index.
Payment of Creditors
It is the University’s policy to obtain the best terms for all business and, thus, there is no single
policy as to the terms used. In agreements negotiated with suppliers, the University endeavours
to include and abide by specific payment terms.
12
UNIVERSITY OF KENT
OPERATING AND FINANCIAL REVIEW
Going Concern
After making appropriate enquiries, the Council considers that the University has adequate
resources to continue in operational existence for the foreseeable future. For this reason the
financial statements have been prepared on a going concern basis.
Conclusion
2007/08 has been an extremely successful year for the University, with excellent financial
results, strong student recruitment, the continued generation of high income levels, in particular
from increased conference activity and research, and effective cost control in a period of high
inflationary pressures. The University continues to meet students’ expectations in providing
good facilities and a thriving learning environment, as evidenced by another excellent
performance in this year’s National Student Survey. The completion of Woolf College, the
University’s first postgraduate college, was a major highlight of the year, together with the
refurbishments of a number of teaching and social facilities and the ongoing development of a
number of other major capital projects, which will bring great benefits to students, staff and the
local community.
All of this would not have been possible without the continued expertise and enormous
commitment of all staff across the University. I am sure Council will wish me to thank everyone
involved in helping to make 2007/08 another tremendously successful year.
Professor Julia Goodfellow Vice-Chancellor
27 November 2008
FINANCIAL STATEMENTS 2007/08 13
CORPORATE GOVERNANCE STATEMENT
The Statement which follows is provided to enable readers of the Annual Report and Accounts
of the University to obtain a better understanding of its governance and legal structure.
The University endeavours to conduct its business in accordance with the seven principles
identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity,
accountability, openness, honesty and leadership) and with the guidance to universities given by
the Committee of University Chairmen (CUC) in its Guide for Members of HE Governing Bodies
in the UK (November 2004). The University is committed to achieving best practice in all
aspects of Corporate Governance.
The University is an independent corporation, whose legal status derives from a Royal Charter
originally granted in 1965. Its objects, powers and framework of governance are set out in the
Charter and its supporting statutes, the latest version of which was approved by the Privy
Council in 2006.
The Charter and Statutes require the University to have three separate bodies, each with clearly
defined functions and responsibilities, to oversee and manage its activities, as follows:
•
The Council is the executive governing body, responsible for the finance, property,
investments and general business of the University, and for setting the general strategic
direction of the institution. Council has 25 members with a majority (17 members - 68%)
from outside the University (described as lay members), from whom its chair and its deputy
chair must be appointed. Members also include representatives of the staff of the University
and the student body. Members do not receive any payment for their work in relation to the
Council. Lay members may, however, claim reimbursement of associated travel costs and
expenses.
•
The Senate is the academic authority of the University and draws its membership (currently
46 members) almost entirely from academic and research staff and students of the
University. Its role is to direct and regulate the teaching and research work of the University.
•
The Court is a large, mainly formal, body comprising over 400 members. It offers a means
whereby the wider interests served by the University can be associated with the institution,
and provides a forum where members of Court can be briefed and comment on key
University activities and developments. The Court meets at least once a year to receive the
Annual Report and audited financial statements of the University. In addition the Court
appoints the Chancellor, on the nomination of the Council after consultation with Senate,
whose role is to preside over meetings of the Court and Congregations for the conferring of
degrees. Many members of the Court are from outside the University, representing the local
community and other designated bodies with an interest in the work of the University. The
membership also includes professorial staff and representatives of other staff (both
academic and non-academic) and the student body.
The Vice-Chancellor, the principal academic and administrative officer of the University, 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 the
Higher Education Funding Council for England (HEFCE), the Vice-Chancellor is the accounting
officer of the University and in that capacity can be summoned to appear before the Public
Accounts Committee of the House of Commons.
14
UNIVERSITY OF KENT
CORPORATE GOVERNANCE STATEMENT
The University’s compliance with the CUC Governance Code of Practice includes the adoption
of a Statement of the Council’s Primary Responsibilities which may be found on the Central
Secretariat’s website. In brief this encompasses: the appointment of the senior staff and lay
members/officers; amendments to the University’s Royal Charter, Statutes and Ordinances;
matters relating to the University’s mission, vision and strategic aims; corporate level financial
matters and decisions; institutional performance and other requirements arising from the
University’s constitutional framework, institutions such as the Funding Council and legislation.
Another requirement from the CUC’s Code is that the Vice-Chancellor provides an annual report
to the Council on matters delegated to him/her by Council and arising from Statutes; this is
completed in the Autumn Term each year and published on the Central Secretariat website.
During 2005/06 Council agreed to undertake a review of its effectiveness and this was
undertaken during Summer 2008 (to be considered by the Council during 2008/09). In
December 2006 Council considered the University’s position against identified Key Performance
Indicators (KPIs) approved in June 2006. Following review of the KPIs proposed in a report from
CUC (November 2006) revised KPIs were adopted and Council considered the University’s
performance against these in June 2007 and July 2008. The position will next be reviewed in
July 2008. It is intended that overall institutional performance will be reviewed by the Council in
2008/09.
Although Council meets at least five times each academic year, much of its detailed work is
initially handled by committees, in particular the Finance and Resources Committee, the Staff
Policy Committee, the Lay Nominations Committee, the Remuneration Committee and the Audit
Committee. The decisions of these committees are formally reported to the Council. These
committees are formally constituted as committees of the Council with written terms of reference
and specified membership, including lay members (from whom Council generally appoints
chairs).
As chief executive of the University, the Vice-Chancellor exercises considerable influence upon
the development of institutional strategy, the identification and planning of new developments,
and shaping of the institutional ethos. The Deputy and Pro-Vice-Chancellors, Director of
Finance and Commercial Services and senior academic and administrative officers all contribute
in various ways to aspects of this work but the ultimate responsibility for what is done rests with
the Council.
The Statutes of the University provide for the Council to appoint a Secretary of the Council (and
of the Court). Any enquiries about the constitution and governance of the University should be
addressed to the Secretary of the Council.
The University maintains a Register of Interests of members of the Council and other staff which
may be consulted by arrangement with the Secretary of the Council.
Statement of Internal Control
The University Council has 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 the University is responsible, in accordance with the
responsibilities assigned to the Council in the University’s Charter and Statutes and the
Financial Memorandum with HEFCE.
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 against material misstatement or loss.
FINANCIAL STATEMENTS 2007/08 15
CORPORATE GOVERNANCE STATEMENT
The system of internal control is based on an ongoing process for identifying, evaluating and
managing the significant risks faced by the University. This process is designed to identify the
principal risks to the achievement of policies, aims and objectives; to evaluate the nature and
extent of those risks; and to manage them efficiently, effectively and economically. This process
has been in place for the year ended 31 July 2008 and up to the date of approval of the financial
statements, and accords with HEFCE guidance.
The Council is responsible for the University’s system of internal control and for reviewing its
effectiveness. The following processes have been established:
• Council meets at least five times each year to consider the plans and strategic direction of
the University
• Council receives an annual report on Risk Management and the annual reports of the Audit
Committee and the Head of Internal Audit Services evaluating the assurance provided by
internal controls, including the principal results of risk identification, evaluation and
management review of effectiveness
• The Vice-Chancellor’s Executive Group oversees risk management and receives regular
reports on risk management activity and performance
• The Audit Committee receives regular reports from the Head of Internal Audit Services
which include the Head of Internal Audit Services’ independent opinion on the adequacy and
effectiveness of the University’s system of internal control, together with recommendations
for improvement
• A University-wide prioritised risk register is maintained, linked to the achievement of
institutional objectives and covering business, operational, compliance and financial risk,
and it is kept up to date through an annual risk assessment exercise to review the risks
included and the scorings applied to each
• Risks deemed to be significant are addressed through detailed action plans, with key
performance data being collected termly and reported to the Executive Group
• Heads of Academic Departments are charged with the identification and management of risk
under the University’s Strategic Planning Model.
Council’s review of the effectiveness of the system of internal control is informed by Internal
Audit Services, which operates to standards defined in the HEFCE Audit Code of Practice
(Accountability and Audit). The Internal Audit Service was reviewed for effectiveness by the
HEFCE Assurance Service in January 2005, and found to provide a high level of assurance.
Council’s review of the effectiveness of the system of internal control is also informed by the
work of the executive managers within the University, who have responsibility for the
development and maintenance of the internal control framework, and by comments made by the
External Auditors in their management letter and other reports.
