University for the Creative Arts

Financial Statements

for the year ended 31 July 2018

University for the Creative Arts

Financial Statements for the year ended 31 July 2018 Contents Page Operating and Financial Review 2-16 Details of Board of Governors 17 Responsibilities and Corporate Governance Statement 18-22 Independent Auditor’s Report 23-24 Consolidated Statement of Comprehensive Income and Expenditure 25 Consolidated Statement of Financial Position 26 Consolidated Statement of Cashflow Statement 27 Consolidated Statement of Changes In Reserves 28 Statement of Principal Accounting Policies and Estimation Techniques 29-34 Notes to the Accounts 35-55

University for the Creative Arts Operating and Financial Review The University is a Higher Education Corporation (HEC) and an exempt charity under the terms of the Charities Act 2011. This review summarises the Board’s assessment of how we have delivered our charitable purposes for public benefit and of our overall performance in 2017/18. In preparing this review, the Board of Governors has had regard to the Charity Commission’s guidance on public benefit. The University’s Beneficiaries The University’s charitable objects, derived from the Education Reform Act 1988: Section 124, are the advancement of further and higher education (FE and HE) and research. Our students are the University’s primary beneficiaries. However, our beneficiaries also include employers and businesses within the creative industries sector and beyond; external researchers and members of the public who visit our galleries and the Crafts Study Centre, a specialist museum, charity and research centre on our Farnham campus; and school children, local communities and our alumni who attend educational events organised by the University and make use of its academic facilities. We do not believe that UCA carries out any activities that could harm its beneficiaries and we are not aware of views amongst others that such harm might arise. No serious incidents of material significance were reported in 2017/18. The University’s 10 Year Strategy Since the arrival of its Vice-Chancellor, Professor Bashir Makhoul, in June 2017, the University has sought to build on its activity over the previous five years, which saw it significantly raise its profile and reputation, to pursue a strategic direction that will ensure its resilience and financial stability, as well as enhancing still further its educational offer. The University is seeking to build on what it does best, with its focus being set on the broader needs of the creative industries, as exemplified by its creation of a Business School for the Creative Industries – the first of its kind in the UK. Pursuit of the two key objectives of recruitment and enhancement will enable the University to invest in its future development, whilst working in partnership with its students and other institutions to co-create the student experience, expansion overseas, and robust recruitment pipelines. Following the arrival of the new Vice-Chancellor, a review of the University’s Strategic Plan has taken place. This signals a change in the positioning of the University and identifies that it intends to be:

• Recognised as a global authority on creative arts, creative technologies and business for the creative industries.

We will:

• Grow our student numbers, increasing the profile and reputation of the University nationally and internationally and developing mutually beneficial partnerships, to deliver a sustainable financial position and more resilient organisation.

• Build upon what we do well, reviewing our portfolio and ensuring that the activities we undertake are effective, coherent and viable, both educationally and financially.

• Review the use of our resources, including the quality of our estate, to ensure our total offer is attractive to students and provides a meaningful educational experience.

Modern University of the Year In September 2018 UCA was named the Modern University of the Year in The Times and The Sunday Times Good University Guide 2019. In addition to receiving this accolade, the University achieved the following rankings in the Guide’s league table:

• Top creative specialist institution

• Top 10 for teaching quality

• Top 40 for social inclusion

• Joint top modern university

• Highest climber, up 25 places Open College of the Arts On 1 November 2016, the distance learning provider Open College of the Arts (OCA), became a wholly owned subsidiary of the University. OCA is a charitable trust established in 1987. In line with the University’s academic strategy, this new member of the group adds distance learning and online degrees at undergraduate and postgraduate level to UCA’s course portfolio and secures the University’s vision of opening up access to creative arts education at university level to everyone, wherever they are in the UK and beyond. UCA has validated all of OCA’s undergraduate and postgraduate qualifications since 2012. This relationship between two long-established creative arts providers means more choice and flexibility for students, providing opportunities for undertaking undergraduate or postgraduate courses to develop their career and/or improve their quality of life. OCA’s mission statement is “To be at the forefront of student-led creative arts education through innovative open, enhanced, & supported distance learning, for an evolving society.” OCA has an Academic Strategy and complimentary Digital Transformation Strategy which set the agenda for the organisation for the next three years and form an element within UCA’s ten year Strategic Plan. This year OCA has established a corporate annual plan which sets out the work that will be undertaken towards meeting these goals; key objectives include:

• Increasing offers and awards (including short courses, Level 3 foundational studies and wider undergraduate and post-graduate offers);

• New curriculum models and study intensity (providing options for full time equivalent study);

• A refreshed curriculum with new programmes;

• Support for widening access and increasing retention through the learner support team;

• Meaningful and memorable student experiences, through an enhanced online student environment and digital study support tools;

• Establishing an enterprise space to support entrepreneurship and career development;

• A marketing brief and plan to establish partnerships and increase visibility;

• Establishing a presence on UCAS;

• External income generation to support innovation in critical areas for OCA such as support for students with mental health issues;

• Introduction of Learning Design to improve course production;

• A focus on International development, in partnership with UCA. Students In 2017/18 the University saw a small overall decrease in student numbers. There was however growth in Overseas numbers as a result of increased investment and targeted strategic recruitment, especially in the Chinese market. Overseas numbers have now increased for the fifth year in succession, rising by over 70% since 2013/14. The Home/EU undergraduate (UG) market remains competitive and recruitment has slipped by 1.5%. Postgraduate (PG) numbers at Home/EU level have increased on last year and doubled in the last five years, but this remains a challenging market, with recruitment levels still relatively low. There was a decrease in recruitment at pre-degree/further education (FE) level continuing the downward trend over the last five years; this included a sharp decrease in Home/EU numbers, largely due to falling demographics.

In response to these trends, student recruitment and retention continued to be a priority throughout the year. The launch of the Business School for the Creative Industries has increased the breadth and diversity of the portfolio by introducing innovative business, management and marketing programmes at both UG and PG

levels. Further demand-orientated portfolio development has also increased the breadth of games design, communications and fashion design at PG level. A drive to increase FE recruitment has led to the introduction of several Extended Diploma programmes to meet increasing local demand at ages 16-19. We expect to see these initiatives bear fruit in the 2018/19 and 2019/20 recruitment cycles.

Student Numbers (FTE)

UCA

Category 2017/18* 2016/17 2015/16 2014/15 2013/14 Higher Education: Home/EU Undergraduate 3,959 4,020 3,981 3,936 4,397 Home/EU Postgraduate 125 114 72 83 64 Overseas Undergraduate 315 277 231 204 169 Overseas Postgraduate 111 108 88 94 80 Higher Education total 4,510 4,519 4,372 4,317 4,710 Further Education: Home/EU 954 1,002 1,104 1,117 1,118 Overseas 36 40 25 43 45 Further Education Total 990 1,042 1,129 1,160 1,163 Total Students 5,500 5,561 5,501 5,477 5,873

*Provisional figures, subject to Higher Educat ion Stat is t ics Agency ( HESA) student return (31 October 2018). Actual figures available in November 2018.

OCA**

Category 2017/18 Higher Education: Home/EU Undergraduate 427 Home/EU Postgraduate 4 Overseas Undergraduate 41 Overseas Postgraduate 2 Higher Education total 474 Total Students 474

**These figures include all distance learning students (excluding withdrawals) who were studying on a module at any point during the 2017/18 academic year. Some of these students will have completed a module during the year and not yet progressed onto a new module but remain within their registration period and so remain registered on the course of study.

Outreach UCA believes that a diverse community is an essential foundation of creativity. The University is committed to providing a range of long-term outreach activities targeted at groups that are under-represented in HE, working collaboratively to raise student attainment in creative areas, including art, design, technology, music and performing arts. The University’s policy and practice regarding Widening Participation (WP) in HE is guided by the National Strategy published in 2014 by the Department for Business, Innovation & Skills (BIS) which emphasised the role HE institutions should play in ensuring that “students from disadvantaged backgrounds can access higher education, get the support they need to succeed in their studies and progress to further study and/or employment suited to their qualifications and potential.” The University is fully committed to the Government’s policy to see “a society becoming less stratified by socio-economic class” and is proud of its record on WP. We continue to perform well against the published Higher Education Funding Council for England (HEFCE) benchmarks. In 2017/18, 96.5%* (2016/17: 96.2%) of our students came from state schools and 9.6%* (2016/17: 12.9%) were in receipt of Disabled Students’ Allowance.

As a member institution of collaborative networks such as Kent & Medway Progression Federation (KMPF), AccessHE and AccessHE Creative, UCA is able to deliver sustained and coordinated outreach activity in conjunction with other higher education institutions (HEIs) to a network of wide reaching and impartial partner schools. Partner schools have been carefully selected, based on their high proportions of students from under-represented groups – for example those in rural and coastal communities across Kent. These networks allow the Outreach team to participate in forums to share best practice, gather different perspectives from across the sector and amend the outreach programme appropriately. UCA is also a member of the Care Leavers Progression Partnership in Kent which is committed to improving post-16 experience for children in care and care leavers. We have offered a range of subject-specific workshops and taster days, and on-campus Easter and Summer School programmes. Our WP activities include National Art & Design Saturday Clubs on all four campuses, as well as a developed range of creative workshops delivered both in schools and on campus for all year groups, and an extended mature learners project. Our overarching ambition is to ensure an institution-wide commitment to eliminating equality gaps, being systematic in the ways that we do this to ensure the opportunities for students when they leave UCA are also equal. This commitment is aligned to the work of UCA’s Equality, Diversity & Inclusivity Committee and UCA will support the goals of other strategic stakeholders, such as Arts Council England, to align with the ‘Creative Case for Diversity’ to ensure that creative industries employers are also supporting the agenda for equality and that collectively we develop a more diverse sector. Additionally, UCA Students’ Union (UCASU) has identified sector practice at other students’ unions regarding children of asylum seekers and supporting their access to HE, and has stated that this is something that it wishes to support through its work in Medway. It has also recognised opportunities for a buddy scheme to be promoted and supported by the SU. Through a new Academic Engagement Programme, UCA is working to build new creative partnerships with schools and colleges to provide access to creative careers tools, resources, events and activities. UCA is a member of the United Kingdom Arts and Design Institutions Association (UKADIA) Widening Participation Group, a partnership of specialist institutions whose attention is focused on supporting specialist arts teachers to raise attainment in under-represented groups and deliver specialist continuing professional development (CPD) workshops and opportunities. UCA has a significant commitment to FE, with a population of just under 1,000 students (18% of UCA’s student population), providing 16-18 Extended and Foundation Diplomas in Art and Design. These provide an alternative route for students who find it difficult to access the more traditional A Level route or who may not have sufficient confidence or knowledge of the creative arts to determine their choice of HE study at 18 years old. Our cohort of 16-18 learners are mainly local to the campuses, providing an opportunity for those who want to stay at home throughout their studies to do so. These courses provide a vital and strong internal progression route to UCA’s HE provision. The Financial Assistance Fund (FAF) is funded by UCA to support Home UG and PG students who may be at risk of not completing their course due to financial hardship. Awards are generally given as grants but short-term loans are also available. Eligible students must have taken their full entitlement to any statutory funding and demonstrate a financial need. In 2017/18 the University paid £75k to eligible students. Following our merger with OCA in November 2016 the University’s part-time and distance-learning offer is now more accessible. OCA, as a provider of high-quality HE courses in partnership with the University, has an obligation to encourage attainment and to push the boundaries of WP to ensure that more students than ever before gain qualifications by operating an open access policy and allowing students to complete a UG degree at a pace more suited to demanding and varied domestic circumstances. The College population consists entirely of part-time distance-learning students with a forecast headcount of 1,600 enrolments for the 2018/19 academic year. * Provisional performance, subject to HESA student return (31 October 2018). Actual figures available in November 2018.

Student Experience Learning Environment The University’s Capital Investment Programme (CIP) is updated on a quarterly basis and reviewed by Governors to ensure that it aligns with the agreed estate and infrastructure developments, the academic strategy, and bank covenants. Major estate developments which have taken place during 2017/18 are as follows:

Epsom Campus: Development of the first phase of the new Business School for the Creative Industries - £1m

Farnham Campus: Construction of a new Film & Media Centre including conference facilities - £5.3m

Rochester Campus: Refurbishment of the Refectory and Canteen - £0.5m In addition to new build and refurbishment projects the University has updated its Planned Maintenance Programme for academic and student residences and work will commence on boiler replacements at Farnham and Rochester during the summer of 2018. Student residences at Rochester and Farnham will also continue with their refurbishment and modernisation programmes. In addition to the estates developments, the University continues to invest in its IT infrastructure and during 2017/18, a new data centre arrangement costing c£1.5m, was put in place to improve University resilience and business continuity arrangements. In addition, a new Human Resources and Payroll system was put in place at a cost of £200k to replace the existing 15-year-old system. Looking forward, the two main estates projects the University will be focussing on are:

Farnham Campus: the provision of 252 new student residences and the enclosure of the central courtyard for new student support, gallery and refectory facilities.

