UoK 2009 ARIAL 171109 PDF - University of Kent · Sally Muggeridge Richard Oldfield Vicky Pryce...

FINANCIAL STATEMENTS 2008/09 1

UNIVERSITY OF KENT

FINANCIAL STATEMENTS FOR THE YEAR TO 31 JULY 2009

CONTENTS PAGE

Membership of the Council 2008/09 2

University Status and Mission 3

Operating and Financial Review 4 - 14

Corporate Governance Statement 15 - 17

Statement of the Responsibilities of the University’s Council 18

Report of the Independent Auditors to the Council of the University of Kent 19 - 20

Consolidated Income and Expenditure Account 21

Statement of Consolidated Total Recognised Gains and Losses 22

Balance Sheets 23 - 24

Consolidated Cash Flow Statement 25

Statement of Principal Accounting Policies 26 - 30

Notes to the Accounts 31 - 53

2 UNIVERSITY OF KENT

MEMBERSHIP OF THE COUNCIL 2008/09

Chair of the Council: Valerie Marshall

Deputy Chair of the Council/ Chair of the Finance and Resources Committee: John Simmonds Chancellor: Sir Robert Worcester Vice-Chancellor: Professor Julia Goodfellow Senior Deputy Vice-Chancellor: David Nightingale President of the Students’ Union: Tom Christian

External members: Judith Armitt Colin Carmichael Julia Casson Neil Davies Dr Eliot Forster Marcia Fry Stephen Grix Sally Muggeridge Richard Oldfield Vicky Pryce Anthony Quigley Mark Watts

His Honour Judge Anthony Webb The Very Reverend Robert Willis

Staff and Student representatives: Professor Joanne Conaghan Iain Kiy Dr Konstantinos Sirlantzis Juliet Thomas Michael Woods

Total Membership: 25

Secretary of the Council: Karen Goffin

The Chairs of Council committees were as follows:

Audit Committee: Anthony Quigley Finance and Resources Committee: John Simmonds Lay Nominations Committee: Valerie Marshall Remuneration Committee: Valerie Marshall Safety, Health and EnvironmentExecutive Committee: Professor Keith Mander Staff Policy Committee: Marcia Fry

As prescribed in University Ordinance the Vice-Chancellor chairs the Joint Committee for Honorary Degrees, a joint committee of Senate and Council.


UNIVERSITY STATUS AND MISSION

STATUS

The University was incorporated by Royal Charter in 1965 and is an exempt charity within the meaning of the Charities Act.

MISSION

During 2008/09, the University of Kent (“the University”) undertook a thorough review of its mission and developed its institutional plan for the period 2009-2012. This plan is based around six key messages.

The University of Kent - the UK’s European University - is:

� A leading UK university

Based in Canterbury, Medway and Brussels, the University of Kent is a leading UK university that makes a major economic, social, and cultural contribution: by providing excellent opportunities in Higher Education for the most able students regardless of social and educational disadvantage, by undertaking innovative world-leading research, and by leading innovation, enterprise and creative activities

� Making a strong international impact

The University has a strong international impact based on its external networks and partnerships with leading universities in Europe and around the world

� Offering an inspiring student experience that prepares students for the future

We offer an inspiring student experience that prepares students for the future based on excellent research-led teaching in a lively, stimulating and effective learning community, and supported by a broad range of extra-curricular opportunities

� Producing innovative world-leading research

Our academic staff produce innovative world-leading research forging new knowledge and creating change

� Enabling and valuing innovation, enterprise and creativity

We promote and value innovation, enterprise and creativity in all areas of our activity

� While operating in an effective, efficient, sustainable and professional manner

We operate in an effective, efficient, sustainable and professional manner based on partnerships between staff and students in academic schools, staff in professional service departments and the Kent Union.


OPERATING AND FINANCIAL REVIEW

Introduction and Scope of the Financial Statements

The Financial Statements for the year ended 31 July 2009 have been prepared on a consolidated basis and include all the recommendations outlined in the revised Statement of Recommended Practice (SORP): Accounting for Further and Higher Education effective from 1 August 2007. All subsidiary undertakings have been consolidated but only Kent Enterprise Limited was trading during the current and prior financial year.

The University has had a very successful year, building on its success in previous years and providing a firm financial base for delivering its Institutional Plan and for future investment into the estate. Income has risen by 9.3% following further growth in student numbers, positive contributions from hospitality activities and through a sustained drive to grow and diversify other income streams whilst limiting associated expenditure. The University has exceeded its budget and generated a surplus of £7.1m. However, the Higher Education Sector, in common with most other industries, is operating in a difficult economic environment and faces some tough challenges ahead. Specific risk areas are expected to include:

� The strong expectation of future cuts in government funding and restrictions on the number of new Home and EU student places;

� Increased competition and lower success rates in applications for research grants and contracts;

� Pension contribution increases and potential future restructuring of multi-employer schemes;

� Potential pay cost demands through the National Pay Framework agreement at rates in excess of inflation;

� Lower investment returns and higher margins on new bank debt; � Predicted demographics of the Home/EU population and its impact on student demand; � Continuing increases in student expectations in a time of constrained resources; � An uncertain world economic climate and an unknown impact on overseas student

recruitment;� Increased competition globally and from non-traditional Higher Education providers.

Financial Highlights for the Year to 31 July 2009

� Operating surplus of £7.1m; � Overseas fees up £2.2m (15%) as a result of strong recruitment of international

students;� Strong residences and catering income contributing £0.6m in excess of budget; � Effective budgetary control on non-pay expenditure; � Increase in Net Current Assets by £7.3m to £11.5m and high year-end cash and short-

term deposit balances; � Capital expenditure of £14.7m.



Students

The University has once again been voted a top university in London and the South East in the National Survey of Student Satisfaction and with 89% of students being satisfied with the quality of their courses, this places the University firmly in the top 20 UK universities.

2008/09 was a very strong year for student recruitment with growth in the year of 7.5% against an average of 5.7% over the previous three years. This was largely driven by a significant 18.5% increase in the number of overseas students and is evidence of Kent’s international reputation as a provider of quality higher education in the UK.

Total Student Numbers Over the Last Five Years

12,67013,535

14,25715,154

16,107

1,610

1,6301,735

1,732

2,053

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2004/05 2005/06 2006/07 2007/08 2008/09

Home Overseas

14,28015,165

15,99216,886

18,160

The increase in the number of undergraduate students at the University continues to exceed that of postgraduate students but 2008/09 saw encouraging growth in recruitment with a 5.4% overall increase in postgraduate students and a 12.1% increase in research students. Approximately 12% of Kent’s student population are postgraduate students and in 2008/09, the number of full-time postgraduate students was 17% higher than in 2007/08 at 1,480. In total, over 1,500 students were studying for a postgraduate taught award and a further 686 were preparing for research degrees.

Specific targets are being set following the approval of the 2009-2012 Institutional Plan, but significant growth is targeted for postgraduate provision during that period. Being Campus-based, the University values its collegial culture and recognises that a creative and innovative approach to all of its activities is essential in an uncertain environment. It has involved students and a range of staff in its “Creative Campus” initiative: a Research Project investigating the use of space on campus with a view to cultivating an inspirational learning environment and improving interdisciplinary communication and creativity. Capital funds have been made available to implement projects that have been identified by the group. Initiatives to date have involved working with the environment and engaging in practical wildlife conservation projects. Building upon the highly successful annual ArtsFEST, students and staff have worked together to support new international events such as World Fest, workshops for families within the University and wider community and a multidisciplinary Student Arts Festival on campus.



Five Year Analysis of Student Population

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2004/05 2005/06 2006/07 2007/08 2008/09

Academic Year Postgraduate - Research [R] Postgraduate - Taught [T] Undergraduate [U]

R R R R RT

U

UU

U U

T T T T

Research

The University was ranked 24th in the UK for its world-leading research, in terms of the best or 4* research submitted to the 2008 Research Assessment Exercise. This was the University’s best ever performance in the RAE, with six of its subject areas ranking within the top ten of their disciplines nationwide. This reflects the University’s continuing investment into its research activity.

Research income has grown from £9.5m in 2003/04 to £15.0m in 2008/09, a rise of 58% and seeing a £2m increase in the year. In the same period postgraduate research student numbers have increased from 498 to 686 (a rise of 38%). The level of research awards in the year increased by 21% to £14.9m, showing a good recovery following the decline seen in 2007/08.

The University’s new Graduate School was officially launched alongside the opening of Woolf College, a new postgraduate college, providing 544 ensuite study bedrooms together with other academic and social spaces. This was celebrated with a newly established Kent Graduate School Scholarship, worth £1,000 for 2009 Kent Graduates who continue their postgraduate studies at the University. In addition to this, the University continues to provide approximately £1.5m postgraduate research scholarships through its academic schools.

The 2009/12 Institutional Plan places great emphasis on further increasing research activity with strategies in place designed to increase the proportion of research active staff across all academic schools and further increase the proportion of research that is world-leading.

Innovation, Enterprise and Creativity

The last year has been about consolidating and building upon the developments and activities achieved under the third round of the Higher Education Innovation Fund (HEIF3). Activities have also responded to and reflected the University’s 5-year plan for innovation and enterprise as set out in the Innovation and Enterprise Strategy document, June 2008. Success in increasing Knowledge Transfer Partnerships and even higher levels of engagement by students with Enterprise activities shows that the strategy is bearing fruit. Work with academic schools and local business is producing some exciting continuing professional development and research opportunities.



Building commenced on the new 3,683m2 Innovation Centre on the Canterbury campus. The Centre, funded by the South East England Development Agency (SEEDA), will provide high-tech incubation space in the form of offices, studios and workshops. Opening in November 2009, it will house the University’s student Innovation zone, ‘The Bulb’, a dedicated physical space to support graduates with innovative business ideas and projects that includes start-up space, mentoring and advice clinics.

Internationalisation at Kent

The University has a strong international impact, based on its external networks, its partnerships with leading universities in Europe and around the world, and its staff, students and alumni. The University launched its Internationalisation Strategy in 2007 to support and implement this and since then, we have:

� reinforced our reputation as the UK’s European University through partnerships with over 100 universities throughout mainland Europe, and activities such as European double degrees, mobility of staff and students under the Erasmus scheme and many other academic and collaborative initiatives and projects with a distinctive European focus;

� pursued a selected range of deep and strategic international inter-institutional relationships, involving a variety of partnership activities in the areas of student and staff mobility, research and enterprise;

� developed academic programmes that have seen students undertaking placements or other academic activities in many countries throughout the EU and the rest of the world;

� recruited students from over 120 countries, including every EU member state and established scholarships for international students, and for students of all EU nationalities following our undergraduate degrees programmes that include study abroad;

� achieved a prestigious award from the European Commission, recognising the quality of our delivery of the European Diploma Supplement to all graduating students;

� celebrated the 10th anniversary of the University of Kent at Brussels and launched the University of Kent at Paris with a range of one year Humanities postgraduate programmes which will be partly taught in Paris.

