Reports

Second-stage Report of the Council on the alteration and refurbishment of the Arup Building on the New Museums site

The Council begs leave to report to the University as follows:

1. In this Report the Council is seeking approval to proceed with the implementation of the refurbishment and alterations of the Arup Building on the New Museums site.

2. A First-stage Report on refurbishment and alterations to the Arup Building, dated 21 January 2013, was submitted to the Regent House on 23 January 2013 (Reporter, 6294, 2012–13, p. 323) and approved by Grace on 8 March 2013 (Reporter, 6301, 2012–13, p. 409).

3. As stated in the First-stage Report, the Arup Building is located on the eastern side of the New Museums site, adjacent to Corn Exchange Street and between the Department of Zoology Building and the Corn Exchange. It was completed in 1971 to the designs of Sir Philip Dowson of architects Arup Associates. It has an approximate gross internal area of 16,000m² and a net useable area of approximately 9,200m² with existing accommodation for the Department of Zoology, the Museum of Zoology, the Department of Materials Science and Metallurgy, the University Computing Service (UCS), the High Performance Computing Service (HPCS), and the Babbage Lecture Theatre.

4. The space vacated by the Department of Materials Science and Metallurgy, the UCS, and the HPCS equipment on the upper floors of the Arup building will be converted to adaptable office accommodation for occupation by the Cambridge Conservation Initiative (CCI). The founder members of the CCI are: the University of Cambridge, Birdlife International, the British Trust for Ornithology, Flora and Fauna International, the International Union for Conservation of Nature, the Royal Society for the Protection of Birds, the Tropical Biology Association, TRAFFIC, and UNEP World Conservation Monitoring Centre. The members will occupy varying amounts of space, depending on the number of staff they will be locating to the building, and those organizations that are not a part of the University will become tenants. Approximately three hundred and sixty workstations will be available for tenants initially, though the internal layout will be adaptable for changing patterns of occupation.

5. The current isolation of the raised podium will be addressed by the creation of a new entrance to the CCI accommodation, a new café, for use by all members of the University and visiting members of the public, linked to a new foyer to the Museum of Zoology. Access will be improved through the simplification of the level changes on the podium by the introduction of new external lifts and by two new external stairs, one that will link the podium with Corn Exchange Street and another that will rise to the podium from near the entrance to the New Museums site, by the archway leading off Pembroke Street.

6. The vacated areas in the lower ground floor currently occupied by the Department of Materials Science and Metallurgy will be converted to use as new stores for the Museum of Zoology and as a Facilities Management base for the entire New Museums site. The new Museum of Zoology stores will allow controlled public access to a much higher proportion of the collections and free up space in the existing part of the Museum for a new Education Room and a new School Room in support of public education and outreach programmes. The Facilities Management base, which will lead directly off the existing loading bay on Corn Exchange Street, is part of proposals being developed to control vehicular access to the New Museums site.

7. The proposals for the work to the Arup Building are being developed so as to make the building as environmentally sustainable as possible within the constraints of the existing building and budget. This will be achieved through a bespoke 'environmental sustainability framework' developed by specialist consultants working with Estate Management and the CCI. Particular efforts are being made to ensure that sustainable design is carried through in a measureable way into sustainable occupancy of the building. The work to the building will significantly improve its energy efficiency and reduce carbon emissions.

8. The above strategy remains in line with the strategy documented in the First-stage Report.

9. The Buildings Committee approved the total project budget for the refurbishment and alteration works at £55.33m on 8 May 2013. This is lower than the budget of £59.6m including VAT approved on 13 July 2011 by the Planning and Resources Committee on the basis of the Full Case for the project. The reduction in costs has primarily been achieved by reclaiming VAT. Funding for the project will be provided by a combination of donations, the Capital Fund and a Chest loan to be repaid with rental income from the Cambridge Conservation Initiative tenant organizations.

10. Drawings of the proposals are displayed for the information of the University in the Schools Arcade; a location plan of the Arup Building is shown below.

11. A planning application was submitted to Cambridge City Council in February 2013 and planning permission was granted on 16 July 2013.

12. Enabling works are currently being implemented on site to relocate part of the UCS to the PABX room within the Arup Building and to relocate the Museum and Department of Zoology staff temporarily during the construction works.

13. Kier Construction has been appointed to assist in the pre-construction process and has been asked to tender for the construction works. Subject to the tender sum being within budget, Kier Construction has been approved by the Buildings Committee to undertake the implementation of these works. Work is programmed to commence in November 2013 and to be completed in April 2015.

