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FINANCIAL STATEMENTS
For the year ended 31 July 2005
Middlesex University Financial Statements for the year ended 31 July 2005 ______
CONTENTS Page Report from the Chair 1-2 Middlesex in Profile 3-4 Membership of the Board of Governors 5 Corporate Governance 6-8 Statement of the Responsibilities of the Board 9 Independent Auditor’s Report to the Board of Governors 10-11 Accounting Policies (Notes A-N) 12-13 Consolidated Income and Expenditure Account 14 Consolidated Statement of Historical Cost Surpluses and Deficits 14 Consolidated Statement of Total Recognised Gains and Losses 15 Balance Sheets 16 Consolidated Cash Flow Statement 17 Notes to the accounts (Notes 1 – 40) 1. Funding Council Grants 18 2. Tuition Fees and Education Contracts 18 3. Research Grants and Contracts 18 4. Other Operating Income 19 5. Endowment Income and Interest Receivable 19 6. Staff 19-20 7. Other Operating Expenses 21 8. Interest Payable 21 9. Analysis of Expenditure by Activity 22 10. Taxation 22 11. Deficit on Continuing Operations 22 12. Consolidated Intangible Assets 22 13. Tangible Fixed Assets 23 14. Investments of the University 24 15. Stocks and Works in Progress 24 16. Debtors 24 17. Cash at Bank and in Hand 25 18. Creditors: Amounts falling due within One Year 25 19. Creditors: Amounts falling due after more than One Year 25-26 20. Provisions for Liabilities and Charges 26 21. Deferred Capital Grants 27 22. Endowments 27 23. Capital Reserve 27 24. Income and Expenditure Account 28 25. Reconciliation of Consolidated Operating Deficit to Net Cash Inflow from Operating Activities 28 26. Returns on Investments and Servicing of Finance 28 27. Capital Expenditure 29 28. Financing 29 29. Analysis of Changes in Net Debt 29 30. Capital Commitments 29 31. Financial Commitments 29 32. Pension Schemes 30-33 33. Contingent Liabilities 33 34. Post Balance Sheet Events 33 35. Related Party Transactions 33 36. HEFCE – Access and Hardship Funds 33 37. TTA – Teacher Training Bursaries 34 38. TTA – Secondary Subject Shortage Scheme 34 39. TTA – Graduate Teacher Programme 34 40. CMU – Campaigning for Mainstream Universities 34 Middlesex University Report from the Chair
A YEAR OF TRANSITION
This year was one of new initiatives, change and consolidation. It will be remembered particularly as the year in which we opened our first non-UK campus and the year when the largest ever number of Middlesex students moved their base campus and the largest ever number of staff moved their place of work.
The fifth year of our Campus Development Strategy was logistically and physically the most demanding. Within the financial year we closed our Tottenham Campus. Humanities students and staff moved to Trent Park; computing students and staff moved to Hendon. At the same time, work was being completed on the second phase of the Hendon redevelopment. The Sheppard Library opened in Autumn 2004; from Autumn 2005 Hendon students can enjoy a magnificent glazed quadrangle, offering new teaching and social space. Hendon has been completely transformed over a four year period. The only remaining work is to landscape and remove a number of temporary buildings.
In Autumn 2004 we were forced to abandon our ambitious plan to substantially change our Trent Park campus. This plan envisaged a large expansion at Trent Park and a consolidation of all Education, Performing Arts and Art and Design programmes there over time (with the subsequent closure of Cat Hill). Following objections to the initial plans, the University reworked its proposals for the development of the site, with major input from the community and from a range of expert bodies and organisations. We applied again for planning permission from Enfield Council. A decision will be made in January 2006.
During the year, the opportunity arose to improve our presence at New Southgate, where administrative activities are based. The University decided to move out of Building 4 and take over the whole of the adjacent Building 2. This move allowed the bringing together in one building all administrative functions not required to be on campuses and delivered an appropriate, high quality headquarters worthy of a global university. The University also took the opportunity to create its own International Foundation Centre at New Southgate. The first cohort began their studies in September.
A key element of a simplified estates portfolio is the project to outsource our halls of residence accommodation and free ourselves of associated financial restriction. This project now nears completion.
Our academic quality and reputation remained at its highest ever level. The year saw the Quality Assurance Agency’s review of our Collaborative Audit provision; the ‘broad outcome’ attainment means that Middlesex now holds the best possible outcomes in all categories of QAA audits. Everyone at Middlesex – or who chooses Middlesex – can be secure that every aspect of our teaching quality is the very best that it can be.
Explicit in our international ambitions is growth in the number of Middlesex students who study either in their own countries on partner campuses or at new campuses outside the UK which bear the Middlesex name. In January 2005 the first cohort of students enrolled at a non-UK Middlesex University campus. Middlesex University Dubai is already the model and inspiration for other future campuses, resting as it does on a partnership model where Middlesex does not fund building costs. We expect to open the second non-UK campus in 2006.
The year saw an improvement, over the previous year, in student recruitment. International recruitment was particularly buoyant, with significant increases in students from Pakistan and Africa.
1 2 Middlesex University Report from the Chair
A YEAR OF TRANSITION
Research continues to develop at Middlesex. In the past it has played a useful part in supporting our postgraduate academic credentials. A new level of commitment, coinciding with the appointment of our new Director of Research Professor Waqar Ahmad, has seen considerable improvement during 2004-05. A mock RAE has established where the increased funding will be invested; our programme of funding research student tutors is bearing fruit; a number of the University’s ‘research stars’ are beginning to gain themselves, and Middlesex, an international profile.
The consolidation of our campuses continues to allow us cost-effectively to upgrade our IT and communication capability. This year saw the completion of a complete academic cycle using our MISIS student system. The system continues to provide the University with better student data than ever before. During the year a new Enquiry and Recruitment module gave the University a modern, effective, communication tool to ensure that prospective students are communicated with regularly and individually.
Having invested, and seen the return on that investment, in fewer, better campuses with appropriate technology and other facilities, the year ended with the University’s Executive agreeing to seek significant cost savings to ensure two things: that the University is in the best possible financial situation before the September 2006 sector changes; and that the University will always have the ability to invest appropriately for the future.
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2005
I am pleased to present the University’s Financial Statements for the year ended 31 July 2005. Additional copies can be downloaded from the University’s website: www.mdx.ac.uk
The University’s funding council grants fell by a further 9% this year following reductions in student recruitment in prior years. This decrease was offset by another strong year of overseas fees growth and increases in research and commercial activities but the net effect was only a 1% increase in income. During the year the University has begun to benefit from the cost efficiencies of a smaller estate and this, together, with controls on all areas of expenditure enabled us to restrict the increase in expenditure to under 4% despite inflationary pressures (notably a further 30% increase in local government pension scheme contribution rates).
In this peak year of Estates change the University also incurred costs of £5.7m which, together with the above mismatch in income and expenditure growth, has led to the University recording a deficit on continuing operations after depreciation of £11.3m. The University has been able to fund this deficit through the disposal, at substantial profit, of its underutilised Halls at the Tottenham campus, a year ahead of that campus closure, and of its site in the Lee Valley which it decided not to develop. The University has, therefore, recorded a surplus for the first time in 5 years.
The University invested a further £22m in its revitalised estate and IT facilities in the year, bringing the total investment to £60m in the last 3 years. This investment has been funded through asset disposals, grants and a re-structuring of the University’s debt. The University’s balance sheet is thus stronger than it has been for some time with net current assets of £9m, total funds of £59m and revenue reserves increasing to £23m, their highest ever level.
Lorna Cocking Chair of the Board of Governors 28 November 2005
3 Middlesex University Middlesex in Profile
A WORLD OF LEARNING
Middlesex University is an international university based in London. We are the most popular UK University with international students – and we are committed to creating opportunities for everyone with the potential to benefit from higher education.
Modern Study Opportunities Some 22,000 students from a wide variety of backgrounds study undergraduate programmes, postgraduate programmes, research degrees, professional short courses and work based learning – while innovations in e-learning and our Global Campus partnerships are taking Middlesex learning around the world.
As well as offering modern undergraduate learning we are one of the UK's largest providers of postgraduate study. Some 4,000 students take taught and research-based programmes – and we have research partnerships with hundreds of organisations worldwide.
An International University Middlesex welcomes some 5,000 international students from more than 100 countries. We have formal links with some 250 leading universities and colleges (partnership details below), while our network of 11 international regional offices around the world offer help and advice to prospective students and their families.
Middlesex Campus Life Each of our London campuses has specialist facilities and each is small enough to be friendly and welcoming. The University has announced a major Development Strategy for the first decade of the 21st century. We are consolidating our operation on fewer, better equipped campuses to ensure our students enjoy the highest possible quality of academic and social facilities.