In 2006 the University’s Audit Committee established a working group to review the University’s
risk management practices in the light of HEFCE best practice guidance (HEFCE 2005/11).
Actions were agreed to refine the current system and implementation of these plans were
managed by the Head of Internal Audit Services throughout 2007/08.
16
UNIVERSITY OF KENT
STATEMENT OF THE RESPONSIBILITIES OF THE UNIVERSITY’S COUNCIL
In accordance with the University’s Charter of Incorporation, the Council is responsible for the
administration and management of the affairs of the University and is required to present
audited financial statements for each financial year to the University Court.
The Council is responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the University and to enable it to
ensure that the financial statements are prepared in accordance with the Charter and Statutes,
the Statement of Recommended Practice on Accounting in Higher Education Institutions and
other relevant accounting standards.
In addition, within the terms and conditions of a Financial Memorandum agreed between the
Higher Education Funding Council for England and the Council of the University, the Council,
through its designated office holder, is required to prepare financial statements for each financial
year which give a true and fair view of the state of affairs of the University and of the surplus or
deficit and cash flows for that year.
In causing the financial statements to be prepared, the Council has ensured that:
• suitable accounting policies are selected and applied consistently
• judgements and estimates are made that are reasonable and prudent
• applicable United Kingdom accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements
• financial statements are prepared on the going concern basis unless it is inappropriate to
presume that the University will continue in operation. The Council is satisfied that the
University 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.
The Council has taken reasonable steps to:
• ensure that funds from HEFCE are used only for the purposes for which they have been
given and in accordance with the Financial Memorandum agreed with HEFCE and any other
conditions which HEFCE may from time to time prescribe
• ensure that there are appropriate financial and management controls in place to safeguard
public funds and funds from other sources
• safeguard the assets of the University and prevent and detect fraud
• secure the economical, efficient and effective management of the University’s resources and
expenditure.
The key elements of the University’s system of internal financial control, which is designed to
discharge the responsibilities set out above, include the following:
• clear definitions of the responsibilities of, and the authority delegated to, heads of academic
and administrative departments
• a comprehensive medium and short-term planning process, supplemented by detailed
annual income, expenditure, capital and cash flow budgets
• regular reviews of academic performance and financial results involving variance reporting
and updates of forecast outturns
• clearly defined and formalised requirements for approval and control of expenditure, with
investment decisions involving capital or revenue expenditure being subject to formal
detailed appraisal and review according to approval levels set by the Council
• comprehensive Financial Regulations, detailing financial controls and procedures, approved
by the Finance and Resources Committee and the Council
• a professional Internal Audit Office whose annual programme is approved by the Audit
Committee in line with the Full Statement of Internal Control.
FINANCIAL STATEMENTS 2007/08 17
INDEPENDENT AUDITOR’S REPORT TO THE COUNCIL OF
THE UNIVERSITY OF KENT
We have audited the consolidated financial statements of the University of Kent for the year
ended 31 July 2008, which comprise the Income and Expenditure Account, the Balance Sheet,
the Cash Flow Statement, the Statement of Consolidated Total Recognised Gains and Losses
and the related notes. These financial statements have been prepared under the historical cost
convention as modified by the revaluation of certain fixed assets and the accounting policies set
out therein.
This report is made solely to the Members of the University Council, as a body, in accordance
with the Higher Education Funding Council for England Code of Practice. Our audit work has
been undertaken so that we might state to the Members of 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 Members of Council as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective Responsibilities of Members of the Council and Auditors
As described in the statement of the responsibilities of the University’s Council, the Council is
responsible for the preparation of the financial statements in accordance with the Statement of
Recommended Practice: Accounting for Further and Higher Education, applicable law and
United Kingdom Accounting Standards.
Our responsibility is to audit the financial statements in accordance with relevant legal and
regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and
if, in our opinion, the Report of the Chair of Finance and Resources Committee is not consistent
with the financial statements, if the University has not kept proper accounting records, or if we
have not received all the information and explanations we require for our audit. We also report
to you whether, in our opinion, monies expended out of funds from whatever source
administered by the University for specific purposes were properly applied for those purposes
and, where relevant, managed in accordance with appropriate legislation and whether monies
expended out of fund provided by the Higher Education Funding Council for England, the
Learning and Skills Council or the Teachers Training Agency were applied in accordance with
the financial memorandum and any other terms and conditions attached to them.
We read the Report of the Chair of the Finance and Resources Committee and consider the
implications for our report if we become aware of any apparent misstatement or material
inconsistencies with the financial statements. Our responsibilities do not extend to any other
information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on Auditing (UK and
Ireland) issued by the Auditing Practices Board, and the Audit Code of Practice issued by the
Higher Education Funding Council for England. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial statements. It also includes
an assessment of the significant estimates and judgements made by the Council in the
preparation of the financial statements, and of whether the accounting policies are appropriate
to the University’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which
we considered necessary in order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy
of the presentation of information in the financial statements.
18
UNIVERSITY OF KENT
INDEPENDENT AUDITOR’S REPORT TO THE COUNCIL OF
THE UNIVERSITY OF KENT
Opinion
In our opinion:
i.
The financial statements give a true and fair view of the state of affairs of the University
of Kent and the group at 31 July 2008, and of the surplus of income over expenditure,
recognised gains and losses and cashflows of the University of Kent and the group for
the year then ended; and the statements have been properly prepared in accordance
with the Statement of Recommended Practice: Accounting for Further and Higher
Education.
ii.
In all material respects, income from the Higher Education Funding Council for England,
the Learning and Skills Council and the Training and Development Agency for Schools,
grants and income for specific purposes and from other restricted funds administered by
the University of Kent have been applied only for the purposes for which they were
received.
iii.
In all material respects, income has been applied in accordance with the University of
Kent’s statutes and where appropriate in accordance with the financial memorandum
with the Higher Education Funding Council for England dated 1 October 2003.
Grant Thornton UK LLP
Chartered Accountants and Registered Auditors
Hemel Hempstead, England
27 November 2008
FINANCIAL STATEMENTS 2007/08 19
CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT
FOR THE YEAR ENDED 31 JULY 2008
Restated
Note
2007/08
2006/07
£000
£000
INCOME
Funding Council Grants
1
55,325 50,395
Tuition Fees and Education Contracts
2
43,921 34,884
Research Grants and Contracts
3
13,032 13,076
Other
Income
4
31,803
28,150
Endowment and Investment Income
5
1,264 1,151
Total
Income
145,345 127,656
EXPENDITURE
Staff
Costs
6
82,704
74,413
Exceptional Restructuring Costs
6
645
300
Other Operating Expenses
7
43,421 38,111
Depreciation
11
8,817
7,781
Interest Payable
8
4,158 4,330
Total
Expenditure
139,745 124,935
Surplus after Depreciation of Assets at Cost
and before Disposal of Assets, Tax and
Transfers in respect of Specific Endowments
5,600
2,721
Taxation
9 - -
Transfers in respect of Specific Endowments
92
83
Surplus after Depreciation of Assets at Cost,
Disposal of Assets, Tax and Transfers in respect
of Specific Endowments
5,692 2,804
There is no difference between the surplus stated above and the historical cost equivalent.
All gains and losses recognised in the year are included above.
All income and expenditure recognised above is derived from continuing operations.
