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Eleventh 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 governing body of the University, which is the Regent House. 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 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.

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

(i) the Annual Report of the Council;
(ii) the Abstract of the Accounts of the University; and
(iii) any Report of the Council proposing allocations from the Chest.

It also has 'the right of reporting to the University on any matters falling within the scope' of this scrutiny, 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 Eleventh Report follows this tradition.

3. In carrying out these functions during the academical year 2005-06 the Board of Scrutiny met fortnightly during each Full Term, with three extra meetings during June and July to finalize its annual Report. It held meetings with the Vice-Chancellor, Pro-Vice-Chancellors Leslie, Minson, and McKendrick, the Registrary, the Director of Finance, the Director of External Affairs and Communications, Mr David Adamson (then Director of EMBS1), the Head of Planning and Property (EMBS), and Dr Christopher Padfield. From time to time it has requested information and/or papers from these and other persons concerned in running the University. To all of them we are grateful for the time and help they have given us.

4. The Board was provided with part-time administrative assistance this year by Miss Emma Easterbrook, whose help has been invaluable.

Financial Matters

The University budget

5. In recent years, the University has been running at a deficit. As the Board has noted in the past, the existence and size of the deficit has depended on whether one is looking at the University on its own ('Little U'), or the University and its subsidiary undertakings and related entities, notably UCLES and CUP ('Big U'). University accounting has also traditionally distinguished between Chest and non-Chest.2 Here again, the out-turn (predicted or actual) will differ depending on whether one is considering only the Chest or the aggregate of Chest and non-Chest income and expenditure. These distinctions make comparisons complex and have led to a plethora of numbers which do not make easy reading for those members of the University who are not closely involved with finance. The major source of concern over the past five years has been the core academic operations of the University, in particular that part of them which is funded from the 'Chest'. The deficits which have occurred have been correctly identified by successive Reports of the central bodies (and the Board) as the result of a sustained under-funding of both the teaching and research activities of the University by HEFCE and research sponsors.

6. The Board first addressed the issues raised by the deficit in its Seventh Report in 2002. In its Eighth, Ninth, and Tenth Reports in 2003-05, the Board attempted to evaluate the steps taken by the University and its senior officers to address the deficit and, in this Eleventh Report, it attempts to assess the progress that has been made since the last Report.

7. The first thing which should be stated is that the University's financial position is improving. Indeed there was a significant improvement in the final results as presented in the accounts for the financial year 2004-05. At the time of the Allocations Report in May 2005, the expectation was that 'Little U', that is consolidated Chest and non-Chest accounts for the University's core academic activities, would show a deficit in the order of £10m. The deficit reported in the Abstract of Accounts3 and Financial Management Information4 was approximately £3m for 'Little U'. Although there are differences in the preparation of allocations and accounts which make a direct comparison difficult, there is some real improvement between the forecast and the result. The latest forecast (May 2006) for the current financial year predicts a Chest deficit of £8.1m; the 2006 Allocations Report makes no predictions for the 'Little U' outcome for the current financial year (2005-06). However, Professor Minson has recently stated that the final accounts are expected to be close to break-even on continuing operations5; we understand this to be true on the 'Little U' basis.6 The year-on-year improvement is the result of two positive movements: income is up and costs, while not actually down, are lower than expected. Funding has increased for research, via real-terms increases in HEFCE 'QR' and full economic costing (fEC, thus far limited to a transitional payment in 2004-05). Further increases are in the pipeline; for teaching, via the new higher home and EU undergraduate fee rate, and for research, by full implementation of fEC. There has been a major sustained effort at reducing costs within the University.

8. The Board in its Tenth Report commended the attempt to identify and control expenditure by asking the Schools and non-School institutions to produce five-year plans. The Board has again seen the plans prepared by both Schools and NSIs as part of the 2005 Planning Round and welcomes the increased consistency of the underlying assumptions that has resulted from the growing maturity of the planning process. The Board strongly supports the efforts that have been made in the preparation of these plans and estimates. The thinking engendered by this exercise, together with a devolved budgeting system which permits Schools to retain surpluses produced by exceeding their savings targets, have been crucial in reducing the deficit. Indeed, the Board understands that Schools have been so successful at producing savings that they have collectively agreed to return half their savings on pay (£3m) to the central coffers, contributing to the reduction in the forecast deficit for 2005-06.