Epsom Campus: the second and main phase of the new Business School for the Creative Industries.

In addition, improvements to IT infrastructure at a cost of c£1m will be undertaken to replace Firewalls and improve IT security. Teaching and Learning UCA is a centre of excellence supporting the UK’s world-leading reputation across the full breadth of creative professions at its four campuses and through partnerships. UCA prepares students for employment in the creative industries through the provision of intensive, studio-based education supported by staff that are eminent in research and professional practice in their disciplines. UCA’s signature pedagogies are enshrined in its creative education strategy offering a distinctive balance of conceptual and critical thinking skills and highly accomplished professional, production and making skills. Creative practice is at the core of learning, teaching and assessment practice and the curriculum is designed to be holistic and inclusive, challenging and developmental. Courses recognise the diversity of students and their needs so are designed to be inclusive in their support for learning. To support teaching staff in their reflective practice, the newly formed Creative Education team will be launching a new Teaching Observation Scheme for FE and HE. The FE Teaching Observation Scheme is aligned to the Common Inspection Framework whilst the HE Teaching Observation Scheme will incorporate the UKPSF (UK Professional Standards Framework for teachers/supporters of learning in higher education). The team of educational developers now offer a range of enhancement support for quality teaching and are on hand to meet with course teams looking to address retention and achievement issues. To help dispersed teaching teams, the Creative Education team are developing a new Creative Education online resource organised around the Teaching Excellence and Student Outcomes Framework (TEF) categories (Teaching on my course, Assessment and feedback, Academic support, Continuation, Employment or Further Study, Highly skilled employment or further study). Each area will include case studies, webinars, videos and inclusive teaching materials designed to help busy teaching teams put strategies in place to address teaching and

learning issues. The team are currently working on the development of an online induction in learning, teaching and assessment for new teaching staff. Careers & Employability Careers & Employability deliver a range of inclusive services aimed to prepare students and recent graduates for professional success. Online learning tools, including myCareer within the myUCA virtual learning environment, provide access to a comprehensive range of resources including downloadable career factsheets, screencasts, and career videos. A designated career online web resource provides access to current professional job vacancies in the creative sector, advertised on behalf of creative industry employers. The service also utilises and supports social media networks, including a new UCA LinkedIn Alumni Network Group aimed to engage and support alumni and recent graduates in their professional development. One-to-one guidance is available through face to face bookable appointments or online through Skype. SPECTRA (standing for Skilled, Professional, Employable, Commercially Aware, Talented, Resilient, Adaptable), an innovative new extra-curricular programme of workshops, talks, speakers and events developed by Careers & Employability in collaboration with academics, alumni and employers, aims to provide inspiration and skills for graduate success delivered across all campuses. SPECTRA career workshops range from personal promotion, digital identity, freelancing, networking, teaching as a career and the wider opportunities for creative graduates. Themed weeks were celebrated during the year including Global Entrepreneurship Week and National Careers Week. These complimented an embedded programme of career workshops and initiatives delivered in collaboration with the academic courses, including a number of workshops supporting an “Emerging Artist Week” delivered at Canterbury, along with embedded sessions on personal and team development and networking across many courses. Successful and engaging employability events were hosted on campus, providing opportunities for students to gain insights into professional life, engage with prospective creative industry employers, and to meet and network with alumni. The highly successful ‘Fashion First’ career and recruitment fair 2018, delivered at Epsom for a fifth year in collaboration with the School of Fashion, attracted leading brand names including ASOS, Kurt Geiger and River Island, plus an alumni panel representing companies such as L’Oreal and Whistles. A ‘Design your Future’ event delivered at Canterbury in collaboration with Graphic Design included alumni speaker Mane Branco, a UX/UI Graphic Designer, a creative activity and CV advice sessions. ‘Projections’, an ambitious Film Career event delivered in collaboration with Film Production (Farnham), featured exhibitors and industry talks, including Itasca Films and Renegade Pictures, an alumni panel and CV and networking sessions. ‘Futurewards’, a Design Career event organised in collaboration with Graphic Design (Epsom), focussed on career and professional development, with industry speakers and a creative activity. ‘Master your Creativity’ Postgraduate and Professional Open Events were hosted on each campus during the last week in April to support progression from UG to PG, and raise awareness of the PG provision bursaries and fee discount incentives at UCA. The events were well-received including display, pop-up stands, talks, portfolio advice, presentations and a competition. Feedback gathered will be used to inform the style and approach for 2018/19. Internationalisation The University is in the process of implementing an Internationalisation Strategy. This is designed to enrich the on-campus and in-country (Trans National Education – TNE) experience for students and staff through greater staff and student mobility within our developing partner network, creating reciprocal, richer learning environments; and enhancing programmes through curriculum development adopting a global context. Several TNE agreements have been signed during 2017/18 for a 2018/19 start. These range from progression agreements, articulation agreements and franchise of foundation programmes which lead to subsequent progression to the UK, to franchise of UG and PG provision in-country. Further discussions are underway with a range of potential partners for a 2019/20 start. We have already developed relationships with over 75 potential partners in more than 15 different countries, including China, Cyprus, Hong Kong, India, Malaysia, Taiwan, and Iceland. Investment has been made into a new International Studies Department, responsible for international student recruitment, the development of international collaborative partnerships, and the delivery of foundation programmes to international students. Consideration is being given not only to recruitment, but to the

support required to ensure these students have a good experience, this includes through the creation of the new Academic Plan in support of the new University Strategy which reinforces the critical importance of successful internationalisation of the University’s activities and culture. The pattern of recruitment is spread across the University’s four campuses to ease requirement on space and accommodation. Attention is being given to English Language provision. Improvements have been made to the admissions processes including turnaround times. Additionally, visa changes are helpfully reducing bureaucratic requirements. The University believes that creativity is stimulated by cultural diversity and that this is a necessary phase of its intellectual development over the next 10 years. Professional Recognition and Accreditation The University has a portfolio of associations with professional, statutory and regulatory bodies. These include: Broadcast Journalism Training Council (BJTC), Creative Skillset, British Kinematograph Sound and Television Society, CILECT, the Higher Education Academy (HEA – see below), the Architects Registration Board (ARB) and the Royal Institute of British Architects (RIBA). 2017/18 saw successful annual monitoring for RIBA and the ARB. The BJTC visited to inspect the BA (Hons) Journalism and BA (Hons) Sports Journalism degrees and confirmed accreditation for the outgoing students during the run out of these courses. The University also re-accredited its CPD provision for teaching staff with Advance HE in June 2018. Teaching staff can now undergo more flexible taught and experiential routes to teaching qualification and professional recognition through our new Creative Education Professional Development Framework. As part of the scheme, we have introduced a professional dialogue, to replace the previous portfolio submission. Since 2016, the University professional recognition scheme has supported over 130 teaching staff to gain teaching qualifications and/or professional recognition. Student Retention Retention is not calculated in totality until the end of the following academic year as it includes those students who fail to return to the next academic year (due to variable start dates depending on the amount of study required). Therefore, in the Annual Academic Monitoring (AAM) process retention is considered on the basis of two categories of attrition only: in-year withdrawal and academic failure. The number of academic failures are minimal at UG level, whilst the number of non-returners is significant, and therefore in this document the full data sets across all categories for the preceding year are considered (in this case 2016/17). The University has improved retention across all levels:

• FE – 90.7% up from 88.9% in 2015/16

• UG – 84.8% up from 83.7% in 2015/16

• PG – 91% up from 90.3% in 2015/16 The University uses the AAM of courses and the production of the University Quality Report to examine the student life-cycle and track the performance of students across groups with protected characteristics. In the last cycle, this analysis stimulated revisions to the terms of reference for our quality committees and identified actions for 2017-20 to support retention, achievement and employability of students. The Quality Report also stimulated a strategic review of employability in 2017, recognising the need to review employability approaches in the curriculum and within professional services to support stronger outcomes for students and address equality gaps. Further initiatives emanating from the Quality Report include a review of the University Credit Scheme to ensure assessment practice does not over penalise very small elements of failure when the learning outcomes for an early stage of learning have been met. The University uses Quality Monitoring as a proactive means of changing practice across the University to support progression and success for all. On-course support for learners is at the heart of our retention strategy in two essential ways: through academic course teams, and through Gateway Services (the physical and on-line services that support students). The academic teams have responsibility for academic and pastoral support of students. In creative arts education these often combine to provide the underpinning of highly individualised creative practice. Recently

the approach to providing tutorial provision was reviewed giving particular emphasis to ‘Induction Tutoring’ to ensure there is a higher level of tutorial support in the early phases of level 4. Providing sufficient on-course support, particularly pastoral support for learners with complex needs is one of the greatest challenges facing our academic communities. Non-continuation of students continues to be a major factor in retention: 25% (87) of all attrition at first degree level in 2016/17 was due to students not returning to studies in 2017/18. The factors contributing to this figure were explored in 2017/18 by the Student Success Committee and a substantial piece of work on interruption and its impact on attrition is underway. Gateway Services act as the first point of contact for UCA students and staff seeking to access the integrated services and support delivered by Library & Student Services, covering Advice & Student Finance, Counselling Services, Careers & Employability, Disability & SpLD and Learning Services. The Gateway campus teams specialise in answering enquiries and providing support both in person and online. They respond to a wide range of questions and will triage queries and signpost enquirers to other UCA staff and services and/or to external organisations who can provide appropriate support. Teaching Qualifications and CPD The University continued its strong trajectory of professional recognition for teaching with qualification successes this year including 35 UCA staff achieving Fellowship of the HEA (including Senior Fellowships). Of the 35 HEA fellowships awarded, 12 of these came through the PG Cert and MA Creative Education credit-bearing qualification, and 23 applications were made through the non credit-bearing professional recognition scheme. These results are a positive contribution to achieving the target of 60% of the teaching staff holding teaching qualifications. More significantly, staff successes in these areas are enabling the development of more reflective cultures of teaching and learning across campuses, disciplines and professional boundaries. A full programme of CPD opportunities around teacher development was offered to UCA staff from 2017-18. These were promoted via UCA Workplace and via the Creative Education wordpress site https://creativeeducationnetwork.com/. They included a programme of activities to support staff interested in applying for HEA Fellowship and various workshops and webinars on aspects of student engagement and inclusivity. In addition, bespoke enhancement activities were offered to various academic teams, often focused around course quality process recommendations. These included topics like BAME attainment, creative teaching, inclusive practice and assessment and feedback. The Head of Teaching, Learning & Student Engagement also facilitated student engagement activities around Value for Money and developing the university strategy. More recently, a successful Course Leader Development event around BAME attainment and a collaborative learning and teaching day for UCA and OCA colleagues were held. Student Outcomes The graduating students of 2017/18 are the most academically successful cohort yet to have graduated from the University for the Creative Arts*. 75.3% of undergraduate students graduated with a first or upper second class degree, an increase of 0.9 percentage points on the achievement of the previous year. This success was mirrored by an increase in the number of 2016/17 graduates that were found by the annual Destinations of Leavers from Higher Education (DLHE) survey to be in employment or further study six months following graduation. 96.9% of full-time, first degree UCA graduates were found to be employed, 2.3 percentage points above the 2015/16 graduates. This raised the University’s position to the top specialist creative university for employment of graduates and contributed to The Times and The Sunday Times Good University Guide award for ‘Modern University of the Year 2019’ in September 2018. The University also saw a significant increase in the number of 2016/17 graduates in graduate level employment six months after graduation: 74%, up 9 percentage points from the 2015/16 graduates. This followed a significant University wide project in 2016/17 and 2017/18 to review employability at UCA. * Provisional results, subject to HESA student return (31 October 2017). Actual figures available in November 2018. Student Satisfaction As a specialist creative arts institution, in competition with other specialists nationally and strong multi-disciplinary universities regionally, UCA must provide its students with an outstanding experience, sustained

industry engagement and excellent studio and workshop facilities, all supported by experienced technical and academic staff who need to be resourceful teachers and creative researcher practitioners. This model of provision is replicated in differing forms across the four campuses at Canterbury, Epsom, Farnham and Rochester in order to ensure an appropriate and equitable experience for students. The success of the provision has been demonstrated by the results of the TEF. In granting a ‘Silver’ award to UCA, the panel noted that ‘metrics indicate very high levels of student satisfaction with academic support and outstanding levels of satisfaction with teaching, assessment and feedback from a diverse body of students, notably exceeding the provider’s benchmarks.’ This performance is echoed in the ranking of the University as 10th of all UK institutions for teaching quality in the 2019 Times/Sunday Times Good University Guide league table, which contributed to the award of ‘Modern University of the Year 2019’.

