FINANCIAL STATEMENTS 2019 FOR THE YEAR ENDED 31 JULY 2019 Officers Chair of Staffing Committee Officers Mr Paul Lee, DL, MA, LLM, (until 31 August 2019) Chancellor and advisers Mr Lemn Sissay, MBE Mrs Ann Barnes BA (Hons), Diploma IHM (from 1 September 2019) Pro-Chancellor Mrs Gillian Easson, MA,FRSA Membership of the Board of Governors President and Vice-Chancellor Professor Dame Nancy J Rothwell, DBE, DL, BSc, From 1 September 2019 PhD, DSc, FRS, FMedSci, FRSB, FRCP(Hon), FRSA Category 1, ex officio members (2) Deputy President and Deputy Vice-Chancellor Professor Dame Nancy J Rothwell, DBE, DL, BSc, Professor Luke Georghiou, BSc, PhD, MAE, FRSA PhD, DSc, FRS, FMedSci, FRSB, FRCP(Hon), FRSA Chair of the Board of Governors President and Vice-Chancellor and Pro-Chancellor Mr Edward M Astle, MA, MBA Mr Kwame Kwarteng, General Secretary of the Students’ Union, HND, BSc (from 1 July 2019) Deputy Chair of the Board of Governors Dr John Stageman, OBE, PhD, CChem, FRSB Category 2, lay members (13) Registrar, Secretary and Chief Operating Officer Mr Edward M Astle, MA, MBA, Chair Mr Patrick Hackett BArch Mrs Ann Barnes, BA (Hons), Diploma IHM Director of Finance Mr Stephen Dauncey BSc, FCCA Mr Gary Buxton, MBE, BA (Hons.) MIoD (until 18 October 2019) Mr Michael Crick, BA Contents Interim Director of Finance Mr Colin Gillespie, BSc (Hons), FCA Mr David Soutter BA (Hons), MA (Hons), FCA Mr Nick Hillman, MA 1 Chair’s foreword Mrs Bridget Lea, BA (Hons) Vice-Presidents (Policy) 2 Review of the year by Dr Neil McArthur, MBE, CEng, FIMechE, FIET Teaching, Learning and Students Professor Dame Nancy Rothwell, Mr Robin Phillips, BA (Hons) Professor Clive Agnew, BSc, PhD President and Vice-Chancellor (until 30 November 2019) Mr Andrew Spinoza, BA, MCIPR 5 Key performance indicators Professor April McMahon, MA, PhD, FBA, FRSE, Dr John Stageman, OBE, PhD, CChem, FRSB, Deputy Chair 6 The year in pictures FLSW (from 1 October 2019) Research Mr Richard Solomons, BA (Econ) (Hons), ACA 12 Financial review by Professor Colette Fagan, BA, MSc, PhD, FAcSS Mrs Alice Webb, M.Eng, Hon DA Mr Stephen Dauncey, Director of Finance Social Responsibility Professor James Thompson BA (Hons), FRSA. Category 3, members of the Senate (6) 22 Corporate governance statement (until 31 July 2019) Professor Aneez Esmail, PhD, MRCGP, 26 Remuneration Professor Nalin Thakkar, BDS, MSc, PhD, FRCPath MFPHM, FRCP Committee report (from 1 September 2019) Professor Danielle George, MBE, BSc, MSc, PhD, FIET 31 Modern slavery and human Vice-Presidents and Deans of Faculties trafficking statement Dr Reinmar Hager MSc, PhD Science and Engineering Professor Steven Jones, PFHEA 34 Statement of the Board of Professor Martin Schröder, BSc, CChem, PhD, Professor Nalin Thakkar, BDS, MSc, Governors’ responsibilities for DIC, FRSE, FRSC, MAE the year ended 31 July 2019 PhD, FRCPath Humanities Dr Delia Vazquez, B.A. Hons, MPhil, PhD 35 Independent auditor’s report Professor Keith Brown, MA, PhD, FRHS, FRSE to the Board of Governors of Biology, Medicine and Health Category 4, members of staff other than The University of Manchester Professor Graham M. Lord MA, PhD, FRCP, FRSB, academic or research staff (1) FMedSci 42 Financial Statements for the Ms Rosalyn Webster BA MA year ended 31 July 2019 Chairs of Committees Category 5, student member (1) 44 Statement of principal of the Board of Governors accounting policies Ms Sara Khan BA (Hons) (from 1 September 2019) Chair of Audit Committee 49 Consolidated statement Mr Colin Gillespie, BSc (Hons), FCA The following were members of the Board of of comprehensive income Chair of Finance Committee Governors in the previous academic year, to the dates shown: 50 Consolidated statement Dr John Stageman, OBE, PhD, CChem, FRSB of changes in reserves Chair of Remuneration Committee Miss Fatima Abid (30 June 2018) General Mr Gary Buxton, MBE, BA (Hons.) MIoD Secretary of the Students’ Union 51 Balance sheet Chair of Nominations Committee Mr Paul Lee, DL, MA, LLM (until 31 August 2019) 52 Consolidated statement Mr Jim Hancock BA (interim until 31 August 2019) Mr Shumit Mandal BSc (until 31 August 2019) of cash flows Mr Edward M Astle, MA, MBA Professor Silvia Massini, Laurea (cum Laude), 53 Notes to the financial statements (from 1 September 2019) MSc, PhD (until 31 August 2019) FINANCIAL STATEMENTS 1 Chair’s foreword These financial statements reveal a reasonable financial performance and good strategic progress against a backdrop of continued financial pressures and uncertainty for the sector. This was another testing year for UK I am also proud of the contribution of the many universities, with uncertainties arising from, skilled and experienced people involved in among others, Brexit and the government the University’s governance. This year saw us review of higher and further education funding, conclude a review of governing instruments, and significant economic headwinds, not least resulting in revised Statutes and Ordinances from the fee cap on home