14. The Council recommends:

I. That approval is confirmed for the implementation of the refurbishment and alteration to the Arup Building as proposed in this Report.

II. That the Pro-Vice-Chancellor (Planning and Resources) be authorized to accept a tender for the works, within the available funding, in due course.

16 July 2013	L. K. Borysiewicz, Vice-Chancellor	Andy Hopper	Mavis McDonald
	N. Bampos	Richard Jones	Rachael Padman
	Athene Donald	Fiona Karet	Shirley Pearce
	I. M. Le M. Du Quesnay	Robert Lethbridge	John Shakeshaft
	Nicholas Gay	Mark Lewisohn	I. H. White
	David Good	Rebecca Lingwood	A. D. Yates

Location plan: Arup Building, New Museums Site, Cambridge

Report of the General Board on the establishment of two Professorships in the Department of Clinical Neurosciences

The General Board beg leave to report to the University as follows:

1. Diseases of the brain and spinal cord are potentially disabling and affect people at all stages of life. Together, they represent a major health care burden, and source of disability and suffering in society. Advances in clinical neuroscience are needed to improve the care and treatment of many diseases that affect the nervous system. Furthermore, discoveries in neuroscience will depend increasingly for their applications to medicine on technical expertise and research in clinical neuroscience.

2. The University has a long tradition of achievement in neuroscience across a range of subject areas. In recent years this has extended to the discipline of clinical neuroscience where, for over 20 years, research in mechanisms of neurological disease and their treatment has been highly productive and internationally competitive, raising the profile of the University in clinical neuroscience and contributing to strong performances in the two most recent Research Assessment Exercises. Clinical neuroscience is an important part of the teaching curriculum in clinical medicine and in providing opportunities for graduate education. The continued commitment of Cambridge to clinical neuroscience is of national strategic importance, and is a priority for the School of Clinical Medicine and the Cambridge Neuroscience Strategic Initiative.

3. The Department of Clinical Neurosciences has invested in the topic of brain plasticity and repair and in the subject area of inflammation as the basis for tissue injury in a range of neurological conditions. The work of the Department in these research areas has been strengthened by benefactions from the John and Lucille van Geest Foundation. The Faculty Board of Clinical Medicine has accordingly agreed to recommend the establishment of two Professorships, which may be held as clinical or non-clinical appointments, to provide leadership in research and teaching in these areas. The full costs of the first Professorship will be met by the Van Geest Foundation Fund for Brain Repair and Neuroscience (Statutes and Ordinances, p. 969). The full costs of the second Professorship will be met from resources available within the School of Clinical Medicine. The Faculty Board has undertaken to provide support and facilities for the Professors from within existing resources.

4. The General Board have accepted the Faculty Board's proposal for the establishment of the Professorships on this basis and have agreed to concur in the view of the Faculty Board that an election to the Professorships should be made by an ad hoc Board of Electors and that candidature should be open to all persons whose work falls within the fields of brain repair and neuroscience. The Board will announce the titles of the Professorships at a later date once the research interests of the persons elected to the Professorships are known.

5. The General Board recommend:

I. That two Professorships be established, with effect from 1 October 2013, each for a single tenure, placed in Schedule B of the Statutes, and assigned to the Department of Clinical Neurosciences.

10 July 2013	L. K. Borysiewicz, Vice-Chancellor	M. J. Daunton	Richard Jones
	Philip Allmendinger	Simon Franklin	Patrick Maxwell
	N. Bampos	C. A. Gilligan	Rachael Padman
	H. A. Chase	David Good	John Rallison

Eighteenth Report of the Board of Scrutiny

The Board of Scrutiny begs leave to report as follows:

1. The Board of Scrutiny could be described as the University's 'watchdog body'. It forms part of the official mechanism for ensuring that the University is run in a way that is transparent and is accountable to the Regent House as the governing body of the University. It comprises eight directly elected members who serve for a period of four years, and the Proctors and Pro-Proctors (who are nominated by the Colleges and formally elected by the Regent House). Of the members who are directly elected by the Regent House, four retire and four new members are elected every two years. Further information is available on http://www.scrutiny.cam.ac.uk/.

2. The Board has a statutory obligation 'to scrutinize on behalf of the Regent House':

(a)The Annual Report of the Council;

(b)The Abstract of the Accounts of the University; and

(c)Any Report of the Council proposing allocations from the Chest.

