Governors’ Report and Financial Statementsfor the year ended 31 July 2012

Inspiring success

Governors’ Report and Financial Statements for the Year Ended 31 July 2012

ContentsForeword from the Chairman and Pro-Chancellor 3

Board of Governors 5

Operating and Financial Review 6

Corporate Governance 16

Statement of Internal Control 18

Independent Auditor’s Report to the 19Board of Governors of Teesside University

Statement of Principal Accounting Policies 20

Consolidated Income and Expenditure Account 23

Statement of Group Historical Cost Surpluses and Deficits 24

Statement of Group Total Recognised Gains and Losses 25

Balance Sheets as at 31 July 26

Consolidated Cash Flow Statement 28

Notes to the Financial Statements, Year ended 31 July 2012 29

Governors’ Report and Financial Statements for the Year Ended 31 July 2012

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Foreword from the Chairmanand Pro-Chancellor

I am pleased to introduce the Governors’ Report and Financial Statements for 2011-12.

The Report reflects the outcome of a year during which the Board of Governorstook the time to review our mission and aims, culminating in publication of ourInstitutional Plan for 2012-15.

The University has, again, continued to make a major contribution to the economic,social and cultural life of our communities. We have been particularly pleased towelcome HRH The Duke of Kent to open the University’s new Darlington Campus,and I look forward to seeing that initiative thrive and prosper as we find new waysto serve our region.

At the national level, we have faced major changes to student funding, and wehave been reassured to see the initial outcome of our response to those changesas we chart our distinctive way within UK Higher Education.

There have also been challenges in relation to the international dimension of ouractivities. After enhancing the administration in relation to international students, I am pleased that we are now regarded as having arrangements for internationalstudents which are among the best in the sector.

Consequently, as we look forward to playing our role within the region, within theUK, and beyond, my colleagues on the Board of Governors and I believe that,during 2011-12, we continued to establish a strong record of progress. Therefore, I commend this report to you as an outline of our achievements and as anindication of our potential.

Sandy Anderson OBE DL FREng

Chairman and Pro-Chancellor

Board of Governors, Year Ended 31 July 2012

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Board of GovernorsIndependent Members

Mr Sandy Anderson OBE DL FREng (Chairman and Pro-Chancellor)

Mr Paul Booth

Mr Chris Fleetwood

Professor Tricia Hart

Mr David Heaton OBE

Mr John Irwin

Mr Alastair MacColl (Vice-Chairman)

Mr Sean Price

Mr Keith Robinson (Treasurer)

Ms Amanda Skelton

Mrs Alison Thain OBE

Co-opted Members

Mr Robin Bloom (appointed with effect from 13 January 2012)

Ms Alison Clark-Jenkins (appointed with effect from 13 January 2012)

Mr Bob Cuffe

Mr Ernie Haidon (retired with effect from 13 January 2012)

Mr John Hogg

Ms Shahda Khan MBE (appointed with effect from 19 October 2012)

Ms Sue Kiddle

Dr Terry Murphy

Mr John Pinkney (appointed with effect from 1 July 2012)

Mr Peter Rowley (retired with effect from 13 January 2012)

Mrs Beverly Simpson

Dr Mark Simpson

Ms Lori Wheatman (resigned with effect from 1 July 2012)

Vice-Chancellor and Chief Executive

Professor Graham Henderson CBE DL

Secretary

Mr J Morgan McClintock

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IntroductionTeesside University was founded in 1930 asConstantine College and became TeessidePolytechnic in 1969. It was redesignated asthe University of Teesside in 1992. In 2009,the Privy Council authorised a change of theinstitutional name to Teesside University.

Teesside University is an exempt charityunder the terms of the Charities Act 2011. It is regulated by the Higher EducationFunding Council for England (HEFCE) whichhas been appointed the principal regulator ofHigher Education Institutions.

The University derives income from a widevariety of sources, but a significant majorityof its funding comes from three sources:grants from the HEFCE, contracts with theNational Health Service (NHS), and tuitionfees.

n The HEFCE is the major public sectorfunder of Higher Education Institutions(HEIs) as a whole, but the proportionof the University’s income derived fromthe HEFCE will decline significantlybetween 2012 and 2015. The University,in common with all other HEIs, isaccountable to the HEFCE forexpenditure of public funds. Therelationship between the University andthe HEFCE is codified in a FinancialMemorandum, which sets out the rightsand responsibilities of both parties.

n Health Education England (HEE) is thenew national commissioning body forthe NHS, which devolves contractingfor education through the North EastLocal Education Training Board(NELETB). The latter continues tocommission a range of programmesand activity for the delivery of nursing,midwifery, physiotherapy, diagnosticradiography, occupational therapy,medical ultrasound, clinical psychology,improving access to psychologicaltherapies, non-medical prescribing,health visiting, school nursing, districtnursing, long term health conditions,dental hygiene/therapy, dental nursing,and a wide range of top-up degreesand short awards which constitutecontinuing professional development.

n Tuition fees are payable in advance byeither students or their employers, orin due course through loans from theStudent Loans Company. This elementof the University’s income will continueto rise significantly over the next threeyears as a proportion of total income.

Mission, Vision,Character, Principlesand ValuesDuring 2011-12, the Board of Governorsestablished a clear mission statement whichis the corner-stone of the Institutional Plan2012-15.

Teesside University is committed to:

Providing opportunities, drivingenterprise, delivering excellence

… and to working in partnership toenable individuals and organisations toachieve their potential through high-quality learning, research andknowledge transfer.

In pursuing its mission, the University iscommitted to continuing to offer a broadrange of full-time, part-time and flexibleundergraduate, professional andpostgraduate taught qualifications, andresearch-based doctoral programmes, tomeet the ongoing development needs of itscurrent and potential students.

Central to the pursuit of its vision, theUniversity has set itself the challenging aim of seeking:

to achieve regional, national andinternational recognition as the UK’sleading university for working withbusiness, and to be amongst the UK’s topinstitutions of higher education in relationto:

n being a vibrant and effective learningcommunity with students at the heartof everything that we do

n enhancing academic and professionalstandards, and producing highlyemployable graduates for the benefitof individuals and organisations

n contributing effectively to theeconomic, social and cultural successof the communities that we serve

n demonstrating a real and continuingcommitment to social inclusion.

The character of Teesside University can bedescribed as:

n Dynamic, confident and committed tothe pursuit of excellence. Teessidegoes from strength to strength as aUniversity widely recognized as anenabling, passionate and partnership-focused institution with a can-domentality that organisations are keento work with.

n Students and employers have accessto a vibrant learning environment inwhich excellent courses, great facilitiesand committed staff combine toinspire individuals with talent andenergy to gain the knowledge andexpertise they need to get into andflourish in their chosen profession.

n Working creatively with employers, we tackle real-world challenges, fullyrecognising and committed todeveloping, the relationship betweenstudent learning, research, knowledgetransfer and business engagement,each informing the other, for thebenefit of staff, students, businessesand the social, economic and culturaldevelopment of the region.

Teesside University is exciting andinnovative, and inspires success.

Given the mission, vision and character, theUniversity has established a number offundamental principles to inform and directthe future direction of its activities, namely:

n recognising the primary importance ofremaining autonomous and financiallyviable in the increasingly turbulent UKHE environment

n retaining and further reinforcing itscharacter and status as a university(not a college or training company)that invests in, values and capitaliseson applied research, innovation andknowledge exchange

Operating and Financial Review

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n maintaining and further enhancing theUniversity’s position as a business-facing, business-engaged university

n retaining a focus on excellence andthe provision of the highest possiblequality student learning experiencewithin the global context necessary forfuture success

n providing opportunities for thoseindividuals with the potential tosucceed in HE, and who wish to stayin the Tees Valley, to use access to HEto enhance their contribution to thehealth, wellbeing and social, economicand cultural future of the area

n maintaining and celebrating itsposition as a people-led organisationthat recruits, values and invests inhigh-quality staff.

Teesside University’s values reflect its aim tobe a caring, fair and supportive institutionwhere everyone takes a shared pride in itsmission and achievements.

Institutional Plan2012-15In November 2011, the Board established theInstitutional Plan for 2012-15. The strategies,aims and targets set out within the plan havebeen cross-referenced to the risks identifiedwithin the University’s Risk Register.

The plan consists of:

n A clear articulation of the mission,vision, character, core principles andvalues which describe and underpinthe University’s ethos, culture andactivities.

n A statement of the general institutionalaims, the subsidiary aims and thetargets that the University will beseeking to deliver over the period ofthe plan.

n Articulation of the three primarystrategies that describe the nature ofthe University’s core academic activityassociated with delivery of the generalinstitutional aims, subsidiary aims andtargets, namely:– Academic strategy– Business engagement strategy– Research strategy

n A series of (annual) key performanceindicators (KPIs) covering a limitednumber of critical areas of developmentactivity within each of the three primarystrategies, enabling the Board ofGovernors and senior management tomonitor progress towards theachievement of some key aims andtargets identified in the institutional plan.

n A series of risks requiring regularmonitoring and management.

The plan is underpinned by a further 21supporting strategies which seek to ensurethat the aims of the plan are fully andsuccessfully achieved.

Public BenefitStatementThe University’s charitable objects are set outin section 124 of the Education Reform Act1988. They include powers to provide highereducation, to carry out research, and topublish the results of the research (or anyother material arising out of or connected withit) in such a manner as the University sees fit.

In determining the University’s objectives andactivities, the Board of Governors has haddue regard to the Charity Commission’sguidance on the reporting of public benefitand, in particular, the supplementary guidanceabout the advancement of education.

There are two key principles of public benefit.First, there must be an identifiable benefit.Second, the benefit(s) must be to the public,or to a section of the public.

Teesside University is committed, in principleand in practice, to the economic, social andcultural success of the communities it serves.The University’s commitment to communityengagement, which is widely acknowledged,is outlined in the Corporate SocialResponsibility Framework. When the Universitywas awarded the Times Higher Education’sUniversity of the Year Award in 2009-10, thejudges (amongst many other attributes)singled out its commitment to working withcommunities and businesses, making it ‘thepublic benefactor par excellence’.

The University places a huge importance onthe overall quality of the student experience,and continually strives to provide all studentswith a friendly and supportive environmentwhere they are most likely to flourish.

Students and employers have access to avibrant learning environment in which excellentcourses, great facilities and committed staffcombine to inspire individuals with talent andenergy to gain the knowledge and expertisethey need to get into and flourish in theirchosen profession. The University offers itsstudents an extensive range of accessiblelearning resources and is committed to ahigh level of professional student support.The Quality Assurance Agency for HigherEducation has acknowledged the University’ssuccess in widening participation, supportedby the development of strong partnershipswith local Further Education Colleges.

Teesside University continues to play acritical role in helping to drive the region’seconomic future. It has capitalised on itsdigital media and technology expertise tocreate a thriving cluster of digital and creativebusinesses in the Tees Valley through theDigital City project. In addition, by engagingwith industry, the University has targetedknowledge and skill gaps identified byemployers across a number of sectors ofimportance to the local and regional economy,and the University has provided a regional,national and international network to helpnew businesses form contacts and grow.

Raising Aspirationsand WideningParticipationThe University continues to deliver a range ofinitiatives designed to drive up aspirations andparticipation across Tees Valley, the NorthEast, and Yorkshire & Humberside, includingworking with primary schools, secondaryschools, sixth-form colleges, and furthereducation colleges in the area.

The University provided information tostudents, parents and teachers on a range oftransition and progression topics designed toencourage students to realise their fullpotential and raise aspirations. Over 36,000prospective students had engaged inwidening participation sessions by July 2012,an increase of 10.7% on 2010-11, and 29.5%on 2009-10.

The University’s ‘Passport Scheme’ hasoffered impartial support to 33 institutionalmembers and over 3,000 Passport students inassisting to demystify common perceptions

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and concerns regarding the new fees regimeand to promote the positive benefits ofhigher education.

In 2012, stronger links have been developedwith local authority services to provideappropriate support during the transition intohigher education for care leavers andstudents with disabilities.

DarlingtonThe £13 million Darlington Campus wasofficially opened by HRH the Duke of Kent inApril 2012, marking the establishment of astrong platform in the West of the Tees Valley,on which to build a range of activities.

The campus is developing Higher Educationin Darlington and its hinterland, in partnershipwith Darlington College, focusing on part-timeand blended delivery, particularly in the fieldsof business, health, social sciences, andeducation.

The campus also facilitates businessengagement by providing opportunities forworkforce development, other services forbusiness, and excellent facilities to hostbusiness events.

The campus is able to use its excellentlocation to provide a hub for students andemployers across the region and beyond.State of the art facilities, including a libraryand ICT suites, are provided for students,whilst the top floor of the building provideshigh specification executive educationfacilities including a boardroom, a lounge fornetworking, a large teaching room and anoutdoor terrace. This has enabled theUniversity to work with regional businessesand community groups. The business reachof the campus is being extended furtherthrough holding regular Business Networkingevents, hosting incubator businesses, andrunning a suite of business seminars as partof the ‘Enterprise Development Programme’with start-up businesses.

Student Recruitment:UK StudentsFollowing a very successful recruitment cycle,in October 2011, the University enrolledsufficient students to meet the targets agreedwith the HEFCE, including recruitment of theadditional student numbers awarded by the

HEFCE following a competitive process. Thisresulted in 27,000 individuals studying at theUniversity, of whom 40% were enrolled onfull-time/sandwich courses, and 60% on part-time courses.

During the year, the University concentratedon preparing for the significant changes inthe funding of Higher Education which wereintroduced in September 2012, from afunding model based on a combination offees and block grant, to one based almostentirely on student fees.