Kent’s contribution to the local and regional community

Student numbers at Medway continued to grow and are set to expand further following a successful bid for additional student numbers in 2010/11. New state of the art, purpose built student residences, provided through a partnership arrangement with Berkeley First, are now available to new full-time students at the campus and offers accommodation to more than 600 students as well a social area and an express-style supermarket. Plans to provide new and enhanced sports facilities at a new regional centre of sporting excellence called Medway Park are being finalised, with the University having committed £3m towards the overall £11m Medway Council project. Two of the buildings at the Universities at Medway campus, shared between the Universities of Kent, Greenwich and Canterbury Christ Church University, together with Mid Kent College, also received double honours in the latest Civic Trust Awards. The Drill Hall Library and the Pilkington Building, providing up to date teaching, computing, library and social facilities, were praised for being ‘an integral part of the area’s regeneration strategy’.

For this coming year, it is has agreed to provide funds to support a graduate internship scheme to combine work experience for unemployed graduates with assistance for local businesses.

The University is considering acting as a lead sponsor for a new Academy School in Medway as part of its Widening Participation strategy. It also provides significant support and guidance to its 19 Partner Schools and Associate Further Education Colleges.



Measurement of Past and Future Performance

The University measures its performance with reference to a number of approved key performance indicators which are reported to Council at the end of each year. These measure performance and monitor progress in a number of areas, including institutional sustainability, student experience, financial health, knowledge transfer and relationships, staff development and estates and infrastructure. At its July 2009 meeting, the University reported improved overall results, with a 35% increase in the number of indicators that were green or amber-green and once again showing excellent performance in relation to management of institutional projects. Research was amongst the areas to have improved during the year following the University’s performance in the RAE 2008 submission and the financial impact of this is expected to strengthen this area further in 2009/10. The financial health of the University was also reported to have improved as a result of a stronger and more liquid balance sheet, which has improved further at the 2008/09 year-end. However, further work was identified as being required to diversify income and increase the reported percentage of University income from non-publicly regulated funding streams and to address issues relating to estates costs and backlog maintenance. Work is continuing into 2009/10 to improve these areas with the approval of a new Institutional Plan for 2009-2012 and provision for strategic investment in the current year budget and five year capital programme.

The Council approved the 2009/10 budget in the context of key performance indicators set out in the University’s Financial Framework. The budgeted surplus for 2009/10, at 2.4% of income, exceeds the framework target but has been increased to ensure that the University can continue to sustain current activity levels and make a continuing investment into strategic academic developments and in updating and enhancing the University’s estate. This is despite the prevailing difficult economic conditions, with increased competition and expected lower available public funding and increased staff costs which are now anticipated to rise to 59% of income as a result of the cumulative effects of past and present national pay settlements and the need to increase pension contributions. The current asset ratio continues to be monitored against its target of 1.0 and is budgeted to be comfortably above this at 1.14.

The budgeted capital programme for the five years from 2009/10, incorporates the University’s strategic growth plans for its Medway campus, an increased offering of residential accommodation at Canterbury and reflects the desire to provide students with high quality teaching, learning and social facilities. It continues to address the need to overhaul the underlying utilities infrastructure network and the need to meet carbon reduction targets. It also allows for significant investment in buildings security and in enhancing the provision of the University’s computing and library services. Although the programme will undoubtedly put pressure on cash reserves, it is important that the needs and expectations of students continue to be met; however it is still expected that the target of 40 days expenditure will be achieved.

Financial Summary

The University’s consolidated results for the years ended 31 July 2009 and 31 July 2008 are summarised as follows:

2008/09 2007/08 Change £000 £000 %age

Income 158,893 145,345 9.3 Expenditure (151,862) (139,745) 8.7 Transfer from Accumulated Income in Endowment Funds 78 92

Surplus for the Year 7,109 5,692 24.9



The results for the 2008/09 year are extremely pleasing and are evidence that the University is continuing to grow its income despite the prevailing difficult economic conditions. The retained surplus for the year of £7.1m (2007/08: £5.7m) represents 4.5% of the University’s turnover and exceeds the targets set within the University’s Financial Framework which is designed to ensure that sufficient cash is generated to fund its ambitious capital programme and enhance the student experience. This also exceeds the budgeted surplus of £3.0m and is largely as a result of strong student recruitment and positive research income growth, combined with continued effective budgetary control over expenditure.

Income

Analysis of Income 2004/05 to 2008/09

AA

A

AA

BB

B

B

B

CC

C CCD

D DD D

EE

E E E

F F F F F0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2004/05 2005/06 2006/07 2007/08 2008/09

£000

Key: A - Funding Council Income D - Residences, Catering and Conferences B - Tuition Fees and Education Contracts E - Other Income C - Research Grants and Contracts F - Investment Income

Total income grew by 9.3% to £158.9m with an additional £10.0m fee income and just under £3.5m additional funding council grant income. Within this increase, the recurrent grant grew by 6.1% despite a reduction of £0.5m following the removal of funding for students studying towards equivalent or lower qualifications and was partly due to the recovery of holdback applied in 2007/08 from under-recruitment additional student numbers. Overall, it was an excellent year for recruitment, with continued growth in full-time undergraduates, particularly from overseas. The final year of variable fees brought in an additional £4.2m net income after costs associated with new bursaries and ensuring fair access to the University.

Income from research activities continued to grow with a 14.9% increase in income over last year with strong margins being seen on some high value grants.

Income from student residences fell by £0.8m in the year but 2007/08 had been an exceptional year for conferences and this activity was expected to fall back to slightly lower levels. Occupation levels within campus accommodation were at an all time high and income from both accommodation and catering activities was ahead of budget. Other non-residential income fell



slightly possibly affected by the downturn in the economy, but the University strategy will continue to pursue growth in this area. Returns on investments and cash balances were hit by the deterioration in the global economy and the prevailing low interest rates on bank deposits, with a low risk approach to investments being adopted.

Management of Resources

Analysis of Expenditure 2008/09 (£000)

Interest Payable 4,093 Depreciation 10,827

Exceptional Restructuring Costs

820

Other Operating Costs 46,154

Staff Costs 89,968

Staff Costs rose by 8.8% in the year, mainly due to the nationally agreed 5% pay settlement that took effect from October 2008, together with promotions and annual increments and a small increase in the number of University staff. New posts were appointed to within the faculties and at academic schools, as part of a strategy to reduce the administrative burden on academic and research staff. Further reviews are being undertaken of operations within certain academic schools and professional service sections, as a means of enabling the University to reposition itself for expected future student demand and in preparation for the 2012 Research Excellence Framework.

Average staff numbers increased by just 25 full-time equivalents in the year, primarily in academic schools.

Other Operating Expenses increased by just £2.7m (6.3%) and included a £0.5m unrealised fall in the market value of the University’s Current Asset Investments, demonstrating good budgetary control over expenditure. All academic schools and professional service departments were asked to make savings against existing budgets and most achieved this either through growing income or restricting their non-pay expenditure. Expenditure in academic schools increased by £0.9m with additional investment being made into the School of Pharmacy and the School of Arts and as a result of increased student numbers at franchised colleges. Research non-pay costs were higher but this was mainly related to the increased research activity and overall margins earned shot up from 18.5% to 25.1%. Administration costs increased overall by £1.1m but was largely due to £1.3m of additional bursary payments, which resulted in a total of £3.3m being provided to students paying higher variable fees, and was offset by a generally lower spend in the central professional services. The low rate of exchange of the pound against the euro however led to higher costs being incurred at our overseas campus in Brussels. Residences and catering non-pay costs were tightly controlled despite an increase in activities.



Depreciation charged in the year increased by £2.0m partly due to the commencement of a planned ten-year refurbishment cycle of residential accommodation which led to a detailed review of the remaining useful economic lives of previous refurbishment and an additional charge of £1.6m. The University’s new college, Woolf College, was completed at the start of the year and various improvements to teaching and research facilities and social spaces continued to be made in line with the University’s Estates Strategy.

Balance Sheet

The 2008/09 Balance Sheet has strengthened over the year with Net Current Assets increasing by £7.3m to £11.5m with a current asset ratio of 1.38. This compares favourably to the targeted 1.0 and reflects the past few years’ positive financial outturns as well as some timing delays in expenditure on planned capital projects. Debtors increased by £2.6m (27%) partly due to the increase in income levels but also due to the summer vacation invoicing of the new postgraduate accommodation, managed by the University.

The University’s main pension schemes are USS and SAUL and are multi-employer schemes and continue to be accounted for as defined contribution schemes. The University follows the requirements of FRS17 in relation to the accounting for the Local Government Pension Scheme for which it has one remaining member and the pension deficit can be seen on the balance sheet; during the year, the deficit increased by £0.2m and now stands at just under £0.7m. Full details of the pension schemes can be found in Note 28 to the financial statements.

Investment Management

The University’s current asset and endowment investments are invested in Common Investment Funds managed by CCLA Investment Management Limited. �During the year the Investment Advisory Group monitored the returns from both the Common Investment Funds and the deposit accounts. The COIF and CBF Investment Funds managed in difficult conditions to produce an increase in the income paid. Movement in the capital value of Fund units reflected volatility in the markets for the long term assets which dominate the Funds, particularly equities and property. The COIF and CBF Fixed Interest Funds produced positive total returns including income payments maintained at the level of the previous year.

The market value of Endowments and Current Asset Investments fell by a combined £1.0m as a result of worsening conditions in the global economy, but this had started to pick up again by year-end. The University’s Investment Policy was reviewed and tightened up during the year as a means of mitigating risk by reducing the maximum amounts of cash that can be deposited with any one financial institution and restricting further the approved counterparty lists.

Cash Flow

Cash generation continued to be strong, with a positive impact on short-term liquidity. This was partly due to high net cashflows from operating activities but benefitted from some upfront receipts of certain grants together with timing delays on high value projects within the capital programme. The University monitors its cash reserves and requires a minimum of 40 days expenditure to be held at any time. At the year-end, the cash reserves, measured as cash in hand, short-term deposits and a percentage of the market value of the current asset investments, represented approximately 74 days worth of the 2008/09 expenditure, excluding depreciation. The University reviewed its plans for the coming five years and significant investment into the estate will continue as discussed below with circa £100m of reserves and loan funded expenditure forecast to be made in this period.



