Annual Reports and Financial Statements for the year ended 31 July 2023

FINANCIAL REVIEW

Scope of the financial statements

The consolidated financial statements provide an overview of the finances and operations of the University Group (the ‘Group’) covering:

•the teaching and research activities of the University (the ‘Academic University’) and its subsidiary companies;

•Cambridge University Press & Assessment (the ‘Press & Assessment’) and its subsidiary companies, joint ventures, and associates;

•the Cambridge University Endowment Fund (‘CUEF’), the investment fund managed by the Group and holding the majority of the Group’s investments together with some investments of Colleges and other associated bodies; and

•the Gates Cambridge Trust and the Cambridge Commonwealth, European and International Trust (the ‘Associated Trusts’), and other subsidiaries of the Group not included in other segments that undertake activities, which, for legal or commercial reasons, are more appropriately carried out by limited companies.

Cambridge Assessment and Cambridge University Press combined into a single organisation on 1 August 2021, and was named Cambridge University Press & Assessment.

Further detailed information about the finances and operations of the Press & Assessment is given in the published annual reports of that entity. The Press & Assessment is a constituent part of the corporation known as the Chancellor, Masters and Scholars of the University of Cambridge. The Press & Assessment’s primary work is the conduct and administration of examinations in schools and for persons who are not members of the University, and operation of the University’s publishing house, dedicated to publishing for the advancement of learning, knowledge, and research worldwide.

The Associated Trusts are separately constituted charities. They are deemed to be subsidiary undertakings of the University since the University appoints the majority of the trustees for each Trust. The purpose of these Trusts is to support the University by enabling persons from both within and outside the United Kingdom to benefit from education at the University through the provision of scholarships and grants.

The financial statements should be read in conjunction with the Annual Report of the Council and the Annual Report of the General Board to the Council for the 2022–23 academic year (Reporter, 6720, 2023–24, p. 131). References to the University reflect the teaching and research activities of the University (excluding subsidiary companies and Associated Trusts), together with the Press & Assessment (but excluding their subsidiary companies, joint ventures, and associates). References to the Group reflect the teaching and research activities of the University together with the Press & Assessment, including all subsidiary companies, Associated Trusts, joint ventures, and associates (see Note 37).

The financial position of the core teaching and research activities of the Academic University may be seen more clearly in the Financial Management Information published in the Cambridge University Reporter (see https://www.governance.cam.ac.uk/committees/finance-committee/Pages/FMI.aspx). The Group considers the best measure of underlying recurrent operating performance to be the adjusted operating surplus/(deficit) for the year shown in Appendix 1 (p. 386).

The Group redefined this measure during the prior year to Reported Surplus less gains or losses on revaluation of investments, fair value adjustment for the CPI-linked bond, change in USS deficit recovery provision, donations, endowments and capital grant income, and adding the CUEF income on a distribution basis. This adjusted measure provides a more reliable and consistent measure of the Group’s performance than the statutory measures.

Financial results for the year

The results for the Group for the year ended 31 July 2023 are summarised in Table 1.

Table 1

Summary statement of comprehensive income	2022–23 £m	(restated*) 2021–22 £m	Change %
Income	2,518	2,238	13%
Expenditure excluding non-cash USS pension and CPI-bond adjustments	(2,479)	(2,241)	11%
Non-cash USS pension and CPI-bond adjustments**	161	(79)
Surplus / (deficit) before other gains and losses and share of surplus of joint ventures and associates	200	(82)
Gain on disposal of fixed assets	–	8
Gain on investments (net)	4	199
Taxation	(5)	(5)
Surplus for the year	199	120	66%
Actuarial gain	286	596
(Loss) / gain on foreign currency translation	(6)	1
Total comprehensive income for the year	479	717	-33%

Adjusted operating surplus for the year	2022–23 £m	2021–22 £m
Surplus for the year (as above)	199	120
Less: Gain on investments	(4)	(199)
Less: CPI-linked bond fair value adjustment	(85)	(182)
Less: USS Pension deficit recovery reflected in staff costs	(75)	261
Less: Donation, endowment and capital grant income	(182)	(96)
Add: CUEF income (distribution basis)	138	121
Adjusted operating (deficit) / surplus for the year***	(9)	25

Reconciliation to Academic University adjusted operating deficit	2022–23 £m	2021–22 £m
Adjusted operating (deficit) / surplus for the year (as above)	(9)	25
Less: the Press & Assessment adjusted operating surplus	(133)	(116)
Less: Trusts and other adjusted operating deficit	32	14
Less: CUEF operating deficit	6	3
Add back: the Press & Assessment contribution to Academic University	39	30
Other consolidation adjustments	(7)	(3)
Academic University adjusted operating deficit (Table 2)	(72)	(47)

*Please refer to Note 43 on page 385 for details of the restatement.

**Includes the non-cash credit relating to the USS deficit recovery provision of 75.2m (2021–22: charge of £260.8m) related to the 2020 scheme valuation, and the positive impact of an unrealised non-cash credit of £85.4m (2021–22: £182.2m) related to the fair value adjustment to the CPI-linked bond.

***See Appendix 1 (p. 386) to the financial statements for further details.

Following the return to a more usual operating environment in 2021–22, the current year has seen a continued increase in activity levels across the Group, albeit that the path of recovery has continued to vary across the Group’s large number of different activities. Overall revenues have increased by 13% during the year, substantially driven by continued increases in the Press & Assessment activity, and increased donations and endowment income, Other income and Investment income. Operating costs (adjusted for non-cash items such as the USS deficit recovery provision and revaluation of the CPI‑linked bond) have increased by 11%, again related, primarily, to the Press & Assessment activity and also as a result of increased Estates and other operating expenditures, in both staff and other operating costs, in the Academic University. The impact of rising inflation has been seen across a broad spectrum of the Group’s cost base.

Total income is higher year on year with an increase of 13% compared to 2021–22, driven by increases in all categories. Higher income in the Press & Assessment and increased donations and endowment income, other income and investment income are the primary drivers, with smaller increases in tuition fees, funding body grants, and research grants and contracts income.

The Group reported a surplus for the year of £198.9m (2021–22: £120.2m). The surplus is £78.7m higher than last year primarily reflecting the following:

•Significantly higher restricted donations of £79.8m (2021–22: £19.2m) higher capital grants and donations income of £72.9m (2021–22: £49.9m), and new endowments of £10.5m (2021–22: £4.7m).

•A significant non-cash credit of £75.2m (2021–22: charge of £260.8m) relating to the USS scheme deficit recovery provision, based on the 2020 scheme valuation.

•A fair value adjustment relating to the CPI-linked bond amounting to a credit of £85.4m (2021–22: £182.2m).