20
UNIVERSITY OF KENT
STATEMENT OF CONSOLIDATED TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 JULY 2008
Restated
Note
2007/08
2006/07
£000
£000
Surplus on Continuing Operations after
Depreciation of Assets at Cost, Disposal of Assets, Tax
and Transfers in respect of Specific Endowments
5,692
2,804
Donated Assets Received
21
-
-
Unrealised (Losses)/Gains on Endowment
Asset
Investments
19
(683)
267
New Endowments and Income Retained for the Year
19
98
24
Actuarial (Loss)/Gain on Pension Scheme
28
(248)
95
Total Recognised Gains and Losses on
Continuing Operations relating to the Year
4,859 3,190
RECONCILIATION
Opening Reserves and Endowments
54,306 51,092
Prior Year Adjustment: Reclassification of Donated
Assets Received
- (33)
Restated Opening Reserves and Endowments
54,306 51,059
Transfer Reserves from Imperial College
21
57
Total Recognised Gains and Losses for the Year
4,859 3,190
Closing Reserves and Endowments
59,186 54,306
The full impact of the Prior Year Adjustment on the University’s Consolidated Reserves and
Endowments, as described in Note 15 of the Statement of Principal Accounting Policies, can be
seen as follows:
£000
Adjustment to Opening Reserves at 1 August 2006
108
Adjustment to Endowments at 1 August 2006
(141)
Adjustment to Income and Expenditure Account for the
Year Ended 31 July 2007
18
Other Adjustments to the Statement of Consolidated Total
Recognised Gains and Losses for the Year Ended 31 July 2007:
New Endowments and Income Retained for the Year
(4)
Total
Prior
Year
Adjustment
(19)
FINANCIAL STATEMENTS 2007/08 21
BALANCE SHEETS AS AT 31 JULY 2008
Consolidated University
Restated Restated
Note 2008 2007 2008 2007
£000
£000 £000 £000
FIXED ASSETS
Tangible Assets
11 155,419 146,628 155,419 146,628
Investments
12 - 1 - 1
155,419 146,629 155,419 146,629
ENDOWMENT ASSETS
13 4,446 5,031 4,446 5,031
CURRENT ASSETS
Stocks
534 515 534 515
Debtors
14 9,513 9,997 9,446 9,841
Investments
13 3,574 3,614 3,574 3,614
Short-Term
Deposits
145 351 145 351
Cash at Bank and in Hand
15,072 11,644 14,978 11,544
28,838 26,121 28,677 25,865
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
15 (24,615) (22,642) (24,611) (22,638)
NET CURRENT ASSETS
4,223 3,479 4,066 3,227
TOTAL ASSETS LESS CURRENT LIABILITIES
164,088 155,139 163,931 154,887
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR
16 (63,960) (64,913) (63,840) (64,698)
PROVISIONS FOR LIABILITIES AND
CHARGES
17 (1,215) (537) (1,215) (537)
NET ASSETS EXCLUDING PENSION LIABILITY 98,913 89,689 98,876 89,652
NET PENSION LIABILITY
(474) (325) (474) (325)
NET ASSETS
98,439 89,364 98,402 89,327
22
UNIVERSITY OF KENT
BALANCE SHEETS AS AT 31 JULY 2008
Consolidated University
Restated Restated
Note 2008 2007 2008 2007
£000
£000 £000 £000
DEFERRED CAPITAL GRANTS
18 39,253 35,058 39,253 35,058
ENDOWMENTS
Expendable
19 3,374 3,830 3,374 3,830
Permanent
19 1,072 1,201 1,072 1,201
4,446 5,031 4,446 5,031
RESERVES
Pension
Reserve
20 (474) (325) (474) (325)
Revaluation
Reserve
21 8,431 8,431 8,431 8,431
General Reserve
22 46,783 41,169 46,746 41,132
54,740 49,275 54,703 49,238
TOTAL FUNDS
98,439 89,364 98,402 89,327
The financial statements on pages 20 to 52 were approved by the Council on 27 November
2008 and signed on its behalf by:
Professor Julia Goodfellow
Vice-Chancellor
Richard Oldfield
Deputy Chair of the Finance and Resources Committee
Denise Everitt
Deputy Vice-Chancellor (Finance and Commercial Services)
FINANCIAL STATEMENTS 2007/08 23
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JULY 2008
Restated
Note
2007/08
2006/07
£000
£000
Cash Flow from Operating Activities
23
18,774 13,036
Returns on Investments and Servicing of Finance
24
(2,937) (3,175)
Capital Expenditure and Financial Investment
25
(10,707) (10,349)
Management of Liquid Resources
26
148
(228)
Financing
(1,850) (1,727)
Increase/(Decrease) in Cash in the Year
3,428
(2,443)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Restated
2007/08
2006/07
£000
£000
Increase/(Decrease) in Cash in the Year
3,428
(2,443)
(Inflow)/Outflow from Liquid Resources
(148)
228
Repayment
of
Debt
1,850
1,727
Current Asset Investments: Non-Cash Movements
(98) 117
Change in Net Debt in the Year
5,032
(371)
Net Debt at 1 August
(48,849) (48,478)
Net Debt at 31 July
27
(43,817) (48,849)
24
UNIVERSITY OF KENT
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 United Kingdom Accounting Standards.
The financial statements have been prepared under the historical cost convention
modified by the revaluation of certain fixed assets and investments.
2.
Basis of Consolidation
The consolidated financial statements include the University and its subsidiary
undertaking, Kent Enterprise Limited. Intra-group transactions are eliminated fully on
consolidation. In accordance with FRS2, the activities of the Students’ Union have not
been consolidated because the University does not control those activities. The activities
of The University of Kent Development Trust have not been included, as the amounts
involved are immaterial.
3.
Recognition of Income and Expenditure
Recurrent block grants from the Higher Education Funding Council for England (HEFCE)
are recognised in the period in which they are received.
Fee income is stated gross and recognised over the related study period. Where the
tuition fee has been reduced by a payment discount, the income receivable is shown net
of the discount. Bursaries and scholarships are accounted for gross as expenditure.
Income from research grants, contracts and other services rendered is included to the
extent of completion of the contract or service concerned. This is generally equivalent to
the sum of the relevant expenditure incurred during the year and any related
contributions towards overhead costs. Any future predicted losses on individual long-
term contracts are recognised immediately. Any payments received in advance are
included in the Balance Sheet within creditors.
Donations with restrictions attached are recognised when the relevant conditions have
been met. Donations which are to be retained for the benefit of the University are
recognised in the Statement of Consolidated Total Recognised Gains and Losses and in
endowments; other donations are recognised by inclusion as other income in the Income
and Expenditure Account.
Income from short-term deposits and current asset investments is credited to income in
the period in which it is earned.
Endowment income is credited to the Income and Expenditure Account on a receivable
basis. Any income on restricted endowments earned in excess of that applied to the
specific purpose is transferred from the Income and Expenditure Account to restricted
endowments. Any realised gains or losses from dealing in the related assets are
retained within the endowments in the Balance Sheet.
Non-recurrent grants from HEFCE or other bodies received in respect of the acquisition
or construction of fixed assets are treated as deferred capital grants and amortised in
line with depreciation over the life of the assets.
FINANCIAL STATEMENTS 2007/08 25
STATEMENT OF PRINCIPAL ACCOUNTING POLICIES
4.
Agency Arrangements
Any funds that the University receives and disburses whilst acting as agent on behalf of
a funding body and where the University is exposed to minimal risk or enjoys minimal
economic benefit in relation to the transaction, are excluded from the Income and
Expenditure Account.
5.
Maintenance of Premises
The University has a long-term rolling maintenance plan, which forms the basis of the
ongoing maintenance of the estate. The cost of long-term and routine corrective
maintenance is charged to the Income and Expenditure Account as incurred.
6.
Foreign Currency Translation
Transactions denominated in foreign currencies are recorded at the rate of exchange
ruling at the dates of the transactions. Assets and liabilities denominated in foreign
currencies are translated into sterling either at year end rates or, where there are related
forward foreign exchange contracts, at contract rates. All resulting exchange differences
are taken to the Income and Expenditure Account in the period in which they arise.
7.
Pension
Schemes
The University has fully adopted Accounting Standard FRS17 ‘Retirement Benefits’. The
impact of this standard has been reflected throughout the financial statements.
Retirement benefits for most employees of the University are provided by the
Universities Superannuation Scheme (USS) and the Superannuation Arrangements of
the University of London (SAUL). These are defined benefit schemes which are
externally funded and contracted out of the State Second Pension (S2P). The assets of
both schemes are held in separate trustee administered funds. The University is unable
to identify its share of the underlying assets and liabilities of the schemes on a
consistent and reasonable basis and therefore, as required by FRS17, 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. Informal reviews of the position of the
schemes are carried out between formal valuations.
Some employees of the University participate in the local government pension fund
which is a defined benefit scheme in which the University’s share of the underlying
assets and liabilities have been separately identified. For this fund, the difference
between the University’s share of the fair value of the assets held in the fund and the
fund’s liabilities, measured on an actuarial basis using the projected unit method, is
recognised in the University’s Balance Sheet as a pension scheme asset or liability, as
appropriate. The pension scheme balance is recognised net of any related deferred tax
balance.