Total Cash, Short-Term Deposits and Current Asset Investments at market value have increased by £10.1m as follows:

2009 2008 Change £000 £000 %age

Cash Deposits and Short-Term Deposits 25,729 15,217 69.1 Current Asset Investments at Market Value 3,136 3,574 (12.3)

28,865 18,791 53.6

Capital Programme

Capital expenditure amounted to £14.7m in the year, of which £4.0m was spent on constructing a new building to house the School of Arts, which is due to be completed in December 2009 at a total cost of £8.9m. A further £2.6m was spent completing the new academic facilities within Woolf College and the College was officially opened during the first term of 2008/09, providing a new 496-seat lecture theatre and seminar rooms, together with multi-functional exhibition space and a small catering outlet. Work also continued on building a new Sports Pavilion at a cost in the year of £2.2m providing up-to-date changing rooms, multi-functional social area and viewing balconies overlooking the grass and artificial pitches. The University continued to invest in improving and updating its facilities with £1.5m refurbishment of and enhancements to security in residential accommodation, £1.1m refurbishment, fitting out and equipping of academic-related space and £0.4m modernisation of catering outlets and other social spaces. A total of £8.6m of the teaching and research-related capital expenditure was funded using the HEFCE Capital Investment Framework grant, with some funding that was received in advance at year-end being used to refurbish lecture theatres and seminar rooms over the summer vacation.

The University’s Estates Strategy was approved in the year and a capital programme for the next five years was presented to Council detailing approximately £140m of investment into the Estate, which goes part way to achieving this. Council approved a new £50m project to provide more campus residential accommodation at Canterbury following the University’s growth in student numbers, and a further £10m investment in the Medway campus was agreed, providing enhanced sports facilities for both academic and recreational purposes and further teaching and learning accommodation.

Gearing

Long-term bank loan debt has fallen by a further £2.1m in the year with gearing levels now reduced to 37% as a percentage of income. Further loan funding is being considered as part of the overall capital investment programme described above.

Equal Opportunities and Diversity

In line with the general intention of its Charter and the law, the University confirms its commitment to policies of equality and diversity, and to the implementation of these policies.

Equality and diversity issues, relating both to staff and students, are regularly considered by the Staff Policy and Student Services Committees. The University employs an Equality and Diversity Manager who acts as a focus for work in these areas on a day-to-day basis. An award is offered to staff who complete a programme of Equality and Diversity training and so far 69 staff working in 24 departments have completed this award. The University has recently applied for a Leadership Foundation Staff Development Impact Award for this initiative.



Employee Involvement

The University places considerable value on the involvement of its employees and on good communications. Newsletters are produced during the year for all staff and information and regular news updates are also available via ‘Campus on-line’ and ‘News’ on the University website and from heads of academic schools and professional service departments reporting back from the Managers’ Forum meetings. Staff are also encouraged to participate in formal and informal consultation at University, faculty and departmental level and have regular opportunities to interact with the Vice-Chancellor and other senior staff at departmental and informal meetings and social occasions. In addition there are termly meetings with the recognised Trades Unions and representatives of non-union staff and managers. There are four elected staff representatives on Council. The University has developed an internal communications strategy which is based on the HEFCE-funded "HElix" model.

Staff Development

The University offers a wide range of staff development opportunities to all staff and achievements in staff development are recognised at the annual award ceremony where the Vice-Chancellor presents staff with their certificates. The University offers an internal management development programme which has been running for more than two years which provides modules in strategy and people management.

Environment

The University achieved its Carbon Trust Standard Accreditation during the year and, at the time of award, was one of only eight HE institutions in the UK to have attained this. This reflects the ongoing work by the University to reduce its carbon footprint and forms a big part of the Estates Strategy, with further projects scheduled to improve the University’s infrastructure and reduce emissions and fuel consumption. This work will be aided by the recent appointment of an Environmental Coordinator, jointly funded by the University and Kent Union, and the successful bid through the HEFCE and SALIX Revolving Green Fund: Institutional Small Projects round, which will provide a recoverable grant of £320k for capital projects that produce energy efficiencies.

Payment of Creditors

It is the University’s policy to obtain the best terms for all business and, thus, there is no single policy as to the terms used. In agreements negotiated with suppliers, the University endeavours to include and abide by specific payment terms.

Going Concern

After making appropriate enquiries, the Council considers that the University has adequate resources to continue in operational existence for the foreseeable future. For this reason the financial statements have been prepared on a going concern basis.

Conclusion

Once again, the University has had an excellent year, both in terms of its academic activities and financial outturn. Our staff have risen to the challenges presented by the Research Assessment Exercise while continuing to deliver high quality teaching to an increasing number of students. They have done this against a background of constrained financial resources and greater competition for funding and students. Academic schools are ably supported by service departments whose professionalism and commitment have ensured that the University remains at the forefront in providing an excellent student experience.



Clearly, the economic climate is challenging and is likely to become more so for universities in the foreseeable future. I am convinced that, with the excellent staff we have, and the facilities and financial base that we have created, the University will continue to meet those new challenges and the opportunities that will arise.

Professor Julia Goodfellow

Vice-Chancellor24 November 2009


CORPORATE GOVERNANCE STATEMENT

The Statement which follows is provided to enable readers of the Annual Report and Accounts of the University to obtain a better understanding of its governance and legal structure.

The University endeavours to conduct its business in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership) and with the guidance to universities given by the Committee of University Chairmen (CUC) in its Guide for Members of HE Governing Bodies in the UK (February/March 2009). The University is committed to achieving best practice in all aspects of Corporate Governance.

The University is an independent corporation, whose legal status derives from a Royal Charter originally granted in 1965. Its objects, powers and framework of governance are set out in the Charter and its supporting statutes, the latest version of which was approved by the Privy Council in 2006.

The Charter and Statutes require the University to have three separate bodies, each with clearly defined functions and responsibilities, to oversee and manage its activities, as follows:

� The Council is the executive governing body, responsible for the finance, property, investments and general business of the University, and for setting the general strategic direction of the institution. Council has 25 members with a majority (17 members - 68%) from outside the University (described as lay members), from whom its chair and its deputy chair must be appointed. Members also include representatives of the staff of the University and the student body. Members do not receive any payment for their work in relation to the Council. Lay members may, however, claim reimbursement of associated travel costs and expenses.

� The Senate is the academic authority of the University and draws its membership (currently 49 members) almost entirely from academic and research staff and students of the University. Its role is to direct and regulate the teaching and research work of the University.

� The Court is a large, mainly formal, body comprising nearly 500 members. It offers a means whereby the wider interests served by the University can be associated with the institution, and provides a forum where members of Court can be briefed and comment on key University activities and developments. The Court meets at least once a year to receive the Annual Report and audited financial statements of the University. In addition the Court appoints the Chancellor, on the nomination of the Council after consultation with Senate, whose role is to preside over meetings of the Court and Congregations for the conferring of degrees. Many members of the Court are from outside the University, representing the local community and other designated bodies with an interest in the work of the University. The membership also includes professorial staff and representatives of other staff (both academic and non-academic) and the student body.

The Vice-Chancellor, the principal academic and administrative officer of the University, has a general responsibility to the Council for maintaining and promoting the efficiency and good order of the University. Under the terms of the Financial Memorandum between the University and the Higher Education Funding Council for England (HEFCE), the Vice-Chancellor is the accounting officer of the University and in that capacity can be summoned to appear before the Public Accounts Committee of the House of Commons.



The University’s compliance with the CUC Governance Code of Practice includes the adoption of a Statement of the Council’s Primary Responsibilities which may be found on the Central Secretariat’s website. In brief this encompasses: the appointment of the senior staff and lay members/officers; amendments to the University’s Royal Charter, Statutes and Ordinances; matters relating to the University’s mission, vision and strategic aims; corporate level financial matters and decisions; institutional performance and other requirements arising from the University’s constitutional framework, institutions such as the Funding Council and legislation.

Another requirement from the CUC’s Code is that the Vice-Chancellor provides an annual report to the Council on matters delegated to him/her by Council and arising from Statutes; this is completed in the Autumn Term each year and published on the Central Secretariat website. During 2008/09 Council undertook a review of its effectiveness and that of its committees. This indicated overall effectiveness and a few changes have been made to improve the position further. In December 2006 Council considered the University’s position against identified Key Performance Indicators (KPIs) approved in June 2006. Following review of the KPIs proposed in a report from CUC (November 2006) revised KPIs were adopted and Council considers the University’s performance against these annually in June/July (most recently in July 2009).

Although Council meets at least five times each academic year, much of its detailed work is initially handled by committees, in particular the Finance and Resources Committee, the Staff Policy Committee, the Lay Nominations Committee, the Remuneration Committee and the Audit Committee. The decisions of these committees are formally reported to the Council. These committees are formally constituted as committees of the Council with written terms of reference and specified membership, including lay members (from whom Council generally appoints chairs). The Audit Committee has a particular role in relation to Corporate Governance as its Annual Report is required to include the Committee’s opinion on the adequacy and effectiveness of the University’s arrangements for risk management, control and governance, for promoting economy, efficiency and effectiveness and the arrangements for the management and quality assurance of data submitted to HESA (Higher Education Statistics Agency), HEFCE and other funding bodies.

As chief executive of the University, the Vice-Chancellor exercises considerable influence upon the development of institutional strategy, the identification and planning of new developments, and shaping of the institutional ethos. The Deputy and Pro-Vice-Chancellors, Director of Finance and senior academic and administrative officers all contribute in various ways to aspects of this work but the ultimate responsibility for what is done rests with the Council.

The Statutes of the University provide for the Council to appoint a Secretary of the Council (and of the Court). Any enquiries about the constitution and governance of the University should be addressed to the Secretary of the Council.

The University maintains a Register of Interests of members of the Council and other staff which may be consulted by arrangement with the Secretary of the Council.

Statement of Internal Control

The University Council has responsibility for maintaining a sound system of internal control that supports the achievement of policies, aims and objectives, while safeguarding the public and other funds and assets for which the University is responsible, in accordance with the responsibilities assigned to the Council in the University’s Charter and Statutes and the Financial Memorandum with HEFCE.

The system of internal control is designed to manage rather than eliminate the risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance against material misstatement or loss.



The system of internal control is based on an ongoing process for identifying, evaluating and managing the significant risks faced by the University. This process is designed to identify the principal risks to the achievement of policies, aims and objectives; to evaluate the nature and extent of those risks; and to manage them efficiently, effectively and economically. This process has been in place for the year ended 31 July 2009 and up to the date of approval of the financial statements, and accords with HEFCE guidance.