•An overall increase in the cost base of the Group ahead of the increase in recurring revenues (excluding restricted donation for multi-year programmes and capital donations).

•Lower gains on investments (mostly unrealised) of £3.9m (2021–22: £199.0m). Gains of £83.8m from the CUEF were offset by a reduction in the assessed value of investment properties of £62.5m, primarily as a result of changes in key worker housing ratios and increasing build and infrastructure costs at the Eddington development. There were also losses on revaluation of spin-out and similar companies of £23.3m.

Group total comprehensive income for the year is £479.0m (2021–22: £717.4m), which benefited from the surplus of £198.9m and £286.4m of actuarial gains (2021–22: £596.0m), derived from the Group’s defined benefit pension schemes, primarily reflecting an increase in market interest rates, inflation and discount rates.

Unrealised gains/losses on investments, fair value adjustment of the CPI-linked bond, actuarial Gains and losses on pension schemes and donations, endowments and capital grant income will continue to fluctuate from year to year over time. These effects are demonstrated in the historical trend data (see Appendix 1 (p. 386)). The University considers the best measure of underlying recurrent operating performance to be the adjusted operating surplus/(deficit) for the year, being the surplus for the year adjusted for gains and losses on investments, the CPI-linked bond fair value adjustment, the change in USS pension deficit recovery provision, donations, endowments, and capital grant income, and the CUEF income on a distribution basis. The Group had a small adjusted operating deficit this year, largely as a result of the changes in income and expenditure described later in this review. The Academic University’s operating cash flows are supported by the element of CUEF distributions funded from long-term capital growth, subsidising the deficit on core teaching and research activities.

Investment by the Group in its capital infrastructure continued during 2022–23 with £177.4m (2021–22: £164.9m) invested in fixed assets, software, and investment property over the period. The overall investment programme activity remains largely on track during the year.

The underlying 2022–23 financial operating performance was satisfactory, albeit that the operating cost pressures that began to be felt in the prior year have become increasingly prevalent this year, and will require careful management in the higher cost environment in which the Group now operates. Management regard the most representative measure of underlying performance to be the adjusted operating deficit for the year of £9.5m (2021–22: surplus of £25.4m) reflected above and in Appendix 1 to the financial statements.

Segmental analysis

The consolidated position comprises four main segments: (i) core academic activities of the Academic University; (ii) the assessment and publishing activities carried out by the Press & Assessment; (iii) CUEF, the investment fund managed by the Group and holding the majority of the Group’s investments together with some investments of Colleges and other associated bodies; and (iv) the combination of smaller entities including the associated trusts and subsidiary companies not included in the other segments. Within the Group, there are a number of intra-group transactions, principally the financial and other support from the Press & Assessment and the CUEF distribution from capital growth. Table 2 gives segmental information, which is considered in further detail in Note 19 to the financial statements.

Table 2	2022–23
	Academic University 2023 £m	The Press & Assessment 2023 £m	CUEF 2023 £m	Trusts and other 2023 £m	Elimination and adjustments* 2023 £m	Total 2023 £m
Income**	1,589	1,015	21	172	(279)	2,518
Expenditure	(1,337)	(873)	(27)	(189)	108	(2,318)
Surplus / (deficit) before other gains and losses and share of surplus of joint ventures and associates	252	142	(6)	(17)	(171)	200
(Losses) / gains on investments (including CUEF gain)	(110)	6	92	(32)	48	4
Taxation	–	(5)	–	–	–	(5)
Surplus for the year***	142	143	86	(49)	(123)	199
Less: Loss / (gain) on investments	110	(6)	(92)	32	(48)	(4)
Less: CPI-linked bond fair value adjustment	(85)	–	–	–	–	(85)
Less: USS pension deficit recovery provision	(73)	(3)	–	1	–	(75)
Less: Donation, endowment, and capital grant income	(166)	–	–	(16)	–	(182)
Add: CUEF income (distribution basis)	–	–	138	–	–	138
Adjusted operating (deficit) / surplus for the year ***	(72)	134	132	(32)	(171)	(9)

	2021–22
	Academic University 2022 £m	The Press & Assessment 2022 £m	CUEF 2022 £m	Trusts and other 2022 £m	Elimination and adjustments* 2022 £m	Total 2022 £m
Income**	1,424	873	22	177	(258)	2,238
Expenditure	(1,455)	(767)	(25)	(183)	110	(2,320)
Surplus / (deficit) before other gains and losses and share of surplus of joint ventures and associates	(31)	106	(3)	(6)	(148)	(82)
Gain on disposal of fixed assets	8	–	–	–	–	8
Gains on investments (including CUEF gain)	52	7	198	19	(77)	199
Taxation	–	(5)	–	–	–	(5)
Surplus for the year***	29	108	195	13	(225)	120
Less: Loss / (gain) on investments	(52)	(7)	(198)	(19)	77	(199)
Less: CPI-linked bond fair value adjustment	(182)	–	–	–	–	(182)
Less: USS pension deficit recovery provision	241	15	–	5	–	261
Less: Donation, endowment, and capital grant income	(83)	–	–	(13)	–	(96)
Add: CUEF income (distribution basis)	–	–	121	–	–	121
Adjusted operating (deficit) / surplus for the year ***	(47)	116	118	(14)	(148)	25

*Includes elimination on consolidation of the Press & Assessment transfers, CUEF distribution from capital growth, and other consolidation adjustments.

**Income includes distribution from CUEF as income, which is eliminated at consolidated level.

***Surplus for the year for the Press & Assessment is before distribution to the Academic University.

Income

The Group’s income increased by £280.2m (up 13%) from £2,238.1m (restated) to £2,518.3m. The Group has diversified sources of revenue providing operational stability with a compound growth of 5.8% over a rolling 10‑year period. The increase this year has come from the continued growth in examination, assessment and publishing services, with an increase of £130.9m (15%) over 2021–22, reflecting continued post-pandemic recovery and growth in the business since the merger in 2021. Donations and endowment income, other income, and investment income have also increased significantly, with smaller increases in tuition fees, funding body grants, and research grants and contracts income.

•Revenues from examination, assessment and publishing services (comprising the majority of revenues from the Press & Assessment) represent the largest source of Group income, and in aggregate totalled £991.0m (2021–22: £860.1m), which amounts to 39% of total revenues for the year.

•Sponsors of research projects represent the second largest source of income for the Group. Research grants and contracts increased by 3% this year to £569.5m (2021–22: £551.8m). The increase has mainly come from higher funding from Other bodies, which increased by 12% to £103.0m, offsetting a decrease in European Commission funding of 23%, to £39.1m.

•Tuition fees and education contracts totalled £390.1m (2021–22: £376.2m), up 4%, principally due to increases in non-regulated fees.