London's Learning Network Higher education: Middlesex is an active member of the London Higher Education Consortium, a forum for London’s higher education providers. Further education: in partnership with local further education colleges we have formed the Middlesex University Higher and Further Education Consortium, one of the UK’s first unified providers of post-16 education. (Partnership details below.)
Equal Opportunities: Mission & Activity At Middlesex University we have a long-standing commitment to equal opportunities and we are seeking to deliver equality of opportunity through our inclusive approach to higher education; our commitment to disabilities, recognised by a Positive about Disabled People standard mark; and our work exploring and supporting racial equality.
Achievements & Official Recognition • Queen’s Award for Enterprise (2003): recognises the University’s excellence in international trade; judges Middlesex “by a thorough and demanding process to be, quite simply, among the best of UK companies” • Queen's Anniversary Prizes for Higher and Further Education – we are one of the few modern universities to be awarded three consecutive Queen's Anniversary Prizes: Work Based Learning (1996), Technology Education (1998) and Flood Hazard Research Centre (2000)
Teaching Quality Assessments • Excellence confirmed – the University received an excellent outcome – “broad confidence” – in the maintenance of both academic standards and quality from the Quality Assurance Agency Collaborative Provision Audit of all Middlesex University Partnerships, 2005. • Excellence confirmed – top grades for Middlesex quality assurance and standards across the whole of the University’s Provision (2003) and on our nursing and allied NHS Provision (2004).
4 Middlesex University Middlesex in Profile
A WORLD OF LEARNING
Teaching Quality Assessments (Cont'd)
Recent Subject Ratings: • Overall excellence ratings for ten subjects inspected • Overall excellence for all subjects inspected since 2000 • Top marks for Learning Resources in each of our last 15 assessments • Top marks for Student Support and Guidance in each of our last 12 assessments
Teacher Education Ratings – following inspection by the Office for Standards in Education (Ofsted): • Information Communication Technology and Design and Technology rated among the UK’s best • All teacher training programmes now rated good or very good
Research • International excellence: the top modern university in London and top six nationally among modern Universities following 2001 Research Assessment Exercise (RAE) • Research ratings in 14 different subjects improved since 1996 RAE
Investor in People Status • Middlesex University was the first London-based university to achieve this status
Positive about Disabled People Standard Mark • Recognises our commitment to disabilities and equality of opportunity
The Middlesex University academic portfolio: • Art, design and electronic arts • Performing arts • Biological and environmental sciences • Product design and engineering • Business, law and management studies • Social sciences • Computing science and IT • Teacher education • Nursing, midwifery and professional studies related • Work based learning and continuing to healthcare medicine professional development • Humanities, media and cultural studies • Design and technology
Partnership Details
International Learning Partners: Akto College (Greece); Hong Kong Baptist University (HK): Hong Kong University (HK); Kenniscentrum CIBIT (Holland); Ningbo University (China); Regional Information Technology Centre and Regional Information Technology Institute (Egypt); Tsinghua University (China); SAE Technology (15 Centres in Australia, Asia and Europe).
Higher education links: Our partners involved in joint provision of MU programmes and other forms of partnership: Ashridge College, the Tavistock Clinic, the Sainsbury Centre for Mental Health, the College of Osteopathy, the Royal Free and University College Medical School, and the Royal Veterinary College.
Further education links: Middlesex University Higher and Further Education Consortium: Barnet College, Capel Manor College, Enfield College, Harlow College, Sir George Monoux Sixth Form College, Leighton Sixth Form College, The College of North East London, Southgate College, Waltham Forest College, Woodhouse College.
Associate college partners: Middlesex has links with: Hampstead Garden Suburb Institute, Harrow College, Ming-Ai (London) Institute, Newham College, College of North West London, Oakhill College, and City of Westminster College.
5 Middlesex University Membership of the Board of Governors
Membership of the Board of Governors during the 2004/05 year and subsequently:
Name Status Dates Committees Served Mrs L Cocking Independent Governor Governance Senior Staff Conditions of (Chair from 05/09/04) Service Senior Staff Conditions of Professor E Gallagher (ex-Chair) Independent Governor Resigned 04/09/04 Service Mrs A Biss Independent Governor Audit Mr M Gerstenhaber Independent Governor Resigned 31/07/05 Finance and General Purposes Ms K Jones Independent Governor Resigned 30/04/05 Audit Mrs D Gray Independent Governor Finance and General Purposes Senior Staff Conditions of Service Mr S Hailey Independent Governor Resigned 20/10/04 Finance and General Purposes Governance Senior Staff Conditions of Service Mr A Modu Independent Governor Finance and General Purposes Ms J Mulroy Independent Governor Audit Senior Staff Conditions of Service Governance Sir Michael Partridge Independent Governor Finance and General Purposes Senior Staff Conditions of Service Governance Ms L Spence Independent Governor Finance and General Purposes Senior Staff Conditions of Service Mr M Cooper Independent Governor Appointed 04/10/04 Audit Senior Staff Conditions of Service Mr P Cheeseman Independent Governor Appointed 27/06/05 Finance and General Purposes Ms R Bhardwaj Independent Governor Appointed 28/11/05 Audit Mr M Rosen Independent Governor Appointed 27/06/05 Finance and General Purposes Mrs S Truttero Independent Governor Finance and General Purposes Dr K Tang Independent Governor Appointed 04/10/04 Finance and General Purposes Ms S Andrews Independent Governor Audit Mr M Phillips Independent Governor Resigned 04/10/04 Finance and General Purposes Professor M Driscoll Vice-Chancellor Finance and General Purposes Senior Staff Conditions of Service Governance Mr P Cheeseman Co-opted lay Governor Resigned 26/06/05 Finance and General Purposes Mr J Montgomery Co-opted lay Governor Resigned 29/11/04 Finance and General Purposes Ms R Bhardwaj Co-opted lay Governor Resigned 27/11/05 Audit Mr M Rosen Co-opted lay Governor Resigned 26/06/05 Finance and General Purposes Ms A Robinson Co-opted lay Governor Appointed 03/10/05 Finance and General Purposes Governance Mr G Lambert Co-opted lay Governor Appointed 03/10/05 Finance and General Purposes Governance Mr S McCleskey Co-opted lay Governor Appointed 03/10/05 Audit Dr J Naish Academic Board nominee Governance Professor G Parker Academic Board nominee Finance and General Purposes Dr J Alleyne Staff nominee Finance and General Purposes Mr A Tremayne Staff nominee Appointed 27/06/05 Governance Mr C Anthony Staff nominee Resigned 09/05/05 Governance Ms R Ramos Student nominee From 01/07/04 to 30/06/05 Finance and General Purposes Mr E Sonhouse Student nominee From 01/07/04 to 30/06/05 Governance Mr K Shilson Student nominee From 01/07/05 to 30/06/06 Finance and General Purposes
6 Mr I Kotomah Student nominee From 01/07/05 to 30/06/06 Governance
Professional Advisors: KPMG (PPP advice) GVA Grimley (student halls advice) Deloitte & Touche LLP 1 Canada Square 10 Stratton Street 3 Victoria Square Canary Wharf London W1X 6JR Victoria Street London E14 5AG Collyer Bristow (contractual advice) St Albans AL1 3TF 4 Bedford Row London WC1R 4DF
Middlesex University Corporate Governance
The 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 out in section one of the Combined Code on Corporate Governance issued by the London Stock Exchange in June 1998. Its purpose is to help the reader of the accounts understand how the principles have been applied.
In the opinion of the Board of Governors, the University complies with all the provisions of the Combined Code in so far as they apply to the Higher Education Sector, and it has complied throughout the year ended 31 July 2005 and subsequently.
The Board of Governors
The composition of the Board of Governors is set out on page 5. It is the Board of Governors’ responsibility to bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct.
The Board of Governors is provided with regular and timely information on the overall financial performance of the University together with other information such as performance against funding targets, proposed capital expenditure, quality matters and personnel related matters such as health and safety and environmental issues. The Board of Governors meets five times a year.
The Board of Governors conducts its business through a number of committees. Each committee has terms of reference, which have been approved by the Board of Governors. The committee structure has been revised so that the committees are Finance and General Purposes Committee, a Governance Committee, a Senior Staff Conditions of Service Committee and an Audit Committee.
All governors are able to take independent professional advice in furtherance of their duties at the University’s expense and have access to the Clerk to Board, who is responsible for ensuring that all applicable procedures and regulations are complied with. The appointment and removal of the Clerk are matters for the Board of Governors as a whole.
Formal agendas, papers and reports are supplied to governors in a timely manner, prior to Board meetings. Briefings are also provided on an ad hoc basis.
The Board of Governors has a strong and independent non-executive element and no individual or group dominates its decision making process. The Board of Governors considers that each of its non- executive members is independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement.
There is a clear division of responsibility in that the roles of Chair and Vice-Chair of the Board of Governors are separated from the role of the University’s Chief Executive, the Vice-Chancellor.