Changes in the defined benefit pension scheme asset or liability arising from factors
other than cash contributions by the University are charged to the Income and
Expenditure Account or the Statement of Consolidated Total Recognised Gains and
Losses in accordance with FRS17.
26
UNIVERSITY OF KENT
STATEMENT OF PRINCIPAL ACCOUNTING POLICIES
8.
Tangible Fixed Assets
Land and Buildings
Land was valued on an open market existing use basis by Grimley - JR Eve (Chartered
Surveyors) on 3 May 1995. In keeping with the transitional rules set out in FRS15 this
land valuation is retained as the cost of that land. Freehold land is not depreciated. The
University buildings are specialised buildings and therefore it is not appropriate to value
them on the basis of open market value. Buildings are included in the Balance Sheet at
cost together with subsequent refurbishment expenditure less accumulated depreciation.
Depreciation on buildings is provided on a straight-line basis over their expected useful
economic lives as follows:
Freehold
buildings
50
years
Components of new buildings e.g. lift, heating,
electrical system etc
25 years
Refurbishment of academic facilities
15 years
Refurbishment of accommodation
10 years
Refurbishment of dining and trading facilities
5 years
Where land and buildings are acquired with the aid of specific grants they are capitalised
and depreciated as above. The related grants are credited to a deferred capital grant
account and are 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.
Certain buildings situated at the Universities at Medway campus are jointly owned by the
University of Kent and the University of Greenwich. All costs associated in the purchase
and refurbishment of these buildings have been shared equally between both parties
and the University of Kent share of this cost has been capitalised in the Balance Sheet.
Finance costs, which are directly attributable to the construction of land and buildings,
are capitalised as part of the cost of those assets, where appropriate.
A review of the impairment of a fixed asset is carried out if events or changes in
circumstances indicate that the carrying value of the fixed asset may not be recoverable.
Buildings under construction are accounted for at cost, based on the value of architects’
certificates and other direct costs incurred to 31 July. They are not depreciated until they
are brought into use.
Equipment
Equipment costing less than £5,000 per individual item or group of related items is
written off in the year of acquisition. All other equipment is capitalised at cost.
Capitalised equipment is depreciated over its useful economic life as follows:
General equipment and furniture
5 to 10 years
Computer equipment and software
3 to 5 years
Equipment acquired for specific research or other projects Project life (generally 3
years)
Where equipment is acquired with the aid of specific grants it is capitalised and
depreciated in accordance with the above policy, with the related grant being credited to
a deferred capital grant and released to the Income and Expenditure Account over the
expected useful economic life of the related equipment.
FINANCIAL STATEMENTS 2007/08 27
STATEMENT OF PRINCIPAL ACCOUNTING POLICIES
9.
Investments
Fixed asset investments that are not listed on a recognised stock exchange are carried
at historical cost less any provision for impairment of their value.
Investments that form part of endowment assets are included in the Balance Sheet at
market value and any subsequent appreciation or depreciation of endowment assets is
added to or subtracted from the reported endowment funds. Current asset investments
are included at the lower of their original cost and net realisable value on a portfolio
basis.
10.
Stocks
Stocks are stated at the lower of their cost and net realisable value. Where necessary,
provision is made for obsolete, slow moving and defective stocks.
11.
Taxation
The University is an exempt charity within the meaning of Schedule 2 of the Charities
Act 1993 and as such is a charitable company within the meaning of Section 506(1) of
the Income and Corporation Taxes Act (ICTA) 1988. Accordingly, the University is
exempt from taxation in respect of income or capital gains received within categories
covered by Section 505 of the ICTA 1988 and Section 256 of the Taxation of
Chargeable Gains Act 1992, to the extent that such income or gains are applied to
charitable purposes only, and the extent to which any such exemption is not disapplied
by Section 505(4) in respect of non-charitable expenditure arising from non-primary
purpose trading. In the event that non-primary purpose trading losses arise, the
University treats the trades concerned as being carried out on a commercial basis with a
view to realisation of gain within the larger undertaking of the University so that Section
393A(3)(b) of the ICTA 1988 applies to allow the non-primary purpose loss to be offset
against the surplus for which tax exemption is disapplied by virtue of the existence of the
non-primary purpose trading loss.
The University receives no similar exemption in respect of VAT. Irrecoverable VAT on
inputs is included in the costs of such inputs. Any irrecoverable VAT incurred on the
purchase of tangible fixed assets is included in the cost of these assets.
As commercial organisations, the University’s subsidiary companies are subject to
corporation tax and VAT.
12.
Liquid
Resources
Liquid resources include sums on short-term deposits with recognised banks and
building societies.
13.
Provisions
Provisions are recognised when the University has a present legal or constructive
obligation as a result of a past event, it is probable that a transfer of economic benefit
will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
14.
Treatment of Operating Leases
All operating lease payments are included in the Income and Expenditure Account in the
period to which the payment relates. Future liabilities under such operating leases are
disclosed as a financial commitment in the accounts.
28
UNIVERSITY OF KENT
STATEMENT OF PRINCIPAL ACCOUNTING POLICIES
15.
Prior Year Adjustment
The prior year adjustment relates to changes in the accounting for charitable donations
in accordance with the revised guidance as issued in the Statement of Recommended
Practice: Accounting for Further and Higher Education, effective from 1 August 2007.
Specifically, this has included the reclassification of donated assets from the revaluation
reserve to deferred capital grants and the reclassification of some gifts and donations,
previously reported as specific endowments, to income or reserves as appropriate.
The reclassification of donated assets to deferred capital grants has led to an increase
in other income during the year of £12,000 (2006/07: £18,000). The reclassification of
gifts and donations from specific endowments to other income has led to an increase in
other income during the year of £46,000 (2006/07: £37,000) and an increase in receipts
in advance of £1,000 (2006/07: £4,000). Transfers in respect of specific endowments
have reduced by £45,000 (2006/07: £37,000). Overall these reclassifications have
increased the consolidated surplus by £13,000 (2006/07: £18,000).
Specific endowments at a cost of £146,000 at 1 August 2007 have been reclassified as
£141,000 general reserves and £5,000 receipts in advance. The corresponding
endowment assets stated at market value have reduced by £145,000 and have been
transferred into the current asset pool of investments. As the previously stated market
value of the portfolio of current asset investments exceeded cost, the unrealised loss of
£1,000 has been netted against the overall unrealised gains. As a result, current asset
investments have increased by £146,000 and total investments have increased by
£1,000. Donated assets at this date included within the revaluation reserve with a net
book value of £15,000 have been reclassified as deferred capital grants.
The full impact of the prior year adjustment on the University's consolidated reserves
and endowments can be seen at the foot of the Statement of Consolidated Total
Recognised Gains and Losses. Further analysis of the prior year adjustment on
investments, deferred capital grants, endowments, the revaluation reserve and the
general reserve is shown in the respective notes to the accounts.
FINANCIAL STATEMENTS 2007/08 29
NOTES TO THE ACCOUNTS
1.
FUNDING COUNCIL GRANTS
2007/08
2006/07
£000
£000
Recurrent Grant (Higher Education Funding Council)
50,913 46,638
Specific Grants
Joint Information Systems Committee (JISC)
1,326
903
All
Other
Grants
1,644
1,456
Deferred Capital Grants Released
Buildings
(Note
18)
1,255
1,060
Equipment (Note 18)
187 338
55,325 50,395
2.
TUITION FEES AND EDUCATION CONTRACTS
2007/08
2006/07
£000
£000
Full-time
Students
25,654
18,463
Full-time Students Charged Overseas Fees
14,582 13,426
Part-time
Fees
2,685
2,272
Research Training Support Grants
451
407
Short Course Fees
549 316
43,921 34,884
3.
RESEARCH GRANTS AND CONTRACTS
2007/08
2006/07
£000
£000
Research
Councils
6,416
5,820
UK
Based
Charities
2,110
1,753
UK
Industry
248
260
European
Commission
1,118
1,135
Other Grants and Contracts
3,140 4,108
13,032 13,076
4.
OTHER INCOME
Restated
2007/08
2006/07
£000
£000
Residences, Catering and Conferences
20,397 17,072
Other
Income-generating
Activities
2,278
2,310
Other
Grant
Income
1,294
1,174
Other
Income
7,834 7,594
31,803 28,150
30
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
5.
ENDOWMENT AND INVESTMENT INCOME
Restated
2007/08 2006/07
£000
£000
Income from Expendable Endowment Assets (Note 19)
128
139
Income from Permanent Endowment Assets (Note 19)
44
42
Other
Investment
Income
134
144
Other Interest Receivable
958
826
1,264 1,151
6.