9. The 2006-07 Allocations Report7 was published in the Reporter of 1 June 2006, shortly before the announcement by the Joint Negotiating Committee for Higher Education Staff of a settlement of the pay dispute.8 As stated by Pro-Vice-Chancellor Minson in his introduction to the Discussion of the Report,9 the effects of the pay settlement (at the time of writing still subject to ratification) would be to increase projected pay costs by approximately £1m in 2006-07 and by £8m in 2008-09.

10. The Allocations Report projects an overall (Chest and non-Chest) deficit of £1.7m for 2006-07, switching to a surplus of £11.2m in 2007-08, £16.1m in 2008-09, and £16.3m in 2009-10. These sums have to be adjusted for the effects of the recent pay settlement. The Board welcomes the reversal of the trend of financial deficits and the return to a more sound financial footing and commends the hard work of the officers involved, both in the centre and the Schools. Notwithstanding the success achieved to date, the Board urges caution on reading the financial forecasts for two reasons:

(i) Even if a surplus of £16.3m could be achieved, it represents only 2% of revenues; and
(ii) There remain considerable uncertainties that could reduce the surpluses as discussed below.

11. At the projected 2009-10 level of surplus of around £8m (after pay adjustment), the University is not generating sufficient levels of revenue and cash to strengthen its reserves. It will take several years to make good the depletion of the Quinquennial Equalization Fund (QEF). However, a measure of the improvement in the past two years may be gained from comparing the forecast in this year's Allocations Report for the QEF accumulated deficit at July 2007 (£27m) with the forecast of May 2004 (£55.6m).10 The low level of surplus generated will inevitably leave the University more vulnerable to external influences. The Board noted Professor Minson's views at the Discussion of last year's Allocations Report that an appropriate level of surplus would be of the order of £30m per year.11 The problem of insufficient cash generation is structural, i.e. the University's revenue structures limit its ability to control the level of surplus. The importance of the development effort in raising additional revenues cannot be under-estimated. The 800th campaign should perhaps be seen more as a starting point than as a culminating objective.

12. Despite the problems in generating a regular budget surplus sufficient to enable a desirable level of investment, the Board is glad to give a cautious welcome to the decision to transfer £10.5m in capital from UCLES to the Strategic Planning Reserve.12 The Board understands that some of this capital has been distributed to Chairs of Schools to enable them to provide proactive support for local academic priorities, e.g. recruitment/retention of staff. This type of strategic investment is essential to forward the University's academic development.

Financial risks

13. The Board, along with the Central Bodies, has consistently identified pay and pensions as among the most significant risks affecting the future finances of the University. To a considerable extent both of these factors are national ones, not specific to this university. The University's main pension schemes are the Universities Superannuation Scheme (USS), and the Cambridge University Assistants' Pension Scheme (CPS). The USS has advised institutions that the employers' contribution rate will be maintained at current levels for the present. However, the actuary's report13 contains a number of caveats and reserves the possibility of the Trustee adjusting contribution rates before the next full actuarial valuation, due to take place in 2008. One of the caveats stems from the need to understand whether the trend which has seen an increasing proportion of staff promoted to senior academic positions in the HE sector over the period 2002-04 is an on-going one. The consequences of the implementation of the single spine and other pay trends in the sector will also require evaluation. Such structural changes in pay have quite significant implications for long-term USS payouts and for the ability of USS to meet compulsory minimum funding requirements. Changes in the assumptions of future investment returns have an even larger effect on pension funds and, in line with experience over the past several years, the impending new regulatory regime requires these assumptions to be kept under close review. A full triennial valuation of the CPS was carried out on 31 July 2003, the results of which triggered an additional payment by the University of £12.08m during the year which ended 31 July 2004.

14. The Allocations Report repeats last year's warning that 'it would be prudent to suppose that, with the advent of fEC, other funding streams in support of research, notably SRIF, will in due course be reduced and that it may therefore be necessary to increase Chest expenditure on core infrastructure'.14 The Board notes that this year's Report refers to sums being set aside in 2008-09 and 2009-10,15 understood to be about £12m p.a. If, as hoped, SRIF continues for a further round, these projected allocations may be available to offset the costs of the pay settlement and to improve the overall position.