Appointments to the Board of Governors
7 Any new appointments to the Board of Governors are a matter for the consideration of the Board of Governors as a whole. The Board of Governors has a nominations committee which is responsible for the selection and nomination of any new member for the Board of Governors’ consideration. The Board of Governors is responsible for ensuring that appropriate training is provided as required. Members of the Board of Governors are appointed for a term of office not exceeding 3 years.
Middlesex University Corporate Governance
Audit Committee
The Audit Committee meets three times a year, with the University’s external and internal auditors in attendance. The Committee considers detailed reports together with recommendations for the improvement of the University’s systems of internal control and management’s responses and implementation plans. It also receives and considers reports from the Higher Education Funding Council for England as they affect the University’s business and monitors adherence to the regulatory requirements. While senior executives attend meetings of the Audit Committee as necessary, they are not members of the Committee and at each meeting the Committee has the opportunity to meet the External Auditors on their own for independent discussions.
The University’s internal auditors monitor the systems of internal control in accordance with an agreed plan of input and report their findings to management and the Audit Committee. Management are responsible for the implementation of agreed recommendations and internal audit undertake periodic follow up reviews to ensure such recommendations have been implemented.
The Audit Committee also advises the Board of Governors on the appointment of internal and external auditors and their remuneration for both audit and non-audit work.
Remuneration Committee
The committee’s responsibilities are to make recommendations to the Board on the remuneration and benefits of the Vice-Chancellor and other senior postholders. Details of remuneration for the year ended 31 July 2005 are set out in note 6 to the financial statements.
Internal Control
The University's Governing Body, the Board of Governors, is responsible for ensuring that the University maintains an effective system of internal control. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The system of internal control is based on an ongoing process designed to identify the principal risks to the achievement of policies, aims and objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. This process has been in place for the year ended 31 July 2005 and up to the date of approval of the financial statements, and accords with HEFCE guidance.
The Board of Governors has delegated the day to day responsibility to the Vice-Chancellor, as Accounting Officer for reviewing the adequacy of the system of internal financial control and making any appropriate amendments. He is also responsible for reporting to the Board of Governors any material weaknesses or breakdowns in internal financial control.
The following processes are in place to ensure the effectiveness of the University's internal control and risk management:
8 • The Board of Governors meets four times a year to consider the plans and strategic direction of the Institution. It is advised by its key committees, receiving regular reports from the Audit and Finance and General Purposes Committees and other reports from management as required. In addition the Board of Governors holds an away day each year to discuss in greater detail a key strand of the Corporate Plan. In 2005 the Board considered the University's strategies in Research and Business Services which has informed the senior management in those areas in the further development of their plans.
Middlesex University Corporate Governance
Internal Control (cont’d)
• The Finance and General Purposes Committee's agenda includes a regular item for consideration of risk and control and receives reports thereon from the senior management team.
• The senior management team receives reports setting out key performance and risk indicators and considers possible control issues brought to their attention by early warning mechanisms which are embedded within the operational units.
• The senior management team and the Audit Committee also receive regular reports from the internal audit which include recommendations for improvement. The Audit Committee's role in this area is to conduct a high level review of the arrangements for internal financial control.
• The Board of Governors’ review of the effectiveness of the system of internal control is informed by the work of the internal auditors, RSM Robson Rhodes, who operate to the standards defined in the HEFCE code of audit practice.
• An organisation-wide risk register is maintained and is available on the University's intranet. The register is reviewed and updated regularly and management report on the actions taken to mitigate risks. The register and corporate plan are cross referenced to each other as an additional mechanism for the identification of risks. Departmental plans report on the local management of corporate risks, identify risks at an operational level and include plans for the mitigation of these risks.
• Monthly management accounts are presented to Finance and General Purposes Committee and the Board of Governors. The annual budget, financial forecasts, any Corporate Plan revisions and the annual monitoring statement are all presented for formal approval by both the committees.
The Governing Body is of the view that there is an ongoing process for identifying, evaluating and managing the University's significant risks, that it has been in place for the year ended 31 July 2005 and up to the date of approval of the annual report and accounts, that it is regularly reviewed by the Governing Body and that it accords with the internal control guidance for directors on the Combined Code as deemed appropriate for higher education. The University also complies with the Guide for Members of Governing Bodies of Universities and Colleges in England and Wales that was issued by the Committee of University Chairmen in November 2004.
These processes enable the University to identify those elements of internal control which require further strengthening. These reviews have not identified any significant area of internal control weakness for the University although they have identified a number of areas where significant improvements should be made and for which the University has plans in place to address.
Going Concern
After making appropriate enquiries, the Board of Governors considers that the University has
9 adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements
Lorna Cocking Chair of the Board of Governors 28 November 2005
Middlesex University Statement of the Responsibilities of the Board of Governors
In accordance with the University’s Instrument and Articles of Government, the Board of Governors is responsible for the administration and management of the University’s affairs, including ensuring an effective system of internal control, and is required to present audited financial statements for each financial year.
The Board of Governors is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the University and to enable it to ensure that the financial statements are prepared in accordance with the University’s Articles, the Statement of Recommended Practice on Accounting in Higher Education Institutions and other relevant accounting standards.
In addition, within the terms and conditions of the Financial Memorandum agreed between the Higher Education Funding Council for England (HEFCE) and the Funding Agreement with the Teacher Training Agency (TTA) and the University’s Board of Governors, the Board of Governors - through its designated office holder - is required to prepare financial statements for each financial year which give a true and fair view of the University’s state of affairs and of the surplus or deficit and cash flows for that year.
In preparing the financial statements, the Board of Governors has ensured that:
• suitable accounting policies are selected and applied consistently • judgements and estimates are made that are reasonable and prudent • applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. • financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Institution will continue in operation. The Board of Governors is satisfied that it has adequate resources to continue in operation for the foreseeable future: for this reason the going concern basis continues to be adopted in the preparation of the financial statements.
The Governing Body has taken reasonable steps to:
• ensure that funds from HEFCE, LSC and the TTA are used only for the purposes for which they have been given and in accordance with the Financial Memorandum with the Funding Councils and the Funding Agreement with the TTA, and any other conditions which the Funding Council or Agency may from time to time prescribe • ensure that there are appropriate financial and management controls in place to safeguard public funds and funds from other sources • safeguard the assets of the University, prevent and detect fraud, and ensure that risk management is in place • secure the economical, efficient and effective management of the University’s resources and expenditure • ensure that the University operates an effective health and safety policy.
The key elements of the University’s system of internal financial control, which is designed to discharge the responsibilities set out above, include the following:
• clear definitions of the responsibilities of, and the authority delegated to, heads of academic and administrative departments • a comprehensive medium and short-term planning process, supplemented by detailed annual income, expenditure, capital and cash flow budgets • regular reviews of key performance indicators and business risks and quarterly reviews of financial results involving variance reporting and updates of forecast outturns • clearly defined and formalised requirements for approval and control of expenditure, with investment decisions involving capital or revenue expenditure being subject to formal detailed appraisal and review according to 10 approval levels set by the Board of Governors • comprehensive Financial Regulations, detailing financial controls and procedures, approved by the Audit Committee and Planning and Resources Committee • a professional Internal Audit team whose annual programme is approved by the Audit Committee and endorsed by the Board of Governors and whose head provides the Board of Governors with a report on internal audit activity within the University and an opinion on the adequacy and effectiveness of the University’s system of internal control, including internal financial control.
Middlesex University Independent Auditor's Report to the Board of Governors
We have audited the financial statements of Middlesex University for the year ended 31 July 2005 which comprise the statement of principal accounting policies, the consolidated income and expenditure account, the note of consolidated historical cost surpluses and deficits, the consolidated statement of total recognised gains and losses, the group and University balance sheets, the consolidated cash flow statement, and the related notes 1 to 40. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the Board of Governors of the University, as a body, in accordance with the Financial Memorandum with HEFCE, dated December 2003. Our audit work has been undertaken so that we might state to the Board of Governors those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Board and the Board's members as a body, for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF THE BOARD OF GOVERNORS AND THE AUDITORS
As described in the statement of the Board of Governors’ responsibilities, the Board of Governors is responsible for the preparation of the financial statements in accordance with the University’s statute, the Statement of Recommended Practice on Accounting for Further and Higher Education and other applicable United Kingdom law and accounting standards.
Our responsibilities as independent auditors are established by statute, the Auditing Practices Board, HEFCE and by our own profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Statement of Recommended Practice on Accounting for Further and Higher Education. We also report whether income from funding bodies, grants and income for specific purposes and from other restricted funds administered by the University have been properly applied only for the purposes for which they were received and whether income has been applied in accordance with the Statutes and, where appropriate, with the Financial Memorandum with HEFCE.
We also report if, in our opinion, the Board of Governors’ report is not consistent with the financial statements, if the group has not kept proper accounting records, the accounting records do not agree with the financial statements or if we have not received all the information and explanations we require for our audit.
