financial review 2009/10 - university of portsmouth - a … iles, chair of the board of governors...

Financial Review 2009/10

Financial Review for the yearended 31 July 2010

Higher Education Corporation

UNIVERSITY OF PORTSMOUTH FINANCIAL REVIEW 2009/10 •

Welcome from the Chair of Governors and the Vice-Chancellor

We are very pleased to present the University’s Financial Statements, including the Operating and Financial Review for 2010. The financial sections of this report show that we have had a very successful year, with a surplus in historic cost terms of £7.7 million. This financial outcome has been achieved through very buoyant recruitment of home and overseas students, a number of successes in gaining funding for research and firm cost control.

The work of our staff during the past financial year has also laid the foundations for continuing successes in the present year, with very strong student recruitment again in the summer of 2010 which will, we believe, ensure that the University remains financially robust despite the increasing impact of reductions in public spending. Within this context we have been able to continue to enhance our estate and to upgrade student facilities. In addition we have used some of our financial headroom in 2009/10 to fund a Voluntary Severance Scheme whose main financial effects will become apparent between now and 2012. We have been able to respond to a number of government agendas in the past year, including the recruitment of additional students in strategically important subjects in science, technology and languages. We continue to work with schools and colleges in our catchment area, to raise aspirations and improve opportunities for students who come from under-represented groups in society. We have worked with local businesses and public sector organisations to help them become more efficient and effective. Our staff and students have also made significant contributions to social enterprise activities in the sub-region, and we believe that these are exemplars for the changes heralded by the coalition government’s vision of the ‘Big Society’.

As we write this foreword, there is a major national debate on the future funding of Higher Education. The outcome of the October 2010 Spending Review, and of the implementation of proposals in the Browne Report on fees and funding, will present us with many challenges. We shall review our strategic ambitions over the coming months, and we remain committed to giving the best possible experience to our students, with strong support to help their future employability. We also continue to support excellent research. We shall face challenges in maintaining our income levels, and even more in ensuring that we are able to convince students that they are getting good value for their much higher fees.

Our ability to rise to these challenges, and to ensure that the University emerges successfully from a period of major change, is much enhanced by our current financial strength. Our greatest asset, however, is the commitment of our staff and we thank them for all that they have done, and will do, to ensure that the University continues to thrive.

Stuart Iles, Chair of the Board of Governors Professor John Craven, Vice-ChancellorNovember 2010

UNIVERSITY OF PORTSMOUTH FINANCIAL REVIEW 2009/10 •

Report of the Board of Governors and Financial Statements for the year ended 31 July 2010

Contents

Board of Governors and Senior Financial Officers of the University . . . . . . . . . . . . . . . . 1

Operating and Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The University’s Structure of Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Report of the Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Statement of Principal Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Consolidated Income and Expenditure Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

University Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Statement of Consolidated Total Recognised Gains and Losses . . . . . . . . . . . . . . . . . . 39

Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

UNIVERSITY OF PORTSMOUTH FINANCIAL REVIEW 2009/10 • 01

Board of Governors and Senior Financial Officers of the University of Portsmouth Higher Education Corporation1 August 2009–22 November 2010

Board of Governors (who are also Trustees) of the UniversityMichael BrooksDr Peter Bunyan (from 1 August 2010)Jack ClimpsonMarie CostaDr Paul Edmondson-Jones MBE* (up to 30 September 2010)David Ferguson (up to 28 January 2010)Dr Graham Floater* (from 1 August 2009)Adam Humphryes*Stuart Iles* (Chairman)Martin James (Deputy Chairman)Michael Oakes (up to 11 October 2010)Joy Okwuadigbo (from 1 August 2009)Deborah Owen-Ellis Clark (from 1 August 2009)Lynda Phillips* (up to 30 September 2010)Mark Readman* (from 1 August 2010)Bill Salmond* (from 1 November 2010)Dianne SmithMichael Staunton (from 1 August 2009)Julie Wood (up to 31 October 2010)

Student Governor

David Smith (from 7 October 2009)

Nominated by Academic Council

Dr Peter StarieDr Karl Nunkoosing*

Nominated by Academic Staff

Dr John Molyneux (from 1 August 2009 to 31 July 2010)Dr Sascha Bachmann (from 1 August 2010)

Nominated by Support Staff

Riz McNaught

Nominated by Student Body

Steve Topazio* (up to 31 July 2010)Aakash Naik* (from 1 August 2010)

Senior Financial Officers of the University

Director of Finance

Emma Woollard

Deputy Director of Finance

Joanne McGuigan (up to 18 December 2009)Dr Elizabeth Bartle (from 1 January 2010)

Head of Accounting

Dr Elizabeth Bartle (up to 31 December 2009)

Vice-Chancellor of the University

Professor John Craven*

Secretary to the Corporation and Clerk to the Board of Governors

Sally Hartley

*Indicates membership of Finance Committee.

02 • FINANCIAL REVIEW 2009/10 UNIVERSITY OF PORTSMOUTH

Operating and Financial Review

Director ofFinance Report

The University’s income in 2009/10 totals £169,494,000, an increase of 6.7%. The rate of increase in the previous year was 11.4%. The surplus for the year is £7.7 million, which is 4.5% of turnover.

These results clearly demonstrate that, despite the continued and increasing cuts to grants from the Higher Education Funding Council for England and pressures elsewhere as a result of recession, the University’s financial position remains extremely strong, enabling us to invest and diversify over future months, thus ensuring our financial sustainability long term.

Financial summary 2009/10£000

2008/09£000

Change£

Change%

Income

Funding Council Grants 67,904 68,257 (353) (0.52)

Tuition fees:Home/EU FTInternationalOther

Total

46,57516,62210,34373,540

40,43513,862

8,92163,218 10,322 16.33%

Research 7,029 6,604 425 6.44%

Other income 21,021 20,694 327 1.58%

Total 169,494 158,773 10,721 6.75%

Expenditure

Staff costs 104,424 98,443 5,981 6.08%

Depreciation 9,140 9,743 (603) (6.19)%

Other 52,724 51,368 1,356 2.64%

Total expenditure 166,288 159,554 6,734 4.22%

Historical cost surplus 7,701 3,603 4,098 113.7%

Surplus as % of income 4.54% 2.27%

Overall performance


Balance sheet extracts 31 July 2010£

31 July 2009£

Difference£

Fixed assets 209,435 207,934 1,501

Cash 55,268 40,943 14,325

Pension liability local government pension scheme

(69,620) (79,470) 9,850

Income from the Funding Councils has decreased slightly in 2009/10. The total includes a reduction in excess of £1 million for the Government’s cuts in teaching grant, offset by an increase in research funding and widening participation (WP) monies. Other reductions are also incorporated, including the part year impact of the end of funding for the Centres of Excellence in Teaching and Learning (CETLs); this grant being time limited and ending during the 2009/10 financial year.

Funding from the Training and Development Agency has been decreasing slightly for a number of years as part of its planned reduction in student numbers. Funding from the Learning and Skills Council and its successor bodies has also been reducing, particularly relating to students over the age of 19. With the exception of the public spending cuts to the main teaching grant, all reductions were anticipated some time in advance and necessary changes to associated costs planned to match.

The income received from Home/EU full time students increased by £6.1 million, 15.2%. This included the final significant increase resulting from students paying the higher tuition fee introduced in 2006. Virtually all students will now be paying the higher fee. There were more students overall in 2009/10, as the University recruited close to the full-time undergraduate maximum permitted by the Higher Education Funding Council for England, and also had high numbers of continuing students.

International fees increased by £2.8 million, 19.9%, in 2009/10. This is a continuation of steady increases in numbers of students over successive years. The University is conscious that this market is highly competitive and vulnerable to the global economic downturn as well as adverse exchange rates and challenges created by the new UKBA visa requirements. Actions are being taken to secure existing and new markets and during 2009/10 the first cohort of students to the International College Portsmouth were recruited by our partner organisation. This has proved extremely successful and the first cohort will transfer to University degree programmes in 2010/11. Further investment will be made in 2010/11 to develop other markets by both the partner and the University.

Our income from research grants and contracts is an important source of income to the University and this has grown by 6.4% in 2009/10. In the context of increased competition for research funding this is a significant achievement. The one area that did not increase was in respect of contracts with industry which has seen a decline, which is not surprising in view of the recession. Other categories of income are expected to be subject to similar pressure as public funding is cut and the University is looking at ways to mitigate against this by strengthening support for research and knowledge transfer, including enhanced support for graduate students.

Grant income

Tuition fee income

Other sources of income

Balance sheet


Other income increased by approximately 1% this year, with some growth across a variety of activity. However, investment income has once again reduced significantly, despite cash balances reaching all-time high levels. This is a consequence of extremely low interest rates.