It also has the right to report to the University on any matter falling within the scope of this scrutiny, to examine the policies of the University and the arrangements made for the implementation of those policies, and has the power to inspect any documents that are relevant to any enquiry that it is empowered to make. The Board, with the best interests of the University in mind, aims to carry out its functions in a constructive manner. Since its inception, the Board's practice has been to publish a single Report exploring the themes that emerge from these official documents, rather than a series of separate Reports on Reports. This Eighteenth Report follows this tradition.

3. In discharge of these obligations during the academical year 2012–13 the Board has met fortnightly during each Full Term with two additional meetings in June to finalize this Report. It held formal meetings with the Vice-Chancellor ('VC'), the Senior Pro-Vice-Chancellor ('PVC'), the PVCs for Institutional Affairs and Research, the Director of Finance, the Registrary, the Project Director and Finance Manager of the North West Cambridge Development, and also with a member of the Council and of the IT Review Committee. The Board is most grateful to all of these individuals for the time and assistance they have given.

4. The Board was provided with part-time administrative assistance this year by Miss Emma Easterbrook and Ms Aimee Kibble. Their help has been invaluable.

5. The Board has provided a summary of the recommendations that it made in its Seventeenth Report together with the Council's responses in Annex A.

Financial matters

6. The consolidated financial statements for the University for 2011–12 show a modest improvement in University finances. Total income grew by almost 5.7 per cent from the previous year, while expenditure grew by only 4.4 per cent and the surplus retained in general reserves increased from £33m to £48m. It was pleasing to see that, with the inclusion of Cambridge Assessment and Cambridge University Press ('CUP'), the Group results showed a small surplus of £5m for the year compared with a deficit of £10m in the previous year. The segmental results also show a significant improvement in financial performance. Most importantly, the deficit on continuing operations in the Education and Research segment was reduced from £36m to £23m. Given the very challenging financial environment and the pressures that the higher education sector is under, these financial results are impressive. The Board would like to congratulate the Senior PVC and the Director of Finance for the efforts they have taken to achieve these results.

7. The financial results for 2011–12 were supported by continued growth in endowment and investment income. Based on the income from the Cambridge University Endowment Fund's ('CUEF') underlying investments rather than distributions, endowment income grew from £17m to £19m. If, however, the accounting methodology had been based on the distributions made by the CUEF, which better reflects the total return investment approach adopted in the management of the endowment, endowment income would have been £54m higher than the reported figure of £19m. This would have resulted in an overall surplus for the year of £70m compared with £51m in the previous year.

8. The CUEF has a financial year end that runs to the end of June and performance analysis for the endowment is monitored to that date. In the year to June 2012 the CUEF generated a return of 1.2 per cent. Although this was below its long-term total return target of RPI plus 5.25 per cent, it was nevertheless in line with the returns achieved on comparable charitable endowments for the period. While performance information is not yet publicly available for the current financial year, the CUEF is expected to report strong investment returns in the year to June 2013 as it has generated a total return of more than 15 per cent over the nine-month period to the end of March 2013.

9. The long-term investment performance of the CUEF has also been good: over the 10 years to June 2012 the average annual total return has been 7.9 per cent per annum. However, while the average return has exceeded the rate of change in RPI, it has not kept up with its long term target (RPI plus 5.25 per cent). In the Financial Review for 2011–12 the Senior PVC comments 'the continued low interest rates and global economic uncertainties make the future long-term returns at the target levels challenging'.1 The Board is in complete agreement with the Senior PVC and in its Seventeenth Report stated 'in such an environment, setting an unrealistically high total return objective may encourage the Investment Office ('IO') to adopt an inappropriately high risk profile in the management of the CUEF'.2

10. The Board again recommends that the total return objectives of the Cambridge University Endowment Fund be reviewed and that more realistic and achievable targets be set.

11. In its Sixteenth and Seventeenth Reports, the Board recommended that the performance results for the CUEF be made more widely available. The Board noted that the University is constrained by what are now the Finance Conduct Authority regulations and recommended that if the appropriate legal disclaimers were to be made, the University would be able to publish the year-end CUEF summary report in the Reporter. The Board notes that the information provided to the Gates Trust and other investors is significantly more detailed than that provided to the Regent House.

12. The Board recommends that there be much greater transparency in matters relating to the management of the Cambridge University Endowment Fund.

13. The Board recommends that the Annual Report distributed to all investors in the Cambridge University Endowment Fund be published in the Reporter.