We read the other information contained in the Board of Governors’ report, including the corporate governance statement, and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.
BASIS OF OPINION
We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board and the Audit Code of Practice issued by HEFCE. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an 11 assessment of the significant estimates and judgements made by the Board of Governors in the preparation of the financial statements and of whether the accounting policies are appropriate to the group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements.
Middlesex University Independent Auditor's Report to the Board of Governors
OPINION
In our opinion:
(a) the financial statements give a true and fair view of the state of affairs of the University and the group as at 31 July 2005 and of the group’s surplus of expenditure over income for the year then ended and have been properly prepared in accordance with the Statement of Recommended Practice on Accounting for Further and Higher Education;
(b) in all material respects income from HEFCE, grants and income for specific purposes and from other restricted funds administered by the University have been applied only for the purposes for which they were received; and
(c) in all material respects income has been applied in accordance with the University’s statutes and, where appropriate, with the Financial Memorandum with HEFCE, dated December 2003.
Deloitte & Touche LLP St Albans 20 December 2005
12 Middlesex University Accounting Policies (Notes A-O)
A. Accounting Convention The financial statements have been prepared under the historical cost convention as modified by the revaluation of inherited land, buildings and assets in accordance with both the Statement of Recommended Practice: Accounting for Further and Higher Education and applicable accounting standards.
The financial statements consolidate the accounts of the University and its material subsidiary undertakings. The consolidated financial statements do not include those of the Middlesex University Students’ Union as the University has no financial interest and no control or significant influence over policy decisions.
B. Recognition of Income Income from Funding Council Recurrent Grants, Tuition Fees and Education Contracts is included in the period in which it is receivable. Income from Donations, Research Grants, Contracts and Other Services Rendered is included to the extent of the spend incurred during the year, together with any related contributions towards overhead costs. All income from short-term deposits is credited to the Income and Expenditure Account on a receivable basis. All income from endowments is credited to the income and expenditure account on a receivable basis. Income from specific endowments not expended in accordance with the restrictions of the endowment is transferred from the income and expenditure account to specific endowments.
C. Foreign Currencies Transactions denominated in foreign currencies are recorded at the rate of exchange ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into sterling either at year end rates or, where there are related forward foreign exchange contracts, at contract rates. The resulting exchange differences are dealt with in the determination of income and expenditure for the financial year.
D. Investments Investments are stated at cost less provision for impairment in value.
E. Tangible Fixed Assets Freehold land and buildings, long leasehold and short leasehold premises are included at cost or valuation together with subsequent refurbishment expenditure, less amounts written off by way of depreciation. In the case of properties and assets inherited by the University under the Education Reform Act 1988, these are included at valuation at the time of inheritance. Freehold land is not depreciated. Finance costs that are directly attributable to the construction of land and buildings are capitalised as part of the costs of those assets. Equipment costing less than £2,500 is generally written off in the year of acquisition. Depreciation is provided on capitalised tangible fixed assets, other than freehold land, over the following periods:
Freehold Buildings 50 years - minor improvements 10 years Equipment - computer hardware and software 4 years - other 5 years
Assets in the course of construction are accounted for at cost, based on the value of architects' certificates and other direct costs incurred to the end of the year. They are not depreciated until they are brought into use.
13 Following the implementation of Accounting Standard FRS15 'Tangible Fixed Assets' during the year ended 31st July 2000, the University adopted a policy of not revaluing fixed assets. The carrying amounts of tangible fixed assets previously revalued were retained at their book value.
Grants received to finance the acquisition of tangible fixed assets are treated as deferred capital grants and released to income on a straight line basis over the same period as the related asset is depreciated.
A review for impairment of a fixed asset is carried out if events or changes in circumstances indicate that the carrying amount may not be recoverable, whether through the economic benefits of use or through disposal. Where there is evidence of impairment, fixed assets are written down to the recoverable amount.
Middlesex University Accounting Policies (Notes A-O)
F. Intangible Fixed Assets Intangible assets are included at cost and amortisation is calculated on a straight line basis to write off Intangible assets over their anticipated useful lives. Estimated useful lives are: Patents - 10 years Trademarks - 10 years Amortisation is applied from the beginning of the financial year after which expenditure is incurred and provision is made for any impairment
G. Endowment Assets Endowment assets are stated at valuation.
H. Leases Fixed assets held under finance leases and the related lease obligations are recorded in the Balance Sheet at the fair value of the leased assets at the inception of the lease. The excess of lease payments over recorded lease obligations are treated as finance charges which are amortised over each lease term to give a constant rate of charge on the remaining balance of the obligations. Rental costs under operating leases are charged to expenditure in equal annual amounts over the periods of the leases.
I. Stocks Stocks and work in progress are valued at the lower of cost and estimated net realisable value.
J. Taxation Middlesex University is a registered charity and is thus exempt from taxation on its income and gains falling within section 505 of the Income and Corporation Taxes Act 1988 or section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that they are applied to its chargeable objectives. No tax charge has arisen in the year. No tax charge has arisen in any of the subsidiaries due to their policies of paying up their profits under gift aid.
The University is registered for Value Added Tax but is unable to recover input tax on the majority of its purchases, education and research being exempt activities under VAT legislation.
K. Pensions Schemes The two principal pension schemes for the University’s staff are the Teachers Superannuation Scheme (TSS) and the London Borough of Barnet Pension Scheme (LBB). The schemes are defined benefit schemes which are independently administered. Pension costs are assessed on the latest actuarial valuations of the schemes and are accounted for on the basis of charging the cost of providing pensions over the period during which the institutions benefit from the employee’s services. Variations from regular costs are spread over the expected average remaining working lifetime of members of the Schemes after making allowances for future withdrawals. A small number of staff remain on other pension schemes.
L. Liquid Resources Liquid Resources comprise short term deposits with recognised banks, building societies and government securities.
M. Repairs and Maintenance The cost of routine maintenance is charged to the income and expenditure account as incurred.
14 N. Provisions Provisions are recognised when the University has a present legal or constructive obligation as a result of a past event. It is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
O. Assets Identified For Disposal Assets identified for disposal are stated at the lower of cost or net realisable value.
Middlesex University Consolidated Income and Expenditure Account for the year ended 31 July 2005
Notes Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Income Funding Council Grants 1 53,078 56,738 Tuition fees and education contracts 2 53,654 49,884 Research grants and contracts 3 2,735 2,452 Other operating income 4 20,447 18,936 Endowment income and interest receivable 5 349 253 Total Income 130,263 128,263 Expenditure Staff costs 6 71,575 69,956 Staff restructuring costs 6 3,030 - Other operating expenses 7 52,419 50,077 Other restructuring expenses 7 2,674 1,354 Depreciation 13 8,569 8,333 Interest payable 8 3,303 3,827 Total Expenditure 141,570 133,547
Deficit on continuing operations after depreciation of assets at valuation and before tax (11,307) (5,284)
Surplus/(deficit) on disposal of assets 13 11,796 (134)
Surplus/(deficit) on continuing operations after depreciation of fixed assets at valuation and disposal of assets but before tax 489 (5,418)
Taxation - -
Surplus/(deficit) on continuing operations after depreciation of assets at valuation, disposal of assets and tax 489 (5,418)
All results are from continuing operations.
