Financial Statements 2002-2003 - University of Kent · Council and Finance-Related Committees 2 Status and Mission 3 Treasurer’s Report 4 - 7 Management Statistics 8 - 9 Corporate

Financial Statements 2002-2003

The University of Kentat Canterbury I at Medway I at Tonbridge I at Brusselsand throughout its region and Euroregion

FINANCIAL STATEMENTS 2002/03 1

UNIVERSITY OF KENT FINANCIAL STATEMENTS FOR THE YEAR TO 31 JULY 2003 CONTENTS PAGE Council and Finance-Related Committees 2 Status and Mission 3 Treasurer’s Report 4 - 7 Management Statistics 8 - 9 Corporate Governance Statement 10 - 12 Independent Auditors’ Report 13 - 14 Statement of Principal Accounting Policies 15 - 17 Consolidated Income and Expenditure Account 18 Statement of Consolidated Total Recognised Gains and Losses 19 Balance Sheets 20 - 21 Consolidated Cash Flow Statement 22 Notes to the Accounts 23 - 39

2 UNIVERSITY OF KENT

COUNCIL AND FINANCE-RELATED COMMITTEES

The Council Chairman: Pro-Chancellor: Sir Geoffrey Chipperfield Ex officio members: Chancellor: Sir Crispin Tickell Deputy Pro-Chancellor: Sir Derek Boorman Treasurer: Alister Dunning Deputy Treasurer: Ronnie Norman Vice-Chancellor: Professor David Melville Deputy Vice-Chancellor: David Nightingale Pro-Vice-Chancellors: Professor Phillip Davies Professor Keith Mander Deans of the Faculties: Ursula Fuller Professor Chris Hale Dr Francis Lough President of the Students' Union: Sam Abu-Dehays Appointed representatives: Kent County Council: John Simmonds Medway Council: Judith Armitt Canterbury City Council: Colin Carmichael External and co-opted members: Mary Berg Dr Simon Campbell George Kennedy John Levett Judge Giles Rooke Jonathan Sloggett John Spence Allison Wainman Robert Worcester Two vacancies Staff and Student representatives: Professor William Gullick Steve Holland Dr David Hornsby Stephen Phillpott John Whyte Secretary to the Council: Nick McHard Audit Committee Chairman: John Spence Members: Dr Alan Bunch David Pentin Judge Giles Rooke Professor Brian Rutherford John Simmonds Secretary: Karen Goffin

Finance and Resources Committee Chairman: Treasurer: Alister Dunning Members: Vice-Chancellor: Professor David Melville Deputy Vice-Chancellor: David Nightingale Pro-Vice-Chancellors: Professor Phillip Davies Professor Keith Mander Deputy Treasurer: Ronnie Norman Chairman of Estates Board: Mary Berg Sir Geoffrey Chipperfield Ursula Fuller Professor Chris Hale Steve Holland George Kennedy Dr Francis Lough Allison Wainman Secretary: Karen Goffin Investments Sub-Committee Chairman: Treasurer: Alister Dunning Members: Deputy Treasurer: Ronnie Norman Professor David Melville Malcolm Brown Secretary: Neil Oliver Remuneration Committee Chairman: Pro-Chancellor: Sir Geoffrey Chipperfield Members: Treasurer: Alister Dunning George Kennedy Professor David Melville (except for his own remuneration) Secretary: Nick McHard (Professor David Melville for Nick McHard's remuneration)


STATUS AND MISSION

STATUS The University was incorporated by Royal Charter in1965 and is an exempt charity within the meaning of the Charities Act. MISSION The University of Kent:

• provides higher education of excellent quality o characterised by flexibility and interdisciplinarity o informed by research and scholarship o meeting the lifelong needs of a diversity of students

• enlarges knowledge by research

o to standards achieving international recognition o throughout its subject range

• is an intellectual and cultural focus for Canterbury and Kent

• supports national and regional economic success

• builds vigorously on its close ties within Europe and continues to develop wider international

relationships. These broad aims are supported by five cross-cutting strategies:

• ensure sound management of the University

• maintain and develop a diverse workforce that can respond professionally and confidently to the University’s objectives

• enhance the effectiveness of the University by providing appropriate and well-equipped teaching,

learning, research and support space for staff and students

• use information and information systems efficiently and effectively to support the University’s objectives

• provide a safe and healthy environment for staff and students.


TREASURER’S REPORT Scope of the Financial Statements I am pleased to be able to submit the financial statements for the year ended 31 July 2003. These have been prepared on a consolidated basis, as set out in Note 12, and include all the recommendations outlined in the Statement of Recommended Practice (SORP) “Accounting in Higher Education Institutions” issued in August 2000. The companies consolidated are ASRU Limited, Kent Enterprise Limited and Kent Property Services Limited. A decision to close ASRU Limited was made by the University Council on 26 March 2002 and the company ceased trading in September 2002. Liquidators were appointed on 3 April 2003. On 1 April 2003 the University officially changed its name from the University of Kent at Canterbury to become the University of Kent, a change that reflects the widening nature of the University’s activity in recent years in Medway, Tonbridge and Brussels. The surplus of £2,069,000 (2002: £1,026,000) was an excellent result in a year of continued development and investment in new projects. Income from continuing operations increased by 6.8% and recurrent costs by 5.2%, reflecting strong recruitment and continuing improvements in budgetary controls. As ever, the rate of increase in the settlement from government failed to match actual staff salary inflation resulting in an effective funding cut. This compounds the continuing pressure on resources brought by the University’s position in the acceptable funding range allowed by the Higher Education Funding Council for England (“HEFCE”); The University, receives £1.8m less than the standard resource for its number of home and EU students when using HEFCE’s own funding methodology. Total teaching income increased by 9%. For the first time, fees from full time overseas (non EU) students exceeded those of full time home and EU students. Home and EU students also attracted HEFCE funding of £24,258,000 for teaching in the year. HEFCE contracted number targets for home and EU students were met and internal targets for overseas numbers exceeded. Page 9 shows an analysis of student numbers. Income from research dropped yet again, the principal reason being a drop in funding from one major source. This is despite achieving a significant absolute and relative improvement in performance in the 2001 Research Assessment Exercise. A major new research initiative has been introduced in 2003/04 in order to support developments in research and capitalise on success in the RAE. Staff costs rose by 4.1% in the year. After adjusting for lower research pay costs and the absence of ASRU Limited, recurrent expenditure on staff rose by 8% during the year in line with planned budgets and increases in activity levels. Average staff numbers for the University only, increased by 22 (1.5%) full time equivalents. There was a 8.3% increase in related income. Other Operating Expenses fell in the year, reflecting both the loss of ASRU Limited expenditure and an offsetting rise in the mix of research expenditure. Underlying expenditure in academic and academic services areas has declined, partly due to strong budgetary control. An increase in depreciation of £802,000 has been offset by an increase of £632,000 in depreciation funded by releases from grants previously received for relevant capital projects. Note 18 shows the amounts funded and balance remaining to be released to the Income and Expenditure Account in the future.