Expenditure has increased from £159.6 million to £166.3 million. Staff costs have increased £6.0 million, (6.1%) compared to 8.4% growth in 2008/09. Growth in 2008/09 was higher as it included the partial impact of the 2008 5% pay award along with increased expenditure on contribution pay for sustained exceptional performance. In 2009/10, the staff costs include £3.4 million one-off expenditure on a voluntary severance scheme, part of an exercise conducted during the year to seek ways to reduce the University’s cost base in light of the announced and forthcoming cuts to public funding. The costs savings as a result of the voluntary severance scheme had only limited impact in 2009/10 and will be far more significant in 2010/11.

Other operating expenditure has changed little from 2008/09. Bursaries to full-time undergraduate students increased by more than £900,000 and there were smaller scale reductions in a number of other categories of expenditure offsetting this.

The surplus on the University’s accounts is £7.7 million compared to £3.6 million in 2008/09. This is a consequence of the increase in fee income and very tight expenditure controls. The announcement of further cuts has led to cautious spending plans, particularly in permanent staff appointments. The challenge for 2010/11 and beyond is to continue to keep costs under tight control and expenditure flexible, to mitigate the impact of future cuts, while at the same time ensuring that the student experience is the best we can provide.

The balance sheet for the University increased in value by £25 million. £14 million is the increase in cash, and is a consequence of the delays to the capital programme (see section below on the capital programme).

After several years of annual increases the technical FRS 17 liability on the pension fund in respect of the local government pension scheme has decreased by £10 million in 2009/10. The assumptions on which the actuaries base the calculations are shown in note 28. These have slightly improved compared to 2008/9. By far the most positive impact is the change from RPI to CPI to determine the rate of increase in future pension costs. The pension fund was valued at 31 March 2010. The report is still awaited and this will impact on the liability in the 2010/11 financial statements.

The University adopts a risk based approach to treasury management. The Treasury Management Policy was updated during 2008 and since then has been subject to ongoing and frequent review to ensure that cash balances are as secure as possible. As in 2008/09, cash balances continued to increase due to the delays with the capital programme, referred to elsewhere in this report. High levels of student recruitment and tight control of expenditure also contributed to the higher levels of cash. The Treasury Management Policy will be fully reviewed and updated in 2010/11.

Expenditure

Surplus

Balance sheet

Investment performance


The University is delighted to report a surplus for 2009/10. This, taken with the exceedingly strong balance sheet position, demonstrates that the University is in an excellent financial position, providing a strong base to plan for the years ahead.

The University is budgeting for a surplus in 2010/11. This was based on known cuts to grant funding at the time the budget was approved in June 2010, plus an estimate for the further cut announced but not quantified until July 2010. The estimate proved to be sufficient. Projections for the following two years were less positive and substantially more uncertain, and will require further action for the University to secure its long term financial sustainability once the full implications of the Browne Review and the October 2010 Spending Review are known.

The University was successful in its bid to HEFCE’s University Modernisation Fund, securing 303 additional students for 2010/11. The additional grant and tuition fee income this provides will help enable the University to undertake a number of projects to generate efficiencies and secure effective ways of working. These will release resource for front line teaching and associated direct support for students. Other investments are being planned in this area during 2010/11 to enhance the student experience and employability and to ensure that we are as efficient and as effective as possible.

The University is mindful of further funding cuts, of the 2010 Spending Review and of changes that may result from the Browne Review of fees and funding. These add to uncertainty and are recognised as the key financial risks facing the University and the HE sector in general over the coming year. These risks and the University’s response are covered in more detail in subsequent sections of this document. The University is confident that its strong financial position enables it to plan for these challenges in a measured manner, allowing continuing investment to deliver to its strategic objectives despite reduced public funding.

2010/11 and beyond


Context

The University of Portsmouth is a modern university, located centrally within a fast-changing historic waterfront city.

The University is organised into five faculties: the Faculty of Creative and Cultural Industries, Faculty of Humanities and Social Sciences, Faculty of Science, Faculty of Technology and the Portsmouth Business School.

Our students are supported to fulfil their potential. We are committed to innovative teaching that is informed by significant research, and to ensuring that students are confident and resilient when they embark on life after university.

We offer superb facilities in a vibrant location – a university by the sea but in the heart of one of Britain’s most historic cities. The main Guildhall campus, located around the city centre, has undergone extensive redevelopment in recent years.

Facts and figuresStudents

Total HE student population

21,604

Of which:

Undergraduate

18,219Postgraduate taught

2,885Postgraduate research

500

Our University


The University of Portsmouth aims for excellence in the creation, interpretation and communication of knowledge.

Our Strategic Plan sets out our direction and places the University in its local, regional, national and international context. It details our headline aims and values, how we will sustain our organisation to achieve our ambitions and respond to national priorities. The full Plan can be found at www.port.ac.uk/strategicplan.

1. To give an excellent student experience focused on knowledge and skills essential for roles in the global workforce.

2. To raise aspirations and promote access to the University.

3. To promote the discovery, development and application of knowledge through high quality research.

4. To contribute to sustainable economic social, cultural and community regeneration and development.

We can deliver these aims only if all students and clients receive good value for money and if the University is sustainable. This requires that:

5. We recruit, support, develop and value high quality staff.

6. Our financial position is strong and enables necessary investments.

7. Our facilities and support services are sustainable and fit for purpose.

8. Our governance is excellent, our strategic direction is clearly stated, risks managed and progress reported to stakeholders.

We are determined to promote values that underpin a liberal and autonomous university. We are committed to:

• Ethical and responsible behaviour• Institutional independence and autonomy• Innovation, creativity and self determination• Freedom of academic enquiry and expression• Equality of access to all opportunities and services• An inclusive community that celebrates diversity• Openness and respect in relations within our community

Our existing strengths across many subject areas enable us to respond creatively to national agendas. In particular we have strong research, knowledge transfer and teaching in priority areas of science, technology, engineering and mathematics, and we are leading developments in creative industries, in design and in enterprise. We promote languages to students across the University and intend to increase our contribution to raising higher level skills to contribute to skills needs in the economy.

Strategic ambitions

Headline aims

Organisational sustainability

Values

Responding to national priorities

www.port.ac.uk/strategicplan


Distinctive features

The University values its reputation for teaching and student support and is committed to ensuring that its students have the best possible learning experience. In the 2010 National Student Survey, students rated Portsmouth in the top 30% of universities for overall student satisfaction. We are working to improve our position in future years by listening and responding to our students, for example by investing in information systems to streamline assessment and feedback processes. The University has made significant investments in student-facing services such as information technology and social learning spaces, and more developments are planned to enhance the student experience and support current approaches to learning.

Our Department for Employability, created in 2008, has significantly enhanced our services to students, including the provision of an in-house recruitment agency available up to five years after graduation. All our courses provide opportunities for work-related learning, from simulated work environments such as our court room and forensics house, to volunteering, to short and long term work placements. There are compulsory units on graduate employment and personal development planning enables students to prepare for their own career development. Our Centre for Enterprise encourages the development of enterprise skills and supports students in setting up businesses, freelancing and consultancy.

The University’s research areas of Applied Mathematics, Allied Health Professions, and European Studies were judged to be among the top research groups in the UK (RAE 2008). Other key research areas include Earth and Environmental Science, Psychology and Mechanical Engineering. We are successfully building our research income, with 6.4% growth to £7 million in 2009/10.

The University has a long tradition of helping UK businesses succeed and enabling them to create new jobs, wealth and prosperity for all. In the last 12 months the University has worked with over 600 businesses of all sizes, helping those businesses create over 200 new jobs. The University is increasingly seen by business as a preferred supplier for research and development.

The University is a key player in the social regeneration of Portsmouth, through our contribution to cultural development, activities aimed at aspiration-raising and widening participation in education, and our contribution to addressing dental health inequalities. Our partners in these activities include Portsmouth City Council, the New Theatre Royal and NHS Portsmouth.

Excellent student experience

Employability and enterprise

Research strength

Business partnerships

Social regeneration


Key Performance Indicators – Summary

Assessment of performance to year end

MONITORED ANNUALLY

StrategicAim(Responsibility)

TopicMonitoredthrough Comment

Performance

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

Headline Aim 1

1. Student Numbers: Home/EU

HEFCE fundedstudents

HESES 09 data showed recruitment comfortably within the HEFCE required band. Full-time undergraduate new entrants were below the maximum.

2. Student Numbers: International

Internationalstudents

Further increase in student recruitment in 2009/10.

Internationalfee income

Out-turn fee income of £16.6 million compared to minimum budget target of £12 million.

3. Quality of student experience

Withdrawal rates

We continue to have below benchmark withdrawal rates. J

Non-completions

Non-completion rates in 2008/09 reduced, but remain relatively high. N/A N/A D

National Student Survey

Slight decline as ranked 27th of 90 mainstream universities compared to 25 in 2009. Still positive compared to UCAS competitors.