This resulted in a new Fees and Scholarshipsoffer to students for the 2012-13 recruitmentcycle, which was successfully launched aspart of the new undergraduate recruitmentcampaign, and the associated outreachactivities. This campaign built on thesuccesses and reputation of the University,and focused on communicating keymessages, leading with the ‘we inspire, yousucceed’ strap line. The issue of 2012 feeswas addressed in a positive andcomprehensive way, demonstrating tostakeholders that a university education isaffordable and can provide significant addedvalue alongside an excellent studentexperience. The University is expected tomeet its full-time undergraduate recruitmenttarget for the 2012 entry, despite the sector-wide downturn in applications and increasedcompetitor activity.

As part of the ongoing marketing andrecruitment activity, separate recruitmentcampaigns were developed for part-timecourses, for the Darlington campus, forpostgraduate study opportunities, and for theUniversity’s Higher Education BusinessPartnership with the five local furthereducation colleges. All of these have beenlaunched for the 2012-13 recruitment cycle,and will continue for 2013-14.

During the year, the University won thefollowing awards for its marketing, recruitmentand student information activities: GoldHEIST award for the 2012 UndergraduateProspectus, Silver HEIST award forCommunity Engagement (the MacKenzieThorpe–Middlesbrough Murals exhibition),and the Higher Education Liaison Officers’Award for Innovation Recruitment Practice(for the University’s Postgraduate VirtualOpen Day).

EducationalPartnershipsThe University has a strong sub-regionalHigher Education Business Partnership(HEBP) with local further education colleges,in Middlesbrough, Stockton, Redcar &Cleveland, Hartlepool and Darlington. In2011-12, the number of students studying atHEBP Colleges exceeded 3,700.

The colleges provide learners with access toa Higher Education curriculum with clear linksto business and industry, and to extensivewebs of higher education opportunities.University-funded higher education centresoperate in all five of our partner colleges.

HEBP partners participate in an annual HigherEducation in Further Education Conference,which provides the opportunity fordissemination of good practice across thepartnership.

In 2011-12, each of these Collegessuccessfully completed a Summative Reviewby the Quality Assurance Agency (QAA). Thestrength of the partnership between individualColleges and the University, and within HEBP,was singled out by the QAA for particularcommendation.

The University is building on its nationalreputation for partnership-working byextending its local network to become thepreferred validation partner of a number offurther education colleges in the North ofEngland (and specifically in the North East,and the Yorkshire and Humber region). Thisstrategy, articulated in the recent InstitutionalPlan, also seeks to raise significantly theUniversity's profile and expand therecruitment footprint.

During 2011-12, a formal partnership wasagreed with Bradford College, one of thelargest providers of higher education in afurther education college in the UK. Severalother colleges are moving through the duediligence stages, with an anticipation that, byDecember 2012, the University will have fivenew significant partnerships, and will haveexpanded considerably within three existingarrangements. The volume of validatedprovision is set to grow to at least twice thesize of the HEBP activity by 2014-15.

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International ActivityRecruitment of international students, whichhad been a remarkable success story inrecent years, was less successful in 2011-12as a result of government changes to the Tier 4 regulations (the points-based systemfor immigration) and the removal of the post-study work visa. This mainly affectedrecruitment from a number of countries in theIndian sub-continent. In addition, the ArabSpring in the Middle East and North Africaalso led to a decrease in the number ofstudents recruited from that region.

Recruitment received a further set-back inFebruary 2012, when, following an audit bythe United Kingdom Border Agency (UKBA),the University’s ability to sponsor internationalstudents was temporarily suspended due toconcerns about the administration of somerecords. Although a second audit by UKBA in2012 demonstrated to the UKBA’s satisfactionthat the University was implementing acomprehensive action plan devised by asteering group led by the Vice-Chancellor,the recruitment pause had already resulted ina loss of applicants. Since then, the Universityhas been engaged in a series of initiatives tore-establish its international profile andrecruitment base as a significant strategicpriority.

In September 2012, the UKBA completed athird audit, when the University receivedassurance that the audit team was highlyimpressed with the way in which informationis now being recorded and retained oninternational student files. The University isdeveloping a positive relationship with theUKBA, which is being complemented by thedevelopment and re-engagement with astrong network of agents and partnersaround the world.

Student ExperienceThe University is committed to providing anexcellent student experience for all of itsstudents, and feedback confirms our successin this area. In the latest 2012 National StudentSurvey (NSS), Teesside achieved an overallsatisfaction score of 86%, placing it in the top10% of all UK Higher Education Institutions.In some subject disciplines, satisfaction wasexceptionally high, with Radiography achievinga 100% score and seven other subjects havingoverall satisfaction recorded as 90% or over.

In the Postgraduate Taught Experience Survey,78% of students report having theirexpectations met or exceeded in all keyareas, with overall satisfaction with my courserising from 82% (in 2010) to 88% (in 2012).

Our international students continue to reporthigh levels of satisfaction with their experienceat Teesside University, with overall satisfactionreaching 88% on the International StudentBarometer

These scores, across a number of measures,indicate that we remain one of the topperforming new universities, as reported inthe Times Higher Education’s StudentExperience Survey. In this report, the overallsatisfaction score of 80% placed the Universityas the highest-ranked modern University.(15th out of all 105 participating institutions).

Learning, Teaching,and Academic QualitySchools and Departments workedcollaboratively through 2011-12 to review thedevelopments achieved through the lifetimeof the 2009-12 Learning, Teaching andAssessment Strategy, culminating in thedevelopment of a new Learning, Teaching andStudent Experience Strategy for 2012-15. Thissub-strategy supports all three PrimaryStrategies, but particularly the AcademicStrategy, and recognises the wider students’learning opportunities which can lead to theenhanced employability of our students. Thestrategy points to a commitment to educatingour students, through the discipline of theirchoice, to become confident, critical, creative,adaptable, articulate and aspiring.

In 2011-12, the University funded eight newLearning and Teaching Innovation projects;organised a new, and successful, schemeentitled Students as Researchers; hosted ahighly-regarded Three Rivers LearningConference; and, once again, convened itsown Annual Learning and TeachingConference. The University was alsosuccessful in winning a CollaborativeTeaching Development Grant from the HigherEducation Academy for the School of Healthand Social Care’s project, entitled Flo’s story:the development of an online interactivelearning package about persistent pain inolder people.

Throughout 2011-12, the University continuedto review its quality processes in the light ofthe University’s intention to increase itsnumber of UK College Partners; in the contextof changes to key external reference points;and in response to the analyses publishedby QAA in various Institutional Audit reports.

This on-going review process resulted inseveral changes to enhance the processesfor approving and overseeing collaborativeprovision, including the development of ageneric Operations Manual and the fullredrafting of the sections of the University’sQuality Handbook relating to EducationalPartnerships with UK Public Sector Collegesand Employer Partnership CollaborativeProvision. The University has also providedsupport to the Tees Valley Colleges within theHigher Education Business Partnership, whichall received successful summative outcomesin the QAA Integrated Quality EnhancementReviews (which concluded in 2012).

The University has responded to theconsultation on, and publication of, severalchapters of the new UK Quality Code forHigher Education. Of particular note is theresponse to the Chapter on ExternalExamining (B7), which has resulted inchanges to the University’s External ExaminerFramework.

The University met the requirement to publishKey Information Sets and the WiderInformation Set by the given deadlines. TheUniversity will continue to reflect on possibleenhancements to its public informationprovision in response to the publication ofPart C of the UK Quality Code for HigherEducation: Information about HigherEducation Provision.

The University continues to implement itsagreed Quality Audit and Review Schedule,with University panels undertaking a numberof audits of the University’s Threshold QualityStandards, and other quality relatedprocesses, resulting in enhancements to theprocesses investigated.

The University has continued to reflect on theappropriateness of the Academic BoardCommittee structure in the light of changingpriorities and the need to ensure thatresources are deployed effectively. This hasresulted in a number of changes, includingsome committees being disbanded.

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EmployabilityEmployability remains a key issue for theUniversity, and our graduates, given theincreasingly challenging economicenvironment.

Therefore, during 2011-12, the Universityconcentrated on developing three keyinitiatives:

n A salaried graduate internship scheme,which commenced in January 2012 inconjunction with local businesses. Thescheme generated positive endorsementsfrom employers and graduates.Subsequently, 78% of interns securedsubstantive positions with the companieswhich had provided their internships.

n Short (six weeks) paid summer workplacements across a range of businesssectors. Students were matched toemployer projects, and again thisinitiative led to positive feedback fromemployers, such as ‘. . . proved beyonda shadow of doubt that youth can still,sometimes surpass experience. Thismeans that, in future, recruitment willinclude innovation and not justexperience’. (Plasrec Ltd). Typicalfeedback from a student participant was:‘I got solid experience in a workenvironment, developed skills which willhelp me throughout my final year, andbuilt personal and professionalrelationships, with possible futureopportunities for me with the company’.

n Students as researchers. This projectenabled students to work with establishedresearchers on elements of researchprojects. Feedback from all concerned hasbeen positive, with students highlightingkey generic skills acquisition, such as teamworking, co-ordination and managementof meetings, and time management.

All three initiatives will become an ongoingpart of Teesside University’s offer to ourstudents and graduates.

The entrepreneurs@tees initiative, whichdevelops entrepreneurial skills and attitudeswith students, and offers support to potentialentrepreneurs, recruited over 700 students in2011-12. To complement this initiative,students launched the Teesside EntrepreneursSociety. A number of high-profile eventsattracted good attendance during the year,including imaginative business competitions

such as The Beermat Challenge (outlining abusiness idea in 50 words). The NationalConsortium of University Entrepreneurs(NACUE) was heavily involved in a number ofthese initiatives. The president ofentrepreneurs@tees went on to become theregional coordinator for NACUE.

Activity in 2012-13 will include a significantprogramme of activity during the NovemberGlobal Entrepreneurship Week, a high-profileevent for students, staff, and externalparticipants.

ResearchThe University’s five Research Institutescontinue to support the development andapplication of high-quality research, with anemphasis on multidisciplinary work andcollaboration with external partners. The fiveinstitutes are:

n Digital Futures Institute n Social Futures Instituten Technology Futures Instituten Health and Social Care Instituten Institute of Design, Culture and the Arts

Preparations for the 2014 ResearchExcellence Framework (REF) continuedthroughout 2011-12, co-ordinated by across-institution REF Steering Group. TheUniversity is now implementing the Code ofPractice for the selection of members of staffto be submitted to REF. The University’ssubmission intentions will be confirmed tothe REF team by December 2012.

The University is a partner in several newprojects, which were awarded by theEuropean Commission in 2011-12, includingthe following funded by FrameworkProgramme 7 (FP7):

n a project on 3D interactive storytelling,funded under the Future and EmergingTechnologies (FET) programme and ledby Katholieke Universiteit Leuven, Belgium

n work to integrate energy-related data witha set of tools for visualising, simulatingand analysing the interrelationshipsbetween factors determining CO2production, led by Enginyeria iArquitectura La Salle, Spain, andsupported under the ICT for Low CarbonEconomy theme

n a Coordination Action to define andpromote advances in innovation for

digital fabrication and its use with newmaterials and processes, led by OCETechnologies BV, part of the CanonGroup, in the Netherlands.

Support for collaborative work has also beenreceived from the EC’s Prevention of andFight against Crime programme, along withproject funding from UK organisations(including the Higher Education Academyand charities such as Arthritis Research UK).

The University continues to work with a widerange of external partners to develop andapply research, encompassing collaborationwith academic, commercial, public sectorand voluntary organisations. Ongoingcollaboration includes the Health and SocialCare Institute’s continued role in Fuse, theregion’s Centre for Translational Research inPublic Health, which brings together theNorth East’s five universities to work with theNHS, local government and other bodies.New initiatives from the past year includecollaboration with the MiddlesbroughPartnership, Middlesbrough Council and theInstitute for Local Governance to share abody of knowledge, developed over fivemajor projects by the Social Futures Institute,on worklessness, social exclusion, and theexperience of young people. In Olympic year,the Institute for Design, Culture and the Artsworked with partners to develop a digitalinstallation which uses animation to showhow disabled athletes move – a developmentwhich formed part of the London 2012Cultural Olympiad Festival.

TeesRep, the University’s institutionalrepository of research publications,celebrated its first birthday in November2011, shortly after Open Access Week washeld to promote the benefits of open accessto research findings. In its first year, 850research outputs were added to TeesRep,attracting 57,000 views and over 44,000downloads, and helping to improve thevisibility of the University’s research output.

The University’s International VisitingAcademics scheme continues to supportinternational networking and collaboration.Researchers from the US, China, Australia,Spain and Gambia will visit the University asa result of awards made in 2011-12. Teessideresearchers have also been funded to makeoverseas visits including to research partnersin Israel, South Africa and the US.

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We have made significant changes to theadmissions and registration process for newresearch students, as well as refining ouracademic monitoring milestones to improvethe efficiency and effectiveness of our researchdegree processes. This followed from acomprehensive review of research degreeadministration processes, carried out by across-university Process Review Group. Wechanged our committee structure so thatoversight of postgraduate research students isnow carried out more directly by the UniversityResearch Degree Committee, withrepresentation from the Schools andResearch Institutes.