15. HEFCE's future actions remain an area of uncertainty. The projections are based on assumptions that funding for teaching will increase in line with inflation and that research (QR) funding will increase at 2% above inflation. Almost every year HEFCE changes elements of the formulae used to fund universities. During the current academical year HEFCE has been consulting universities on changes to the method for funding teaching.16 The Board agrees that 'a number of the proposals would be unwelcome to the University'.17

16. It is not appropriate to provide a detailed account of HEFCE's proposals here, but there are two issues worth noting in the Cambridge context. One is the proposal to change the assumed level of fees, which is deducted by HEFCE from the calculated total level of resource to arrive at the actual main teaching allocation. HEFCE has suggested that the assumed home undergraduate fee might be increased from the current £1,200 to £1,750 in 2007-08 and £2,000 in 2008-09. One controversial element of the change in assumed fee is the extent to which it is judged to contravene the principle of 'additionality', which embodies the promise that the extra income from higher fees would be additional to existing income; HEFCE interprets this principle as operating at a sector-wide level only. The effect of this is to increase the money paid in respect of higher-cost subjects (price groups A and B in technical terms)18 and reduces the resource allocated for lower-cost subjects (price groups C and D).19 Overall it would reduce the calculated level for Cambridge by a modest sum (approx £0.7m p.a.) but it is important to recognize that it would not necessarily reduce our actual HEFCE 'T' allocation. This is because although HEFCE calculates an assumed total resource according to a formula, it actually allocates a sum rolled forward from the previous year (i.e. last year's allocation adjusted for the annual funding increase) unless the assumed resource and rolled-forward resource differ by more than 5%.20 This method is designed to provide HEIs with more predictable and stable funding; its effect is to smooth out small changes in the formula and is often referred to as the 5% tolerance band. The second significant proposal is to convert premiums paid for special factors, currently added to the 'T' core and subject to the tolerance band, into targeted allocations which will be outside the tolerance band smoothing. This would affect the 'old and historic buildings' premium (currently worth about £4.3m to the University): this premium and related matters are the subject of ongoing negotiations between the University and HEFCE. HEFCE has published a summary of responses to the consultative proposals with its comments.21 The two issues discussed above were of some concern to a number of institutions and HEFCE will announce its plans later this year.

17. An additional source of uncertainty is introduced for the medium term by the outcome of the 2008 RAE and the possible transition to a metrics-based research funding system, at least for science and technology-based (STEM) subjects. This latter transition might begin as early as 2009-10.22 The 2008 RAE data will not inform HEFCE allocations until 2008-09 - and then only for volume measures. The new quality-rating data are not expected to be available until allocations for 2009-10. Given this timing, some have questioned the value of proceeding with the 2008 RAE as constituted.

18. At least one further change in funding has already been announced by HEFCE.23 The Museums and Galleries Fund is managed for HEFCE by the Arts and Humanities Research Council (AHRC). It supports museums and galleries in the higher education sector where the cost of stewardship goes beyond what universities could be expected to meet from mainstream funding for teaching and research, as well as collections that have research significance beyond their home institutions. This funding stream, which is worth some £1.7m p.a. to the University, is scheduled to cease in 2009. There is no indication of any funding to replace this stream. Cambridge is fortunate in the depth and breadth of its museum collections, which provide an important scholarly and teaching resource as well as making significant contributions to public outreach activities. The future funding of these museums is therefore a matter of concern.

Other financial matters

19. The Board welcomes the successful renegotiation of the Terms of Agreement between the University and the Colleges. Overall the Board believes that the new fee agreement strikes a fair balance between the interests of both parties. Nevertheless, under the new agreement the University is accepting any risk of adverse changes in HEFCE funding allocation for teaching. In return the University retains the benefit of the increased fee income. The net result in the next financial year is an increased allocation to the Colleges of £2.3m over the forecast based on the previous formula.

20. The Board has been concerned in recent years at the rate of expansion in the University administration. It has previously pointed out the rapid growth in administrative staff numbers but precise total figures have been impossible to obtain. As a proxy measure, the costs of administrative pay rose by 9.6% from 2003-04 to 2004-05 while the pay costs across the whole University rose by 3.3% for the same period.24 The Board has noted in previous Reports that the University's administration has been expanding at a faster rate than the University as a whole for several years. It remains concerned that this trend, which has been recognized as a necessary 'catch-up' in the past, does not show the expected return to the 'norm' for the rest of the establishment. The Board would be glad to learn that the Council has a plan to bring the expansion in administrative costs and staff numbers into line with the overall rate of growth in University activities.