Student satisfaction, as evidenced in the annual satisfaction surveys, increased across virtually all levels in 2017/18:

- FE courses had an overall increase in satisfaction to 87%, from 84% in 2016/17 - UG (comparative to 2016/17):

o Year 0 decreased by two percentage points from 91% to 89% o Year 1 increased by one percentage point to 87% o Year 2 increased by two percentage points to 82%

- PG increased by one percentage point to 89%, from 88% in 2016/17. However, most importantly, the National Student Survey (NSS) of Year 3 (as a measure of the overall

satisfaction of our UG student body with the quality of their time at UCA, enabling direct sector comparisons)

increased from 79% to 83% with an 88% response rate. This was a significant improvement on 2016/17, and

although not achieving the level achieved in 2015/16 (85%) or the University’s target of 86%, it was in line

with the sector average (83%), with above sector performance in teaching and assessment. A significant

number of UCA undergraduate courses received 95% overall satisfaction or above, and those areas not

reaching the University’s target have course-specific targeted action plans to improve student engagement

and satisfaction.

Research The organisational context to Research support and direction in the University changed considerably in 2017/18. In January 2018 the Leadership Team gave its support for a new structure, creating a new department of Research and Education under a permanent full-time Director of Research and Education who commenced employment on 1 August 2018 and oversees three teams: an Education team, a Research team and a Galleries team. During 2017/18 the Research Office has continued to deliver its core functions, directed to the support and leadership of staff research and research degrees. Preparations for the Research Excellence Framework (REF) 2021 have been continued and intensified during the year, with 70% of academic staff participating in the Mock REF (December 2017 / January 2018), and outputs and impact reviewed by external assessors from Kingston and Ulster Universities. The new research degrees partnership was successfully implemented during 2017/18, and, as planned from the start of the partnership, preparations have been commenced by the Research Office for UCA’s own application for Research Degree Awarding Powers. The embedding of research as an activity primarily located in a school context has seen growing confidence emerging in school-based research, and the Research Office has supported events led by heads of schools and their professors and readers. A number of new readership appointments have been made: a second reader for the School of Communication Design; a new reader in the School of Fashion; and a reader in the School of Film, Media and Performing Arts (the first reader or professor in this school). A University research day in May brought together members of the Leadership Team, research office, heads of schools and professors and readers for a day of strategic planning. This was focused on REF and the new structure of research funding in the UK, with a presentation from David Sweeney, the newly-appointed Executive Chair of Research England.

Funding and Staff Research Achievements The table below indicates the total amount of external funding awarded in 2017/18. There is a decrease from the previous year (which was boosted by a National Collaborative Outreach Programme (NCOP) award in support of outreach activity) but there is a significant upward trend from 2015/16.

2017/18 2016/17 2015/16 2014/15 2013/14

Total amount awarded* £305,677 £775,010** £111,062 £500,500 £143,157

Number of bids 38 11 14 16 10

Number of successful bids

26 4 1 5 3

Number of unsuccessful bids

4 6 10 7 3

Number of bids outcome pending

8 1 3 4 4

* This figure reflects the total amount received during each financial year. A number of grants were awarded for projects which span more than one financial year ** Please note that funding from the NCOP is included in this total (£775,010). Not included in the above table is UCA’s successful participation in a bid led by Royal Holloway, University of London to the Arts and Humanities Research Council’s (AHRC’s) Creative Industries Clusters programme, announced at the end of summer 2018 but with funding due to come on stream in 2018/19. UCA will derive £661,419 from this source over three years, contributing a match of £166,559 (20%) in staff time and resources. The project, known as StoryFutures, is one of just nine bids to receive funding from the AHRC programme, and will bring together universities and world leading creative and technology companies with the region’s small and medium-sized enterprises (SMEs). The project will tackle the challenge of next-generation storytelling: how the creative sector will harness technologies including augmented, virtual, mixed and cross Reality (AR, VR, MR, XR), smart devices, and artificial intelligence to engage audiences in new experiences. Other staff research highlights during the year include: Professor Lesley Millar MBE developed her very successful contemporary tapestry exhibition (previously exhibited at the National Centre for Craft and Design in Lincolnshire and the Holbourne Museum in Bath) for the William Morris Gallery in London, under the title Weaving New Worlds. Professor Simon Olding co-curated the exhibition Things of Beauty Growing: British Studio Pottery, which opened at the Yale Center for British Art in the USA and then moved to the Fitzwilliam Museum in Cambridge. Professor Olding also co-authored the accompanying book, a major scholarly work on this subject. The exhibition included work by the University’s new Chancellor – alumna and Emerita Professor Magdalene Odundo OBE – who was installed in June 2018, succeeding Dame Zandra Rhodes DBE RDI who became Chancellor Emerita. Professor Martin Charter published Designing for the Circular Economy, an edited collection drawing together the latest thinking in design for sustainability. Camille Baker received EU funding for her project STARTS Eco-System, a follow up to WEAR, which was also Europe-funded. She also published her book New Directions in Mobile Media and Performance. Professor Anna Fox continued the Leverhulme-funded Fast Forward: Women in Photography project with workshops in Helsinki, New Delhi and New York. Professor Fox and Professor Karen Knorr received British Council funding for a two-woman show, Another Way of Telling, at the Shanghai Centre of Photography. Professor Jean Wainwright curated a major group exhibition, Powerful Tides, bringing together the work of major artists, dead and living, around the theme of the sea, as part of the celebrations for Chatham Dockyard’s 400-year anniversary. Steffi Klenz’s images of the glowing refracted glass from lighthouse lamps were featured in the exhibition. Phil Gomm’s animated film visualisation of Benjamin Britten’s Young Person’s Guide to the Orchestra was screened with live accompaniment by orchestras at events in France, Germany, Poland, Bulgaria, Slovenia

and Slovakia, as part of the European-funded ONE (Orchestra Network for Europe) project. The film has scored successes at film festivals including Le Petit Cannes. The above researchers all received support from the University’s Research Fund, as well as drawing in external funding from a variety of funding bodies in the UK and Europe. Human Resources (HR) Supporting Strategy The HR department continues to work with key stakeholders to support the achievement of UCA’s strategic plan, with a focus placed on:

• Improving the skills of managers;

• Ensuring employees feel valued and fairly treated;

• Informed employees who can contribute to decisions and are listened to;

• Enhancing the performance and experience of staff. Lead and Manage Change New strategies and objectives have inevitably required change in the way teams and individuals work, and in the frameworks and structure in which they operate. With the implementation of an integrated HR and Payroll system, much work has been undertaken to review process and procedures, creating capacity through maximising technology and developing capability through upskilling and reskilling managers. We continually engage with staff across the University at all levels through surveys, Workplace and other engagement mechanisms. This valuable information both informs development and drives change within the University. The recent emerging staff survey action plan focuses on three key areas – Effective Performance Management, Culture and Values, and Dignity and Respect – and is endorsed by the Vice-Chancellor and championed by members of the Leadership Team. Reward and Recognition Against a background of funding constraints and public sector pay restraint we awarded an across-the-board pay increase effective from 01 August 2018 of 2.0%, with 2.76% on the lowest point and consequent extra loading for the first 15 spine points. This was in addition to the incremental payments of circa 3% that approximately one-half of UCA staff received. The University also confirmed its on-going commitment to the payment of the Living Wage. Reflect and embed learning We continue to place great emphasis on the development of our staff, equipping all staff with the capacity and capability to respond with agility to the constantly changing environment. The culture of self-directed learning continues to gain momentum, supported by an increasing demand for bespoke programmes that tailor a range of development opportunities to roles and individual staff. HR works closely with the Leadership Team to ensure all development relates directly to University objectives. Equality and Diversity The University has continued to promote equality and diversity during 2017/18 including our on-going commitment to Disabled Go, Stonewall (LGBT) and trans inclusion. Following the statutory publication of the Gender Pay Gap data, the University is working to reduce the identified median pay gap of 8.4% and address gender pay disparity. Continued emphasis is being placed on supporting mental health, enhancing resilience and inclusive practice through the enhancement of the Mental Health First Aider training programmes.

Financial Review Summary Financial Statements to 31 July 2018 The Financial Statements for the year ended 31 July 2018 have been prepared to comply with the Statement of Recommended Practice (2015 SORP) “Accounting for Further and Higher Education”. Presentation of the primary Financial Statements for the year to 31 July 2018 is summarised as follows:

2018 2017

£’000 £’000

Extracts from Consolidated Statement of Comprehensive Income

Total income 62,415 61,429

Total expenditure + (62,888) (61,027)

(Deficit)/Surplus for the year (473) 402

(Deficit)/Surplus for the year as a % of total income -0.76% 0.65%

Extracts from Consolidated Statement of Financial Position

Net current assets 6,167 4,835

Pension provision (25,809) (32,104)

Total net assets 45,666 36,718

Extracts from Consolidated Statement of Cashflow

Net cash flow from operating activities 5,890 6,068

Increase in cash and cash equivalents 2,463 1,044

+ including restructuring costs of £464k (2017: £86k). Total income has increased by £986k, an increase of 1.6%. Tuition fee income has increased by £855k, which includes £1.6m of tuition fee income from OCA, a subsidiary acquired on 1 November 2016 (see note 27). The increase in tuition fee income is attributed to HE/PG Overseas students. Total expenditure increased by £1.9m, an increase of 3.0%. The increase in expenditure is predominantly in staff costs (up by £2.2m), partly reflecting the annual pay award of 1.7% and incremental pay. OCA staff costs have increased by £0.3m (70%) mainly due to move of Tutor payments onto the Payroll from operating expenses. FRS 102 defined benefit pension accounting adjustments (non cash) account for ‘current service costs’ of £2.4m and a decrease in interest costs of £0.1m during the year. A small deficit of £473k, after accounting for the FRS 102 pension adjustments above, was achieved through tight cost control, supported by Value for Money initiatives. These disciplines will continue to be important for the years ahead.

Financial Strategy The Financial Strategy has continued to aim for a resilient financial position that supports the University’s core activities and which assists strategic development. The strategy focuses on increasing income and maximising efficiency to achieve and exceed a net cash inflow from operating activities of 8.0% in future years. The Strategy targets annual capital investment of at least 2.5% of the Reinstatement Value of the estate.

Key Performance Indicators (KPIs) A number of financial and non-financial KPIs have been identified by the Board of Governors and are reported to it on a quarterly basis. These include the ratios that were recommended by HEFCE and by the Committee of University Chairs. Within the year covered by the above extracts, the values for the financial KPIs are shown below. The Board pays particular attention to cash-related Performance Indicators (highlighted in the table below), where comparisons can be drawn across the sector. 2018 2017 Liquidity days 95 83

% %

Current assets as a percentage of current liabilities (‘current ratio’)

155 148

External borrowing as a percentage of total income (‘gearing’)

8.8 2.4

Surplus for the year as a percentage of total income -0.76 0.65

Total net assets as a percentage of total income 73.2 59.8

Staff costs as a percentage of total income (excluding restructuring costs of £464k, 2017: £86k)

58.7 56.7

Cash generated during the year £5,890k £6,068k

Pension Costs and Liabilities Annually, the University considers and agrees the assumptions used by the Actuaries to calculate the University's pension costs and liabilities in accordance with the requirements of Financial Reporting Standard 102 (FRS 102) and these are reported in Note 23 of these Financial Statements. The Actuaries have calculated the University's long term pension liabilities in the context of FRS 102 at 31 July 2018 as £25,182k (2017: £31,418k); the decrease is primarily a result of actuarial gains in both the Surrey and Kent Local Government Pension Schemes. Managing Risks and Uncertainty The funding environment in the last five years has become more uncertain for all universities. The changes in the HE funding regime that took place in 2012/13, when relatively predictable levels of government-funded grants were replaced by student tuition fees, have had an effect on patterns of student recruitment across the HE sector. At the same time, the removal of the student numbers cap and the fall in the number of young people in the UK has intensified the competition between universities. In the short to medium term, the risk continues that public capital funding of higher education could be constrained if the overall economic climate does not improve; and that the tuition fees charged to students may be affected by the review of post 18 education and funding. The referendum decision in June 2016 for the UK to exit the European Union has not yet affected our activities, but the medium to long term impact remains unknown. The biggest risk for the University emanating from these changes and uncertainties is the reduction, over time, in the University’s Home/EU student population leading to more volatile fee income. For UCA, where some 18% of students are on FE courses, the impact of these changes has been compounded by recent

adjustments to the Education & Skills Funding Agency (ESFA) methodology and the material reduction in the ESFA grant. The University is dependent on its capacity to generate sufficient surpluses on teaching and other income streams to invest adequately in infrastructure, to enhance teaching and research and to address previous under-investment. The University continues to manage risk pro-actively, shaping strategy and policy in anticipation of and response to the external environment. The University’s Risk Register is maintained by the Strategic Risk Management Group reporting to the Leadership Team and reviewed by the Audit & Risk Committee through an on-going process of risk analysis, in line with the University’s Risk Management Policy. To address our primary risks the University has diversified its target markets by increasing numbers of post-graduate and overseas students and expanding its portfolio to encompass business studies subjects. The University opened its Business School for the Creative Industries in 2017, the first of its kind in the UK. Alongside this, we have embarked on an extensive partnership programme with colleges throughout the country to secure the pipe-line of home undergraduates. This approach is complemented by the extension of market reach through joint development of distance, blended and on-line learning techniques with our subsidiary OCA targeting both UK and international recruitment.