Business EngagementActivitiesA significant piece of work was undertaken in2011-12 to analyse the performance of theUniversity’s current business engagementmodel and to benchmark it against those ofother HEIs. The final report andrecommendations were used as the basis fora major action plan in 2012-13, aimed atraising the profile and performance ofbusiness engagement activity in the contextof national and LEP policy and of changingfunding arrangements. Key priorities aremarketing and communications, both internaland external; growth of graduate enterpriseand student entrepreneurship; developmentand consolidation of strong businessrelationships in Darlington; closer relationshipsbetween research and business engagement;and establishing a Business Board. Alongsidethese developments, business income andactivity targets will be a primary focus.

The University’s strong reputation for qualitywas reinforced during the year by the award ofPutting the Customer First (PCF) accreditationfor all of its business engagement activityacross all Schools – the only HEI in the countryto achieve accreditation at this level. PCF is aquality badge with national recognition.

As lead partner in the European EnterpriseNetwork (EEN) North East, the Universitycontinued to build both European andregional business connections and to developthe EEN offer (promoting research, trade andinnovation partnerships and developmentopportunities for NE business) as a valuableelement of its business portfolio. A furthertwo years of funding was secured for thenetwork in May 2012, providing the

opportunity to grow a strong Europeanpresence with the support of a committedbusiness board.

Enterprise andKnowledge TransferDigitalCity Innovation (DCI), a flagship projectfor the University, won a further round ofERDF grant during the year, enabling it tobuild on an strong foundation of job andbusiness creation in digital media andtechnologies. With almost 200 companiesnow created since 2008, DCI puts anestimated £20m back into the Tees Valleyeconomy every year. It has expanded its offernow to include foresighting, industryworkshops, and six-month digital industryplacements for graduates, making asignificant contribution to employability andemployment. The year also saw Universityinvestment of over £200K in DCI’s sisterproject, DigitalCity Business, to enable thebusiness development arm of DigitalCity tocontinue operating in the face of publicfunding reductions. Together with a similarinvestment by Tees Valley Unlimited andsmaller investments by the Tees Valley localauthorities, this led to the creation of a newDigitalCity Board with new terms of referenceand a new chair.

Knowledge transfer programme successesin the year included another Grade A –Outstanding award. This brought the totalnumber of Grade As to five for the School ofScience and Engineering, and means thatover 70% of the University’s recent KTPshave achieved the highest quality gradeavailable – compared with an averagenational rate of 8%. The University continuedto deliver KTPs funded from ERDF andaimed specifically at regional SMEs. A socialenterprise strategy was agreed during theyear, and its implementation is now underway with a structured support and trainingprogramme provided by Acumen, a socialenterprise support organisation with a highnational profile and excellent supportnetworks. The University was successful inwinning an award from UnLtd, a nationalsupport organisation, in a competitionsponsored by the HEFCE. The award willenable viable social enterprise proposalsfrom staff and students to receive bothfinancial and coaching and mentoringsupport. These developments will be

instrumental in supporting the University’saim to develop a strong social enterprisesupport structure, both on campus and forthe wider community.

Commercialisation activity included theestablishment of two spinout companies,Dynamic Motion Detection (DMD) andTeesside Wire. Commercial developmentfunding was put into DMD to develop itsproduct for the commercial market.

WorkforceDevelopmentThe HEFCE’s funding of the University’s£5.13m Strategic Development Fund (SDF)project, Building the Future, ended during2011-12. The anticipated outturn of full-timeequivalent students on workforcedevelopment programmes for 2011-12exceeded 1,000, representing over 3,000learners and almost four times the figure forthe first year of SDF support. A detailedevaluation of Building the Future by externalconsultants, confirming the project’s goodperformance and highlighting areas of goodpractice, was submitted to the HEFCE withthe final accounts. The project was featuredat the University’s own disseminationconference in November 2011, as well as innumerous national conferences. TheUniversity’s success in delivering workforcedevelopment programmes was recognisedby the HEFCE through the award of a £1mTransition Fund grant in July 2012 to supportthe development and implementation of asustainable workforce development strategyafter the HEFCE funding ceases.

The grant from the Transition Fund wasawarded on the basis of a strong focus onengineering, leadership, management, health,the development of strategic partnerships toopen up new routes to market and businessdevelopment in and around Darlington. TheTransition Fund project forms the focus forstrategic development of businessopportunities in 2012-13. Most of the funding(around £600K) will be used to supportemployers to engage in two-year workforcedevelopment programmes.

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Financial PerformanceKey Financial Data 2011-12 2010-11

£000 £000

Total income 132,361 145,865

Total expenditure 121,001 133,290

Surplus for the year 11,360 12,575

Exceptional items (included in above):Voluntary severance (1,201) (3,118)scheme

Capital additions 2,699 8,819

Cash at bank and in 68,107 57,243hand including money market investments

Borrowings 6,742 7,383

Total funds (net assets) 133,405 113,545

Cash flow generated 13,458 8,558from operations

In financial terms, 2011-12 has proved to beanother successful year for the University.Despite a reduction in overall income, theUniversity has managed expenditure togenerate an operating surplus of £11.4m andto meet all of the financial KPIs included inthe Financial Strategy.

The net assets of the University increased by£19.9m to £133.4m. The main item of capitalexpenditure related to the extensiveredevelopment of the library (which is nowover 13 years old). The improvements providea wider variety of learning environmentsranging from informal zones, through spaceswhich accommodate evolving technologies,to traditional areas for silent study.

The University participates in the LocalGovernment Pension Scheme (LGPS) andthe Teachers’ Pension Scheme (TPS). TheTPS is accounted for on a contribution basis,whereas the LGPS is accounted for underFRS 17. The FRS 17 accounting has resultedin a charge of £1.9 m to the income andexpenditure account (over and above thecontributions made). Actuarial gains andlosses are charged/credited to the Statementof Recognised Gains and Losses. For theyear to 31 July 2012, there was an actuarialgain of £9.4m, largely as a result of a changein the assumption relating to salary increasesfrom 5.0% to 2.6%. These amounts accountfor the decrease in the pension fund deficitfrom £24.0m to £16.5m.

The University holds significant cashbalances which it invests in money marketdeposits and AAA rated liquidity funds. Itoperates to an agreed counterparty list as setout in the Treasury Management Policy. Thislist sets out investment limits and minimumratings requirements for deposit-takers. Inview of the current economic climate, thePolicy was reviewed comprehensively during2011-12 to ensure that the Universityminimises the exposure to risk of its funds.Regular reports on Treasury Managementwere taken to the Governors’ ResourcesCommittee.

Cash flow from operations for the year was£13.5m. The University invested a further£10.0m in money market deposits, madeloan repayments of £0.9, and incurred netcapital expenditure of £1.9m.

Human ResourcesTeesside University acknowledges that itsstaff are its most valuable asset. This isdemonstrated by providing and enhancing awide range of initial and continuingdevelopment opportunities for all staffgroups, to enable them to implement theUniversity’s mission, corporate objectivesand core strategies.

In December 2011, the University achievedGold status following an extensive Investorsin People review. Over the last three years,the University has progressed from Bronze to Gold status, a fact which recognises theon-going commitment to, and continuingenhancement of, the learning anddevelopment support we provide to all ourstaff. It is particularly significant that theUniversity achieved this level of recognitionduring a challenging period.

Communication with all staff continues to bea key priority at a time of major and frequentchange in the sector. The outcomes of theUniversity’s staff survey (being conducted inOctober 2012) will be a strong indicator ofthe extent to which the University is balancingthe need to respond to changes whilst stillmaintaining its reputation as an employer ofchoice.

It is particularly encouraging to note that, inthese times of austerity, the University is stillcommitted to investing in the training anddevelopment of staff as a major factor insupporting the University’s focus onenhancing the student experience and

improving employment opportunities forstudents.

During 2011-12, the focus of the Departmentfor Learning Development has been to providelearning and development programmes whichhave been identified through a series ofdiscussions about training needs with Deans/Directors, Learning and TeachingCoordinators, Technology Enhanced LearningCoordinators and Staff DevelopmentCoordinators. This approach has assistedSchools and Departments to focus andidentify their specific learning and developmentneeds for individuals, groups and teams.This approach has also ensured that theDepartment for Learning Development hasplanned and resourced learning anddevelopment activities which have efficientlyand effectively met the University’s needs.

Some of the key achievements during 2011-12have been:

n The design, development and delivery ofa training programme to equip staff withthe relevant knowledge to enable theUniversity to comply with its duties as aUK Border Agency (UKBA) HighlyTrusted Sponsor. Following evaluation ofthe event, further training will be providedto more staff at the start of the 2012-13academic year.

n The 2012 Graduate Intern Programme,which comprised a weekly learning anddevelopment programme designed todevelop and enhance the graduates’employability skills. Evaluation of thelearning and development aspect of theprogramme highlighted that all of theinterns had benefited from engaging withthe learning and development activities.Activities in team building andcommunication were regarded as themost beneficial components.

n Continued support to School annualconference events, to encourage andfocus staff engagement in enhancing thestudent experience.

n Supporting the facilitation of a tailoredSenior Management developmentsession, designed for the Vice-Chancellorand the University Corporate ExecutiveTeam, to develop a shared understandingof how they will collectively lead theUniversity through a period of change.

n Funding from the University’s CentralStaff Development Budget, which hasenabled 103 members of staff to continue

Operating and Financial Review, Year Ended 31 July 2012

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to receive support to undertake HEaccredited courses and qualifications.The funding criteria are reviewed on anannual basis to ensure their effectivenessagainst University/School/Departmentstrategies and plans.

n Given the requirement for efficiencysavings across the sector, the Universitycontinues to examine carefully allexpenditure on staffing. In addition to the2012 voluntary severance scheme, whichgenerated savings of £1.4m, there havebeen a number of restructures andchanges to working practices which havedelivered further efficiencies, usually bymaking more effective use of technologyand/or by economies of scale. This hasenabled the deployment of someadditional staffing to support growthactivities. Work is also underway toexamine the extent to which the use ofcasual staff and hourly-paid staff isappropriate.

Equal OpportunitiesThe University is committed to equalopportunities for all staff and students,ensuring that individuals are treated fairly andwith respect at all times, and given equality ofopportunity in all activities. A range of policies,procedures, training initiatives and focusgroups for staff and students about keydiversity strands demonstrates the University’scommitment to ensuring that equality anddiversity issues are clearly understood, andthe University’s commitment to disseminatinggood practice.

Further initiatives have been developed during2011-12 to embed consideration of equalityand diversity within the operations of theUniversity. Key developments have includedestablishing an equality and diversity actionplan, enhancing equality and diversitymanagement information, introducingmonitoring for sexual orientation and religionand belief, delivering training for relevant staffon the equality and diversity considerationsof the research excellence framework, andextending more generic training for linemanagers on managing diversity in theworkplace.

Physical ResourcesIn the last six years, the University has spentover £52m on new buildings andimprovements to existing buildings. As notedearlier in this report, the main item of capitalexpenditure in 2011-12 related to theredevelopment of the library.

The University has also spent a significantamount of money on long-term maintenanceprojects, including:

n replacing electric heating with gasheating at a number of locations

n refurbishing a number of Universitybuildings

n internal improvements to a number ofHalls of Residence.

There has also been investment in ICTequipment and resources, with funds beingprovided both by the University and by theHEFCE, through the learning and teachingcapital allocations.

EnvironmentalDevelopmentsThe University continues to monitor itsenvironmental progress through Eco Campus,the framework management systemspecifically designed for the higher educationsector, which recognises staged progressiontowards ISO 14001 registration. The Universityis currently working towards achieving thesecond stage (Silver) award.

The University has successfully maintainedits 2:1 status in the People and Planet GreenLeague, even though the scoring criteriahave become more stringent. The progresshas been achieved through the growingpartnership between the staff in the EstatesDivision of the Campus Facilities Departmentand Environmental Representatives fromevery School and Department.

The wide range of activities monitored withinthe Eco Campus framework has been keptunder formal review by the University’sEnvironmental Advisory Group, which has,during the year, reviewed and amended aseries of environmental Policies, Procedures,and Practices.

The University achieved a reduction of 4.8%in carbon emissions (compared to the prioryear) reflecting the first year of investment inthe Carbon Reduction Programme and a

range of energy conservation measures. Thisreduction was achieved despite an increasein University space – the Darlington Campus.Projects during 2011-12, the second year ofthe University’s ten-year Carbon ReductionProgramme, included converting the heatingwithin a further three halls of residence fromelectricity to gas-fired, commissioning acombined heat and power unit in theMiddlesbrough Tower, and introducingautomatically-controlled low-energy lightingsystems throughout various buildings.

The University successfully completed theCarbon Reduction Commitment EnergyEfficiency Scheme (CRCEES) registrationprocess. The University was ranked 11th withinthe Universities and Colleges Sub-Group(highest in the North of England),demonstrating the University’s commitmentto improving energy efficiency and reducingcarbon emissions.

During 2011-12, progress was maintainedtowards diversification of the means by whichstudents and staff arrive at the Middlesbroughcampus. The Cannon Park Way Park andRide scheme continued to be very successful,and the University provided a shuttle bus froma new bus-shelter on Southfield Road toCannon Park Way, via MiddlesbroughRailway Station.

Key PerformanceIndicatorsThe University’s key performance indicatorsinclude the student retention and completionindicators which are an important part of theUniversity’s Access Agreement with OFFA.

The key performance indicators cover thewhole range of the University’s operations,including:

n student recruitmentn student progression, retention and

attainmentn student satisfactionn graduate destinationsn research activityn commercial activity.

Achievements during 2011-12 included:

n the average tariff points score of UKstudents entering full-time degreeprogrammes at Teesside has increasedfrom 259 points (for the 2006 entry cohort)to 316 points (for the 2011 entry cohort)

Operating and Financial Review, Year Ended 31 July 2012

14

n the percentage of students gaining firstclass or upper second class degrees hasincreased to 52.8% in 2010-11

n National Student Survey scores haveimproved. The overall satisfaction scorefor all respondents has increased, with86% being achieved in 2012.