21. In its review of the plans submitted for the 2005 Planning Round, the Board found some evidence that the positive change in thinking in the Schools plans has yet to percolate to some NSIs. Nevertheless, many other NSIs demonstrate clear planning, excellent operational efficiency, and value-for-money. In its Tenth Report, the Board suggested that increased operational co-ordination of small NSIs might be financially advantageous and it may be that a move towards some larger cost centres in some areas would contribute to a change in thinking. However, it should be emphasized that any reorganization must be justifiable both by improvements to administrative arrangements and on financial grounds. Any reorganization of NSIs which increased bureaucracy and costs would, in the Board's view, be a mistake. The varying size, areas of activity, and overall quality of both governance and management among the NSIs calls for some caution in moving forward with change. The old adage that 'if it ain't broke don't fix it' is particularly applicable here. It is important, in determining whether appropriate structures are in place, that where operational efficiency, good practice, and high morale already exist in an NSI, such as the Careers Service, these must not be undermined by unnecessary and expensive central bureaucracy.

22. The Board believes that any such changes and reorganization should be conducted against a background of a solid and documented evidence base, which should be available for inspection. There should be sufficient time allowed for wide consultation and all appropriate procedural steps and required Ordinance changes should be properly reported upon and secured before any changes are implemented. It also considers that the consequences of any reorganization and change need to be fully thought through and properly costed in advance. A further expansion in administrative budgets needs explicitly to be justified.

Consolidation of Accounts

23. The Board notes with approval the steps towards a complete consolidation of the University's financial accounts, which is expected to happen for the first time in 2005-06 with the inclusion of the accounts of CUP. This should allow the auditors to confirm that the accounts now comply with applicable United Kingdom accounting standards and provide a 'true and fair view' of the University's financial position.

24. One of the technical challenges created by the consolidation of the Accounts is the presentation of segmental or disaggregated activity reports in a way which makes clear the financial performance of the different strands of University operations. In particular it is helpful to have a transparent explanation of the underlying surplus or deficit for each major area and the inter-segmental, intra-group transfers which overlie these to produce the final consolidated outcome. The Board has discussed this issue with the Director of Finance who has stated his desire to improve the clarity of the information provided in future years. The Board is strongly supportive of this endeavour. If, for the sake of simplicity, it proves necessary to provide additional information outside the formal statement of Accounts, this would nevertheless be welcome.

Joined-up budgeting

25. The Board continues to believe that the interests of the University would be well-served if the annual Allocations Report could be developed into a 'joined-up' budget for the University which consolidates financial allocations and forecasts for the University's core academic activities 'Little U'. Although in some senses this is already what the Allocations Report does, it remains true that the detail therein is much more complete for the Chest activities than for those funded by non-Chest resources. This issue assumes a greater importance as the proportion of University activity which is non-Chest continues to grow. Furthermore, now that many of the budget decisions are devolved, there is an evident lack of accountability and transparency. We understand that the Finance Division is mindful of the potential benefits and we hope that the annual financial planning exercise will facilitate a joined-up approach to University budgeting.

26. One development which has occurred in the past year comprises a small number of structural changes to the Resource Allocation Model (RAM). RAM, to put it in simplistic terms, is a set of formulae designed to show which parts of the University 'earn' the income that the University receives from different sources, and to determine how much of that income each of those parts is then to be allowed to spend. It has primarily been used to set savings targets and is embedded into the annual planning process. When the Board commented on the RAM in its Ninth Report, it commended the intentions behind the model but recommended that certain technical issues involving allocation of teaching funds and the top-slicing of the College Fee might be re-examined to avoid perverse incentives. The latest revision of the RAM now allocates expenditure for the College Fee to Schools on a per capita basis; in addition the subject weightings have been revised to reflect teaching income 'as earned' from HEFCE.25 These changes are welcomed by the Board as producing a more 'real' model of income and expenditure.

Building projects

27. The University continues to make major investment in the construction of new buildings and the refurbishment of existing ones. The Board drew attention in its Ninth Report to the then current Estate Plan, which concluded that the University's estate had expanded to a size which was not sustainable in the medium term. The latest version of the Estate Plan re-emphasizes that view and notes that: 'The operational estate has grown beyond a sustainable size for needs identified for the next five years. Proposals for further expansion must continue to be subject to full scrutiny through the Capital Projects Process … Future additions to the estate should be accompanied by compensating disposals unless they are shown by a business plan to be fully self financing or are to meet an approved and directly associated increase in the volume of activity with identified and sufficient funding'.26

28. It is necessary to recognize that space is expensive to operate and maintain. A continued expansion of the operational estate will only be sustainable if income rises faster than our expenditure on non-estate items. As discussed above, the University is attempting to return to a position of operational surpluses sufficiently large to enable proactive strategic investment in academic developments. For these reasons it is important that the estate is carefully controlled.