Quality reviews All reviews satisfactory. QAA Institutional Audit showed ‘confidence’.

4. Student outcomes

Undergraduate degrees

No change in total proportion awarded 1st and 2.1 degrees.

Studentemployment

Small increase in progression rates to employment and graduate jobs. J

HeadlineAim 2

5. Promoting Access

HEFCE PIson W.P.

We exceeded most key HEFCE benchmarks for widening participation in 2008/09. J

HeadlineAim 3

6. Research Researchincome and RAE grades

10% increase in research income to £6.4 million in 2009/10.

7. KT and Third Stream

Other incomegeneration

4% increase in income generation in 2009/10.

Headline Aim 4

8. Economic and social regeneration

Range of activity

Lead role in regeneration through promoting social enterprise, cultural developments and new graduate internship programme.

Sustainability Aim 1

9. Human resources

Staff survey feedback

Positive overall responses demonstrate staff commitment. Some issues to be addressed. N/A N/A N/A

Staff turnover Turnover rates have reduced. D


10. Financial position

Financial surplus

Surplus of £9.7 million in management accounts for 2009/10.


11. Building quality

Estates condition

The condition of our estate remains well above average for the sector, with no space classed as unsuitable.

12. Space utilisation

Space use data 2009/10 Semester 1 space use rates were generally lower than 2008/09, and below the ‘efficient’ rate in three faculties.

N/A


13. Governance Risk and KPIs Assurance review in June 2010 confirmed HEFCE’s confidence in effectiveness of our management and governance.


MONITORED QUARTERLY

StrategicAim Topic

Monitoredthrough Comment

Performance by calendar year

Qua

rter

2005

2006

2007

2008

2009

2010

Headline Aim 1 14. Student demand

UCAS applications

19% increase in applications for 2010 entry.

Q1

Q2

Q3

Q4 Not Applicable

International applications

7% increase in applications for 2010 entry.

Q1

Q2

Q3

Q4 Not Applicable


15. Financial position

Cashflow We remain significantly in excess of the required minimum cash balances.

Q1

Q2

Q3

Q4 D

GREEN Good: Performing at or above management expectations

AMBER Mixed: Some concerns which need to be addressed

RED Problematic: Serious concerns, overall performance below management expectations

D = December 2010

J = June 2011

Notes on coding of performance:

Dates for future data:


Progress Against Headline Aims

Our student recruitment continues to be healthy, with significant increases in demand from Home/EU students and international students. This has enabled the University to recruit additional students, within HEFCE controls. We have maintained healthy recruitment to Science, Technology, Engineering and Maths courses, which are a national priority, with initiatives including a new degree in Applied Physics.

We aim to promote the employability of our graduates through excellent facilities and opportunities to develop work-related skills. The later section on our capital plan describes recent investment to enhance the student experience and employability. Our students benefit from engagement with business and the community. For example accounting and finance students worked with the Rowans Hospice and the Roberts Centre Children’s Charity in a partnership that offered accounting advice to the charities. This emphasis on skills for employment contributes to successful graduate progression to jobs and further study.

The University is committed to initiatives that inspire students to achieve academically. We want everyone who is capable of benefiting from a university education to be aware of opportunities and we invest significantly in outreach activity to this end. We are keen to promote maths, science, engineering and languages and to contribute to the teaching in schools in our community in these subjects. Activities have included summer schools for 200 14/15 year olds, our UP for Maths programme for primary and secondary pupils and master-classes for A Level students. Our Teenpreneur social enterprise programme promotes entrepreneurship. These activities contribute to our above benchmark performance in widening participation as measured by HEFCE.

The University is proud of its ground breaking research across a range of subjects. For example, our biomedical and health studies research makes a positive contribution to wellbeing and life expectancy. Research grant success this year includes £1.4 million awarded to Portsmouth cosmologists to fund further research into the emergence of structure in our universe. We have the UK’s first dedicated laboratory-based brain tumour research centre and undertake gene research. This innovation has contributed to the 6.4% growth in our research income in 2009/10.

Our researchers are keen to build public engagement and understanding of science and technology. For example scientists and students built models of flying pterosaurs, which formed a centrepiece in the Royal Society’s 350th anniversary celebrations on London’s South Bank.

The University of Portsmouth has a direct impact on the local and regional economy. In 2009/10 the University helped 600 businesses and other organisations improve their profitability and efficiency. In the process we have generated over £6.2 million of external income from knowledge transfer activities.

Aim 1To give an excellent student experience focused on knowledge and skills essential for roles in the global workforce

Aim 2To raise aspirations and to promote access to the University

Aim 3To promote the discovery, development and application of knowledge through high quality research


The University is an integral part of the city of Portsmouth. In addition to the study and employment opportunities the University creates, we actively engage with the city to apply the skills and knowledge of our staff and students in a tangible and mutually beneficial way. These activities range from student volunteering in a City Council funded intergenerational project to provision of free advice for local people on employment law by law students.

Our cultural impact is important. More than 11,000 people attended exhibitions and shows, hosted by our Faculty of Creative and Cultural Industries this year. Our Creative Partnership programme works with 49 local schools and engaged with over 4,000 schoolchildren this year.

We also aim to make positive contributions to environmental sustainability, through our curriculum, research and practical measures including environmentally sensitive designs for new buildings.

Aim 4To contribute to sustainable economic, social, cultural and community regeneration and development


Progress Against Sustainability Aims

Our success depends on the commitment, creativity and professionalism of our staff. The University is one of the city’s largest employers with over 3,000 staff.

The economic downturn has put pressure on staffing budgets. The voluntary severance scheme has allowed us to reduce and refresh our staff base.

It is vital to ensure that we can maintain and improve the University’s performance. We are confident that we increasingly have the right mix of staff to deliver the University’s core objectives. Importantly, we are able to operate more efficiently in years to come.

The overarching themes of our current HR strategy are:

• Contribution, performance and reward, including changes to the appraisal and contribution pay processes

• Developing leaders through early identification of future leadership potential, with appropriate training and mentoring

• Engaging and supporting our staff with more two-way communication processes and new policies to improve work/life balance

The University of Portsmouth aims to provide equality of opportunity in all matters relating to employment. Consequently, all employment decisions are made with regard only to the requirements of the job and the capabilities of the individual and are not influenced by any unlawful consideration of the protected characteristics covered by the Equality Act 2010. The University aims to provide facilities, advice and support to enable its employees to acquire the necessary skills and knowledge to fulfil their roles effectively and develop their potential to meet the University’s future requirements. The University is committed to lawful Positive Action where there is under-representation, to achieve equality of opportunity.

The University has a Single Equality Scheme that lays out our equality and diversity priorities for the period 2010–2013.

The University places considerable value on the involvement of its employees and on good communication with them. Staff are encouraged to participate in formal and informal consultation at University, Faculty and Departmental level, often through the membership of committees. The Board of Governors has four staff members and has committed itself to maintain this representation and encourage full participation of staff in the activities of the Board.

Our staff

Equal opportunity and diversity

Employee involvement


The University recognises two trade unions for collective bargaining purposes (UCU and UNISON) and has regular dialogue with them through formal and informal channels. The University has staff associations for academic and support staff. Staff are also involved via staff networks covering disability, sexual orientation, race and parenting/caring responsibilities. Within the University’s equality impact assessment process, staff from minority groups are involved in Assessment Panels that review all University policy and practice.

The University’s current capital investment programme was approved in June 2009. A limited number of projects were approved in advance of this, to enable work to commence. The programme totals £64 million and is due for completion in 2014. Proposed projects include two major new building developments, a number of smaller new builds and refurbishments, and continued investment in IT. It is expected that we will dispose of some poor quality buildings.

Planning these two major projects has progressed throughout the year. One project is to provide new academic space for the School of Education and Continuing Studies and Institute of Criminal Justice Studies and will promote efficiency. The University will decide in due course whether to dispose of the site vacated by these departments. This project also incorporates 600 student bedrooms, which are being constructed by a development partner. This will help to realise our ambition of offering a halls of residence place to all first year students who wish for one. The other major project comprises new facilities for the visual and performing arts.

Planning and design of both projects has been slower than expected, contributing to the significant increase in our cash balances during the year, as we intend to part-fund the projects from our own resources.

The new Dental Academy opened as planned in September 2010. The enlarged building houses final year dental students from King’s College London alongside our dental therapy and nursing students.

A number of smaller capital projects were completed during 2009/10. New facilities for the Department of Law include a mock courtroom being used to train lawyers, expert witnesses, social workers and probation officers of the future. Shared use for other purposes includes use by the Crown Prosecution Service and a London Chamber of Solicitors as a training tool, with student work experience provided in return.

