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Annual Report of the Local Examinations Syndicate

This is the one hundred and forty-fifth Annual Report of the Syndicate. It covers the events of the financial year 2001-02.

The LOCAL EXAMINATIONS SYNDICATE beg leave to present the following Annual Report to the Council.

Introduction

The year ended 30 September 2002 has been another successful one for the UCLES Group, with entries for examinations continuing to grow across the business. Examination results were delivered accurately and on time in all business streams.

Overall, the Group recorded a surplus of £1.6m which, although down on the previous year, was a significant improvement on the forecast budget. This outcome was achieved by increased income and reduced direct costs, salaries, and other overheads although the effect of this was offset to some extent by continued investment in information management infrastructure and projects to support business objectives. There was an unrealized loss in the value of the Group's invested reserves at 30 September 2002, due to the continuing fall in stock markets.

Group Structure

The Syndicate was established in 1858 to administer examinations for persons who were not members of the University and to inspect schools, with the aim of raising standards in education. The Syndicate began examining overseas in 1863 and this aspect of its work grew quickly. In 1888, the Syndicate was empowered to hold examinations for commercial certificates. The Certificate of Proficiency in English, the Syndicate's first examination in the field of English as a foreign language, was introduced in 1913. Thus, the foundations for our work today were laid by 1914. From the mid 1980s, as successive UK Governments moved to exert greater control over the school curriculum and examinations at ages 16 and 18, the number of English examination boards was reduced by a process of consolidation. The Syndicate acquired the Oxford Delegacy of Local Examinations, the Oxford and Cambridge Schools Examination Board, the Midland Examining Group, and the RSA Examinations Board, amongst others.

The UCLES Group is now organized into three externally-trading business streams - Oxford, Cambridge, and RSA Examinations (OCR), Cambridge International Examinations (CIE), and English for Speakers of Other Languages (ESOL) - each of which has a distinct product range and group of customers. OCR is responsible for examinations and other assessment activity for both general and vocational qualifications in the UK; CIE is responsible for international school examinations and international vocational awards; and ESOL is responsible for examinations in English as a foreign language and qualifications for language teachers throughout the world. ESOL was formerly known as EFL but changed its name on 1 October for marketing purposes and to reflect the increasing diversity of its candidature. The work of the three business streams is supported by six service divisions: these are Finance, Information Management, Research and Evaluation, Human Resources, Distribution, and Premises and Other Services. Printing has been outsourced to Cambridge University Press since 1 October 2000, and during the year a Group Print Manager was appointed to manage the relationship with CUP and other suppliers.

The Group is now reaping the benefits of the business stream arrangements in terms of greater focus on the specific needs of each area of the organization's activities. There is increasingly intensive collaboration between the three streams in terms of sharing of best practice, avoiding duplication of effort, collaborating in accessing markets, and offering an enhanced product range to existing clients.

All parts of the Group are engaged in a continuous process of review of their activities and processes, in order to improve the service to clients, whether these be external (in the case of OCR, CIE, and ESOL) or internal (in the case of central service divisions). The Group Information Management strategy is vital in this respect. The Group is also supporting a number of longer-term projects exploring the application of new technologies in assessment. By carrying out its own programme of research and publication, the Group contributes directly to the development of curriculum and assessment practice world-wide.

The UCLES Group and the University

The Local Examinations Syndicate is a constituent part of the University and therefore falls within the University's status as an exempt charity. OCR is a company limited by guarantee with the University as its sole member. It is also an exempt charity, under Schedule 2(w) of the Charities Act 1993, on the grounds that it is administered on behalf of the University. The Syndicate and OCR are the two principal operating entities of the UCLES Group.

The Group is an important part of the University's mission, under the heading of its relationship with society. We have defined our mission statement as being 'To provide high quality assessment services world-wide'. To accomplish this we offer a comprehensive range of qualifications - both academic and vocational. By ensuring that these are designed to encourage positive educational experiences and the development of relevant knowledge, skills, and abilities, we enable the University, through our work, to deliver practical benefits to millions of people who would otherwise never come into contact with it. In this way we provide recognition of individual learners' achievements, thereby assisting them to achieve their own educational and career objectives, giving them access to further progress in education (including entry to universities) and in the workplace. The Group's activities contribute in a tangible way to the needs and development of countries across the world.