TREASURER’S REPORT Summary of Results for the Year The University’s consolidated results for the years ended 31 July 2003 and 31 July 2002 are summarised as follows:

2002/03 2001/02 £000 £000

Income 82,016 77,864 Expenditure (79,944) (77,666) (Deficit)/Surplus on Disposal of Assets (3) 1,064 Closure Cost of Subsidiary Company - (236) Surplus for the Year 2,069 1,026 Investment Management The University’s long-term and endowment investments are currently invested in Common Investment Funds managed by CCLA Investment Management Limited and a residual portfolio managed by BFS Investments plc. The Investments Sub-Committee monitors the returns from the Common Investment Funds, which have produced a relatively good performance from most asset classes of the diversified portfolio and has produced an overall return slightly ahead of the WM Co. Charity Fund Universe benchmark. There are two largely matching items in this year’s accounts, both of which relate to Current Asset Investments. The collapse of the Aberdeen Preferred Income Investment Trust has brought the need to write off the value of zero dividend preference shares issued by the Trust. Against this, last year’s provision designed to reduce the carried value of Current Asset Investments has been partly reversed owing to an improvement in stock market values. During 2002/03 there has been a recovery in global stock markets and following the general upward movement in UK share values, the market value of the University’s investments has improved during the year. The market value of the University’s Endowment Asset Investments at 31 July 2003 was £3,075,000; an increase of £91,000 over last year and the value of Current Asset Investments was £4,785,000, a decrease of £154,000, which was due to the realisation of Current Asset Investments. Included in the above valuation is an unsecured bond stock with a market value of £201,650 at 31 July 2003, which was due for redemption on 30 September 2003. The issuer failed to redeem this bond and the University is awaiting restructuring proposals from the company following negotiations with an informal committee of bondholders. A provision has been made in the financial statements for the full market value of the bond pending the receipt of further information. Capital Projects Expenditure on capital projects was £9,632,000, of which £3,353,000 was funded by grants or donations. During the year, the new Social Policy building was completed and a major extension to sports facilities undertaken. Expenditure on projects 90% funded by the Science Research Infrastructure Fund totalled £2,468,000 and provided significant improvements in facilities for Biosciences, Physical Sciences and Electronics. The opportunity was also taken to undertake a much needed improvement to the administrative building. As part of a long-term strategy to improve the standard of residential accommodation, £1,985,000 was spent on refurbishing the existing bedstock.


TREASURER’S REPORT Cash Flow Total cash balances and Current Asset Investments at market value have decreased by £1,511,000 as follows: 2003 2002 £000 £000 Cash Deposits and Short Term Deposits 4,032 5,389 Current Asset Investments at Market Value 4,785 4,939 8,817 10,328 High levels of expenditure on capital projects as part of a development strategy has meant that cash balances have fallen during the year. Future Developments Significant progress has been made in planning and funding the new Medway Campus during the year. The South East England Development Agency has recently agreed a package of £8.6m funding and potential further funding of £15m from the Office of the Deputy Prime Minister has now received indicative approval. This brings the total external funding to almost £32m to support this ambitious project, which will require an overall investment of some £46m. The HEFCE is making a contribution towards this cost of £3.95m. The University is also grateful that Medway Council has pledged £2.5m towards the new campus. Work is expected to start shortly on new buildings for the University and the first stage of new joint facilities to be shared with the University of Greenwich and Mid Kent College with an anticipated completion date of September 2005. Strong recruitment has led to pressure on residential accommodation and work has now started on a new block of 339 en-suite self-catering rooms that should be ready for occupation in September 2004. This will be loan funded. Equal Opportunities and Diversity In conformity with the general intention of its Charter and the law, the University confirms its commitment to policies of equal opportunities and racial equality for staff and students, and to the implementation of these policies. Equal opportunities issues relating to both staff and students are regularly considered by the Staff Policy and Student Services Committees. The University also employs an Equality Co-ordinator who acts as a focus for work on equal opportunities on a day-to-day basis. Employee Involvement The University places considerable value on the involvement of its employees and on good communication with them. 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-line’ on the University web site. Staff are also encouraged to participate in formal and informal consultation at the University, Faculty and Departmental level and have regular opportunities to interact with the Vice-Chancellor at Departmental and Forum meetings. In addition there are termly meetings with the recognised Trades Unions. There are now two non-academic staff representatives on Council.


TREASURER’S REPORT 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 they continue to adopt the going concern basis in preparing the financial statements. Conclusion This year has seen a major improvement in revenue performance. As planned, major capital expenditure has been made in order to improve facilities for students on campus and to invest further in successful areas such as Social Policy. Cash balances have therefore decreased. The significant improvement in revenue performance has meant that the impact on reserves has not been as high as expected. The University is currently in a development phase but recognises the need to increase cash generation over the medium term. The successes of this year could not have been achieved without the continued dedication and hard work of University staff. I know that Council will wish me to thank them for their contribution to the continuing growth and development of this University in very challenging conditions. In this, my last report as Treasurer, I emphasise my own appreciation and thanks to University staff for their dedication throughout the period of my office. A A Dunning Treasurer 16 December 2003


