Keele Universit y St atement of Account s

Transcription

1 keele university Keele, Staffordshire ST5 5BG Tel: +44 (0) Fax: +44 (0) Keele Universit y Statement of Accounts /05

2 Statement of Accounts for the Year Ended 31 July Vice-Chancellor s Report 3 Treasurer s Report 4 Corporate Governance 6 Responsibilities of the Council of the University of Keele 8 Report of the Auditors 9 Consolidated Income and Expenditure Account 10 Balance Sheet 12 Consolidated Cash Flow Statement 14 Statement of Consolidated Total Recognised Gains and Losses 14 Statement of Principal Accounting Policies 15 Notes to the Accounts 18 The Council 37

3 Keele Univer sit y St atemen t of Accoun t s Vice-Chancellor s Report Keele University has experienced both growth and success during /05, but also faces the significant challenges and financial pressures affecting Higher Education as a whole. Against this difficult financial background I am pleased to report a surplus of 0.6m. Last year I reported that much progress had been made towards developing the University s strategic aims and objectives in the light of significant changes in the external environment. Building on consultation and planning in the previous twelve months, by the start of the /05 financial year the University was able to commence the implementation of KEELE2006. This initiative is designed to ensure the successful strategic and financial positioning of Keele in the evolving Higher Education environment, with specific objectives for research and enterprise and educational programmes. The successful delivery of the aims and objectives of KEELE2006 requires an associated programme of structural reorganisation. Implementation of the required changes began during the financial year /05 and I am confident that all the revised structures will be fully in place by the summer of 2006 as planned. Progress to date has included establishing seven Research and Enterprise Institutes to co-ordinate all research and enterprise activity. This will enable the University to focus its resources for research on areas of established and emerging strength, whilst ensuring that research and enterprise funds are used transparently and to best effect. A reduced number of Schools will now be responsible for teaching and related activities only and will be encouraged to make proactive changes to courses both to secure Keele s position in the higher education market and also to manage instances of reduced activity resulting from falls in demand for certain courses. Executive Deans have been appointed to each of the three Faculties and are assuming responsibility for managing devolved budgets. Heads of Schools and Research Institute Directors are now directly accountable to these Deans, who in turn are accountable to the Deputy Vice-Chancellor. During /05, as part of the implementation of KEELE2006, a thorough review of all central support services was undertaken in conjunction with the University s internal auditors. This was accompanied by an extensive consultation exercise with both administrative and academic members of staff. The purpose of the review was to align central support services with the new academic structures and, in particular, to ensure the provision of professional and effective support services to the new Faculties. The review resulted in proposals for a revised model for the delivery of central services and a series of action plans to improve the efficacy of support services. These will be implemented during /06. Keele is a growth University. As such it aims to maintain a steady and sustainable increase in both home and overseas students. It achieved this aim in /05 and is on target to achieve it for /06. In order to sustain steady growth in student numbers the University recognises that it must continue to invest in its facilities and services. Supported by HEFCE capital grants the University is investing significantly in its capital infrastructure to improve teaching, research and accommodation facilities. The University is also investing in other aspects of student services. During /05 a working group looked at the particular requirements of overseas students and made recommendations for improving teaching and support facilities for these students. Work is now in hand to implement these recommendations. /05 also saw the establishment of a Graduate School to oversee the development of policy in respect of postgraduate research and to co-ordinate the administrative and educational functions required to support postgraduate research students. The early success of the new Undergraduate Medical School at Keele continues. In /05 the School welcomed its second intake of first-year undergraduate medical students. The University also celebrated the first medical students to graduate at Keele. Under an agreement with Manchester University, these students transferred to Keele in 2002/03 following 2 years of pre-clinical study at Manchester. The students then completed 3 years clinical study at Keele University, with all of the final-year students successfully graduating in /05. On 8 January The Department for Education and Skills announced that Keele had been selected as the leading partner to run the Science Learning Centre, West Midlands. This Centre was to deliver high quality Continuing Professional Development to science teachers and technicians throughout the region. The Centre was completed in January and was officially opened on 10 June by Mr Bill Rammell MP, Minister of State for Lifelong Learning, Further and Higher Education. A director has been successfully appointed to manage the Centre. Overall /05 has been a busy but successful and rewarding year. I should like to thank all the University s staff who have worked hard and contributed to this success and who provide the expertise and support so vital to the reputation and vibrancy of the University. I should also like to thank all lay members of Council who give their advice, experience and expertise freely to the University. Finally, I would like to thank all the students who continue to choose Keele for a unique learning experience. Professor J. V. Finch Vice-Chancellor October

4 4 Keele Univer sit y St atemen t of Accoun t s Treasurer s Report These Financial Statements comprise the consolidated results of the University and its subsidiary companies. Keele University Science Park Ltd and Keele Facilities Management Ltd both traded throughout the year; Keele University Science and Business Park Ltd was incorporated as a new subsidiary company during the year. A further two subsidiaries, Keele Student Developments Ltd and Keele University Press Ltd, did not trade during the year and have applied to be removed from the register of companies. The subsidiary companies undertake activities, which for commercial and legal reasons, are better channelled through them. To achieve tax efficiency, the subsidiary companies then gift aid any taxable profits to the University. Results for the Year The consolidated income and expenditure results for the year to 31 July, together with 2003/04 comparisons, are summarised as follows / /04 Income 79,944 74,703 Release from revaluation reserve ,868 75,532 Expenditure 80,172 74,288 Deferred Taxation in Subsidiary Companies 60 Surplus for the Year 636 1,244 The retained surplus for the year of 636,000 exceeds the budgeted surplus of 304,000. This result is both satisfactory and particularly pleasing as /05 was a transitional year during which the University commenced implementing the infrastructure to support KEELE2006. This implementation, which will be completed during /06, is a key factor in assisting the University in achieving its future financial viability.

5 Keele Univer sit y St atemen t of Accoun t s Capital Projects The University incurred capital expenditure of 7.6 million during the year. A major achievement was the completion within budget of the Science Learning Centre, West Midlands. This capital project costing 1.4 million was funded by the Department of Education and Skills and comprised a major refurbishment of the Dorothy Hodgkin Building, which is located near to the centre of campus. This building now provides a high quality environment for the support and promotion of the teaching of science across the region. Further amounts, in excess of 1.5 million, were spent on improving the research and teaching facilities of the University. Most of this expenditure was funded through capital grants received from HEFCE. During the year work also continued to maintain and improve the general estate and student accommodation. This included improvements to disabled access and an investment of 2.2 million to upgrade student residences as part of a 25-year refurbishment programme. Financial Restructuring During /05 the University negotiated an agreement with its bankers for replacement loan facilities totalling 18 million, on more beneficial interest and repayment terms, together with an overdraft facility of 3 million. This will allow the University to continue to invest in its capital programme, which is important in being able to maintain high standards of teaching and research facilities, whilst also allowing the University flexibility in its cash management. At 31 July the University had drawn-down 9 million against its loan facilities, but expects to have to fully utilise the facility in future years, after which it will have to generate cash to fund the interest and repayment obligations. At 31 July the University held investments of 22.7 million to fund the 25-year student accommodation refurbishment programme in accordance with the Owengate Agreement. During the year this fund was reinvested in an amortising fixed rate interest deposit. This deposit will shield the University from risks in the equity market and will release annual cash flows that match the forecast funding requirements of the refurbishment programme. Subsidiary Companies Keele University Science Park Ltd has developed commercial properties on the University campus for rental purposes. During the year it made a gift aid contribution of 218,000 to the University. Keele Facilities Management Ltd has continued to grow its business and is establishing itself as a known provider of facilities management within the local area and to the higher education sector. The company made a gift aid contribution of 94,000 to the University. Keele University Science and Business Park Ltd was incorporated during the year to support the development of the University campus. The company is a wholly-owned subsidiary of the University. Conclusion This year has seen the University achieve a surplus of 0.6 million which, given the continuing financial pressures, is a significant achievement by all concerned. The University continues to maintain tight control of its finances in order to meet its financial targets whilst also delivering improvements in services and facilities. C. J. Myatt University Treasurer October