Other performance indicators are used by theBoard’s Resources Committee (key financialindicators) and by the Employment PolicyCommittee (trends in staffing levels andcomposition, absences, turnover, recruitmentprocesses and staff qualifications).

Principal Risks and UncertaintiesSignificant risks to the University are regularlyassessed, with reference to a risk register.The University has mitigating actions in placeto reduce the impact and likelihood of risks,and holds sufficient funds to enable it torespond promptly to unforeseen events.

The University continues to embed riskmanagement practices within its culture,enabling it to respond to new threats andopportunities, and to the potential impact ofa small number of significant financial risks.

The Board of Governors has identified thefollowing as the most significant risks to theUniversity:

n inability to achieve enrolment targetsfor home and EU students

n inability to achieve enrolment targetsfor international students

n failure to meet UKBA requirements.

These risks are detailed below:

1. Inability to achieve enrolmenttargets for home and EU students

The uncertain impact of the new studentfunding arrangements, which has applied tonew entrants from September 2012,continues to present the University withsignificant challenges. The University hashad to consider the likely responses ofpotential applicants to a substantial increasein tuition fees, even though students are notrequired to start meeting these costs untilafter graduation, and how to position itself ina market where fees can vary betweeninstitutions and subjects.

The Higher Education White Paper, publishedon 28 June 2011, contained a proposal to

remove student places from institutions on apro rata basis, to create a margin to beallocated in response to competitive bids. It also proposed to prevent universities frombidding for places from the margin unlesstheir average annual fee, after waivers, wasbelow £7,500. Therefore, the Universityamended its original fee and bursary strategy,which formed part of the Access Agreementapproved by OFFA in July 2011. TheUniversity changed its proposal to set a singleannual fee for degree programmes, at £8,500,to a graduated fee structure for degreeprogrammes, with fees in three bandsbetween £7,450 and £8,450, according tothe subject of study, and fees for foundationdegrees of £5,500. The revised AccessAgreement was approved by OFFA inOctober 2011, and the University wassuccessful in the competitive biddingprocess, being allocated more places thanthe number removed to create the margin.

The risks of failing to recruit the allocatednumbers, and of failing to attract sufficientstudents with qualifications at or above AABat A-level or equivalent, who are outside therecruitment cap, have been addressedthrough a corporate recruitment strategy,which has resulted in enhanced marketingactivities, improved processes for trackingand managing applications from initialenquiry through to enrolment, improvedmonitoring of competitor activity, and theappointment of marketing account managersin each School.

Initial indications for 2012-13 are that theUniversity has filled over 95% of its allocatedplaces for students with qualifications belowAAB at A-level or equivalent. This will enablethe University to mitigate HEFCE grantpenalties for over-recruitment in previousyears, and is not expected to disadvantagethe University in the allocation of places for2013-14.

The University experienced a 20% reductionin recruitment of students with qualificationsat or above AAB or equivalent, but it shouldbe noted that the national pool of candidateswith qualifications at this level proved to besubstantially smaller than expected.

2. Inability to achieve enrolmenttargets for international students

The pausing of the University’s license for aperiod during 2011-12 has caused somedisruption to recruitment activities. As a

result, student enrolments in October 2012have been significantly lower than in recentyears.

The University is implementing a strategy torestore international student numbers to theirprevious levels by 2014-15. This includes:further enhancements to the University’swebsite to include detailed country pages forthe major markets; a major agent andpartner conference at Teesside in October2012; an enhanced campaign for February2013 entry; major events in key countries forpartners and agents (China, Malaysia andIndia); a targeted media campaign in keymarkets; and enhanced web advertising.

3. Failure to meet UKBArequirements

Extensive work took place during 2011-12 toidentify enhancements to current processes,and to embed these across the University, toensure continuation of the UKBA’s highlytrusted status.

These included:

n a comprehensive review of the systemsfor establishing the records relating toInternational Students, and for regularupdating and monitoring of these records

n significant enhancements to the systemsfor recording attendance andengagement of International Students

n appointing Lead Monitoring Officers inevery School

n establishing a compliance team withinthe Student Records & InformationDepartment

n establishing an independent compliancefunction, with the new post ofCompliance Auditor located in the newDepartment of Quality & Governance(now distinct from the Student Records &Information Department)

n commissioning monthly compliancechecks by the University’s InternalAuditors

n establishing regular co-ordination reviewsby the University Secretary (triangulatingreports by the International StudentRecords Manager, the ComplianceAuditor, and Internal Audit)

n establishing regular reviews of theoperation of attendance monitoringsystems by the Deputy Vice-Chancellor(Learning and Student Experience)

n establishing a comprehensive trainingand staff development programme

Operating and Financial Review, Year Ended 31 July 2012

15

n inclusion within the University’s RiskRegister of ‘non-compliance with UKBArequirements’ as a separate risk in itsown right.

As a result of the additional work undertakenduring 2011-12, the University was reportedto have arrangements for UKBA compliancewhich were ‘among the best in the sector’.

Further improvements planned during 2012-13 include:

n introducing student engagementsoftware and card-reader technology, toenhance monitoring of attendance and tofacilitate analysis of attendance

n enhancing liaison with UKBA officers, toensure timely exchange of information

n active membership of the North-EastUKBA Compliance Group, to ensure thatregional universities resolve commonissues in partnership with UKBA

n improved information disseminationthroughout the University

n greater co-ordination of immigrationadvice for students.

Trends and FactorsAffecting FuturePerformanceThe main trends and factors that are likely toaffect the University’s future development,performance and position include:

Academic Profile

n continued impact of the introduction ofvariable tuition fees

n changing training and knowledge transferdemands of key employers

n revisions to our workforce developmentstrategy, necessitated by policy andfunding changes at national level

n revisions to the postgraduate taught andpart time portfolios to reflect thechanging circumstances and fundingarrangements of these student groups

n further development and exploitation ofkey markets for international recruitmentand trans-national education delivery

n refinement of the offer at the Darlingtoncampus and related expansion ofstudent recruitment and businessengagement activity

n identification of emerging areas ofacademic expertise, linked to externalmarket demand, that can be capitalisedupon to deliver future growth

n development of strategic partnershipswith external stakeholders and partnersthat can anchor the University’s activityand provide a platform for future growth

n exploitation of emerging opportunities toexpand access to learning throughdifferent modes of study such as flexiblelearning, work-based learning, distancelearning, etc.

n continued enhancement of the portfolioof student support and retention activitiesto maximise student progression andattainment

n action to embed employability skills in allprogrammes of study and to deliver astep change in employment six monthsafter graduation.

External Factors

n demographic trends in the Tees Valleyregion

n fundamental changes in thecommissioning and funding of highereducation by government, the NHS andother public bodies

n ongoing impact on student demand forhigher education of rising tuition fees andchanges to the student funding supportregime

n intensification of the competition fromother providers of higher education, andexpansion of the involvement of theprivate and further education sectors inhigher education delivery

n funding of public sector pensionschemes, and phasing out of defaultretirement age

n changes in the funding of research andlikely tendency towards greaterconcentration of research funding fromall sources.

Corporate Activity to MaintainFinancial Sustainability

n the need to continue to prioritise financialstability, to allow us to make consideredresponses

n streamlining of systems and processesto improve operating efficiency

n implementation of major cost reductionprogrammes

n increase recruitment of full costinternational students and students whoare outside the student number controls

n the need to continue to work in closestrategic partnership with our localnetwork of indirectly funded HE BusinessPartnership colleges whilst systematicallyexpanding our wider partnership networkwith colleges throughout the North East,Yorkshire and Humberside, andinvestigating strategic partnerships withother private providers

n focus on expanding services which arenot dependent on public sector support –for example, consultancy andcommercial research.

ConclusionsThe University’s activities, in the context offactors likely to affect its future development,performance and position, are set out in thisOperating and Financial Review.

The Board of Governors believes that theUniversity has the strong governance andleadership necessary to take it through thisperiod of significant change in highereducation, and is well placed to managesuccessfully the risks and challenges whichlie ahead. Like many higher educationinstitutions, Teesside faces considerableexternal uncertainties, but it will continue toseek opportunities to expand and diversify toensure continued success.

On the basis of the evidence outlined in thisReview, the Board of Governors has areasonable expectation that the Universityhas adequate resources to continue inoperational existence for the foreseeablefuture. Accordingly, the Governors continueto adopt the going concern basis inpreparing the annual report and accounts.

Chair of Governors

Vice-Chancellor

The University’s Board of Governors isresponsible for reviewing the effectiveness ofthe University’s system of internal control.Such a system is designed to manage ratherthan eliminate the risk of failure to achievebusiness objectives. It can only providereasonable and not absolute assuranceagainst material misstatement or loss.

The University’s Board of Governorscomprises up to 17 lay persons appointedunder the University’s Instrument and Articlesof Government, four representatives of staffand students and the University’s ChiefExecutive, the Vice-Chancellor. The role ofChair of the Board of Governors is separatedfrom the role of the University’s ChiefExecutive, the Vice-Chancellor. The Board ofGovernors is ultimately responsible for allactivities of the University. By the Instrumentand Articles of Government, and under theFinancial Memorandum with the HEFCE, the Board of Governors is responsible for theongoing strategic direction of the University,approval of major developments, and thereceipt of regular reports from the Vice-Chancellor and the Board’s committees on the operations of its business and itssubsidiary companies.

The Board of Governors meets approximatelysix times a year, and has several committees,including a Resources Committee, aNomination Committee, a RemunerationCommittee, an Audit Committee, a StudentExperience Committee and an EmploymentPolicy Committee. All of these committees areformally constituted with terms of referenceand comprise mainly lay members of theBoard of Governors.

The Audit Committee meets at least threetimes a year. It is responsible for meeting with the external auditors to discuss auditfindings, and with the internal auditors toconsider detailed internal audit reports andrecommendations for the improvement of the University’s systems of internal control,together with management’s response andimplementation plans. The members of thisCommittee also receive and consider reportsfrom the HEFCE as they affect the University’sbusiness, and monitor adherence with theregulatory requirements. They review theUniversity’s annual financial statements in thecontext of the approved accounting policies.While senior executives attend meetings ofthe Audit Committee, they are not membersof the Committee and, from time to time, theCommittee meets with the external auditorsor the internal auditors on their own forindependent discussions.

The Employment Policy Committee determinesthe framework within which senior executiveswill manage the University’s employees.

The Nomination Committee considersnominations for vacancies on the Board.

The Remuneration Committee determines theremuneration of the six holders of seniorposts.

The Resources Committee inter aliarecommends to the Board of Governors the University’s annual revenue and capitalbudgets and monitors performance inrelation to the approved budgets.

The Student Experience Committee advisesthe Board of Governors on a number ofstudent related matters

Corporate GovernanceThe University is committed to exhibiting best practice in all aspects of corporate governance.This summary describes the manner in which the University has applied the principles set outin the UK Corporate Governance Code issued by the Financial Reporting Council in June 2010.Its purpose is to help the reader of these accounts to understand how the principles havebeen applied.

The University follows the Governance Code of Practice contained in the Guide for Membersof Higher Education Governing Bodies in the UK which was issued by the Committee ofUniversity Chairs in March 2009.

Summary of the University’s Structure ofCorporate Governance

Corporate Governance, Year Ended 31 July 2012

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Corporate Governance, Year Ended 31 July 2012

17

Responsibilities of theBoard of GovernorsIn accordance with the University’sInstrument and Articles of Government, theBoard of Governors is ultimately responsiblefor the management of the affairs of theUniversity, including ensuring an effectivesystem of financial control.

The Board of Governors is responsible forensuring that proper accounting records arekept which disclose with reasonableaccuracy at any time the financial position ofthe University, and for enabling it to ensurethat the Financial Statements are prepared inaccordance with the University’s Instrumentand Articles of Government, the Statement ofRecommended Practice on Accounting forFurther and Higher Education and otherrelevant accounting standards. In addition,within the terms and conditions of a FinancialMemorandum agreed between the HEFCEand the Board of Governors of the University,the Board of Governors, through itsdesignated office holder, is required toprepare Financial Statements for each financialyear which give a true and fair view of thestate of affairs of the University and of thesurplus or deficit and cash flows for that year.

In causing the Financial Statements to beprepared, the Board of Governors hasensured that:

n suitable accounting policies are selectedand applied consistently

n judgements and estimates are made thatare reasonable and prudent

n applicable accounting standards havebeen followed, subject to any materialdepartures disclosed and explained inthe Financial Statements and

n financial statements are prepared on thegoing concern basis, unless it isinappropriate to presume that theUniversity will continue in operation. TheBoard of Governors is satisfied that theUniversity has adequate resources tocontinue in operation for the forseeablefuture. For this reason, the going concernbasis continues to be adopted in thepreparation of the Financial Statements.

The Board of Governors has takenreasonable steps to:

n ensure that funds from the HEFCE areused only for the purposes for which theyhave been given and in accordance withthe Financial Memorandum with theHEFCE and any other conditions whichthe HEFCE may from time to timeprescribe

n ensure that there are appropriatefinancial and management controls inplace to safeguard public funds andfunds from other sources

n safeguard the assets of the Universityand prevent and detect fraud, and

n secure the economical, efficient andeffective management of the University’sresources and expenditure.