•Funding body grants from the OfS and Research England increased by 5% to £207.6m (2021–22: £197.3m), the majority of which related to recurrent teaching and research grants and other revenue grants, primarily from UKRI.

•Other income of £178.0m (2021–22: £160.7m) increased this year, with higher revenues from residences, catering, conferences, and a continued recovery in revenues from the Group’s various non-core activities related to academic departments.

•Donations and endowments received were £132.4m, (2021–22: £52.8m), with the increase primarily due to increased restricted donations for multi-year projects, and donations of heritage assets during the year of £19.1m (2021–22: £4.8m).

•Investment income increased to £49.7m from £39.2m in 2021–22, primarily as a result of increased income from other investments (including short-term and fixed-rate deposits), as interest rates have continued to rise during the year.

Examination, assessment and publishing services

The Press & Assessment carry out examination and assessment services through its three exam boards: Cambridge Assessment English, Cambridge Assessment International Education, and Oxford Cambridge and RSA Examinations (OCR). Publishing services incorporate income from the sales of educational and scholarly books, e-books, journals, applications, and related services through its three publishing groups: Academic (research books, advanced learning materials and reference content as well as journals); Cambridge English Language Teaching (materials for both adults and students); and Education (teaching materials for schools and advice on educational reform). Total examination, assessment and publishing income in the year to 31 July 2023 increased by 15% to £991.0m as noted above, representing continued solid recovery from the pandemic and continued growth post the merger of the Press and Assessment businesses in 2021.

Research

The Group’s 2022–23 research income increased to £569.5m from £551.8m in the previous year. The increase has mainly come from higher funding from Other Bodies, which increased by 12% to £101.8m. Research income across the primary sources of funding was broadly flat, with small percentage increases in UK Research Councils, UK-based charities and UK Government offsetting a fall of 23% in funding from the European Commission.

The University receives recurrent funding from the UK government in the form of grants for teaching, research, and other activities. In 2022–23, the University was also allocated £141.5m (2021–22: £131.4m) of Quality-Related (QR) funding, representing 7.2% (2021–22: 7.1%) of the overall grant award for England.

Research income

Donations

The University receives benefactions and donations from a variety of sources including trusts and foundations, corporations, and individuals (both alumni and non-alumni). The total given for donations and endowment income recognises all new endowments, donations for capital in respect of heritage assets, and other restricted and unrestricted donations available for current spend.

In aggregate over the year ended 31 July 2023, donations and endowment income totalled £132.4m (2021–22: £52.8m). Whilst the level of donations and endowments available for unrestricted purposes was slightly above the previous year, income for restricted purposes and capital projects (which routinely shows high variability year on year) was significantly higher. In particular, restricted donations for multi-year programmes, such as the Mastercard Foundation Scholars Programme, contributed a substantial proportion of the increase.

The Academic University continues to see increasing benefits from the dedicated team of development professionals, working in alignment with the University’s priorities in raising endowment and investing in cutting-edge research, scholarships, and facilities. In July 2022, the Dear World, Yours Cambridge Campaign for the University and Colleges concluded, raising a total of £2.217bn in commitments. With reference to international competitors’ philanthropy programmes, the University continues to develop the potential to grow donations, with enhanced alignment to academic priorities.

Investment income

Investment income is an important component of the University’s funding mix generated by the Group’s financial investments, in particular the CUEF and from current asset investments (deposits and money market investments). During the year, the Group invested a further £150m in the Cambridge Multi-Asset Fund (CMAF), which is intended to provide greater returns than deposits and money market investments, whilst maintaining high levels of liquidity for funds intended for operational use, over the medium term. The Group has reported investment income of £49.7m (2021–22: £39.2m).

Other investment assets (excluding CUEF assets) generated income of £29.1m during the year (2021–22: £17.2m) mainly from current asset investments. The majority of the University and Group’s current asset investments are invested in the deposit pool. This pool is managed by the Group Treasury according to guidelines on diversification, exposure, and credit quality as agreed by the Finance Committee. The investments are principally short-term deposits with banks and similar institutions.

Other income

The Group generates significant other income including property rentals, contributions from health and hospital authorities, residences, catering and conferences, other activities linked to academic departments (for example, the Cambridge Institute for Sustainability Leadership) and income from intellectual property managed, primarily, through Cambridge Enterprise Limited. Total other income of £178.0m (2021–22: £160.7m) has increased this year, primarily as a result of continued recovery in residences, catering and conferences, and other activities linked to academic departments.

Expenditure

The Group’s headline total expenditure in 2022–23 of £2,317.9m (2021–22: £2,320.4m) was £2.5m lower than the prior year. However, excluding the non-cash impacts of significant adjustments to the USS deficit recovery provision and the fair value adjustment related to the CPI-linked bond described on page 300, expenditure was £2,478.5m (2021–22: £2,241.8m), an increase of £236.7m (11%) compared to the prior year.

Expenditure excluding the USS deficit recovery provision adjustment and the fair value adjustment related to the CPI‑linked bond comprises staff costs (including research) of 44%; other operating expenses of 48%; depreciation and amortisation of 5%; and interest and other finance costs of 2%. The main changes compared to 2021–22 levels reflect the following:

•Staff costs increased by 5% to £1,095.8m. The increase is substantially due to a mix of pay increases, the non‑consolidated cost-of-living-related pay award of £11.1m, and early part-implementation of the 2023–24 pay award in February 2023. In 2021–22, an exceptional Covid‑19 payment of £13.2m was made to Academic University staff in July 2022.

•Other operating expenses increased by 16% to £1,197.7m, reflecting increased costs in the Academic University (primarily Estates and buildings, Laboratory supplies, Travel, transport and subsistence, and IT services and equipment), and the Press & Assessment (increases in both cost of sales and other operating costs, related to the increase in income described on page 302).

•Depreciation and amortisation has increased from £130.5m to £136.4m.

•Interest and other finance costs of £48.6m (2021–22: £37.6m) mainly comprise Interest payments on bonds of £21.1m (2021–22: £21.1m) and other interest costs, primarily relating to non-cash interest on pension liabilities, of £26.3m (2021–22: £15.9m), which has increased due to adverse movements in bond yields.

Cash flow and financing

During the year, the net cash inflow from operating activities after taxation of £26.0m was significantly lower than the prior year (2021–22: £92.4m). Most of this difference relates to working capital, where there was an outflow of £41.7m, compared to an inflow of £23.1m in 2021–22. Most of the movement this year relates to debtors, with an increase of £13.6m in research debtors and £25.1m in the Press & Assessment debtors.