FINANCIAL INFORMATION


STUDENT INFORMATION


CORPORATE GOVERNANCE STATEMENT The University is committed to achieving best practice in all aspects of Corporate Governance. This summary describes the University’s Corporate Governance arrangements and the manner in which the University has applied the principles set out in Section 1 of the Combined Code on Corporate Governance issued by the London Stock Exchange in June 1998. Its purpose is to help the reader of the accounts understand how the principles have been applied. Summary of the University’s Structure of Corporate Governance The University’s Council comprises lay members, staff and students appointed under the Statutes of the University, the majority of whom are non-executive. The roles of the Chancellor and the Pro-Chancellor, Chairman of the Council, are separate from the role of the University’s Chief Executive, the Vice-Chancellor. The specific powers and responsibilities of the Council are set out in the Statutes of the University. By custom and under the Financial Memorandum with the Higher Education Funding Council for England (HEFCE), the Council holds to itself the responsibilities for the ongoing strategic direction of the University, approval of major developments and the receipt of regular reports from Executive Officers on the day to day operations of its business and its subsidiary companies. Council has an annual meeting at which the institutional strategies are reviewed and it formally approves the University’s Corporate Plan. In addition, Council meets at least three times a year and has several Committees, including a Finance and Resources Committee, a Lay Nominations Committee, a Remuneration Committee and an Audit Committee. All of these Committees are formally constituted with terms of reference and have significant lay membership. The Finance and Resources Committee is responsible inter alia to Council for the University’s annual revenue and capital budgets and monitors performance in relation to the approved budgets. The Lay Nominations Committee considers nominations for vacancies in the Council membership under the relevant Statutes. The Remuneration Committee determines the annual remuneration of the Vice-Chancellor, Deputy Vice-Chancellor and Secretary and Registrar. The Audit Committee is responsible for meeting, at least twice annually, with the External Auditors and Internal Auditors of the University and reviewing their work. The Committee considers detailed reports together with recommendations for the improvement of the University’s systems of internal control and management’s responses and implementation plans. It also receives and considers reports from HEFCE as they affect the University’s business and monitors adherence with the regulatory requirements. Whilst senior executives attend meetings of the Audit Committee as necessary, they are not members of the Committee, and the Committee meets periodically with the External Auditors on their own for independent discussions. The Council maintains a Register of Interests of its members and of the staff of the University. Further information about the Governance of the University and the Register may be obtained from the Secretary and Registrar. 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 HEFCE 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.


CORPORATE GOVERNANCE STATEMENT

In causing the financial statements to be prepared, the Council has ensured that: • suitable accounting policies are selected and applied consistently; • judgements and estimates are made that are reasonable and prudent; • applicable United Kingdom accounting standards have been followed, subject to any material departures

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

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

The Council has taken reasonable steps to: • ensure that funds from HEFCE are used only for the purposes for which they have been given and in

accordance with the Financial Memorandum agreed with HEFCE and any other conditions which HEFCE may from time to time prescribe;

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

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

expenditure. The key elements of the University’s system of internal financial control, which is designed to discharge the responsibilities set out above, include the following: • clear definitions of the responsibilities of, and the authority delegated to, heads of academic and

administrative departments; • a comprehensive medium and short-term planning process, supplemented by detailed annual income,

expenditure, capital and cash flow budgets; • regular reviews of academic performance and financial results involving variance reporting and updates

of forecast outturns; • clearly defined and formalised requirements for approval and control of expenditure, with investment

decisions involving capital or revenue expenditure being subject to formal detailed appraisal and review according to approval levels set by the Council;

• comprehensive Financial Regulations, detailing financial controls and procedures, approved by the Finance and Resources Committee and Council;

• a professional Internal Audit Section whose annual programme is approved by the Audit Committee in line with the following Full Statement of Internal Control.

Full 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 of effectiveness. The system of internal control is based on an ongoing process designed to identify the principal risks to the achievement of policies, aims and objectives; to evaluate the nature and extent of those risks; and to manage them efficiently, effectively and economically. This process has been in place for the year ended 31 July 2003 and up to the date of approval of the financial statements, and accords with HEFCE guidance.


CORPORATE GOVERNANCE STATEMENT

The Council has responsibility for reviewing the effectiveness of the system of internal control. The following processes have been established: • up to five Council meetings are held each year to consider the plans and strategic direction of the

institution; • Council receives an annual report from the Audit Committee concerning internal control, and the

Vice-Chancellor’s Policy and Planning Group requires termly reports from Risk Owners on the steps they are taking to manage the significant risks in their areas of responsibility, including progress reports on key projects;

• Council has determined that the Vice-Chancellor’s Policy and Planning Group should oversee risk management;

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

• a regular programme of interviews and workshops is held to identify and keep up to date the record of risks facing the University;

• Department Heads are charged with the identification and management of risk under the University Strategic Planning Model;

• a system of key performance and risk indicators has been developed; • a robust risk prioritisation methodology based on risk ranking and cost-benefit analysis has been

established; • a University risk register is maintained; • reports are received from budget holders, department heads and project managers on internal control

activities. Council’s review of the effectiveness of the system of internal control is informed by the Internal Audit Section, which operates to standards defined in the HEFCE Audit Code of Practice and which was last reviewed for effectiveness by the HEFCE Audit Service in February 2000. 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.


INDEPENDENT AUDITORS’ REPORT TO THE COUNCIL OF THE UNIVERSITY OF KENT We have audited the financial statements of The University of Kent for the year ended 31 July 2003, which comprise the Income and Expenditure Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised Gains and Losses and the related notes. This report is made solely to the members of the University Council. Our audit work has been undertaken so that we might state to the Members of Council those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the University and the Members of Council as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of the Council and Auditors As described in the statement of the Council’s responsibilities, the Council is responsible for the preparation of the financial statements in accordance with applicable law and United Kingdom Accounting Standards. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards. We report to you our opinion as to whether the financial statements give a true and fair view. We also report to you whether, in our opinion monies expended out of funds from whatever source administered by the University for specific purposes were properly applied for those purposes and where relevant managed in accordance with appropriate legislation and whether monies expended out of funds provided by the Higher Education Funding Council for England were applied in accordance with the financial memorandum and any other terms and conditions attached to them. We also report to you if, in our opinion, the Treasurer’s Report 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 Treasurer’s Report and consider the implications for our report if we become aware of any apparent misstatements within it. Basis of Audit Opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board, and the Audit Code of Practice issued by the Higher Education Funding Council for England. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Council in the preparation of the financial statements, and of whether the accounting policies are appropriate to the University’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.


INDEPENDENT AUDITORS’ REPORT TO THE COUNCIL OF

THE UNIVERSITY OF KENT Opinion In our opinion the financial statements give a true and fair view of the state of affairs of The University of Kent and its subsidiary companies at 31 July 2003 and of the surplus for the year then ended. In our opinion, in all material respects, funds from whatever source administered by the University for specific purposes were properly applied for the intended purposes and, where relevant, managed in accordance with appropriate legislation for the year ended 31 July 2003. In our opinion, in all material respects, funds provided by the Higher Education Funding Council for England were applied in accordance with the financial memorandum dated 1 August 2000 and any other terms and conditions attached to them for the year ended 31 July 2003. RSM Robson Rhodes LLP Chartered Accountants and Registered Auditors Hemel Hempstead, England 17 December 2003


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 in Further and Higher Education Institutions and in accordance with applicable Accounting Standards.

2. Basis of Accounting

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

3. Basis of Consolidation

The consolidated financial statements include the University and its subsidiary undertakings, ASRU Limited, Kent Enterprise Limited and Kent Property Services Limited. Intra-group sales and profits 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.