The Council is responsible for the University’s system of internal control and for reviewing its effectiveness. The following processes have been established:

� Council meets at least five times each year to consider the plans and strategic direction of the University

� Council receives an annual report on Risk Management and the annual reports of the Audit Committee and the Head of Internal Audit Services evaluating the assurance provided by internal controls, including the principal results of risk identification, evaluation and management review of effectiveness

� The Vice-Chancellor’s Executive Group oversees risk management and receives regular reports on risk management activity and performance

� The Audit Committee receives regular reports from the Head of Internal Audit Services which include the Head of Internal Audit Services’ independent opinion on the adequacy and effectiveness of the University’s system of internal control, together with recommendations for improvement

� A University-wide prioritised risk register is maintained, linked to the achievement of institutional objectives and covering business, operational, compliance and financial risk, and it is kept up-to-date through an annual risk assessment exercise to review the risks included and the scorings applied to each

� Risks deemed to be significant are addressed through detailed action plans, with key performance data being collected termly and reported to the Executive Group

� Heads of academic schools and professional service departments are charged with the identification and management of risk under the University’s Strategic Planning Model.

Council’s review of the effectiveness of the system of internal control is informed by Internal Audit Services, which operates to standards defined in the HEFCE Audit Code of Practice (Accountability and Audit). The Internal Audit Service was reviewed for effectiveness by the HEFCE Assurance Service in January 2009, and found to provide a high level of assurance. Council’s review of the effectiveness of the system of internal control is also informed by the work of the executive managers within the University, who have responsibility for the development and maintenance of the internal control framework, and by comments made by the External Auditors in their management letter and other reports.

In 2006 the University’s Audit Committee established a working group to review the University’s risk management practices in the light of HEFCE best practice guidance (HEFCE 2005/11). Actions were agreed to refine the current system and implementation of these plans were managed by the Head of Internal Audit Services throughout 2007/08. These controls have been continued through 2008/09.


STATEMENT OF THE RESPONSIBILITIES OF THE UNIVERSITY’S COUNCIL

In accordance with the University’s Charter of Incorporation, the Council is responsible for the administration and management of the affairs of the University and is required to present audited financial statements for each financial year to the University Court.

The Council is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the University and to enable it to ensure that the financial statements are prepared in accordance with the Charter and Statutes, the Statement of Recommended Practice on Accounting in Higher Education Institutions and other relevant accounting standards.

In addition, within the terms and conditions of a Financial Memorandum agreed between the Higher Education Funding Council for England and the Council of the University, the Council, through its designated office holder, is required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the University and of the surplus or deficit and cash flows for that year.

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

� suitable accounting policies are selected and applied consistently � judgements and estimates are made that are reasonable and prudent � applicable United Kingdom accounting standards have been followed, subject to any

material departures disclosed and explained in the financial statements � financial statements are prepared on the going concern basis unless it is inappropriate to

presume that the University will continue in operation. The Council is satisfied that the University has adequate resources to continue in operation for the foreseeable future; for this reason the going concern basis continues to be adopted in the preparation of the financial statements.

The Council has taken reasonable steps to:

� ensure that funds from HEFCE are used only for the purposes for which they have been given and in accordance with the Financial Memorandum agreed with HEFCE and any other conditions which HEFCE may from time to time prescribe

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

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

expenditure.

The key elements of the University’s system of internal financial control, which is designed to discharge the responsibilities set out above, include the following:

� clear definitions of the responsibilities of, and the authority delegated to, heads of academic schools and professional service departments

� a comprehensive medium and short-term planning process, supplemented by detailed annual income, expenditure, capital and cash flow budgets

� regular reviews of academic performance and financial results involving variance reporting and updates of forecast outturns

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

� comprehensive Financial Regulations, detailing financial controls and procedures, approved by the Finance and Resources Committee and the Council � a professional Internal Audit Office whose annual programme takes into account matters

included in the Risk Register and is approved by the Audit Committee in line with the Full Statement of Internal Control.


REPORT OF THE INDEPENDENT AUDITORS TO THE COUNCIL

OF THE UNIVERSITY OF KENT

We have audited the consolidated and University financial statements (the ‘financial statements’) of the University of Kent for the year ended 31 July 2009 which comprise the consolidated income and expenditure account, the consolidated and University balance sheets, the consolidated cash flow statement, the statement of consolidated total recognised gains and losses and the related notes 1 to 33. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Members of the University's Council, in accordance with the charter and statutes of the University. Our audit work has been undertaken so that we might state to the Members of the University's Council those matters we are required to state to it 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's Council for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Members of the University’s Council and auditors

The University Council's responsibilities for preparing the financial statements in accordance with the 2007 Statement of Recommended Practice: Accounting for Further and Higher Education, applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice) are set out in the Statement of the Responsibilities of the University's Council on page 18.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and the International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the 2007 Statement of Recommended Practice: Accounting for Further and Higher Education. We also report to you whether income from funding councils, grants and income for specific purposes and from other restricted funds administered by the University have been properly applied only for the purposes for which they were received. In addition, we report to you whether, in all material respects, income has been applied in accordance with the statutes and, where appropriate, the financial memorandum with the Higher Education Funding Council for England. We also report to you if in our opinion the operating and financial review is not consistent with the financial statements, if the University has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit.

We read the operating and financial review and the corporate governance statement and consider the implications for our report if we become aware of any apparent misstatements within them or material inconsistencies with the financial statements. We are not required to consider whether the statement of internal control (included as part of the corporate governance statement) covers all risks and controls, or to form an opinion on the effectiveness of the University’s corporate governance procedures or its risk and control procedures.

Basis of opinion

We have conducted our audit in accordance with the International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board, and the Audit Code of Practice issued by the Higher Education Funding Council for England. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the University's Council in preparing the financial statements and whether the accounting policies are appropriate to the group and University’s circumstances, consistently applied and adequately disclosed.

Grant Thornton UK LLP Bryanston Court Selden Hill Hemel Hempstead HP2 4TN

T +44 (0)1442 260200 F +44 (0)1442 236294 www.grant-thornton.co.uk


REPORT OF THE INDEPENDENT AUDITORS TO THE COUNCIL

OF THE UNIVERSITY OF KENT

We planned and have performed our audit so as to obtain all the information and explanations we considered necessary to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we have also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion:

� the financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of affairs of the University and the group as at 31 July 2009 and of the group’s surplus of income over expenditure for the year then ended;

� the financial statements have been properly prepared in accordance with the 2007 Statement of Recommended Practice: Accounting for Further and Higher Education.

� in all material respects, income from the Higher Education Funding Council for England, grants and income for specific purposes and from other restricted funds administered by the University during the year ended 31 July 2009 have been applied for the purposes for which they were received

� in all material respects, income during the year ended 31 July 2009 has been applied in accordance with the University’s statutes and, where appropriate, with the financial memorandum with the Higher Education Funding Council for England.

Grant Thornton UK LLP Registered Auditor Chartered Accountants Hemel Hempstead

25 November 2009

Grant Thornton UK LLP Bryanston Court Selden Hill Hemel Hempstead HP2 4TN

T +44 (0)1442 260200 F +44 (0)1442 236294 www.grant-thornton.co.uk


CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT

FOR THE YEAR ENDED 31 JULY 2009

Note 2008/09 2007/08 £000 £000

INCOME

Funding Council Grants 1 58,808 55,325 Tuition Fees and Education Contracts 2 53,877 43,921 Research Grants and Contracts 3 14,976 13,032 Other Income 4 30,255 31,803 Endowment and Investment Income 5 977 1,264

Total Income 158,893 145,345

EXPENDITURE

Staff Costs 6 89,968 82,704 Exceptional Restructuring Costs 6 820 645 Other Operating Expenses 7 46,154 43,421 Depreciation 11 10,827 8,817 Interest Payable 8 4,093 4,158

Total Expenditure 151,862 139,745

Surplus on Continuing Operations after Depreciation ofAssets at Cost and before Tax 7,031 5,600

Taxation 9 - -

Surplus on Continuing Operations after Depreciation of Assets at Cost and Tax 7,031 5,600

Surplus for the Year Transferred from Accumulated Income in Endowment Funds 78 92 Surplus for the Financial Year Retained withinGeneral Reserves 7,109 5,692

There is no difference between the surplus stated above and the historical cost equivalent.

All gains and losses recognised in the year are included above.

All income and expenditure recognised above is derived from continuing operations.


STATEMENT OF CONSOLIDATED TOTAL RECOGNISED GAINS AND LOSSES


Note 2008/09 2007/08 £000 £000

Surplus for the Financial Year Retained within General Reserves 7,109 5,692

Unrealised Losses on Endowment Asset Investments 19 (523) (683)

New Endowments and Income Retained for the Year 19 136 98

Actuarial Loss on Pension Scheme 28 (214) (248)

Total Recognised Gains and Losses onContinuing Operations relating to the Year 6,508 4,859

RECONCILIATION

Opening Reserves and Endowments 59,186 54,306

Transfer Reserves from Imperial College - 21

Total Recognised Gains and Losses for the Year 6,508 4,859

Closing Reserves and Endowments 65,694 59,186


BALANCE SHEETS AS AT 31 JULY 2009

Consolidated University Note 2009 2008 2009 2008 £000 £000 £000 £000

FIXED ASSETS

Tangible Assets 11 159,338 155,419 159,338 155,419 Investments 12 - - - -

159,338 155,419 159,338 155,419

ENDOWMENT ASSETS 13 4,059 4,446 4,059 4,446

CURRENT ASSETS

Stocks 556 534 556 534 Debtors 14 12,071 9,513 12,051 9,446 Investments 13 3,136 3,574 3,136 3,574 Short-Term Deposits 10,122 145 10,122 145 Cash at Bank and in Hand 15,607 15,072 15,479 14,978

41,492 28,838 41,344 28,677

CREDITORS: AMOUNTS FALLING DUEWITHIN ONE YEAR 15 (29,982) (24,615) (29,978) (24,611)

NET CURRENT ASSETS 11,510 4,223 11,366 4,066

TOTAL ASSETS LESS CURRENT LIABILITIES 174,907 164,088 174,763 163,931

CREDITORS: AMOUNTS FALLING DUEAFTER MORE THAN ONE YEAR 16 (61,001) (63,960) (60,894) (63,840)

PROVISIONS FOR LIABILITIES ANDCHARGES 17 (1,069) (1,215) (1,069) (1,215)

NET ASSETS EXCLUDING PENSION LIABILITY 112,837 98,913 112,800 98,876

NET PENSION LIABILITY (665) (474) (665) (474)

NET ASSETS 112,172 98,439 112,135 98,402


BALANCE SHEETS AS AT 31 JULY 2009

Consolidated University

Note 2009 2008 2009 2008 £000 £000 £000 £000

DEFERRED CAPITAL GRANTS 18 46,478 39,253 46,478 39,253

ENDOWMENTS

Expendable 19 3,102 3,374 3,102 3,374 Permanent 19 957 1,072 957 1,072

4,059 4,446 4,059 4,446

RESERVES

Pension Reserve 20 (665) (474) (665) (474) Revaluation Reserve 21 8,431 8,431 8,431 8,431 General Reserve 22 53,869 46,783 53,832 46,746