The Group values the involvement of the University in its work, through the participation of University staff as members of its committees or as examiners, and through participation in the outreach activities of Departments, of which the Millennium Mathematics Project is a leading example. The Group contributes to the University's work on admissions by administering the STEP examination and screening tests for applicants to read Medicine and Veterinary Medicine, and Computer Sciences; it is also involved in supporting other activities.

The brand names 'UCLES' and 'OCR', in their various representations, are immensely valuable property of the University. The Group takes active steps to protect this property, by the registration of trademarks and Internet domain names, and by exercising strict control over the ways in which its many partners and clients may describe their association with the Group; where infringements are detected, firm action is taken to ensure compliance with our rules. CIE and ESOL worked closely together to review the branding of their activities, and the ways in which the exploitation of this branding by centres could be regulated most effectively. The 'Cambridge' brand is clearly one of the most important factors in the global success of the examinations, and it is important to ensure that it is used effectively, without compromising any of the University's other activities or interests. This is reflected in the changes to ESOL's and CIE's branding, which were approved by the Council.

Security of Qualifications

One factor that maintains the world-wide reputation of all the Group's qualifications is the close attention given to maintaining their security and integrity. This attention begins with absolute confidentiality over the setting of examination papers. It extends through the stages of printing, distribution to centres, and storage prior to the examination session. Security is maintained in the examination room and over the return of candidates' scripts to examiners. It continues through the collection of marks and the subsequent administrative processes to the issue of results. Each examination has its own schedule, which must be strictly adhered to, so that all the results can be published to centres on their due dates. Appropriate procedures are in place to maintain the security and integrity of assessments, such as coursework or project work, which are not conducted through timed, unseen examinations. Many stages of the process are conducted away from the Group's premises and effective measures are taken to ensure that the necessary involvement of third parties, whoever and wherever they may be, does not compromise the integrity of our qualifications in any way. This is an immense logistical undertaking. In the last year the Group dealt with over 8.1 million subject entries from over 12,000 centres in over 150 countries, dispatched over 12 million question papers with large quantities of supporting materials, and called on the services of some 20,000 examiners.

Regulation and Standards

OCR's general qualifications are closely regulated by the Qualifications and Curriculum Authority (QCA). This regulation covers the subjects and the number of syllabuses that can be offered, syllabus content, schemes of assessment, and many aspects of administration. Notwithstanding this regulatory framework, the maintenance of awarding standards remains the responsibility of OCR, through its Chief Executive, who is designated in this role as the Accountable Officer; this responsibility is subject to regular public scrutiny and audit. Regulation of OCR's vocational qualifications, although not yet so complete, is also exercised by QCA.

Towards the end of the year, the Secretary of State for Education and Skills set up the Tomlinson inquiry on A Level standards. OCR co-operated fully with the inquiry, the initial stages of which took place in late September, and both the inquiry and QCA, who conducted their own investigation, supported OCR's actions.

CIE is responsible for the definition and maintenance of standards for all of the Group's international qualifications, although where general qualifications are administered in partnership with a Ministry of Education, that Ministry is increasingly involved in standard setting and in the administrative aspects of regulation.

ESOL is fully responsible for the regulation of its work and for the setting and maintenance of standards. In this it must look to competition from the USA, unlike OCR and CIE, whose competition is essentially based on the British approach to education. ESOL has been working with QCA, however, to ensure that its examinations are compatible with the UK National Qualifications Framework and achieved formal accreditation for its examinations, which will allow further education institutions to gain funding for courses leading to the exams.