6 Keele Univer sit y St atemen t of Accoun t s Corporate Governance The following statement is provided to enable readers of the Annual Review and Statement of Accounts of the University of Keele to obtain a better understanding of its governance and legal structure. The University of Keele is committed to exhibiting best practice in all aspects of corporate governance. The University endeavours to conduct its business in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership) and with the guidance to universities from the Committee of University Chairmen in its Guide for Members of HE Governing Bodies in the UK. The University is an independent corporation, whose legal status derives from The University of Keele Act originally granted in Its objects, powers and framework of governance are set out in the Charter and its supporting Statutes. The Charter and Statutes require the University to have three separate bodies, each with clearly defined functions and responsibilities, to oversee and manage its activities, as follows: The Council is the executive governing body, responsible for the finance, property, investments and general business of the University, and for setting the general strategic direction of the institution. It has a majority of members from outside the University (described as lay members), from whom its Chair and Deputy Chair must be drawn. Members also include representatives of the University s staff and student body. None of the lay members receive any payment, apart from the reimbursement of expenses, for the work they do for the University. The Senate is the academic authority of the University and draws its membership entirely from the academic staff and the students of the institution. Its role is to regulate and superintend the education, welfare and discipline of students and the promotion of learning and research. The Court is a large, mainly formal body. It offers a means whereby the wider interests served by the University can be associated with the institution, and provides a public forum where members of Court can raise any matters about the University. The Court normally meets once a year to receive the Annual Review and audited Statement of Accounts of the University. In addition, major changes to the constitution of the University require the approval of the Court before they can be submitted to the Privy Council. Most members of the Court will be from outside the University, representing the local community and other designated bodies with an interest in the work of the University. The membership also includes representatives of the staff of the University (both academic and non-academic) and the student body. The principal academic and administrative officer of the University is the Vice-Chancellor, who has a general responsibility to the Council for maintaining and promoting the efficiency and good order of the University. Under the terms of the formal financial memorandum between the University and the Higher Education Funding Council for England (HEFCE), the Vice-Chancellor is the accounting officer of the University. The Council meets four times a year and has several committees, including a Strategic Planning Committee, a Nominations Committee, Promotions Committee including a Remuneration Committee, a Health and Safety Committee and an Audit Committee. All of these committees are formally constituted with written terms of reference and majority lay member representation. During 2003/04 Council undertook a review of its effectiveness, in line with guidance based on the Lambert Report. No issues of significance were identified, but recommendations that arose from the review have been implemented during /05. In respect of its strategic and development responsibilities, Council receives recommendations and advice from the Strategic Planning Committee on all matters concerning the strategic development of the University, including the allocation of resources to meet the strategic plans, and all other matters concerning the management of the University finances. The Strategic Planning Committee recommends the annual revenue and capital budget and is supported by a Finance Sub-Committee that monitors performance in relation to the approved budgets. The Nominations Committee considers nominations for vacancies in the Council membership under the relevant Statute. The University, in accordance with guidance based on the Lambert Report, has advertised vacancies nationally against a defined person specification. The Remuneration Committee determines the remuneration of the most senior staff, including the Vice-Chancellor. The Occupational Health and Safety Committee considers matters to do with staff and student health including safety on University premises and fulfilment of statutory obligations in this respect. The Audit Committee meets at least 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 Funding Council as they affect the University s business and monitors adherence to the regulatory requirements. Whilst senior executives attend meetings of the Audit Committee as necessary, they are not members of the Committee and the Committee may meet the external auditors on their own for independent discussions.

7 Keele Univer sit y St atemen t of Accoun t s The University maintains a Register of Interests of members of Council, which may be consulted by arrangement with the Secretary and Registrar. The Statutes of the University of Keele specify that the Secretary and Registrar should act as Secretary of Council. Any enquiries about the constitution and governance of the University should be addressed to the Secretary and Registrar. Risk Management and the System of Internal Control As the governing body of the University of Keele, the Council has responsibility for maintaining a sound system of internal control that supports the achievement of policies, aims and objectives, while safeguarding the public and other funds and assets for which the University is responsible, in accordance with the responsibilities assigned to the governing body in the Charter and Statutes and the Financial Memorandum with HEFCE. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify the principal risks to the achievement of policies, aims and objectives; to evaluate the nature and extent of those risks; and to manage them efficiently, effectively and economically. The University has developed and applied procedures that enabled it to be fully compliant with HEFCE requirements throughout /05, and will continue to operate these up to and beyond the date of approval of the Financial Statements. The University has a published risk management policy. This policy identifies clearly and distinguishes the roles and responsibilities of both the Council and the executive management team. The policy was last reviewed and updated in June. As a result of the review, during /06 the institution plans to: i. Continue to develop its risk awareness training ii. Develop further the existing system of key performance and risk indicators. This will include monitoring key risks (operational and strategic) identified within the institution s annual planning process. The University employs UNIAC to undertake its internal audit functions and they operate to standards defined in the HEFCE Audit Code of Practice. The internal auditors submit regular reports to the Audit Committee including the head of internal audit s independent opinion on the adequacy and effectiveness of the system of internal control, together with recommendations for improvement. The Chair of the Audit Committee provides the Council with regular reports concerning internal control. The Council s review of the effectiveness of the system of internal control is informed by the work of the internal auditors and the executive managers within the University who have responsibility for the development and maintenance of the internal control framework, and by comments made by the external auditors in their management letter and other reports.