61,635 54,740 61,598 54,703

TOTAL FUNDS 112,172 98,439 112,135 98,402

The financial statements on pages 21 to 53 were approved by the Council on 24 November 2009 and signed on its behalf by:

Professor Julia Goodfellow

Vice-Chancellor

John Simmonds

Chair of the Finance and Resources Committee

Denise Everitt

Deputy Vice-Chancellor (Finance and Commercial Services)


CONSOLIDATED CASH FLOW STATEMENT


Note 2008/09 2007/08 £000 £000

Cash Flow from Operating Activities 23 20,058 18,774

Returns on Investments and Servicing of Finance 24 (3,045) (2,937)

Capital Expenditure and Financial Investment 25 (4,368) (10,707)

Management of Liquid Resources 26 (10,130) 148

Financing (1,980) (1,850)

Increase in Cash in the Year 535 3,428

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

2008/09 2007/08 £000 £000

Increase in Cash in the Year 535 3,428

Outflow/(Inflow) from Liquid Resources 10,130 (148)

Repayment of Debt 1,980 1,850

Current Asset Investments: Non-Cash Movements (591) (98)

Change in Net Debt in the Year 12,054 5,032

Net Debt at 1 August (43,817) (48,849)

Net Debt at 31 July 27 (31,763) (43,817)


STATEMENT OF PRINCIPAL ACCOUNTING POLICIES

1. Basis of Preparation

These financial statements have been prepared in accordance with the Statement of Recommended Practice (SORP): Accounting for Further and Higher Education 2007 and in accordance with applicable United Kingdom Accounting Standards.

The financial statements have been prepared under the historical cost convention modified by the revaluation of certain fixed assets and investments.

2. Basis of Consolidation

The consolidated financial statements include the University and its subsidiary undertaking, Kent Enterprise Limited. Intra-group transactions are eliminated fully on consolidation. In accordance with FRS2, the activities of the Students’ Union have not been consolidated because the University does not control those activities. The activities of The University of Kent Development Trust have not been included, as the amounts involved are immaterial.

3. Recognition of Income and Expenditure

Recurrent block grants from the Higher Education Funding Council for England (HEFCE) are recognised in the period in which they are received.

Fee income is stated gross and recognised over the related study period. Where the tuition fee has been reduced by a payment discount, the income receivable is shown net of the discount. Bursaries and scholarships are accounted for gross as expenditure.

Income from research grants, contracts and other services rendered is included to the extent of completion of the contract or service concerned. This is generally equivalent to the sum of the relevant expenditure incurred during the year and any related contributions towards overhead costs. Any future predicted losses on individual long-term contracts are recognised immediately. Any payments received in advance are included in the Balance Sheet within creditors.

Donations with restrictions attached are recognised when the relevant conditions have been met. Donations which are to be retained for the benefit of the University are recognised in the Statement of Consolidated Total Recognised Gains and Losses and in endowments; other donations are recognised by inclusion as other income in the Income and Expenditure Account.

Income from short-term deposits and current asset investments is credited to income in the period in which it is earned.

Endowment income is credited to the Income and Expenditure Account on a receivable basis. Any income on restricted endowments earned in excess of that applied to the specific purpose is transferred from the Income and Expenditure Account to restricted endowments. Any realised gains or losses from dealing in the related assets are retained within the endowments in the Balance Sheet.

Non-recurrent grants from HEFCE or other bodies received in respect of the acquisition or construction of fixed assets are treated as deferred capital grants and amortised in line with depreciation over the life of the assets.



4. Agency Arrangements

Any funds that the University receives and disburses whilst acting as agent on behalf of a funding body and where the University is exposed to minimal risk or enjoys minimal economic benefit in relation to the transaction, are excluded from the Income and Expenditure Account.

5. Maintenance of Premises

The University has a long-term rolling maintenance plan, which forms the basis of the ongoing maintenance of the estate. The cost of long-term and routine corrective maintenance is charged to the Income and Expenditure Account as incurred.

6. Foreign Currency Translation

Transactions denominated in foreign currencies are recorded at the rate of exchange ruling at the dates of the transactions. Assets and liabilities denominated in foreign currencies are translated into sterling either at year end rates or, where there are related forward foreign exchange contracts, at contract rates. All resulting exchange differences are taken to the Income and Expenditure Account in the period in which they arise.

7. Pension Schemes

The University has fully adopted Accounting Standard FRS17 ‘Retirement Benefits’. The impact of this standard has been reflected throughout the financial statements.

Retirement benefits for most employees of the University are provided by the Universities Superannuation Scheme (USS) and the Superannuation Arrangements of the University of London (SAUL). These are defined benefit schemes which are externally funded and contracted out of the State Second Pension (S2P). The assets of both schemes are held in separate trustee administered funds. The University is unable to identify its share of the underlying assets and liabilities of the schemes on a consistent and reasonable basis and therefore, as required by FRS17, accounts for the schemes as if they were defined contribution schemes. As a result, the amount charged to the Income and Expenditure Account represents the contributions payable to the schemes in respect of the accounting period. Informal reviews of the position of the schemes are carried out between formal valuations.

Some employees of the University participate in the local government pension fund which is a defined benefit scheme in which the University’s share of the underlying assets and liabilities have been separately identified. For this fund, the difference between the University’s share of the fair value of the assets held in the fund and the fund’s liabilities, measured on an actuarial basis using the projected unit method, is recognised in the University’s Balance Sheet as a pension scheme asset or liability, as appropriate. The pension scheme balance is recognised net of any related deferred tax balance.

Changes in the defined benefit pension scheme asset or liability arising from factors other than cash contributions by the University are charged to the Income and Expenditure Account or the Statement of Consolidated Total Recognised Gains and Losses in accordance with FRS17.



8. Tangible Fixed Assets

Land and Buildings

Land was valued on an open market existing use basis by Grimley - JR Eve (Chartered Surveyors) on 3 May 1995. In keeping with the transitional rules set out in FRS15 this land valuation is retained as the cost of that land. Freehold land is not depreciated. The University buildings are specialised buildings and therefore it is not appropriate to value them on the basis of open market value. Buildings are included in the Balance Sheet at cost together with subsequent refurbishment expenditure less accumulated depreciation.

Finance costs, which are directly attributable to the construction of land and buildings, are capitalised as part of the cost of those assets, where appropriate.

Buildings under construction are accounted for at cost, based on the value of architects’ certificates and other direct costs incurred to 31 July. They are not depreciated until they are brought into use.

Depreciation on buildings is provided on a straight-line basis over their expected useful economic lives as follows:

Freehold buildings 50 years Components of new buildings e.g. lift, heating, electrical system etc 25 years Refurbishment of academic facilities 15 years Refurbishment of accommodation 10 years Refurbishment of dining and trading facilities 5 years

Where material, a depreciable asset’s anticipated useful economic life is reviewed annually and the accumulated and future depreciation adjusted in accordance with FRS15. During the year, the remaining useful economic lives of previous refurbishments were reviewed, resulting in an additional charge to depreciation of £1.6m. A review of the impairment of a fixed asset is also carried out if events or changes in circumstances indicate that the carrying value of the fixed asset may not be recoverable.

Where land and buildings are acquired with the aid of specific grants they are capitalised and depreciated as above. The related grants are credited to a deferred capital grant account and are released to the Income and Expenditure Account over the expected useful economic life of the related asset on a basis consistent with the depreciation policy.

Certain buildings situated at the Universities at Medway campus are jointly owned by the University of Kent and the University of Greenwich. All costs associated in the purchase and refurbishment of these buildings have been shared equally between both parties and the University of Kent share of this cost has been capitalised in the Balance Sheet.

Equipment

Equipment costing less than £5,000 per individual item or group of related items is written off in the year of acquisition. All other equipment is capitalised at cost.

Capitalised equipment is depreciated over its useful economic life as follows:

General equipment and furniture 5 to 10 years Computer equipment and software 3 to 5 years Equipment acquired for specific research or other projects Project life (generally 3

years)



8. Tangible Fixed Assets (continued)

Where equipment is acquired with the aid of specific grants it is capitalised and depreciated in accordance with the above policy, with the related grant being credited to a deferred capital grant and released to the Income and Expenditure Account over the expected useful economic life of the related equipment.

9. Investments

Fixed asset investments that are not listed on a recognised stock exchange are carried at historical cost less any provision for impairment of their value.

Investments that form part of endowment assets are included in the Balance Sheet at market value and any subsequent appreciation or depreciation of endowment assets is added to or subtracted from the reported endowment funds. Current asset investments are included at the lower of their original cost and net realisable value on a portfolio basis.

10. Stocks

Stocks are stated at the lower of their cost and net realisable value. Where necessary, provision is made for obsolete, slow moving and defective stocks.

11. Taxation

The University is an exempt charity within the meaning of Schedule 2 of the Charities Act 1993 and as such is a charitable company within the meaning of Section 506(1) of the Income and Corporation Taxes Act (ICTA) 1988. Accordingly, the University is exempt from taxation in respect of income or capital gains received within categories covered by Section 505 of the ICTA 1988 and Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied to charitable purposes only, and the extent to which any such exemption is not disapplied by Section 505(4) in respect of non-charitable expenditure arising from non-primary purpose trading. In the event that non-primary purpose trading losses arise, the University treats the trades concerned as being carried out on a commercial basis with a view to realisation of gain within the larger undertaking of the University so that Section 393A(3)(b) of the ICTA 1988 applies to allow the non-primary purpose loss to be offset against the surplus for which tax exemption is disapplied by virtue of the existence of the non-primary purpose trading loss.

The University receives no similar exemption in respect of VAT. Irrecoverable VAT on inputs is included in the costs of such inputs. Any irrecoverable VAT incurred on the purchase of tangible fixed assets is included in the cost of these assets.

As commercial organisations, the University’s subsidiary companies are subject to corporation tax and VAT.

12. Liquid Resources

Liquid resources include sums on short-term deposits with recognised banks and building societies.

13. Provisions

Provisions are recognised when the University has a present legal or constructive obligation as a result of a past event, it is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.



14. Treatment of Operating Leases

All operating lease payments are included in the Income and Expenditure Account in the period to which the payment relates. Future liabilities under such operating leases are disclosed as a financial commitment in the accounts.