29. The University continues to maintain a strict limit on the long-term maintenance budget. This will be £15m in 2006-07, a level which has not increased in cash terms over the provision in 2003-04 despite a significant increase in costs. The strategy of holding down the level of maintenance spending has been justified by the high level of capital spending on refurbishment projects, largely supported by SRIF, and the reported condition of the estate. In this context SRIF will contribute some £31m in the 2006-08 period. The Allocations Report27 records preliminary indications that SRIF allocation will continue for a further round.

30. As with all procurement, it is important that the University obtains value for money from its new buildings and major refurbishment programmes. It is also important that proper budgetary control is exercised. In general, the management of the new buildings projects has delivered them within budget. However, there have been a number of projects completed in the past twelve months which have incurred significant cost over-runs. The projects involved were the new buildings for English, Criminology, the Gurdon Institute, and the CR-UK building. The reasons for the increases in expenditure on these projects are varied and complex. In at least one case, the final costs are not yet known and are still the subject of dispute between the University and its contractors. The total increase in expenditure over and above what was approved by Grace of the relevant Reports is in the order of £10m, not including any future settlements of outstanding disputes. It is important to recognize that these capital sums do not immediately adversely affect the University's current income and expenditure account since, in accounting terms, they are capitalized in the accounts and thus 'expensed' over the accounting lifetime of the building. Nevertheless, they have to be paid, typically from cash reserves which inevitably means a loss to the University of investment return or interest (approximately £0.4m p.a. loss of income for capital costs of £10m).

31. It is appropriate to ask whether there are lessons to be learned for the future management of such projects. The Board believes that there are, notwithstanding that there have already been significant changes to the capital projects process and the policies of the University in procuring buildings since these four projects were initiated. We are pleased to note that the relevant central committees have taken a pro-active stance in investigating these particular projects and the Board has reason to believe that lessons are being taken on board.

32. While the Board believes that it is both necessary and appropriate that the PRC manage these projects and are able to approve increases in expenditure, it does think that significant increases in project costs should be noted in the relevant Allocations Report. Although the primary purpose of the Allocations Report is to seek approval for the future expenditure of Chest funds, it is also customary to report on changes to the financial forecasts for the current year and on the capital expenditure on buildings. In the Board's view, reporting variation between approved and forecast budgets represents part of the stewardship role within the Council's responsibilities to the Regent House.

Recommendations

1.    The University should contain the rate of expansion of its administration, both in terms of head-count and cost, within the rate of growth of the University as a whole.

2.    Any reorganization of non-School institutions should focus only on areas where expectation of an improvement in performance and value-for-money can be reasonably demonstrated.

3.    Appropriate Ordinance changes should be secured in advance of any administrative reorganization of Syndicates or comparable independent units.

4.    When major capital projects substantially exceed their approved costs, this should be reported to the University.

Major Projects

North-West Cambridge

33. The University has been engaged in producing proposals for the development of a major new site in North-West Cambridge for several years. There have been three Reports to the University, the last of which28 was approved in April 2005. The completion of the Cambridge Local Plan, which is expected to be adopted by Cambridge City Council on 20 July 2006, represents a major step forward for this project. The new Cambridge Local Plan designates the University's land in North-West Cambridge as an area of major change in the planning period 2006-16. This should permit the University to proceed with the development.

34. The University has been developing a Masterplan, along the lines authorized by the Third Report. A major feature of the planned development is residential accommodation for University staff; other elements include provision for collegiate development, modest academic building, and some related commercial development as well as necessary community infrastructure. The Third Report envisaged that the initial phase of development would focus on residential building and that the development would be financed by selling some of the housing on the open market. The planning inspector examining the Draft Cambridge Local Plan considered submissions from the University and Cambridge City Council on the issue of how much housing should be reserved for University use. The inspector concluded that 50% was an appropriate figure (subject to financial viability)29; this conclusion has been incorporated into the final plan. Technically the Cambridge Local Plan applies only to that portion of the site, which is within the City boundary. The development of the site requires the preparation of a Joint Area Action Plan by the City Council and South Cambridgeshire District Council, although housing could be built on part of the site in advance of this Plan.

35. The Board believes that the University needs carefully to consider what size and number of accommodation units would best serve to meet the future needs of University staff. It is widely believed that the high cost of housing in Cambridge is an important factor in creating difficulties for the University in recruiting new staff. Clearly the differing needs of newly recruited staff will influence the type of accommodation which would prove attractive to them.