STAFF COSTS
The average number of persons (including senior post holders) employed by the University
during the year expressed as full time equivalents was:
2007/08
2006/07
Avge FTE Avge FTE
No.
No.
Academic
Staff
614
564
Research
Staff
139
147
Academic
Related
Staff
374
310
Clerical
Staff
426
442
Manual
and
Ancillary
308
301
Technical
88
82
1,949 1,846
The above figures exclude 333 FTE (2006/07: 349 FTE) in relation to employees classified as
casual workers that are paid by timesheet. This figure includes post-graduate students who
assist lecturers by providing part-time teaching to students.
2007/08
2006/07
£000
£000
Staff Costs for the above persons:
Wages
and
Salaries
69,029
61,950
Social
Security
Costs
5,368
4,990
Other Pension Costs (Note 28)
8,307
7,473
Exceptional Restructuring Costs
645 300
83,349 74,713
The Exceptional Restructuring Costs relate entirely to early retirements and voluntary severance
arrangements.
FINANCIAL STATEMENTS 2007/08 31
NOTES TO THE ACCOUNTS
6.
STAFF COSTS (continued)
2007/08
2006/07
£000
£000
Staff Costs by Department:
Academic
Departments
44,815
40,067
Academic
Services
5,816
5,102
Research Grants and Contracts
6,554
6,078
Administration
14,149
12,569
Catering
and
Residences
6,664
6,036
Premises
3,614
3,398
Other
1,092 1,163
Sub-total
82,704
74,413
Exceptional Restructuring Costs
645 300
Total
83,349 74,713
Emoluments of the Vice-Chancellor:
£000
£000
Salary
188
199
Pension
26
28
Total Emoluments for the Year
214 227
The emoluments of the Vice-Chancellor are determined by the Remuneration Committee which
takes into account performance during the year and data from comparable institutions. The
emoluments are shown on the same basis as that for higher paid staff. Prior to April 2006, the
University’s pension contributions to USS were paid at the same rate as for other academic staff
subject to restrictions imposed by the statutory earnings cap. From April 2006, this cap was
removed and contributions have been paid at the normal rate.
Remuneration of other Higher Paid Staff, excluding employer’s
pension
contributions:
No.
No.
£100,000
-
£109,999
2
1
£110,000
-
£119,999
1 -
£120,000 - £129,999
1
-
There were no payments made to former Higher Paid Staff during the year (2006/07: £Nil) for
compensation for loss of office.
32
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
7.
OTHER OPERATING EXPENSES
2007/08
2006/07
£000
£000
Academic
Departments
12,205
11,061
Academic
Services
3,373
2,851
Research Grants and Contracts
3,786
4,583
Administration (including Bursary Payments)
10,182
7,727
Catering
and
Residences
5,466
4,506
Premises
6,729
6,133
Other
Expenses
1,680 1,250
43,421 38,111
Other Operating Expenses include:
Auditors’
Remuneration
41
39
Auditors’ Remuneration in Respect of Non-Audit Services
26
31
Rents Paid on Buildings (Operating Leases)
385 661
452 731
8.
INTEREST PAYABLE
2007/08
2006/07
£000
£000
On Bank Loans repayable wholly in more than five years
4,151
4,325
FRS17
Finance
Costs
6
5
Other Interest Payable
1
-
4,158 4,330
9.
TAXATION
2007/08
2006/07
£000
£000
UK Corporation Tax payable on the profits of the
University and subsidiary companies
Nil Nil
10.
SURPLUS ON CONTINUING OPERATIONS FOR THE YEAR
The Surplus on Continuing Operations for the Year is made up as follows:
Restated
2007/08
2006/07
£000
£000
University Surplus for the Year
5,692
2,804
Surplus generated by subsidiary companies
-
-
5,692 2,804
Details of the University’s subsidiary companies can be found in Note 12.
FINANCIAL STATEMENTS 2007/08 33
NOTES TO THE ACCOUNTS
11.
TANGIBLE FIXED ASSETS
Consolidated and University
Freehold
Land
Assets
Under
and
Buildings
Construction
Equipment
Total
£000
£000
£000
£000
Cost or Valuation
At 1 August 2007
171,560
3,831
29,790
205,181
Additions
8,677
- 3,113
11,790
Buildings Under Construction
-
5,818
-
5,818
Transfer Buildings Under Construction
3,231
(3,231)
-
-
Disposals
-
-
(2,722) (2,722)
At 31 July 2008
183,468
6,418 30,181 220,067
Depreciation
At 1 August 2007
33,771
-
24,782
58,553
Charge for the Year
6,104
-
2,713
8,817
Disposals
-
-
(2,722) (2,722)
At 31 July 2008
39,875
- 24,773
64,648
Net Book Value
At 31 July 2008
143,593
6,418
5,408 155,419
At 1 August 2007
137,789
3,831
5,008 146,628
Financed by Capital Grant
34,107
3,877
1,233
39,217
Other
109,486
2,541
4,175 116,202
Net Book Value at 31 July 2008
143,593
6,418
5,408 155,419
Land was acquired both by gift and purchase (£139,000) and is stated at valuation of
£8,570,000 and not depreciated. The valuation was prepared by Grimley - J R Eve (Chartered
Surveyors) on an open market existing use basis as at 3 May 1995. The land is included in the
Balance Sheet at this valuation and the excess of the valuation over net book value (£139,000)
has been taken to the Revaluation Reserve (Note 21).
Interest of £Nil on loans used to finance the construction of buildings has been capitalised in the
year (Note 8). Total interest capitalised to date, included in the cost of Freehold Land and
Buildings, amounted to £852,439 at 31 July 2008.
34
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
12.
FIXED ASSET INVESTMENTS
Consolidated
and
University
2008
2007
£000
£000
Loans
-
1
At 31 July 2008 the University held an interest in the following companies:
Name of Company
% Shareholding
Nature of Business
Canterbury Business School Limited
100
Dormant
Invicta Technology Investments Limited
100
Dormant
Kent Business School Limited
100
Dormant
Kent Enterprise Limited
100
Scientific and Industrial
Consultancy
Kent Management School Limited
100
Dormant
Kent Property Services Limited
100
Dormant
Summer Academy Limited
100
Dormant
The financial year-end of all the subsidiaries is 31 July. All the companies are registered in
England and Wales.
13.
ENDOWMENT ASSETS AND CURRENT ASSET INVESTMENTS
Consolidated
and
University
Restated
2008
2007
£000
£000
Endowment Asset Investments:
Cost
Price
4,945
4,847
Market
Value
4,446 5,031
Current Asset Investments:
Cost
Price
3,574
3,614
Market
Value
3,574 3,614
FINANCIAL STATEMENTS 2007/08 35
NOTES TO THE ACCOUNTS
13.
ENDOWMENT ASSETS AND CURRENT ASSET INVESTMENTS (continued)
Consolidated
and
University
Restated
2008
2007
£000
£000
Total Investment Assets:
Balance at 1 August at Market Value as previously stated
8,645
8,353
Prior Year Adjustment (Note 15 of the Statement of
Principal Accounting Policies)
-
1
Restated Balance at 1 August at Market Value
8,645
8,354
Additions
58
23
(Depreciation)/Appreciation
(683)
268
Investment Assets at Market Value
8,020 8,645
Investments comprise the following:
Charities
Investment
Funds
7,838
8,521
Equities
35
35
Endowment-Linked
Bank
Deposit
147
89
Subsidiary and Associated Companies
-
-
8,020 8,645
14.
DEBTORS
Consolidated University
2008 2007 2008 2007
£000 £000 £000 £000
Amounts falling due within one year:
Debtors
4,397 5,345 4,373 5,279
Research
Grants
and
Contracts
1,279 1,616 1,279 1,616
Owing
by
Subsidiaries
- - -
10
Prepayments and Accrued Income
3,795 2,937 3,794 2,936
9,471 9,898 9,446 9,841
Amounts falling due after more than one year:
Debtors
42
99
-
-
9,513 9,997 9,446 9,841
36
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
15.