8 Keele Univer sit y St atemen t of Accoun t s Responsibilities of the Council of the University of Keele In accordance with its Charter of Incorporation, the Council of the University of Keele is responsible for the administration and management of the affairs of the University of Keele including ensuring an effective system of internal control, and is required to present audited financial statements for each financial year. The Council has responsibility for ensuring that the University keeps 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 Charter of Incorporation, the Statement of Recommended Practice on Accounting in Higher Education Institutions and other relevant accounting standards. In addition, within the terms and conditions of a Financial Memorandum agreed between the Higher Education Funding Council for England and the Council of the University of Keele, the Council, through its designated office holder, is required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the University and of the surplus or deficit and cash flows for that year. In causing the financial statements to be prepared, the Council has ensured that: Suitable accounting policies are selected and applied consistently; Judgements and estimates are made that are reasonable and prudent; Applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; Financial statements are prepared on the going concern basis unless it is inappropriate to presume that the University will continue in operation. The Council is satisfied that the University has adequate resources to continue in operation for the foreseeable future; for this reason the going concern basis continues to be adopted in the preparation of the financial statements. The Council has taken such steps as are reasonably open to it to: Ensure that funds from the Higher Education Funding Council for England and the Teacher Training Agency are used only for the purposes for which they have been given and in accordance with the Financial Memorandum with the Funding Council and the funding arrangement with the Teacher Training Agency and any other conditions which the Funding Council or the Teacher Training 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 and prevent and detect fraud; Secure the economical, efficient and effective management of the University s resources and expenditure. The key elements of the University s system of internal financial control, which is designed to discharge the responsibilities set out above, include the following: Clear definitions of the responsibilities of, and the authority delegated to, heads of academic and administrative departments; A comprehensive medium and short-term planning process, supplemented by detailed annual income, expenditure, capital and cash flow budgets; Regular reviews of academic performance and monthly 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 approval levels set by the Council; Comprehensive Financial Regulations, detailing financial controls and procedures, approved by the Audit Committee and the Finance Sub-Committee; Professional Internal Audit team whose annual programme is approved by the Audit Committee and whose head provides the Council with a report on internal audit activity within the University and an opinion on the adequacy of effectiveness of the University s system of internal control, including internal financial control. Any system of internal financial control can, however, only provide reasonable, but not absolute, assurance against material misstatement or loss.

9 Keele Univer sit y St atemen t of Accoun t s Report of the Auditors, Kpmg Llp to the Council of the University of Keele We have audited the financial statements on pages 10 to 36, which have been prepared under the historical cost convention, as modified by the revaluation of certain assets, and in accordance with the accounting policies set out on pages 15 to 17. This report is made solely to the Council, in accordance with the Charter and Statutes of the University. Our audit work has been undertaken so that we might state to the Council those matters we are required to state to it in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Council, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the University s Council and the Auditors As described on page 8, the Council has responsibility for preparing the financial statements. Our responsibilities as independent auditors are established by statute, the Auditing Practices Board, the Higher Education Funding Council for England and our 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 in Higher Education Institutions. We also report to you 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 the Higher Education Funding Council for England and the Teacher Training Agency. We also report to you if, in our opinion, the Vice-Chancellor s Report and the Treasurer s Report are not consistent with the financial statements, if the University 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 have also reviewed whether the statement on page 6 reflects the University s compliance with the relevant provisions of the Combined Code specified for our review in so far as they apply to the Higher Education Sector, and we report if it does not. We are not required to consider whether the statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the University s corporate governance procedures or its risk and control procedures. We read the other information contained in the Members Reports (including the corporate governance statement), and consider the implications for our report if we become aware of any apparent misstatements within it. Basis of Opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board and the Audit Code of Practice issued by the Higher Education Funding Council for England. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Council in the preparation of the financial statements, and of whether the accounting policies are appropriate to the 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. Opinion In our opinion: The financial statements give a true and fair view of the state of the affairs of the University and the group as at 31 July and of the surplus of income over expenditure, recognised gains and losses and cash flows of the University and the group for the year then ended and have been properly prepared in accordance with the Statement of Recommended Practice on Accounting in Higher Education Institutions; In all material aspects, income from the Higher Education Funding Council for England and Teacher Training Agency grants and income for specific purposes and from other restricted funds administered by the University have been applied for the purposes for which they were received; In all material aspects, income has been applied in accordance with the University s Statutes and where appropriate, with the Financial Memorandum with the Higher Education Funding Council for England and the funding agreement with the Teacher Training Agency. KPMG LLP Chartered Accountants Registered Auditor St James s Square Manchester United Kingdom

10 10 Keele Univer sit y St atemen t of Accoun t s Consolidated Income and Expenditure Account for the year ended 31 July Income note / /04 Funding council grants 1 26,229 24,349 Academic fees and support grants 2 20,711 17,923 Research grants and contracts 3 8,121 7,745 Other operating income 4 22,900 23,440 Endowment income and interest receivable 5 1,983 1,246 Total income 79,944 74,703 Expenditure Staff costs 6 49,150 45,266 Depreciation 11 3,790 3,448 Other operating expenses 7 26,709 24,932 Interest payable Total expenditure 80,172 74,288 (Deficit)/Surplus after depreciation of assets at valuation and before tax (228) 415 Taxation (Deficit)/Surplus after depreciation of assets at valuation and tax (288) 415

11 Keele Univer sit y St atemen t of Accoun t s Note of Historical Cost Surpluses and Deficits note / /04 (Deficit)/Surplus after depreciation of assets at valuation and tax (288) 415 Difference between an historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount Release from revaluation reserve on disposal of assets Historical cost surplus after tax 636 1,244 Income and expenditure account balance at 1 August 4,197 2,953 Income and expenditure account balance at 31 July 4,833 4,197 The consolidated income and expenditure of the University and its subsidiaries relate wholly to continuing operations.

12 12 Keele Univer sit y St atemen t of Accoun t s Balance Sheet as at 31 July Consolidated University Fixed Assets note Tangible assets , , ,863 99,488 Investments 12 20,334 20,454 20,809 20, , , , ,417 Endowment Asset Investments 13 1,359 1,694 1,359 1,694 Current Assets Stocks and stores in hand Debtors 14 12,145 10,056 15,479 9,583 Included in debtors are amounts receivable greater than one year see note 14 Investments 15 7,781 7,914 7,781 7,914 Cash at bank and in hand ,663 19,136 23,908 18,101 Creditors: Amounts Falling Due Within One Year 16 31,082 26,686 31,298 25,876 Net Current Liabilities (10,419) (7,550) (7,390) (7,775) Total Assets Less Current Liabilities 117, , , ,336 Creditors: Amounts Falling Due After More Than One Year 17 48,310 48,202 48,310 44,872 Provisions for Liabilities and Charges Net Assets 68,575 69,648 67,590 68,590

13 Keele Univer sit y St atemen t of Accoun t s Consolidated University note Deferred Capital Grants 19 25,072 24,776 25,017 24,720 Endowments Specific 20 1,341 1,605 1,341 1,605 General ,359 1,694 1,359 1,694 Reserves Revaluation reserve 21 37,311 38,981 36,040 37,686 Income and expenditure account 22 4,833 4,197 5,174 4,490 42,144 43,178 41,214 42,176 Total 68,575 69,648 67,590 68,590 The financial statements on pages 10 to 36 were approved by the Council on 20 October, and signed on its behalf by: J. V. Finch, Vice-Chancellor C. J. Myatt, Treasurer K. J. Clarke, Director of Finance