NOTES TO THE ACCOUNTS

1. FUNDING COUNCIL GRANTS

2008/09 2007/08 £000 £000

Recurrent Grant (Higher Education Funding Council) 53,514 50,913 Specific Grants

Joint Information Systems Committee (JISC) 1,594 1,326 All Other Grants 1,755 1,644

Deferred Capital Grants Released Buildings (Note 18) 1,408 1,255 Equipment (Note 18) 537 187

58,808 55,325

2. TUITION FEES AND EDUCATION CONTRACTS

2008/09 2007/08 £000 £000

Full-time Home and EU Students 32,885 25,654 Full-time International Students 16,771 14,582 Part-time Fees 3,185 2,685 Research Training Support Grants 473 451 Short Course Fees 563 549

53,877 43,921

3. RESEARCH GRANTS AND CONTRACTS

2008/09 2007/08 £000 £000

Research Councils 6,643 6,416 UK Based Charities 2,191 2,110 UK Industry 612 248 European Commission 1,715 1,118 Other Grants and Contracts 3,815 3,140

14,976 13,032

4. OTHER INCOME

2008/09 2007/08 £000 £000

Residences, Catering and Conferences 19,617 20,397 Other Income-generating Activities 2,450 2,278 Other Grant Income 1,194 1,294 Other Income 6,994 7,834

30,255 31,803



5. ENDOWMENT AND INVESTMENT INCOME

2008/09 2007/08 £000 £000

Income from Expendable Endowment Assets (Note 19) 150 128 Income from Permanent Endowment Assets (Note 19) 45 44 Other Investment Income 142 134 Other Interest Receivable 640 958

977 1,264

6. STAFF COSTS

The average number of persons (including senior post holders) employed by the University during the year expressed as full time equivalents was:

2008/09 2007/08 Avge FTE Avge FTE No. No.

Academic Staff 620 614 Research Staff 134 139 Academic Related Staff 394 374 Clerical Staff 431 426 Manual and Ancillary 306 308 Technical 89 88

1,974 1,949

The above figures exclude 399 FTE (2007/08: 333 FTE) in relation to employees classified as casual workers that are paid by timesheet. This figure includes post-graduate students who assist lecturers by providing part-time teaching to students.

2008/09 2007/08 £000 £000

Staff Costs for the above persons:

Wages and Salaries 75,089 69,029 Social Security Costs 5,895 5,368 Other Pension Costs (Note 28) 8,984 8,307 Exceptional Restructuring Costs 820 645

90,788 83,349

The Exceptional Restructuring Costs relate entirely to early retirements and voluntary severance arrangements.



6. STAFF COSTS (continued)

2008/09 2007/08 £000 £000

Staff Costs by Department:

Academic Departments 48,700 44,815 Academic Services 6,539 5,816 Research Grants and Contracts 6,691 6,554 Administration 16,329 14,149 Catering and Residences 6,418 6,664 Premises 4,056 3,614 Other 1,235 1,092

Sub-total 89,968 82,704

Exceptional Restructuring Costs 820 645

Total 90,788 83,349

Emoluments of the Vice-Chancellor: £000 £000

Salary 193 188 Pension 27 26

Total Emoluments for the Year 220 214

The emoluments of the Vice-Chancellor are determined by the Remuneration Committee which takes into account performance during the year and data from comparable institutions. The emoluments are shown on the same basis as that for higher paid staff.

Remuneration of other Higher Paid Staff, excluding employer’spension contributions: No. No.

£100,000 - £109,999 6 2 £110,000 - £119,999 3 1 £120,000 - £129,999 1 1 £130,000 - £139,999 2 -

There were no payments made to former Higher Paid Staff during the year (2007/08: £Nil) for compensation for loss of office.



7. OTHER OPERATING EXPENSES

2008/09 2007/08 £000 £000

Academic Departments 13,098 12,205 Academic Services 3,179 3,373 Research Grants and Contracts 4,273 3,786 Administration (including Bursary Payments) 11,260 10,182 Catering and Residences 5,460 5,466 Premises 7,482 6,729 Other Expenses 947 1,680 Unrealised Losses on Current Asset Investments 455 -

46,154 43,421

Other Operating Expenses include:

Auditors’ Remuneration 47 41 Auditors’ Remuneration in Respect of Non-Audit Services 25 26 Rents Paid on Buildings (Operating Leases) 362 385

434 452

8. INTEREST PAYABLE

2008/09 2007/08 £000 £000

On Bank Loans repayable wholly in more than five years 4,066 4,151 FRS17 Finance Costs 27 6 Other Interest Payable - 1

4,093 4,158

9. TAXATION

2008/09 2007/08 £000 £000

UK Corporation Tax payable on the profits of the University and subsidiary companies Nil Nil

10. SURPLUS ON CONTINUING OPERATIONS FOR THE YEAR

The Surplus on Continuing Operations for the Year is made up as follows:

2008/09 2007/08 £000 £000

University Surplus for the Year 7,109 5,692 Surplus generated by subsidiary companies - -

7,109 5,692

Details of the University’s subsidiary companies can be found in Note 12.



11. TANGIBLE FIXED ASSETS

Consolidated and University

Freehold Land Assets Under and Buildings Construction Equipment Total

£000 £000 £000 £000 Cost or Valuation

At 1 August 2008 183,468 6,418 30,181 220,067

Additions 5,487 - 2,814 8,301 Buildings Under Construction - 6,445 - 6,445 Transfer Buildings Under Construction 5,542 (5,542) - - Disposals - - (1,484) (1,484)

At 31 July 2009 194,497 7,321 31,511 233,329

Depreciation

At 1 August 2008 39,875 - 24,773 64,648

Charge for the Year 8,054 - 2,773 10,827 Disposals - - (1,484) (1,484)

At 31 July 2009 47,929 - 26,062 73,991

Net Book Value

At 31 July 2009 146,568 7,321 5,449 159,338

At 1 August 2008 143,593 6,418 5,408 155,419

Financed by Capital Grant 39,114 5,354 1,979 46,447 Other 107,454 1,967 3,470 112,891

Net Book Value at 31 July 2009 146,568 7,321 5,449 159,338

Land was acquired both by gift and purchase (£139,000) and is stated at valuation of £8,570,000 and not depreciated. The valuation was prepared by Grimley - J R Eve (Chartered Surveyors) on an open market existing use basis as at 3 May 1995. The land is included in the Balance Sheet at this valuation and the excess of the valuation over net book value (£139,000) has been taken to the Revaluation Reserve (Note 21).

Interest of £Nil on loans used to finance the construction of buildings has been capitalised in the year (Note 8). Total interest capitalised to date, included in the cost of Freehold Land and Buildings, amounted to £852,439 at 31 July 2009.



12. FIXED ASSET INVESTMENTS


2009 2008 £000 £000

Cost of Investment in Subsidiary Companies - -

At 31 July 2009 and 31 July 2008 the University held an interest in the following companies:

Name of Company % Shareholding Nature of Business

Canterbury Business School Limited 100 Dormant Invicta Technology Investments Limited 100 Dormant Kent Business School Limited 100 Dormant Kent Enterprise Limited 100 Other Business Activities Kent Management School Limited 100 Dormant Kent Property Services Limited 100 Dormant Summer Academy Limited 100 Dormant

The financial year-end of all the subsidiaries is 31 July. All the companies are registered in England and Wales.

13. ENDOWMENT ASSETS AND CURRENT ASSET INVESTMENTS

Consolidated and University 2009 2008

£000 £000 Endowment Asset Investments:

Cost Price 5,081 4,945 Market Value 4,059 4,446

Current Asset Investments:

Cost Price 3,591 3,574 Market Value 3,136 3,574



13. ENDOWMENT ASSETS AND CURRENT ASSET INVESTMENTS (continued)


2009 2008 £000 £000

Total Investment Assets:

Balance at 1 August at Market Value 8,020 8,645

Additions 153 58

Depreciation (978) (683)

Investment Assets at Market Value 7,195 8,020

Investments comprise the following:

Charities Investment Funds 6,860 7,838 Equities 35 35 Endowment-Linked Bank Deposit 300 147

7,195 8,020

14. DEBTORS

Consolidated University Restated Restated

2009 2008 2009 2008 £000 £000 £000 £000

Amounts falling due within one year:

Debtors 7,692 5,676 7,672 5,652 Research Grants and Contracts 1,822 1,696 1,822 1,696 Prepayments and Accrued Income 2,557 2,099 2,557 2,098

12,071 9,471 12,051 9,446 Amounts falling due after more than one year:

Debtors - 42 - -

12,071 9,513 12,051 9,446

The above restatement of prior year amounts relates to a re-classification of debtor balances to align the categories with recommended best practice for the HE sector.



15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Consolidated University Restated Restated 2009 2008 2009 2008 £000 £000 £000 £000

Bank Loans Due for Repayment 2,119 1,980 2,119 1,980 Research Grants Received on Account 3,718 3,746 3,718 3,746 Payments Received in Advance 11,767 5,887 11,767 5,887 Creditors and Accrued Liabilities 9,127 10,012 9,123 10,008 Taxation and Social Security 3,251 2,990 3,251 2,990

29,982 24,615 29,978 24,611

The above restatement of prior year amounts relates to a re-classification of creditor balances to align the categories with recommended best practice for the HE sector.

16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR


2009 2008 2009 2008 £000 £000 £000 £000

Mortgages secured on University Buildings 60,628 62,608 60,628 62,608 Less: Bank Loans repayable within one-year (2,119) (1,980) (2,119) (1,980) Capital Grant Creditors - 1,217 - 1,217

58,509 61,845 58,509 61,845

Other Long-Term Liabilities 2,492 2,115 2,385 1,995

61,001 63,960 60,894 63,840

Payable as follows:

Between one and two years 2,266 2,334 2,266 2,214 Between two and five years 7,792 8,761 7,685 8,761 After five years 50,943 52,865 50,943 52,865

61,001 63,960 60,894 63,840

The University has one variable rate loan of £750,000 that commenced on 3 February 2003 and is repayable by equal principal instalments until 6 February 2013. Interest is charged at the current LIBOR rate plus 0.75%. All other bank loans are at commercial fixed rates of between 5.31% and 8.75% and are repayable by instalments falling due between 1 August 2009 and 1 October 2030.



17. PROVISIONS FOR LIABILITIES AND CHARGES


Restructuring Pensions Total £000 £000 £000

Balance at 1 August 2008 471 744 1,215

Utilised in the Year (446) (164) (610) Transferred from Income andExpenditure Account 596 (132) 464

Balance at 31 July 2009 621 448 1,069

The Restructuring Provision relates to the estimated costs of early retirement and voluntary severance arrangements.

The Pensions Provision relates to amounts payable to part-time members of staff following decisions by the European Court of Justice, pending the outcome of UK Industrial Tribunal cases.