Other impacts include the operating cost base (excluding non-cash items) of the Academic University rising faster than operating income, offset by the increased surplus generated by the Press & Assessment. The activities of the Press & Assessment further the mission of the University in important ways and provide significant sources of funds for the Academic University. In the financial year to 31 July 2023, the Press & Assessment produced an increased surplus (before contribution to the University) of £143.2m (2021–22: £109.3m). Routinely, 30% of these surpluses are transferred to the University and used towards funding capital expenditure and academic investment, alongside donations, grants, and a continued draw on University unrestricted resources.

The net cash outflow for the Group was £209.6m (2021–22: £227.9m), driven by net cash inflows from operating activities after taxation as noted above of £26.0m, as well as cash outflows from investment activities of £226.8m (2021–22: £387.0m) and outflow from financing activities of £8.8m (2021–22: inflow of £66.7m). The outflow from investment activities relates primarily to acquisition of fixed assets, CUEF activity and investments of £150m into the Cambridge Multi Asset Fund (CMAF). The outflow from financing activities is primarily interest costs, combined with a lower level of net CUEF subscriptions from Colleges and Associated Bodies compared to 2021–22.

Net assets

The following table shows the movement in Group net assets analysed into its main segments:

Table 3	Academic University 2023 £m	The Press & Assessment 2023 £m	CUEF 2023 £m	Trusts and other 2023 £m	Elimination and adjustments 2023 £m	Total 2023 £m
Net assets at 31 July 2022	5,288	814	4,001	615	(4,025)	6,693
Surplus / (deficit) for the year before tax	142	148	86	(49)	(123)	204
Taxation	–	(5)	–	–	–	(5)
Surplus for the year (Table 2)	142	143	86	(49)	(123)	199
Actuarial gain	233	53	–	–	–	286
Loss on currency translation	–	(6)	–	–	–	(6)
Dividend paid to non-controlling interest	–	(4)	–	–	–	(4)
Transfers	–	(39)	–	(10)	49	–
Net assets at 31 July 2023	5,663	961	4,087	556	(4,099)	7,168

The Group’s net assets totalled £7,167.7m at 31 July 2023 (2022: £6,692.9m). Total comprehensive income of £479.0m, comprising the majority of the increase in net assets, is described on page 300.

Fixed assets

The University has continued to deliver its capital investment programme, focusing on maintaining and enhancing its facilities and infrastructure in order to safeguard its position as a global leader in education and research. However, cash generated from the University’s own operational activities continues to be insufficient to deliver significant elements of the programme. For this reason, philanthropy and other sources of capital funding, including contributions from the Press & Assessment, are critical to the future programme’s success.

In the year 2022–23, fixed asset additions for the Group were £113.9m (2021–22: £114.9m), with capital expenditure on Land and Buildings of £73.5m (2021–22: £86.7m), and further expenditure of £40.4m (2021–22: £28.2m) on equipment. The University continues to complete the extensive capital investment programme of the last few years and focus on developing a sustainable mid- and long-term programme of investments in buildings, people, and infrastructure. Significant expenditure continued on the new Cavendish III national laboratory facilities. This project constituted 47% of the capital expenditure on Land and Buildings.

The University’s estates strategy is continuing to reshape the City. Focused on the major campus areas of West and North West Cambridge, the Biomedical Campus, and the City Centre, the estates strategy is supporting both continued academic excellence and the development of housing, transport, and childcare facilities for staff and their families. The University continues to develop its site at Eddington (formerly North West Cambridge), with Phase 1 now substantially complete, and work continues on the options for future phases.

The Group has continued to invest in Intangible assets during the year, with capitalised expenditure of £52.0m (2021–22: £42.3m), the majority of which relates to software development in the Press & Assessment.

Cambridge University Endowment Fund (CUEF)

The CUEF is an investment vehicle, which enables the University to pool assets held on trust and invest them for the very long term, gaining from scale, diversification, and professional management. The CUEF is managed by University of Cambridge Investment Management Limited (UCIM) under investment and distribution policies set by the Cambridge University Endowment Trustee Body (CUETB). The CUEF is open to the University and to the Colleges and charitable trusts associated with the University. At 31 July 2023, there were fifteen College investors.

The CUEF aims to preserve and grow the value of the perpetual capital of its investors, while providing a sustainable income stream. The investment strategy of the CUEF is primarily to invest through specialist, third‑party fund managers in order to access the various asset types and geographies that the Fund targets. A central tenet of the strategy is that well‑directed active management allows unconstrained investors with long‑term investment horizons to outperform passive investments over time, net of fees.

This contention has been supported by Fund performance over the life of the CUEF and aims to enable CUEF to meet its long-term return objective of the UK Consumer Prices Index (CPI) +5%, net of fees, to fund distributions to investors of around 4% of the net asset value per year. The distribution policy is based on underlying capital values, ensuring the distribution is directly linked to the performance of the Fund.

At 31 July 2023, the net asset value of the CUEF was £4,087.2m (2022: £4,000.5m) of which £3,735.9m (2022: £3,672.9m) is attributable to the Group.

Asset allocation

The Fund is diversified over five broad asset classes: Public Equity, Private Equity, Absolute Return & Credit, Real Assets, and Fixed Interest/Cash. Because of this diversification, the annualised volatility of the Fund has been approximately two-thirds that of the MSCI All‑Country World Equity Index ex‑fossil fuels (ACWI ex‑fossil fuels) since 1 July 2020 as measured in Sterling. Direct investment by the Fund is modest and primarily focused on positions held to maintain an appropriate level of broad market exposure. These may include, from time to time, real estate, equity index positions, exchange traded funds, and instruments for the management of the Fund’s foreign exchange hedge programme.

The asset allocation and investment selection in the Fund is aimed at optimising the expected long-run total return, bearing in mind expected future volatility. The CUEF’s asset allocation as at 30 June 2023 is shown below. Over the course of 2022–23, allocations to Absolute Return & Credit have increased in comparison to 2021–22 and allocation to Public Equity and Real Assets has decreased.

Asset allocation

Performance

The CUEF reports its performance to 30 June 2023. For this financial year, the CUEF delivered a net return of +4.1% (2021–22: -0.3%), which is below the Fund’s absolute target of CPI +5% and narrowly lagged the CUEF’s ‘new 65/35’ passive benchmark of +4.5%, largely attributable to the flat performance of Private Equity in 2022–23, despite the strong performance of this asset class over the long term. Over a three-year rolling period, the CUEF had an annualised return of 8.8%, 400 basis points per year higher than the ‘new 65/35’ passive benchmark3 which was 4.8% annualised for the same period.

The University’s Financial Statements include the CUEF values and gains on investment on a 31 July basis. The overall CUEF movements are demonstrated below.