The key elements of the University’s systemof internal financial control, which is designedto discharge the responsibilities set outabove, include the following:

n clear definitions of the responsibilities of,and the authority delegated to, seniormanagement and heads of academicschools and administrative departments

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

n regular reviews of key performanceindicators and business risks, andmonthly reviews of financial resultsinvolving variance reporting and updatesof forecast out-turns

n clearly defined and formalisedrequirements for approval and control ofexpenditure, with investment decisionsinvolving capital or revenue expenditurebeing subject to formal detailed appraisaland review according to approval levelsset by the Board of Governors

n comprehensive financial regulations,detailing financial controls andprocedures, approved by the ResourcesCommittee, the Audit Committee and theBoard of Governors, and

n a professional internal audit team whoseannual programme is approved by theAudit Committee.

Statement of Internal Control

18

Statement of Internal ControlAny system of internal control can, however,only provide reasonable, but not absolute,assurance against material misstatement or loss.

The Board of Governors has responsibility for maintaining a sound system of internalcontrol that supports the achievement ofpolicies, aims and objectives, whilstsafeguarding the public and other funds and assets for which it is responsible inaccordance with the responsibilities assignedto the governing body in the University’sInstrument and Articles of Government andthe Financial Memorandum with the HEFCE.

The system of internal control is designed tomanage rather than eliminate the risk of failureto achieve policies, aims and objectives. Itcan therefore only provide reasonable andnot absolute assurance of effectiveness.

The system of internal control is based on acontinuous process designed to identify theprincipal risks to the achievement of policies,aims and objectives, to evaluate the natureand extent of those risks and to managethem efficiently, effectively and economically.This process, which accords with the HEFCEguidance, has been in place for the yearended 31 July 2012 and up to the date ofapproval of the Financial Statements.

The Board of Governors, through the AuditCommittee, has overall responsibility forreviewing the Statement of Internal Control,for updating the University’s riskmanagement strategy, and for ensuring thatthere is a sound approach to confirm thatthis strategy is adopted and embeddedconsistently and effectively across eachactivity within the University.

The following key processes form part of theUniversity’s strategy to manage risk:

n the University has adopted a range ofpolicies and procedures to reflect riskmanagement principles

n a key element of the University’s approachto risk management is clear reporting ofthe Risk Management Policy, risk registerand the processes in place to manageand mitigate risk

n a Risk Assessment Framework is in placewhich forms the basis of detailed riskidentification and management

n a Risk Management Committee, led bythe Vice-Chancellor and reporting to theUniversity’s Corporate Executive Team,oversees risk management across theUniversity

n the University has a formal and structuredRisk Management Policy to ensure thatkey risks are identified and managedconsistently across the University

n the Risk Management Policy is reviewedon a regular basis

n a corporate risk register is in place and isreviewed at least annually

n the corporate risk register is supportedby risk management statements in thedevelopment plans of each School anddepartment, covering both corporate andoperational risks

n responsibility for monitoring each key riskhas been assigned to senior officers ofthe University with the Deputy UniversitySecretary having day-to-day responsibilityfor risk management within the University

n the Audit Committee receives regularreports from the internal auditors whichinclude an independent opinion on theadequacy and effectiveness of theUniversity’s risk management, governance,internal control and arrangements toprovide value for money, together withrecommendations from the internalauditors for improvement and

n the Board of Governors receives regularreports from the Chair of the AuditCommittee concerning internal controland it requires regular reports from seniormanagers on the steps they are taking tomanage risk in their areas of responsibility,including progress reports on key projects.

The Board of Governors accepts theconclusion of the Audit Committee’s AnnualReport as follows:‘Given the breadth of issues considered by theCommittee in 2011-12, the consideration givenby External Auditors, the Internal Auditors, theManagement of the University and the AuditCommittee itself, the Committee is satisfiedthat the University is properly financiallymanaged, has effective internal control andmanagement systems, has effective riskmanagement control and governancearrangements, has satisfactory arrangementsto promote the economy, efficiency andeffectiveness of the University’s activities, andhas satisfactory arrangements for themanagement and quality assurance of thedata submitted to HESA, HEFCE and otherfunding bodies.’

Independent Auditor’s Report, Year Ended 31 July 2012

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We have audited the financial statements ofTeesside University for the year ended 31July 2012 which comprise the consolidatedincome and expenditure account, theconsolidated and University balance sheets,the consolidated cash flow statement, theconsolidated statement of historical costsurpluses and deficits, the consolidatedstatement of total recognised gains andlosses and the related notes 1 to 31. Thefinancial reporting framework that has beenapplied in their preparation is applicable lawand United Kingdom Accounting Standards(United Kingdom Generally AcceptedAccounting Practice) and the Statement ofRecommended Practice: Accounting forFurther and Higher Education.

This report is made solely to the Board ofGovernors in accordance with the financialmemorandum effective August 2010. Ouraudit work has been undertaken so that wemight state to the Board of Governors thosematters we are required to state to it in anauditor’s report and for no other purpose. Tothe fullest extent permitted by law, we do notaccept or assume responsibility to anyoneother than the Board of Governors as a body,for our audit work, for this report, or for theopinions we have formed.

RespectiveResponsibilities of the Board ofGovernors and AuditorAs explained more fully in the Board ofGovernors’ Responsibilities Statement, theBoard of Governors is responsible for thepreparation of the financial statements thatgive a true and fair view. Our responsibility isto audit and express an opinion on thefinancial statements in accordance withapplicable law and International Standardson Auditing (UK and Ireland). Thosestandards require us to comply with theAuditing Practices Board’s Ethical Standardsfor Auditors.

Scope of the Audit ofthe FinancialStatementsAn audit involves obtaining evidence aboutthe amounts and disclosures in the financialstatements sufficient to give reasonableassurance that the financial statements arefree from material misstatement, whethercaused by fraud or error. This includes anassessment of: whether the accountingpolicies are appropriate to the University’scircumstances and have been consistentlyapplied and adequately disclosed; thereasonableness of significant accountingestimates made by the Board of Governors;and the overall presentation of the financialstatements. In addition, we read all thefinancial and non-financial information in theannual report to identify materialinconsistencies with the audited financialstatements. If we become aware of anyapparent material misstatements orinconsistencies we consider the implicationsfor our report.

Opinion on FinancialStatementsIn our opinion the financial statements:

n give a true and fair view of the state ofthe University’s affairs as at 31 July 2012and of its surplus for the year then endedand

n have been properly prepared inaccordance with United KingdomGenerally Accepted Accounting Practiceand the Statement of RecommendedPractice: Accounting for Further andHigher Education.

Opinion on OtherMatters Prescribed bythe Higher EducationFunding Council forEngland Audit Code ofPracticeIn our opinion:

n in all material respects, income from theFunding Council, grants and income forspecific purposes and from otherrestricted funds administered by theUniversity during the year ended 31 July2012 have been applied for the purposesfor which they were received and

n in all material respects, income duringthe year ended 31 July 2012 has beenapplied in accordance with theUniversity’s statutes and, whereappropriate, with the FinancialMemorandum, with the Funding Council.

Matter on Which Weare Required to Reportby ExceptionWe have nothing to report in respect of thefollowing matter where the Higher EducationFunding Council for England Audit Code ofPractice requires us to report to you if, in ouropinion:

n the Statement of Internal Control isinconsistent with our knowledge of theUniversity.

Deloitte LLPCHARTERED ACCOUNTANTS ANDSTATUTORY AUDITORLeeds, England

Independent Auditor’s Report to the Board of Governors of Teesside University

Basis of PreparationThese Financial Statements have beenprepared in accordance with the Statementof Recommended Practice (SORP):Accounting for Further and Higher Education2007 and in accordance with applicableaccounting standards.

The Financial Statements are prepared inaccordance with the historical costconvention modified by the revaluation ofcertain fixed assets.

Basis of ConsolidationThe consolidated Financial Statementsinclude the University, its subsidiaryundertakings and the Friends of theUniversity of Teesside Trust for the financialyear to 31 July 2012. Intra-group transactionsare eliminated on consolidation.

The consolidated Financial Statements do notinclude those of the Students’ Union becausethe University does not control those activities.

Income RecognitionFunding council block grants are accountedfor in the period to which they relate.

Fee income is stated gross and credited tothe income and expenditure account over theperiod in which students are studying. Wherethe amount of the tuition fee is reduced, by a discount for prompt payment, incomereceivable is shown net of the discount.Bursaries and scholarships are accountedfor gross as expenditure and not deductedfrom income.

Recurrent income from grants, contracts andother services rendered is accounted for onan accruals basis and included to the extentof the completion of the contract or serviceconcerned; any payments received inadvance of such performance arerecognised on the balance sheet as liabilities.

Donations with restrictions are recognisedwhen relevant conditions have been met; inmany cases recognition is directly related toexpenditure incurred on specific purposes.Donations which are to be retained for the

benefit of the University are recognised in thestatement of total recognised gains andlosses and in endowments; other donationsare recognised by inclusion as other incomein the income and expenditure account.

Non-recurrent grants received in respect ofthe acquisition or construction of fixed assetsare treated as deferred capital grants. Suchgrants are credited to deferred capital grantsand an annual transfer made to the incomeand expenditure account over the usefuleconomic life of the asset, at the same rateas the depreciation charge on the asset forwhich the grant was awarded.

Income from the sale of goods or services is credited to the income and expenditureaccount when the goods or services aresupplied to the external customers or theterms of the contract have been satisfied.

Endowment and investment income iscredited to the income and expenditureaccount on a receivable basis. Income fromrestricted endowments not expended inaccordance with the restrictions of theendowment is transferred from the incomeand expenditure account to restrictedendowments. Any realised gains or lossesfrom dealing in the related assets are retainedwithin the endowment in the balance sheet.

Increases or decreases in value arising onthe revaluation or disposal of endowmentassets, ie the appreciation or depreciation of endowment assets, is added to orsubtracted from the funds concerned andaccounted for through the balance sheet bydebiting or crediting the endowment asset,crediting or debiting the endowment fundand is reported in the statement of totalrecognised gains and losses.

Agency ArrangementsFunds the University receives and disbursesas paying agent on behalf of a funding bodyare excluded from the income and expenditureof the University where the University isexposed to minimal risk or enjoys minimaleconomic benefit related to the transaction.

Leases and HirePurchase ContractsCosts in respect of operating leases arecharged on a straight-line basis over thelease term.

Finance leases, which substantially transferall the benefits and risks of ownership of anasset to the University, are treated as if theasset had been purchased outright. Theassets are included in fixed assets and thecapital elements of the leasing commitmentsare shown as obligations under financeleases. The lease rentals are treated asconsisting of capital and interest elements.The capital element is applied in order toreduce outstanding obligations and theinterest element is charged to the incomeand expenditure account in proportion to thereducing capital element outstanding. Assetsheld under finance leases are depreciatedover the shorter of the lease term or the usefuleconomic lives of equivalent owned assets.

TaxationThe University is an exempt charity within themeaning of schedule 3 of the Charities Act2011 (formerly schedule 2 of the CharitiesAct 1993) and is considered to pass the testsset out in paragraph 1 schedule 6 of theFinance Act 2010 and therefore it meets thedefinition of a charitable company for UKcorporation tax purposes. Accordingly, theUniversity is potentially exempt from taxationin respect of income or capital gains receivedwithin categories covered by section 287Corporation Taxes Act 2009 and sections 471,and 478-488 Corporation Taxes Act 2010(formerly section 505 of the Income andCorporation Taxes Act 1988) or section 256 ofthe Taxation of Chargeable Gains Act 1992,to the extent that such income or gains areapplied to exclusively charitable purposes.

All UK subsidiary companies are liable tocorporation tax in the same way as any othercommercial organisation.

The University receives no similar exemptionin respect of Value Added Tax. IrrecoverableVAT on inputs is included in the costs of such

Statement of Principal Accounting Policies, Year Ended 31 July 2012

20

Statement of Principal Accounting Policies

Statement of Principal Accounting Policies, Year Ended 31 July 2012

21

inputs. Any irrecoverable VAT allocated totangible fixed assets is included in their cost.

All UK subsidiary companies are liable to VATin the same way as any other commercialorganisation except that any education ortraining provided by a university subsidiary isan exempt supply of education.

Deferred tax is provided in full on timingdifferences which result in an obligation atthe balance sheet date to pay more tax, or aright to pay less tax, at a future date, at ratesexpected to apply when they crystallisebased on current rates and law. Timingdifferences arise from the inclusion of itemsof income and expenditure in taxationcomputations in periods different from thosein which they are included in financialstatements. Deferred tax assets arerecognised to the extent they are regardedas more likely than not that they will berecovered. Deferred tax assets and liabilitiesare not discounted.

Land and BuildingsLand and buildings are stated at valuation or cost. The basis of valuation, which wascarried out by independent charteredsurveyors, is a combination of depreciatedreplacement cost and open market value forexisting use. Certain properties from whichthe University derives no economic benefitand which, in the opinion of the Board ofGovernors, have a value substantially lessthan their depreciated replacement cost wereseparately valued by the University.

On adoption of FRS 15, the Universityfollowed the transitional provision to retainthe book value of land and buildings, themajority of which were revalued on 31 July1997 by Storey Sons & Parker, CharteredSurveyors, but not to adopt a policy ofrevaluations of these properties in the future.These valuations are retained subject to therequirement to test assets for impairment inaccordance with FRS 11.

Costs incurred in relation to a tangible fixedasset, after its initial purchase, are capitalisedto the extent that they increase the expectedfuture benefits to the University from theexisting tangible fixed asset beyond itspreviously assessed standard of performance;the cost of any such enhancements areadded to the gross carrying amount of thetangible fixed asset concerned.