14 14 Keele Univer sit y St atemen t of Accoun t s Consolidated Cash Flow Statement for the year ended 31 July note / /04 Net cash inflow from operating activities 29 3,887 3,966 Returns on investments and servicing of finance Taxation Capital expenditure and financial investment 32 (5,996) (675) Cash outflow/(inflow) before use of liquid resources and financing (1,550) 3,844 Management of liquid resources inflow/(outflow) of short term deposits 468 (3,015) Financing: Draw-down of new loans 9,000 Repayment of loans (7,798) (318) Increase in cash Reconciliation of Net Cash Flow to Movement in Net (Debt)/Funds for the year ended 31 July / /04 Increase in cash in the period (Decrease)/Increase in short term deposits (468) 3,015 Draw-down of new loans (9,000) Repayment of loans 7, Change in net (debt)/funds (1,550) 3,844 Net funds/(debt) at 1 August 1,439 (2,405) Net (debt)/funds at 31 July 30 (111) 1,439 Statement of Consolidated Total Recognised Gains and Losses for the year ended 31 July / /04 (Deficit)/surplus after depreciation of assets at valuation and tax (288) 415 Endowment income expended for year (410) (175) New endowments Charge to Income & Expenditure account in respect of fixed asset write off (see note 11) (757) Total recognised (losses)/gains for the year (1,441) 281

15 Keele Univer sit y St atemen t of Accoun t s Statement of Principal Accounting Policies 1. Accounting Convention These Financial Statements have been prepared under the historical cost convention as modified for the revaluation of investments and certain land and buildings. They have been prepared in accordance with both the Statement of Recommended Practice (SORP): Accounting in Higher Education Institutions and applicable Accounting Standards. 2. Consolidation The Consolidated Financial Statements consolidate the Financial Statements of the University and all its subsidiary companies for the financial year to 31 July. Keele University Science Park Ltd (KUSP Ltd) principal activity operation and development of a science and business park Keele Student Developments Ltd (KSD Ltd) the company has not traded in the year, and has applied to be removed from the Register of Companies Keele University Press Ltd (KUP Ltd) the company has not traded in the year, and has applied to be removed from the Register of Companies Keele Facilities Management Ltd (KFM Ltd) principal activity provision of consultancy services plus the delivery of facilities management services for associated and external customers Keele University Science & Business Park Ltd (KUSBP Ltd) principal activity the business of land development and associated activity The University of Keele owns the whole of the issued ordinary share capital in all five companies, all of which are registered in England and Wales. The Financial Statements do not consolidate the Students Union as it is a separate body in which the University has no financial interest and no control or significant influence over policy decisions. The University holds 99.7% of the shares in Owengate Keele (Holdings) Ltd but has no Board representation and no voting rights and, on this basis, it has not been consolidated into the accounts. Unless otherwise stated, the acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired in the year are included in the consolidated income and expenditure account from the date of acquisition. Goodwill arising on consolidation (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) is capitalised on acquisition. 3. Recognition of Income Grants from HEFCE are included in the income and expenditure account on an accruals basis. Income derived from research grants and contracts and endowments or donations received for specific purposes is included to the extent of equivalent expenditure 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. A premium received for the lease of student accommodation to Owengate (Keele) plc, after deducting all direct costs associated with arranging the lease, is being released to the Income and Expenditure account over the period of the lease on a straight line basis. 4. 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 at year end rates. The resulting exchange differences are dealt with in the determination of income and expenditure for the financial year. 5. 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.

16 16 Keele Univer sit y St atemen t of Accoun t s Statement of Principal Accounting Policies continued 6. Land and Buildings The transitional rules set out in FRS 15, Tangible Fixed Assets, have been applied in implementing FRS 15. Land and buildings are stated at the revalued amount, the basis of valuation being depreciated replacement cost. The valuation at 31 July 1992 was performed by Grimley (International Property Advisers). Freehold land is not depreciated as it is considered to have an indefinite useful life. Buildings are depreciated over their expected useful lives of 60 years and expenditure on furniture and equipment capitalised as part of new capital projects is depreciated on a straight line basis over 10 years. Where buildings are acquired with the aid of specific grants they are capitalised and depreciated as above. The related grants are treated as deferred capital grants and released to income over the expected useful life of the buildings. Depreciation in relation to the subsidiary companies land and buildings is provided on a straight line basis at the following rates: Head Lease Buildings 0.80% on cost 1.66% on cost/revaluation 7. Equipment and Furniture Depreciation in relation to equipment and furniture is provided on a straight line basis at the following rates: Equipment and furniture 4-10 years on cost Equipment and furniture costing less than 2,000 per individual item or group of related items is written off in the year of acquisition. All other equipment and furniture is capitalised at cost and depreciated over its expected useful life. Where it is acquired with the aid of specific grants it is capitalised and depreciated as above. The related grant is treated as a deferred capital grant and released to income over the expected useful life of the equipment. Depreciation relating to subsidiary companies equipment is provided at 20% on cost. 8. Current Asset and Endowment Asset Investments Investments are included at the lower of cost or net realisable value. 9. Fixed Asset Investments Fixed asset investments are accounted for using the historical cost method, subject to an annual impairment review. The fixed asset investments include the Owengate Refurbishment Fund. An amount equivalent to the expected expenditure on the refurbishment programme in the next twelve months has been transferred to current asset investments. 10. Donated Assets Donated assets are capitalised at market value and depreciated in full in the year of receipt. The University s significant donated assets are works of art, porcelain and antiques. All significant assets were transferred to the University at least four years ago and have a nil net book value. 11. Stocks Stocks comprising raw materials and consumables are stated at the lower of cost or net realisable value. Materials held by academic and academic service departments are excluded, this expenditure being charged to the income and expenditure account when incurred. 12. Maintenance of Premises The cost of routine maintenance is charged to the income and expenditure account in the period it is incurred. The University has a 10 year planned maintenance programme which is reviewed periodically. Actual expenditure on planned maintenance is charged to the income and expenditure account in the period it is incurred. 13. Taxation The University is an exempt charity within the meaning of Schedule 2 of the Charities Act 1993 and, as such, is a charity within the meaning of Section 506(1) of the Taxes Act Accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by Section 505 of the Taxes Act 1988 or Section 256 of the Taxation of Chargeable Gains Act to the extent that such income or gains are applied to exclusively charitable purposes. The University receives no similar exemption in respect of Value Added Tax, which, in respect of the trading activities of the University s subsidiaries, is provided for at current rates.

17 Keele Univer sit y St atemen t of Accoun t s Pensions The University participates principally in the Universities Superannuation Scheme (USS) and the Keele Superannuation Scheme (KSS). The schemes are defined benefit schemes, which are externally funded and contracted out of the State Earnings-Related Pension Scheme. The funds are valued every three years by professionally qualified independent actuaries using the projected unit method, the rates of contribution payable being determined by the trustees on the advice of the actuary. In the intervening years, the actuaries review the progress of the schemes. Pension costs are assessed in accordance with the advice of the actuaries, based on the latest actuarial valuations of the schemes, and are accounted for on the basis of charging the cost of providing pensions over the period during which the institution benefits from the employees services. Unless it is considered prudent to recognise deficiencies over a shorter period, variations from regular costs are spread over the expected average remaining working lifetime of Members of the Schemes after making suitable allowances for future withdrawals. A small number of staff remain in other pension schemes. 15. 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. 16. Cash flows and liquid resources Cash flows comprise increases or decreases in cash. Cash includes cash in hand and deposits repayable on demand. Overdrafts are included within creditors falling due within one year. Liquid resources comprise assets readily realisable, and they include term deposits and other instruments held as part of the University s treasury management activities.