The Budget Report

14. In its Seventeenth Report, the Board stated that '[d]espite the ongoing challenges that the University faces, the recently published Report of Council on the financial position and budget of the University for 2012–13 forecasts a healthy improvement in the University's financial position'.3 The Board is pleased to see that in the 2013–14 Budget Report the Council has confirmed that 'the hoped-for improvement is materializing, and the projected financial position of the University continues to improve steadily towards modest surpluses'.4 The Board would like to congratulate the Senior PVC for the financial discipline that he has introduced during recent planning rounds, and considers that the actions taken have helped to return University finances to a surplus position earlier than originally forecast.

15. The tight budgetary constraint recommended by the Council ensured that the actual out-turn for the Chest in the 2011–12 financial year was £8.8m better than the budget forecast. The University achieved this result because total income was almost £10m greater than the budgeted sum, whereas total expenditure was only £1m greater than the budget. The latest forecasts show similar improvements continuing through the remainder of this planning round through until 2016–17. The latest forecast for 2012–13 remains largely unchanged from the original budget, but the budget for 2013–14 now shows a Chest deficit of only £0.3m compared with the projected deficit of £8.4m in the 2011–12 Budget Report.

16. The cumulative position – projected in the 2011–12 Budget Report to be a deficit of £21.4m over the four years to 2014–15 – is, with the actual 2011–12 out-turn included, now projected to be a deficit of only £6.4m. There is also reason to believe that the budget for 2013–14, and the projections beyond, are based on relatively conservative assumptions. For example, endowment income and interest income which rose to £22.5m in 2011–12 is now forecast to decline to £21.8m in 2012–13 and to £20.6m by 2014–15. Given the recent trend in endowment income, this seems to be an overly cautious assumption.

17. This improvement in the financial health of the University is largely attributable to the tight budgetary restraints that have been proposed by the Council. In particular, the annual general wage increase is budgeted to be only 1 per cent per annum for the remainder of the planning round. Strict controls are also being imposed on other operating expenditures, with non-pay expenses budgeted to increase by only 2 per cent per annum over the next five years. Total staff costs, even allowing for additional pension costs, increased by only 1.3 per cent in 2011–12. As a result, over the remaining four years of the current planning round (from 2012–13 to 2016–17), while total Chest income is projected to increase by 9.2 per cent, allocations from the Chest for Schools and Academic departments will grow by only 5.7 per cent.

18. The constraints that have been placed on the Unified Administrative Service ('UAS') expenditure are particularly impressive, with the UAS Chest expenditure budgeted to increase by only 4.6 per cent over the remaining four years of the current planning round. Total UAS expenditure, including Chest and non-Chest expenditures, is projected to decrease by 1 per cent over the period in question. Improved purchasing policies are making a material contribution to cost controls within the UAS and it is clear that the Procurement Services Office's efforts and improved procurement practices throughout the University are bearing fruit.

19. One of the most pressing financial concerns for the University is the cost of pension provision, and uncertainty regarding future liability. This issue was highlighted by the Senior PVC as one of the principal risks affecting the long-term financial position of the University.5 In addition to the two main University schemes, the Universities Superannuation Scheme ('USS') and the Cambridge University Assistants' Contributory Pension Scheme ('CPS'), there is also a liability for two CUP defined benefit schemes that are closed to new members. The total pension cost incurred by the University Group in 2011–12 was £96.4m, an increase of £7.3m over the previous year.

20. The CPS and the two CUP schemes are accounted for in accordance with Financial Reporting Standard 17, but the liability attributable to the USS scheme is not included in the accounts of the University. This is because it is not possible to separate and attribute the Cambridge-specific liabilities of this multi-employer scheme. The total Group pension liabilities included in the consolidated financial statements for 2011–12 were reported as £369m, an increase of £61m on the previous year. Of this reported sum, £265m was attributable to the deficit on the CPS and £95m was attributable to the deficit on the CUP schemes. If it were possible to attribute to the University its share of the deficit in the USS scheme, the total liability would be substantially larger. At the last triennial actuarial valuation at 31 March 2011, the USS scheme had a deficit of £2.9bn. It is estimated that this deficit increased to £9.8bn as at 31 March 2012. It is very clear that the next triennial actuarial valuation will show a substantial increase in the deficit and the funding level is likely to decrease. This will result in increases in the contribution rates.

21. The Board recommends that the University engages proactively with the Universities Superannuation Scheme to ensure that the scheme remains sustainable without undue risk to the University.

Estates strategy

22. The Board has spent considerable time reviewing the North West Cambridge Development plans and would like to congratulate the project's Finance Manager, Mr Kerry Sykes, and all those involved in this complex and challenging undertaking. The Board remains concerned about the long-term sustainability of the assumed student rents and whether existing Colleges will take on all of the student rental rooms. Given the size, complexity, and potential risks to the University, the Board will continue to monitor all aspects of the project closely.