The Third Space was opened for the second semester of 2009/10. A former nightclub within the Student Centre was converted into much needed social learning space. The new facility is extremely well used and other similar spaces will be provided elsewhere. The new University Nursery was completed in summer 2010 and provides excellent facilities. Work on the second development phase of the Institute of Marine Science has been slower than anticipated, but building is now underway.

Capital building programme


When the capital programme was developed the University necessarily made assumptions about the availability of funding, including the continuation of HEFCE teaching capital investment fund, albeit at a reduced level. The availability of the University’s own cash reserves to support the plan was also included. Assumptions were made about the likely levels of ongoing cuts to public spending. To date these assumptions remain appropriate. Capital projects are being progressed, but we may need to defer or scale back future activity to ensure the plan remains affordable.


Future risks and trends

HEFCE funding for 2010/11 has been reduced; our share was a £0.6 million reduction on our HEFCE allocation of £56 million. Significant further reductions from 2012 onwards, and cuts in future HEFCE capital funding, are anticipated. Reductions in funding for the public sector, including the NHS, will have a knock-on effect on organisations’ ability to fund education and training for their staff.

We will actively seek opportunities to increase funding, such as bidding for additional student numbers, business outreach and building on our research strengths and income. We will work with our partners to ensure that our courses continue to meet their development needs, and offer good value for money. We are investing £2.5 million HEFCE modernisation funding in projects to reduce our future cost base.

The Browne Review is of great significance to us as the majority of our students are full-time undergraduates. We will focus on responding to changes in university funding and fees in a way which builds on our organisational strengths and contributes to our long-term strategy. Importantly, the University’s current recruitment position is strong, with a 20% increase in UCAS applications in 2010. Widening participation is an important strand of University strategy. We will seek to work within the new model for HE funding and fees to ensure that financial concerns do not deter applicants.

There are general expectations of future reductions in research funding, potentially affecting HEFCE QR and Research Council Funding, albeit at a lower level of reduction than teaching funding. We will ensure that our research strategy is informed appropriately.

We will continue actively to support areas of research strength, and invest in facilities and staff to enhance their activities and income generation capability. We are working to diversify income sources for research and knowledge transfer and build strong partnerships with other universities and with businesses.

Public sector spending cuts

Anticipated changes

Mitigating risk

Undergraduate fees review

Potential impact and mitigation

Research selectivity

Changes to research funding

Mitigating the risk


Strategic priorities in 2010/11

We aim to build on our recruitment success, whilst ensuring that students have the best possible experience at Portsmouth. We are working to restructure our academic year from 2012, to provide an improved learning experience for students and a more efficient structure of course delivery. Assessment and feedback will be improved, which should increase student satisfaction. High quality teaching is critical and we will continue to recruit, retain, reward and develop the best staff. We will enhance student engagement through personal tutor support, and aim to reduce non-completions. We will build on the success of our new student social learning spaces, and extend the model of open IT access across the University.

The overall employability of our graduates is equal to national benchmarks, but we will continue to do more to improve employment in graduate jobs. The University will strive for graduate employment outcomes through further support for internships, placements, work experience and volunteering. We will ensure the curriculum promotes personal communication skills, teamwork, and other qualities that employers want. We will also develop closer partnerships with local, national and international businesses.

We will accelerate the growth of high quality research and knowledge transfer activity across the University. We will set clear research and knowledge transfer income targets for the year ahead. We will respond positively to the priorities of the Government, to maximise research and knowledge transfer funding opportunities for the University. We will also work to ensure that the positive economic impact of the University’s research and knowledge transfer on the UK economy is understood by funders, Government and the wider community.

We must do more with less, and combine innovation with efficiency to deliver change. Service delivery models will be reviewed throughout the organisation. Investment in management information and technology will streamline administrative processes and reduce duplication. A significant proportion of the £2.5 million funding we received from HEFCE’s University Modernisation Fund will be invested in information systems to streamline administration, remove duplication and provide more efficient services to support academic delivery.

Excellent student experience

Graduate employment

Research and Knowledge Transfer

Innovation and efficiency


The University of Portsmouth is currently in a secure financial position. We recognise that we will need to operate more efficiently in leaner times to come. We will focus on our core aims; prioritising the student experience including quality teaching; employability of our graduates; and building research and knowledge transfer. We will also continue to ensure that our priorities have a demonstrable public benefit, including our important contribution to revitalising the local and regional economy.

Conclusion


Public BenefitStatement

The University of Portsmouth is a Higher Education Corporation set up under the Education Reform Act 1988. The University is a Charity under Statute, also known as an ‘exempt charity’. Following changes in charity legislation, from 1 June 2010 HEFCE became the ‘principal regulator’ for higher education institutions (HEIs) in England that are exempt charities.

The University of Portsmouth’s primary purpose as contained in the Education Reform Act 1988 (as amended), is to provide education, including Higher Education, and to carry out and publish research. As a Higher Education Corporation, the University has the power to do anything which appears to be necessary or expedient for that purpose.

The specific vision, values, strategic aims and objectives flowing from our primary purpose are set out in the University’s current Strategic Plan 2007–2012. The University takes a wide view of its charitable purpose; not only prescribed to the delivery of higher education, but to related wider social, economic and ethical concerns locally, regionally, nationally and internationally.

The University has due regard to the Charity Commission’s guidance on public benefit. Through its range of activities the University provides benefits to different sections of the public as follows:

Benefit to Code

National benefit National

Local, regional and national community Community

Students and graduates Students

Disadvantaged communities Disadvantage

Business and the economy Business

Activity Benefit

The University develops and provides courses in national priority areas to meet skills shortages in the national workforce. For example, we contribute to the education of dentists in collaboration with King’s College London which helps meet the national shortage of dental professionals.

The University maintains a broad portfolio of programmes that continue to meet student and employer demand, developing a diverse community of students which benefits both the individuals and society as a whole.

Definition of the benefits the University of Portsmouth provides

Aim 1To give an excellent student experience focused on knowledge and skills essential for roles in the global workforce

National

Community


Students

Activity Benefit

The University focuses on employability through advice and guidance services. Purple Door recruitment, our proactive employment service, supports an increasing number of students and graduates in a challenging employment environment.

The University works with business, industry and major local employers to promote student progression and works with regional partners such as the Royal Navy to provide flexible and targeted courses. This enables students from many backgrounds to be successful on our courses.

The University benefits children, parents and students through its UP for It, Schools Liaison and student bursary provision. We aim to raise aspirations, change perceptions and encourage pupils from all socio-economic backgrounds to see higher education as an attractive and accessible option working with local FE colleges, secondary and primary schools to that end.

Students contribute to the life of the city through volunteering, work-based learning, placements, enterprise projects and small business start-up opportunities which bring diversity to the local community and facilitate community engagement. This work supports local charities such as the Rowans Hospice.

The University has high profile research, including biomedical sciences, which makes a direct contribution to national health and wellbeing. The University’s research in human physiology, sports science and other related disciplines, and its expertise in leisure and tourism, logistics, security and environmental impact all contribute to the success of the London Olympics 2012 and to the success of UK sport more generally.

The University develops the public understanding of science through, for example, INTECH, public lectures, Café Scientifique. These help people understand scientific aspects of the world they live in, how they can contribute to change and make informed decisions on issues facing them.

The University’s knowledge transfer and third stream activity benefits business partners through the University’s research and development expertise, and students are empowered by the use of work placements.

Aim 2To raise aspirations and to promote access to the University

Aim 3To promote the discovery, development and application of knowledge through high quality research

StudentsBusiness

Community

Community

CommunityDisadvantage

Students

CommunityNational

StudentsBusiness


Activity Benefit

The University contributes to, supports and encourages cultural activities in the city. The University stimulates design-based enterprises in its region which contributes to the development and promotion of the creative and cultural sector.

The University works with partners to promote local economic development and inward investment to Portsmouth and South East Hampshire. This develops the attractiveness, vitality, creativity, aspirations and economy of Portsmouth and the sub-region.

The University employs over 3,000 staff and teaches more than 20,000 students, and so has a positive impact on the local economy through employment opportunities, spending by students and staff and a flow of graduates into jobs locally and regionally.

The University’s community outreach work in sport benefits improving health, fitness and sporting achievement in the city.

The University supports enterprise and business start-ups in the University and locally. This contributes to the local economy and encourages entrepreneurial activity.

The University contributes to economic and social regeneration of city areas through sensitive and innovative construction projects. The University is improving its environmental performance, minimising energy use and maximising the use of sustainable resources through energy efficient buildings and systems acting as a role model for environmental efficiency.

Aim 4To contribute to sustainable economic, social, cultural and community regeneration and development

Community

CommunityBusiness

Community

Community

StudentsBusiness

CommunityBusiness


Environmental responsibility

The University is strongly committed to improving its environmental performance and is undertaking a number of initiatives which are working towards a more energy efficient, low carbon and socially responsible future.