18 18 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts 1. Funding Council Grants / /04 Recurrent grant 22,189 19,229 Specific grants 989 2,222 Teacher Training Agency 1,403 1,359 Deferred capital grants released in year (Note 19) Buildings Equipment ,240 1,163 26,229 24, Academic Fees and Support Grants / /04 Full-time students 12,718 11,873 Full-time students charged overseas fees 5,415 4,071 Part-time fees Research training support grants Short course fees 2,190 1,604 20,711 17, Research Grants and Contracts / /04 Research councils 2,179 1,764 Charitable bodies 1,444 1,563 Other bodies 4,498 4,418 8,121 7,745 Less contribution to overheads Expenditure (Note 8) 7,143 6,969 The costs of staff and materials utilised in research work undertaken in the Department of Postgraduate Medicine and met directly from the funds of the Shropshire and Staffordshire Strategic Health Authority are not included above. These costs are 910,238 for the Authority s year ended 31 March ( 705,049).

19 Keele Univer sit y St atemen t of Accoun t s Other Operating Income / /04 Residences, catering and conferences 7,747 7,215 Other services rendered Released from deferred capital grants (Note 19) Operating lease rentals 4,767 4,689 Rents Leisure Centre Information Services Intellectual Property 720 1,068 Health Centre Medicines Management Health, Planning and Management 961 1,168 PRP income 177 Postgraduate Medicine 2,272 2,037 Other 3,684 4,086 22,900 23,440 The operating lease rentals comprise the annual rental payment received from Owengate (Keele) plc and the annual release of the lump sum premium received from the financial restructuring. 5. Endowment Income and Interest Receivable / /04 Transferred from specific endowments Income from investments 1,557 1,045 Other interest receivable ,983 1,246

20 20 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 6. Staff /05 Staff costs: 2003/04 Wages and salaries 40,462 37,109 Social Security costs 3,301 3,075 Other pension costs (Note 33) 4,752 4,385 48,515 44,569 Early retirement/severance costs include 102,000 ( 72,000) for 1 higher paid staff A general pay award of 3.0% was made during the year 49,150 45,266 Emoluments of the Vice-Chancellor (including accommodation allowance) Emoluments of the highest paid senior post holder (which include royalties received) The emoluments of the Vice-Chancellor are shown on the same basis as for higher paid staff. The University s pension contributions to USS are paid at the same rates as for other academic staff and amounted to 21,031 (2003/04 20,419). Average staff numbers by major category Number Number Academic/Research Technical Academic Related Secretarial/Clerical Other Staff numbers for /05 include sessional teachers now transferred to the payroll. This explains the significant increase in the number of academic/research staff. 1,886 1,759 Remuneration of higher paid staff excluding employers pension contributions 70,000-79, ,000-89, ,000-99, , , , , , , , , , , , , , , , , , , , ,999 1 A member of staff earned over 200,000 in the year, and had University pension contributions to the NHS of 24,529. In, a different member of staff earned over 200,000, and had University pension contributions to USS of 10,819.

21 Keele Univer sit y St atemen t of Accoun t s Other Operating Expenses / /04 Residences, catering and conferences operating expenses 4,518 3,685 Consumables and laboratory expenditure Books and periodicals Fellowships, scholarships and prizes 1,544 1,074 Heat, light, water and power 1,572 1,347 Repairs and general maintenance 1,800 1,912 Grants to Keele University Students Union Rents and rates 1,848 1,775 Auditors remuneration external other services internal Equipment Research expenses 2,815 3,166 Teaching fees 2,612 2,335 Printing and stationery 1,342 1,411 Telephones Subscriptions Advertising Travel, subsistence and conference expenses 930 1,276 Impairment of fixed asset investments (204) (71) Consultants and works fees Other 4,001 4,094 26,709 24,932

22 22 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 8. Analysis of /05 Expenditure by Activity Staff Costs Depreciation Other Operating Expenses Interest Payable Academic departments 28,142 1,213 8,775 38,130 Academic services 2, ,644 Research grants and contracts (Note 3) 4,328 2,815 7,143 Residences, catering and conferences 4, , ,781 Premises 2, , ,349 Administration 6, , ,524 Restructuring ,540 Impairment of fixed asset investments (204) (204) Other expenses 461 1, ,265 Total per income and expenditure account 49,150 3,790 26, , /04 45,266 3,448 24, ,288 Total The depreciation charge has been funded by: Deferred capital grants released 2,077 Revaluation reserve released 924 General income 789 3, Interest Payable / /04 Bank and other loans wholly repayable within five years Loans not wholly repayable within five years Taxation / /04 Deferred Tax on profits of subsidiary companies 60

23 Keele Univer sit y St atemen t of Accoun t s Tangible Assets Consolidated University Valuation/Cost At 1 August Land & Buildings Equipment Total Land & Buildings Equipment Total Completed Under Construction Completed Under Construction Valuation 67,652 67,652 63,047 63,047 Cost 48, ,286 69,495 47, ,967 68,142 Additions at cost 5,446 2,181 7,627 5,446 2,181 7,627 Transfers 46 (46) 46 (46) Reclassification of assets 1,037 (1,037) 1,037 (1,037) Transfer to revaluation reserve (1,342) (333) (1,675) (1,342) (333) (1,675) Disposals Valuation (233) (233) (233) (233) At 31 July Cost (620) (620) (620) (620) Valuation 67,419 67,419 62,814 62,814 Cost 52,730 22,097 74,827 51,696 21,778 73,474 Depreciation At 1 August 17,213 15,808 33,021 16,204 15,497 31,701 Charge for year 2,141 1,649 3,790 2,056 1,645 3,701 Reclassification of assets 536 (536) 536 (536) Transfer to revaluation reserve (596) (333) (929) (596) (333) (929) Eliminated on disposals (48) (48) (48) (48) At 31 July 19,246 16,588 35,834 18,152 16,273 34,425 Net book value At 31 July 100,903 5, ,412 96,358 5, ,863 At 1 August 98, , ,126 93, ,470 99,488