Buildings under construction are accountedfor at cost, based on the value of architects’certificates and other directly attributablecosts incurred to 31 July 2012.

Depreciation

Freehold land is not depreciated. Freeholdbuildings are depreciated over their expecteduseful economic life to the University ofbetween 15 and 50 years on the amount atwhich the tangible fixed asset is included inthe balance sheet. Where material, adepreciable asset’s anticipated usefuleconomic life is reviewed annually and theaccumulated and future depreciationadjusted in accordance with FRS 15.

No depreciation is charged on assets in thecourse of construction.

Acquisition with the Aid of SpecificGrants

Where buildings are acquired with the aid ofspecific grants, they are capitalised anddepreciated.

The related grants are credited to a deferredcapital grant account and released to theincome and expenditure account over theexpected useful economic life of the relatedasset on a basis consistent with thedepreciation policy.

Repairs and Maintenance

Expenditure to ensure that a tangible fixedasset maintains its previously recognisedstandard of performance is recognised in theincome and expenditure account in theperiod it is incurred. The University has aplanned maintenance programme, which isreviewed on an annual basis.

Equipment andFurnitureEquipment and furniture costing less than£1,500 per individual item or group of relateditems is written off to the income andexpenditure account in the period ofacquisition. All other equipment is capitalisedat cost. All assets are depreciated over theiruseful economic life as follows:

n motor vehicles – four years

n equipment and furniture – between threeyears and ten years.

Where equipment is acquired with the aid of specific grants, it is capitalised anddepreciated in accordance with the policy set

out above, with the related grant credited toa deferred capital grant account andreleased to the income and expenditureaccount over the expected useful economiclife of the related equipment.

InvestmentsListed investments held as endowmentassets are shown at market value.Investments in subsidiary undertakings andnon-listed entities are shown at the lower ofcost or net realisable value.

Current asset investments are included at thelower of cost and net realisable value.

StockStock is stated at the lower of cost and netrealisable value.

Cash Flows and LiquidResourcesCash flows comprise increases or decreasesin cash. Cash includes cash in hand, cash atbank and deposits repayable on demand.Deposits are repayable on demand if theyare available within 24 hours without penalty.No other investments, however liquid, areincluded as cash.

Liquid resources comprise term deposits andgovernment securities. They exclude anysuch assets held as endowment assetinvestments.

Intra-groupTransactionsGains or losses on any intra-grouptransactions are eliminated in full. Amounts in relation to debts and claims betweenundertakings included in the consolidationare also eliminated.

Foreign CurrencyTranslationsAssets and liabilities denominated in foreigncurrencies are translated at the rates ofexchange ruling at the end of the financialyear, with all resulting exchange differencesbeing taken to the income and expenditureaccount in the period in which they arise.

Unrestricted Donations

Charitable donations are recognised in theaccounts when the charitable donation hasbeen received or if, before receipt, there issufficient evidence to provide the necessarycertainty that the donation will be receivedand the value of the incoming resources canbe measured with sufficient reliability.

Endowment Funds

Where charitable donations are to beretained for the benefit of the University asspecified by the donors, these are accountedfor as endowments. There are two maintypes:

n restricted expendable endowments – thedonor has specified a particular objectiveother than the purchase or constructionof tangible fixed assets, and theUniversity can convert the donated suminto income

n restricted permanent endowments – thedonor has specified that the fund is to bepermanently invested to generate anincome stream to be applied to aparticular objective.

Accounting forRetirement BenefitsThe University contributes to the UniversitiesSuperannuation Scheme (USS), the LocalGovernment Superannuation Scheme(LGPS) and the Teachers’ Pension Scheme(TPS). All schemes are defined benefitschemes which are contracted out of theSecond State Pension (S2P).

The assets of the USS and TPS are held inseparate trustee-administered funds.Because of the nature of the schemes, theirassets are not hypothecated to individualinstitutions and scheme-wide contributionrates are set. The University is thereforeexposed to actuarial risks associated withother institutions’ employees and is unable toidentify its share of the underlying assets andliabilities of these schemes on a consistentand reasonable basis and therefore asrequired by FRS 17 Retirement Benefits,accounts for the schemes as if they weredefined contribution schemes. As a result,the amount charged to the income andexpenditure account represents thecontributions payable to the schemes inrespect of the accounting period.

The University is able to identify its share ofassets and liabilities of the LGPS and thusthe University fully adopts FRS 17 RetirementBenefits.

ProvisionsProvisions are recognised in the FinancialStatements when the University has apresent obligation (legal or constructive) as a result of a past event, it is probable that atransfer of economic benefits will be requiredto settle the obligation and a reliable estimatecan be made of the amount of the obligation.The amount recognised as a provision isdiscounted to present value where the timevalue of money is material. The discount rateused reflects current market assessments ofthe time value of money and reflects anyrisks specific to the liability.

Statement of Principal Accounting Policies, Year Ended 31 July 2012

22

Accounting for Charitable Donations

Consolidated Income and Expenditure Account, Year Ended 31 July 2012

23

Year ended Year ended31 July 2012 31 July 2011

Note £000 £000

Income

Funding body grants 1 53,707 61,157

Tuition fees and education contracts 2 62,910 66,439

Research grants and contracts 3 2,862 3,622

Other income 4 12,154 14,104

Endowment and investment income 5 728 543_________ _______

Total Income 132,361 145,865_________ _______

Expenditure

Staff costs 6 75,147 79,679

Other operating expenses 40,066 48,073

Depreciation 11 5,281 5,076

Interest and other finance costs 7 507 462_________ _______

Total Expenditure 8 121,001 133,290_________ _______

Surplus on continuing operations after 11,360 12,575depreciation of assets at valuation before and after tax

Surplus for the year transferred to accumulated (2) (3)income in endowment funds

_________ _______

Surplus for the year retained within 22 11,358 12,572general reserves _________ _______

All items of Income and Expenditure arise from continuing operations.

Consolidated Income and Expenditure Account

Statement of Group Historical Cost Surpluses and Deficits

Statement of Group Historical Cost Surpluses and Deficits, Year Ended 31 July 2012

24

Year ended Year ended31 July 2012 31 July 2011

Note £000 £000

Surplus on continuing operations after depreciation 11,360 12,575of assets at valuation, before and after tax

Difference between historical cost depreciation 22 705 725and the actual charge for the year calculated on the revalued amount

_________ _______

Historical cost surplus for the year before 12,065 13,300and after tax _________ _______

Statement of Group Total Recognised Gains and Losses, Year Ended 31 July 2012

25

Year ended Year ended31 July 2012 31 July 2011

Note £000 £000

Surplus on continuing operations after depreciation 11,360 12,575of assets at valuation, before and after tax

Appreciation of endowment assets 21 – 11

Actuarial gain/(loss) in respect of pension scheme 29 9,365 (5,663)

_________ _______

Total recognised gains relating to the year 20,725 6,923_________ _______

Reconciliation

Opening reserves and endowments 94,801 87,878

Total recognised gains for the year 20,725 6,923_________ _______

Closing reserves and endowments 115,526 94,801_________ _______

Statement of Group Total Recognised Gains and Losses

Balance Sheets, as at 31 July 2012

26

Consolidated University2012 2011 2012 2011

Note £000 £000 £000 £000

Fixed assets

Tangible assets 11 108,224 110,983 108,468 111,227

Investments 12 30 30 59 59_________ _______ _______ _______

108,254 111,013 108,527 111,286_________ _______ _______ _______

Endowment assets 13 209 207 209 207_________ _______ _______ _______

Current assets

Stock 49 42 38 38

Debtors 14 8,820 9,617 11,149 12,364

Investments 15 42,987 33,048 42,987 33,048

Cash at bank and in hand 25,120 24,195 24,112 23,065_________ _______ _______ _______

76,976 66,902 78,286 68,515

Less: creditors – amounts falling due within one year 16 (21,088) (25,326) (23,097) (27,569)_________ _______ _______ _______

Net current assets 55,888 41,576 55,189 40,946_________ _______ _______ _______

Total assets less current liabilities 164,351 152,796 163,925 152,439

Less: creditors – amounts falling due after 17 (8,921) (9,905) (8,921) (9,905)more than one year

Less: provisions for liabilities 19 (5,559) (5,386) (5,559) (5,386)_________ _______ _______ _______

Total net assets excluding pension liability 149,871 137,505 149,445 137,148

Net pension liability 29 (16,466) (23,960) (16,466) (23,960)_________ _______ _______ _______

Total net assets including pension liability 133,405 113,545 132,979 113,188_________ _______ _______ _______

Balance Sheets as at 31 July

Balance Sheets, as at 31 July 2012

27

Consolidated University2012 2011 2012 2011

Note £000 £000 £000 £000

Deferred capital grants 20 17,879 18,744 17,879 18,744_________ _______ _______ _______

Endowments

Expendable 41 42 41 42

Permanent 168 165 168 165

_________ _______ _______ _______

21 209 207 209 207_________ _______ _______ _______

Reserves

Income and Expenditure account 112,931 98,997 112,505 98,640excluding pension reserve

Pension reserve 29 (16,466) (23,960) (16,466) (23,960)_________ _______ _______ _______

Income and Expenditure account 22 96,465 75,037 96,039 74,680including pension reserve

Revaluation reserve 23 18,852 19,557 18,852 19,557_________ _______ _______ _______

Total reserves 115,317 94,594 114,891 94,237_________ _______ _______ _______

Total funds 133,405 113,545 132,979 113,188_________ _______ _______ _______

The Financial Statements on pages 20 to 49 were approved by the Board of Governors on 16 November 2012 and were signed on its behalf by:

Chair of Governors Vice-Chancellor

Balance Sheets as at 31 July continued

Consolidated Cash Flow Statement, Year Ended 31 July 2012

28

Year ended Year ended31 July 2012 31 July 2011

Note £000 £000

Net cash inflow from operating activities 24 13,458 8,558

Returns on investments and servicing 25 239 (100)of finance

Capital expenditure and financial investment 25 (1,898) (7,140)

Management of liquid resources 25 (9,939) 10,948

Financing 25 (926) (876)_________ _______

Increase in cash in the year 934 11,390_________ _______

Reconciliation of net cash flow to movement in net funds

Increase in cash in the year 934 11,390

Change in short-term deposits 9,939 (10,948)

Change in debt 926 876_________ _______

Change in net funds 11,799 1,318

Net funds at 1 August 46,489 45,171_________ _______

Net funds at 31 July 26 58,288 46,489_________ _______

Consolidated Cash Flow Statement

Notes to the Financial Statements, Year Ended 31 July 2012

29

1 FUNDING BODY GRANTS

2012 2011£000 £000

Recurrent grants

Higher Education Funding Council 50,550 50,747

Training and Development Agency 8 55

Specific grants

Higher Education Innovation Fund 1,117 1,684

Research Capital Investment Fund – 307

Teaching Capital Investment Fund 106 3,208

Strategic Development Fund 164 1,615

Teaching Quality Enhancement Fund – 519

Access and Widening Participation 75 796

Joint Information Systems Committee Fund 102 87

Pathfinder 22 52

CETL 3 1

Economic Challenge Investment Fund – 131

Graduate Internships – 194

National Teaching Fellowships 23 14

Other 3 61

Deferred capital grants released in year

Buildings (note 20) 202 200

Equipment (note 20) 1,332 1,486_________ _______

53,707 61,157_________ _______

2 TUITION FEES AND EDUCATION CONTRACTS

2012 2011£000 £000

Full-time home and EU students 25,406 24,412

International students 12,094 15,281

Part-time students 5,959 5,625

Education contracts 19,451 21,121_________ _______

62,910 66,439_________ _______

Notes to the Financial Statements, Year Ended 31 July 2012

3 RESEARCH GRANTS AND CONTRACTS

2012 2011£000 £000

Research Councils 603 551

UK-based charities 215 497

UK central government 351 614

UK Health Service 594 668

European Commission 898 806

Other grants and contracts 201 486_________ _______

2,862 3,622_________ _______

4 OTHER INCOME

2012 2011£000 £000

Residences, catering and conferences 4,073 3,954

Other income-generating activities 662 798

Other grant income 3,816 5,042

Release from deferred capital grants (note 20) 415 395

Other income 3,188 3,915_________ _______

12,154 14,104_________ _______

5 ENDOWMENT AND INVESTMENT INCOME

2012 2011£000 £000

Income from permanent endowments (note 21) 5 6

Income from short-term investments 723 528

Pension finance return – 9_________ _______

728 543_________ _______

Notes to the Financial Statements, Year Ended 31 July 2012

30

Notes to the Financial Statements, Year Ended 31 July 2012

31

6 STAFF

2012 2011£000 £000

Staff costs

Wages and salaries 59,106 61,890

Social security costs 4,802 4,894

Other pension costs (note 29) 9,498 9,380

Increase in the provision for enhanced pensions (note 19) 540 397

Restructuring costs 1,201 3,118_________ _______

75,147 79,679_________ _______

Emoluments of the Vice-Chancellor £ £

Salary 215,059 221,567

Benefits in kind 17,517 16,379_________ _______

232,576 237,946

Pension costs (on the same basis as for other academic staff) 30,323 31,241_________ _______

262,899 269,187_________ _______

Remuneration of other higher paid staff including benefits in kind and excluding employer’s pension contributions

2012 2011number number

£100,000 - £109,999 1 1

£110,000 - £119,999 3 1

£120,000 - £129,999 1 3_________ _______

Average staff numbers by major category (full-time equivalents)

Academic and research 705 749

Administrative and technical 781 831

Other 131 137_________ _______

1,617 1,717_________ _______

7 INTEREST AND OTHER FINANCE COSTS

2012 2011£000 £000

Bank loans not wholly repayable within five years 58 60

Finance leases 372 402

Pension finance cost 77 –_________ _______

507 462_________ _______

8 ANALYSIS OF TOTAL EXPENDITURE BY ACTIVITY

2012 2011£000 £000

Academic departments 65,538 69,805

Academic services 11,900 13,775

Research grants and contracts 2,385 3,138

Residences, catering and conferences 3,718 3,573

Premises 11,734 12,140

Administration 18,495 19,782

Other 7,231 11,077_________ _______

121,001 133,290_________ _______

Other operating expenses include

External auditor’s remuneration in respect of audit services 44 48

External auditor’s remuneration in respect of non-audit services 5 4

Operating lease rentalsLand and buildings 919 880Equipment 158 112

_________ _______

9 SURPLUS ATTRIBUTABLE TO PARENT UNDERTAKING

The surplus dealt with in the accounts of the parent undertaking was £11,289,000 (2011: £12,756,000).