undergraduates and being approved. This has enabled a reduction the funding of pensions. in Board size, as recommended by an external review of governance in 2017, with effect In this context, it is encouraging to see the from 1 September 2019. We also continued to University report an improved operating oversee full compliance with the Committee performance, with a rise in income from of University Chairs’ Higher Education research, and an increased operating surplus Senior Staff Remuneration Code, and are (see page 14) – the key measure of the maintaining our programme of continuous University’s financial performance. There governance improvement for the Board and its was great progress against the core goals committees. The Board also has had a role in and Campus Masterplan, with numerous the development of the new vision and strategic highlights offered in the President and plan for the University, to be launched in 2020. Vice-Chancellor’s review. The overall deficit, however, is a concern, and mainly arises In both the near and longer term, I am from a non-cash accounting provision for confident that the University will continue to the USS pensions deficit. build on its unique combination of strengths – its scale, location in the UK’s second city, Ensuring the University’s financial sustainability excellence in research and teaching, world against the current political and economic leading innovation, unparalleled civic backdrop requires shrewd management and engagement and commitment to social strong leadership. On behalf of the Board responsibility – to contribute skills, knowledge of Governors I would like to commend the and long-term economic and social benefit President and Vice-Chancellor, the Senior regionally, nationally and globally. Leadership Team and all academic and support staff who are steering the University through these unpredictable waters. Edward M Astle Chair of the Board of Governors and Pro Chancellor 2 FINANCIAL STATEMENTS President and Vice-Chancellor’s review of the year The year covered by these financial statements was another challenging one for the University and the whole UK higher education sector. While we have improved our operating performance, we have also reported an accounting deficit due entirely to the worsening of pension liabilities. Ensuring our financial sustainability is paramount, and never more so, as we approach the end of our Manchester 2020 strategic plan and look to our future. This was another year of external turbulence interdisciplinary collaboration. We restructured and uncertainty for the higher education sector. our Faculty of Science and Engineering (FSE) The future funding of university staff pensions into two Schools, with each of the previous continued to be of concern across the sector. Schools now incorporated as Departments. In While student recruitment for our University the Faculty of Humanities, our School of Law remains healthy, others are now struggling merged with our School of Social Sciences. because of global competition and a dip in the number of 18-year-olds in the UK. In a challenging year for the sector, we reported a reasonable financial performance. Our priority, The Augar Review of post-18 education and as in previous years, was to consolidate the funding in England was published in May, financial position of the University by generating though it is uncertain as to which, if any of an operating surplus, which is essential for the recommendations will be implemented ongoing investment. Operating surplus is – and when. The review made some helpful defined in the financial review on page 14. Total recommendations, including support for further comprehensive income fell from £102.2 million education, reintroducing the maintenance grant to a deficit of £(110.5 million) and total net and reducing interest repayments on loans assets from £1.7 billion to £1.6 billion. Excluding while students are studying. It recommended very significant one-off pensions adjustments a reduction in the cap on home undergraduate and other external volatilities, our financial fees to £7,500. A subsequent report by the House results show an increase in underlying operating of Lords Select Committee described the highly surplus to £40.8 million (3.7% of income) from damaging impact of reducing the fee cap without £24.7 million (2.3%) last year (see page 14). financial compensation. While this shows a year-on-year Uncertainty over Brexit continued for another improvement, it falls short of our year. Our priority is to remain a civic university aim of delivering an operating with a global outlook and reach, which welcomes surplus in the 5–7% range of and embraces staff and students, and values our income. You can see a full academic and business partnerships across the breakdown in the financial world. We continue to do our best to support our overview. We continue staff, students and collaborators who are affected to implement an agreed in different ways by the referendum outcome.