Consolidated statement of historical cost surpluses and deficits for the year ended 31 July 2005 Notes Year ended Year ended 31 July 2005 31 July 2004 £000 £000 15 Surplus/(deficit) on continuing operations before taxation 489 (5,418) Realisation of property revaluation gains 23 9,500 -
Difference between historical cost depreciation and the actual charge for the period calculated on the re-valued amount 23 607 1,244
Historical cost surplus/(deficit) for the period before taxation 10,596 (4,174) Historical cost surplus/(deficit) for the period after taxation 10,596 (4,174)
Middlesex University Consolidated Statement of Total Recognised Gains and Losses for the year ended 31 July 2005
Notes Year ended Year ended 31 July 2005 31 July 2004 £000 £000
Surplus/(deficit) on continuing operations after depreciation of assets at valuation and disposal of assets and tax 489 (5,418)
HEFCE reimbursement of principal element of debt charges 23 689 707 Endowment capital reduction for the year 22 (27) (23) New endowments 22 49 91
Total recognised gains/(losses) relating to the year 1,200 (4,643)
Reconciliation
Opening reserves and endowments 58,097 62,740
Total recognised gains/(losses) for the year 1,200 (4,643)
Closing reserves and endowments 59,297 58,097
16 Middlesex University Balance Sheets as at 31 July 2005
Notes Group University Group University 2005 2005 2004 2004 £000 £000 £000 £000 Fixed assets Intangible asset 12 1,135 - 1,002 - Tangible assets 13 131,748 112,940 134,448 118,455 Investments 14 36 1,813 36 1,809 132,919 114,753 135,486 120,264
Endowment assets 22 126 126 104 104
Current assets Stocks and work-in-progress 15 516 56 573 155 Assets identified for disposal 13 10,580 10,580 12,110 12,110 Debtors: amounts falling due within one year 16 16,542 17,353 14,901 12,593 Debtors: amounts falling due after more than one year 16 - 18,997 - 14,587 Cash at bank and in hand 17 5,810 3,124 3,470 648 33,448 50,110 31,054 40,093 Creditors: amounts falling due within one year 18 (24,350) (21,428) (49,074) (42,477)
Net current assets / (liabilities) 9,224 28,808 (17,916) (2,280)
Total assets less current liabilities 142,143 143,561 117,570 117,984
Creditors: amounts falling due after more than one year 19 (61,055) (61,055) (45,418) (45,418)
Provisions for liabilities and charges 20 (6,711) (6,711) (4,840) (4,840)
NET ASSETS 74,377 75,795 67,312 67,726
Deferred capital grants 21 15,080 15,080 9,215 9,215
Endowments Specific 22 126 126 104 104
Capital reserve 23 36,575 36,575 45,993 45,993 Income and expenditure account 24 22,596 24,014 12,000 12,414
Total funds 59,297 60,715 58,097 58,511 17 74,377 75,795 67,312 67,726
The financial statements on pages 14 to 34 were approved by the University Board on 28 November 2005 and were signed on its behalf by:-
Lorna Cocking Professor Michael Driscoll Melvyn Keen Chair of the Board of Governors Vice Chancellor Director of Finance
Middlesex University Consolidated Cash Flow Statement for the year ended 31 July 2005
Restated Notes Year ended Year ended 31 July 2005 31 July 2004 £000 £000
Cash (outflow)/inflow from operating activities 25 (6,199) 4,030
Returns on investments and servicing of finance 26 (2,150) (2,376)
Capital disposals and expenditure 27 10,126 (10,951)
Cash inflow/(outflow) before use of liquid resources and financing 1,777 (9,297)
Financing 28 563 11,205
Increase in cash in the year 29 2,340 1,908
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year 29 2,340 1,908
Cash used to decrease/(generated from) rolling credit facility 28 15,400 (15,400) Cash generated from new loans 28 (32,000) - Cash used to decrease other loans and finance leases 28 16,726 4,902
Movement in net debt in year 29 2,466 (8,590)
Opening net debt at 1 August 29 (59,359) (50,769)
Closing net debt at 31 July (56,893) (59,359)
The cash flow statement year ended 31 July 2004 has been restated to show the University’s rolling credit facility as part of its financing arrangements rather then its operating activities.
18 Middlesex University Notes to the Accounts
1. Funding Council grants Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Recurrent grants Higher Education Funding Council for England (HEFCE) 43,986 42,514 Teacher Training Agency (TTA) 3,009 2,296 Learning and Skills Council (LSC) 510 512
Specific grants HE Reach out to Business & Community - 368 Higher Education Innovation Fund 705 177 Learning and Teaching quality 454 245 Rewarding and developing staff * - 1,944 Research grants 1,628 1,663 Reimbursement of debt charge - interest 729 1,192 Other grants 1,242 4,380
Deferred capital grants released in year Buildings 206 996 Equipment 609 451 53,078 56,738
* Rewarding and developing staff grants is included in recurrent grant in 2004/5
2. Tuition fees and education contracts Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Full-time students charged home fees 12,709 12,376 Full-time students charged overseas fees 23,626 20,486 Part-time fees 3,301 2,937 Short course fees 926 1,581 NHS education contracts 13,092 12,504 53,654 49,884
Restated 3. Research grants and contracts Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Research Councils 277 98 UK based charities 139 255 UK central government 1,431 1,026 UK industrial 208 209
19 European Commission 609 765 Other EU government bodies 66 30 EU other 3 38 Other overseas 2 31 2,735 2,452
Income of £1,080k included in note 4 for year ended 31 July 2004 has been reclassified as research income and restated in note 3.
Middlesex University Notes to the Accounts
Restated 4. Other operating income Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Residences, catering and conferences 6,767 6,303 Other services rendered 6,210 4,135 Health authorities 269 247 Sports income 533 497 Childcare 530 515 Rent and room hire 152 390 Validation fees 2,474 2,171 Subsidiary companies 1,975 3,060 Releases from deferred capital grants 181 168 Other income 1,356 1,450 20,447 18,936 Income of £1,080k included in note 4 for year ended 31 July 2004 has been classified as research income and restated in note 3.
5. Endowment income and interest receivable Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Interest receivable 349 253
6. Staff Year ended Year ended 31 July 2005 31 July 2004 The average monthly numbers of employees during Number Number the year were: Academic 810 775 Administration and senior staff 946 1,009 Technical 136 140 Other (including Research) 193 177 2,085 2,101
Staff costs for the above persons: Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Wages and salaries 59,459 58,675 Social security costs 5,112 4,978 Other pension costs 7,004 6,303 71,575 69,956 Restructuring costs 3.030 - 74,605 69,956
20 Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Employment costs for staff on permanent contracts 62,552 61,456 Employment costs for staff on temporary contracts 9,023 8,500 71,575 69,956 Restructuring costs 3,030 - 74,605 69,956 The restructuring costs relate to a small number of redundancies and an increase to the enhanced pensions provision following an actuarial review.
Middlesex University Notes to the Accounts
6. Staff (continued)
The number of staff including senior post-holders and the Vice-Chancellor, who received emoluments in the following ranges was: Year ended Year ended 31 July 2005 31 July 2004 Number Number £70,001 to £80,000 13 1 £80,001 to £90,000 5 5 £90,001 to £100,000 4 2 £100,001 to £110,000 - 1 £110,001 to £120,000 2 2 £120,001 to £130,000 2 2 £130,001 to £140,000 1 - £170,001 to £180,000 - 1 £180,000 to £190,000 1 - 28 14
Senior post-holder emoluments are made up as follows: Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Salaries 2,038 1,047 Benefits in kind 52 42 Pension contributions 262 129 Total emoluments 2,352 1,218
Emoluments of the Vice-Chancellor
The above emoluments include amounts payable to the Vice-Chancellor (who is also the highest paid senior post-holder) of:
Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Salaries 148 141 Benefits in kind 14 14 Pension contributions 20 19
21 Total emoluments 182 174
The pension contributions for the Vice-Chancellor and senior post-holders are in respect of employer’s contributions to either the Teachers Pension Scheme or the Local Government Pension Scheme and are paid at the same rate as for other employees.
Middlesex University Notes to the Accounts
7 Other operating expenses Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Consumables 2,167 2,619 Learning resources 1,580 1,410 Funds payable to other colleges 7,223 7,370 Auditors' remuneration 278 200 Catering and hospitality 701 773 Marketing related costs 2,076 2,010 Consultants and professional advisors 1,275 3,400 External staffing and services 1,315 954 Staff development costs 777 1,008 Student recruitment, bursaries and scholarships 7,891 6,536 Subscriptions and memberships 564 (74) Equipment and furniture (not capitalised) 381 640 IT expenditure and maintenance 4,541 4,309 IT operating leases 2,019 2,299 NHS service charge costs 787 1,106 Grants to Student Union 515 485 Transport, Travel & Subsistence 1,812 1,912 Insurance 582 544 Telephones and postage 933 961 Rent and rates 1,287 1,500 Repairs and general maintenance 1,681 1,333 Utilities 1,736 1,437 Other premises costs 3,169 2,655 Subsidiary companies 3,914 3,580 Other expenditure 3,216 1,110 52,419 50,077
Restructuring costs 2,674 1,354
Restructuring costs relate to the revenue expenditure incurred by the university on the implementation of its Estates Strategy, particularly; the closure of Tottenham Campus, the relocation of staff and students to Hendon Campus and Trent Park Campus, and the relocation of staff on the New Southgate Campus.