The University has committed to reduce carbon emissions through participation in government schemes such as the Carbon Reduction Commitment Energy Efficiency Scheme. The government Spending Review has significantly changed the scheme and as a result there will no longer be any recycling of payments to participants. There will still be a need to purchase annually about 16,500 tonnes of carbon allowance (based on energy consumption) starting in 2012 at a cost of about £200,000.

To ensure a steady stream of carbon reduction projects the University is partnering with the Carbon Trust’s Higher Education Carbon Management Programme. By March 2011, the University will have an endorsed plan which will meet HEFCE requirements and outline a five year approach to reduce carbon emissions.

The University has invested in the HEFCE/Salix Revolving Green Fund which funds energy efficiency projects. Investment of £415,000 to date has identified forecast savings of 455 tonnes of carbon and £104,000 per annum. Other long term capital and maintenance projects are contributing to continuing annual returns. This investment has several benefits: it limits the annual carbon allowances required; increases the potential to improve building energy certificate ratings and aims to reduce emissions.

Thirty-five of our buildings are currently required to have a Display Energy Certificate which reflects carbon emissions ratings for fuel consumption, and provide a measure of improving performance.

In accordance with its Estates Strategy the University requires its new buildings to use the BREEAM approach to sustainable building design and, within the realms of affordability and value for money, aspires to achieve a BREEAM rating of ‘Excellent’. To achieve this rating, low carbon technologies such as heat pumps, solar thermal and photovoltaic panels are considered at design stage. Also popular has been the introduction of natural ventilation in the University Library and the Dennis Sciama Building.

A major improvement in energy efficiency could be achieved as a result of plans to relocate University services into more energy efficient buildings and limit building use in the evening to the most energy efficient. Refurbishments to existing buildings include the introduction of movement sensors for lighting in corridors and stairwells and a trial on the use of low energy lighting is planned for the Library.

Our commitment

Carbon reduction

Energy efficiency


The University has been working to calculate emissions and reduce their impact in:

• Gas and electricity consumption• Waste disposal and water consumption• Business travel and fleet vehicle use• Staff and student commuting• Procurement activity

Development work is underway on new methods of communication and feedback to promote low carbon initiatives. Through these initiatives, a reduction in energy consumption, water use and improved recycling rates will be achieved.

For example, environmental data management systems are being explored to enable performance feedback to staff and students about electricity and gas consumption, recycling and water use per building and their associated carbon emissions. Initial trials have taken place in halls of residence where it is hoped that the publication of consumption figures will have a positive impact on residents’ resulting approach to carbon reduction.

The new ethical investment policy is an important step towards the University’s environmental sustainability ideals. Investments are now governed by environmental and social practices which aim to control any harm to the environment and communities worldwide.

Carbon footprint

Carbon communication

Ethical investment


The University’s Structure of Corporate Governance

The University’s Board of Governors draws its authority from University’s Articles and Instrument of Government. The majority of Governors are external to the University, and the Board also includes student and staff members, together with the Vice-Chancellor and the President of the Students’ Union (both ex officio). The roles of Chairman and Deputy Chairman of the Board are separated from the role of the University’s Chief Executive, which is the Vice-Chancellor.

Governors receive no remuneration from the University in respect of activities undertaken while acting as Governor, but are paid expenses for travel and subsistence and training in relation to duties undertaken as a consequence of Board membership.

The University maintains insurance for its Governors in respect of their duties as Governors of the institution.

The University operates in accord with the CUC Governance Code of Practice and Principles and maintains a live document which benchmarks the University against that Code. An internal audit of Corporate Governance in May 2010 confirmed that the University remains well aligned with that Code.

The University’s Board of Governors is responsible for the ongoing strategic direction of the University, approval of major developments and takes an overview of the inherent risks facing the institution. The Governors discharge the responsibilities set out in the Committee of University Chairs (CUC) Guide for Members of Higher Education Governing Bodies in the UK, including responsibilities for the proper conduct of public business, strategic planning, monitoring performance, finance, audit, estate management, charitable status, staffing, Students’ Union and health and safety. The matters reserved specifically for the Board for decision are set out in the Articles of Government of the University (the Articles) and under the model Financial Memorandum with the Higher Education Funding Council for England (HEFCE). The Board receives regular reports from executive officers on the day-to-day operations of the University’s business and its subsidiary companies.

Membership

Governors’ remuneration

Governors’ insurance

CUC Governance Code of Practice and Principles

Responsibilities


In accord with the CUC Governance Code of Practice, the Board of Governors maintains a Statement of Primary Responsibilities which summarises the key concerns of the Governors. This confirms that the Board of Governors shall be responsible for the following:

Approving the mission and strategic vision of the institution, including the determination of the educational character and mission of the University and for oversight of its activities, long-term business plans, key performance indicators (KPIs) and annual budgets, and ensuring that these meet the interests of stakeholders; enabling the institution to achieve and develop its primary objectives of teaching and research, which includes considering and approving the institution’s Strategic Plan which sets the academic aims and objectives of the institution and identifies the financial, physical and staffing strategies necessary to achieve these objectives.

Appointing the head of the institution as chief executive of the institution and putting in place suitable arrangements for monitoring his/her performance.

Appointing the Clerk to the Board of Governors and putting in place suitable arrangements for monitoring his/her performance.

The appointment, grading, suspension, dismissal and determination of the pay and conditions of service of the holders of senior posts.

Setting a framework for the pay and conditions of service of all other staff.

Ensuring the establishment and monitoring of systems of control and accountability, including financial and operational controls and risk assessment, clear procedures for handling internal grievances and for managing conflicts of interest; for the effective and efficient use of resources, the solvency of the University and the Corporation and for safeguarding their assets; for approving annual estimates of income and expenditure and for approving annual actuals of income and expenditure.

Monitoring regularly institutional performance against its planned strategies and operational targets and approved KPIs, which should be, where possible and appropriate, benchmarked against other institutions.

Observing the highest standards of corporate governance; including ensuring and demonstrating integrity and objectivity in the transaction of Board business, and wherever possible following a policy of openness and transparency in the dissemination of Board decisions.

Directing and overseeing the institution’s arrangements for internal and external audit.

Statement of Primary Responsibilities

Strategy

Vice-Chancellor

Clerk to the Board of Governors

Senior postholders

Staff

Stewardship

Monitoring

Corporate governance

Audit


Oversight of the strategic management of the institution’s land and buildings and the physical resources to support IT. As part of this responsibility it considers, approves and keeps under review:

• an estate strategy which identifies the property and space requirements needed to fulfil the objectives of the institution’s strategic plan, and also provides for a planned programme of maintenance;

• an IT Strategy which identifies the hardware and software requirements and the related business processes and infrastructure needed to fulfil the objectives of the institution’s Strategic Plan, and provides for a planned programme of maintenance.

To take such steps as are reasonably practicable to ensure that the Students’ Union operates in a fair and democratic manner and is accountable for its finances (Education Act 1994).

The health and safety of employees, students and other individuals whilst on the institution’s premises and in other places where they may be affected by its operations; including ensuring that the institution has a written statement of policy on health and safety and arrangements for the implementation of that policy (Health and Safety at Work Act 1974).

Ensuring the University provides an inclusive environment for work and study through embedding diversity and equal opportunities into everything the University does, particularly in those core functions and activities that directly affect staff and students at work and study.

The Board of Governors shall not delegate the following:

a) the determination of the educational character and mission of the University;

b) the approval of the annual estimates of income and expenditure;

c) ensuring the solvency of the University and the Corporation and the safeguarding of their assets;

d) the appointment or dismissal of the Vice-Chancellor; and

e) the varying or revoking of the Articles of Government.

Estates and Information Technology

Students’ Union

Health and safety

Equality and diversity

Board’s reserved powers


The Board meets five times a year and has several committees. All of the committees are formally constituted with terms of reference and are chaired by an external member of the Board. The committees are Audit and Quality Committee, Finance Committee, Human Resources Committee, Estate and Information Technology Committee, Students’ Academic and General Affairs Committee (SAGA), Nominations Committee and Remuneration Committee.

This committee meets four times a year with the External Auditors and Internal Auditors of the University and reviews their work. The Committee has responsibility for overseeing the development and implementation of risk management. The Committee considers detailed reports together with recommendations for the improvement of the University’s systems of internal control, including business, operational and compliance controls in addition to financial controls, management’s response thereto and implementation plans. In addition, it considers matters relating to quality assurance. It also receives and considers reports from the HEFCE as they affect the University’s business and monitors adherence to the regulatory requirements. It reviews the University’s annual financial statements together with the accounting policies. The Committee has responsibility for confirming and promoting Value for Money. Whilst senior executives attend meetings of the Audit and Quality Committee, they are not members of the Committee and the Committee’s terms of reference provide that members have a regular opportunity to meet on their own with the External and Internal Auditors for independent discussions.