4. Recognition of Income and 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. All income from short-term deposits is credited to the Income and Expenditure Account in the period in which it is earned. Income from specific endowments and donations is included to the extent of the relevant expenditure incurred during the year, together with any related contributions towards overhead costs. Recurrent grants from the Higher Education Funding Council for England (HEFCE) are recognised in the period in which they are received. 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.

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. Monetary 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. The resulting exchange differences are dealt with in the determination of income and expenditure for the financial year.


STATEMENT OF PRINCIPAL ACCOUNTING POLICIES 7. Pension Schemes 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). Both Schemes are valued every three years by professionally qualified independent actuaries using the projected unit method, the rates of contribution payable being determined by the trustees on the advice of the actuaries. In the intervening years, the actuaries review the progress of the Schemes. Pension costs are assessed in accordance with the advice of the actuaries based on the latest actuarial valuations of the Schemes and are accounted for on the basis of charging the cost of providing pensions over the period during which the Institution benefits from the employees’ services.

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 FRS15 this land valuation is retained as the cost of that land. Freehold land is not depreciated. The University buildings are specialised buildings and therefore it is not appropriate to value them on the basis of open market value. Buildings are included in the Balance Sheet at cost together with subsequent refurbishment expenditure less accumulated depreciation. Depreciation on buildings is provided on a straight-line basis over the estimated useful lives as follows: Freehold buildings 50 years Components of new buildings e.g. lift, heating, electrical system etc 25 years Refurbishment of accommodation and academic facilities 15 years Refurbishment of dining and trading facilities 5 years Where land and buildings are acquired with the aid of specific grants they are capitalised and depreciated as above. The related grants are credited to a deferred capital grant account and are released to the Income and Expenditure Account over the expected useful economic life of the related asset on a basis consistent with the depreciation policy. Finance costs, which are directly attributable to the construction of land and buildings, are capitalised as part of the cost of those assets, where appropriate. A review of the impairment of a fixed asset is carried out if events or changes in circumstances indicate that the carrying value of the fixed asset may not be recoverable. Buildings under construction are accounted for at cost, based on the value of architects’ certificates and other direct costs incurred to 31 July. They are not depreciated until they are brought into use.

Equipment Equipment costing less than £5,000 per individual item or group of related items is written off in

the year of acquisition. All other equipment is capitalised at cost.


STATEMENT OF PRINCIPAL ACCOUNTING POLICIES 8. Tangible Fixed Assets (continued) Equipment (continued)

Capitalised equipment is depreciated over its useful economic life as follows: General equipment 5 years

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

Where equipment is acquired with the aid of specific grants it is capitalised and depreciated in

accordance with the above policy, with the related grant being credited to a deferred capital grant and released to the Income and Expenditure Account over the expected useful economic life of the related equipment.

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. 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 charity within the meaning of Section 506(1) of the Income and Corporation Taxes Act (ICTA) 1988. Accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by Section 505 of the ICTA 1988 or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied to exclusively charitable purposes.

The University receives no similar exemption in respect of VAT. 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 institution has a present legal or constructive obligation as a

result of a past event, it is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.


CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT For the Year Ended 31 July 2003 Discontinued Continuing Total Operations Operations Operations

Note 2002/03 2002/03 2002/03 2001/02 £000 £000 £000 £000

INCOME

Funding Council Grants 1 - 32,490 32,490 30,612 Tuition Fees and Education Contracts 2 - 22,602 22,602 19,167 Research Grants and Contracts 3 - 8,017 8,017 8,473 Other Income 4 87 18,296 18,383 18,495 Endowment and Investment Income 5 - 524 524 1,117

Total Income 87 81,929 82,016 77,864

EXPENDITURE

Staff Costs 6 32 49,239 49,271 47,323 Exceptional Restructuring Expenses 6 - 643 643 253 Other Operating Expenses 7 (1) 23,046 23,045 23,844 Depreciation 11 - 5,002 5,002 4,200 Interest Payable 8 - 1,983 1,983 2,046

Total Expenditure 31 79,913 79,944 77,666

Surplus after Depreciation of Assets at Cost and before Disposal of Assets and Tax 56 2,016 2,072 198 (Deficit)/Surplus on Disposal of Assets (3) - (3) 1,064 Closure Cost of Subsidiary Company - - - (236) Taxation 9 - - - - Surplus after Depreciation of Assets at Cost, Disposal of Assets and Tax 53 2,016 2,069 1,026 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. Note regarding 2001/02 column: The amount of £566,000 for the diminution of Current Asset Investments is now included in Other Operating Expenses.


STATEMENT OF CONSOLIDATED TOTAL RECOGNISED GAINS AND LOSSES For the Year Ended 31 July 2003

Note 2002/03 2001/02 £000 £000

Surplus on Continuing Operations after Depreciation of Assets at Cost, Disposal of Assets and Tax 2,016 1,792 Donated Assets Received 218 10 Unrealised Profits/(Losses) on Endowment Asset Investments 19 124 (542) New Endowments and Income Retained for the Year 19 (33) (32) TOTAL RECOGNISED GAINS AND LOSSES ON CONTINUING OPERATIONS RELATING TO THE YEAR 2,325 1,228 Surplus/(Deficit) on Discontinued Operations after Depreciation of Assets at Cost, Disposal of Assets and Tax 53 (766) TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE YEAR 2,378 462 RECONCILIATION Opening Reserves and Endowments 37,406 36,944 Total Recognised Gains and Losses for the Year 2,378 462 Closing Reserves and Endowments 39,784 37,406


BALANCE SHEETS AS AT 31 JULY 2003

Consolidated University Note 2003 2002 2003 2002 £000 £000 £000 £000

FIXED ASSETS

Tangible Assets 11 67,685 63,094 67,685 63,055 Investments 12 5 6 5 6

67,690 63,100 67,690 63,061

ENDOWMENT ASSETS 13 3,075 2,984 3,075 2,984 CURRENT ASSETS

Stocks 533 576 533 576 Debtors 14 7,050 6,603 7,082 6,383 Investments 13 4,785 4,939 4,785 4,939 Short-Term Deposits 26 - 2,000 - 2,000 Cash at Bank and in Hand 26 4,032 3,389 3,785 4,068

16,400 17,507 16,185 17,966

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 15 (12,866) (13,674) (12,725) (13,402) NET CURRENT ASSETS 3,534 3,833 3,460 4,564 TOTAL ASSETS LESS CURRENT LIABILITIES 74,299 69,917 74,225 70,609 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 16 (22,250) (22,099) (22,250) (22,099) PROVISIONS FOR LIABILITIES AND CHARGES 17 (807) (493) (807) (1,207) NET ASSETS 51,242 47,325 51,168 47,303