Other operating expenses include: Auditors' remuneration: Financial statements audit (Deloitte & Touche LLP)* 109 73 Other services from external auditors 13 15 Internal audit (RSM Robson Rhodes) 156 94 Other services from internal auditors - 18
* includes £78,000 in respect of the University
22 8 Interest Payable
On inherited liabilities 805 1,198 Other loans not wholly repayable within five years 1,259 1,555 Bank overdrafts 770 207 Finance leases 469 867 Total 3,303 3,827
Middlesex University Notes to the Accounts
Analysis of 2005 expenditure by Total 9. activity Staff Deprec- Other op. Interest Costs iation activities payable £000 £000 £000 £000 £000 Academic departments 42,932 1,029 10.305 0 54,266 Academic services 11,471 1,300 8,813 0 21,584 Research grants and contracts 1,308 0 1,427 0 2,735 Residences, catering & conferences 980 608 3,078 1,359 6,025 Premises 2,933 4,783 7,059 1,893 16,668 Subsidiary Companies 1,507 50 3,914 1 5,472 Administration 9,721 563 11,370 0 21,654 Other expenses 723 236 6,453 50 7,462 71,575 8,569 52,419 3,303 135,866 Restructuring costs 3,030 0 2,674 0 5,704 Total operating expenditure 74,605 8,569 55,093 3,303 141,570
The depreciation charge has been funded by: Capital reserve release 607 Deferred capital grant release 996 General income 6,966 8,569
10. Taxation Year ended Year ended 31 July 2005 31 July 2004 £000 £000 UK corporation tax payable on the profits of the - - University’s subsidiary companies. - -
11. Surplus/(deficit) on continuing operations
The surplus/(deficit) on continuing operations for the year is made up as follows:
Year ended Year ended 31 July 2005 31 July 2004 £000 £000 University's surplus/ (deficit) for the year 1,493 (5,824) Retained surplus generated by subsidiary undertakings 83 72 Losses generated by subsidiary undertakings (1,112) (388) Surpluses generated by subsidiary undertakings 760 2,943 Less surplus generated by subsidiary undertakings
23 (735) (2,221) Total 489 (5,418)
12. Consolidated intangible assets Year ended Year ended 31 July 2005 31 July 2004 Patent and Licences £000 £000 Net Book Value at 1st August 1,002 49 Additions in year 134 1,002 Disposals in year - (49) Amortisation charge for year (1) - Net Book Value at 1st July 1,135 1,002
Middlesex University Notes to the Accounts
13. Tangible fixed assets Assets Freehold Freehold under University Land Buildings Equipment construction Total £000 £000 £000 £000 £000 Cost or Valuation At 1 August 2004 29,472 122,083 64,700 5,347 221,602 Additions - 1,248 1,374 13,670 16,292 Transfers to current assets (4,250) (8,635) (489) - (13,374) Transfers between accounts - 1,132 1,012 (2,144) - Disposals (1,395) (1,888) (124) - (3,407) At 31 July 2005 23,827 113,940 66,473 16,873 221,113 Depreciation At 1 August 2004 - 46,219 56,928 - 103,147 Charge for year - 4,749 3,378 - 8,127 Transfers to current assets - (2,614) (180) - (2,794) Eliminated in respect of disposals - (190) (117) - (307) At 31 July 2005 - 48,164 60,009 - 108,173 Net book value at 31 July 2005 23,827 65,776 6,464 16,873 112,940 Net book value at 1 August 2004 29,472 75,864 7,772 5,347 118,455 Inherited 20,125 20,823 - - 40,948 Financed by capital grant - 8,211 1,221 5,648 15,080 Other 3,702 36,742 5,243 11,225 56,912 Net book value at 31 July 2005 23,827 65,776 6,464 16,873 112,940
The University disposed of its Lee Valley site in November 2004 and Somerset Halls (student accommodation) in September 2004. Tottenham Campus has been identified for disposal and transferred to current assets with a net book value of £10,580k. Tottenham Campus was sold in September 2005.
Assets Freehold Freehold under Consolidated Land Buildings Equipment construction Total £000 £000 £000 £000 £000 Cost or Valuation At 1 August 2004 29,472 122,083 65,5551 21,219 238,325 Revaluation - - 3 - 3 Additions 0 1,855 2,036 15,674 19,565 Transfers to current assets (4,250) (8,635) (489) - (13,374) Transfers between accounts - 18,957 1,062 (20,019) - Disposals (1,395) (1,888) (171) - (3,454) At 31 July 2005 23,827 132,372 67,992 16,874 241,065 Depreciation At 1 August 2004 - 46,219 57,658 - 103,877 Exchange revaluation - - 1 - 1 Charge for year - 5.053 3,516 - 8,569 24 Transfers to current assets - (2,614) (180) - (2,794) Eliminated in respect of disposals - (190) (146) - (336) At 31 July 2005 - 48,468 60,849 0 109,317 Net book value at 31 July 2005 23,827 83,904 7,143 16,874 131,748
Net book value at 1 August 2004 29,472 75,864 7,893 21,219 134,448 Inherited 20,125 20,823 - - 40,948 Financed by capital grant - 8,211 1,221 5,648 15,080 Other 3,702 54,870 5,922 11,226 75,720 Net book value at 31 July 2005 23,827 83,904 7,143 16,874 131,748 The net book value of tangible fixed assets includes £2,101k (2004: £2,154k) in respect of assets held under finance leases. Depreciation charged for the year on those assets amounted to £52k (2004: £52k)
Middlesex University Notes to the Accounts
14. Investments of the University Group University Group University Year ended Year ended Year ended Year ended 31 July 2005 31 July2005 31 July 2004 31 July 2004 £000 £000 £000 £000 Investments in CVCP Properties plc 36 36 36 36 Investments in MU Ventures Ltd. - 1,700 - 1,700 Investments in Middlesex Silver Co. Ltd. -4 - - Investments in MU Press Ltd. -60 - 60 Investments in other subsidiary companies -13 -13 ii 36 1,813 36 1,809
Parent interest in Principal trading subsidiary ordinary shares Principal activity Country of voting rights incorporation MU Ventures Ltd. 100% Consultancy Services England and Wales Teaching Resources Ltd. 100% Supply of science & tech. products England and Wales MU Property Services Ltd. 100% Property development England and Wales MU Facilities Ltd. 100% Facility development and provider England and Wales Middlesex Silver Company Ltd. 100% Intellectual property devt, England and Wales acquisition and licensing. Argentium Silver Company Ltd. 100% Licensing of intellectual property. England and Wales MU Press Ltd. 100% Supply of learning materials and Publishing England and Wales Middlesex Services (Cyprus) Ltd 100% Student Recruitment Cyprus Middlesex Services Ltd 100% Student recruitment Hong Kong Middlesex Uni (SEA) SDN BHD 100% Student recruitment Kuala Lumpar Middlesex International (Dubai) FZ-LLC 100% Student recruitment Dubai
MU Ventures Ltd is 100% owned by Middlesex University. Middlesex Silver Company Ltd is owned 50% by MU Ventures Ltd and 50% by Middlesex University. Argentium Silver Company Ltd is 100% owned by Middlesex Silver Company Ltd. Investments are stated at cost, with the exception of Teaching Resources Ltd and MU Ventures Ltd. The University is holding a provision for impairment against these subsidiary companies of £0.3m and £1m respectively.
15. Stocks and work-in-progress Group University Group University Year ended Year ended Year ended Year ended 31 July 2005 31 July2005 31 July 2004 31 July 2004 £000 £000 £000 £000 Stock 459 - 406 - Work-in-progress - research & consultancy 57 56 167 155 516 56 573 155
16. Debtors Group University Group University Year ended Year ended Year ended Year ended 25 31 July 2005 31 July 2005 31 July 2004 31 July 2004 £000 £000 £000 £000 Amounts falling due within one year: Trade debtors 2,163 1,587 3,710 1,143 Tuition Fees 7,162 7,162 5,709 5,709 Other debtors 1,221 1,156 1,674 1,674 Amounts owed by subsidiary undertakings -1,605 - 597 Prepayments and accrued income 5,996 5,843 3,808 3,470 16,542 17,353 14,906 12,593 Amounts falling due after more than one year: Amounts owed by subsidiary undertakings - 18,997 - 14,587 16,542 36,350 14,901 27,180 Middlesex University Notes to the Accounts
17. Cash at bank and in hand Cash at bank and in hand includes £1,219kk (2004: £616k) in respect of monies held on behalf of third parties.