This committee examines and monitors, on behalf of the Board, all areas of the University’s financial policy and strategy and makes recommendations and proposals and provides advice thereon. As part of its remit, it also recommends to the Board the University’s annual revenue and capital budgets and monitors performance against the approved budgets.

This committee considers and approves the pay and conditions of service for staff other than the holders of senior posts as defined in the Articles.

This committee is concerned with strategic and operational planning, including the formulation of the Estate and IT Strategies.

This committee is the principal medium through which the governors are directly able to hear the views and concerns of the students through the Students’ Union’s Sabbatical Officers.

Board and Committee Meetings

Audit and Quality Committee

Finance Committee

Human Resources Committee

Estate and Information Technology Committee

Students’ Academic and General Affairs (SAGA) Committee


This committee considers and recommends nominations for vacancies in the Board membership in accord with the Instrument of Government.

This committee determines the annual remuneration of the Vice-Chancellor, other holders of senior posts and the Clerk to the Board, as required by the Articles.

Following the internal audit of Corporation Governance and Risk Management in May 2010, the Risk Management Policy was updated and approved by the Board of Governors in June 2010. The maintenance and update of the Risk Register is the responsibility of the University Secretary. As one means of complying with the key principles of risk management, all committees of the Board of Governors conducted their work in the context of the Strategic Plan and the Risk Management Policy. In essence, committees will examine the inherent risks in the strategic objectives of the committees as they contribute to the Strategic Plan.

The risk categories match the headline aims and the sustainability objectives of the University’s Strategic Plan. The emphasis placed on particular risks varies in response to external pressures and challenges facing the University and progress with major initiatives and changes to activity.

Risk categories are:

• Failure in student recruitment and experience• Failure to widen participation• Failure to maintain research reputation and generate income• Community hostility• Failure to control costs• Failure to attract and retain staff• Failure in infrastructure• Serious governance failure

In common with the rest of the Higher Education sector, the biggest risk currently facing the University is the economic climate and consequential reductions to public sector funding. This is covered in more detail in the report from the Director of Finance and in the specific section on risks.

Nominations Committee

Remuneration Committee

Risk Management

Risk categories


2009/2010 Financial Responsibilities of the University’s Board of Governors

In accordance with the University’s Articles, the Board is responsible for the management of the affairs of the University and is required to present audited financial statements for each financial year.

The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the University and enable it to ensure that the financial statements are prepared in accordance with the University’s Articles, the Statement of Recommended Practice: Accounting for Further and Higher Education and other relevant Accounting Standards. In addition, within the terms and conditions of a Financial Memorandum agreed between HEFCE and the University, the Board, 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 at the year end and of the surplus or deficit and cash flows for that year.

In causing the financial statements to be prepared, the Board has ensured that:

• suitable accounting policies are selected and applied consistently;• judgements and estimates are made that are reasonable and prudent;• applicable Accounting Standards have been followed, subject to any material departures disclosed and

explained in the financial statements;• financial statements are prepared on a going concern basis unless it is inappropriate to presume that the

University will continue in operation.

The Board 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 with the Funding Council and any other conditions which the Funding Council may from time to time prescribe;

• ensure that there are appropriate financial and managerial controls in place to safeguard public funds and funds from other sources;

• safeguard the assets of the University and to prevent and detect fraud;• secure the economical, efficient and effective management of the University’s resources and

expenditure.

The Board 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.

2009/2010 Statement of Internal Control

As the governing body of the University of Portsmouth, we have responsibility for maintaining a sound system of internal control that supports the achievement of policies, aims and objectives, while safeguarding the public and other funds and assets for which we are responsible, in accordance with the responsibilities assigned to the governing body in the Statutes and Articles 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 of effectiveness.


The system of internal control is based on an ongoing process 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 2010 and up to the date of approval of financial statements. It continues to be reviewed and refined in accordance with HEFCE guidance.

As the governing body, we have responsibility for reviewing the effectiveness of the system of internal control. The following processes have been established:

• We meet five times a year together with an annual strategic event to consider the plans and strategic direction of the institution.

• We receive periodic reports from the chairman of the Audit and Quality Committee concerning internal control, and we require regular reports from managers on the steps they are taking to manage risks in their areas of responsibility, including progress reports on key projects.

• Audit and Quality Committee has responsibility for overseeing the development and implementation of our Risk Management Policy.

• The Audit and Quality Committee receives regular reports from our internal auditors, which include the internal auditor’s independent opinion on the adequacy and effectiveness of the institution’s system of internal control, together with recommendations for improvement.

• Risk awareness training takes place, predominantly through Management Information Briefing Sessions (MIBS).

• A system of key performance and risk indicators has been developed and is reported to the Board at each meeting in the quarterly operating statements.

• Reports are received from budget holders, department heads and project managers on internal control activities.

Our review of the effectiveness of the system of internal control is informed by the HEFCE Assurance Service, which operates to standards defined in the HEFCE Audit Code of Practice. The University was last reviewed by the HEFCE Assurance Service in June 2010 and the review confirmed HEFCE’s confidence in the effectiveness of the University’s management and governance. HEFCE’s overall conclusion was that it was ‘able to place reliance on the accountability information provided by the University of Portsmouth’, which is the highest achievement in the HEFCE lexicon of conclusions. The next review will take place in five years’ time. In addition, HEFCE makes an annual risk assessment of the University which was last confirmed in April 2010. The internal auditors submit regular reports which include their independent opinion on the adequacy and effectiveness of the institution’s system of internal control, with recommendations for improvement.

Our review of the effectiveness of the system of internal control is also informed by the work of the executive managers within the institution, 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.


Independent Auditors Report to the Board of Governors of the University of Portsmouth

We have audited the financial statements for the year ended 31 July 2010 which comprise the consolidated income and expenditure account, the consolidated balance sheet, the University’s balance sheet, the consolidated cash flow statement, the consolidated statement of 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 opinion has been prepared for and only for the Board of Governors as a body. Our audit work has been undertaken so that we might state to the University’s Board of Governors those matters we are required to state to them in an auditors’ 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 University’s Board of Governors as a body, for our audit work, for this report, or for the opinions we have formed.

Respective Responsibilities of the Board of Governors and AuditorsAs described in the Statement of Responsibilities of the University’s Board of Governors, the University’s Board of Governors is responsible for the preparation of financial statements in accordance with the Accounts Direction issued by the Higher Education Funding Council for England, the Statement of Recommended Practice – Accounting for Further and Higher Education Institutions, applicable law and United Kingdom Accounting Standards.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements, International Standards on Auditing (UK and Ireland) and the Audit Code of Practice issued by the Higher Education Funding Council for England.

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Statement of Recommended Practice – Accounting for Further and Higher Education Institutions. We also report to you whether in our opinion, income from funding bodies, grants and income for specific purposes and from other restricted funds administered by the University, have been properly applied in all material respects for the purposes for which they were received, and whether income has been applied in all material respects in accordance with the University’s statutes and where appropriate with the Financial Memorandum dated 1 August 2008 with the Higher Education Funding Council for England and with the Funding Agreement with the Training and Development Agency for Schools.

We also report to you if, in our opinion, the University has not kept proper accounting records, the accounting records do not agree with the financial statements, or if we have not received all the information and explanations we require for our audit.

We read the other information contained in the financial statements and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises the Report of the Board of Governors, Statement of Corporate Governance, Statement of Responsibilities of the University’s Board of Governors and the Statement of Principal Accounting Policies. Our responsibilities do not extend to any other information.


Basis of Audit OpinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 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 Board of Governors 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.

OpinionIn our opinion:

i) the financial statements give a true and fair view of the state of affairs of the University and the group at 31 July 2010, and of the group’s surplus of income over expenditure, recognised gains and losses and cash flows for the year then ended and have been properly prepared in accordance with the Statement of Recommended Practice – Accounting for Further and Higher Education Institutions and United Kingdom Generally Accepted Accounting Practice;

ii) in all material respects, income from the Higher Education Funding Council for England, the Skills Funding Agency and the Training and Development Agency, grants and income for specific purposes and from other restricted funds administered by the University have been applied for the purposes for which they were received;

iii) in all material respects, income has been applied in accordance with the University’s statutes and where appropriate in accordance with the Financial Memorandum dated 1 August 2008 with the Higher Education Funding Council for England and with the Funding Agreement with the Training and Development Agency covering the period 1 August 2009 to 31 July 2010.

Mazars LLPChartered Accountants and Independent Statutory AuditorsNovember 2010


Statement of Principal Accounting Policies

1. Accounting ConventionThe financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings. They are in accordance with both the Statement of Recommended Practice (revised and reissued July 2007): Accounting for Further and Higher Education (SORP) applicable Accounting Standards and HEFCE Accounts Direction.