The University’s share of the CUEF represents approximately 92% of the total of £4,087m at 31 July 2023.

CUEF Fund Performance year to 30 June 2023

CUEF as reported year to 31 July 2023

References:

¹ Group share (Note 23) £84m.

² Group share (Note 12) (£138m).

³ UCIM new ‘65/35 Benchmark’ consists of: 33% MSCI World Index (GBP-Unhedged) ex fossil fuels after 1 July 2020; 24% MSCI World Index (GBP‑Hedged) ex fossil fuels after 1 July 2020; 8% MSCI Emerging Markets Index (GBP‑Unhedged) ex fossil fuels after 1 July 2020; 15% Barclays Capital Global Aggregate Bond Index (GBP‑Hedged); 10% FTSE British Government Index‑Linked All Stocks (GBP); 10% UK Quarterly Property Index (GBP).

Sustainability

UCIM has continued to make encouraging progress towards its ambition of net zero greenhouse gas emissions from the CUEF portfolio by 2038, in line with the broader operational ambitions of the University.

The aim is to achieve this goal with a three-pronged strategy of:

•investing in renewable energy development and divesting meaningful* exposure to fossil fuels by 2030;

•engaging with the CUEF’s fund managers; holding them to account on reducing carbon emissions in their portfolios; and

•reporting regularly to stakeholders on progress against these aims.

Specific highlights in the year to 30 June 2023 included the following:

•UCIM has further embedded sustainability considerations into its formal investment process through the introduction of four specific criteria by which to assess a new fund management partner. The UCIM team has found these criteria to be helpful and a positive way to engage with partners on sustainability in the early stages of the investment process.

(1)Is net zero a serious consideration for the senior leadership team?

(2)Does the firm have a formal net zero policy or approach in place?

(3)Does the firm engage with its portfolio on climate change?

(4)Is there adequate reporting in place to match UCIM requirements?

•As a result of UCIM’s active engagement, a number of fund management partners have made tangible improvements, including the creation of new sustainable investment policies, the incorporation of environmental factors into their decision making, enhanced reporting against sustainability metrics, such as levels of greenhouse gas emissions, and the creation of fossil-free funds.

•The continuation of a bespoke Executive Education programme, developed and delivered in partnership with the Cambridge Institute for Sustainability Leadership (CISL), which supports UCIM’s fund management partners to decarbonise their portfolios. Following the third cohort in Spring of 2023, eighteen firms have completed the programme, representing approximately US$150bn of assets under management. A fourth cohort is planned for 2024.

* UCIM defines ‘meaningful’ as 0.5% of the portfolio or less.

Other investments

Some long-term investments are held outside the CUEF, amounting to £179.2m (2022: £214.1m). These include other securities, JVs, associates, and equity investments in spin-out companies overseen by the University’s technology transfer company Cambridge Enterprise Limited and through its holding in Cambridge Innovation Capital. The majority of the decrease during the year is attributable to investments in spin-out companies, which saw valuation losses of £26.9m.

During the prior year, the Group invested £250.0m in the new Cambridge Multi-Asset Fund (CMAF), which is intended to provide greater returns than deposits and money market investments, whilst maintaining high levels of liquidity for funds intended for operational use, over the medium term. During this year, a further £150.0m has been invested. The fund had a value of £406.8m at 31 July 2023 (2022: £244.7m).

Pension schemes

The Group is exposed to the costs and risks of pension schemes, in particular in relation to the Universities Superannuation Scheme (USS). The USS is a multi-employer scheme and Note 36 to the financial statements describes how the scheme is reflected in these statements. The actuarial valuation of the overall scheme as at 31 March 2020 reflected a shortfall of £14.1bn, which is currently being mitigated though an agreed Deficit Recovery Plan paid for by all institutions as per an agreed Schedule of Contributions.

Because of the mutual nature of the USS scheme, the University is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. As required by FRS 102, the University, therefore, only recognises a balance sheet liability in respect of future contributions arising from the agreed Recovery Plan, which determines how each employer within the scheme will fund the most recently calculated overall deficit. For the purposes of the financial statements, the calculation of the liability for the obligation to fund the USS deficit uses the modeller shared by the British Universities Finance Directors Group (BUFDG) for the Higher Education sector. This calculation reflects the Schedule of Contributions put in place in March 2022 following the finalisation of the USS March 2020 valuation, as updated for current discount rate information. The liability for this year has decreased significantly to £348.9m (2022: £437.3m), primarily due to an increase in the discount rate applied to the estimated deficit recovery contributions, as a result of increases in inflation and interest rates in the year.

Subsequent to finalisation of the 2020 scheme valuation noted above, the USS Trustee has continued to undertake monitoring activities, and to issue interim monitoring reports. The most recent monitoring reports have indicated an estimated net asset/liability position of a surplus of £7.6bn at 31 March 2023, a surplus of £8.5bn at 30 June 2023 and a surplus of £10.0bn at 30 September 2023. These are all significant improvements from the deficit position at 31 March 2020 on which the current deficit recovery provision is based. These monitoring reports do not constitute a formal scheme valuation and are, therefore, not considered when calculating the deficit recovery provision disclosed in the financial statements, which has to reflect the contributions determined at the last published formal funding valuation. The valuation as at 31 March 2023 is currently being finalised. It is likely that this new valuation will lead to the removal of the requirement for continued deficit recovery contributions. It is therefore expected that the deficit recovery provision disclosed in Note 30 will be substantially derecognised.

The Group has three other major schemes: the Cambridge University Assistants’ Contributory Pension Scheme (CPS) for University assistant staff and two defined benefit schemes for staff of the Press & Assessment. The CPS is a hybrid‑defined benefit scheme with a defined contribution component. The scheme remains open to new joiners and future accrual. The triennial valuation of the CPS at 31 July 2021 has shown a significantly improved position, and the scheme’s deficit has further improved in subsequent valuations for FRS 102 reporting purposes. Since 2011, additional employer contributions of £14.6m p.a. have been made, but it has been agreed that there will be no additional contribution during the year from 1 August 2023 to 31 July 2024. The funding position will next be re-examined as at 31 March 2024, at which time additional contributions of £10.0m would recommence should the funding level be below 95%.

The Press & Assessment defined benefit schemes are closed to new joiners and, following the triennial valuation of the two UK schemes as at 1 January 2022, show a substantially improved deficit position.

The CPS and the Press & Assessment UK schemes (being single-employer schemes) are included in the financial statements in accordance with FRS 102. The associated net pension liability as at 31 July 2023, which represents the present value of the schemes’ obligations to provide future benefits in relation to past service less the market valuation of schemes assets, has decreased to £79.4m (2022: £354.8m). Of this, £62.6m relates to the CPS scheme, and £16.8m to the Press & Assessment schemes. The majority of the improvement is as a result of changing financial market conditions during the year and, in particular, the impact on the discount rate of changes to inflation and interest rate expectations.