Notes to the Financial Statements, Year Ended 31 July 2012

32

Notes to the Financial Statements, Year Ended 31 July 2012

33

10 INTANGIBLE FIXED ASSETS – GOODWILL

Consolidated and University

£000

Cost

At 31 July 2012 and 31 July 2011 270

_________Amortisation

At 31 July 2012 and 31 July 2011 270_________

Net Book Value

At 31 July 2012 and 31 July 2011 –_________

11 TANGIBLE FIXED ASSETS

Freehold Assets Vehicles Equipment Totalland and in the andbuildings course of furniture

construction

Consolidated £000 £000 £000 £000 £000

Cost/Valuation

At 1 August 2011 128,950 10,517 137 20,370 159,974

Additions in year 281 1,145 – 1,273 2,699

Transfers in year 9,765 (10,324) – 559 –

Written off in year – (177) – (350) (527)________ ________ _______ ________ ________

At 31 July 2012 138,996 1,161 137 21,852 162,146________ ________ _______ ________ ________

Depreciation

At 1 August 2011 31,624 – 76 17,291 48,991

Charge for year 3,404 – 27 1,850 5,281

Written off in year – – – (350) (350)________ ________ _______ ________ ________

At 31 July 2012 35,028 – 103 18,791 53,922________ ________ _______ ________ ________

Net Book Value

At 31 July 2012 103,968 1,161 34 3,061 108,224________ ________ _______ ________ ________

At 31 July 2011 97,326 10,517 61 3,079 110,983________ ________ _______ ________ ________

Notes to the Financial Statements, Year Ended 31 July 2012

34

11 TANGIBLE FIXED ASSETS continued

Freehold Assets Vehicles Equipment Totalland and in the andbuildings course of furniture

construction

University £000 £000 £000 £000 £000

Cost/Valuation

At 1 August 2011 129,313 10,517 137 19,016 158,983

Additions in year 281 1,145 – 1,273 2,699

Transfers in year 9,765 (10,324) – 559 –

Written off in year – (177) – (350) (527)

________ ________ _______ ________ ________

At 31 July 2012 139,359 1,161 137 20,498 161,155________ ________ _______ ________ ________

Depreciation

At 1 August 2011 31,624 – 76 16,056 47,756

Charge for year 3,404 – 27 1,850 5,281

Written off in year – – – (350) (350)

________ ________ _______ ________ ________

At 31 July 2012 35,028 – 103 17,556 52,687________ ________ _______ ________ ________

Net Book ValueAt 31 July 2012 104,331 1,161 34 2,942 108,468

________ ________ _______ ________ ________

At 31 July 2011 97,689 10,517 61 2,960 111,227________ ________ _______ ________ ________

FRS 15 Tangible Fixed Assets: the transitional rules set out in FRS 15 have been applied on implementing FRS 15. Accordingly, the book valuesat implementation have been retained.

Notes to the Financial Statements, Year Ended 31 July 2012

35

11 TANGIBLE FIXED ASSETS continued

At 31 July 2012 the net book value of freehold land and buildings, for the group and the University, includes £772,000 (2011: £946,000) inrespect of assets held under finance leases. The depreciation charge for the year on these assets was £174,000 (2011: £174,000).

Analysis of cost or valuation

Freehold Assets Vehicles Equipment Totalland and in the andbuildings course of furniture

construction

£000 £000 £000 £000 £000

Consolidated

1997 Professional Valuation 48,167 – – – 48,167

1997 University Valuation 645 – – – 645

1998 University Valuation 1,999 – – – 1,999

Cost 88,185 1,161 137 21,852 111,335________ ________ _______ ________ ________

At 31 July 2012 138,996 1,161 137 21,852 162,146________ ________ _______ ________ ________

University

1997 Professional Valuation 48,167 – – – 48,167

1997 University Valuation 645 – – – 645

1998 University Valuation 1,999 – – – 1,999

Cost 88,548 1,161 137 20,498 110,344________ ________ _______ ________ ________

At 31 July 2012 139,359 1,161 137 20,498 161,155________ ________ _______ ________ ________

Asset revaluations

The majority of land and buildings held at 31 July 1997 were revalued at that date by Storey Sons & Parker, Chartered Surveyors. The basis ofvaluation was a combination of depreciated replacement cost and open market value for existing use and the valuation has not been updated.Certain properties, which in the opinion of the Governors have had a permanent diminution in value due to a significant reduction in use by theUniversity and which in their opinion have a value substantially less than their depreciated replacement cost, were separately valued by theUniversity.

If the freehold land and buildings had not been revalued they would have been included at the following amounts:

Consolidated University2012 2011 2012 2011£000 £000 £000 £000

Cost 113,654 103,608 113,958 103,912

Accumulated depreciation and impairment (28,533) (25,834) (28,533) (25,834)_________ _______ _______ _______

Net book value 85,121 77,774 85,425 78,078_________ _______ _______ _______

12 FIXED ASSET INVESTMENTS

OtherInvestments

£000

Consolidated

Cost

At 31 July 2012 and 31 July 2011 30

________

Other SubsidiaryInvestments Undertakings Total

£000 £000 £000

University

Cost

At 31 July 2012 and 31 July 2011 30 29 59________ ________ _______

The University’s subsidiary undertakings and its percentage shareholding in each are as follows:

Subsidiary Undertaking Nature of Business Shareholding

University of Teesside Enterprises Limited Commercial activities, enterprise, Limited by guarantee(Registered in England and Wales) trading and liaison with industry

and commerce.

Teesnap Limited To provide and promote educational 100% Ordinary Shares(Registered in England and Wales) and training services relating to nursing, (Issued share capital – £100)

midwifery and associated professions and/or professions allied to medicine and to provide management services related to the aforementioned.

Teesdent Limited Provision of primary dental care 100% Ordinary Shares(Registered in England and Wales) (Issued share capital – £1)

Teesside (Beijing) Education Consulting Co Ltd Provision of consultation services and 100% registered capital (Wholly foreign-owned enterprise of foreign communication and exchange (Registered capital RMB 300,000)the People’s Republic of China) in relation to education.

The University also consolidates The Friends of the University of Teesside Trust, an independent trust which may provide funds for theassistance and benefit for educational purposes of the University and for other charitable purposes which are connected with and acceptable tothe University.

Notes to the Financial Statements, Year Ended 31 July 2012

36

Notes to the Financial Statements, Year Ended 31 July 2012

37

13 ENDOWMENT ASSETS

Consolidated and University

£000

At 1 August 2011 207

Decrease in market value of investments (7)

Increase in cash balances held for endowment funds 9_________

At 31 July 2012 209_________

Valuation at Valuation at 31 July 2012 31 July 2011

£000 £000

Fixed interest stocks 5 5

Equities 117 124

Bank balances 87 78_________ _______

Total endowment asset investments 209 207_________ _______

Fixed interest stocks and equities at cost 124 132_________ _______

14 DEBTORS

Consolidated University2012 2011 2012 2011£000 £000 £000 £000

Debtors 3,195 5,199 3,128 5,125

Prepayments and accrued income 5,625 4,418 5,568 4,390

Amounts due from subsidiary undertakings – – 2,453 2,849

_________ _______ _______ _______

8,820 9,617 11,149 12,364_________ _______ _______ _______

15 INVESTMENTS

Consolidated Consolidatedand University and University

2012 2011£000 £000

UK Government Treasury Bills 9,987 –

Deposits maturing in one year or less 33,000 33,048_________ _______

42,987 33,048_________ _______

Deposits are held with banks operating in the London market and licensed by the Financial Services Authority with more than 24 hours maturityat the balance sheet date. The interest rates for these deposits are fixed for the duration of the deposit at the time of placement.

At 31 July 2012 the weighted average interest rate of these fixed rate deposits was 1.48% and the remaining weighted average period for whichthe interest rate is fixed on these deposits was 49 days. The fair value of these deposits was not materially different from the book value.

16 CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR

Consolidated University2012 2011 2012 2011£000 £000 £000 £000

Mortgages and unsecured loans 642 642 642 642

Obligations under finance leases 343 285 343 285

Payments received on account 6,289 6,116 5,554 4,983

Creditors 5,875 6,981 5,872 6,922

Social security and other taxation payable 1,564 1,584 1,560 1,584

Accruals and deferred income 6,375 9,718 6,340 9,662

Amounts due to subsidiary undertakings – – 2,786 3,491_________ _______ _______ _______

21,088 25,326 23,097 27,569_________ _______ _______ _______

17 CREDITORS – AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

Consolidated University2012 2011 2012 2011£000 £000 £000 £000

Loans secured on residential and other property repayable by 2022 6,100 6,741 6,100 6,741

Obligations under finance leases (note 18) 2,821 3,164 2,821 3,164_________ _______ _______ _______

8,921 9,905 8,921 9,905_________ _______ _______ _______

Notes to the Financial Statements, Year Ended 31 July 2012

38

Notes to the Financial Statements, Year Ended 31 July 2012

39

18 BORROWINGS

a Bank loans and overdrafts

Consolidated Consolidatedand University and University

2012 2011£000 £000

Bank loans and overdrafts are repayable as follows:

Within one year 642 642

Between one and two years 642 642

Between two and five years 1,926 1,926

In five years or more 3,532 4,173_________ _______

6,742 7,383_________ _______

Bank loans include mortgages at 0.25% above Bank of England Base Rate and 0.3% above LIBOR, repayable by instalments and secured onfreehold properties of the University.

b Finance leases

Consolidated Consolidatedand University and University

2012 2011£000 £000

The net finance lease obligations to which the University is committed are:

Within one year 343 285

Between one and two years 409 343

Between two and five years 2,412 1,459

In five years or more – 1,362_________ _______

3,164 3,449_________ _______

The finance leases relate to academic and student accommodation.

19 PROVISIONS FOR LIABILITIES

Enhancedpensions

Consolidated and University £000

At 1 August 2011 5,386

Increase 540

Utilised in year (367)________

At 31 July 2012 5,559________

Enhanced pensions

The pension provision is in respect of pension enhancements payable to staff who have taken early retirement. The assumptions for calculating this provision are as follows:

31 July 2012 31 July 2011

Discount rate 2.4% 3.9%

Inflation 1.6% 2.6%

20 DEFERRED CAPITAL GRANTS

HEFCE Other Grants TotalConsolidated and University £000 £000 £000

At 1 August 2011

Buildings 5,294 10,932 16,226

Equipment 1,601 917 2,518________ ________ _______

Total 6,895 11,849 18,744________ ________ _______

Cash received and receivable

Buildings – 100 100

Equipment 981 3 984________ ________ _______

Total 981 103 1,084________ ________ _______

Notes to the Financial Statements, Year Ended 31 July 2012

40

Notes to the Financial Statements, Year Ended 31 July 2012

41

20 DEFERRED CAPITAL GRANTS continued

HEFCE Other Grants TotalConsolidated and University £000 £000 £000

Released to Income and Expenditure Account

Buildings (notes 1 and 4) 202 312 514

Equipment (notes 1 and 4) 1,332 103 1,435________ ________ _______

Total 1,534 415 1,949________ ________ _______

At 31 July 2012

Buildings 5,092 10,720 15,812

Equipment 1,250 817 2,067________ ________ _______

Total 6,342 11,537 17,879________ ________ _______

21 ENDOWMENTS

Restricted Restricted 2012 2011Expendable Permanent Total Total

Consolidated and University £000 £000 £000 £000

At 1 August 2011

Capital 39 58 97 86

Accumulated income 3 107 110 107________ ________ _______ ________

42 165 207 193________ ________ _______ ________

Investment income – 5 5 6

Expenditure (1) (2) (3) (3)________ ________ _______ ________

(1) 3 2 3________ ________ _______ ________

Decrease in market value of investments – – – 11________ ________ _______ ________

At 31 July 2012 41 168 209 207________ ________ _______ ________

Represented by

Capital 39 58 97 97

Accumulated income 2 110 112 110________ ________ _______ ________

41 168 209 207________ ________ _______ ________

21 ENDOWMENTS continued

Restricted Restricted 2012 2011Expendable Permanent Total Total

Consolidated and University £000 £000 £000 £000

Analysis by type of purpose:

Lectureships 11 – 11 10

Prize funds 13 8 21 21

Scholarships and bursaries 17 31 48 49

Research support – 129 129 127

________ ________ _______ ________

41 168 209 207________ ________ _______ ________

Major endowments

Restricted permanent endowments include one major individual fund:

The Peter Berg Foundation is used to finance scientific research relating to the study of mechanical engineering, metallurgy, metrology, chemicalengineering, biotechnology, chemistry, civil engineering, structural engineering, building instrumentation, control engineering and electronic andcomputer engineering provided that the results of such research shall be disseminated for the benefit of the public.