24 24 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 11. Tangible Assets (continued) During the year, the University implemented a new fixed asset register. As part of this process, it was identified that certain assets with a cost of 1,037,000 and accumulated depreciation of 536,000 required reclassification between land & buildings and equipment. In addition, the value of land and buildings at 1 August has been reclassified between cost and valuation. The net transfer to revaluation reserve of 746,000 relates to the write off of unidentified assets and historic differences following a full review of the fixed asset register during the year. This cost is offset by a corresponding reduction in the revaluation reserve. The net effect of these movements is a charge to the Income and Expenditure Account of 11,000 in the year. The main buildings and grounds are freehold, except for the University s interest in a Medical Research building on the University Hospital of North Staffordshire NHS Trust s site with a revalued cost of 221,000 and its interest in the Undergraduate Medical School on the University Hospital of North Staffordshire NHS Trust s site with a cost of 1,650,000. The transitional rules set out in FRS 15, Tangible Fixed Assets, have been applied in implementing FRS 15. The land and buildings of KUSP Ltd were revalued in 1997 at 5,010,000 by Heywoods, Chartered Surveyors. The valuation was based on an open market capital value at an equivalent yield of 11%. The land and buildings of the University excluding off campus houses were revalued at 31 July 1992 at 64,879,000 by Grimley (International Property Advisers). The valuation was based on open market value for the existing use on a Depreciated Replacement Cost basis. In the Consolidated Accounts the net book value of land and buildings based on historic cost would be 63,166,000 ( 67,920,000), the depreciation charge for the year being 1,507,000 ( 983,000). In the University s Accounts the net book value of land and buildings based on historic cost would be 60,182,000 ( 62,907,000), the depreciation charge for the year being 1,440,000 ( 1,006,000). The value of land not depreciated included with main buildings and grounds is 2,970,000 ( 3,180,000). On 22 February 1999, the University and Pochin plc formed a joint venture company, Keele Park Developments Ltd, to provide a new access road and innovation centre buildings, being the first phase of the continuing development of the science park provision within the University campus. The University has a 25% non-participating shareholding in the joint venture company and has granted to it a 135-year lease on seven acres of land for the development. As granting of this lease has no material effect on the financial statements, the land remains stated at net book value within fixed assets. On 1 January 2000, the University leased its student accommodation to Owengate (Keele) plc for a period of 30 years. The assets leased remain on the balance sheet of the University and the premium received is released over the life of the lease. The net book value of the assets leased is 24,598,000 ( 25,053,000). 12. Fixed Asset Investments Consolidated University Owengate Refurbishment Fund 20,251 20,371 20,251 20,371 Investment in subsidiary companies at cost: KUSP Ltd KSD Ltd KUP Ltd KFM Ltd KUSBP Ltd Owengate Keele (Holdings) Ltd Investment in spin out companies at cost less impairment: Intelligent Orthopaedics Limited Equities ,334 20,454 20,809 20,929

25 Keele Univer sit y St atemen t of Accoun t s The market value of the investment managed by Tilney Fund Management at 31 July is nil ( 24,809,000). During the year, this investment portfolio was replaced by an investment fund with the Royal Bank of Scotland. The market value of this fund as at 31 July was 22,737,000 ( nil), with nil impairment provision. At 31 July, there was a provision of 329,000 to reduce the fixed interest rate investments held in the Tilney Fund to market value. Investments in subsidiary companies are stated at cost less amounts written off. Both KUP Ltd and KSD Ltd did not trade in the year, and all assets have been transferred to the University. In August, both companies applied to Companies House to be struck off from the Register of Companies. A new wholly owned subsidiary company (Keele University Science and Business Park Ltd) was incorporated in the year. The University has purchased, at the par value of 1 each, the 2 ordinary shares that the company has issued. The University purchased 425 ordinary C shares with a nominal value of 10 pence each for a total of 125,000 in Intelligent Orthopaedics Ltd, representing 25% of the issued share capital of that company. This shareholding is held in equal shares on behalf of the University of Keele, Staffordshire University and the University Hospital of North Staffordshire NHS Trust. Intelligent Orthopaedics Ltd is a spin out company of Keele University. In line with FRS 11, the University has reviewed the value of this investment at 31 July, and has fully impaired the cost to nil. 13. Endowment Asset Investments Consolidated & University At 1 August 1,694 1,771 Net release (335) (77) At 31 July 1,359 1,694 Equities 5 5 Short term investments 1,354 1,689 Total endowment asset investments 1,359 1,694 Fixed interest investments and equities at cost Debtors Consolidated University Debtors 6,034 3,637 5,572 3,488 Prepayments and accrued income 6,111 6,419 6,084 5,956 Amounts due from subsidiary undertakings 3, ,145 10,056 15,479 9,583 Included in prepayments are amounts receivable greater than one year of 2,706,000 ( 2,819,000). Included in amounts due from subsidiary undertakings in the University are amounts receivable greater than one year of 3,330,000 ( nil).

26 26 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 15. Current Asset Investments Consolidated & University Current portion of Owengate Refurbishment Fund 2,486 4,384 Short term deposits 5,295 3,530 7,781 7, Creditors: Amounts Falling Due Within One Year Consolidated University Mortgages and unsecured loans Balance at bank 693 1, ,141 Payments received on account 1,107 1,409 1,107 1,291 Creditors 5,266 2,012 5,259 1,568 Social Security and other taxation payable 1,063 1,008 1,063 1,008 Accruals and deferred income 21,311 18,821 21,182 18,398 Amounts due to subsidiary undertakings Current portion of Owengate premium (note 17) 1,635 1,635 1,635 1,635 31,082 26,686 31,298 25,876

27 Keele Univer sit y St atemen t of Accoun t s Creditors: Amounts Falling Due After More Than One Year Consolidated University Long-term loans 9,069 7,326 9,069 3,996 Other long-term creditors 39,241 40,876 39,241 40,876 48,310 48,202 48,310 44,872 Other long-term creditors relates to the premium received on the 30 year lease of student accommodation to Owengate (Keele) plc. The premium is released on a straight line basis over the period of the lease. Consolidated University Analysis of debt: Debt can be analysed as falling due: In one year or less, or on demand Between one and two years Between two and five years 1,153 1,575 1, In five years or more 7,909 5,197 7,909 2,640 9,076 7,874 9,076 4,390 During the year, the University secured a loan facility of 18m, which comprised a 13m term loan and a 5m revolving credit facility. The term loan can be drawn-down over a period of 3 years, and is repayable in full after 25 years from the date of the first draw-down. The revolving credit facility is available for 5 years, after which time the University has the option to turn this into a term loan over 20 years. 18. Provisions for Liabilities and Charges Consolidated University Deferred Taxation Severances Total Deferred Taxation Severances Total At 1 August Utilised in the year (585) (585) (585) (585) Additions At 31 July Severances The severance provision relates to payments to staff which had been agreed at the year end but were not paid until the following year. Deferred Taxation The deferred taxation provision relates to a timing difference in the subsidiary accounts in relation to gift aid payments to the University. The liability will only crystallise if the subsidiary companies do not pay over an appropriate level of gift aid to the University.

28 28 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 19. Deferred Capital Grants Consolidated University Funding Council Other Grants & Benefactions Total Funding Council Other Grants & Benefactions Total At 1 August Buildings 17,466 4,459 21,925 17,466 4,403 21,869 Equipment 2, ,851 2, ,851 Total 20,112 4,664 24,776 20,112 4,608 24,720 Cash Received Buildings 256 1,078 1, ,078 1,334 Equipment , ,039 Total 926 1,447 2, ,447 2,373 Released to Income and Expenditure Buildings Equipment 1, ,510 1, ,510 Total 1, ,077 1, ,076 At 31 July Buildings 17,314 5,378 22,692 17,314 5,323 22,637 Equipment 2, ,380 2, ,380 Total 19,390 5,682 25,072 19,390 5,627 25, Endowments Consolidated & University Specific General Total At 1 August 1, ,694 Additions Income for year Transferred to I & E account to match actual expenditure (339) (71) (410) At 31 July 1, ,359 Specific endowments are credited to the income and expenditure account to the extent that expenditure is incurred for relevant specific purposes.