2. Basis of ConsolidationThe consolidated financial statements consolidate the financial statements of the University and its subsidiary and quasi-subsidiary undertakings for the financial year to 31 July 2010. The South East Hampshire and Isle of Wight Educational Trust has been consolidated as a quasi-subsidiary on the basis that the University is responsible for the appointment of Trustees and therefore has indirect control over the Trust.

The consolidated financial statements do not include those of the University of Portsmouth Students’ Union as it is a separate entity.

3. Recognition of IncomeIncome from restricted expendable endowments, donations, research grants, contracts and other services rendered is included to the extent of the expenditure incurred during the year. This is generally equivalent to the sum of the direct expenditure incurred during the year and any related contributions towards indirect costs.

Tuition fee income is recognised net of all discounts in accordance with application note G to FRS 5 ‘Reporting for the substance of transactions’.

Gifts in kind, other than tangible fixed assets, are credited to donations in the income and expenditure account. Donated tangible fixed assets are valued and the amount credited to deferred capital grants.

Capital grants are deferred and amortised in the Income and Expenditure Account over the estimated lives of the related assets.

Where the institution disburses funds it has received as a paying agent on behalf of a funding body, or other body, and has no beneficial interest or risks related to the receipt and subsequent disbursement of the funds, these funds are excluded from the Income and Expenditure Account.

All other income is credited to the Income and Expenditure Account on a receivable basis.

4. Pension SchemesThe two principal pension schemes for the University’s staff are the Teachers’ Pension Scheme (TPS) and the Hampshire County Council administered Local Government Pension Scheme (LGS). Under the provisions of FRS 17, the TPS is accounted for under the same terms as a defined contribution scheme, the LGS is accounted for under the terms of a defined benefit scheme. The schemes are externally administered and contracted out of the State Earnings-Related Pension Scheme.

The TPS is valued every five years by the Government Actuary. The LGS is valued every three years by an independent actuary using a market led approach, the rates of contribution payable being determined by the actuary.

5. BursariesBursaries awarded to students have been accounted for as administration expenditure.

6. Foreign CurrenciesTransactions denominated in foreign currencies are recorded at the rate of exchange ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the year end rate. The resulting exchange differences are dealt with in the determination of income and expenditure for the financial year.


7. LeasesRental costs under operating leases are charged to the Income and Expenditure Account in the year in which they arise.

8. Land and BuildingsLand and Buildings are included in the financial statements at cost or valuation.

The University’s freehold buildings were revalued as at 31 July 2009. This interim valuation was conducted by King Sturge LLP. The basis of revaluation is depreciated replacement cost. The next full valuation is planned for 31 July 2011.

Buildings under construction are accounted for at direct cost incurred to 31 July. They are not depreciated until they are brought into use.

Buildings are depreciated over their expected remaining useful lives (50 years or less). Freehold land is not depreciated.

Where buildings are acquired with the aid of specific grants they are capitalised and depreciated as above. The related grants are treated as deferred capital grants and released to income over the expected useful life of the buildings.

As required under FRS 15, the University had adopted a five year cyclical review for the valuation of its properties, with interim valuation at the end of year 3.

The University’s leasehold buildings are separated into three types. Leaseholds in excess of 99 years are treated as freehold buildings and held at cost pending valuation. Leaseholds between 99 years and 20 years (long leaseholds) are held at the lower of cost or valuation, the leasehold is depreciated over the term of the lease. Leaseholds less than 20 years (short leaseholds) are held at cost and depreciated over the term of the lease. Tenant improvements to leasehold or rented property are capitalised and depreciated over the expected remaining useful lives (50 years or less).

An annual review of buildings is undertaken to determine if there has been any impairment in the accounting period. Any impairment is charged to the Income and Expenditure account.

Expenditure to ensure that a tangible fixed asset maintains its previously recognised standard of performance is recognised in the income and expenditure account in the period it is incurred. The institution has a planned maintenance programme, which is reviewed on an annual basis.

Land and buildings inherited from the Local Education Authority (LEA) and buildings acquired since incorporation are stated in the balance sheet at valuation on the basis of depreciated replacement cost, as the open market value for existing use is not readily obtainable. Where it is not possible to obtain a reliable cost or valuation or where the cost of obtaining a valuation is greater than the benefit to the users of the financial statements for inherited or donated assets these assets are excluded from capitalisation.

9. EquipmentNon-computer equipment costing less than £15,000 per individual item or group of related items is written off in the year of acquisition. All other equipment, including computers where they are part of the University network, is capitalised.

Capitalised equipment is stated at cost and depreciated over its expected useful life, as follows:

AV equipment 3 yearsIT infrastructure 5 yearsOther equipment 5 yearsSpecialist scientific equipment 10 yearsVehicles 5 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 account and released to income and expenditure account over the expected useful economic life of the related equipment.

An annual review of equipment is undertaken to determine if there has been any impairment in the accounting period. Any impairment is charged to the Income and Expenditure account.

10. InvestmentsEndowment Asset Investments are included at current market values. All other investments are included at the lower of cost and net realisable value.

11. StocksStocks are valued at the lower of cost and net realisable value.

12. Cash Flows and Liquid ResourcesCash flows comprise increases or decreases in cash. Cash includes cash in hand, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty. No investments, however liquid, are included as cash.

Liquid resources comprise assets held as a readily disposable store of value. They include term deposits held as part of the University’s treasury management activities. They exclude any such assets held as Endowment Asset Investments.

13. Maintenance of PremisesThe University has a rolling maintenance plan which is reviewed on an annual basis. The cost of routine corrective maintenance is charged to the Income and Expenditure Account as incurred.

14. Taxation StatusThe University is an exempt charity within the meaning of Schedule 2 of the Charities Act 1993 and as such is a charity within the meaning of Section 506(1) of the Taxes Act 1988. Accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by Section 505 of the Taxes Act 1988 or Section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that such income or gains are applied to exclusively charitable purposes. This exemption does not extend to the subsidiaries, UPEL, UPTL and UPIL, where any profits or gains arising are chargeable to corporation tax. The Group receives no similar exemption in respect of Value Added Tax.

15. ProvisionsProvisions are recognised when the institution 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.

16. Payment of CreditorsIt is the University’s policy to obtain the best terms for all business and therefore terms are negotiated individually with suppliers. The University’s policy is to abide by specific payment terms made in those agreements. On average the University took 34 days to pay its creditors from the date of issue of the invoice (2008/09 36 days).

17. Comparatives2009/10 figures reflect up to date amendments to technical accounting guidance; 2008/09 comparator figures have been amended accordingly. The 2008/09 column headers include the word ‘restated’ to indicate any such amendment.

For 2009/10 (and 2008/09 comparator figures), these amendments comprise the recategorisation of both Knowledge Transfer Partnership and Research Fellowship income to ‘Research Income’ from ‘Other Income’ (as detailed in accounting notes 3 and 4 respectively) and corresponding expenditure (note 8). The income figures overall remain unchanged.


University of PortsmouthFinancial Statements for the year ended 31 July 2010

Consolidated Income and Expenditure Accountfor the year ended 31 July 2010

Note 2009/10£000

Income

67,90473,540

7,02920,582

439

Total Income 169,494

Expenditure

104,4249,140

47,1225,602

Total Expenditure 166,288

Surplus/(deficit) after depreciation of assets at valuation and before tax 3,206

0

Surplus/(deficit) after depreciation of assets at valuation and tax 3,206

Consolidated statement of historical cost surpluses and deficitsfor the year ended 31 July 2010

3,206

4,495

Historical cost surplus for the year 7,701

Page 36



Consolidated Balance Sheetas at 31 July 2010

Note 2010 2010£000 £000

Fixed Assets209,347

88

209,435

Endowment Assets 1,577

Current Assets302

6,87053,828

1,440

62,440

Creditors: amounts falling due within one year (19,946)

Net Current Assets 42,494

Total Assets less Current Liabilities 253,506

Creditors: amounts falling due after one year (13,005)

Net Assets excluding Pension Liability 240,501

Pension Liability (69,620)

Net Assets including Pension Liability 170,881

Deferred Capital Grants 42,438

Restricted Expendable Endowments 1,577

General Reserve excluding Pension liability 88,914Pension Reserve (69,620)

General Reserve including Pension liability 19,294

Revaluation Reserve 107,572

Total Reserves 126,866

Total 170,881

Page 37



University Balance Sheetas at 31 July 2010

Note 2010 2010£000 £000

Fixed Assets209,323

4,008

213,331

Endowment Assets 1,577

Current Assets291

7,31853,828

1,225

62,662

Creditors: amounts falling due within one year (23,624)

Net Current Assets 39,038

Total Assets less Current Liabilities 253,946

Creditors: amounts falling due after one year (13,005)

Net Assets excluding Pension Liability 240,941

Pension Liability (69,620)