36. At the moment the University has 338 accommodation units available for staff, all on a rental basis. The proposals for North-West Cambridge will add 1,000-1,250 units to the total. One of the options under consideration is to rent out only half of the units and to employ one or more forms of shared ownership to enable a wider spectrum of staff to benefit. The University has been operating a shared equity scheme since 2002.30 This scheme has attracted only four participants; this may be in part because the scheme has not been actively promoted and in part because it is unattractive to staff. The Board considers that the University needs to reflect on this experience when developing options for the range of tenure models to be used in North-West Cambridge. If the University is to attract 500+ staff into some form of shared ownership, it is likely that the options will need to be more attractive than the present shared equity scheme. Alternative routes to increasing the affordability of local housing should be considered. The Board is aware, for example, that there is a small but enthusiastic group of staff interested in self-build housing. There ought to be room for this kind of imaginative solution in a diverse community with breadth of vision.

37. The development of North-West Cambridge will be a very big undertaking, which will cost many hundreds of millions of pounds and take place over at least 15 to 20 years. It is clear that the University will need to take a number of key decisions on how the development is to be implemented. These include whether to form a company to manage the development or to engage a commercial partner, determining the mix of dwelling sizes and forms of tenure, whether to directly manage the rented properties or work with an appropriate partner. The Board urges the Council to continue to consult the University at all appropriate stages of the process and to involve a range of stakeholders in producing proposals.

Information Management Projects

38. The University is currently implementing two major computer software projects. In its Annual Report, the Council made brief comments to the effect that 'two major information management projects … are currently taking place: CamSIS, in the course of implementation in the University and the Colleges, for student information, and CHRIS, in the course of active development, for human resources information'. Given the history of such projects, both internally and elsewhere, it would have been more reassuring to be given some idea of the Council's assessment of progress on these systems. The Information Strategy Group has responsibility for these projects, but unfortunately the minutes of the Information Strategy Group are not available on the Web. We recommend that in future they should be. There is however good overview information via the project websites (http://www.chris.cam.ac.uk/ and http://www.camsis.cam.ac.uk/). The Board is glad to observe that piloting and phased roll-outs are planned for CHRIS.31

Cambridge Enterprise

39. A review of the Research Services Division, which reported in July 2004,32 recommended the separation of Cambridge Enterprise from RSD (§§18-20) and the need to move to 'customer focused culture targeted at academic sectors' (§39). The Board of Scrutiny especially welcomed these recommendations but notes that there is still some progress to be made. On the latter recommendation, it finds that there are still anecdotal reports of bureaucratic procedures hindering rather than helping principal investigators. The Division is still burdened by the failure of CUFS to bill research grant sponsors efficiently. It hopes that the recent (June 2006) upgrade of CUFS will at long last give the RSD the tools they need.

40. The Council accepted the recommendation to establish Cambridge Enterprise as a distinct entity outside the central administration and in October 2004 advertised the position of Director stating that the appointed individual would 'be responsible for the early revision of the current business plan for Cambridge Enterprise'.33 In March 2006, a new Director was appointed and in June 2006 the Council published plans for the incorporation of Cambridge Enterprise, which it is proposed to achieve by renaming an existing subsidiary company and transferring the relevant staff to this new entity.34 There are a number of issues in the draft business plan (which accompanied the Report) which are of concern to the Board (the expectation that consulting income can be increased by £0.75m p.a. while simultaneously increasing the administrative 'charge' from 10% to 20% to give one example). However, the Board considers that it is appropriate to allow the new Director time to refine and improve the business plan. For this reason it does not propose to comment in detail here. The Board recommends that the activities and financial accounts of Cambridge Enterprise should be the presented in an annual Report to the University.

41. On a related but separate topic, the Board is concerned that the arrangements for the housing of Cambridge Enterprise do not compromise its independence from the investors or professional advisors with whom it must deal. It is concerned that four members of Council (including an external member) expressed the view that the proposed arrangements for the East Forum might give rise to conflicts of interest or the appearance thereof,35 notwithstanding the clear statements regarding lack of any special privileges contained within the Report.36

Pay and Grading

42. The Board has been following the progress of the introduction of the single spine with interest, but feels it would not be appropriate to make any comment until the process is complete. We intend to return to this matter next year.