18. DEFERRED CAPITAL GRANTS


Funding Other Total Council Grants and

Benefactions £000 £000 £000

Balance at 1 August 2008

Buildings 24,549 13,468 38,017 Equipment 253 983 1,236

24,802 14,451 39,253

Cash Received

Buildings 6,997 1,719 8,716 Equipment 1,702 256 1,958

8,699 1,975 10,674

Released to Income and Expenditure

Buildings (1,408) (826) (2,234) Equipment (537) (678) (1,215)

(1,945) (1,504) (3,449)

Balance at 31 July 2009

Buildings 30,138 14,361 44,499 Equipment 1,418 561 1,979

31,556 14,922 46,478



19. ENDOWMENTS


Unrestricted Restricted Total Restricted Total Total Permanent Permanent Permanent Expendable 2009 2008 £000 £000 £000 £000 £000 £000

Balance at 1 August

Capital Value 418 446 864 2,999 3,863 4,501 Accumulated Income - 208 208 375 583 530

418 654 1,072 3,374 4,446 5,031

New Endowments - 2 2 212 214 190 Investment Income 18 27 45 150 195 172 Expenditure (18) (28) (46) (227) (273) (264)

Decrease in Market Value ofInvestments (54) (62) (116) (407) (523) (683)

Balance at 31 July 364 593 957 3,102 4,059 4,446

Represented by:

Capital Value 364 408 772 2,737 3,509 3,863 Accumulated Income - 185 185 365 550 583

364 593 957 3,102 4,059 4,446



20. PENSION RESERVE


2009 2008 £000 £000

Balance at 1 August (474) (325)

Actuarial Loss (214) (248) Transferred to General Reserve 23 99

Balance at 31 July (665) (474)

21. REVALUATION RESERVE


2009 2008 £000 £000

Net Revaluation Amount at 1 August 8,431 8,431

Transferred to General Reserve - -

Net Revaluation Amount at 31 July 8,431 8,431

The Revaluation Reserve relates to land valued at £8,431,363.

22. MOVEMENT ON GENERAL RESERVES


£000 £000 Income and Expenditure Account Reserve:

Balance at 1 August 2008 46,783 46,746

Historical Cost Surplus after Depreciation of Assets at Cost,Disposal of Assets and Tax 7,109 7,109

Transfer from Pension Liability (23) (23)

Balance at 31 July 2009 53,869 53,832



23. RECONCILIATION OF CONSOLIDATED OPERATING SURPLUS

TO NET CASH FROM OPERATING ACTIVITIES

2008/09 2007/08 £000 £000

Surplus before Tax 7,109 5,692 Depreciation (Note 11) 10,827 8,817 Deferred Capital Grants Released to Income (Note 18) (3,449) (2,720) Interest and Endowments Receivable (1,055) (1,356) Interest Payable 4,093 4,158 Increase in Stocks (22) (19) (Increase)/Decrease in Debtors, Prepayments and Research Grants (2,586) 487 Decrease in Current Asset Investments 455 - Increase in Creditors 4,882 3,136 (Decrease)/Increase in Provisions (146) 678 Other Non-cash Movements (50) (99)

Net Cash Inflow from Operating Activities 20,058 18,774

24. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

2008/09 2007/08 £000 £000

Income from Endowments 195 172 Income from Investments and Short-Term Deposits 810 1,089 Interest Paid (4,050) (4,198)

Net Cash Outflow from Returns on Investments andServicing of Finance (3,045) (2,937)

25. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT

2008/09 2007/08 £000 £000

Purchase of Tangible Fixed Assets (15,256) (17,834) Investment Assets Sold - 1 Deferred Capital Grants Received 10,674 6,915 Endowments Received 214 190 Reserve Transfer from Imperial College - 21

Net Cash Outflow for Capital Expenditure and Financial Investment (4,368) (10,707)



26. MANAGEMENT OF LIQUID RESOURCES

2008/09 2007/08 £000 £000

(Increase)/Decrease in Current Asset Investments andShort-Term Deposits (10,130) 148 Net Cash (Outflow)/Inflow from Management of Liquid Resources (10,130) 148

27. ANALYSIS OF CHANGES IN NET DEBT

At Cash Other At 1 August Flows Changes 31 July

2008 2009 £000 £000 £000 £000

Current Asset Investments 3,574 153 (591) 3,136 Short-Term Deposits 145 9,977 - 10,122 Cash at Bank and in Hand 15,072 535 - 15,607 18,791 10,665 (591) 28,865 Debt due within one year:

Bank Loan (1,980) 1,980 (2,119) (2,119) Debt due after one year (60,628) - 2,119 (58,509)

(43,817) 12,645 (591) (31,763)



28. PENSION SCHEMES

The two principal pension schemes for the University’s staff are the Universities Superannuation Scheme (USS) and the Superannuation Arrangements of the University of London (SAUL). The University also participates in a Local Government Pension Fund.

The total pension cost for the University and its subsidiaries are:

2008/09 2007/08 £000 £000

Contributions to USS 6,980 6,361 Contributions to SAUL 1,918 1,791 Contributions to Other Schemes 86 155

Total Pension Cost (Note 6) 8,984 8,307

The 2008/09 contributions to Other Schemes includes £46,667 (2007/08: £100,333) additional pension contributions payable to a local government pension scheme primarily in respect of past service performed. There is only one active member of the Scheme employed by the University and no new members are admitted.

USS PENSION SCHEME

The University participates in the Universities Superannuation Scheme (USS), a defined benefit scheme which is contracted out of the State Second Pension (S2P). The assets of the Scheme are held in a separate fund administered by the trustee, Universities Superannuation Scheme Limited (USS). USS has over 130,000 active members and the University has 1194 active members participating in the Scheme.

The appointment of directors to the board of the trustee is determined by the company’s Articles of Association. Four of the directors are appointed by Universities UK; three are appointed by the University and College Union, of whom at least one must be a USS pensioner member; one is appointed by the Higher Education Funding Councils; and a minimum of two and a maximum of four are co-opted directors appointed by the management committee. Under the Scheme trust deed and rules, the employer contribution rate is determined by the trustee, acting on actuarial advice.

Because of the mutual nature of the Scheme, the University is unable to identify its share of the underlying assets and liabilities of the Scheme on a consistent and reasonable basis and therefore, as required by FRS17 ‘Retirement Benefits’, accounts for the Scheme as if it were a defined contribution scheme. As a result, the amount charged to the Income and Expenditure Account represents the contributions payable to the Scheme in respect of the accounting period.

The latest actuarial valuation of the Scheme was as at 31 March 2008. This was the first valuation for USS under the new scheme-specific funding regime introduced by the Pensions Act 2004, which requires schemes to adopt a statutory funding objective which is to have sufficient and appropriate assets to cover their technical provisions.

The valuation was carried out using the projected unit method. The assumptions which have the most significant effect on the result of the valuation are those relating to the rate of return on investments (i.e. the valuation rate of interest), the rates of increase in salary and pensions and the assumed rates of mortality. The financial assumptions were derived from market yields prevailing at the valuation date. An ‘inflation risk premium’ adjustment was also included by deducting 0.3% from the market-implied inflation on account of the historically high level of inflation implied by government bonds (particularly when compared to the Bank of England’s target of 2% for CPI which corresponds broadly to 2.75% for RPI per annum).



28. PENSION SCHEMES (continued)

To calculate the technical provisions, it was assumed that the valuation rate of interest would be 6.4% per annum (which includes an additional assumed investment return over gilts of 2% per annum), salary increases would be 4.3% per annum (plus an additional allowance for increases in salaries due to age and promotion reflecting historic Scheme experience, with a further cautionary reserve on top for past service liabilities) and pensions would increase by 3.3% per annum.

Standard mortality tables were used as follows:

Male members’ mortality PA92 MC YoB tables - rated down 1 year Female members’ mortality PA92 MC YoB tables – No age rating

Use of these mortality tables reasonably reflects the actual USS experience, but also provides an element of conservatism to allow for further improvements in mortality rates. The assumed life expectations on retirement at age 65 are:

Males (Females) currently aged 65 22.8 (24.8) years Males (Females) currently aged 45 24.0 (25.9) years

At the valuation date, the value of the assets of the Scheme was £28,842.6 million and the value of the Scheme’s technical provisions was £28,135.3 million indicating a surplus of £707.3 million. The assets therefore were sufficient to cover 103% of the benefits which had accrued to members after allowing for expected future increases in earnings.

The actuary also valued the Scheme on a number of other bases as at the valuation date. On the Scheme’s historic gilts basis, using a valuation rate of interest in respect of past service liabilities of 4.4% per annum (the expected return on gilts) the funding level was approximately 71%. Under the Pension Protection Fund regulations introduced by the Pensions Act 2004 the Scheme was 107% funded; on a buy-out basis (i.e. assuming the Scheme had discontinued on the valuation date) the assets would have been approximately 79% of the amount necessary to secure all the USS benefits with an insurance company; and using the FRS17 formula as if USS was a single employer scheme, using an AA bond discount rate of 6.5% per annum based on spot yields, the actuary estimated that the funding level at 31 March 2008 was 104%.

The technical provisions relate essentially to the past service liabilities and funding levels, but it is also necessary to assess the ongoing cost of newly accruing benefits. The cost of future accrual was calculated using the same assumptions as those used to calculate the technical provisions except that the valuation rate of interest assumed asset outperformance over gilts of 1.7% per annum (compared to 2% per annum for the technical provisions) giving a discount rate of 6.1% per annum; also the allowance for promotional salary increases was not as high. There is currently uncertainty in the sector regarding pay growth. Analysis has shown very variable levels of growth over and above general pay increases in recent years, and the salary growth assumption built into the cost of future accrual is based on more stable, historic salary experience. However, when calculating the past service liabilities of the Scheme, a cautionary reserve has been included, in addition, on account of the variability mentioned above.

The institution contribution rate required for future service benefits alone at the date of the valuation was 16% of pensionable salaries and the trustee company, on the advice of the actuary, agreed to increase the institution contribution rate from 14% to 16% of pensionable salaries from 1 October 2009.

Since 31 March 2008 global investment markets have continued to fall and at 31 March 2009 the actuary has estimated that the funding level under the new scheme-specific funding regime had fallen from 103% to 74%. This estimate is based on the funding level at 31 March 2008, adjusted to reflect the funds’ actual investment performance over the year and changes in market conditions (market conditions affect both the valuation rate of interest and also the




inflation assumption which in turn impacts on the salary and pension increase assumptions).

On the FRS17 basis, using an AA bond discount rate of 7.1% per annum based on spot yields, the actuary estimated that the funding level at 31 March 2009 was 86%. An estimate of the funding level measured on a buy-out basis at that date was approximately 46%.

