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Fifth Report of the Board of Scrutiny: Notice

20 November 2000

The Council have considered the Fifth Report of the Board of Scrutiny (p. 25) and the remarks made at the Discussion held on 24 October 2000 (p. 146). They have referred certain of the recommendations to the General Board and to the Finance Committee. When those bodies' comments are available the Council will respond in detail to the Board of Scrutiny's recommendations. In the meantime they wish to respond on certain procedural matters and to two specific issues.

On the procedural point, the Council note the remarks made at the Discussion about their reference of the Report back to the Board for further consideration. Under Statute A, VIII, 1 the Council's primary duty in respect of the Reports of all bodies that have the right to report to the University is to approve them for publication. However, the Council are clear that they are under a duty to the Regent House to scrutinize all Reports before publication and to clarify any inaccuracies or confusions, and that they have a broad power to refer any Report for consultation before publication, subject to safeguards for its publication not more than six months from the date it was sent to the Registrary for submission to the Council. They will fulfil this duty as much in respect of the Board of Scrutiny's Reports as of all others. In the present case the Council were concerned that some parts of the Board's Report were inaccurate. The Council will return to these concerns in its full response. The delay in publication of the Report, which was well within the statutory limit, did not affect the date of its Discussion.

The first of the two specific issues on which the Council wish to comment at this stage relates to the status of the Local Examinations Syndicate (UCLES) and Cambridge University Press within the University. The Council, for the reasons given in their previous response (Reporter, 1999-2000, p. 226), remain of the view that the distinctive constitutional status and activities of these two institutions make it inappropriate and misleading to describe or treat them as 'subsidiary undertakings'. Moreover the effect of consolidating funds under the University's direct control with those that are not would be to obscure rather than to clarify the University's overall financial position. Even if UCLES and the Press were to be so regarded for accounting purposes, the Council note that FRS 2 states that a subsidiary undertaking 'is to be excluded from consolidation … if [its] activities are so different from those of other undertakings to be included in consolidation that its inclusion would be incompatible with the obligation to give a true and fair view'. The Council remain concerned to ensure that this obligation is met. They note that the University's external auditors have raised no objections to non-consolidation.

In response to the Board's Fourth Report the Council did not imply that FRS 2 did not apply to universities. They drew attention to the fact that the position of the two institutions in the University was not the same as that of subsidiaries of a holding company. It remains the case that UCLES and the Press are not subsidiaries but charitable enterprises within the University.

The Council will respond to the Board's detailed recommendations as they affect UCLES and the Press in their further Notice. The Council are however concerned, given the importance of the issue, that their view of the accounting requirements arising from the fundamental relationship between the University, UCLES, and the Press should be placed before the Regent House as soon as possible.

The second matter on which the Council wish to respond now is the agreement between the Colleges and the University. This agreement is the result of changes in the arrangements for funding the College undergraduate fee that arose from negotiations between the Colleges' Committee advised by the Fees Sub-Committee of the Bursars' Committee, the Council, the Higher Education Funding Council for England, and the Government. The Council note that the agreement has already been widely circulated in Cambridge. After consultation with the Standing Committee of the Colleges, the Council agree with the Board that it would be appropriate for the agreement to be published and it is set out in full in the Annex to this Notice.

To avoid further misunderstanding between the Board and the Council in future years, the Council propose during the course of the present academical year to offer to discuss with the Board mutually beneficial ways of proceeding.

ANNEX

Terms of Agreement between the University and Colleges regarding College fees

as agreed by the Colleges' Committee on 10 July 1999 and by the Council on 26 July 1999

Terms of Agreement

1. General arrangements

(a) For 1999-2000 the Colleges will accept the cash limit of £26,244,771 (subject to increase by any further funds that HEFCE might provide), to be converted to a per capita fee using actual relevant student numbers for that year. (It may be necessary to use estimated numbers for an initial calculation, to be followed by a mid-year adjustment.)
(b) For future years the rate of increase in the per capita fee will be determined by the University in consultation with the Colleges, having regard to the underlying rates of increase in the components of the University's HEFCE grant but without regard to planned student numbers, and allowing for a 2.18% annual reduction for a period of ten years (of which 1999-2000 is the first).
(c) If it is the wish of the University, the Colleges will be willing to discuss measures for the protection of the University against overshooting or undershooting of target relevant student numbers in future years, in which case the Colleges will have the right to pass on the effect of that protection to those Colleges whose total relevant student numbers have contributed to the overshoot or undershoot, pro rata to their overshoot or undershoot as appropriate.
(d) The University and the Colleges will agree the University/Colleges Memorandum, and the list of matters for resolution between the University and the Colleges, as set out below.
(e) The agreement will apply up to the year 2002-03 (so that the per capita fee up to and including that year will be determined in accordance with the agreement) and is subject to the satisfactory resolution of audit arrangements set out below.