By 2022/23, overseas students are forecast to amount to 23% of the total student FTE population and 30% of total income. The institutional strategy is to secure those proportions by the extension of collaborative arrangements with overseas’ institutions and the development of transnational education programmes. Advancing the international agenda is a top priority for the University. Maintaining a focus on quality is equally important. The University is intent on improving all quality metrics, including those in the TEF. Improving DLHE results, particularly graduate employability, is a key objective and the University is pleased with the recent improvements to both this and student satisfaction in 2017/18. Continuing investment in infrastructure is vital to the University in ensuring attractiveness to domestic and overseas students and thus long-term sustainability in an increasingly competitive market. The University’s Capital Investment Programme will result in its drawing down of the £12m term loan facility available from its bankers by 2018/19, with repayments starting in 2019/20. The full borrowing facility of £22m falls within bank covenants and is not considered to be a significant institutional risk. The University is exploring alternative sources of funding capital projects in addition to public funding and bank facilities Conclusion The Board of Governors is content with the financial outturn and satisfied that although the University has realised a modest deficit, it has nonetheless improved on its financial plan. On the basis of this outturn, the Board has approved a plan to return to surplus in 2019/20 which aligns with the academic strategy and combines overseas student recruitment activity and TNE developments with further operating efficiencies. The University’s medium term financial forecasts show an increasing level of operating surplus. The Board of Governors is particularly pleased with the academic and student achievements throughout the year that have culminated in the Sunday Times naming UCA as Modern University of the Year 2019. Once again, the Board wishes to express its thanks for the dedication and hard work of all staff, without whom these successes could not have been achieved. Pauline Waterhouse OBE Deputy Chair of the Board of Governors 27 November 2018 University for the Creative Arts Falkner Road Farnham Surrey GU9 7DS

Board of Governors Independent Patrick Bradley Emma Buckby Appointed 1 August 2018 Marie Conte-Helm OBE Mark Eastwood Jim Gollan Retired 31 July 2018 Johnny Luk Appointed 1 August 2018 Alan Newton John Oliver Andrew Ramsay Sarah Reardon Appointed 1 August 2018 Harry Rich Retired 31 July 2018 Robert Taylor (Chair) Colin Tweedy OBE Retired 31 July 2018 Pauline Waterhouse OBE (Deputy Chair) Co-opted Lesley Adams (Staff) Appointed 1 August 2017 Patricia Ambrose Professor Lesley Millar MBE (Staff) Retired 31 July 2018 Victoria Pomery OBE Retired 31 July 2018 Christopher Rachlin Freda Sack Resigned 6 June 2018 Tim Savage (Staff) Appointed 1 August 2018 Jane Wentworth Resigned 31 December 2017 Vice-Chancellor Professor Bashir Makhoul Academic Board Nominee Colin Holden Student Governors Riley Clowes Appointed 1 February 2018; Retired 30 June 2018 Annie Durwood Appointed 1 July 2018 Tomm Morton Resigned 31 January 2018 Marta Szurmiej Appointed 1 July 2018 Simone Ziel Resigned 30 June 2018 Bankers Barclays Bank plc, 28th Floor, 1 Churchill Place, Canary Wharf, London, E14 5HP Auditors Internal Auditors: BDO LLP, 55 Baker Street, London, W1U 7EU External Auditors: KPMG LLP, 15 Canada Square, Canary Wharf, London, E14 5GL

Professional Advisors – Solicitors:

Eversheds Sutherland LLP, One Wood Street, London, EC2V 7WS

Responsibilities and Corporate Governance Statement Responsibilities of the Board of Governors In accordance with the Education Reform Act 1988, the Governing Body of the University for the Creative Arts Higher Education Corporation is responsible for the administration and management of the affairs of the University. These responsibilities are set out fully in the Articles of Government and are summarised in the Statement of Primary Responsibilities as:

• To approve the mission and strategic vision of the institution, long-term academic and business plans and key performance indicators, and to ensure that these meet the interests of stakeholders.

• To delegate authority to the Vice-Chancellor for the academic, corporate, financial, estate and human resource management of the institution, and to establish and keep under regular review the policies, procedures and limits within such management functions as shall be undertaken by and under the authority of the Vice-Chancellor.

• To ensure the establishment and monitoring of systems of control and accountability, including financial and operational controls and risk assessment, and procedures of handling internal grievances and for managing conflicts of interest.

• To ensure processes are in place to monitor and evaluate the performance and effectiveness of the institution against the plans and approved key performance indicators, which should be, where possible and appropriate, benchmarked against other comparable institutions.

• To establish processes to monitor and evaluate the performance and effectiveness of the governing body itself.

• To conduct its business in accordance with best practice in higher education corporate governance and with the principles of public life drawn up by the committee on Standards in Public Life.

• To safeguard the good name and values of the institution.

• To appoint the Vice-Chancellor and Deputy Vice-Chancellors and to put in place suitable arrangements for monitoring their performance.

• To appoint a Clerk to the governing body and to put in place suitable arrangements for monitoring his/her performance and to ensure that, if the person appointed has managerial responsibilities in the institution, there is an appropriate separation of the lines of accountability.

• To be the employing authority for all staff in the institution and to be responsible for establishing a human resources strategy.

• To be the principal financial and business authority of the institution, to ensure that proper books of account are kept and to approve the annual budget and financial statements.

• To have overall responsibility for the institution’s assets, property and estate and be responsible for establishing an estate strategy.

• To be the institution’s legal authority and, as such, to ensure that systems are in place for meeting all the institution’s legal obligations, including those arising from contracts and other legal commitments made in the institution’s name.

• To make such provision as it thinks fit for the general welfare of students, in consultation with the Academic Board.

• To act as trustee for any property, legacy, endowment, bequest or gift in support of the work and welfare of the institution.

• To ensure that the institution’s constitution is followed at all times and the appropriate advice is available to enable this to happen.

The Governing Body is required to present audited financial statements for each financial year and 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 Charter of Incorporation, the Statement of Recommended Practice (SORP 2015) “Accounting for Further and Higher Education” and other relevant Accounting Standards. In addition, within the Office for Students (OfS)’ Terms and Conditions of Funding for Higher Education Institutions, the University is required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the University and of the surplus or deficit and cash flows for that year. When preparing the financial statements, the Board of Governors ensures 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 departure disclosed and explained in the financial statements;

• financial statements are prepared on the going concern basis unless it is inappropriate to presume that the University will continue in operation. The Board of Governors is satisfied that the University has adequate resources to continue in operation for the foreseeable future: for this reason the going concern basis continues to be adopted in the preparation of the financial statements.

The Board of Governors has taken reasonable steps to:

• ensure that funds from the Higher Education Funding Council for England (HEFCE), the OfS, Research England and the Education and Skills Funding Agency (ESFA) are used only for the purposes for which they have been given and in accordance with the Memorandum of Assurance and Accountability with HEFCE, the OfS’ Terms and Conditions of Funding for Higher Education Institutions, the Terns and Conditions of Research England Grant, the Funding Agreements with the ESFA, and any other conditions which these funding bodies may from time to time prescribe;

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

• safeguard the assets of the University and the prevention and detection of fraud, bribery and other irregularities;

• secure the economical, efficient and effective management of the University’s resources and expenditure.

Corporate Governance Principles and ethos of the University The University endeavours to conduct its business in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership), and with the guidance to institutions of higher education which has been provided by the Committee of University Chairs (CUC) in its Higher Education Code of Governance, published in December 2014 and revised in June 2018. A Register of Interests of governors and senior managers is regularly maintained.

Constitution and structural organisation The University is an independent corporation, established as a Higher Education Corporation under the terms of the Education Reform Act 1988 and the Further and Higher Education Act 1992. It is also an exempt charity under the Charities Act 2011. The University’s objects, powers and framework of governance are set out in the Articles of Government which were approved by the Board of Governors of the predecessor institution on 8 November 1995. Amendments to the Articles were approved by the Privy Council on 22 July 2005, on 26 July 2006, on 13 May 2008, on 16 August 2012 and on 8 August 2014. The University’s Board of Governors comprises 22 members appointed under the Instrument and Articles of Government of the University, the majority of whom are non-executive. The Board conducted a review of its effectiveness in 2016/17 in accordance with the Effectiveness Framework approved in October 2006. It concluded that the outcomes of the review provide appropriate confidence that the Board’s responsibilities are being appropriately fulfilled. The matters specifically reserved to the Board for decision are set out in the Articles of Government of the University. The Board holds to itself the responsibilities for the on-going strategic direction of the University, approval of annual estimates of income and expenditure, ensuring the solvency of the University and the safeguarding of its assets. The Clerk is appointed under the Articles of Government to act as Secretary to the Board and its committees. The Board of Governors normally meets four times a year and conducts its business through four committees: Audit & Risk, Employment & Finance, Remuneration and Nominations. Each of these Committees is formally constituted with terms of reference and comprises mainly lay members of the Board. The Chairman of the Board is a member of the Remuneration and Nominations Committees. The Audit & Risk Committee meets at least four times a year and comprises of lay members of the Board and a co-opted member, none of whom serves on the Employment & Finance Committee. The University’s internal and external auditors are in attendance and, although Senior Officers of the University also attend committee meetings, the members meet the auditors without the officers present immediately before each committee meeting. The Committee considers detailed reports from the auditors, which include recommendations for the improvement of the University’s systems of internal control, together with management responses and implementation plans. It also receives and considers guidance from HEFCE/OfS through the Audit Code of Practice as it affects the University’s business and monitors adherence to the regulatory framework. Amongst its responsibilities it keeps under review the effectiveness of the risk management arrangements and provides an opinion on the adequacy of the management and quality assurance of data submitted to the Higher Education Statistics Agency (HESA), the Student Loans Company, HEFCE, the OfS, Research England and other bodies.. The Committee scrutinises the annual statement of compliance for the Research Concordat and receives an annual report on donations made to the University, as well as considering the annual report for the Prevent Duty and the annual Modern Slavery and Human Trafficking Statement in draft before recommending their approval to the Board. The Internal and External Auditors have direct access to the Chair of the Board of Governors, the Chair of the Audit & Risk Committee and the Vice-Chancellor at any time. The Employment & Finance Committee meets at least four times a year. It reviews, on behalf of the Board, the annual revenue, capital and cash flow budgets and monitors performance in relation to the approved budgets through the management and annual accounts. As per expectations set out in the CUC’s HE Code of Governance, the Committee advises the Board of Governors on reputational or financial implications of proposed partnerships or collaborations. It considers and approves the University’s Equality & Diversity action plan in addition to monitoring its progress. The Committee advises the Board on the remuneration and terms and conditions of all staff, with the exception of the holders of senior posts, as defined in the Articles of Government. The Remuneration Committee determines the remuneration of the holders of senior posts and monitors their performance. In 2017/18 these were the Vice-Chancellor, Deputy Vice-Chancellors, University Secretary and Clerk to the Board of Governors.

The Nominations Committee considers nominations for all vacancies for members of the Board of Governors under the appropriate Articles of Government and has responsibility for seeking and considering nominations for the University’s Chancellor and recommending an appointment to the Board of Governors. In line with expectations of the CUC’s HE Code of Governance, the University has made explicit its commitment to Equality and Diversity in its recruitment practices and literature, in order to appoint governors who will represent its diverse student population. The Board of Governors has ensured that a properly constituted Board of Trustees exists for OCA, the University’s wholly-owned subsidiary. UCA’s Board of Governors is responsible for approving OCA’s strategic direction, and its Employment & Finance Committee receives financial reports in respect of the College. Reports on OCA risks are received by its Board of Trustees. Internal control The Board of Governors has responsibility for maintaining a sound system of internal control that supports the achievement of policies, aims and objectives, while safeguarding the public and other funds and assets for which it is responsible, in accordance with the responsibilities assigned to the governing body in the Instrument and Articles of Government and the OfS’ Terms and Conditions of Funding for Higher Education Institutions, and the Terms and conditions of Research England Grant. This system is based on an on-going process designed to identify the principal risks to the achievement of the University’s aims and objectives; to evaluate the likelihood and impact of those risks; and to manage them efficiently, effectively and economically. This process has been in place for the year ended 31 July 2018 and up to the date of approval of the financial statements and accords with OfS guidance. The key elements of the University's systems of risk management and internal control, which are designed to discharge the responsibilities set out above, include the following:

• oversight of risk management by the Leadership Team;

• the integration of risk management into the annual planning cycle of the University covering all business, operational, financial and compliance risks. This process is informed by detailed annual income, expenditure, capital and cash flow budgets;

• the maintenance of an institutional Risk Register which is updated annually in accordance with the Strategic Plan and assessed on a quarterly basis. The Register includes an evaluation of the likelihood and impact of risks, and identifies mitigation measures;

• a Risk Management Group, reporting to the Leadership Team, that keeps the Risk Register under review, adding new risks where necessary and monitoring the status of current risks against progress with the action plans;

• clear definitions of the responsibilities and delegated authority of heads of academic and administrative departments including responsibility for identifying and managing operational risks at a departmental level and escalating significant risk to the Risk Management Group;

• regular reviews of key performance indicators and quarterly reviews of financial results involving variance reporting and updates of forecast out-turns;

• clearly defined and formalised requirements for approval and control of expenditure, with investment decisions involving capital or revenue expenditure being subject to formal detailed appraisal and review according to approval levels set by the Board of Governors;

• comprehensive financial regulations, detailing financial controls and procedures, recommended to the Board of Governors by the Audit & Risk Committee in consultation with the Employment & Finance Committee.