Finally, there is a modest net pension asset recognised in 2022–23 of £0.8m in respect of other pension schemes, including the Press & Assessment US schemes (which have net assets of £2.2m) and the Local Government Pension Scheme for staff who are employed through the University’s primary school. Pensions are discussed further in Note 36 to the financial statements.

The Group’s current service costs and deficit-recovery contributions (including the USS provision decrease) as reflected through staff costs in the year 2022–23 were £78.4m (2021–22: £440.3m). Excluding the non-cash adjustment to the USS provision, costs were £181.4m (2021–22: £189.5m).

Long-term borrowings

In 2012, the University issued £350m of 3.75% unsecured bonds due in October 2052. The bonds are listed on the London Stock Exchange. The net proceeds of the issue (£342m) were applied in the University’s investment in the Eddington development.

In 2018, the University secured additional external finance, providing the University with options to further develop its non-operational estate (that is, projects outside those directly enabling core academic teaching and research activities). The University raised £600m in unsecured external finance through two tranches:

•£300m 60-year (2078) bullet repayment fixed-rate bond at coupon 2.35% p.a.

•£300m 50-year (2068) CPI-linked bond at coupon 0.25% p.a., amortising from year 10 and capped at 3% and floored at 0%.

As at 31 July 2023, the Group had outstanding bond liabilities totalling £837.4m (2022: £922.7m).

Over time, proceeds from the bonds will provide added flexibility in the continuing support of the University’s academic mission and furthering the interests of our students through the development of income-generating projects in the non-operational estate, including further strategic housing.

Such income-generating projects are of high strategic importance; they deliver significant indirect benefits essential to the University’s primary mission, while also addressing the critically important housing challenge, providing alternative income streams at a time of significant financial volatility.

The Group’s net debt as at 31 July 2023 was £1.0m (2022: net cash of £105.0m) (see Note 42). This includes the cumulative non-cash fair value re-measurement of the CPI-linked bond at the balance sheet date of credit £100.3m (2022: credit of £17.0m). This will move year on year depending on volatility in the bond markets, so a more reflective position of the Group’s underlying net debt position is an adjusted net debt of £136.1m (2022: net cash of £65.0m), taking into account the cumulative fair value remeasurement described above, and the accretion in the value of the CPI‑linked bond of £34.8m from inception. The change during the year is impacted by the investment of Group funds into both the CUEF (£122.7m) and CMAF (£150.0m) during the year. Please refer to Appendix 1 for more information.

Financial outlook

The University remains confident in its long-term financial sustainability. We have continued to manage our financial reserves prudently in a period where the continued post-pandemic rebound in activity levels have seen costs, amplified by significant ongoing inflation, continuing to outgrow revenues in the short term. Indeed, we now see these effects dominating the operational finances for the next few years, with the Academic University now having moved into an operating deficit position.

The University is therefore redoubling its efforts to manage its sources of revenue effectively, and its cost base more efficiently, in order to achieve a sustainable operating cash flow surplus at the Academic University level and generate the long-term cash flow needed to ensure it has the resources to maintain its position amongst the world’s leading universities.

Tuition fee income is expected to grow modestly, reflecting a gradual increase in the number of postgraduate students paying international fees and a rise in unregulated fee levels, but with overall fee growth levels limited by the continued freeze of regulated home fees at £9,250 per student, now meeting less than a half of the underlying cost of providing Cambridge’s unique student experience.

Research grants and contracts income recognised is expected to continue its recovery to pre-pandemic levels as current multi-year grant awards work their way through the system. However, the University continues to compete in a highly competitive market, and the long-term trajectory continues to depend on levels of Government funding for research, supported by the University’s very strong performance in the last Research Excellence Framework and continued strong rankings. News of the UK’s continued association with the EU’s Horizon Europe programme was well received by the research community across Cambridge and the wider sector. However, block grants for funding from UKRI are not expected to increase to match inflation.

Cambridge University Press & Assessment has seen a further strong business performance delivery with total revenues of over £1bn for the first time, but the outlook for this business remains highly dependent on the global economy, the levels of international interest in learning and certification in English, and the use of international curricula in schools around the world.

Cambridge University Press & Assessment’s prospects also hinge on the continued development of digital delivery capabilities in an increasingly competitive market.

Costs across the University Group have risen sharply and continue to do so, in the prolonged high- inflationary environment. External factors of higher national pay settlements and elevated levels of inflation for goods and services, are adding to a continued growth in Cambridge’s own activity levels post- pandemic as well as, targeted increases in spend on maintenance and renewals across our large physical and IT estates. To these costs, we must add the investment needed to meet the University’s zero carbon objectives. These increasing costs are likely to be offset somewhat by the expected reductions in contributions to USS following the conclusion of the 2023 valuation, and by the higher interest rates now available on the University’s cash balances.

In order to address the residual cost escalation and to provide additional resources to invest in pay and other priorities, a number of ambitious modernisation and transformation programmes are now underway, which bring significant potential to increase the levels of efficiency and effectiveness of the devolved organisation, notably through a reimagined approach to collective professional services, greater leverage in procurement and purchasing of goods and services, and through improved usage of the physical estate.

The long-term growth objective of the CUEF remains at 5.0% + CPI. However, turbulence in financial markets in response to global events continues to highlight the potential for volatility in short to medium term investment returns.

Risks to future financial performance continue to include economic and mobility concerns resulting from geo-political events, and concerns and residual impacts from the global pandemic; Government actions to address the national deficit and debt; sustained cost inflation; further turbulence in financial markets impacting future CUEF and other investment returns.

PRINCIPAL RISKS AND UNCERTAINTIES

The University Council, which is the University’s principal executive body, takes primary responsibility for ensuring the University has an effective and balanced enterprise risk management framework in place. Business risk management is at the core of the University’s overall system of internal controls and is designed to focus on and mitigate, to every extent possible, the most significant risk events that might adversely or beneficially affect the University’s ability to achieve its policies, aims and objectives.

The University is committed to ensuring that it has a robust and comprehensive system of risk management in line with the requirements of the Office for Students, and follows good practice in considering risk appetite in the context of the University’s academic mission, seeking to ensure an appropriate balance between risk aversion and opportunity capture. The business risk management approach identifies and appraises risks and opportunities in a systematic manner. Accountability and responsibility for risk mitigation is assigned to management across the devolved organisation. Managers are encouraged to implement good risk management practice across the University. The University makes conservative and prudent disclosure of the financial and non-financial implications of risks.