2. Audit arrangements

The following arrangements will apply in relation to audit:

(a) Each College will keep a separate account of the payments made to the College by the University.
(b) Each College's External Auditors will be asked to sign a certificate to the effect that the payments made to the Colleges by the University have been applied for the purposes set out in the University/Colleges Memorandum.
(c) The University's External Auditors will rely on the certificates from College External Auditors to enable them to certify that HEFCE income has been applied for the purposes for which it was received.

Other details of audit arrangements will need to be the subject of discussion with the University Treasurer, following further work by the College Accounts Working Party of the Bursars' Committee. Those details will include:

(i) a summary of Heads of Expenditure that will be eligible for the use of HEFCE funds in a manner compatible with the University's financial memorandum with HEFCE;
(ii) the timetable for the receipt by the University's External Auditors of the certificates from College External Auditors, having regard to the need for the University's external audit report to be completed by the end of November;
(iii) arrangements necessary to satisfy the appropriate Statement of Auditing Standard applicable to the relationship between principal auditors and other auditors;
(iv) the procedure to be followed in the event of the failure of a College's External Auditors to produce a certificate, or the issue of a qualified certificate; in such circumstances the procedure would include the requirement for an early report from the College's Council or Governing Body to the Audit Committee and the Council of the University explaining the situation.

3. In agreeing the period to 2002-03 as the duration of the agreement, the Tripartite Committee and representatives of the University were mindful that undergraduate admissions targets have been agreed by the Planning and Resources Committee of the University and by the Joint Consultative Committee on Admissions up to and including that year, but not beyond.

University/Colleges Memorandum

This memorandum sets out the responsibilities of the Colleges for the education of undergraduates matriculated in the University of Cambridge under the financing arrangements for Colleges approved by the Secretary of State for Education and Employment in December 1998.

It is fundamental to the mission of the University of Cambridge that it should remain a collegiate university. The Colleges and the University will work closely together on all matters of common interest affecting the education of students and the pursuit of scholarship and research. In the discussion of matters concerning this Memorandum, the Colleges and the University will act through, or under the authority of, the Colleges' Committee and the University Council respectively. The Colleges offer their students a fully supportive environment of education, learning and research. In particular they undertake to provide the following services:

1. Recruitment The University Council, in consultation with the Colleges, will determine the target number of undergraduate students to be admitted by the Colleges collectively in each of the principal categories (e.g. arts/science, home/EC, overseas). The Colleges will use their best endeavours to admit the target numbers so determined, within the resources available to them. The Colleges will play a full and active role in promoting access, and will support the initiatives of the Cambridge Intercollegiate Admissions Office, mounting Open Days, sending representatives to admissions conferences and schools, and encouraging their individual academics to promote the University. The Colleges will make use of inter-collegiate pooling arrangements to seek to ensure that the most worthy candidates are admitted to Cambridge in each subject regardless of their College of first preference.

2. Selection/Admission The Colleges will interview and/or test by appropriate means all applicants worthy of admission to Cambridge. With inter-collegiate discussion where necessary, the Colleges will take due note of guidance from the Joint Consultative Committee on Admissions on numbers of students to be admitted for the various disciplines. The Colleges will confirm compliance with entry requirements, and residential and other status, as required by University regulations, and promptly provide schedules of those to be matriculated.

The Colleges will provide such statistical data as may be reasonably required by the University.

3. Administration The Colleges will be the normal channels of communication between students and official bodies, both inside and outside the University. The Colleges will enter students for University examinations and will present students for University degrees.

4. Monitoring The Colleges will deal with all external bodies where reports on students are required, (e.g. LEAs, Student Loan Company, etc.), except where specifically undertaken by Faculties or Departments. Changes of course, deferrals, suspensions, withdrawals, repeat-years, etc., will be dealt with by the Colleges within University regulations, and notified as necessary.