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 Board of Governors has responsibility for reviewing the effectiveness of the systems of risk management and internal control. The following processes have been established:

• the Board meets at regular intervals to consider the plans and strategic direction of the University;

• the Audit & Risk Committee, through its consideration of the Risk Register at each meeting, provides oversight of the risk management process and requires regular reports from the University’s management on the steps being taken to manage risks, including progress reports on key risks, systems for identifying significant risks facing the University, identifying actions required to minimise risk and regularly evaluating risks, using key risk and performance indicators;

• a professional Internal Audit team, whose annual programme is risk-based and approved by the Audit & Risk Committee, reports regularly to Audit & Risk Committee on specific areas of internal control, which include an independent opinion on the adequacy of the effectiveness of the University’s systems of internal control together with recommendations for improvement;

• management makes regular reports and presentations to the Audit & Risk Committee on internal control and risk mitigation actions;

• the Chair of the Audit & Risk Committee reports to the Board at each meeting on the status of the Risk Register and the findings of the Internal Audit Team.

The Governing Body’s review of the effectiveness of the system of internal control was informed during the year by the Internal Auditors, BDO LLP, who operate to standards defined in the OfS Audit Code of Practice. The Internal Auditors provide the Board of Governors with an annual report, which provides an independent opinion on the adequacy and effectiveness of the University’s system of internal control with recommendations for improvement. The Board’s review is also informed by the work of the senior managers within the University, who have responsibility for the development and maintenance of the internal control framework, and by comments made by the External Auditors, KPMG, in their Management Letter and other reports. In the opinion of Governing Body there were no significant internal control weaknesses or failures arising during the year ended 31 July 2018 and up to the date of approval of the financial statements. Signed _______________________ Signed Professor Bashir Makhoul Pauline Waterhouse OBE Vice-Chancellor Deputy Chair of the Board of Governors 27 November 2018 27 November 2018

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF GOVERNORS OF UNIVERSITY FOR THE CREATIVE ARTS

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of University for the Creative Arts (“the University”) for the year

ended 31 July 2018 which comprise the consolidated statement of comprehensive income and expenditure,

financial position, cash flow, changes in reserves and related notes, including the statement of principal

accounting policies and estimation techniques.

In our opinion the financial statements:

• give a true and fair view of the state of the Group’s and the University’s affairs as at 31 July 2018, and of

the Group’s and the University’s income and expenditure, gains and losses and changes in reserves, and of

the Group’s cash flows, for the year then ended;

• have been properly prepared in accordance with UK accounting standards, including FRS 102 The

Financial Reporting Standard applicable in the UK and Republic of Ireland, and with the 2015 Statement of

Recommended Practice – Accounting for Further and Higher Education; and

• meet the requirements of the Accounts Direction dated 19 June 2018 issued by the Office for Students

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and

applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under,

and are independent of the group in accordance with, UK ethical requirements including the FRC Ethical

Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our

opinion.

Going concern

We are required to report to you if we have concluded that the use of the going concern basis of accounting is

inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of

that basis for a period of at least twelve months from the date of approval of the financial statements. We

have nothing to report in these respects.

Other information

The Board of Governors is responsible for the other information, which comprises the Operating and Financial

Review and Corporate Governance Statement. Our opinion on the financial statements does not cover the

other information and, accordingly, we do not express an audit opinion or any form of assurance conclusion

thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial

statements audit work, the information therein is materially misstated or inconsistent with the financial

statements or our audit knowledge. Based solely on that work, we have not identified material misstatements

in the other information.

Board of Governors responsibilities

As explained more fully in their statement set out on page 18 and 19, the Board of Governors is responsible

for: the preparation of the financial statements and for being satisfied that they give a true and fair view; such

internal control as it determines is necessary to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error; assessing the group and parent University’s ability

to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the

going concern basis of accounting unless it either intends to liquidate the group or the parent University or to

cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free

from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report.

Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in

accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can

arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at

www.frc.org.uk/auditorsresponsibilities.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

We are required to report on the following matters under the Office for Students and Research England Audit

Codes of Practice issued under the Further and Higher Education Act 1992.

In our opinion, in all material respects:

• funds from whatever source administered by the Group or the University for specific purposes have been

properly applied to those purposes and managed in accordance with relevant legislation;

• income has been applied in accordance with the University's Statutes.

• funds provided by the Office for Students and Research England have been applied in accordance with

the terms and conditions attached to them; and

• funds provided by HEFCE have been applied in accordance with the Memorandum of Assurance and

Accountability and any other terms and conditions attached to them.

THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES

This report is made solely to the Board of Governors, in accordance with paragraph 13(2) of the University’s

Articles of Government and section 124B of the Education Reform Act 1988. Our audit work has been

undertaken so that we might state to the Board of Governors those matters we are required to state to them in

an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the University and the Board of Governors for our audit work, for

this report, or for the opinions we have formed.

Andrew Sayers for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square Canary Wharf E14 5GL November 2018

Consolidated Statement of Comprehensive Income and Expenditure

For the year ended 31 July 2018

2018 2017

Group University Group University

Note £'000 £'000 £'000 £'000

Income

Funding body grants

1 8,699 8,507 8,770 8,770

Tuition fees and education contracts

2 44,433 42,860 43,578 42,075

Research grants and contracts

3 42 42 147 147

Other operating income

4 9,077 9,179 8,908 8,913

Endowment and investment income 5 164 164 26 26

Total income 62,415 60,752 61,429 59,931

Expenditure

Staff costs (including restructuring costs of £464k, 2017: £86k)

6

37,105 36,284

34,925 34,441

Other operating expenses

8 22,005 21,199 22,069 21,158

Depreciation

2,820 2,808 2,691 2,675

Interest and other finance costs (net) 9 958 958 1,117 1,117

Write-off of goodwill created on Acquisition of OCA

7

- - 225 -

Total expenditure 7 62,888 61,249 61,027 59,391

(Deficit)/Surplus for the year (473) (497) 402 540

Transfers from restricted endowments

16 (107) (107) (10) (10)

Actuarial gain in respect of pension schemes 15 9,528 9,528 12,229 12,229

Total comprehensive income/(expenditure) for the year

8,948 8,924 12,621 12,759

Represented by:

Endowment comprehensive expenditure for the year

16 (107) (107) (10) (10)

Restricted comprehensive income/(expenditure) for the year

17 (388) (388) 373 373

Unrestricted comprehensive income/(expenditure) for the year

9,443 9.419 12,258 12,396

8,948 8,924 12,621 12,759

The income and expenditure of the Group relates wholly to continuing operations. Notes on pages 25 to 55 form part of the financial statements.

Consolidated Statement of Financial Position

As at 31 July 2018

2018 2017

Group University Group University

Note £'000 £'000 £'000 £'000

Non-current assets

Fixed assets 10 70,802 70,782 65,757 65,747

Endowment assets 16 64 64 171 171

70,866 70,846 65,928 65,918

Current assets

Stock 256 251 236 232

Trade and other receivables 12 1,570 1,264 1,696 1,552

Cash and cash equivalents 15,635 15,339 13,172 12,832

17,461 16,854 15,104 14,616

Creditors: amounts falling due within one year 13

(11,294) (10,560)

(10,269) (9,640)

Net current assets 6,167 6,294 4,835 4,976

Total assets less current liabilities 77,033 77,140 70,763 70,894

Creditors: amounts falling due after more than one year 14

(5,500) (5,500)

(1,500) (1,500)

Provisions

Pension provision 15 (25,809) (25,809) (32,104) (32,104)

Other provisions 15 (58) (58) (441) (441)

Total net assets 45,666 45,773 36,718 36,849

Restricted reserves Income and expenditure reserve - endowment reserve 16

64 64

171 171

Income and expenditure reserve - restricted reserve 17

366 366

754 754

430 430 925 925

Unrestricted reserves Income and expenditure reserve - unrestricted 45,236 45,343 35,793 35,924

Total reserves 45,666 45,773 36,718 36,849

The financial statements were approved by the Board of Governors on 27 November 2018 and signed on its behalf by: Professor Bashir Makhoul Pauline Waterhouse OBE Vice-Chancellor Deputy Chair of the Board of Governors Notes on pages 29 to 55 form part of the financial statements.

Consolidated Statement of Cash Flow

For the year ended 31 July 2018

2018 2017

Group University Group University

Note £'000 £'000 £'000 £'000

Net cash flow from operating activities 20 5,890 5,912 6,068 5,913

Cash flows from investing activities

Acquisition of OCA net of cash acquired - - 189 -

Purchase of fixed assets (7,865) (7,843) (5,703) (5,699)

Receipt of capital grants 457 457 376 376

Interest received 57 57 16 16

Net cash outflow from investing activities (7,351) (7,329) (5,122) (5,307)

Cash flows from financing activities

Interest paid (76) (76) (102) (102)

New secured loans 4,000 4,000 200 200

Repayments of loans - - - -

Net cash outflow from financing activities 3,924 3,924 98 98

Increase/(decrease) in cash and cash equivalents 2,463 2,507 1,044 704

Cash and cash equivalents at the beginning of the year 13,172 12,832 12,128 12,128

Cash and cash equivalents at the end of the year 15,635 15,339 13,172 12,832 The notes on pages 29 to 55 form part of these Financial Statements

Consolidated Statement of Changes in Reserves

For the year ended 31 July 2018

Group Income and expenditure account Total

Endowment Restricted Unrestricted

£’000 £’000 £’000 £’000

Balance at 1 August 2016 181 381 23,535 24,097

Surplus from the income and expenditure statement

- 20 382 402

Other comprehensive expenditure - - 12,229 12,229

Release of restricted funds spent in year (10) 353 (353) (10)

Total comprehensive income/(expenditure) for the year

(10) 373 12,258 12,621

Balance at 1 August 2017 171 754 35,793 36,718

Surplus from the income and expenditure statement

- 146 (619) (473)

Other comprehensive income - - 9,528 9,528

Release of restricted funds spent in year (107) (534) 534 (107)

Total comprehensive income/(expenditure) for the year

(107) (388) 9,443 8,948

Balance at 31 July 2018 64 366 45,236 45,666

University Income and expenditure account Total

Endowment Restricted Unrestricted

£’000 £’000 £’000 £’000

Balance at 1 August 2016 181 381 23,528 24,090

Surplus/(deficit) from the income and expenditure statement

- 20 520 540

Other comprehensive expenditure - - 12,229 12,229

Release of restricted funds spent in year (10) 353 (353) (10)

Total comprehensive income/(expenditure) for the year

(10) 373 12,396 12,759

Balance at 1 August 2017 171 754 35,924 36,849

Surplus from the income and expenditure statement

- 146 (643) (497)

Other comprehensive income - - 9,528 9,528

Release of restricted funds spent in year (107) (534) 534 (107)

Total comprehensive income/(expenditure) for the year

(107) (388) 9,419 8,924

Balance at 31 July 2018 64 366 45,343 45,773

The notes on pages 29 to 55 form part of these Financial Statements

Statement of Principal Accounting Policies and Estimation Techniques 1 Basis of Preparation These financial statements have been prepared in accordance with the Statement of Recommended Practice (SORP): Accounting for Further and Higher Education 2015 and in accordance with Financial Reporting Standards (FRS 102). They conform to guidance published by HEFCE. The financial statements are prepared in sterling which is the functional currency of the group and rounded to the nearest £000. The University is a public benefit entity and therefore has applied the relevant public benefit requirement of FRS 102. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements, except as noted below.

2 Basis of Accounting The financial statements are prepared under the historical cost convention modified by the revaluation of certain fixed assets.