23. The Board recognizes the challenges of managing the large number of projects across the University estate but understands that costs have been incurred that might have been avoided with better co-ordination between projects from the outset. For example, the Planning and Resources Committee ('PRC') has noted that, in respect of the move of critical IT infrastructure from the New Museums site to West Cambridge, '[w]hilst some of this cost would have been incurred anyway, a significant part of it might have been avoided if the need had been identified earlier'.6

24. The Board recommends that the Council ensures that there is better co-ordination between projects.

Research strategy

25. The Board recognizes that the Research Excellence Framework ('REF') has created challenges across the University and caused additional burdens on staff. Nevertheless it is apparent that the University has adopted a thoughtful and structured response to the REF process.

26. In the coming year there will be a shift towards an expectation of 'open access' to research outputs. There is considerable concern within the University about the implications of the Finch Report.7 The Board is concerned that the details of open access requirements are not yet fully defined and may have implications for academic freedom. Additional costs could be involved that fall unevenly on different subject areas. Other aspects of the University's operations, notably the publishing activities of CUP, might also be affected. The Board is satisfied that the University, led by the PVC (Research), is engaging comprehensively with the open access proposals. The Board has been assured that the University is committed to upholding academic freedom and, in particular, will not seek to discourage the current diversity of research outputs.

27. The Board notes the establishment of an open access website8 by the University, welcomes the direct communication with members of staff and encourages the University to monitor the effectiveness of this website. While the policy of distributing the available funds (to support publication in charging journals) on a 'first come, first served' basis reflects the University's desire not to interfere with, or judge, individual research choices, the Board encourages the University to ensure that sufficient resources are available, and to support a reasonable and needs-based allocation of these resources across the University.

28. The Board recommends that the University ensures that its implementation of the open access scheme does not disadvantage any particular subject areas.

International strategy

29. The Board notes the ongoing development of the University's International Strategy. It hopes that the International Strategy Office ('ISO') will work closely with the Research Strategy Office ('RSO'), the Cambridge University Development Office ('CUDO'), the Colleges, Cambridge in America ('CAm'), and any other regional bodies that may be established, to ensure that International Strategy, Research Strategy, and Development Strategy are all mutually supportive.

Development strategy

30. The Board looks forward to the further articulation of a comprehensive development strategy, which must include effective liaison between CUDO and the Colleges. The Board notes the appointment of a new Director of CUDO. In its Seventeenth Report, the Board recommended that there be greater oversight of CAm by the Council. The Board was surprised to discover the magnitude of the cost to the Chest of CAm in the 2011–12 financial year.

31. The Board recommends that the Council pays particular attention to the direction, budget, and location of Cambridge in America and any other regional development bodies that may be established, and ensures that reporting lines are clear.

Graduate students

32. In order to promote research, the University is committed to increasing graduate student numbers (already three times the level of 30 years ago) by 2 per cent per annum for some years yet. The Colleges have agreed to increase their intake subject to additional accommodation becoming available beyond 2015.

33. Cambridge falls behind many competitors in respect of the availability, and the efficient distribution, of funds to support Ph.D. courses (which contribute to research much more than Masters' courses) and the timeliness of admissions decisions. These factors may contribute to the fluctuation in the numbers admitted year by year, as a significant number of applicants decline offers at a late stage. The Board understands that this remains a priority for fundraising, and it will monitor the effectiveness of the action taken by the Postgraduate Admissions Committee and the PVC (Education) to achieve greater predictability and a closer match between the numbers and the available accommodation.

34. Accommodation is very important for graduate as well as undergraduate students – and is critically important for the large number moving to Cambridge for the first time. The University relies on the Colleges to provide social facilities for graduate students, pastoral and administrative support, and contact with senior academics outside their own subject. For students living in private accommodation or far from their College, access to all of the above is much reduced.

35. The University has responded to this problem with ambitious plans to build new accommodation at North West Cambridge, in a form that may become a new graduate College if funds become available. While it is envisaged that existing Colleges will 'rent' some of the rooms for their students, the scheme for the management of these facilities (including security, maintenance, administration, and cleaning) remains to be settled, as does the level of charges for students. The Board is concerned that the latter appear likely to be considerably higher than the current average and beyond the reach of a substantial number of students.

36. The Board recommends that the Council gives further consideration to the availability of affordable accommodation for graduate students.