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Consolidated
University
Restated
Restated
2008 2007 2008 2007
£000 £000 £000 £000
Bank Loans Due for Repayment
1,980
1,850
1,980
1,850
Payments Received in Advance: Funding Councils
1,341
1,641
1,341
1,641
Payments
Received
in
Advance
8,292 6,708 8,292 6,708
Creditors and Accrued Liabilities
10,012
9,718 10,008
9,714
Taxation and Social Security
2,990 2,725 2,990 2,725
24,615 22,642 24,611 22,638
The comparative figures have been restated following a reclassification of a premium received
in advance which was previously included within deferred capital grants (see Note 18).
16.
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Consolidated
University
Restated Restated
2008 2007 2008 2007
£000 £000 £000 £000
Mortgages secured on University Buildings
62,608 64,458 62,608 64,458
Less: Bank Loans repayable within one-year
(1,980) (1,850) (1,980) (1,850)
Capital Grant Creditors
1,217 - 1,217 -
61,845 62,608 61,845 62,608
Other Long-Term Liabilities
2,115 2,305 1,995 2,090
63,960 64,913 63,840 64,698
Payable as follows:
Between one and two years
2,334
2,290
2,214
2,075
Between two and five years
8,761
7,092
8,761
7,092
After five years
52,865 55,531 52,865 55,531
63,960 64,913 63,840 64,698
The University has one variable rate loan of £750,000 that commenced on 3 February 2003 and
is repayable by equal principal instalments until 6 February 2013. Interest is charged at the
current LIBOR rate plus 0.75%. All other bank loans are at commercial fixed rates of between
5.31% and 8.75% and are repayable by instalments falling due between 1 August 2008 and 1
October 2030.
The comparative figures have been restated following a reclassification of a premium received
in advance which was previously included within deferred capital grants (see Note 18).
FINANCIAL STATEMENTS 2007/08 37
NOTES TO THE ACCOUNTS
17.
PROVISIONS FOR LIABILITIES AND CHARGES
Consolidated
and
University
Enhanced Voluntary Pensions
Total
Pension Severance/
Costs
Early
Retirement
£000
£000
£000 £000
Balance at 1 August 2007
92
45
400
537
Utilised in the Year
(82)
(40)
(160)
(282)
Transferred from Income and
Expenditure Account
311 145 504
960
Balance at 31 July 2008
321 150 744 1,215
The Pensions Provision relates to amounts payable to part-time members of staff following
decisions by the European Court of Justice, pending the outcome of UK Industrial Tribunal
cases.
38
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
18.
DEFERRED CAPITAL GRANTS
Consolidated and University
Restated
Restated
Funding
Other Total
Council
Grants and
Benefactions
£000 £000
£000
Balance at 1 August 2007 as previously stated
Buildings
20,588 15,341 35,929
Equipment
393
1,096
1,489
20,981 16,437 37,418
Balance Sheet Reclassification
Buildings
-
(2,375) (2,375)
Equipment
-
15
15
-
(2,360)
(2,360)
Restated Balance at 1 August 2007
Buildings
20,588
12,966 33,554
Equipment
393
1,111
1,504
20,981 14,077 35,058
Cash Received
Buildings
5,216
1,257
6,473
Equipment
47
395
442
5,263
1,652
6,915
Released to Income and Expenditure
Buildings
(1,255)
(755) (2,010)
Equipment
(187)
(523)
(710)
(1,442)
(1,278)
(2,720)
Balance at 31 July 2008
Buildings
24,549
13,468 38,017
Equipment
253
983
1,236
24,802 14,451 39,253
The opening balance at 1 August 2007 has been restated in respect of a prior year adjustment
of £15,000 from general reserves in relation to donated assets received and a reclassification of
a £2,375,000 premium received in advance to long-term (£2,090,000) and short-term
(£285,000) creditors.
FINANCIAL STATEMENTS 2007/08 39
NOTES TO THE ACCOUNTS
19.
ENDOWMENTS
Consolidated and University
Specific
General Total
£000 £000 £000
Balance at 1 August 2007 at Market Value
as previously stated
4,696
480
5,176
Prior Year Adjustments:
Transferred to reserves
(139)
-
(139)
Transferred to deferred income
(6)
-
(6)
Restated Balance at 1 August 2007 at Market Value
4,551 480 5,031
Reclassified as:
Unrestricted
Permanent
-
480
480
Restricted
Permanent
721 -
721
Restricted
Expendable
3,830
- 3,830
4,551 480 5,031
Unrestricted
Restricted Total
Restricted
Total Total
Permanent
Permanent
Permanent
Expendable
2008 2007
£000 £000 £000 £000
£000 £000
Restated Balances:
Capital
Value
480 508 988
3,513
4,501
4,244
Accumulated Income - 213
213
317
530
496
Restated Balances
at 1 August
480
721
1,201
3,830
5,031
4,740
New
Endowments
- 22 22
168
190
107
Investment
Income
16 28 44
128
172
181
Expenditure
(16) (33) (49)
(215)
(264)
(264)
(Decrease)/Increase in
Market Value of
Investments
(62)
(84)
(146)
(537)
(683)
267
Balance at 31 July
418 654 1,072 3,374 4,446 5,031
Represented by:
Capital
Value
418 446 864
2,999
3,863
4,501
Accumulated Income - 208
208
375
583
530
418 654 1,072 3,374 4,446 5,031
In previous years balances were analysed as general endowments and specific endowments.
The revised headings above reflect the requirements of the revised SORP and the University’s
accounting policies.
40
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
20.
PENSION RESERVE
Consolidated
and
University
2008
2007
£000
£000
Balance at 1 August
(325)
(520)
Actuarial
(Loss)/Gain
(248)
95
Transferred to General Reserve
99 100
Balance at 31 July
(474) (325)
21.
REVALUATION RESERVE
Consolidated
and
University
2008
2007
£000 £000
Net Revaluation Amount at 1 August
8,431
8,464
Prior Year Adjustment: Reclassification of Donated Assets Received
-
(33)
Restated Net Revaluation Amount at 1 August
8,431
8,431
Transferred to General Reserve
-
-
Net Revaluation Amount at 31 July
8,431 8,431
The Revaluation Reserve relates to land valued at £8,431,363.
22.
MOVEMENT ON GENERAL RESERVES
Consolidated
University
£000
£000
Income and Expenditure Account Reserve:
Balance at 1 August 2007 as previously stated
41,028
40,991
Prior Year Adjustment (Note 15 of the Statement of
Principal Accounting Policies)
141
141
Restated Balance at 1 August 2007
41,169
41,132
Transfer of Reserves from Imperial College
21
21
Historical Cost Surplus after Depreciation of Assets at Cost,
Disposal of Assets and Tax
5,692
5,692
Transfer from Pension Liability
(99) (99)
Balance at 31 July 2008
46,783 46,746
FINANCIAL STATEMENTS 2007/08 41
NOTES TO THE ACCOUNTS
23.
RECONCILIATION OF CONSOLIDATED OPERATING SURPLUS
TO NET CASH FROM OPERATING ACTIVITIES
Restated
2007/08
2006/07
£000
£000
Surplus
before
Tax
5,692
2,804
Depreciation
(Note
11)
8,817
7,781
Deferred Capital Grants Released to Income (Note 18)
(2,720) (2,719)
Interest and Endowments Receivable
(1,356) (1,234)
Interest
Payable
4,158
4,330
(Increase)/Decrease
in
Stocks
(19)
22
Decrease/(Increase) in Debtors, Prepayments and Research Grants
487
(161)
Increase
in
Creditors
3,136
2,377
Increase/(Decrease)
in
Provisions
678
(59)
Other Non-cash Movements
(99) (105)
Net Cash Inflow from Operating Activities
18,774 13,036
24.
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Restated
2007/08
2006/07
£000
£000
Income
from
Endowments
172
181
Income from Investments and Short-Term Deposits
1,089
966
Interest
Paid
(4,198) (4,322)
Net Cash Outflow from Returns on Investments and
Servicing
of
Finance
(2,937) (3,175)
25.
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Restated
2007/08
2006/07
£000
£000
Purchase of Tangible Fixed Assets
(17,834) (13,268)
Investment
Assets
Sold
1
1
Deferred Capital Grants Received
6,915
2,754
Endowments
Received
190
107
Reserve Transfer from Imperial College
21 57
Net Cash Outflow for Capital Expenditure and Financial Investment
(10,707) (10,349)
42
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
26.