3 Going Concern The activities of the Group and the University, together with the factors and risks likely to affect its future development and performance, are set out in the Operating and Financial Review. The financial position of the Group and the University, its cashflow, liquidity and borrowings are described in the Financial Statements and accompanying Notes. The University currently has a £12m sterling money market facility available for capital expenditure drawdown by 31 July 2019, repayable by 31 July 2026. Additionally, there is a £10m sterling money market facility available for working capital until 1 August 2020. The University also has approval for a £100k overdraft facility. The future financial success of the University depends on its ability to maintain and improve its student recruitment and retention numbers in a changing marketplace. Given these uncertainties, the University regularly updates its financial forecasts and projections, which extend over a three year period in accordance with HEFCE requirements. Currently, these forecasts indicate that it will be able to operate within existing facilities and their covenants over this period. Accordingly, the University has a reasonable expectation that it has adequate resources to continue in operational existence for the foreseeable future, and for this reason will continue to adopt the going concern basis in the preparation of its Financial Statements.

4 Basis of Consolidation The consolidated financial statements include the University’s wholly owned subsidiaries, Open College of the Arts, UCA Enterprises Ltd and UCA Ventures Ltd for the year ended 31 July 2018. Intra-group transactions are eliminated on consolidation. The consolidated financial statements do not include the income and expenditure of the Students’ Union as the University does not exert control or dominant influence over policy decisions.

Statement of Principal Accounting Policies (Continued)

5 Income Recognition Income from the sale of goods or services is credited to the Consolidated Statement of Comprehensive Income when the goods or services are supplied to the external customers or the terms of the contract have been satisfied. Fee income is stated gross of any expenditure which is not a discount and credited to the Consolidated Statement of Comprehensive Income over the period in which the students are studying. Where the amount of the tuition fee is reduced, by a discount for prompt payment, income receivable is shown net of the discount. All bursaries and scholarships, which are not normally used for University services, are accounted for gross as expenditure and not deducted from income. Investment income is credited to the Consolidated Statement of Comprehensive Income on a receivable basis. Funds the University receives and disburses as paying agent on behalf of a funding body are excluded from the income and expenditure of the University where the University is exposed to minimal risk or enjoys minimal economic benefit related to the transaction. Grant funding Grant funding including funding council block grant, research grants from government sources and grants (including research grants) from non-government sources are recognised as income when the University is entitled to the income and performance related conditions have been met. Income received in advance of performance related conditions being met is recognised as deferred income within creditors on the balance sheet and released to income as the conditions are met. Donations and endowments Non exchange transactions without performance related conditions are donations and endowments. Donations and endowments with donor imposed restrictions are recognised in income when the University is entitled to the funds. Income is retained within the restricted reserve until such time that it is utilised in line with such restrictions, at which point the income is released to general reserves through a reserve transfer. Donations with no restrictions are recognised in income when the University is entitled to the funds. Investment income and appreciation of endowments is recorded in income in the year in which it arises as either restricted or unrestricted income according to the terms applied to the individual endowment fund. There are four main types of donations and endowments identified within reserves:

1. Restricted donations – the donor has specified that the donation must be used for a particular objective.

2. Unrestricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream for the general benefit of the University.

3. Restricted expendable endowments – the donor has specified a particular objective other than the purchase or construction of tangible fixed assets, and the University has the power to use the capital.

4. Restricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream to be applied to a particular objective.

Statement of Principal Accounting Policies (Continued) 5 Income Recognition (continued) Capital grants Capital grants are recognised in income when the University is entitled to the funds subject to any performance related conditions being met. 6 Accounting for Retirement Benefits

The three principal pension schemes for the University’s staff are the Teachers’ Pension Scheme (TPS) for academic staff; the Surrey Pension Fund and the Kent Pension Fund for non-academic staff. All schemes are defined benefit schemes, which are externally funded and were contracted out of the State Earnings-Related Pension Scheme up until 5 April 2016. The TPS is a multi-employer scheme for which it is not possible to identify the assets and liabilities to University members due to the mutual nature of the scheme and therefore this scheme is accounted for as a defined contribution retirement benefit scheme. A liability is recorded within provisions for any contractual commitment to fund past deficits within the TPS scheme. The University’s subsidiary OCA operates a defined contribution pension scheme, payments are charged to the Statement of Comprehensive Income and Expenditure as they become payable. Defined Benefit Plan Defined benefit plans are post-employment benefit plans other than defined contribution plans. Under defined benefit plans, the University’s obligation is to provide the agreed benefits to current and former employees, and actuarial risk (that benefits will cost more or less than expected) and investment risk (that returns on assets set aside to fund the benefits will differ from expectations) are borne, in substance, by the University. The Group should recognise a liability for its obligations under defined benefit plans net of plan assets. This net defined benefit liability is measured as the estimated amount of benefit that employees have earned in return for their service in the current and prior periods, discounted to determine its present value, less the fair value (at bid price) of plan assets. The calculation is performed by a qualified actuary using the projected unit credit method. Where the calculation results in a net asset, recognition of the asset is limited to the extent to which the University is able to recover the surplus either through reduced contributions in the future or through refunds from the plan. These plans are valued every three years by professionally qualified independent actuaries. Enhanced Pensions Provision The actual cost of the enhanced element of an on-going pension to any former member of staff, as a result of a severance or similar agreement, is paid by the University. An estimate of the expected future cost of any enhancement to the on-going pension of a former member of staff is charged in full to the University’s income and expenditure account in the year that the member of staff retires. In subsequent years, an adjustment is made to provisions in the balance sheet based on an actuarial valuation. 7 Employment Benefits

Short term employment benefits such as salaries and compensated absences are recognised as an expense in the year in which the employees render service to the Group or University. Any unused benefits are accrued and measured as the additional amount the Group and University expects to pay as a result of the unused entitlement.

Statement of Principal Accounting Policies (Continued)

8 Leases Finance leases Leases in which the Group or University assume substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Leased assets acquired by way of finance leases and the corresponding lease liabilities are initially recognised at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Operating leases Costs in respect of operating leases are charged on a straight-line basis over the lease term. Any lease premiums or incentives are spread over the minimum lease term. 9 Stocks Stocks are valued at the lower of cost or net realisable value. 10 Foreign Currency Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arsing on translation are recognised in Surplus or Deficit. 11 Tangible Fixed Assets

Land and buildings Land that had been revalued to market value on or prior to the date of transition to the 2015 FE HE SORP is measured on the basis of deemed cost, being the revalued amount at the date of that revaluation. Land is not depreciated as it is considered to have an indefinite useful life. Buildings are stated at cost and depreciated over their expected useful lives of 50 years on a straight line basis. A full year depreciation is charged in the year a building is brought into use. Equipment and Plant Equipment and plant, including computers and software, costing less than £3,000 per individual item is recognised as expenditure. All other equipment and plant is capitalised. Capitalised equipment and plant is stated at cost and depreciated over its expected useful life of 4 years for equipment and 10 years for plant on a straight line basis. Depreciation methods, useful lives and residual values are reviewed at the date of preparation of each Balance Sheet. A full year depreciation is charged in the year an asset is brought into use.

Statement of Principal Accounting Policies (Continued) 11 Tangible Fixed Assets (continued)

Assets in the Course of Construction (AICC) Assets in the course of construction are accounted for at cost, based on the value of architect’s certificates and other direct costs, incurred to 31 July. They are not depreciated until they are brought into use, at this point they receive a full year depreciation charge. 12 Taxation

The University and OCA are exempt charities within the meaning of Part 3 of the Charities Act 2011. They are therefore charities within the meaning of Paragraph 1 of Schedule 6 to the Finance Act 2010 and accordingly, the University and OCA are potentially exempt from taxation in respect of income and capital gains received within the categories covered by Sections 478-488 of the Corporation Tax Act 2010 (CTA 2010) or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied to exclusively charitable purposes. The University receives no similar exemption in respect of Value Added Tax. Irrecoverable VAT on inputs is included in the costs of such inputs. Any irrecoverable VAT allocated to fixed assets is included in their cost. The University’s other subsidiaries are liable to Corporation Tax in the same way as any commercial organisation. Any surplus arising in the active subsidiaries is gift aided to the University to the extent that any corporation tax that may become assessable is extinguished. 13 Cash and Cash Equivalents 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. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of change in value. Liquid resources comprise assets held as a readily disposable store of value. They comprise short term deposits (maximum period or term of 3 months) held as part of the University’s treasury management activities. They exclude assets held as Endowment Asset Investments. 14 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised when:

a) The Group or University has a present obligation (legal or constructive) as a result of a past event; b) it is probable that a transfer of economic benefits will be required to settle the obligation; and c) a reliable estimate can be made of the amount of the obligation.

A contingent liability arises from a past event that gives the Group or University a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Group or University. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. A contingent asset arises where an event has taken place that gives the Group or University a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Group or University. Contingent assets and liabilities are not recognised in the Balance Sheet but are disclosed in the notes.

Statement of Principal Accounting Policies (Continued)

15 Investments Investments within the Financial Statements relate primarily to subsidiaries which are eliminated upon consolidation, deficits on combinations transacted at nil value are recorded immediately within the Statement of Comprehensive Income and Expenditure. Investments in subsidiary undertakings are shown at the lower of cost or net realisable value. Listed investments held as fixed assets or endowments assets are shown at market value. 16 Financial Instruments The financial assets and liabilities held qualify as basic financial instruments as described in Section 11 of FRS 102. Basic financial instruments, comprising trade debtors, cash and cash equivalents and trade payables, are initially recognised at transaction value and subsequently measured at their settlement value. Cash is held on deposit in Barclays Bank. Trade debtors and trade creditors consist of balances outstanding at the financial year end. Loans are measured at the amortised cost using the effective interest rate method. 17 Reserves Reserves are classified as restricted or unrestricted. Restricted endowment reserves include balances which, through endowment to the University, are held as a permanently restricted fund which the University must hold in perpetuity. Other restricted reserves include balances where the donor has designated a specific purpose and therefore the University is restricted in the use of these funds.

Notes to the accounts 1. Funding Body Grants 2018 2017

Group University Group University

£'000 £'000 £'000 £'000

Recurrent Grants:

HEFCE/OfS/Research England 3,243 3,051 3,317 3,317

ESFA 4,929 4,929 5,002 5,002

Specific Grants:

HEFCE 70 70 75 75

HEFCE capital grant 457 457 376 376

8,699 8,507 8,770 8,770

2. Tuition Fees and Education Contracts

UK & EU Higher Education Students 37,704 36,406 37,875 36,648

Non EU Higher Education Students 5,912 5,747 5,049 4,906

UK & EU Further Education Students 680 585 562 446

Non EU Further Education Students 75 60 90 73

Short Course Fees 62 62 2 2

44,433 42,860 43,578 42,075

3. Research Grants and Contracts

Research Councils - - - -

UK based Charities 42 42 35 35 UK central government, local authorities, health & hospital authorities - - 42 42

UK industry, commerce & public corporations - - - -

EU government bodies - - 70 70

Other grants and contracts - - - -

42 42 147 147

Notes to the accounts (Continued)

4. Other Operating Income 2018 2017

Group University Group University

£'000 £'000 £'000 £'000

Residences, catering and conferences 6,077 6,077 5,957 5,957

Other services 501 620 523 543

Project income 529 529 249 249

Other income 1,970 1,953 2,179 2,164

9,077 9,179 8,908 8,913

5. Endowment and Investment Income

Transferred from restricted permanent endowments (Note 16) 101 101

2 2

Transferred from restricted expendable endowments (Note 16) 6 6

8 8

Other interest receivable 57 57 16 16

164 164 26 26

6. Staff

2018 2017

Group University Group University

£'000 £'000 £'000 £'000

Staff Costs:

Wages and salaries 27,033 26,304 26,354 25,930

Social security costs 2,536 2,476 2,458 2,419

Apprenticeship levy 119 116 38 38

Other pension costs 7,417 7,388 6,075 6,054

37,105 36,284 34,925 34,441

Average full-time equivalent staff numbers by major category: Number Number Number Number

Academic departments 401 398 397 397

Academic services 225 213 226 221

Administration and Central Services 104 101 103 94

Premises 32 32 33 33

Research and development 11 11 11 11

Residences and catering 27 27 29 29

800 782 799 785

Notes to the accounts (Continued)

6. Staff (continued)

Emoluments of the Vice Chancellor The Vice-Chancellor took up office on 5 June 2017 and his remuneration package was unchanged from his appointment until 31 July 2018 inclusive. In determining the base salary parameters available when making the appointment, Remuneration Committee considered external benchmarking data drawn from the Universities and Colleges Employers Association (UCEA) Remuneration survey for comparable institutions (all universities with income between £24m and £70m; new (post-1992) universities in the same income band; and universities in London and the South East with income up to £70m), together with data drawn from the annual Times Higher Education vice-chancellor pay survey. The set of benchmark institutions for the latter was comprised of specialist arts institutions and universities with a similar level of income. The salary awarded was determined in light of the skills and experience that the successful candidate would bring to the post, as evidenced during the selection process. In addition, as part of the profile raising activities for the University, costs of £7,173 were borne in relation to an exhibition at which the Vice Chancellor’s work was exhibited.