Cost of undergraduate education

37. The Board views with concern the substantial downward revision (from £17.1k to £14.8k per capita) of the University's estimate of the annual cost of educating undergraduates. This is a figure with a high visibility nationally: it is widely used to justify the level of undergraduate fees and bursaries, and fundraising in support of the latter. It must command confidence, and so needs to be supported by a robust and clearly explained calculation methodology.

38. The Board recommends that the University publishes details of how the cost of an undergraduate education is calculated.

Information technology

39. The Board recognizes that multiple, ambitious, and complex IT infrastructure projects are underway throughout the University. The Board is supportive of the merger of the University Computing Service ('UCS') and the Management Information Services Division ('MISD') as a major step towards reducing duplication of IT service provision. It is, however, concerned that not all central IT providers are included in the reorganization.

40. The Board recommends that the Council monitors the reorganization of IT services to ensure that the needs of all users are met, and keeps other central IT providers under review.

41. The Board welcomes the construction of a new Data Centre in West Cambridge, but is concerned that this alone may not be sufficient to meet the University's expanding hosting and storage needs over the expected 10-year use of the facility. The volume of data being generated and stored is already substantial and is growing rapidly. The Board is concerned that use of external storage providers may not always be appropriate. The Board understands that the cost of fitting out the 'fallow hall' at the same time as the rest of the Data Centre would be relatively inexpensive.

42. The Board recommends that the Council ensures that the Data Centre is sufficient for the University's needs and that sufficient funds are set aside for the commissioning of the 'fallow hall'.

43. IT systems increasingly underpin all aspects of University business. Accordingly, data corruption, data loss, accidental disclosure, and cyber-attack are serious risks to the University's reputation and to its ability to undertake research and teaching.

44. The Board recommends that a University IT Security Strategy be developed and implemented, and that guidance be provided on the appropriateness of the use of external storage providers.

Risk management

45. The Board is concerned that the Key Risk Register did not include a number of significant risks to the University that have emerged this year. Moreover when several risks overlap, the overall risk level increases considerably.

46. The Board recommends that the Council takes steps to ensure that the Key Risk Register is managed effectively, and also that consideration is given to how possible inter-dependencies between risks can be taken into account.

Human Resources

47. The Board continues to have a range of human resource issues drawn to its attention. This year a particularly visible example was the publication of a Report9 potentially affecting the employment of two named University Officers. As the Board's Seventeenth Report noted, the Board does not generally inquire into individual cases but the Board intends next year to monitor human resource issues very closely.

Administration and governance

48. The Board welcomes the approval of proposals for electronic voting in ballots of the Regent House10 and will monitor how well the new system works in practice.

49. The Board recognizes that the University has invested considerable effort in making much information available online. It notes, however, that some information is outdated or incomplete and that there are significant discrepancies in access to information across the University. The Board will consider this further in the future.

summary of recommendations

1.The Board again recommends that the total return objectives of the Cambridge University Endowment Fund be reviewed and that more realistic and achievable targets be set.

2.The Board recommends that there be much greater transparency in matters relating to the management of the Cambridge University Endowment Fund.

3.The Board recommends that the Annual Report distributed to all investors in the Cambridge University Endowment Fund be published in the Reporter.

4.The Board recommends that the University engages proactively with the Universities Superannuation Scheme to ensure that the scheme remains sustainable without undue risk to the University.

5.The Board recommends that the Council ensures that there is better co-ordination between projects.

6.The Board recommends that the University ensures that its implementation of the open access scheme does not disadvantage any particular subject areas.

7.The Board recommends that the Council pays particular attention to the direction, budget, and location of Cambridge in America and any other regional development bodies that may be established, and ensures that reporting lines are clear.

8.The Board recommends that the Council gives further consideration to availability of affordable accommodation for graduate students.

9.The Board recommends that the University publishes details of how the cost of an undergraduate education is calculated.

10.The Board recommends that the Council monitors the reorganization of IT services to ensure that the needs of all users are met, and keeps other central IT providers under review.

11.The Board recommends that the Council ensures that the Data Centre is sufficient for the University's needs and that sufficient funds are set aside for the commissioning of the 'fallow hall'.

12.The Board recommends that a University IT Security Strategy be developed and implemented, and that guidance be provided on the appropriateness of the use of external storage providers.

13.The Board recommends that the Council takes steps to ensure that the Key Risk Register is managed effectively, and also that consideration is given to how possible inter-dependencies between risks can be taken into account.

5 July 2013	Catherine Mackenzie (Chair)	Martin Dixon	Christina Skott
	Bruce Beckles	David Goode	Brian Sloan
	Ruth Charles	Jonathan Holmes	Dick Taplin
	Kevin Coutinho	Owen Saxton	Paul Warren

Annex A.