BALANCE SHEETS AS AT 31 JULY 2003

Consolidated University Note 2003 2002 2003 2002

£000 £000 £000 £000 DEFERRED CAPITAL GRANTS 18 11,458 9,919 11,458 9,919 ENDOWMENTS

Specific 19 2,665 2,613 2,665 2,613 General 19 410 371 410 371

3,075 2,984 3,075 2,984 RESERVES

Revaluation Reserve 20 8,585 8,455 8,585 8,455 General Reserve 21 28,124 25,967 28,050 25,945

36,709 34,422 36,635 34,400

TOTAL FUNDS 51,242 47,325 51,168 47,303 The financial statements on pages 15 to 39 were approved by the Council on 16 December 2003 and signed on its behalf by: Professor D Melville Vice-Chancellor A A Dunning Treasurer D K Everitt Director of Finance


CONSOLIDATED CASH FLOW STATEMENT For the Year Ended 31 July 2003

Note 2002/03 2001/02 £000 £000

Cash Flow from Operating Activities 22 5,668 7,019 Returns on Investments and Servicing of Finance 23 (1,385) (1,234) Capital Expenditure and Financial Investment 24 (6,079) (2,665) Management of Liquid Resources 25 2,171 (1,764) Financing 268 (425) Increase in Cash in the Year 643 931 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

2002/03 2001/02 £000 £000

Increase in Cash in the Year 643 931 (Outflow)/Cash Inflow from Liquid Resources (2,171) 1,764 Increase in Loans (750) - Repayment of Debt 481 425 Current Asset Investments: Non Cash Movements 17 (566) Change in Net Debt in the Year (1,780) 2,554 Net Debt at 1 August (12,233) (14,787) Net Debt at 31 July 26 (14,013) (12,233)


NOTES TO THE ACCOUNTS 1. FUNDING COUNCIL GRANTS 2002/03 2001/02

£000 £000 Recurrent Grant (Higher Education Funding Council) 29,235 28,508 Specific Grants

Joint Information Systems Committee (JISC) 603 451 All Other Grants 1,265 865

Deferred Capital Grants Released Buildings (Note 18) 401 294 Equipment (Note 18) 986 494

32,490 30,612

2. TUITION FEES AND EDUCATION CONTRACTS 2002/03 2001/02

£000 £000 Full-time Students 9,340 8,446 Full-time Students Charged Overseas Fees 10,644 8,257 Part-time Fees 1,770 1,365 Research Training Support Grants 82 61 Short Course Fees 766 1,038

22,602 19,167 3. RESEARCH GRANTS AND CONTRACTS 2002/03 2001/02

£000 £000 Research Councils 2,551 2,850 UK Based Charities 1,149 840 UK Industry 618 525 European Commission 671 525 Other Grants and Contracts 3,028 3,733

8,017 8,473 4. OTHER INCOME 2002/03 2001/02

£000 £000 Residences, Catering and Conferences 12,044 11,216 Other Income-generating Activities 1,753 2,697 Other Grant Income 720 547 Other Income 3,866 4,035

18,383 18,495


NOTES TO THE ACCOUNTS 5. ENDOWMENT AND INVESTMENT INCOME 2002/03 2001/02

£000 £000 Transferred from Specif ic Endowments (Note 19) 309 423 Income from General Endowment Asset Investments (Note 19) 14 19 Other Investment Income (62) 340 Other Interest Receivable 263 335

524 1,117 Other Investment Income comprises: Dividends and interest received £193,000, gains on sale of investments £23,000 and loss on investments written off £278,000. 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: 2002/03 2001/02 Avge FTE Avge FTE No. No. Academic Staff 441 428 Research Staff 119 122 Academic Related Staff 236 223 Clerical Staff 343 331 Manual and Ancillary 281 293 Technical 73 74 Subsidiary Companies (this includes ASRU Limited) 14 33 1,507 1,504 2002/03 2001/02

£000 £000 Staff Costs for the above persons: Wages and Salaries 41,459 39,734 Social Security Costs 3,061 3,051 Other Pension Costs (Note 27) 4,751 4,538 Exceptional Restructuring Costs 643 253

49,914 47,576 The Exceptional Restructuring Costs relate entirely to early retirements and voluntary severance arrangements.


NOTES TO THE ACCOUNTS 6. STAFF COSTS (continued) 2002/03 2001/02

£000 £000 Staff Costs by Department: Academic Departments 26,132 24,393 Academic Services 3,539 3,261 Research Grants and Contracts 4,412 4,801 Administration 7,265 6,660 Catering and Residences 4,867 4,511 Premises 2,293 1,877 Other 763 1,820 Sub-total 49,271 47,323 Exceptional Restructuring Expenses 643 253 Total 49,914 47,576 Emoluments of the Vice-Chancellor (appointed 1 September 2001): Professor David Melville: Salary 144 119 Pension 9 17 153 136 Professor Robin Sibson (retired 31 August 2001): Salary - 11 Pension cost - 1 - 12 Total emoluments for the year 153 148 The emoluments of the Vice-Chancellor are determined by the Remuneration Committee who take 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. The University’s pension contributions to USS are paid at the same rates as for other academic staff. Remuneration of other Higher Paid Staff, excluding employer’s pension contributions: No. No. £70,000 - £79,999 3 1


NOTES TO THE ACCOUNTS 7. OTHER OPERATING EXPENSES 2002/03 2001/02

£000 £000 Academic Departments 8,112 7,938 Academic Services 1,605 2,292 Research Grants and Contracts 1,946 1,367 Administration 3,654 3,611 Catering and Residences 3,679 3,296 Premises 2,799 3,076 Other Expenses 1,250 2,264

23,045 23,844 Other Operating Expenses include: Auditors’ Remuneration 38 36 Auditors’ Remuneration in Respect of Non-Audit Services 4 16 42 52 8. INTEREST PAYABLE 2002/03 2001/02

£000 £000 On Bank Overdrafts and Other Loans 1 34 On Bank Loans repayable wholly in more than five years 1,982 2,012

1,983 2,046 9. TAXATION 2002/03 2001/02

£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: Note 2002/03 2001/02 £000 £000 University Surplus for the Year 2,017 659 Prior years covenanted surplus received by the University from Kent Enterprise Limited and Kent Property Services Limited 12 (28) (47) Surplus generated by ASRU Limited, Kent Enterprise Limited and Kent Property Services Limited and consolidated with the University 12 80 30 Write down of Investment in ASRU Limited and Provision for Closure 12 - 1,150 2,069 1,792