2018 2017

£ £

Salary and benefits (Professor S Ofield-Kerr) - 79,440

Pension contributions (Professor S Ofield-Kerr) - 12,810

Salary and benefits (A Cooke) - 52,515

Pension contributions (A Cooke) - 9,875

Salary and benefits (Professor B Makhoul) 210,000 16,827

Pension contributions (Professor B Makhoul) 34,608 2,773

244,608 174,240

Professor S Ofield-Kerr resigned with effect on 31 December 2016. A Cooke then acted as Acting Vice Chancellor until 4 June 2017 and Professor B Makhoul took up office on 5 June 2017. The Vice-Chancellor’s pension contributions are on the standard terms of the Teachers’ Pension Scheme for Professor S Ofield-Kerr and Professor B Makhoul and the Surrey LGPS for A Cooke. The Vice Chancellor’s basic salary is 6.8 times the median pay of staff, where the median pay is calculated on a full-time equivalent basis for the salaries paid to established and sessional staff. The Vice-Chancellor’s total remuneration is 7.2 times the median total remuneration of staff, where the median total remuneration is calculated on a full-time equivalent basis for the total remuneration. The median pay and total remuneration exclude casual and agency staff as the information regarding the full-time equivalent of these staff was not held by the University for the year ended 31 July 2018.

Notes to the accounts (Continued) 6. Staff (continued)

Remuneration of other higher paid staff, including employer's pension contributions and benefits in kind

2018 2017

Group and University

Number

Number

£100,000 - £104,999 1 3

£105,000 - £109,999 - -

£110,000 - £114,999 - -

£115,000 - £119,999 - -

£120,000 - £124,999 - 1

£125,000 - £129,999 1 -

£130,000 - £134,999 - -

£135,000 - £139,999 - -

£140,000 - £144,999 - 1

£145,000 - £149,999 - -

£150,000 - £154,999 1 -

£155,000 - £159,999 - -

3 5

2018 2017

£ £

Compensation for loss of office to former higher paid staff 135,031 - Key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the University. Staff costs includes compensation paid to key management personnel.

2018 2017

£ £

Key management personnel 787,728 720,259 Governors No Governor has received/waived remuneration from the group during the year (2017: – none). The total expenses paid to or on behalf of 22 Governors was £6k (2017: £7k to 23 Governors). This represented travel and subsistence expenses of £3k (2017: £4k) incurred in attending Committee meetings and other training events in their official capacity as a Governor and £3k (2017: £3k) for attendance at various events in their official capacity as a Governor.

Notes to the accounts (Continued)

7. Analysis of expenditure by activity

Other operating

Staff costs Costs Total

2018 2017 2018 2017 2018 2017

£'000 £'000 £'000 £'000 £'000 £'000

Group Restated Restated Restated

Academic departments 16,583 16,555 3,674 4,007 20,257 20,562

Academic services 9,020 8,637 5,253 5,372 14,273 14,009 Administration and central

Services 8,679 * 6,891 * 2,957 2,862 11,636 9,753

Premises 1,156 1,224 5,058 4,922 6,214 6,146

Research and development 634 643 322 340 956 983

Residences and catering 1,033 975 4,741 4,566 5,774 5,541

37,105 34,925 22,005 22,069 59,110 56,994

Depreciation - - 2,820 2,691 2,820 2,691

Interest and other finance costs - - 958 1,117 958 1,117

Loss on acquisition of OCA - - - 225 - 225

37,105 34,925 25,783 26,102 62,888 61,027

£'000 £'000 £'000 £'000 £'000 £'000

University

Academic departments 16,348 16,531 3,132 3,388 19,480 19,919

Academic services 8,668 8,338 5,193 5,224 13,861 13,562 Administration and central

Services 8,445 * 6,730 * 2,808 2,717 11,253 9,447

Premises 1,156 1,224 4,998 4,923 6,154 6,146

Research and development 634 643 322 340 956 983

Residences and catering 1,033 975 4,746 4,566 5,779 5,542

36,284 34,441 21,199 21,158 57,483 55,599

Depreciation - - 2,808 2,675 2,808 2,675

Interest and other finance costs - - 958 1,117 958 1,117

36,284 34,441 24,965 24,950 61,249 59,391

* Includes FRS 102 pension adjustment for the difference between actual pension payments and the Actuary’s calculated current service cost and losses on curtailments £2,410k (2017: £605k) and staff restructuring costs of £464k (2017: £86k), including redundancy, holiday and pension payments.

Notes to the accounts (Continued)

8. Other Operating Expenses 2018 2017

Group University Group University

£'000 £'000 £'000 £'000

Equipment, furniture and computing costs 1,746 1,734 2,065 2,054

Audit fees (including VAT):

Remuneration for external audit services 62 52 60 46 Remuneration for non-audit services from external audit firm 5 5

5 5

Remuneration for internal audit services 39 39 39 39

Residences and catering 4,746 4,746 4,566 4,566

Long term maintenance costs 995 995 730 730

Other expenses 14,412 13,628 14,604 13,718

Total 22,005 21,199 22,069 21,158

9. Interest And Other Finance Costs (net)

On loans wholly repayable within five years 76 76 102 102

Net interest charge on pension liability (Note 23) 882 882 1,015 1,015

Enhanced Pension – Interest cost (Note 15) - - - -

958 958 1,117 1,117

Notes to the accounts (Continued)

10. Tangible Assets Freehold Assets in the

Land and course of

Buildings Plant Construction Equipment Total

Group £'000 £'000 £'000 £'000 £'000

Cost

At 1 August 2017 75,716 3,518 1,506 16,202 96,942

Additions at cost 7,843 22 7,865

Reclassification in year 1,508 52 (4,001) 2,441 -

Disposals

At 31 July 2018 77,224 3,570 5,348 18,665 104,807

Depreciation

At 1 August 2017 14,638 2,178 - 14,369 31,185

Charge for year 1,115 272 - 1,433 2,820

Disposals

At 31 July 2018 15,753 2,450 - 15,802 34,005

Net book value at 31 July 2018 61,471 1,120 5,348 2,863 70,802

Net book value at 31 July 2017 61,078 1,340 1,506 1,833 65,757

University £'000 £'000 £'000 £'000 £'000

Cost

At 1 August 2017 75,716 3,518 1,506 16,183 96,923

Additions at cost - - 7,843 - 7,843

Reclassification in year 1,508 52 (4,001) 2,441 -

At 31 July 2018 77,224 3,570 5,348 18,624 104,766

Depreciation

At 1 August 2017 14,638 2,178 - 14,360 31,176

Charge for year 1,115 272 - 1,421 2,808

At 31 July 2018 15,753 2,450 - 15,781 33,984

Net book value at 31 July 2018 61,471 1,120 5,348 2,843 70,782

Net book value at 31 July 2017 61,078 1,340 1,506 1,823 65,747

Notes to the accounts (Continued)

10. Tangible Assets (continued) Group and University Land & Buildings includes land held at a value of £21,455k (2017: £21,455k). University Land and buildings transferred at incorporation were financed by exchequer funds, now reflected in Group Reserves. Should the University cease to exist as a university, it may be liable, under the terms of the Memorandum of Assurance and Accountability with the HEFCE, to repay the funds.

11. Investments The University has an investment of £1 and £2 respectively in the wholly owned subsidiaries UCA Enterprises Ltd and UCA Ventures Limited, both registered in England and Wales. In the period covered by these financial statements these companies have not traded. As at 1 November 2016 the University acquired the Open College of the Arts for nil consideration – see note 27 for further information. The financial statements of these subsidiaries have been consolidated using the acquisition basis of accounting. Details of the subsidiaries will be filed with the Registrar of Companies.

12. Trade and other receivables

2018 2017

Group University Group University

£'000 £'000 £'000 £'000

Amounts falling due within one year:

Trade receivables 673 388 822 689

Prepayments and accrued income 884 863 762 751

Other receivables 13 13 112 112

1,570 1,264 1,696 1,552

Notes to the accounts (Continued)

13. Creditors: amounts falling due within one year

2018 2017

Group University Group University

£’000 £’000 £’000 £’000

Trade creditors 3,081 3,014 3,220 3,104

Other Tax Payable & Social Security 720 698 770 761

Other creditors 1,940 1,448 1,504 1,101

Funds received in advance 860 860 736 736

Access Funds (Note 24) 141 141 80 80

Accruals 4,552 4,399 3,959 3,858

11,294 10,560 10,269 9,640

14. Creditors: amounts falling due after more than one year 2018 2017

Group University Group University

£’000 £’000 £’000 £’000

Barclays Bank Loan (see Note (1) below) 5,500 5,500 1,500 1,500

5,500 5,500 1,500 1,500

Borrowing facilities available are (1) Bank Loan A: A sterling money market facility up to an amount of £10m, for a term ending on 1

August 2020. £5.5m drawn down at the year end (2017: £1.5m). (2) Bank Loan B: A sterling money market facility up to an amount of £12m, with a final drawdown date of

31 July 2019 and a final repayment date of 31 July 2026. No amounts were drawn down at the year end.

Notes to the accounts (Continued)

14. Creditors: amounts falling due after more than one year (continued)

The repayment of the University’s loans falls due as follows:

Barclays Total Total

Bank Loans Loans

Loan 2018 2017

£'000 £'000 £'000

Loan repayments:

- in one year or less - - -

- one to two years 5,500 5,500 1,500

- two to five years - - -

- five years or more - - -

5,500 5,500 1,500

15. Provisions for Liabilities and Charges

Enhanced

Pension

Defined benefit

obligation (note 23)

Total pension

provision Restructuring Other Total other

Group and University £'000 £'000 £'000 £'000 £'000 £'000

As at 1 August 2017 686 31,418 32,104 178 263 441

Utilised in period (59) (3,372) (3,431) (178) (223) (401)

Additions in 2017/18 - - - - 18 18 Transfer from income and expenditure - 6,664 6,664 - - - Actuarial gain - (9,528) (9,528) - - -

At 31 July 2018 627 25,182 25,809 - 58 58

The enhanced pension provision relates to the estimated liability for enhanced pension arrangements agreed as part of staff severance conditions. A formal valuation was carried out at 31 July 2013 using a discount rate provided by the University’s Actuary of 2.8% and a pension increase rate of 2.8%. In 2018, the enhanced pension liability has been recalculated in accordance with guidance issued for the Association of Colleges. The principal assumptions for this calculation are:

2018 2017

Interest Rate 2.3% 2.3%

Net Interest Rate 1.3% 1.3%

Notes to the accounts (Continued) 16. Endowment Funds Restricted Restricted 2018 2017

Permanent Expendable Total Total

Group and University £’000 £’000 £’000 £’000

At 1 August 2017 159 12 171 181

Investment income - - - - Transferred to Income & Expenditure Account (Note 5)

(101) (6) (107) (10)

Endowment Assets at 31 July 2018

58 6 64 171

Endowment capital 117 6 123 129

Accumulated income (59) - (59) 42

Endowment Funds at 31 July 2018 58 6 64 171

All Endowment Assets are held as cash in deposit accounts.

17. Restricted Reserves

Unspent capital grants

Other

restricted funds

2018 2017

Total Total

Group and University £’000 £’000 £’000 £’000

At 1 August 2017 534 220 754 381

New grants 457 544 1,001 801

Capital grants utilised (991) (394) (1,385) (23)

Expenditure - - - (405)

Transferred to unrestricted reserves - (4) (4) -

Total restricted comprehensive (expenditure)/income (534) 146 (388) 373

At 31 July 2018 - 366 366 754

2018 2017

Total Total

Analysis of other restricted funds /donations by type of purpose: £’000 £’000 Scholarships/Bursaries 35 34 Research support 94 121 Study abroad 33 31 Widening participation 195 5 General 9 29

366 220

Notes to the accounts (Continued)

18. Lease Obligations

At 31 July 2018, the University had total future minimum lease payments in respect of properties, vehicles and IT equipment under non-cancellable operating leases payable as follows:

2018 2017

Group University Group University

£’000 £’000 £’000 £’000

Within one year 3,040 3,017 2,930 2,915

Between two and five years 9,016 8,992 9,838 9,832

More than five years 10,841 10,841 12,238 12,238

22,897 22,850 25,006 24,985

19. Capital Commitments

Provision has not been made for the following capital commitments at 31 July 2018:

2018 2017

Group University Group University

£’000 £’000 £’000 £’000

Commitments contracted at 31 July 5,906 5,906 1,092 1,092

Authorised but not contracted at 31 July 2,681 2,681 5,312 5,312

8,587 8,587 6,404 6,404

Notes to the accounts (Continued)

20. Reconciliation of surplus to net cash flow from operating activities

2018 2017

Group University Group University

£’000 £’000 £’000 £’000

(Deficit)/Surplus for the year (473) (497) 402 540

Adjustments for non-cash items

HEFCE funds prepaid (91) (91) 91 91

Depreciation 2,820 2,808 2,691 2,675

Decrease/(increase) in stocks (20) (19) 14 11

Decrease/(increase) in debtors 330 316 (418) (423)

Increase/(decrease) in creditors 940 1,011 1,770 1,726

(Decrease)/increase in provisions (3,842) (3,842) (4,043) (4,043)