Recommendations

5.    Council should actively engage the University in developing proposals for North-West Cambridge.

6.    The minutes of the Information Strategy Group should be published on the University website.

7.    Once incorporated, Cambridge Enterprise should publish annual accounts and a report of its activities.

Administration and Governance

Statutes and Ordinances

43. Once again, the Board wishes to draw attention to the increasing discrepancy between the University's current practices and the published Statutes and Ordinances. The Council has already accepted that the discrepancy exists and indicated that revisions will be forthcoming in due course. The Board notes that, despite these assurances, no effective action has been taken; they consider that the matter is now urgent. To cite but one example: the Personnel Division currently places much emphasis on a distinction between academic and academic-related staff, but the most recently published Statutes and Ordinances make only one mention of the latter category.37 The Board can find no formal definition. This seems an untenable situation, which is likely to give rise to dissent and confusion. The Board repeats its recommendation that a complete revision of Statutes and Ordinances to bring them into line with current practice in the University is now a matter of urgency. It emphasizes that the revisions it recommends, while substantial, are relatively straightforward. If the University decides it wishes to embark upon a more radical revision of Statutes and Ordinances intended to alter the division of matters between the two and/or to make material change to the scope and compass of either, the Board strongly believes that the first step must be a wide consultation and debate about the policy to be pursued. A committee appointed by the Regent House, such as an occasional Syndicate, should lead this debate. The Board does not see any pressing need for such a major reform of Statutes, which would be both time consuming and expensive since outside legal expertise would probably be required.

Timing of Reports

44. At the Discussion on the 2006 Allocations Report and the Report on the Incorporation of Cambridge Enterprise,38 the Board drew attention to the fact that members of the Regent House had been allowed little more than one week, at one of the busiest times of the year, to comment on two substantial and important Reports. The Board notes that it is required by Chapter VII of Statute A to scrutinize the Allocations Report 'on behalf of the Regent House'. This year, timing did not permit the Board to perform this statutory duty in the most effective manner, so preventing it from providing guidance to the Regent House at or before the Discussion and submission of the Grace to approve the Allocations. The Board's comments on the Allocations Report are contained in this Annual Report, published long after the Allocations Report has been discussed and its recommendations approved. The Board notes that this is not ideal practice; it would much prefer to be able to publish its comments in such a way that they could be taken into account by members of the Regent House both at the Discussion and during consideration of the Grace. This could only be achieved by significant revision of the schedule followed this year, and they urge the Council to consider ways in which this might be achieved, entering into meaningful dialogue with such other bodies (including the Board) as may be appropriate.

45. The Board is aware of concern within the University that the re-branding of Addenbrooke's and Papworth hospitals as Cambridge University Hospitals NHS Trust was not notified in Reporter.

Recommendations

8.    The University should embark on a thorough updating of the Ordinances to ensure that they fully reflect Graces that have been approved.

9.    Council should consider allowing more time for the consideration of certain Reports before Discussions are held.

Summary of Recommendations

Financial Matters

1.    The University should contain the rate of expansion of its administration, both in terms of head-count and cost, within the rate of growth of the University as a whole.

2.    Any reorganization of non-School institutions should focus only on areas where expectation of an improvement in performance and value-for-money can be reasonably demonstrated.

3.    Appropriate Ordinance changes should be secured in advance of any administrative reorganization of Syndicates or comparable independent units.

4.    When major capital projects substantially exceed their approved costs, this should be reported to the University.

Major Projects

5.    Council should actively engage the University in developing proposals for North-West Cambridge.

6.    The minutes of the Information Strategy Group should be published on the University website.

7.    Once incorporated, Cambridge Enterprise should publish annual accounts and a report of its activities.

Administration and Governance

8.    The University should embark on a thorough updating of the Ordinances to ensure that they fully reflect Graces that have been approved.

9.    Council should consider allowing more time for the consideration of certain Reports before Discussions are held.

13 July 2006NICHOLAS HOLMES (Chairman)ELISABETH LEEDHAM-GREENNICK PYPER
 NICHOLAS DOWNERJOHN LITTLERICHARD STIBBS
 FRANK KINGDAVID PHILLIPSONDAVID YATES
 MICHAEL KUCZYNSKICATHERINE PITT 

(Margaret Glendenning was on leave during Easter Term)