5. Fees The Colleges will collect University fees, grants and student loans, from students and LEAs or other bodies, paying such of them to the University or the student as appropriate in accordance with agreed procedures. The Colleges will notify students of University sanctions for non-payment.

6. Financial Assistance The Colleges will advise students and support them in applying for access, travel, scholarship and hardship funds.

7. Records The Colleges will keep full records in respect of each student including results of examinations and termly reports, and will provide references, records and transcripts when required by law or requested by the student.

8. Discipline The Colleges will share with the University responsibility for the discipline of students, including the adoption and implementation of codes of practice, ordinances and regulations, in liaison as appropriate with the Proctors.

9. Teaching Undergraduate teaching is shared between the University and the Colleges. The Colleges and the University will co-operate in ensuring that undergraduates receive an education of the highest quality. The Colleges accept primary responsibility for the direction of studies and small-group teaching of their students, the University having provided lectures, laboratory facilities, etc. Each student will be given advice and guidance by the College (the University acknowledging that, in specific cases, reports of attendance may need to be kept by Faculties and Departments), including general oversight, advice on choices of options, reading matter and other resources, guidance on presentation of work, approaches to lectures, etc.

10. Academic Resources The Colleges will employ staff as necessary for the functions described in this memorandum, and will provide and maintain a proper teaching, research and working environment for them. The Colleges will in particular ensure the provision of adequate teaching space for supervisions, seminars, classes and lectures as required.

The Colleges will ensure the availability of library, computer and other resources reasonably necessary for the tasks they assign to students. The Colleges will use their best endeavours to ensure that the academic resources, tutorial support, and other services provided for students are of a high standard.

11. Tutorial The Colleges will take responsibility for the welfare of students, for example, through Tutors, Deans, Chaplains, Nurses and access to a Counselling Service. They will also ensure that every encouragement is given to students to develop their personality by way of involvement in the arts, sport, debate and the like. Frequent occasions for social mixing will be provided, and student-led activities of an appropriate character will be encouraged.

Matters for resolution between the University and the Colleges

1. Procedures for discussion of matters of common interest

The University and the Colleges have a common interest in the establishment of clear and effective channels for the discussion and resolution of matters of common interest.

2. University Academic Staff: College membership

The University and the Colleges have a common interest in seeking to ensure that all established University academic staff should have the opportunity of contributing to collegiate life, at least through membership of a College and where possible through holding a College Fellowship. They further have an interest in wishing to achieve the offer of College membership to unestablished University academic staff, which is especially appropriate where such staff contribute to College teaching.

3. University Academic Staff: College duties

The University and the Colleges have a common interest in seeking the involvement of established University academic staff in College teaching and other duties, and in the acceptance of teaching Fellowships of Colleges. They have an interest in reducing the impediments to Colleges duties placed upon Professors and Readers by the University in view of the greatly increased proportion of such officers since the present restrictions were introduced. They have an interest in consultation on matters of University employment policy, as Colleges normally follow that policy in respect of concurrent College offices.

4. College Academic Staff: Faculty association

The University and the Colleges have a common interest in seeking to promote a close association between College academic staff and their respective Faculties and Departments, and in encouraging such staff to pursue research at the highest possible level.

5. Research Assessment Exercise

The University has an interest in agreeing satisfactory arrangements with the Colleges relating to the inclusion by the University of College staff in the Research Assessment Exercise.

6. Access

The University and the Colleges have a common interest in seeking to ensure that those of the highest potential are admitted as students irrespective of their financial means.

7. College Accounts

The University has an interest to ensure the accountability of the public funds to be received by the Colleges through the University on account of College undergraduate fees. The University and the Colleges should seek to agree a mutually satisfactory form of account which takes account of the charitable status of the Colleges.

8. A common student records system

The University and the Colleges have a common interest in this regard. The actual implementation of a system will require detailed discussion and the consideration of its resource implications.

9. Distribution of Fellowships amongst the Colleges

The University and the Colleges have a common interest in seeking to ensure that University Teaching Officers are distributed amongst the Colleges in a way which reflects the teaching needs of the Colleges.