Summary of the Board's recommendations in its Seventeenth Report and of the Council's responses

Recommendation 1

The Board recommends that the Council makes as much information as possible available to the Regent House before asking for its approval for the North West Cambridge project.

Response: The Council agrees with the Board on the importance of publishing full information about the North West Cambridge project. Updates on the project's progress are provided regularly via a dedicated website (http://www.nwcambridge.co.uk/) and also in Council Notices and Reports published in the Reporter, including most recently the Report seeking authority to commence Phase 1 of development on the North West Cambridge site, on which a ballot will be taken in January (Reporter, 6282, 2012–13, p. 59). This most recent Report included financial information about the project and an invitation to any member of the Regent House to request further such information considered by the Finance Committee from the Director of Finance.

Recommendation 2

The Board recommends that positive interest coverage throughout the duration of the project is a condition for approval of the North West Cambridge project.

Response: It is normal for a large project of this nature to require a significant up-front investment before the subsequent income streams can be developed sufficiently to repay that investment. Hence it is unrealistic to require a positive interest cover throughout its duration. The intent of the project is to deliver a high quality sustainable environment and viable community with good facilities in place at the outset. It also has a high proportion of housing let at below market rent in order to provide suitable affordable accommodation to University employees. The inevitable consequence of these factors is that the project bears a higher level of infrastructure cost in its early stages, that providing a high quality environment incurs some additional cost, and that rental income does not match that which might arise on a site receiving rents charged at market rates. However, the interest rate on borrowing is fixed and therefore, over time, the impact of inflation increases income from rental streams such that interest payments are exceeded by income after the first ten years following occupation of the site. Further, the cost of additional interest (i.e. the amount by which interest exceeds income) arising in this first period is not significant compared to the overall level of borrowing, adding £7m to the outstanding debt, before interest cover becomes positive (see the chart illustrating this in the Reporter, 6282, 2012–13, p. 62).

Recommendation 3

The Board recommends that Council, through the Finance Committee, undertakes a comprehensive review of the total return objectives for the Cambridge University Endowment Fund in order to ensure that the targets are realistic and achievable over future rolling ten-year periods.

Recommendation 4

The Board recommends the establishment of a process by which total return objectives for the Cambridge University Endowment Fund will be reviewed at regular intervals in order to ensure that they remain appropriate.

Response: The Council is pleased to note the Board's recognition of the efforts made to control budgets and to make the reporting of its financial position more transparent.

In agreeing the total return objective the Council, through the Finance Committee, considered the historical performance of the Cambridge University Endowment Fund (CUEF, formerly known as the Amalgamated Fund). The CUEF has since its inception in 1958 achieved this objective and modelling provides an acceptable probability of achieving it into the future.

The Council recognizes that the current investment and economic conditions are uncertain and has consulted its Investment Board. The Board believes that the CUEF should not take a short-term view and the current long-term perspective was consistent with past history. The Board has no reason to believe that the investment objective is not achievable and notes that the CUEF does not take on unnecessary risk in chasing a short-term target. The risk profile of the CUEF is appropriate for a perpetual endowment and the three-year rolling volatility of 11%, substantially less than the volatility of global equity markets, indicates that risks are being appropriately managed. The Board is of the view that consistency and patience were important in achieving an investment objective.

Recommendation 5

The Board recommends that the annual summary performance report that is distributed to investors in the Cambridge University Endowment Fund be published in the Reporter.

Response: The Finance Committee has agreed to investigate whether it is possible to make further information available about the performance of the Cambridge University Endowment Fund to members of the Regent House while ensuring that all compliance considerations and the Fund's commercial operations are unaffected.

Recommendation 6

The Board recommends that the University Research Office take steps to create a strong and visible presence in academic departments, including establishing regular opportunities for direct interaction between URO staff and academics.

Response: Since the beginning of 2012, the University Research Office has comprised the Research Strategy Office (RSO) and the Research Operations Office (ROO). Staff from both offices work closely together in their interactions with academic institutions. This occurs frequently in the preparation of University responses to the increasing number of exercises required of HEIs by the funding bodies. Both research offices are committed to working closely with Schools, Faculties, and Departments and the engagement between ROO and academics has been facilitated by the re-organization of the office into School-based teams, with the team supporting the Clinical School being based at Addenbrooke's Hospital. It is common practice for Schools to invite the relevant Assistant Director, who heads their School research support team, to participate in regular School management team meetings, while they are also invited to attend Council of School meetings.