18. Creditors: amounts falling due within one year
Group University Group University Year ended Year ended Year ended Year ended 31 July 2005 31 July 2005 31 July 2004 31 July 2004 £000 £000 £000 £000
Bank loans and overdrafts 1,825 1,825 1,761 1,761 Rolling credit facility --15,400 15,400 Obligations under finance leases 48 48 378 378 Payments received on account 1,716 1,716 959 959 Trade Creditors 9,956 9,100 9,496 7,972 Amounts owed to subsidiary undertakings - 287 - 23 Other taxation and social security 1,728 1,662 2,507 2,072 Accruals and deferred income 9,077 6,790 18,573 13,912
24,350 21,428 49,074 42,477
19. Creditors: amounts falling due after more than one year
HEC and consolidated Total of Finance Mortgages Total LEA Debt Leases £000 £000 £000 £000 Long term debt as at 1 August 2004 14,038 7,984 23,396 45,418 Add back: transfer to short term creditors 692 378 941 2,011 Additions during the year - - 32,000 32,000 Capital repaid in year (689) (5,803) (10,234) (16,726) Debt outstanding at 31 July 2005 14.041 2,559 46,103 62,703 Transfer: to short term creditors (670) (48) (930) (1,648) Long term debt as at 31 July 2005 13,371 2,511 45,173 61,055
The University has a long term loan facility of £55m. Of this, 32m was drawn down at the balance sheet
HEC and consolidated London London London Total
26 Borough Borough Borough of Barnet Enfield Haringey LEA Debt £000 £000 £000 £000 Long term debt as at 1 August 2004 6,238 1,147 6,653 14,038 Add back: transfer to short term creditors 260 155 277 692 Additions during the year - - - - Capital repaid in year (260) (155) (274) (689) Debt outstanding at 31 July 2005 6,238 1,147 6,656 14,041 Transfer: to short term creditors (250) (155) (265) (670) Long term debt as at 31 July 2005 5,988 992 6,391 13,371
27 Middlesex University Notes to the Accounts
19. Creditors: amounts falling due after more than one year (cont'd)
Analysis of long term debt Group University Group University Year ended Year ended Year ended Year ended 31 July 2005 31 July 2005 31 July 2004 31 July 2004 £000 £000 £000 £000 Due: Between one and two years 1,457 1,457 7,420 7,420 Between two and five years 6,709 6,709 5,702 5,702 In five years or more 50,378 50,378 24,312 24,312 Finance leases 2,511 2,511 7,984 7,984 Total long term debt 61,055 61,055 45,418 45,418
Loans with fixed interest rates have their rate renewed at a fixed future date or at the end of the loan. The loans are secured against the properties to which they relate.
Interest rate Interest rate Expiry Project name: % renewal date date Falcon Fields/Robbins Hall 10.60 2008 2008 Hendon, Platt and Usher Halls 6.20 variable rate 2020 Hendon Campus 4.886 variable rate 2030 Trent Park Campus 5.645 (max) floating rate 2030
Finance lease obligations
Obligations under finance Group University Group University leases fall due as follows: Year ended Year ended Year ended Year ended 31 July 2005 31 July 2005 31 July 2004 31 July 2004 £000 £000 £000 £000 Within one year 48 48 378 378 Between one and two years 62 62 416 416 Between two and five years 289 289 754 754 In five years or more 2,160 2,160 6,814 6,814 Total 2,559 2,559 8,362 8,362
20. Provisions for liabilities and charges Group and University Enhanced Restructuring Pension Provision Total Provision £000 £000 £000 At 1 August 2004 4,727 113 4,840 Utilised during the year (481) (102) (583) Charged to income and expenditure account 2,454 0 2,454 At 31 July 2005 6,700 11 6,711
28 Middlesex University Notes to the Accounts 21. Deferred capital grants Group and University Other grants Funding & Councils benefactions Total At 1 August 2004: £000 £000 £000 Land and buildings 5,312 2,253 7,565 Equipment 1,650 - 1,650 6,962 2,253 9,215 Cash received: Land and buildings 6,174 359 6,533 Equipment 328 - 328 6,502 359 6,861 Released to income and expenditure: Land and buildings (206) (181) (387) Equipment (609) - (609) (815) (181) (996) At 31 July 2005: Land and buildings 11,280 2,431 13,711 Equipment 1,369 - 1,369 Total 12,649 2,431 15,080 All deferred capital grants relate to the University
22. Endowments Group and University 2005 2004 Specific Specific £000 £000 At 1 August 2004 104 36 Additions 49 91 Investment income and appreciation 2 1 Capital reduction for the year (29) (24) At 31 July 2005 126 104 Represented by: Cash balances (note 29) 126 104 Representing: Decade of Development campaign 55 47 Prize funds 47 48 Welfare and Scholarship funds 17 9 Other funds 7- All endowments are specific and relate to the University
23. Capital reserve 2005 2005 2005 2004 Total Assets Loans Total £000 £000 £000 £000
Net assets at value at 31 January 1991 55,879 85,125 (29,246) 55,879 Disposal of pre-incorporation assets (13,140) (13,140) - (13,140) Disposal of pre-incorporation assets in year (9,500) (9,500) - - Net assets at value at 31 July 33,239 62,485 (29,246) 42,739
Net contribution to depreciation: At 1 August brought forward 3,254 (11,262) 14,516 3,791 Released in year (607) (607) - (1,244) Inherited debt principal reimbursement 689 - 689 707 At 31 July carry forward 3,336 (11,869) 15,205 3,254
Capital Reserve at 31 July 36,575 50,616 (14,041) 45,993
29 The capital reserve represents the net assets of Middlesex University inherited from the various local authorities
Middlesex University Notes to the Accounts
24. Income and expenditure account Group University Group University Year ended Year ended Year ended Year ended 31 July 2005 31 July 2005 31 July 2004 31 July 2004 £000 £000 £000 £000 Opening balance at 1 August 12,000 12,414 16,174 16,994 Surplus /(deficit) after depreciation of assets at valuation and taxation 489 1,493 (5,418) (5,824)
Release from capital reserve 10,107 10,107 1,244 1,244
Closing balance at 31 July 22,596 24,014 12,000 12,414
25. Reconciliation of consolidated operating surplus/ (deficit) to Year ended Year ended net cash (outflow) / inflow from operating activities 31 July 2005 31 July 2004 £000 £000 Surplus/(deficit) on continuing operations after depreciation of assets at valuation 489 (5,418) Depreciation (note 13) 8,569 8,333 Amortisation of intangible assets (note 12) 1 - Deferred capital grants released to income (note 21) (996) (1,615) (Profit)/loss on disposal of tangible fixed assets (11,796) 134 Interest receivable (note 5) (349) (253) Reimbursement of loan interest charges (805) (1,198) LEA debt interest payable 805 1,198 Other debt interest payable 2,499 2,629 (Increase)/decrease in stocks (54) 173 Decrease in work-in-progress 110 134 Increase in debtors (1,642) (3,234) (Decrease)/increase in creditors (4,901) 3,362 Increase/(decrease) in provisions 1,871 (215) Net cash (outflow)/ inflow from operating activities (6,199) 4,030
The change on creditors has been restated for year ended 31 July 2004 to remove the rolling credit facility which is now shown as part of financing in note 28.
26. Returns on investments and servicing of finance Year ended Year ended 31 July 2005 31 July 2004
Interest received 349 253 Interest paid (2,835) (2,959) Funding Council’s interest reimbursement 805 1,198 Interest element of finance lease rental payment (469) (868)
Net cash outflow from returns on investment and servicing of finance (2,150) (2,376)
30 Middlesex University Notes to the Accounts
27. Capital expenditure Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Purchase of tangible fixed assets (22,229) (24,049) Sales of tangible fixed assets 25,494 8,265 Deferred capital grants received 6,861 4,833 Net cash inflow/(outflow) from capital expenditure 10,126 (10,951)
Restated 28. Financing Year ended Year ended 31 July 2005 31 July 2004 Debt due beyond a year: £000 £000 LEA loan repayments (689) (707) Finance lease repayments (5,803) (345) Mortgage repayments (10,234) (3,850) New mortgages 32,000 - 15,274 (4,902) Rolling credit facility (overdraft) (15,400) 15,400 Funding Council’s grant reimbursements 689 707 Net cash outflow from financing 563 11,205
The financing note has been restated for year ended 31 July 2004 to include the rolling credit facility from note 25.
Restated 29. Analysis of changes in net debt At 1 Aug 2004 Cashfows At 31 July 2005 £000 £000 £000 Cash in hand, and at bank 3,470 2,340 5,810 Rolling credit facility (overdraft) (15,400) 15,400 - LEA loans (14,730) 689 (14,041) Mortgages and loans (24,337) (21,766) (46,103) Finance Leases (8,362) 5,803 (2,559) Borrowings (62,829) 126 (62,703) Net Debt (59,359) 2,466 (56,893)
The net debt has been restated for year ended 31 July 2004 to include the rolling credit facility
30. Capital commitments Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Commitments contracted for at 31 July 3,710 2,035 Authorised (but not contracted for) at 31 July 22,027 6,188 25,737 8,223
31. Financial commitments Year ended Year ended 31 July 2005 31 July 2004 Operating lease commitments, equipment: £000 £000 Expiring within one year 2,387 1,960 Expiring within two and five years 2,324 4,015 Expiring after five years 49 - 4,760 5,975
31 Middlesex University Notes to the Accounts
32. Pension schemes
The University's employees belong to two principal pension schemes, the Teachers' Pension Scheme (TPS) for academic staff and the Local Government Pension Scheme (LGPS) for other staff. The schemes are defined benefit schemes providing benefits based on a final pensionable salary. The total pension cost for the year for the University and its subsidiaries was £7,004k (2004 £6,303k).
Teachers' Pension Scheme
The TPS is an unfunded defined benefit scheme. Contributions, on a pay-as-you-go basis, are credited to the exchequer under arrangements governed by the Superannuation Act 1972. The total pension cost for the year for the University and its subsidiaries was £3,354k (2004 £3,769k). Actuarial valuations are carried out on a notional set of investments.