29 Keele Univer sit y St atemen t of Accoun t s Revaluation Reserve Consolidated University Revaluations At 1 August 38,981 39,810 37,686 38,498 Contributions to depreciation Transfer from fixed assets Release to I & E account on disposal of fixed assets , , At 31 July 37,311 38,981 36,040 37, Income and Expenditure Account Consolidated University (Deficit)/surplus after depreciation of assets at valuation and tax (288) 415 (216) 296 Release from revaluation reserve Release from revaluation reserve on disposal of assets Historical cost surplus after tax 636 1, ,108 Balance at 1 August 4,197 2,953 4,490 3,382 Balance at 31 July 4,833 4,197 5,174 4, Access Funds Grant income Interest 2 1 Payments: Undergraduate support Postgraduate support Funding Council Grants are available solely for students, the University acts only as a paying agent. The grants and related disbursements are therefore excluded from the income and expenditure account

30 30 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 24. Teacher Training Agency Grant Income 1,367 1,524 Grant Payments 1,367 1,524 The grant income received from the TTA are available solely for the students, the University acts only as a paying agent. The grant income and related payments to the students are therefore excluded from the income and expenditure account. In addition to the above, during /05 the University received 12,000 ( nil) in respect of Minority Ethnic Recruitment. All of this was expended during the year. 25. Obligations under the Financial Restructuring Agreements Investments of 22,737,000 have been set aside to enable the University to meet its future obligations under the financial restructuring agreements which underpin the 30-year refurbishment programme for student residences. Under the agreements the University is obliged to ensure that the sums in the refurbishment account and the value of permitted investments (the present funds ) are more than 90% but less than 100% of the amount needed to defray the cost of the refurbishment works. In the event funds fall below 90% or, in the case of (i) are less than the value of the required fund, the following will apply: (i) the refurbishment account is frozen but the University is obliged to carry out the refurbishment work (ii) rent under the lease is paid into the account to top up the fund to at least 90% (iii) if two consecutive notices are served (not more than 12 months apart) the University is obliged to top up the fund to 90% The University has refinanced its investments in the year in order to generate the level of return required to satisfy these obligations. 26. Contingent Liabilities Consolidated & University Bank guarantee in respect of Keele University Science Park 750 Repurchase of houses sold to staff 10,605 9,800 Interest guarantee in respect of Keele Park Developments Ltd 1,000 1,000 11,605 11, Capital Commitments Consolidated & University Commitments contracted at 31 July 1,

31 Keele Univer sit y St atemen t of Accoun t s Analysis of Changes in Consolidated Financing During the Year Mortgages & Loans Balance at 1 August ,192 Capital repayments Balance at 31 July 7,874 New loans 9,000 Capital repayments (7,798) Balance at 31 July 9,076 (318) 29. Reconciliation of Consolidated Operating Surplus to Net Cash from Operating Activities (Deficit)/surplus before tax (228) 415 Depreciation (Note 11) 3,790 3,448 Deferred capital grants released to income (Note 19) (2,077) (1,912) Deferred premium released to income (1,635) (1,635) Investment income (Note 5) Profit on sale of fixed assets (1,983) (1,246) (257) (560) Impairment of fixed asset investments (204) (71) Interest payable (Note 9) Increase in stocks (11) (9) (Increase)/decrease in debtors (1,669) 133 Increase in creditors 7,771 4,513 (Decrease)/increase in provisions (133) 248 Net cash inflow from operating activities 3,887 3,966

32 32 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 30. Analysis of Changes in Net Debt At 01 Aug 04 Cash at bank and in hand Cash Flows At 31 Jul 05 Other cash balances 963 (440) 523 Bank overdraft (1,253) 560 (693) (290) 120 (170) Short term deposits Endowment assets 1,689 (335) 1,354 Other 7,914 (133) 7,781 Debt due within one year (548) 541 (7) Debt due after one year (7,326) (1,743) (9,069) 1,439 (1,550) (111) 31. Returns on Investments and Servicing of Finance Income from endowments (Note 20) Income from investments 1,137 1,045 Interest paid (639) (549) Capital Expenditure and Financial Investment Tangible assets acquired (9,769) (9,046) Fixed asset and other investments acquired (1,691) (911) (11,460) (9,957) Receipts from sales of fixed assets 1, Deferred capital grants received (Note 19) 2,373 4,884 Fixed asset investments sold 2,015 3,696 Endowments received (Note 20) (5,996) (675)

33 Keele Univer sit y St atemen t of Accoun t s Pension Schemes The two principal pension schemes for University staff are the Universities Superannuation Scheme (USS) and the University of Keele Staff Pension and Life Assurance Scheme (KSS). Contributions paid by the University are: USS 3,606 3,245 KSS 1,562 1,356 Other Contributions paid by the University 5,440 4,764 Actuarial adjustment to KSS contributions (688) (379) Charge to Income & Expenditure account (Note 6) 4,752 4,385 Universities Superannuation Scheme ( USS ) The University participates in the Universities Superannuation Scheme, a defined benefit scheme which is externally funded and contracted out of the State Earnings-Related Pension Scheme. The assets of the scheme are held in a separate trustee-administered fund. It is not possible to identify each institution s share of the underlying assets and liabilities of the scheme and hence contributions to the scheme are accounted for as if it were a defined contribution scheme. The cost recognised within the surplus/deficit for the year in the income and expenditure account being equal to the contributions payable to the scheme for the year. The latest published actuarial valuation of the scheme was at 31 March The assumptions which have the most significant effect on the result of the valuation are those relating to the rate of return on investments (i.e. the valuation rate of interest) and the rates of increase in salary and pensions. In relation to past service liabilities the financial assumptions were derived from market yields prevailing at the valuation date. It was assumed that the valuation rate of interest would be 5.0% per annum, salary increases would be 3.7% per annum and pensions would increase by 2.7% per annum. In relation to future service liabilities it was assumed that the valuation rate of interest would be 6.0% per annum, including an additional investment return assumption of 1.0% per annum, salary increases would be 3.7% per annum and pensions would increase by 2.7% per annum. The valuation was carried out using the projected unit method. At the valuation date, the market value of the assets of the scheme was 19,938 million and the value of the past service liabilities was 19,776 million leaving a surplus of assets of 162 million. The assets, therefore, were sufficient to cover 101% of the benefits which had accrued to members after allowing for expected future increases in earnings. The institution contribution rate required for future service benefits alone at the date of the valuation was 14.25% of salaries but it was agreed that the institution contribution rate will be maintained at 14.0% of salaries. To fund this reduction of 0.25% for the period of 12 years from the date of the valuation (the average outstanding working lifetime of the current members of the scheme) required the use of 82.5 million of the main section surplus. This left a past surplus of 79.5 million (including the Supplementary Section) to be carried forward. Surpluses and deficits which arise at future valuations may impact on the institution s future contribution commitment. The last formal actuarial valuation was on 31 March when the above rates were reviewed. This valuation will not be announced until December, and will only be publicly available in March The total pension cost for the University was 3,606,000 ( 3,245,000). The contribution rate payable by the University was 14.0% of pensionable salaries.