Defined Benefit pension scheme service costs 5,782 5,782 4,611 4,611

Net interest on Defined Benefit pension liability 882 882 1,015 1,015

Enhanced pension interest costs - - - -

Write off of goodwill on acquisition of OCA (note 27) - - 225 -

Adjustments for investing or financing activities

Interest payable 76 76 102 102

Interest receivable (57) (57) (16) (16)

Capital grants received (457) (457) (376) (376)

Total adjustments 6,363 6,409 5,666 5,373

Net cash flow from operating activities 5,890 5,912 6,068 5,913

21. Reconciliation of net cash flow to net change in debt 2018 2017

Group University Group University

£’000 £’000 £’000 £’000

Increase/(Decrease) in Cash in the Period 2,463 2,507 855 704

(Decrease) in endowment asset investments (107) (107) (10) (10)

Loan (drawdown)/repayment in the year (4,000) (4,000) (200) (200)

Total change in net debt (1,644) (1,600) 645 494

Notes to the accounts (Continued)

22. Analysis of changes in net debt

At 1 August

2017 Net cash

flows

Other non- cash

changes At 31

July 2018

£'000 £'000 £'000 £'000

Group

Cash at bank and in hand 13,172 2,463 - 15,635

Endowment asset investments 171 (107) - 64

Debt due after one year (1,500) (4,000) - (5,500)

Net cash 11,843 (1,644) - 10,199

£'000 £'000 £'000 £'000

University

Cash at bank and in hand 12,832 2,507 - 15,339

Endowment asset investments 171 (107) - 64

Debt due after one year (1,500) (4,000) - (5,500)

Net cash 11,503 (1,600) - 9,903

23. Pension Schemes

Retirement benefits for employees of the University are provided by defined benefit schemes, which are funded by contributions from the University and employees. Payments are made to the Teachers' Pension Scheme (TPS) for academic staff and to Surrey Pension Fund for non-academic staff. In 2005/06, Kent based non-academic staff ceased making payments to the KCC Fund and commenced payments to the Surrey Pension Fund. The assets and liabilities relating to the Kent staff then employed within the KCC Fund were transferred to the Surrey Pension Fund during 2005/06. These are all independently administered schemes. (a) Teachers’ Pension Scheme The Teachers' Pension Scheme (TPS) is a statutory, contributory, defined benefit scheme, governed by the Teachers' Pensions Regulations 2010, and, from 1 April 2014, by the Teachers’ Pension Scheme Regulations 2014. These regulations apply to teachers in schools and other educational establishments, including academies, in England and Wales that are maintained by local authorities. In addition, teachers in many independent and voluntary-aided schools and teachers and lecturers in some establishments of further and higher education may be eligible for membership. Membership is automatic for full-time teachers and lecturers and, from 1 January 2007, automatic too for teachers and lecturers in part-time employment following appointment or a change of contract. Teachers and lecturers are able to opt out of the TPS. The Teachers’ Pension Budgeting and Valuation Account Although members may be employed by various bodies, their retirement and other pension benefits are set out in regulations made under the Superannuation Act 1972 and are paid by public funds provided by Parliament. The TPS is an unfunded scheme and members contribute on a ’pay as you go‘ basis – these contributions, along with those made by employers, are credited to the Exchequer under arrangements governed by the above Act.

Notes to the accounts (Continued) 23. Pension Schemes (continued) The Teachers' Pensions Regulations 2010 require an annual account, the Teachers' Pension Budgeting and Valuation Account, to be kept of receipts and expenditure (including the cost of pension increases). From 1 April 2001, the Account has been credited with a real rate of return, which is equivalent to assuming that the balance in the Account is invested in notional investments that produce that real rate of return. Valuation of the Teachers’ Pension Scheme The latest actuarial review of the TPS was carried out as at 31 March 2012 and in accordance with The Public Service Pensions (Valuations and Employer Cost Cap) Directions 2014. The valuation report was published by the Department for Education (the Department) on 9 June 2014. The key results of the valuation are:

· employer contribution rates were set at 16.4% of pensionable pay;

· total scheme liabilities for service to the effective date of £191.5 billion, and notional assets of £176.6

billion, giving a notional past service deficit of £15.0 billion;

· an employer cost cap of 10.9% of pensionable pay.

· actuarial Assessments are undertaken in intervening years between formal valuations for financial

reporting purposes, using updated membership data.

The new employer contribution rate administration levy for the TPS were implemented in September 2015

A full copy of the valuation report and supporting documentation can be found on the Teachers’ Pension Scheme website at the following location:

https://www.teacherspensions.co.uk/news/employers/2014/06/publication-of-the-valuation-

report.aspx

Scheme Changes Following the Hutton report in March 2011 and the subsequent consultations with trade unions and other representative bodies on reform of the TPS, the Department published a Proposed Final Agreement, setting out the design for a reformed TPS to be implemented from 1 April 2015. The key provisions of the reformed scheme include: a pension based on career average earnings; an accrual rate of 1/57th; and a Normal Pension Age equal to State Pension Age, but with options to enable members to retire earlier or later than their Normal Pension Age. Importantly, pension benefits built up before 1 April 2015 will be fully protected. In addition, the Proposed Final Agreement includes a Government commitment that those within 10 years of Normal Pension Age on 1 April 2012 will see no change to the age at which they can retire, and no decrease in the amount of pension they receive when they retire. There will also be further transitional protection, tapered over a three and a half year period, for people who would fall up to three and a half years outside of the 10 year protection. Regulations giving effect to a reformed Teachers’ Pension Scheme came into force on 1 April 2014 and the reformed scheme commenced on 1 April 2015. The pension costs paid to TPS in the year amounted to £2,517k (2017: £2,441k). No amounts were outstanding at the year end (2017: nil).

Notes to the accounts (Continued) 23. Pension Schemes (continued) FRS 102 Under the definitions set out in The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102), the TPS is a multi-employer pension scheme. The University is unable to identify its share of the underlying assets and liabilities of the scheme. Accordingly, the University has taken advantage of the exemption in FRS 102 and has accounted for its contributions to the scheme as if it were a defined-contribution scheme. The University has set out above the information available on the scheme and the implications for the University in terms of the anticipated contribution rates.

(b) Surrey and Kent Local Government Pension Schemes

For non-academic staff the University participates in the Surrey County Council and Kent County Council LGPS which are defined benefit statutory schemes, administered in accordance with the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007, the Local Government Pension Scheme (Administration) Regulations 2008 and the Local Government Pension Scheme (Transitional Provisions) Regulations 2008. They are contracted out of the State Second Pension. They are final salary schemes. Active members of the Kent scheme were transferred to the Surrey scheme on 1 April 2006. On 26 October, the High Court handed down a judgment involving the Lloyds Banking Group’s defined benefit pension schemes. The judgment concluded the schemes should be amended to equalise pension benefits for men and women in relation to guaranteed minimum pension benefits, “GMP”. The Government will need to consider this outcome in conjunction with the Government’s recent consultation on GMP indexation in public sector schemes before concluding on any changes required to LGPS schemes. The latest triennial actuarial valuations for the SCC and KCC are dated 31 July 2016. The Schemes have been grouped for the purpose of these notes, and the University’s share of the schemes’ obligations and assets as calculated by the actuaries Hymans Robertson LLP and Barnett Waddingham are shown below.

The amounts recognised in the Balance Sheet are as follows:

2018 2017 £’000 £’000 Present value of funded obligations 112,480 109,627 Fair value of plan assets (87,337) (78,303)

Net underfunding in funded plans 25,143 31,324 Present value of unfunded obligations 39 94

Net Liability 25,182 31,418

Notes to the accounts (Continued) 23. Pension Schemes (Continued)

Analysis of movement in the present value of liabilities:

2018 2017 £’000 £’000 Present value of liabilities at the start of the year 109,721 111,349 Current service cost (net of member contributions) 5,779 4,591 Past service cost (including curtailments) - 17 Interest cost on defined benefit obligation 3,005 2,716 Actual member contributions 971 1,095 Actuarial (gain)/loss (5,067) (8,158) Actual benefit payments (1,890) (1,889)

Present value of liabilities at the end of the year 112,519 109,721

Analysis of movement in the fair value of scheme assets:

2018 2017 £’000 £’000 Fair value of assets at the start of the year 78,303 69,322 Return on assets excluding interest 4,461 4,135 Other actuarial loss - (64) Interest income on plan assets 2,123 1,701 Actual member contributions 971 1,095 Actual employer contributions 3,372 4,006 Actuarial gains/(losses) - - Actual benefit payments (1,890) (1,889) Administrative expenses (3) (3)

Fair value of assets at the end of the year 87,337 78,303

Notes to the accounts (Continued) 23. Pension Schemes (Continued)

The amounts charged in Income and Expenditure are as follows:

2018 2017 £’000 £’000 Current service cost 5,782 4,594 Past service cost (including curtailments*) - 17

Total operating charge 5,782 4,611

Interest cost on defined benefit obligation 3,005 2,716 Interest income on plan assets (2,123) (1,701)

Net charge to interest and other finance costs 882 1,015

Total charge to statement of comprehensive income and expenditure (note 15) 6,664 5,626

*Curtailments arise from early payment of accrued pensions (including augmentations) in respect of any redundancies effected during the year ended 31 July 2018.

The amount recognised in Changes in Reserves is as follows:

2018 2017 £’000 £’000 Actuarial gains/(losses) 9,528 12,229

Total charge to statement of changes in reserves (note 15) 9,528 12,229

No amounts in respect of pensions were included in the cost of an asset during the year (2017: nil) The Board of Governors will continue to monitor both the affordability and sustainability of the defined benefit pension schemes in the medium to longer term taking account of, among other things, the projected contribution rates based on the triennial valuations carried out by the Schemes' Actuaries and discussions with the Schemes' Trustees. The University expects to contribute £3,012,000 to the Local Government Pension Schemes in the next financial year.

Notes to the accounts (Continued)

23. Pension Schemes (Continued)

The major categories of Employer Assets as a percentage of Total Employer Assets are as follows: 2018 2017 Equities 72% 73% Bonds 16% 14% Property 7% 8% Cash 4% 5% Principal Actuarial Assumptions at the Balance Sheet date (expressed as weighted averages):

2018 2017 Discount Rate 2.8% 2.7% Future Salary Increase Rate 2.8% 2.9% Future Pension Increase Rate 2.4% 2.5%

The Actuary of each fund makes assumptions on life expectancy based on the fund’s experience. Currently, life expectancy post retirement for current and future pensioners are:

Males Females Current Pensioners 22.5 – 23 years 24.6 – 25.1 years Future Pensioners 24.1 – 25.2 years 26.4 – 27.4 years

An allowance is included for 25% of future retirements to elect additional tax-free cash up to HMRC limits for pre-April 2008 service and 63% of the maximum tax-free cash for post April 2008 service.

(c) OCA Defined Contribution Scheme

From 1 April 2016 OCA started a defined contribution scheme administered by Royal London. Contributions of £29k were paid in the year.

Notes to the accounts (Continued) 24. Access Funds

2018 2017

£'000 £'000

Balance unspent/(prepaid) at beginning of year 80 65

Funding council grants - HE - -

Funding council grants – SFA & EFA 169 122

Adjustment (6) -

243 187

Disbursed to Students – HE - -

Disbursed to Students – SFA & EFA (102) (107)

Balance unspent at end of year

141

80

Funding Council grants are available solely for students: the University acts only as paying agent. The grants and related disbursements are therefore excluded from the Income and Expenditure Account.

25. Related Party Transactions

Due to the nature of the University's operations and the composition of the Board of Governors (being drawn from public and private sector organisations) it is inevitable that transactions occasionally take place with organisations in which a member of the Board of Governors has an interest. Such interests are required to be disclosed and all transactions involving organisations in which a member of the Board of Governors may have an interest are conducted at arm’s length and in accordance with the University's financial regulations and normal procurement procedures. During the year £115k was paid to Farnham Maltings Limited for venue hire and other services (2017: £59k): the spouse of the Deputy Vice-Chancellor (Academic Development), is the Chief Executive of Farnham Maltings Limited.

The University paid in full a grant during the year of £369k (2017: £369k) to the Student Union, a separate charity: the Student Union Sabbatical Officer is the Student Governor of the University. The University provides museum space and facilities to The Craft Study Centre, a separate charity. A joint agreement exists between the two parties.

Notes to the accounts (Continued)

26. Carrying amount of financial instruments

The carrying amounts of the financial assets and liabilities include:

2018 2017

Group University Group University

£’000 £’000 £’000 £’000

Assets measured at cost less impairment * 16,790 16,209 14,664 14,135

Liabilities measured at amortised cost (5,500) (5,500) (1,500) (1,500)

Liabilities measured at cost less impairment (3,828) (3,767) (3,906) (3,896)

* Bank overdraft has been offset against cash held at bank as the University has a legally enforceable right to do so and the intention to settle on a net basis.