NOTES TO THE ACCOUNTS 11. TANGIBLE FIXED ASSETS (CONSOLIDATED)

Freehold Land and Buildings Equipment Total £000 £000 £000

Cost or Valuation At 1 August 2002 77,053 22,989 100,042 Additions 5,304 3,830 9,134 Buildings Under Construction 498 - 498 Disposals - (1,205) (1,205) At 31 July 2003 82,855 25,614 108,469 Depreciation At 1 August 2002 18,376 18,572 36,948 Charge for the Year 1,750 3,252 5,002 Eliminated in Respect of Disposals - (1,166) (1,166) At 31 July 2003 20,126 20,658 40,784 Net Book Value At 31 July 2003 62,729 4,956 67,685 At 1 August 2002 58,677 4,417 63,094 Financed by Capital Grant 9,714 1,636 11,350 Other 53,015 3,320 56,335 Net Book Value at 31 July 2003 62,729 4,956 67,685


NOTES TO THE ACCOUNTS 11. TANGIBLE FIXED ASSETS (UNIVERSITY ONLY)

Freehold Land and Buildings Equipment Total £000 £000 £000

Cost or Valuation At 1 August 2002 77,053 22,413 99,466 Additions 5,304 3,830 9,134 Buildings Under Construction 498 - 498 Disposals - (654) (654) At 31 July 2003 82,855 25,589 108,444 Depreciation At 1 August 2002 18,376 18,035 36,411 Charge for the Year 1,750 3,252 5,002 Disposals - (654) (654) At 31 July 2003 20,126 20,633 40,759 Net Book Value At 31 July 2003 62,729 4,956 67,685 At 1 August 2002 58,677 4,378 63,055 Financed by Capital Grant 9,714 1,636 11,350 Other 53,015 3,320 56,335 Net Book Value at 31 July 2003 62,729 4,956 67,685 The transitional rules set out in FRS15 Tangible Fixed Assets have been applied on implementing FRS15. Accordingly the book values at implementation have been retained. The original revaluation of land in 1995 has not been updated. 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 20). Buildings with a net book value of £9,667,531 and cost of £17,191,008 have been funded from Treasury sources; should these particular buildings be sold, the University would either have to surrender the proceeds to the Treasury or use them in accordance with the Financial Memorandum with HEFCE.


NOTES TO THE ACCOUNTS 12. INVESTMENT IN SUBSIDIARY COMPANIES Consolidated University 2003 2002 2003 2002

£000 £000 £000 £000 Investment in Subsidiary Companies at Cost - - 1,498 648 Write down of Investment in ASRU Limited - - (1,498) (648) Loans 5 6 5 6

5 6 5 6 At 31 July 2003 the University held an interest in the following companies: Company Share Capital Activity ASRU Limited £1,498,000 Statistical Information (see below) Canterbury Business School Limited £2 Dormant Invicta Technology Investments Limited £1 Dormant Kent Business School Limited £1 Dormant Kent Enterprise Limited £100 Scientific and Industrial Consultancy Kent Management School Limited £2 Dormant Kent Property Services Limited £2 Property Management Summer Academy Limited £2 Dormant ASRU Limited is in the process of being wound up and full details are included in the Treasurer’s Report. Two of the subsidiary companies changed their names during the year: • Kent Scientific and Industrial Projects Limited changed its name to Kent Enterprise Limited on 17

October 2002; • UKC Property Services Limited changed its name to Kent Property Services Limited on 23 May 2003. The financial year-end of all the subsidiaries is 31 July. All the companies are wholly owned by the University and are registered in England. 13. INVESTMENTS Consolidated University 2003 2002 2003 2002

£000 £000 £000 £000 Endowment Asset Investments: Cost Price 3,796 3,829 3,796 3,829 Market Value 3,075 2,984 3,075 2,984 Current Asset Investments: Cost Price 5,089 5,505 5,089 5,505 Market Value 4,785 4,939 4,785 4,939 Subsidiary Company Investments: Cost Less Provision for Diminution in Value - - - -


NOTES TO THE ACCOUNTS 13. INVESTMENTS (continued) Consolidated University 2003 2002 2003 2002

£000 £000 £000 £000 Total Investment Assets: Balance at 1 August at Market Value 7,923 10,406 7,923 10,706 Additions - 343 850 343 Disposals and write down of ASRU Limited (195) (612) (1,045) (912) Appreciation/(Depreciation) 132 (2,214) 132 (2,214) Investment Assets at Market Value 7,860 7,923 7,860 7,923 Investments comprise the following: Charities Investment Funds 6,519 6,419 6,519 6,419 Debenture and Unsecured Loan Stocks 1,305 1,461 1,305 1,461 Equities 36 36 36 36 Preference Shares - 7 - 7 Subsidiary and Associated Companies - - - -

7,860 7,923 7,860 7,923 The above investments include an unsecured bond holding with a market value at 31 July 2003 of £201,650. These bonds were due for redemption on 30 September 2003 but the issuer failed to do so and the University is awaiting restructuring proposals from the company following negotiations with an informal committee of bondholders. A provision has been made for the full market value of this bond. 14. DEBTORS Consolidated University 2003 2002 2003 2002

£000 £000 £000 £000

Amounts falling due within one year: Debtors 3,941 3,838 3,908 3,583 Research Grants and Contracts 1,171 1,375 1,171 1,375 Owing by Subsidiaries - - 65 35 Prepayments and Accrued Income 1,938 1,390 1,938 1,390

7,050 6,603 7,082 6,383 15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Consolidated University

2003 2002 2003 2002 £000 £000 £000 £000

Bank Loans Due for Repayment 580 462 580 462 Payments Received in Advance - Funding Councils 2,527 1,445 2,527 1,445 Payments Received in Advance 4,573 4,741 4,450 4,579 Creditors and Accrued Liabilities 3,400 5,334 3,382 5,292 Taxation and Social Security 1,786 1,692 1,786 1,624

12,866 13,674 12,725 13,402


NOTES TO THE ACCOUNTS 16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

Consolidated University 2003 2002 2003 2002

£000 £000 £000 £000 Mortgages secured on University Buildings 22,830 22,561 22,830 22,561 Less: Bank Loans repayable within one-year (580) (462) (580) (462)

22,250 22,099 22,250 22,099 Payable as follows: Between one and two years 625 505 625 505 Between two and five years 2,117 1,804 2,117 1,804 After five years 19,508 19,790 19,508 19,790

22,250 22,099 22,250 22,099 There are two loans with The Royal Bank of Scotland Group: • Loan for £24,500,000 that commenced on 23 January 1997 and is repayable by equal instalments until 24

January 2022. Interest is charged at a fixed rate of 8.75% over the term of the loan. • Loan for £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% and is paid each quarter together with the principal repayments.