34 3 4 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 33. Pension Schemes (continued) Keele Superannuation Scheme (KSS) Contributions to the University s defined benefit pension scheme are charged to the income and expenditure account so as to spread the cost of pensions over employees working lives with the University. The contributions are determined by a qualified actuary on the basis of triennial valuations using the projected unit method. The most recent valuation was at 1 August The assumptions which have the most significant effect on the results of the valuation are those relating to the rate of return on investments and the rates of increase in salaries and pensions. FRS 17 Transitional Disclosures The most recent actuarial valuation showed that the market value of the scheme s assets was 10,095,000 at 1 August 2002 and that the actuarial value of those assets represented 70% of the benefits that had accrued to members, after allowing for expected future increases in earnings. The contributions of the University and employees were at 18.6% and 6% of earnings respectively. The total pension cost for the University was 1,562,000 ( 1,356,000). The contribution rate payable from 1 May 2001 in accordance with the actuarial valuation is 18.6% of pensionable salaries. This was increased to an effective rate of 19.7% from 1 August 2002 as agreed following the actuarial review of the scheme. From 3 March 2003 to 31 July 2003, this comprised an actual charged rate of 11.6%, with the remaining 8.1% being incorporated into a deferred top up payment totalling 869,000, which was paid in March. In the year to 31 July, there was an actual charged rate of 11.7%, with further deferred top up payments of 1,086,000 being paid prior to 31 July. In the year to 31 July, there was an actual charged rate of 12.2% with deferred top-up payments of 217,000 being payable prior to 31 July As at 31 July, there was a prepayment of 1,146,000 ( 458,000) in the University and consolidated balance sheet in relation to the scheme. Whilst the University continues to account for pension costs in accordance with Statement of Standard Accounting Practice 24 Accounting for Pension Costs, under FRS 17 Retirement Benefits the following transitional disclosures are required. The valuation was updated by the actuary on an FRS 17 basis as at 31 July and 31 July. The major assumptions used by the actuary in this valuation were: Rate of increase in salaries 3.25% 3.25% 3.50% 3.50% Rate of increase in pensions in payment and deferred pensions: Pre 1 August 2001 Service 3.50% 3.50% 3.50% 3.50% Post 1 August 2001 Service 2.50% 2.50% 2.75% 2.50% Discount rate applied to scheme liabilities 5.00% 5.75% 5.50% 6.00% Inflation assumption 2.50% 2.50% 2.75% 2.50% The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice.

35 Keele Univer sit y St atemen t of Accoun t s Scheme Assets The fair value of the scheme s assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme s liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain, were: Long term rate of return 31 Jul 05 Value at 31 Jul 05 Long term rate of return 31 Jul 04 Value at 31 Jul 04 Long term rate of return 31 Jul 03 Value at 31 Jul 03 Long term rate of return 31 Jul 02 Value at 31 Jul 02 Equities 7.75% 12, % 9, % 8, % 8,229 Bonds 5.00% 5, % 3, % 3, % 1,378 Other property 4.50% 4.50% % % ,613 13,291 11,504 10,095 Present value of scheme liabilities (22,944) (18,332) (18,431) (14,959) Deficit in the scheme Pension liability (5,331) (5,041) (6,927) (4,864) Related deferred tax liability/asset Net pension liability (5,331) (5,041) (6,927) (4,864) The amount of this net pension liability would have a consequential effect on reserves. Movement in Deficit during the Year 2003 Deficit in scheme at beginning of year (5,041) (6,927) (4,864) Current service cost (476) (575) (428) Contributions paid 1,562 1, Other finance income 66 (78) 5 Actuarial gain (1,442) 1,183 (2,352) Deficit in scheme at end of year (5,331) (5,041) (6,927)

36 36 Keele Univer sit y St atemen t of Accoun t s Notes to the Accounts continued 33. Pension Schemes (continued) If FRS 17 had been fully adopted in these financial statements, the pension costs for the defined benefit scheme would have been: Analysis of other pension costs charged in arriving at operating deficit Current service cost Analysis of other finance costs charged in arriving at operating deficit Expected return on pension scheme assets 1, Interest on pension scheme liabilities (1,061) (1,026) (908) Analysis of amount recognised in the statement of total recognised gains and losses % % (78) 5 Actual return less expected return on pension scheme assets 1,880 (122) (150) Percentage of year end scheme assets 10.7% (1.0%) (1.0%) Experience gains and losses arising on the scheme liabilities (8) 6 (159) Percentage of present value of year end scheme liabilities 0.0% 0.0% (1.0%) Changes in assumptions underlying the present value of the scheme liabilities 2003 % 2003 (3,314) 1,299 (2,043) Percentage of present value of year end scheme liabilities (14.4%) 6.0% (11.1%) Actuarial gain recognised in the Statement of total recognised gains and losses (1,442) 1,183 (2,352) 34. Related Party Transactions The University holds shares in a company called Keele Park Developments Ltd. The University has entered into a lease with this company in respect of areas of land for development. The annual rent payable by KPD is a peppercorn. The University and a subsidiary company also provide facilities management services. During the year, the group received 105,000 (31 July 75,000) from KPD in sales income. As at 31 July, 57,000 (31 July 29,000) was owed to the group. A lay member of Council is also the Chair of the Board of the Shropshire and Staffordshire Health Authority, which has certain contracts with the University. During the year, 5,242,000 ( 5,199,000) was recognised as income by the University in connection with these contracts, and there was 1,244,000 ( 973,000) included within deferred income creditors on the balance sheet.

37 Keele Univer sit y St atemen t of Accoun t s The Council as at 31 July Members Ex-Officio The Pro-Chancellor The Deputy Pro-Chancellors The Vice-Chancellor The Treasurer The Deputy Vice-Chancellor The Deans of the Faculties A. F. Wood A. E. Fisher, BA, MSc E. R. Hassall, CBE, DSc, CEng, FRICS, FIMM, FGS Professor J. V. Finch, CBE, DL, BA, PhD, AcSS C. J. Myatt, FCMA Professor M. Pearson, BA, PhD Professor S. A. Dilly, BSc, MB, BS, FRCPath Professor S. J. Scott, BSc, MA (Econ), FRSA Professor J. Winchester, MA, DPhil, CGeol, FGS Members of University Staff Professor J. Horton, MSc Professor M. Ormerod, BA, PhD, CChem, MRSC A. J. Dawson, BA, MSc, PhD Professor P. Crome, BS, MB, MD, PhD, RCP, FFPM, DObstCROG W. J. Robinson, ACIPS Lay Members appointed by the Council M. G. Brereton, BA M. Clarke, BA, MSc, Solicitor of the Supreme Court I. J. Dudson, CBE, DL, BSc K. Farrell, BSc, DMS, DUniv, FIMMM, FIPD, MIOD Professor D. Holdcroft, MA M. Michell M. D. Peckham, JP, BA, CertEd, DipEdAdmin, FRSA P. Siddique A. J. Smith, BSc, CEng, FIMMM P. Soar, BA M. A. Spurr, OBE, DL, BA, DLitt T. R. Wright, BSc, MA Student Representatives P. Butters M. E. Stewart, BSc, BGS, AAPG Director of Finance K. J. Clarke, MA, ACA Secretary The University Secretary and Registrar S. J. Morris, BA, FBIFM Legal Advisers Knight & Sons The Brampton, Newcastle Staffordshire Bankers National Westminster Bank plc High Street, Newcastle Staffordshire External Auditors KPMG LLP St James Square Manchester Internal Auditors UNIAC Deansgate Manchester

38 38 Keele Univer sit y St atemen t of Accoun t s Notes