The strenuous efforts the Group makes to maintain the standard and rigour of all its awards is a primary reason why its qualifications are highly regarded. This again is a major task, involving statistical analysis, comparative studies, and research projects into various aspects of the assessment process. It also depends heavily on the expertise and judgement of the senior examiners and the subject officers who are ultimately the guardians of the Group's standards. Most examiners for our general qualifications are drawn from the ranks of the teaching profession, in schools, colleges, and universities; for our vocational qualifications, assessors and verifiers are drawn from those directly involved in training and the workplace. All examiners, assessors, and verifiers are trained in their work and a variety of approaches is used to ensure conformity to laid down marking practices and, as appropriate, regulatory Codes of Practice.

In many parts of the world the media have great influence and it is often difficult to maintain a rational debate about standards based on fact rather than opinion. Political, economic, societal, and technological factors all have a strong impact on a nation's requirements for education and training; consequently what is expected in educational achievement at primary, secondary, and tertiary levels undergoes continuous change. In these circumstances, it is inappropriate to discuss a comparison of standards over long periods of time; comparison of questions set in the nineteenth century with those which today's examination candidates face suggests that what is expected of them has changed and largely increased. Indeed, it would be surprising if the general level of educational achievement in candidates for the Group's examinations had not been on a continuously rising curve, bearing in mind the amount of public and private money that has been fed into education over the years.

Lifelong Learning

Much of the Group's work has traditionally been directed to pupils in secondary education, leading up to university entrance or, for those not proceeding to tertiary education, entry into the workplace. However, in line with the increasing world-wide demand for lifelong learning, the Group provides qualifications for people of all ages, especially in the areas of English language tests and vocational and skills-based qualifications. We work closely with users of such qualifications, especially employers, to align our qualifications with their needs. The Group also has a long tradition of offering qualifications for teachers of ESOL. We have recognized that there is now a need, particularly in many of our international markets, to provide qualifications for teachers who wish to update their skills, especially in the area of IT. In addition to these specific programmes, we organize annually a large number of training sessions for teachers, to help them understand the requirements of the syllabuses and the schemes of assessment in their subjects. Provision of resource material in printed and electronic form, for teachers and pupils, is another essential feature of our work. The Group works closely with a number of leading publishers in ensuring that up-to-date learning and teaching materials are available.

People

The Group is heavily reliant on the knowledge and experience of its staff and external examiners and great attention is paid to their further training and development. The Group also depends upon the services of a number of contractors and consultants. Syndics wish to record their appreciation of the work of all those who have contributed to the Group's activities over the past year.

Finance

As is shown in the attached accounts, which have been prepared in compliance with the Statement of Recommended Practice: Accounting for Charities, the UCLES Group achieved a surplus of £1.6 million for the financial year 2001-02, compared to a surplus of £2.2 million in 2000-01. Each of the three business streams recorded an operating surplus.

Income from examination fees and other educational and assessment services increased from £118.8 million to £129.2 million due to increased revenue in all three Business Streams.

The overall expenditure in providing examination services was £10.5 million higher than in 2000-01, due to increased costs of examinations arising from additional entries and higher expenditure on Information Management and staff costs.

During the year 2001-02, £0.25 million was transferred from the West Midlands Examinations Board to the WMEB Fund (Statutes and Ordinances, p. 896).

Although continuing growth is forecast in the number of examination entries, fee rates are subject to external pressures particularly from customers who are billed in euros (whilst sterling remains strong against the euro) or where they find it difficult to raise foreign currency to pay in sterling.