SSAP 24
The pension cost is assessed every five years in accordance with the advice of the government actuary. The assumptions and other data that have the most significant effect on the determination of the contribution levels are as follows:
Latest actuarial valuation 31 March 2001 Actuarial method Prospective benefits Investment returns gross per annum 7.0% Salary scale increases per annum 4.5% Market value of assets at date of last valuation £142,880 million Proportion of members' accrued benefits covered by the actuarial value of the assets 100%
Following the implementation of Teachers’ Pensions (Employers’ Supplementary Contributions) Regulations 2000 the government actuary carried out a further review on the level of employers contributions. For the period from 1 April 2004 to 31 March 2005 the employer contribution rate was 13.5%. The rate remained the same for the period 1 April 2004 to 31 March 2005.
FRS 17
Under the definitions set out in Financial Reporting Standard (FRS) 17 (Retirement Benefits), the TPS is a multi- employer pension scheme. The University is unable to identify its share of the underlying (notional) assets and liabilities of the scheme. Accordingly, the University has used the exemption in FRS 17 and contributions to the scheme have been accounted for as if it were a defined contribution scheme.
Local Government Pension Scheme
The LGPS is a funded defined benefit scheme, with assets held in separate trustee administered funds. It is administered locally by the London Borough of Barnet and is a multi-employer scheme. The total contribution made for the year ended 31 July 2005 for the University and its subsidiary companies was £3,650k (2004 - £2,534k).
SSAP 24
The pension cost is assessed every three years by a professionally qualified independent actuary using the projected unit method, the rates of contribution payable being determined by the actuary.
32 Middlesex University Notes to the Accounts
32. Pensions schemes (cont’d)
A valuation by the Fund’s actuary was carried out at 31 March 2004 and the assumptions and other data which have most significant effect on the determination of the contribution levels are as follows:
Latest actuarial valuation 31 March 2004 Actuarial method Projected Unit Investment returns gross per annum 4.7% Pension increases per annum 2.9% Salary scale increase per annum 4.4% Market value of assets at date of last valuation £359 million Proportion of members’ accrued benefits covered by the actuarial value of the assets 66%
For the period from 1 April 2004 to 31 March 2005 the employer contribution rate was 13.6%. The rate increased to 17.8% from 1 April 2005 for the period to 31 March 2006.
FRS 17
The following information is based upon a full actuarial valuation of the Fund at 31 March 2004 updated to 31 July 2005 by a qualified independent actuary.
At 31 July At 31 July At 31 July 2005 2004 2003 Inflation 2.8% 2.9% 2.5% Rate of increase in salaries 4.3% 4.7% 4.3% Rate of increase in pensions 2.8% 2.9% 2.5% Discount rate for liabilities 5.0% 5.8% 5.4%
The assets in the scheme and the expected rates of return are set out below:
31 July 2005 31 July 2005 31 July 2004 31 July 2004 31 July 2003 31 July 2003
Fair value Expected return Fair value Expected return Fair value Expected return £m %pa £m %pa £m %pa Equities 295.3 7.3 235.5 7.9 221.7 8.0 Bonds 70.0 4.7 55.5 5.4 53.5 5.0 Property 39.8 5.4 36.6 6.7 33.2 6.7 Cash 30.0 4.5 22.6 4.5 14.3 3.5 Average 435.1 6.5 350.2 7.2 322.7 7.2
Restated Restated 31 July 2005 31 July 2004 31 July 2003 £000 £000 £000 Market value of scheme assets 56,342 45,988 39,564 Actuarial value of scheme liabilities (94,261) (75,230) (67,878) Deficit in the scheme (37,919) (29,242) (28,314)
The restated values appering in note 33 relate to an adjustment to the FRS17 report from the Actuary for previous Middlesex Polytechnic pensioners who are not part of the Middlesex university scheme.
Under the transitional arrangements of FRS 17, no provision has been made by the University for the institution’s share of the deficit indicated above.
33 Middlesex University Notes to the Accounts
32. Pension schemes (cont’d)
If provision were made, the following entries would be made: Year ended Year ended 31 July 2005 31 July 2004 £000 £000 Balance sheet presentation
Net assets excluding FRS 17 pension liability 74,377 67,312 Net pension liability (37,919) (29,242) Net assets including FRS 17 pension liability 36,458 38,070
Under the transitional arrangements of FRS 17, the University’s pension charge for the year calculated under FRS 17 assumptions is not included in the financial statements (as this is currently calculated on a SSAP 24 basis). If the charge had been included on a FRS 17 basis, the following entries would be made.
Analysis of the amount charged to income and expenditure account Service cost 3,619 3,155 Curtailments and settlements 293 11 Total operating charge 3,912 3,166
Analysis of net return on pension scheme Restated Expected return on pension scheme assets 3,392 2,933 Interest on pension liabilities (4,456) (3,753) Net return (1,064) (820)
Amount recognised in the statement of total recognised gains and losses (STRGL) Restated Actual return less expected return on pension scheme assets 6,126 635 Experience gains and losses arising on the scheme liabilities (3,522) 14 Change in financial and demographic assumptions underlying the scheme liabilities (9,988) (125) Actuarial (loss)/gain recognised in STRGL (7,384) 524
Movement in surplus during year Restated Deficit in scheme at 1 August (29,242) (28,314) Movement in year: Current service charge (3,619) (3,155) Contributions 3,650 2,534 Past service costs - (19) Contributions in respect of unfunded benefits 33 - Impact of curtailments and settlements (293) (11) Net interest / return on assets (1,064) (820) Actuarial (loss)/ gain (7,384) 524 Deficit in scheme at 31 July (37,919) (29,242)
34 Middlesex University Notes to the Accounts
32. Pension schemes (cont’d)
Restated Restated Restated History of experience gains and losses Year ended Year ended Year ended Year ended 31 July 2005 31 July 2004 31 July 2003 31 July 2002 £000 £000 £000 £000 Difference between the expected and actual return on assets: Amount £000 6,126 635 (882) (8,812) Value of assets £000 56,342 45,988 39,564 35.737 % of scheme assets 10.9% 1.4% (2.2%) (24.7%)
Experience gains and losses on scheme liabilities: Amount £000 (3,522) 14 (4) (461) Present value of liabilities £000 (94,261) 75,230 67,878 55,725 %of scheme liabilities 3.7% 0.0% 0.0% (0.8%)
Total actuarial gains and losses recognised in STRGL: Amount £000 (7,384) 524 (7,434) (6,986) Present value of liabilities £000 (94,261) 75,230 67,878 55,725 % of scheme liabilities 7.8% 0.7% (11.0%) (12.5%)
33. Contingent liabilities
The University is not aware of any contingent liabilities which fall to be disclosed in accordance with standard accounting practice.
34. Post balance sheet events
As part of our estates strategy to reduce the number and improve the quality of our student campuses, the University sold Tottenham Campus in September 2005. Humanities students and staff moved to Trent Park, and Computing students and staff moved to Hendon, the latter to coincide with the completion of the second phase of the Hendon redevelopment.
35. Related party transactions
Due to the nature of the University’s operations and the composition of the board of governors (being drawn for public and private sector organisations) it is inevitable that transactions will take place with organisations in which a member of the board of governors may have an interest. All transactions involving organisations in which a member of the board of governors may have an interest are conducted at arm’s length and in accordance with the University’s financial regulations and normal procurement procedures.
36. HEFCE – Access and hardship funds
Year ended Year ended 31 July 2005 31 July 2004 £000 £000
Balance brought forward 183 95 Funding Council Grants 1,507 1,828 1,690 1,923
35 Disbursed to students (1,514) (1,740) Balance carried forward at 31 July 176 183
Middlesex University Notes to the Accounts
37. TTA - Teacher Training Bursaries Year ended Year ended 31 July 2005 31 July 2004 £000 £000
Balance brought forward (8) 83 Teacher Training Agency grant received 1,961 2,101 Disbursed to Students (2,507) (2,192) Balance carried forward at 31 July (104) (8)
38. TTA – Secondary Subject Shortage Scheme
Balance brought forward (agreed from funding council) 6 2 Teacher Training Agency grant received 20 42 Disbursed to Students (27) (38) Balance carried forward at 31 July (1) 6
39. TTA – Graduate Teacher Programme
Balance brought forward 325 - Teacher Training Agency grant received 2,681 1,266 Disbursed to Students (2,239) (941) Balance carried forward at 31 July 767 325
40. CMU – Campaigning for Mainstream Universities
Balance brought forward 102 - Subscriptions from member universities received 342 142 Campaign expenses (178) (40) Balance carried forward at 31 July 266 102
Funding Council hardship funds and bursaries, as detailed in notes 36 to 39 are available solely for students and student support; the University acts only as a paying agent. The University also acts as a paying agent for CMU as detailed in note 40. All of the funding and related disbursements are therefore excluded from the income and expenditure account.
36