17. PROVISIONS FOR LIABILITIES AND CHARGES Consolidated

Restructuring Closure of Investment Total Subsidiary Provision

£000 £000 £000 £000 At 1 August 357 136 - 493 Utilised in the Year (329) (136) - (465) Transfer from Income and Expenditure Account 578 - 201 779 At 31 July 606 - 201 807 University

Restructuring Closure of Investment Total Subsidiary Provision

£000 £000 £000 £000 At 1 August 357 850 - 1,207 Utilised in the Year (329) (850) - (1,179) Transfer from Income and Expenditure Account 578 - 201 779 At 31 July 606 - 201 807 Investment provision details are included with Note 13.


NOTES TO THE ACCOUNTS 18. DEFERRED CAPITAL GRANTS Consolidated and University

Funding Other Grants Council & Benefactions Total £000 £000 £000

At 1 August 2002

Buildings 8,643 49 8,692 Equipment 1,066 161 1,227

9,709 210 9,919 Cash Received

Buildings 1,504 23 1,527 Equipment 1,427 174 1,601

2,931 197 3,128 Released to Income and Expenditure

Buildings (Notes 1 and 4) (401) (26) (427) Equipment (Notes 1 and 4) (986) (176) (1,162)

(1,387) (202) (1,589) At 31 July 2003

Buildings 9,746 46 9,792 Equipment 1,507 159 1,666 11,253 205 11,458


NOTES TO THE ACCOUNTS 19. ENDOWMENTS Consolidated and University

Specific General Total £000 £000 £000

At 1 August 2002 at Market Value 2,613 371 2,984 Investment Income 105 14 119 Additions 171 - 171 Transferred to Income and Expenditure Account (Note 5) (309) (14) (323) Movement before Depreciation (33) - (33) Unrealised Profits 85 39 124 At 31 July 2003 at Market Value 2,665 410 3,075 Representing: Bursaries, Fellowships and Scholarship Funds 575 - 575 Chairs and Lectureship Funds 1,499 - 1,499 Memorial Funds 182 - 182 Prize Funds 114 - 114 Other Funds 295 410 705

2,665 410 3,075 20. REVALUATION RESERVE Consolidated University 2003 2002 2003 2002

£000 £000 £000 £000 Net Revaluation Amount At 31 July and 1 August 8,585 8,455 8,585 8,455 The Revaluation Reserve relates to land valued at £8,431,363 and donated equipment with a book value of £153,140.


NOTES TO THE ACCOUNTS 21. MOVEMENT ON GENERAL RESERVES Consolidated University

£000 £000 Income and Expenditure Account Reserve: Balance at 1 August 2002 25,967 25,945 Historical Cost Surplus after Depreciation of Assets at Cost, Disposal of Assets and Tax 2,069 2,017 Transfer from Revaluation Reserve for Depreciation of Donated Equipment 88 88 Balance at 31 July 2003 28,124 28,050 22. RECONCILIATION OF CONSOLIDATED OPERATING SURPLUS

TO NET CASH FROM OPERATING ACTIVITIES 2002/03 2001/02 £000 £000

Surplus before Tax 2,016 1,792 Depreciation (Note 11) 5,002 4,079 Profit on Sale of Fixed Assets - (1,064) Deferred Capital Grants Released to Income (Note 18) (1,589) (957) Interest and Endowments Receivable (524) (1,117) Interest Payable 1,983 2,014 Decrease in Stocks 43 22 (Increase)/Decrease in Debtors, Prepayments and Research Grants (674) 24 (Increase)/Decrease in Current Asset Investments (262) 566 (Decrease)/Increase in Creditors (806) 2,145 Increase/(Decrease) in Provisions 450 (69) Net Cash Inflow from Continuing Operating Activities 5,639 7,435 Cash Outflow in respect of Discontinued Activities 29 (416) Net Cash Inflow from Operating Activities 5,668 7,019 23. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

2002/03 2001/02 £000 £000

Income from Endowments 119 137 Income from Short-Term Investments 263 335 Other Interest Received 216 340 Interest Paid (1,983) (2,046) Net Cash Outflow from Returns on Investments and Servicing of Finance (1,385) (1,234)


NOTES TO THE ACCOUNTS 24. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT

2002/03 2001/02 £000 £000

Purchase of Tangible Fixed Assets (excluding Donated Asset of £218,000) (9,414) (7,468) Decrease of Endowment Assets - 32 Sale of Tangible Fixed Assets 36 1,444 Deferred Capital Grants Received 3,128 3,054 Endowments Received 171 273 Net Cash Outflow for Capital Expenditure and Financial Investment (6,079) (2,665) 25. MANAGEMENT OF LIQUID RESOURCES

2002/03 2001/02 £000 £000

Decrease/(Increase) in Current Asset Investments 2,171 (1,764) Net Cash Outflow/(Inflow) from Management of Liquid Resources 2,171 (1,764) 26. ANALYSIS OF CHANGES IN NET DEBT

At Cash Other At 1 August Flows Changes 31 July 2002 2003 £000 £000 £000 £000

Current Asset Investments 4,939 (171) 17 4,785 Short-Term Deposits 2,000 (2,000) - - Cash at Bank and in Hand 3,389 643 - 4,032

10,328 (1,528) 17 8,817 Debt due within one year: Bank Loan (462) 462 (580) (580) Debt due after one year (22,099) (731) 580 (22,250)

(12,233) (1,797) 17 (14,013)


NOTES TO THE ACCOUNTS 27. 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 following two notes gives a full explanation of these schemes. The total pension cost for the University and its subsidiaries are:

2002/03 2001/02 £000 £000

Contributions to USS 3,651 3,416 Contributions to SAUL 1,089 1,115 Contributions to Other Schemes 11 7 Total Pension Cost (Note 6) 4,751 4,538 USS PENSION SCHEME The University participates in the Universities Superannuation Scheme, a defined benefit scheme which is externally funded and contracted out of the State Second Pension (SP2). The assets of the scheme are held in a separate trustee-administered fund. It is not possible to identify each institution’s share of the underlying assets and liabilities of the scheme and hence contributions to the scheme are accounted for as if it were a defined contribution scheme. The cost recognised within the surplus/deficit for the year in the Income and Expenditure Account being equal to the contributions payable to the scheme for the year. The last available actuarial valuation of the scheme was at 31 March 2002. The assumptions which have the most significant effect on the result of the valuation are those relating to the rate of return on investments (i.e. the valuation rate of interest) and the rates of increase in salary and pensions. In relation to the past service liabilities the financial assumptions were derived from market yields prevailing at the valuation date. It was assumed that the valuation rate of interest would be 5.0% per annum, salary increases would be 3.7% per annum and pensions would increase by 2.7% per annum. In relation to the future service liabilities it was assumed that the valuation rate of interest would be 6.0% per annum, including an additional investment return assumption of 1% per annum, salary increases would be 3.7% per annum and pensions would increase by 2.7% per annum. The valuation was carried out using the projected unit method. At the valuation date, the value of the assets of the scheme was £19,938 million and the value of the past service liabilities was £19,726 million leaving a surplus of assets of £162 million. The assets therefore were sufficient to cover 101% of the benefits which had accrued to members after allowing for expected future increases in earnings. The institution contribution rate required for future service benefits alone at the date of the valuation was 14.25% of salaries but it was agreed that the institution contribution rate will be maintained at 14% of salaries. To fund this reduction of 0.25% for the period of 12 years from the date of the valuation (the average outstanding working lifetime of the current members of the scheme) required the use of £82.5 million of the surplus. This left a past service surplus of £79.5 million (including the Supplementary Section) to be carried forward. Surpluses or deficits, which arise at future valuations, may impact on the institution’s future contribution commitment. The next formal actuarial valuation is due as at 31 March 2005 when the above rates will be reviewed. The USS pension cost of the University was £3,651,292 (2001/02: £3,415,750). This includes £304,869 (2002: £288,711) outstanding contributions at the balance sheet date. The contribution rate payable by the institution was 14% of pensionable salaries.


NOTES TO THE ACCOUNTS

27. PENSION SCHEMES (continued) SAUL PENSION SCHEME The University participates in a centralised defined benefit scheme for all qualified employees with the assets held in separate Trustee-administered funds. The University has now adopted FRS17 for accounting for pension costs. It is not possible to identify the University’s share of the underlying assets and liabilities of SAUL. Therefore contributions are accounted for as if SAUL were a defined contribution scheme and pension costs are based on the amounts actually paid (i.e. cash amounts) in accordance with paragraphs 8-12 of FRS17. The scheme is subject to triennial valuation by professionally qualified and independent actuaries. The last available valuation was carried out as at 31 March 2002 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 6.0% pa 7.0% pa - after retirement 5.0% pa 5.0% pa Salary growth* 4.2% pa 4.2% pa Pension increases 2.7% pa 2.7% pa * excluding an allowance for promotion increases. The actuarial valuation applies to the scheme as a whole and does not identify surpluses or deficits applicable to individual Employers. As a whole, the market value of the scheme’s assets was £941 million representing 121% of the liability for benefits after allowing for expected future increases in salaries. The contribution rate required for future service benefits alone at the date of the valuation was 17.4% of salaries per annum. Employers who have recently joined SAUL (“New Employers”) and certain employee groups (as agreed by the Trustee of SAUL), pay 17.4% of salaries per annum until the second actuarial valuation after entry (or some other period as agreed with the Trustee). The past service surplus allows all other Employers to pay contributions at the rate of 10.5% of pensionable salaries per annum, subject to review at future valuations. The surplus also supports the continuation of the Employee contribution rate of 5% of salaries per annum, again subject to review. The next formal valuation is due at 31 March 2005 when the above rates will be reviewed. The SAUL pension cost for the University and its subsidiary companies was £1,088,623 (2002: £1,114,997). This includes £90,339 (2002: £86,079) outstanding contributions at the balance sheet date.


NOTES TO THE ACCOUNTS 28. CAPITAL COMMITMENTS Consolidated University 2003 2002 2003 2002

£000 £000 £000 £000 Contractual Commitments at 31 July 1,528 3,565 1,528 3,565 The University has entered into further contractual commitments since the 31 July 2003 amounting to £12.2m for a new block of 339 en-suite self-catering rooms. OTHER CAPITAL PROJECTS As mentioned in the Treasurer’s Report, the University plans to commence several other major projects in the next year. No contractual commitments have been entered into at the date of this report but preliminary negotiations with partner and lending institutions have commenced. Expenditure and funding for these projects is estimated as: Total Next Later Grant Loan Reserve Project Cost Year Years Funding Funding Funding £000 £000 £000 £000 £000 £000 Rationalisation of Laboratory Space 7,797 2,059 5,738 6,568 - 1,229 Medway Development (over next 5 years - first phase) 31,940 8,346 23,594 18,238 13,000 702 Retail Development on Campus 907 807 100 - - 907 40,644 11,212 29,432 24,806 13,000 2,838 29. CONTINGENT LIABILITIES UMALT The University is a member of UMALT, a company limited by guarantee formed to provide a mutual association for terrorism risks. Under the terms of its membership each member acts as insurer and insured. If the association as a whole suffers a shortfall in any underwriting year the members are liable for their prorated share spread using a bank facility over 7 years. The University is a guarantor on a joint and several basis with other members of this £60 million bank facility. No liability has yet arisen under this guarantee. PENSIONS CONTINGENT LIABILITY Decisions by the European Court of Justice may increase the liability for pension provision of UK employers, including institutions such as the University of Kent. Whilst a UK Industrial Tribunal case has placed time limits on claims, thus suggesting that any liability will be limited, ultimately appeals would be back to the European Court of Justice. In view of this continuing uncertainty, no financial provision has been made in these financial statements in relation to this matter. 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.


NOTES TO THE ACCOUNTS 30. ACCESS FUNDS 2002/03 2001/02

£000 £000 Funding Council Grants 427 513 Disbursed to Students (402) (459) Balance Unspent at 31 July 25 54 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. It is no longer a requirement to operate a separate interest bearing bank account for access funds and they are now handled through the University banking facility. Neither interest nor audit fees therefore accrue directly to these funds. 31. 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. 32. POST BALANCE SHEET EVENT Unsecured bonds redeemable on 30 September 2003 were held in the University investment portfolio at 31 July 2003 at a market value of £201,650. The issuer failed to redeem the bonds on 30 September 2003 and the University is awaiting restructuring proposals from the company following negotiations with an informal committee of bondholders. A provision has been made for the full market value of the bonds.

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Documents

Financial Statements 2002-2003 - University of Kent · Council and Finance-Related Committees 2 Status and Mission 3 Treasurer’s Report 4 - 7 Management Statistics 8 - 9 Corporate