Thus the Group must maintain a strong balance sheet in order to ensure financial stability in a risky business environment and to provide a cushion against adverse circumstances. Reserves are also required to fund investment in the development of the Group's infrastructure and business and to ensure that no financial liability will ever fall on general University funds. Syndics consider that it would be imprudent for the Group to rely on loans to fund any of these requirements and that the University is unlikely to wish to divert general resources to support the Group's work. The Group must therefore maintain sufficient reserves to meet all its funding requirements, in bad as well as good times. The available reserves provide the necessary buffer to meet the Group's investment needs and cover for contingencies. Over the last decade the ratio of available reserves to annual operating costs has more than halved and Syndics concluded that a ratio of 80% (based on the accounts to 30 September 2000) was an appropriate figure. It has been the Group's policy to invest the available reserves in the University's Amalgamated Fund. This policy has served the Group (and the University) well over the years, enabling substantial support to be given to a range of general University purposes and to scholarship schemes for students from the Commonwealth and other countries, without drawing on the operating account. However, the policy introduces its own risk when, from time to time, stock markets fall. At 30 September 2002 the accounts showed a further unrealized loss of £10.3 million (as against a loss of £11.3 million in 2000-01). As a result, the ratio of available reserves to operating costs fell to 52%, less than Syndics had concluded was necessary in 2000; however, on the assumption that stock markets will recover Syndics have decided that this lower level of available reserves is acceptable for the moment.

During the year £3.8 million was transferred to the Chest, in line with the agreement reached between Syndics and the Council in 1995, to transfer £3 million annually indexed by the change in the retail price index. Despite the fall at 30 September 2002 in the value of its available reserves, the Syndics will continue the policy next year, because most of the transfer should be covered by investment income. In addition, the Group has given financial assistance on a small scale to a number of University activities that relate closely to the Group's mission: support for the undergraduate admissions prospectus; the Millennium Mathematics Project, an outreach activity to schools run jointly by the Departments of Education and of Applied Mathematics and Theoretical Physics; and grants to some of the less well endowed Colleges to support overseas students, in recognition of the importance of international work to the Group. These grants will be continued next year. The Group has also agreed to provide the screening tests used by Colleges for admission purposes in the Medical and Computer Sciences without charge, initially for a period of three years.

Since 1981 the Group has transferred from its reserves and investment income £95 million to general University funds; £18 million to the Cambridge Commonwealth and Overseas Trusts; and £3 million to establish the Research Centre for English and Applied Linguistics.

Corporate Governance

The Syndicate, comprising six members of the Regent House and six external members, along with a Chairman appointed by the Vice-Chancellor and the Treasurer, is responsible for the oversight of the work of the Group. It met ten times during the year. All the Syndics and the Group Chief Executive are directors of OCR and, from the start of the year, a revised constitution was in place whereby the OCR Board and the Syndicate had a common membership and formal meetings of the OCR Board were held as part of each Syndicate meeting.

The Group Remuneration Committee met three times during the year to review the remuneration of the Group's senior executives and to consider matters of general remuneration policy. The salary of the Group Chief Executive is determined by the full Syndicate. The Nominations Committee had one meeting.

The Syndicate has in place an agreed statement of the powers delegated to the Group Chief Executive. The day-to-day management of the Group is the responsibility of the Group Chief Executive and the Corporate Board, whose other members comprise the Chief Executives of the three business streams, the Deputy Chief Executive of OCR, and the Group Directors of Finance, Information Management and Human Resources. Dr Michael Halstead retired as Group Chief Executive in May and was succeeded by Mr Simon Lebus who joined the Group on 1 July.

Internal audit is contracted to Robson Rhodes, who report to the University Audit Committee.

Business Risks

The Syndics/OCR Board confirm the major risks to which UCLES/OCR is exposed, as identified by the Syndics/trustees, have been reviewed and systems have been established to mitigate those risks.

Corporate Developments

Printing is of critical importance to the Group and, in recognizing this, a Group Print Manager was appointed to manage the relationship with Cambridge University Press and other suppliers. The Group Print Manager has begun to investigate opportunities for reducing costs and improving the efficiency of printing operations, building on work undertaken by the consultants Pira International Ltd.

A consultant was engaged to identify business risks and suitable contingency arrangements for maintaining business continuity in the event of a major disruption to the Group's activities. This work will be taken forward by the new Group Premises and Services Director, Raymond McNeill. Mr McNeill replaces Reg Horrod who died suddenly in June.