Net Assets including Pension Liability 171,321

Deferred Capital Grants 42,438

Restricted Expendable Endowments 1,577

89,354 Pension Reserve (69,620)

General Reserve including Pension liability 19,734

Revaluation Reserve 107,572

127,306

171,321

Page 38



Consolidated Cash Flow Statementfor the year ended 31 July 2010

Note 2010£000

Net cash inflow from operating activities 14,456

(677)

0

1,136

(13,834)

(589)

Increase in cash 492

Reconciliation of net cashflow to movement in net funds

492

13,834

589

14,915

26,666

41,581

Statement of Consolidated Total Recognised Gains and Lossesfor the year ended 31 July 2010

3,206

733

(797)

14

0

(3,810)

17,150

Total recognised gains/(losses) relating to the year 16,496

Reconciliation

110,320

1,627

16,496

Closing funds 128,443

Page 39



Notes to the Accounts2009/10

£000Funding council grants

Recurrent grants61,466

683 715

Total recurrent grants 62,864

Specific grants1,336

500 144

56 10

0 0 6

385

Total specific grants 2,437

Deferred capital grants released in yearBuildings:

707 Equipment:

1,896

67,904

Tuition fees and education contracts

44,020 2,555

16,622 31

4,198 1,181 3,384

187 1,362

73,540

Research grants and contracts

2,565 1,136

935 388

1,481 27

271 226

7,029

Page 40



Notes to the Accounts2009/10

£000Other income

12,830

752 3,271 1,7205,743

478 33

243 1,2552,009

20,582

Endowment and investment income

121 318

439

Staff costs

31 July 2010Number

1,0581,221

2,279

1,0741,174

2,248

Page 41



Notes to the Accounts

Staff costs (continued) Year ended31 July 2010

£000

86,011 6,758

11,655

104,424

Year ended31 July 2010

Number

1,3666820

257341115112

2,279


£000

67,174 4,112

951 10,862 13,579

3,581 4,132

33

104,424

Higher paid staff emolumentsYear ended31 July 2010

Emoluments of the Vice-Chancellor £000

196


Number

3 0 1

Remuneration of other higher paid staff

Page 42




Higher paid staff emoluments (continued)Year ended31 July 2010

Compensation for loss of office £000

0

0


£000Other Operating Expenses

12,228 1,362 1,445 1,657 5,584 9,602 8,781 6,067

396

47,122

51 19 77 18

3,354 97

5

Interest Payable

1,182 4,420

5,602

Taxation

0

Surplus/(deficit) on Continuing Operations for the Period

2,838 368

3,206

Page 43




Tangible Fixed Assets

Freehold Land &Properties Long-Term Short-Term Buildings Total Equipment Vehicles Total

£000 £000 £000 £000 £000 £000 £000

(a) Consolidated

Cost or valuation:

Additions at cost 9,471 0 0 9,471 3,679 0 13,150Disposals/Demolitions (2,638) 0 0 (2,638) (641) (4) (3,283)

At 31 July 2010 203,982 4,285 46 208,313 16,807 290 225,410

Depreciation:

Depreciation for the year 7,096 66 9 7,171 1,969 0 9,140Disposals/Demolitions (306) 0 0 (306) (480) (4) (790)

At 31 July 2010 7,050 66 9 7,125 8,648 290 16,063

Net Book Value

At 31 July 2010 196,932 4,219 37 201,188 8,159 0 209,347

Land and BuildingsLeasehold Properties

Page 44




Tangible Fixed Assets

Freehold Land &Properties Long-Term Short-Term Buildings Total Equipment Vehicles Total

£000 £000 £000 £000 £000 £000 £000

(b) University

Cost or valuation:

Additions at cost 9,471 0 0 9,471 3,660 0 13,131Disposals/Demolitions 0 0 0 0 (30) (4) (34)

At 31 July 2010 203,978 4,285 46 208,309 16,717 292 225,318

Depreciation:

Depreciation for the year 7,046 66 9 7,121 1,908 0 9,029Disposals/Demolitions 0 0 0 0 (11) (4) (15)

At 31 July 2010 7,046 66 9 7,121 8,582 292 15,995

Net Book Value

At 31 July 2010 196,932 4,219 37 201,188 8,135 0 209,323

Land and BuildingsLeasehold Properties

Page 45




2010 2010£000 £000

Investments0 4,200 0 (280)0 3,920

0 0 37 37

1 1 50 50

88 4,008

Endowment assets2010 2010£000 £000

1,627 1,627 32 32

(31) (31)733 733

(784) (784)

1,577 1,577

8 8 1,266 1,266

140 140 163 163

1,577 1,577

Debtors2010 2010£000 £000

1,546 1,471

0 240 0 16

4,862 4,749

0 380 0 0

462 462

6,870 7,318

University

Consolidated University


Consolidated

Page 46




Creditors: Amounts falling due within one year

2010 2010£000 £000

840 840 1,197 1,193 6,418 6,418

0 3,802 0 11

3,831 3,830 7,660 7,530

19,946 23,624

Creditors: Amounts falling due after more thanone year

2010 2010£000 £000

840 840 3,247 3,247 8,618 8,618

12,705 12,705

300 300

0 0

13,005 13,005

Borrowings

Consolidated


University

Page 47




Deferred capital grantsFunding Other Grants &Council Benefactions Total

£000 £000 £000

6,346 4,161 10,507 1,087 0 1,087

7,433 4,161 11,594

(707) (33) (740)(1,896) 0 (1,896)

(2,603) (33) (2,636)

35,664 4,855 40,519 1,919 0 1,919

37,583 4,855 42,438

Endowments Consolidatedand University

£000

1,627 14

733 (676)(121)

(50)

1,577

1,416 161

1,577

Movement in Reserves

2010£000

112,067

(4,495)0

107,572

Consolidated and University


Page 48




Movement in Reserves (continued)

Income and Expenditure Reserve

2010 2010£000 £000

77,723 78,531

3,206 2,838 4,495 4,495 3,490 3,490

88,914 89,354

Total Reserves

110,320 111,128

3,206 2,838 0 0

13,340 13,340 126,866 127,306

88,914 89,354 (69,620) (69,620)107,572 107,572

126,866 127,306

Reconciliation of consolidated operating surplus to net cash inflow from operating activities

2010£000

3,206

9,140 5,602

(2,636)(439)

18 (26)

(1,990)2,511 (930)

14,456

2010£000

Returns on investments and servicing of finance

515 (1,210)

18

(677)

University Consolidated

Page 49



Notes to the Accounts2010£000

Capital expenditure and financial investment

(10,442)(30)

11,594 14

1,136

2010£000

Management of liquid resources

13,834

13,834

2010£000

Financing

(589)

(589)

Analysis of changes in net funds

Cash Other AtFlows changes At 31 July 2010£000 £000 £000

0 1,440 0 158

0 1,598

53,828

(840)(13,005)

0 41,581

Page 50




Pension and similar obligations

TPS

Page 51




Pension and similar obligations (continued)

31 July 2010

5.4%5.0%2.8%2.8%3.5%2.8%

8.2%4.2%3.5%7.7%1.4%6.7%

£00056,19224,985

6,1305,573

92,880

31 July 2010

52582715

22.3 24.724.3 26.5

31 July 2010£000

92,880

(153,440)

(9,060)

(69,620)

LGS

2010

Page 52




Pension and similar obligations (continued)

31 July 2010£000

(5,430)(350)

(5,780)

5,040 (9,460)

(4,420)

(10,200)

31 July 2010£000

(3,910)100

17,150

13,340

31 July 2010£000

(146,140)

(5,430)(8,890)(2,090)3,860 (350)

16,480 (10,880)

(153,440)

31 July 2010£000

(9,870)

(570)610 670 100

(9,060)

31 July 2010£000

76,540

5,040 6,100 2,090

(3,860)6,970

92,880

Page 53




Pension and similar obligations (continued)31 July 2010 31 July 2009

£000 £000

5,040 6,970

12,010

31 July 2010

6,9707.5%

31 July 2010

1,590 1.0%

31 July 2010

(4,780)-2.9%

31 July 2010

13,3408.2%

2010£000

5,744 5,780

131

11,655

Page 54




Capital commitments

2010 2010£000 £000

3,560 3,560 34,784 34,784

38,344 38,344

Financial Commitments

2010£000

Land and Buildings

1673,6063,773

Vehicles

109

109

Contingent Liability

Post Balance Sheet Events

Related Party Transactions


UniversityConsolidated

Page 55



Access and Hardship Funds2010£000

HEFCE Grants

114 453 270 837

1 (711)127

SFA Grants

0 116 116

0 (116)

0

Non funding council grants

321 0

717 1,038 (725)313

Training and Development Agency Grants

59 974 154

1,187 (1,234)

(47)

Page 56

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financial review 2009/10 - university of portsmouth - a … iles, chair of the board of governors...

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