MANAGEMENT OF LIQUID RESOURCES
Restated
2007/08
2006/07
£000
£000
Decrease/(Increase) in Current Asset Investments and
Short-Term
Deposits
148 (228)
Net Cash Inflow/(Outflow) from Management of Liquid Resources
148 (228)
27.
ANALYSIS OF CHANGES IN NET DEBT
Restated
At Cash
Other
At
1
August
Flows
Changes
31
July
2007
2008
£000 £000 £000 £000
Current Asset Investments
3,614
58
(98)
3,574
Short-Term Deposits
351
(206)
-
145
Cash at Bank and in Hand
11,644 3,428
- 15,072
15,609
3,280 (98)
18,791
Debt due within one year:
Bank
Loan
(1,850) 1,850 (1,980) (1,980)
Debt due after one year
(62,608)
- 1,980 (60,628)
(48,849) 5,130
(98) (43,817)
FINANCIAL STATEMENTS 2007/08 43
NOTES TO THE ACCOUNTS
28.
PENSION SCHEMES
The two principal pension schemes for the University’s staff are the Universities Superannuation
Scheme (USS) and the Superannuation Arrangements of the University of London (SAUL). The
University also participates in a Local Government Pension Fund.
The total pension cost for the University and its subsidiaries are:
2007/08
2006/07
£000
£000
Contributions
to
USS
6,361
5,703
Contributions
to
SAUL
1,791
1,660
Contributions to Other Schemes
155
110
Total Pension Cost (Note 6)
8,307 7,473
The 2007/08 contributions to Other Schemes includes £100,333 (2006/07: £73,516) additional
pension contributions payable to a local government pension scheme primarily in respect of past
service performed. There is only one active member of the scheme employed by the University
and no new members are admitted.
USS PENSION SCHEME
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 (S2P). The
assets of the scheme are held in a separate fund administered by the trustee, Universities
Superannuation Scheme Limited (USS Ltd). The appointment of directors to the board of the
Trustee is determined by the 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; one is appointed by the Higher Education
Funding Councils; and a minimum of two and a maximum of four are co-opted 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.
Because of the mutual nature of the scheme, the University is unable to identify its share of the
underlying assets and liabilities of the scheme on a consistent and reasonable basis and
therefore, as required by FRS17 ‘Retirement Benefits’, accounts for the scheme as if it were a
defined contribution scheme. As a result, the amount charged to the Income and Expenditure
Account represents the contributions payable to the scheme in respect of the accounting period.
The latest actuarial valuation of the scheme was as at 31 March 2005. The 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) and the rates of increase in salary and pensions and the assumed
rates of mortality. In relation to the past service liabilities the financial assumptions were derived
from market yields prevailing at the valuation date. It was assumed that the valuation rate of
interest would be 4.5% per annum, salary increases would be 3.9% per annum (plus an
additional allowance for increases in salaries due to age and promotion and a further amount of
£800m of liabilities to reflect recent experience) and pensions would increase by 2.9% per
annum. In relation to the future service liabilities it was assumed that the valuation rate of
interest would be 6.2% per annum, including an additional investment return assumption of
1.7% per annum, salary increases would be 3.9% per annum (also plus an allowance for
increases in salaries due to age and promotion) and pensions would increase by 2.9% per
annum.
44
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
28.
PENSION SCHEMES (continued)
Standard Mortality tables were used as follows:
Pre-retirement mortality
PA92 rated down 3 years
Post retirement mortality
PA92 (c=2020) for all retired and non-retired
members
Use of these mortality tables reasonably reflects the actual USS experience, but also provides
an element of conservatism to allow for further small improvements in mortality rates. The
assumed life expectations on retirement at age 65 are:
Males
19.8
years
Females
22.8
years
At the valuation date, the value of the assets of the scheme was £21,740 million and the value
of the past service liabilities was £28,308 million indicating a deficit of £6,568 million. The assets
therefore were sufficient to cover 77% 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. Using
the Minimum Funding Requirement prescribed assumptions introduced by the Pensions Act
1995, the scheme was 126% funded at that date; under the Pension Protection Fund
regulations introduced by the Pensions Act 2004 it was 110% funded; on a buy-out basis (i.e.
assuming the Scheme had discontinued on the valuation date) the assets would have been
approximately 74% 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, the actuary
estimated that the funding level would have been approximately 90%.
Since 31 March 2005 the financial security of the scheme has undergone considerable volatility.
The actuary has estimated that the funding level had increased to 91% at 31 March 2007, but
that at 31 March 2008 it had fallen back to 77%. This fluctuation in the scheme’s funding level is
due to the volatility of the investment returns on the schemes assets in the period since 31
March 2005 compared to the returns allowed for in the funding assumptions and also the
changing gilt yields, which are used to place a value of the scheme’s liabilities. These estimated
funding levels are based on the funding levels at 31 March 2005, adjusted to reflect the fund’s
actual investment performance and changes in gilt yields (i.e. the valuation rate of interest). On
the FRS17 basis, using a AA bond discount rate of 6% based on spot yields, the actuary
estimated that the funding level at 31 March 2008 was 104%. An estimate of the funding level
measured on a buy-out basis was approximately 78%.
The institution contribution rate required for future service benefits alone at the date of the
valuation was 14.3% of pensionable salaries but the trustee company, on the advice of the
actuary, decided to maintain the institution contribution rate at 14% of pensionable salaries.
Surpluses or deficits which arise at future valuations may impact on the institution’s future
contribution commitment. The sensitivities regarding the principal assumptions used to measure
the scheme liabilities are set out below:
Assumption
Change in Assumption
Impact on Scheme
Liabilities
Valuation rate of interest
Increase/Decrease by 0.5%
Decrease/Increase by £2.2bn
Rate of pension increases
Increase/Decrease by 0.5%
Increase/Decrease by £1.7bn
Rate of salary growth
Increase/Decrease by 0.5%
Increase/Decrease by £0.5bn
Rate of mortality
More prudent assumption Increase by £0.8bn
(mortality used at last
actuarial valuation, rated
down by a further year)
FINANCIAL STATEMENTS 2007/08 45
NOTES TO THE ACCOUNTS
28.
PENSION SCHEMES (continued)
USS is as 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 bias towards equities
through portfolios that are diversified both geographically and by sector. The trustee recognises
that it would be possible to select investmentsproducing 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, the trustee has
agreed to take on a level of 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. Before deciding to take investment risk relative to the
liabilities, the trustee receives advice from its investment consultant and the scheme actuary
and considers the views of the employers. The strong positive cash flow of the scheme means
that it is not necessary to realise investments to meet liabilities. The trustee believes that this,
together with the ongoing flow of new entrants into the scheme and the strength of covenant of
the employers enables it to take a long-term view of its investments. Short-term volatility of
returns can be tolerated and need not feed through directly to the contribution rate. The actuary
has confirmed that the scheme’s cash flow is likely to remain positive for the next ten years or
more.
The next formal triennial actuarial valuation was due as at 31 March 2008. The contribution rate
will be reviewed as part of each valuation. This report is due to be made available later in the
year.
The USS pension cost for the University was £6,360,591 (2006/07: £5,702,835). This includes
£541,477 (2007: £489,848) outstanding contributions at the balance sheet date.
SAUL PENSION SCHEME
The University participates in a centralised defined benefit scheme for all qualified employees
with the assets held in separate Trustee-administered funds. The University has now adopted
FRS17 for accounting for pension costs. It is not possible to identify the University’s share of the
underlying assets and liabilities of SAUL. Therefore contributions are accounted for as if SAUL
were a defined contribution scheme and pension costs are based on the amounts actually paid
(i.e. cash amounts) in accordance with paragraphs 8-12 of FRS17.
The scheme is subject to triennial valuation by professionally qualified and independent
actuaries. The last available valuation was carried out as at 31 March 2005 using the projected
unit credit method in which the actuarial liability makes allowance for projected earnings. The
following assumptions were used to assess the past service funding position and future service
liabilities:
Valuation Method
Projected Unit
Past
Service
Future
Service
Investment return on liabilities
- before retirement
5.5% pa
6.5% pa
- after retirement
4.5% pa
4.5% pa
Salary growth*
4.15% pa
4.15% pa
Pension increases
2.65% pa
2.65% pa
* excluding an allowance for promotion increases.
46
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
28.
PENSION SCHEMES (continued)
The actuarial valuation applies to the scheme as a whole and does not identify surpluses or
deficits applicable to individual Employers. As a whole, the market value of the scheme’s assets
was £982 million representing 93% of the liability for benefits after allowing for expected future
increases in salaries.