Surpluses or deficits which arise at future valuations may impact on the University’s future contribution commitment. A deficit may require additional funding in the form of higher contribution requirements, where a surplus could, perhaps, be used to similarly reduce contribution requirements. The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:

Assumption Change in Assumption Impact on Scheme

LiabilitiesValuation rate of interest Increase/Decrease by 0.5% Decrease/Increase by £2.2bnRate of pension increases Increase/Decrease by 0.5% Increase/Decrease by £1.5bnRate of salary growth Increase/Decrease by 0.5% Increase/Decrease by £0.7bnRate of mortality More prudent assumption

(move to long cohort future improvements from the medium cohort adopted at the valuation)

Increase by £1.6bn

USS is a “last man standing” scheme so that in the event of the insolvency of any of the participating employers in USS, the amount of any pension funding shortfall (which cannot otherwise be recovered) in respect of that employer will be spread across the remaining participant employers and reflected in the next actuarial valuation of the Scheme.

The Trustee believes that over the long-term equity investment and investment in selected alternative asset classes will provide superior returns to other investment classes. The management structure and targets set are designed to give the fund a bias towards equities through portfolios that are diversified both geographically and by sector. The Trustee recognises that it would be possible to select investments producing income flows broadly similar to the estimated liability cash flows: However, in order to meet the long-term funding objective within a level of contributions that it considers the employers would be willing to make, the Trustee has agreed to take on a degree of investment risk relative to the liabilities. This taking of investment risk seeks to target a greater return than the matching assets would provide whilst maintaining a prudent approach to meeting the fund’s liabilities. Before deciding to take investment risk relative to the liabilities, the Trustee receives advice from its investment consultant and the scheme actuary, and considers the views of the employers. The strong positive cash flow of the scheme means that it is not necessary to realise investments to meet liabilities. The Trustee believes that this, together with the ongoing flow of new entrants into the scheme and the strength of covenant of the employers, enables it to take a long-term view of its investments. Short-term volatility of returns can be tolerated and need not feed through directly to the contribution rate. The actuary has confirmed that the Scheme’s cash flow is likely to remain positive for the next ten years or more.

The next formal triennial actuarial valuation is due as at 31 March 2011. The contribution rate will be reviewed as part of each valuation and may be reviewed more frequently.

The USS pension cost for the University was £6,979,724 (2007/08: £6,360,591). This includes £590,801 (2008: £541,477) outstanding contributions at the balance sheet date.




SAUL PENSION SCHEME

The University participates in a centralised defined benefit scheme for all qualified employees with the assets held in separate Trustee-administered funds. The University has now adopted FRS17 for accounting for pension costs. It is not possible to identify the University’s share of the underlying assets and liabilities of SAUL. Therefore contributions are accounted for as if SAUL were a defined contribution scheme and pension costs are based on the amounts actually paid (i.e. cash amounts) in accordance with paragraphs 8-12 of FRS17.

SAUL is subject to triennial valuations by professionally qualified and independent actuaries. The last available valuation was carried out as at 31 March 2008 using the projected unit credit method in which the actuarial liability makes allowance for projected earnings. The following assumptions were used to assess the past service funding position and future service liabilities:

Valuation Method Projected Unit Past Service Future Service

Investment return on liabilities - before retirement 6.9% pa 7.0% pa - after retirement 4.8% pa 5.0% pa

Salary growth* 4.85% pa 4.85% pa Pension increases 3.35% pa 3.35% pa * excluding an allowance for promotion increases.

The actuarial valuation applies to SAUL as a whole and does not identify surpluses or deficits applicable to individual employers. As a whole, the market value of SAUL’s assets was £1,266 million representing 100% of the liability for benefits after allowing for expected future increases in salaries.

Based on the strength of the employer covenant and the Trustee’s long-term investment strategy, the Trustee and the employers agreed to maintain employer and member contributions at 13% of salaries and 6% of salaries respectively following the valuation.

A comparison of SAUL’s assets and liabilities calculated using assumptions consistent with FRS17 revealed SAUL to be in surplus at the last formal valuation date (31 March 2008). The next formal actuarial valuation is due as at 31 March 2011 when the above rates will be reviewed.

The SAUL pension cost for the University and its subsidiary companies was £1,917,792 (2007/08: £1,789,539). This includes £176,472 (2008: £163,188) outstanding contributions at the balance sheet date.

LOCAL GOVERNMENT PENSION FUND

The University also participates in a defined benefit local government pension fund, in which there is only one active member currently employed by the University and no new members are admitted.




The fair values of the University’s share of the assets in the fund at the balance sheet date can be analysed as follows:

Expected Return Expected Return On Assets Assets at On Assets Assets at at 31 July 2009 31 July 2009 at 31 July 2008 31 July 2008 % pa £000 % pa £000

Equities 7.3 656 7.8 685 Bonds 5.3 162 5.7 176 Property 5.3 76 5.7 104 Cash 4.3 57 4.8 73

Total 6.6 951 7.0 1,038

The main actuarial assumptions at the balance sheet date were as follows:

31 July 2009 31 July 2008 % pa % pa

Inflation/Pension increase rate 3.7 3.8Salary increase rate 5.2 5.3Expected return on assets 6.6 7.0Discount rate 6.0 6.7

Life expectancy assumptions are based on the PFA92 and PMA92 tables, projected to calendar year 2033 for non pensioners and 2017 for pensioners. Based on this, the average life expectancies at age 65 are summarised below:

Males Females

Current pensioners 21.5 years 24.4 years Future pensioners 22.6 years 25.5 years

The fair value of the fund assets, the present value of the fund liabilities and the resulting deficit on the fund as recognised in the Balance Sheet are as follows:

2009 2008 £000 £000

Fair Value of Fund Assets 951 1,038 Present Value of Fund Liabilities (1,577) (1,454) Present Value of Unfunded Liabilities (39) (58)

Net Pension Liability (665) (474)




The movement in the deficit during the year can be analysed as follows:

2008/09 2007/08 £000 £000

Defined Benefit Obligation at 1 August (1,512) (1,454)

Current Service Cost (8) (7) Interest Cost (99) (82) Contributions by Members (2) (2) Actuarial (Losses)/Gains (80) (47) Past Service Costs - (6) Estimated Unfunded Benefits Paid 3 5 Estimated Benefits Paid 82 81

Defined Benefit Obligation at 31 July (1,616) (1,512)

Fair Value of Employer’s Assets at 1 August 1,038 1,129

Expected Return on Assets 72 82 Contributions by Members 2 2 Contributions by the University 55 107 Contributions in respect of Unfunded Benefits 3 5 Actuarial (Losses)/Gains (134) (201) Unfunded Benefits Paid (3) (5) Benefits Paid (82) (81)

Fair Value of Employer’s Assets at 31 July 951 1,038

Net Pension Fund Deficit at 31 July (665) (474)




The amounts recognised in the Income and Expenditure Account in the current year can be analysed as follows: 2008/09 2007/08

£000 % of pay £000 % of pay

Current Service Cost 8 22.4% 7 23.9% Interest Cost 99 275.0% 82 264.5% Expected Return on Employer Assets (72) (200.0%) (82) (264.5%) Past Service Cost - 0.0% 6 19.4%

35 97.4% 13 43.3%

Actual Return on Fund Assets (62) (111)

Amounts for the current and previous four years are as follows: 2008/09 2007/08 2006/07 2005/06 2004/05 £000 £000 £000 £000 £000

Fair Value of Employer Assets 951 1,038 1,129 1,015 876 Present Value of Defined Benefit Obligation (1,616) (1,512) (1,454) (1,535) (1,512) Deficit (665) (474) (325) (520) (636) Experience (Losses)/Gains on Assets (134) (201) 25 76 99 Experience (Losses)/Gains on Liabilities 21 (62) 1 (2) 4

Recognised in the Statement of Consolidated Total Recognised Gains and Losses (STRGL)

2008/09 2007/08 2006/07 2005/06 2004/05 £000 £000 £000 £000 £000

Actuarial (Losses)/Gains (214) (248) 95 40 (15) Increase/(Decrease) in Irrecoverable Surplus from membership fall and other factors - - - - -

Actuarial (Losses)/Gains Recognised in STRGL (214) (248) 95 40 (15)

Cumulative Actuarial (Losses)/Gains (342) (128) 120 25 (15)



29. CAPITAL COMMITMENTS


2009 2008 £000 £000

Contractual Commitments at 31 July 6,863 4,023

OTHER CAPITAL PROJECTS

The University has agreed, but it is not yet contractually committed, to contribute a sum of £3m towards a total £11m project to provide sports facilities at Medway Park. This is referred to in more detail in the Operating and Financial Review.

30. FINANCIAL COMMITMENTS

At 31 July, there were annual commitments under non-cancellable operating leases as follows:


2009 2008 £000 £000

Land and Buildings:

Expiring within one year 527 111 Expiring within two and five years inclusive - 251 Expiring in over five years 251 -

778 362

Other:

Expiring within one year 9 6 Expiring within two and five years inclusive 11 -

20 6

31. CONTINGENT LIABILITIES

CROSS-GUARANTEES

On the 23 June 1993 the University entered into a cross guarantee for the indebtedness of Kent Enterprise Limited in favour of National Westminster Bank Plc.

UM ASSOCIATION (SPECIAL RISKS) LIMITED

The University is a member of UM Association (Special Risks) Limited, a company limited by guarantee formed as a mutual association to financially assist its members in respect of certain terrorism risks. The rules of the Association allow the directors of the company to make discretionary awards to members who suffer uninsured losses arising from a terrorism incident, but also allow the directors to seek a supplementary contribution from all members on a pro rata basis if additional resources are required to meet the discretionary awards. Up to 31 July 2009, no supplementary contribution has been requested from the University during the lifetime of its membership of the Association. With effect from 1 August 2009, the clause under which the directors were empowered to impose a supplementary contribution has been removed from the Association’s rules.



32. ACCESS FUNDS

2008/09 2007/08 £000 £000

Balance Unspent at 1 August 4 12

Funding Council Grants 409 488 Interest earned 4 8

413 496

Disbursed to students (397) (490) Audit fees (1) (1) Access administration costs (12) (13)

Balance Unspent at 31 July 7 4

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

33. RELATED PARTY TRANSACTIONS

KENT MAN LIMITED

The University is one of five partners in Kent MAN Limited, a company formed on 1 April 2002 and limited by guarantee, maintaining micro-wave radio links between Higher Education Institutions in Kent.

SUBSIDIARY COMPANIES

All related party transactions are between the University of Kent and its wholly owned subsidiaries. As such the University has taken advantage of the specific exemption given under Financial Reporting Standard 8 and not disclosed these transactions.

University of KentThe Registry, CanterburyKent CT2 7NZ

www.kent.ac.uk 108917

UoK 2009 ARIAL 171109 PDF - University of Kent · Sally Muggeridge Richard Oldfield Vicky Pryce...

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