Audit Memorandum

Introduction

1. In this memorandum 'public funds' means those sums out of the funds provided by HEFCE to the University which it pays to Colleges, Halls, etc., under the College/University Memorandum.
2. The University, as the recipient of public funds allocated by the HEFCE, is already covered by the standard terms of a Financial Memorandum and Audit Code of Practice applying to all institutions in the HE sector. The guiding principle is that public funds must be properly accounted for and used economically, effectively and efficiently.
3. Recognising the particular relationship between the University and the Colleges and their separate legal identities, HEFCE has made clear that it will continue to conduct all routine audit business with the University, and HEFCE will rely on access to records, information and accounts held by the University in respect of public funds. HEFCE will rely on university officers to provide any explanation which it reasonably considers necessary to fulfil its responsibilities, in particular in ensuring that public funds have been applied in accordance with the Financial Memorandum. It will look to the University Audit Committee as the body responsible for providing an assurance that public funds allocated to the University are properly used.
4. So long as the University Audit Committee and University officers can provide the necessary assurance at University level, HEFCE would not seek information or explanations beyond that level. Only in exceptional circumstances, where HEFCE reasonably concluded that public funds were at risk and the University Audit Committee or University officers had not been able to supply the necessary assurance that proper safeguards were in place would there by a need to seek information or explanation direct from a College. But in all cases, HEFCE would first address any question or concern to the University and give the University full opportunity to discuss the issues with the College and to respond, before taking any further action.
5. HEFCE will not include the Colleges in its routine programme to assess compliance with the Audit Code of Practice and to assess internal management controls. But the University will notify HEFCE of any serious weakness, fraud or breakdowns relating to the use of these public funds in or by Colleges.

Role of Colleges

6. It is now, and will continue to be, the responsibility of each College to satisfy itself on the adequacy and effectiveness of the internal control system. The University will need suitable assurance to this effect in order to discharge the role set out in paragraphs 2-5.
7. Colleges will keep proper records of their income from these public funds, and their expenditure therefrom, in a form or forms prescribed from time to time by the University.
8. Any income from these public funds, and expenditure therefrom, will be separately identified in the Colleges' accounts.
9. The University, through the University Treasurer, shall be entitled to make reasonable requests to the auditors of any College for explanations of that College's accounts in respect of the public funds.
10. Bursars of Colleges will, as necessary and appropriate, facilitate access by the University Treasurer to their College's auditor. In particular, Colleges will instruct their auditors annually to furnish a letter or report following their review of the financial statements and controls, which confirms that public funds have been used for the purposes intended, and which identifies, if applicable, any significant accounting or control weaknesses which relate to these public funds.

College fee audit procedures

1. Each College will keep a separate account of the payments made to the College by the University.

The total of publicly funded fee payments made to the College by the University from HEFCE funds will be shown as a separate item on the income side of each College's Education Memorandum. The expenditure side will comprise a summary of heads of expenditure eligible for the use of HEFCE funds. The form of the Education Memorandum will be agreed with the University.

2. Each College's External Auditors will be asked to sign a certificate to the effect that the payments made to the Colleges by the University have been applied for the purposes set out in the University/Colleges Memorandum.

The External Auditors of each College will certify the Education Memorandum with respect of those funds referred to in paragraph 1 of the Audit Memorandum using a form of words agreed with the University. The Education Memorandum will be submitted to the University Treasurer each year by a date determined by the University, having regard to the date by which the University's own external audit needs to be completed.

3. The University's External Auditors will rely on the certificates from College External Auditors to enable them to certify that HEFCE income has been applied for the purposes for which it was received.

If the University's External Auditors have reasonably concluded that there is cause for concern over a College's Education Memorandum, the University Treasurer will first discuss the issue with the Bursar of the College concerned and then decide what further action is required. The Treasurer will have the right to require an early report from the Council or Governing Body of the College to the Council of the University. Such a report will normally be required in cases where External Auditors of a College refuse to certify the Education Memorandum or qualify their report.

CAMBRIDGE COLLEGE

Education Memorandum

Expenditure £ £ Income £ £
Educational Costs: College Fees:
Teaching
Tutorial
Admissions
Research
Academic Awards to Students
Other Educational Facilities
Other Expenses
Undergraduate fee income provided by HEFCE (College fee abated to £xx)

Other undergraduate (College Fee £yy)

Graduate (College Fee £zz)


Balance being deficit funded from other resources




Education Memorandum: Auditors' Report

In compliance with the Audit Memorandum, we have reviewed the relevant books, records and financial controls of the College and confirm that public funds (as defined in that Memorandum) have been applied for the purposes for which they were received, and in accordance with the University/Colleges Memorandum. We have not identified any significant accounting or control weaknesses relating to those public funds.

College Auditors


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Cambridge University Reporter, 29 November 2000
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