Annex A: Glossary of Terms

AHRC:Arts and Humanities Research Council.
Allocations Report:An annual Report published in the Easter Term that gives details of the University's budget for Chest income and expenditure, together with an outline of the non-Chest budget.
Big U:The University in the most inclusive sense, including UCLES and CUP and certain associated Trusts.
CamSIS:Cambridge Student Information System.
Capital Projects Process:University Capital (building) Projects valued at over £1m.
Chest:An income stream consisting of funding council grants, Home and Overseas fees, endowment income, a share of research grant overheads, transfers from CUP and UCLES, and certain other operating income.
CHRIS:Cambridge Human Resources Information System.
CPS:Cambridge University Assistants' Contributory Pension Scheme.
CR-UK:Cancer Research-UK.
CUFS:Cambridge University Financial System.
CUP, or the Press:Cambridge University Press.
EMBS:Estate Management and Building Service.
fEC:Full economic costing.
HE:Higher Education.
HEFCE:Higher Education Funding Council for England.
HEI:Higher Education Institution.
Little U:The University in a narrow sense, that is to say the parts engaged in its core academic activities and excluding other parts of the corporation such as UCLES and CUP, subsidiary companies, and other related entities.
NSI:Non-School institution [of the University].
PRC:Planning and Resources Committee [a joint committee of the Council and the General Board].
PI:Principal Investigator.
PVC:Pro-Vice-Chancellor.
QEF:Quinquennial Equalization Fund: any surplus from the Chest at the end of the financial year is transferred into this fund, which is used to make up any deficit on the Chest in other years.
QR:A component of the HEFCE grant reflecting assessed research quality in a subject, the value of which is the product of a per capita sum reflecting the quality and the number of staff entered into the assessment.
RAE:Research Assessment Exercise.
RAM:Resource Allocation Model [for the University].
RSD:Research Services Division [part of the UAS].
SRIF:Science Research Investment Fund [managed by HEFCE].
STEM:Science, Technology, Engineering, Mathematics, and Medical subjects.
T:Block funding given to the University by HEFCE to support the teaching of Home and European Union students.
UAS:Unified Administrative Service [of the University].
UCLES:University of Cambridge Local Examinations Syndicate.
USS:Universities Superannuation Scheme.

1 See Annex A for an explanation of acronyms and specialized terms used.

2 A simplified definition of 'Chest' funds is the core central money which, by and large, the University can choose how to spend. It is allocated by an annual Report of the Council, approved by Grace. Non-Chest covers all the remaining income to the University, which is either received for specific purposes or is spent at someone else's discretion, typically a Department's.

3 Reporter, 16 December 2005, p. 256.

4 Reporter, Special Number 8, 2005-06.

5 i.e. excluding one-off profits on property sales.

6 Reporter, 21 June 2006, p. 770.

7 Reporter, 1 June 2006, p. 671.

8 http://www.ucea.ac.uk/Documents/12_pay/2006payagreement.pdf

9 Reporter, 21 June 2006, p. 770.

10 Reporter, 26 May 2004, p. 716.

11 Reporter, 15 June 2005, p. 819.

12 Reporter, 16 December 2005, p. 256.

13 USS Actuarial Valuation Report as at 31 March 2005.

14 Reporter, 1 June 2006, p. 671, §79.

15 Reporter, 1 June 2006, p. 671, §79.

16 HEFCE 2005/41.

17 Reporter, 1 June 2006, p. 671, §76.

18 Price group A: the clinical stages of medicine and veterinary science; B: laboratory-based subjects (science, pre-clinical stages of medicine and dentistry, engineering and technology).

19 Price group C: subjects with a studio, laboratory or field-work element; D: subjects not included in A, B, or C.

20 5% approximately, the precise tolerance band is fixed for each HEI by contract with HEFCE.

21 HEFCE 2006/12.

22 http://www.dfes.gov.uk/consultations/downloadableDocs/consultationDocument%20jcutshall2.doc

23 http://www.ahrc.ac.uk/holders/mgc/core_fund/core_support.asp?ComponentID=95439&SourcePageID=90714#1

24 Reporter, Special Number 8, 2005-06.

25 http://www.admin.cam.ac.uk/cam-only/offices/planning/strategic/round/2005/pr05_letter.pdf

26 http://www.admin.cam.ac.uk/cam-only/offices/embs/strategy/2005estate_strategy.pdf

27 Reporter, 1 June 2006, p. 671, §79.

28 Reporter, 2 March 2005, p. 513.

29 http://www.cambridge.gov.uk/ccm/navigation/environment/planning/cambridge-local-plan/local-plan-inquiry/

30 Reporter, 6 February 2002, p. 518.

31 http://www.chris.cam.ac.uk/cam-only/news/slides20060516.pdf, slide 14.

32 Reporter, 11 August 2004, p. 1047.

33 Reporter, 6 October 2004, p. 6.

34 Reporter, 1 June 2006, p. 683.

35 Reporter, 7 June 2006, p. 704.

36 Reporter, 7 June 2006, p. 704 §5.

37 Statutes and Ordinances 2005 ed., p. 633

38 Reporter, 21 June 2006, p. 770.


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Cambridge University Reporter 26 July 2006
Copyright © 2006 The Chancellor, Masters and Scholars of the University of Cambridge.