The movement on this fund for the year was as follows:

£000

At 1 August 2011 126

Investment income 4Expenditure (1)

_________

At 31 July 2012 129_________

22 INCOME AND EXPENDITURE ACCOUNT

Consolidated University£000 £000

At 1 August 2011 75,037 74,680

Surplus retained for the year 11,358 11,289

Transfer from revaluation reserve 705 705

Actuarial gain in respect of pension scheme 9,365 9,365_________ _______

At 31 July 2012 96,465 96,039_________ _______

Notes to the Financial Statements, Year Ended 31 July 2012

42

Notes to the Financial Statements, Year Ended 31 July 2012

43

23 REVALUATION RESERVE

Consolidated and University

£000

At 1 August 2011 19,557

Transfer to Income and Expenditure Account (705)_________

At 31 July 2012 18,852_________

The transfer to the Income and Expenditure Account is in respect of the excess depreciation as a result of the revaluation of freehold land and buildings.

24 RECONCILIATION OF CONSOLIDATED OPERATING SURPLUS TO NET CASH INFLOW FROM OPERATING ACTIVITIES

2012 2011£000 £000

Surplus after depreciation of assets at valuation and before tax 11,360 12,575

Depreciation and write offs 5,458 5,076

Deferred capital grants released to income (1,949) (2,081)

Investment income (728) (534)

Interest payable 430 462

Profit on sale of fixed assets – (1)

Pensions cost less contributions payable 1,871 1,617

Increase in stocks (7) (8)

Decrease in debtors 855 1,362

Decrease in creditors (4,005) (1,550)

Increase/(decrease) in provisions 173 (8,360)

_________ _______

Net cash inflow from operating activities 13,458 8,558_________ _______

25 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT

2012 2011£000 £000

Returns on investments and servicing of finance

Income from endowments 5 6

Interest received 665 357

Interest element of finance lease rental payments (372) (402)

Other interest paid (59) (61)_________ _______

Net cash inflow/(outflow) for returns on 239 (100)investments and servicing of finance _________ _______

Capital expenditure and financial investment

Purchase of tangible fixed assets (2,158) (9,634)

Endowment funds invested – (14)

Sale of tangible fixed assets – 1

Sale of endowment asset investments 7 14

Deferred capital grants received 253 2,493_________ _______

Net cash outflow for capital expenditure and (1,898) (7,140)financial investment _________ _______

Management of liquid resources

Net movement in short-term deposits (9,939) 10,948_________ _______

Financing

Repayment of bank loan (641) (642)

Repayment of finance lease (285) (234)_________ _______

(926) (876)_________ _______

Notes to the Financial Statements, Year Ended 31 July 2012

44

Notes to the Financial Statements, Year Ended 31 July 2012

45

26 ANALYSIS OF CHANGES IN NET FUNDS

OtherAt 1 August Cash Non-cash At 31 July

2011 Flows Changes 2012£000 £000 £000 £000

Cash at bank and in hand

Endowment assets 78 9 – 87

Other 24,195 925 – 25,120________ ________ _______ ________

24,273 934 – 25,207

Short-term deposits 33,048 9,939 – 42,987

Debt due within 1 year (642) 642 (642) (642)

Debt due after 1 year (6,741) (1) 642 (6,100)

Finance leases (3,449) 285 – (3,164)________ ________ _______ ________

46,489 11,799 – 58,288________ ________ _______ ________

27 LEASE OBLIGATIONS

Consolidated Consolidatedand University and University

2012 2011£000 £000

At 31 July the annual commitments underoperating leases were as follows:

Buildings

Expiring within one year 959 908

Equipment

Expiring within one year 71 –

Expiring between two and five years 63 127_________ _______

1,093 1,035_________ _______

28 FUTURE CAPITAL COMMITMENTS

Consolidated Consolidatedand University and University

2012 2011£000 £000

Commitments contracted at 31 July 878 853_________ _______

29 PENSION SCHEMES

The two principal pension schemes for the University’s staff are the Teachers’ Pension Scheme England and Wales (TPS) and the Local Government Pension Scheme (LGPS), established locally as the Teesside Pension Fund (TPF). Six members (2011 – one) of staff aremembers of the Universities Superannuation Scheme.

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

Year ended Year ended31 July 2012 31 July 2011

£000 £000

TPS: contributions paid 4,162 4,237

TPF: charge to the Income and Expenditure account 5,304 5,131

Contributions paid to other pension schemes 32 12_________ _______

Total Pension Cost (note 6) 9,498 9,380_________ _______

Outstanding pension contributions at 31 July 948 947_________ _______

The assumptions and other data relevant to the determination of the contribution levels of the schemes are as follows:

TPS TPF

Investment returns per annum 6.5% 4.7% - 7.1%

Salary scale increase per annum 4.5% 5.4%

Pension increase per annum Not disclosed 3.4%

Market value of assets at date of last valuation £163,240m £2,025m

MFR proportion of members' accrued benefits 98% 98%covered by the actuarial value of the assets

Teachers’ Pension Scheme

TPS is actuarially valued not less than every four years by the Government Actuary. The last actuarial valuation was as at 31 March 2004.Contributions are paid by the University at the rate specified. The Scheme is unfunded and contributions are made to the Exchequer. Thepayments from the Scheme are made from funds voted by Parliament. The contribution rate payable by the employer is 14.1% of pensionablesalaries.

Under the definitions set out in Financial Reporting Standard ‘Retirement benefits’ (FRS 17), the TPS is a multi-employer defined benefit pensionscheme. The University is unable to identify its share of the underlying assets and liabilities of the Scheme. Accordingly, the University has takenadvantage of the exemption in FRS 17 and has accounted for its contributions as if it were a defined contribution scheme.

Teesside Pension Fund

TPF is valued every three years by professionally qualified independent actuaries using the projected unit method, the rates of contributionpayable being determined by the trustees on the advice of the actuaries. In the intervening years, the TPF actuary reviews the progress of theTPF scheme.

For the TPF, the actuary has indicated that the resources of the scheme are likely, in the normal course of events, to meet the liabilities as theyfall due at the level specified by the LGPS Regulations. The contribution payable by the employer was increased from 14.4% to 14.7% ofpensionable salaries from April 2012. In subsequent years the rate will increase to 15.1%.

Under the definitions set out in FRS 17, the TPF is a multi-employer defined benefit pension scheme. In the case of the TPF, the actuary of thescheme has identified the University’s share of its assets and liabilities as at 31 July 2012.

The pension scheme assets are held in a separate trustee-administered fund to meet long-term pension liabilities to past and present employees.The trustees of the Fund are required to act in the best interests of the Fund’s beneficiaries. The appointment of trustees to the Fund is determinedby the scheme’s trust documentation. The trustees are responsible for setting the investment strategy for the scheme after consultation withprofessional advisers.

Notes to the Financial Statements, Year Ended 31 July 2012

46

Notes to the Financial Statements, Year Ended 31 July 2012

47

29 PENSION SCHEMES continued

A full actuarial valuation was carried out at 31 March 2010 and updated to 31 July 2012 on an FRS 17 basis by a qualified independent actuary.The material assumptions used by the actuary for FRS 17 at 31 July were:

2012 2011% %

Price increases 2.6 2.7

Salary increases 2.6 5.0

Pension increases 1.8 2.7

Discount rate 3.9 5.3

The current mortality assumptions include sufficient allowance for future improvements in mortality rates. The assumed life expectations onretirement at age 65 are:

2012 2011Years Years

Retiring today

Males 19.0 18.9

Females 23.1 23.0

Retiring in 10 years

Males 21.0 20.9

Females 25.0 24.9

The expected return on assets is based on the long-term future expected investment return for each asset class as at the beginning of the year.The returns on gilts and other bonds are assumed to be the gilt yield and corporate bond yield respectively. The return on equities and propertyis assumed to be a margin above gilt yields.

The University’s share of the assets in the TPF and the expected rates of return are as follows:

2012 2011Share of assets Long term return Share of assets Long term return

% % % %

Equities 60 7.1 81 7.4

Gilts 10 4.0 7 4.3

Other bonds 21 5.3 2 5.4

Property 4 6.6 4 6.9

Cash 5 3.0 6 3.0

29 PENSION SCHEMES continued

The following amounts at 31 July were measured in accordance with the requirements of FRS 17.

2012 2011£000 £000

Analysis of the amount shown in the balance sheet

University’s estimated asset share 100,269 95,715

Present value of the University’s estimated share (116,735) (119,675)of scheme liabilities

_________ _______

Deficit in the scheme – (Net pension liability) (16,466) (23,960)_________ _______

Analysis of the amount charged to staff costs within operating surplus

Current service cost 5,143 4,945

Losses on curtailments 139 186

Past service cost 22 –_________ _______

Total operating charge 5,304 5,131_________ _______

Analysis of amount charged to interest payable(2011 – credited to other finance income)

Expected return on pension scheme assets 6,384 5,636

Interest on pension scheme liabilities (6,461) (5,627)_________ _______

Net (charge)/return (77) 9_________ _______

Analysis of the amount recognised in the statement of total recognised gains and losses (STRGL)

Actual return less expected return on the (4,468) 6,076University’s share of pension scheme assets

Changes in assumptions underlying the present value 13,833 (10,227)of the scheme liabilities

Experience gains and losses – (1,512)_________ _______

Actuarial gain/(loss) recognised in STRGL 9,365 (5,663)_________ _______

Movement in deficit during the year

Deficit in the scheme at 1 August (23,960) (16,680)

Movement in year:Current service costs (5,143) (4,945)Losses on curtailments (139) (186)Past service costs (22) –Contributions 3,510 3,505Other finance (costs)/income (77) 9Actuarial gain/(loss) 9,365 (5,663)

_________ _______

Deficit in scheme at 31 July (16,466) (23,960)_________ _______

Notes to the Financial Statements, Year Ended 31 July 2012

48

Notes to the Financial Statements, Year Ended 31 July 2012

49

29 PENSION SCHEMES continued

2012 2011£000 £000

Analysis of the movement in the present value of the scheme liabilities

At 1 August 119,675 100,260

Current service cost 5,143 4,945

Interest cost 6,461 5,627

Contributions by scheme participants 1,600 1,643

Actuarial gains and losses (13,833) 8,803

Benefits paid less individual transfers in (2,472) (1,789)

Losses on curtailments 139 186

Past service cost 22 –_________ _______

At 31 July 116,735 119,675_________ _______

Analysis of movement in the market value of the scheme assets

At 1 August 95,715 83,580

Expected rate of return on scheme assets 6,384 5,636

Actuarial gains and losses (4,468) 3,140

Contribution by the employer 3,510 3,505

Contributions by scheme participants 1,600 1,643

Benefits paid less individual transfers in (2,472) (1,789)_________ _______

At 31 July 100,269 95,715_________ _______

History of experience gains and losses – cumulative

Amounts for the current and previous four periods are as follows:

2012 2011 2010 2009 2008£000 £000 £000 £000 £000

Present value of scheme liabilities (116,735) (119,675) (100,260) (96,801) (84,800)

Scheme assets 100,269 95,715 83,580 68,513 67,205________ ________ _______ ________ ________

Deficit (16,466) (23,960) (16,680) (28,288) (17,595)________ ________ _______ ________ ________

Experience adjustments on scheme liabilities – 1,424 – – 1,757

Experience adjustments on scheme assets (4,468) 3,140 6,926 (7,035) (5,314)

The cumulative amount of actuarial gains and losses recognised in the statement of total recognised gains and losses is £9,586,000 gain (2011: £221,000 gain).

Defined benefit scheme assets do not include any of the University’s own financial instruments or any property occupied by the University.

The estimated employer’s contribution to the scheme for the year ending 31 July 2013 is £3,350,000.

The actual return on scheme assets in the year was £1,916,000 (2011: £11,711,000 return).

30 ACCESS FUNDS

2012 2011£000 £000

HEFCE grants 608 606Interest earned 3 2

_________ _______

611 608

Disbursed to students (488) (608)_________ _______

Balance unspent at 31 July 123 –_________ _______

HEFCE grants are available solely for students. The University acts only as paying agent.

The grants and related disbursements, to the extent of total access fund income, are therefore excluded from the Income and Expenditure Account.

31 RELATED PARTY TRANSACTIONS

Due to the nature of the University’s operations and the composition of the Board of Governors (being drawn from local public and privatesector organisations), it is inevitable that transactions will take place with organisations in which a member of the Board of Governors may havean interest. All transactions involving organisations in which a member of the Board of Governors may have an interest are conducted at arm’slength and in accordance with the University’s financial regulations and normal procurement procedures. No transactions were identified whichshould be disclosed under FRS 8 Related Party Disclosures.

The University paid £1,203 (2011: £1,488) to certain members of the Board of Governors as reimbursement of travel expenses. Governors didnot receive any other payments.

The University has taken the exemption under FRS 8, relating to subsidiary undertakings where 100% or more of the voting rights are controlledwithin the group, not to disclose related party transactions.

The President of Teesside University Students’ Union (TUSU) is a member of the Board of Governors. The financial statements of TUSU areseparately audited and in accordance with accounting policy Basis of Consolidation the results are not consolidated with the University. TUSU received a block grant from the University of £734,000 (2011: £735,000) and other specific grants of £27,000 (2011: £15,000).

Notes to the Financial Statements, Year Ended 31 July 2012

50

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RTeesside UniversityMiddlesbroughTees Valley T: +44 (0) 1642 218121 TS1 3BA UK tees.ac.uk

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