Reporter 15/12/99: Fourth Report of the Board of Scrutiny: Notice

Fourth Report of the Board of Scrutiny: Notice

13 December 1999

The Council have considered the recommendations contained in the Fourth Report of the Board of Scrutiny (Reporter, 1998-99, p. 792) and the remarks made at the Discussion of the Report on 6 July 1999 (ibid., p. 890).

The Council recognize the care and attention to detail with which members of the Board have approached their responsibilities. They share the gratitude expressed in the Discussion on 6 July to members of the Board. The Board's Report is a lengthy document and contains much on which the Council could comment. They have however agreed to confine their response to the Board's specific recommendations.

The Council have consulted the General Board and sought advice from the Finance Committee. In the light of that further information the Council comment as follows:

I. The balance of support between the University's various Schools

The General Board advise the Council that their policy is to allocate resources, on the basis of their assessment of need, in order to sustain excellence across the current range of subjects. The Council and the Board, in consultation with the Schools, are currently engaged in the development of a more transparent resource allocation methodology to support decisions on allocations within the context of the University's mission as a whole. The Board therefore believe it would be inopportune to publish a Report on this matter at present given the substantial amount of work that is being undertaken, in consultation with Faculties and Departments, on the review of the University's Mission, the development of a resource allocation methodology, and the implications of the Transparency Review.

II. The accounts of the Local Examinations Syndicate and the Cambridge University Press

The accounts of the CUP have never been consolidated with those of the University and the accounts of UCLES were deconsolidated in 1996 on the advice of the Finance Committee. Subsequently, a change of Statute has been approved which authorizes publication of the UCLES accounts separately from those of the University. The Council do not consider that UCLES and the CUP are 'subsidiary undertakings' for the purposes of Financial Reporting Standard 2. Certainly if the purpose of the accounts is to give a true and fair representation of the finances of the organization concerned, the consolidation of the accounts of UCLES and the CUP with those of the University will obscure the position of the academic undertaking. The business requirements of UCLES and the CUP are different from those of the University and that justifies both separate accounts and a separate year-end date appropriate to the competitive markets in which they each operate. The Council can see no helpful purpose in compliance with accounting standards applicable to subsidiaries of commercial holding companies for institutions which have separate functions from those of the University and stand in a different relationship to it. The Financial Memorandum between the HEFCE and the University explicitly provides for non-consolidation when, as is the case with UCLES and the CUP, it would infringe formal University requirements expressed in Statutes and Ordinances. The Council have been advised that the University's external auditors view the accounting arrangements between the University, UCLES, and the CUP as reasonable and appropriate.

III. Reduction in stated income and Financial Reporting Standard 12

The Finance Committee has advised the Council that the recommendation not to reduce stated income is misconceived. It is clear to the Council that the University does not act in the way the Board seem to suggest; the surplus for the year is calculated according to the requirements of the Higher Education Institutions Statement of Recommended Practice. The amount transferred to the Quinquennial Equalization Fund is the net surplus having taken account of various allocations and other transfers shown in detail both in the Treasurer's Report and in the Accounts themselves and the attached Notes.

The Treasurer has advised the Finance Committee that FRS 12 will be taken into account in the 1998-99 accounts.

IV. College Accounts

The Council published a Notice on 26 May 1999 (Report of the Council on College Contributions in the financial year 1998-99: Notice, Reporter, 1998-99, p. 631) in which it said that further consideration of the form of the College Accounts would follow the report of a Working Party of the Bursars' Committee which is currently reviewing the issue. That report has been delayed because of work necessary to put in place audit arrangements for College expenditure from HEFCE funding transferred to Colleges under the College fee settlement. The Council have no further comments at this stage.

V. Amalgamated Fund

It has been University policy to retain an income reserve equivalent to between six and twelve months' income so as to ensure that distributions can continue to be made smoothly even when market conditions are adverse. The Council take the view that stability is important and needs to be viewed in the long term. In the 1960s and 1970s the Fund had difficulty in keeping pace with inflation; the Fund's long-term yield of around 4 per cent a year is considerably better than the yield on UK and international equities. The last ten years in particular have seen substantial increases in value and the Council and the Finance Committee are well aware of the importance to investment holders of maximizing the Fund's distributions. The Council and the Committee do not however believe it would be wise to distribute capital gains on a regular basis, given the risk of losses in some years. Against this background the Council have accepted the advice of the Finance Committee that the Investments Committee should continue to give careful consideration to setting distribution levels each year but should be advised to look to a slightly reduced income reserve within the range of six to nine months.

VI. Higher-paid staff

The Council agree with the Board and will publish this information as a Note to the accounts with effect from the accounts for 1998-99.

VII. Intellectual Property Rights

The Council and the General Board intend to publish a consultative paper during 1999-2000, and if at all possible by the Easter Term 2000.

VIII. Recruitment, retention, and reward of academic and academic-related staff

In paragraph 4 of their Report the Board of Scrutiny acknowledge that excessive pressure on the officers of the Work and Stipends Section (and the Research Grants and Contract Section) was causing significant delays in the progress being made in carrying forward the reforms. Nevertheless it seems to the General Board that the Board of Scrutiny appear to continue to expect reviews of very complex matters to be conducted on unrealistic timetables.

The General Board have advised the Council that the description of the savings exercise and early retirement schemes as a 'staff cull' is neither accurate nor in accordance with the criteria adopted for the scheme. The Board and the Council set out their reasons for proposing the schemes in their Report and subsequent Notices. Those reasons included the need to make financial provision for additional promotions and longer-term pay restructuring in all grades. The General Board expect to publish a Report on additional increments and discretionary pay in the Lent Term 2000.

With regard to paragraphs 41 to 44 of the Board of Scrutiny's Report, the issues ventilated have been addressed in the Bett Report and raise fundamental national problems. It is not realistic to expect that local solutions to problems experienced by more junior staff are possible when the national scale of the problem is so great. The funding recommendations of the Bett Report have not received government support and the indication is that the national funding required to implement Bett will have to be found through movement towards performance-related pay.

On paragraphs 48 and 49 the General Board are reassured that the Board of Scrutiny welcome the policies and actions relating to equal opportunities which they do not feel are described in over-ambitious terms. The General Board are clear that all policies in this area are dependent for success in practice upon their application by members and staff of the University as a whole. The development of a sense of shared ownership and collective responsibility, neither of which can be imposed upon the University, are crucial to the future success of all activity in this area.

IX. Financial benefits of College Fellowships and external income

The Council and the Board note that for their part the Colleges have excluded the benefits of College Fellowships from the Memorandum of Agreement with the University, drawn up in connection with the new arrangements for the payment of College Fees. The Board have the issue of external income under review as part of a wider review of IPR, copyright, and declarations of interest. The Council and the General Board will be consulting the Regent House on these matters.

X. Professorial awards

The Council have been advised that the General Board expect that the data will be published in the format suggested.

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