In tandem, both offices work closely with academics in their Departments to investigate and engage in major funding opportunities, most involving significant interaction with academics across a wide range of University academic institutions, in the support, and development, of strategic initiatives and in planning for the REF.

Recommendation 7

The Board recommends that continuing priority be given to international engagement to ensure that the University remains internationally competitive. In particular, it recommends that the development of international strategy continues, that sufficient resources be allocated to the implementation of that strategy, and that their effectiveness be monitored.

Response: The Council welcomes the Board's support for the development of an international strategy. The resources, which have been enhanced and refocused, will be kept under review as the strategy develops. The recently established International Strategy Committee is consulting with the Colleges and others to inform the development of a paper on International Engagement for the General Board.

Recommendation 8

The Board recommends that the University take steps to review the optimum rate of increase in graduate student numbers and to increase co-ordination with the Colleges in this area.

Response: Graduate numbers in the University have grown by about 2% p.a. over the past thirty years. In 2009–10, a sudden increase in admissions, particularly in one-year courses, exceeded College capacity, and a cap on such numbers was introduced. Ph.D. numbers are not capped. Discussions have since taken place with the Colleges. A University and Colleges Joint Committee working group reported during 2011–12 and supported the Council's ambition to increase postgraduate numbers by 2% p.a. at least until 2015, with further increases dependent on building projects (such as the North West Cambridge project) going ahead. This rate of growth represents a compromise between the wish of Schools to increase their graduate numbers and the ability of the Colleges to absorb these numbers, and it provides a stable basis for medium-term planning. A standing Postgraduate Admissions Committee now provides a forum for discussion of postgraduate numbers with the Colleges. No School has expressed a wish to reduce its total undergraduate numbers and the planning assumption is that undergraduate numbers will remain constant.

Recommendation 9

The Board recommends that there be greater oversight of Cambridge in America by the Council.

Response: Cambridge in America is a tax-exempt organization (recognized by the U.S. Internal Revenue Service under the terms of section 501(c) (3) of the Internal Revenue Code) which funds grants that benefit Cambridge University and its member Colleges. In compliance with IRS regulations, the Board of Directors of Cambridge in America maintains complete discretion over allocation of gifts to Cambridge. Gifts to Cambridge in America qualify for an income tax deduction to the limits allowed by law. Cambridge in America therefore necessarily operates with legal independence from the University. Its Board includes the Vice-Chancellor and three other resident members of Collegiate Cambridge who are all members of the Regent House. The funding allocated to Cambridge in America for operational purposes through the planning round is subject to the same scrutiny as other allocations to Schools and non-School institutions. The review of development activities referred to by the Board has been the subject of extensive discussion by the Council on two occasions in April and September 2012. The Council considered an investment plan for the Development Office at its meeting on 26 November for consideration through the current planning round. Its review has included the Collegiate University's relationship with Cambridge in America and how that might be improved for the benefit of more effective engagement and fundraising in the future. Ensuring that the University receives value for money for its contribution to the costs of Cambridge in America as it and the Colleges prepare for the next phase of fundraising is a principal concern and one that will be addressed through the process outlined here.

Recommendation 10

The Board recommends that the University Risk Register include recognition of the risks to the University, both reputational and direct, consequent upon the actions or financial circumstances of individual Colleges.

Response: The Key Risk Register includes the risk 'Associated Bodies', which is owned by the Senior Pro-Vice-Chancellor. The risk analysis recognizes that association with certain bodies operating under the 'Cambridge brand' carries reputational and, in some cases, financial risks for the University. The list of Associated Bodies includes the Colleges. The Risk Steering Committee reviews each risk on the Key Risk Register twice a year; there is an annual review in October and an interim review in March.

The Key Risk Register is used by the internal auditor to compile the annual internal audit plan and risk management is a standing item on the agenda of the University's Audit Committee. The Audit Committee receives the annual report of the Risk Steering Committee, which includes the annual review of the Key Risk Register.

Annex B.

Glossary of terms

CAm	Cambridge in America
CPS	Contributory Pension Scheme
CUDO	Cambridge University Development Office
CUEF	Cambridge University Endowment Fund
CUP	Cambridge University Press
IO	Investment Office
ISO	International Strategy Office
MISD	Management Information Services Division
PRC	Planning and Resources Committee
PVC	Pro-Vice-Chancellor
REF	Research Excellence Framework
RSO	Research Strategy Office
UAS	Unified Administrative Service
UCS	University Computing Service
USS	Universities Superannuation Scheme
VC	Vice-Chancellor