The Group also appointed an interim Health and Safety manager to undertake a detailed review of the Group's health and safety arrangements. As a result of this work, a new Group Health and Safety Policy was agreed, along with detailed procedures, and reference materials for all existing and new staff were prepared. Many other more practical measures were taken to improve arrangements at the Group's various sites.

Terms and conditions of employment were harmonized across the Group in January 2002, and the HR Division has continued to review Policies and Procedures to harmonize these across the Group. In addition, OCR and Corporate Services agreed to introduce a new performance management system with effect from 1 October 2002. The operation of the new scheme, and performance related pay arrangements, will be reviewed during the coming year.

The area formerly occupied by the print operation in Progress House, Coventry has been re-developed to provide office space for the Coventry Finance unit, enabling the lease of Rowan House to be surrendered, and the Birmingham regional office. This new facility also helps to relieve existing over-crowding in the Coventry offices as well as providing meeting room facilities on site. An extension of the lease to the Simpers warehouse was negotiated for a period of three years, thereby deferring the problem of long-term warehouse provision in Cambridge. The Group is proceeding with the purchase of South Cambridgeshire Hall and House, but is unlikely to be able to take occupancy until 2005.

IM

The consolidation of the Group's examinations processing systems continued throughout the year. This work included the creation of a separate processing system for OCR to meet regulatory requirements and improve throughput for all business streams. The business processes and supporting systems are now very stable and contributed towards smooth and efficient operational delivery of examinations throughout the year.

The significant investment in new technology commenced in the previous year was taken forward with a number of strategic developments. New infrastructure platforms for Web-based systems were put in place and new websites for CIE, ESOL, and OCR developed. In addition, the initial phase of a new customer management database and the first applications based on this, in particular to support CIE and ESOL centre registration policies, were developed. Further development of customer facing applications is planned by all business streams in the next year.

In addition, a number of pilots of other new technologies, including electronic document management, business intelligence tools, document scanning, and online assessment were undertaken to assist the business in developing a modernization programme for assessment and administration.

The Interactive Technologies in Assessment and Learning (ITAL) unit's expertise in computer assisted assessment continued to be recognized and QCA commissioned two reports from it on security aspects of computer-based Key Stage 3 ICT tests, and the impact of electronic marking on Key Stage 2 and 3 test design with the Research and Evaluation Division (RED). ITAL has also been working with CIE and OCR to investigate ways of using Internet-based communication technologies to bring teachers together in virtual communities to share best practice, and to receive training without them having to travel long distances or leave the classroom for long periods.

RED

The Research and Evaluation Division has had a successful year across a wide range of activities, winning contracts and increasing dissemination through publications and conferencing. The National Curriculum Group successfully delivered seven Key Stage 3 tests for England, Wales, and Northern Ireland, and developed the new model for Key Stage 3 English assessment in England for 2003. The Primary Assessment Unit gathered evidence showing that the National Literacy programme has produced real gains in literacy standards and published a framework for the primary school curriculum which, while based on UK practice, could be applied in other countries. RED also developed an innovative interactive computer-based assessment for high ability maths students in collaboration with colleagues at the University working on the Millennium Mathematics Project.

Outlook

The long term prospects of the Group appear to be favourable although there are significant challenges ahead including continuing localization of CIE's business.

In the UK, there are likely to be many major initiatives on the horizon emerging from the Tomlinson Inquiry, the government's proposals for 14-19 education, and developments for lifelong learning. OCR is well positioned to respond positively to these challenges.

19 December 2002

Auditors

KPMG LLP, 37 Hills Road, Cambridge, CB2 1XL

Bankers

Barclays Bank Plc, 15 Bene't Street, Cambridge, CB3 3PZ

HSBC Plc, 2 Station Avenue, Coventry, CV4 9GQ

Appendix A: The Local Examinations Syndicate

Appendix B: The OCR Board

The membership of the Board during 2001-02 was:

Appendix C: UCLES Group Corporate Board

Appendix D: Subject Entries by Business Stream

Appendix E: List of Acronyms

Appendix F [90Kb pdf]   more information on PDF

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Cambridge University Reporter, 2 May 2003