Following the two informal funding reviews at 31 March 2004 and 31 March 2003, the Trustee of
SAUL has undertaken a significant consultation exercise with Employers and representatives of
Members regarding the level of contributions payable to SAUL.
Following this consultation, the Employers have agreed to contribute 13.0% of salaries from
August 2006 (previously 10.5% of salaries), an increase of 2.5% of salaries. Member
contributions also increased by 1.0% of salaries to 6.0% of salaries with effect from the same
date.
Employers who have recently joined SAUL (“New Employers”) and certain employee groups (as
agreed by the Trustee of SAUL), pay 19.2% of salaries per annum from August 2006 until the
second actuarial valuation after entry (or some other period as agreed with the Trustee).
A comparison of SAUL’s assets and liabilities calculated using assumptions consistent with
FRS17 revealed the Scheme to be broadly balanced at the last formal valuation date (31 March
2005). The next formal actuarial valuation was due as at 31 March 2008 when the above rates
will be reviewed. A report on this valuation will be made available by 31 March 2009.
The SAUL pension cost for the University and its subsidiary companies was £1,789,539
(2006/07: £1,659,549). This includes £163,188 (2007: £148,511) outstanding contributions at
the balance sheet date.
LOCAL GOVERNMENT PENSION FUND
The University also participates in a defined benefit local government pension fund, in which
there is only one active member currently employed by the University and no new members are
admitted.
The fair values of the University’s share of the assets in the fund at the balance sheet date can
be analysed as follows:
Long-Term
Long-Term
Expected Return
Assets at Expected Return
Assets at
at 31 July 2008
31 July 2008
at 31 July 2007
31 July 2007
%
pa
£000
%
pa
£000
Equities 7.8
685
8.0
792
Bonds
5.7
176
5.2
125
Property 5.7
104
6.0
114
Cash
4.8
73 5.1
97
Total
7.0 1,038 7.2 1,128
FINANCIAL STATEMENTS 2007/08 47
NOTES TO THE ACCOUNTS
28.
PENSION SCHEMES (continued)
The main actuarial assumptions at the balance sheet date were as follows:
31 July 2008
31 July 2007
%
pa
%
pa
Inflation/Pension increase rate
3.8
3.3
Salary increase rate
5.3
4.8
Expected return on assets
7.0
7.2
Discount rate
6.7
5.8
Life expectancy assumptions are based on the PFA92 and PMA92 tables, projected to calendar
year 2033 for non pensioners and 2017 for pensioners. Based on this, the average life
expectancies at age 65 are summarised below:
Males Females
Current pensioners
21.5 years
24.4 years
Future pensioners
22.6 years
25.5 years
The fair value of the fund assets, the present value of the fund liabilities and the resulting deficit
on the fund as recognised in the Balance Sheet are as follows:
2008
2007
£000
£000
Fair Value of Fund Assets
1,038
1,129
Present Value of Fund Liabilities
(1,454) (1,396)
Present Value of Unfunded Liabilities
(58)
(58)
Net Pension Liability
(474)
(325)
48
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
28.
PENSION SCHEMES (continued)
The movement in the deficit during the year can be analysed as follows:
2007/08
2006/07
£000
£000
Defined Benefit Obligation at 1 August
(1,454) (1,535)
Current Service Cost
(7)
(9)
Interest Cost
(82)
(76)
Contributions by Members
(2)
(2)
Actuarial (Losses)/Gains
(47)
70
Past Service Costs
(6)
-
Estimated Unfunded Benefits Paid
5
4
Estimated Benefits Paid
81
94
Defined Benefit Obligation at 31 July
(1,512) (1,454)
Fair Value of Employer’s Assets at 1 August
1,129
1,015
Expected Return on Assets
82
71
Contributions by Members
2
2
Contributions by the University
107
110
Contributions in respect of Unfunded Benefits
5
4
Actuarial (Losses)/Gains
(201)
25
Unfunded Benefits Paid
(5)
(4)
Benefits Paid
(81) (94)
Fair Value of Employer’s Assets at 31 July
1,038 1,129
Net Pension Fund Deficit at 31 July
(474) (325)
FINANCIAL STATEMENTS 2007/08 49
NOTES TO THE ACCOUNTS
28.
PENSION SCHEMES (continued)
The amounts recognised in the Income and Expenditure Account in the current year can be
analysed as follows:
2007/08
2006/07
£000
% of pay
£000
% of pay
Current Service Cost
7
23.9%
9
26.5%
Interest
Cost
82 264.5% 76 233.0%
Expected Return on Employer Assets
(82)
(264.5%)
(71)
(217.7%)
Past Service Cost
6
19.4%
-
-
13
43.3% 14
41.8%
Actual Return on Fund Assets
(111)
96
Amounts for the current and previous four years are as follows:
2007/08
2006/07
2005/06
2004/05
2003/04
£000
£000
£000
£000
£000
Fair Value of Employer Assets
1,038
1,129
1,015
876
-
Present Value of Defined Benefit Obligation
(1,512) (1,454) (1,535) (1,512)
-
Deficit
(474)
(325)
(520)
(636) -
Experience (Losses)/Gains on Assets
(201)
25
76
99
-
Experience (Losses)/Gains on Liabilities
(62)
1
(2)
4
-
Recognised in the Statement of Consolidated Total Recognised Gains and Losses (STRGL)
2007/08
2006/07
2005/06
2004/05
2003/04
£000
£000
£000
£000
£000
Actuarial (Losses)/Gains
(248)
95
40
(15)
-
Increase/(Decrease) in Irrecoverable Surplus
from membership fall and other factors
-
-
-
-
-
Actuarial (Losses)/Gains Recognised in STRGL (248)
95 40 (15)
-
Cumulative Actuarial (Losses)/Gains
(128) 120 25 (15)
-
50
UNIVERSITY OF KENT
NOTES TO THE ACCOUNTS
29.
CAPITAL COMMITMENTS
Consolidated
and
University
2008
2007
£000
£000
Contractual Commitments at 31 July
4,023 3,390
30.
FINANCIAL COMMITMENTS
At 31 July, there were annual commitments under non-cancellable operating leases as follows:
Consolidated
and
University
2008
2007
£000
£000
Land and Buildings:
Expiring within one year
111
-
Expiring within two and five years inclusive
251
251
Expiring in over five years
- 124
362 375
Other:
Expiring within one year
6
4
Expiring within two and five years inclusive
-
6
6
10
31.
CONTINGENT LIABILITIES
CROSS-GUARANTEES
On the 23 June 1993 the University entered into a cross guarantee for the indebtedness of Kent
Enterprise Limited in favour of National Westminster Bank Plc.
UM ASSOCIATION (SPECIAL RISKS) LIMITED
The University is a member of UM Association (Special Risks) Limited, a company limited by
guarantee formed as a mutual association to financially assist its members in respect of certain
terrorism risks. The rules of the Association allow the directors of the company to make
discretionary awards to members who suffer uninsured losses arising from a terrorism incident,
but also allow the directors to seek a supplementary contribution from all members on a pro rata
basis if additional resources are required to meet the discretionary awards. Up to 31 July 2008,
no supplementary contribution has been requested from the University during the lifetime of its
membership of the Association.
FINANCIAL STATEMENTS 2007/08 51
NOTES TO THE ACCOUNTS
32.
ACCESS FUNDS
2007/08
2006/07
£000
£000
Balance Unspent at 1 August
12
57
Funding
Council
Grants
488
534
Interest earned
8
8
496
542
Disbursed
to
students
(490)
(570)
Audit
fees
(1)
(1)
Access administration costs
(13)
(16)
Balance Unspent at 31 July
4
12
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.
33.
RELATED PARTY TRANSACTIONS
KENT MAN LIMITED
The University is one of five partners in Kent MAN Limited, a company formed on 1 April 2002
and limited by guarantee, maintaining micro-wave radio links between Higher Education
Institutions in Kent.
SUBSIDIARY COMPANIES
All related party transactions are between the University of Kent and its wholly owned
subsidiaries. As such the University has taken advantage of the specific exemption given under
Financial Reporting Standard 8 and not disclosed these transactions.
52
UNIVERSITY OF KENT
University of Kent
The Registry, Canterbury
Kent CT2 7NZ
3
www.kent.ac.uk
8
4
7
0
1