The Group has a risk management framework overseen by the Audit Committee, for which the Council has the ultimate responsibility. The Academic University and the Press & Assessment have separate risk management policies which are relevant to those entities. The framework is designed to allow the senior leadership team to consider the University’s key risks in a meaningful way and within the context of the University’s evolving priorities, prior to scrutiny and approval of the University Risk Register through the Audit Committee and Council.

The senior leadership team is responsible for identifying and managing risks across the University’s activities. The Council receives reports on the University’s risks at least biannually, and seeks assurances over risk management and controls from individuals identified as accountable for risks. The Council has delegated to the Audit Committee the responsibility for reviewing the University’s risk management processes to ensure that they are adequate and effective. The Audit Committee considers risk management as a standing item in its meetings to ensure routine monitoring, and will report to the Council on internal controls and alert the Council to any emerging issues as necessary. The Audit Committee also receives an annual opinion from the internal auditors on the adequacy and effectiveness of the University’s arrangements for risk management, control, governance and Value for Money, and provides assurance to Council on the adequacy and effectiveness of the University’s arrangements for risk management.

This year the internal auditors’ opinion provided reasonable assurance over risk management, governance and internal controls, except for some areas where weaknesses in internal controls were identified and reported during internal audit work completed during the year. In all cases, the University is taking steps to further enhance internal controls in these areas. The Audit Committee also welcomed the introduction of a new Head of Institution Assurance Statement to provide visibility over controls operated at a devolved level and noted the continued focus on the timely implementation of internal audit actions. These steps have increased the level of assurance the Audit Committee is able to provide and the Audit Committee confirms its assurance to the Council on the adequacy and effectiveness of the University’s arrangements for risk management, control, governance and value for money.

In parallel to the risk management framework, the University’s senior leadership team have identified a set of University risks. The University Risk Register identifies those risks that are considered to have a fundamental impact on the University’s ability to deliver its mission or to operate effectively.

The principal risks and uncertainties of the University are broadly consistent year on year, with some changes in emphasis to reflect the heightened risk of significant downturns in the UK and/or Global financial markets and the risks of increases to or continued high levels of inflation. These risks have potential downstream impacts on a number of the other risk areas identified. The activities of the Press & Assessment are subject to the pressures of international competition. The Press & Assessment balance the need to reinvest sufficient of their operating surplus to thrive with the need to support the University’s core academic activities wherever possible.

The University remains comparatively well positioned in the sector to deal with financial risks. While costs across the University Group have risen sharply and continue to do so, in the prolonged high-inflationary environment, revenue streams are well diversified, both in terms of revenue line and geographically. These sources of revenue provide significant resilience, as does the strong and liquid balance sheet, enabling the University to manage the unexpected over the short term, and time to make the necessary operating adjustments. Furthermore, there are potential additional sources of revenue open to the University, albeit that the University chooses not to maximise surpluses.

Key strategic risk areas indentified include:

Risk area	Responses and actions
Reputational and financial impact through failure to meet OfS and other stakeholder expectations for widening student access and ensuring effective participation; student dissatisfaction in the quality of their educational experience; failure to compete with international competitors especially in providing financial support for doctoral students, particularly through failure to obtain funding for Doctoral Training Programmes (DTPs); inadequate support for student mental health and wellbeing; failure to recruit the very best undergraduate and postgraduate students; failure to ensure that educational facilities are of an acceptable standard for a world-class educational institution.	•Implementation of the actions committed to in the University’s Access and Participation Plan agreed with the OfS (2020–21 to 2024–25). •Full engagement with Colleges which are responsible for undergraduate admission decisions. •Implementation of the recommendations of the strategic review of admissions and outreach. •Continued progress in the Student Support Initiative with a particular focus on postgraduate studentships. •International Student Recruitment Strategy. •Support for innovation in methods of teaching and examination. •Implementation of the strategic review of student mental health and wellbeing. •Programme Board for Education Space responsible for improving educational space. •Strategy to support DTPs and Centres for Doctoral Training (CDTs). •The University’s Industrial Action Task Force has implemented a number of actions to mitigate as far as possible the detrimental impacts to students as a result of the marking and assessment boycott, which has significantly affected this year's examinations cycle.
Significant downturn in UK and/or Global financial markets leads to reduced financial strength. Combined impact of devalued long-term Investments, reduced endowment distribution levels, deterioration in pension valuations (increasing contribution levels), levels of student applications, particularly from overseas, and reduced sources of revenue and philanthropy. Also further potential impact on staff through UK cost of living crisis and falling real incomes and potential supply chain disruption.	•The University continues to focus on the optimal management of long-term financial sustainability, including stress testing and enhanced contingency planning. •The University is actively exploring opportunities to attract new revenue streams, modernise processes to seek cost efficiencies and ensure its capital programme is fully funded ahead of new commitments being made. •Over time, more fundamental adjustments to the cost base could be made but would negatively impact on students and research. Likewise capital investment would have to be prioritised on refurbishment over investment. •The University is investing further in its Development and Alumni Relations activities. •The professionally managed CUEF has allocations across a diversified range of asset classes, sectors, styles and geographies with a broad equity focus, designed to optimise returns and be resilient over the long term.
Significant increases in or continued high levels of inflation would result in an increase in the cost base of the University without matching increases in home student and government revenue streams.	•The University will continue to engage with Government directly and through the HE sector to ensure the funding is allocated reflecting inflationary pressures and increased costs of services for the sector. •The University will continue to explore other revenue streams (both in UK and internationally) with Cambridge University Press & Assessment to ensure the resources are maximised to offset increased costs. •The University will continue to invest in measures to increase the effectiveness and efficiency of its operations to optimise current and future use of resources. •The University will continue to monitor the USS pension scheme funding position, noting the improved position in recent monitoring reports.
Changes to government policy particularly resulting from increased funding pressures related to UK national deficits and debt, and economic recovery post‑Covid‑19, lead to further cuts in financial support and provision for education.	•The University continues to engage with government directly and through the HE sector to influence policy in support of its education and research mission. The University also continues to diversify its income sources. •The University performed strongly in the 2021 Research Excellence Framework (REF 2021) and will continue to ensure REF preparedness across the University to maximise future QR funding opportunities. •The College dimension of education provision is distinctive and successful, but it is costly to deliver. The University continues to review ways of controlling costs, seeking value-for-money gains, and opportunities to develop the mix of students over time, while maintaining the highest quality of education and without compromising on admission standards. •The University will continue to maintain and further develop its strategic relationships with research funders, including charities, Research Councils and industrial funders, and respond to new funding opportunities as they arise.
The Press & Assessment operates in challenging international markets where global economic conditions and competitor activity may adversely impact its financial performance, reducing the funds available for reinvestment in the University’s core academic mission. The University has a wide international footprint of activities. International tax laws are narrowing the distinction between supporting activities and permanent establishments, leading to the potential for more overseas activity to become taxable.	•The creation of the Press & Assessment addresses a growing desire from learners, teachers and researchers to engage with Cambridge in a joined up digital way, and reflects the demand for innovative products that combine expertise in learning and assessment. The integration has been given impetus by rapid changes in education and research, accelerated by the rapid uptake of digital education during the pandemic. Successfully competing in digital education is key to the Press & Assessment’s future success. •The Press & Assessment aims to diversify its product offerings, develop new revenue streams and deepen existing capabilities overseen by a Board with significant commercial expertise. •The University continues to monitor the key risks associated with its combined international activities. •The Strategic Partnership Office coordinates functional due diligence of proposed new international activities, sharing best practice. •The University leverages specialist external taxation and legal advice in support of its core internal capabilities.
Increasingly competitive landscape for all forms of research funding.	•The University continues to enhance the capabilities and capacity of its Research Office in support of the ongoing processes for grant application and lifecycle management, compliance and enhancement of financial analysis. •The University continues to maintain active communications with key stakeholders (e.g. Research England, UKRI) and to diversify research income, including building on progress with philanthropy. •The University has a growing focus on industrial research collaboration with international partners, focusing on finding solutions to the major global challenges.
Post-Brexit outcomes restrict access to movement and funding of EU students and staff. Reduced access to current levels of EU Research income. Wider economic downturn impacts future sources of revenue and availability of indirect labour and materials, disrupting the capital expenditure programme. Areas of high-risk are: EU research funding, immigration costs, EU student recruitment, student funding and communications.	•The ongoing financial and labour market challenges due to the UK’s exit from the EU remain of concern. The University and the HE sector continue to engage with Government on all post-Brexit issues. •Decrease in European Research Council (ERC) funding could still impact the University’s research income and its ability to engage leading researchers. HM Treasury has committed to guarantee existing ERC funding commitments. The University welcomes the recent announcement by the Government that the UK is to rejoin the EU Horizon scientific research funding scheme. •Managing the expectation of research projects due to increased costs of goods and services from EU as well as shortages of skilled labour to deliver these projects.
Inability to attract and retain the best academics and adequately resource professional staff through a failure to compete with escalating levels of international reward levels, growth in the University’s complexity and scale, and high costs of living and housing in the Cambridge area.	•The University continues to focus on pensions and pay as key components of a competitive employment proposition, seeking economy, efficiency and effectiveness in its operations to accommodate pay and pension inflation as necessary. •The University has made an additional cost of living-related payment of 2% of salary to all staff, and implemented part of the 2023–24 sector‑agreed pay award in February 2023, six months early. The University will continue to monitor, and where appropriate address, the UK cost of living crisis impacting its staff. •The University is also focusing on the provision of transport, nursery schooling and housing, with the Eddington development designed to ease pressures. •The University continues to work with the sector to ensure long-term and attractive pension schemes including the USS. •The University is offering a flexible working environment.
Significant data breach, failure to comply with GDPR, or major information security event (cyber security) leads to loss of confidential/commercially sensitive information or failure of IT infrastructure.	•The University has invested resources to understand its data assets and the security landscape across a devolved institution, and to enable assessment of the risks associated with loss of confidential and commercially sensitive information. •The University has developed and is implementing an updated Cyber Strategy to deliver enhanced security controls across the University, noting that this is a challenge in more devolved areas of control and in an environment of increased and changing threats. •The University has an ongoing programme of cyber risk awareness training and engagement for all staff.
Inadequate long-term maintenance and development of the academic and non‑academic estate and supporting infrastructure. Failure to develop and protect a fit‑for‑purpose IT infrastructure due to devolved organisation and associated fragmentation, customisation and local solution development.	•The University has an ambitious capital building programme and is actively sharpening the prioritisation and management of its strategic investments. •The University seeks to optimise available funding through maximising associated capital grants and philanthropic resources and by increasing net operating cash flows. •A comprehensive programme of work is continuing, aimed at tackling the maintenance backlog. Allocated funds for maintenance have been substantially enhanced to enable this work to build momentum. •From a strategic perspective, the Reshaping our Estate programme aims to create a University of Cambridge estate that is more efficient, more effective, more environmentally sustainable and fit for purpose. •The University continues to implement a Digital Workplace programme, with regular reports to the Audit Committee. This will include the adoption of a determined direction of travel to include: consistent and secure infrastructure agnostic of location; appropriate policies and standards for staff to work securely and effectively from any location; and a path to maximise the benefits offered by digital technologies. •Establish appropriate investment levels and the prioritised allocation of resources between the University’s digital vs. physical estate.
Failure to maintain adequate risk management of Health & Safety related risks and compliance with associated regulations across the distributed University estate and activities leads to personal injury/fatality or significant loss of facilities.	•The University has policies and procedures in place to support appropriate risk management and compliance across the organisation for Health and Safety related risks. However, the devolved nature of the University and diverse nature of associated direct and indirect activities represent a challenge in ensuring full assurance coverage. The University has strengthened its central oversight and governance of health and safety risks, one aim of which is to provide greater visibility of, and therefore assurance around, health and safety matters across the institution.

Concluding remarks

The mission of the University of Cambridge is to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. The purpose of the University’s finances is to support that overarching academic mission.

Our objective therefore is to drive the maximum resources into those activities that matter most – research, teaching and learning excellence, innovation and the University’s wider impact agenda – and ensure that Cambridge has enough resources to maintain its position as a world-leading university.

Cambridge continues to operate a high quality, high-cost approach to teaching, in parallel with a very significant amount of research activity. These loss-making core activities continue to be supported by distributions from our restricted endowment reserves and direct donations. Our ambition remains to achieve a modest, sustainable surplus for the Academic University cash flow in the long run, in order to maximise the funds available for reinvestment into the University’s mission and provide greater resilience across funding sources.

Our funds for one-off investment come from distributions from unrestricted endowment reserves, built over time, distributions from Press & Assessment, government grants and philanthropy. Over the longer term, these funds will be boosted by surpluses generated from our bond-funded property and investment portfolio, over and above that needed to service the debt.

Having weathered the financial impacts of the pandemic, we now face the extended impacts of a sustained period of exceptional cost inflation, notably in energy, outpacing revenue growth in the near term. Other significant risks include ongoing market turbulence in response to global events impacting the CUEF, and the Press & Assessment’s continuing dependency on key products.

We are continuing to seek to diversify sources of income and surplus in Press & Assessment, while progressing our resilient, long-term strategy at CUEF and ensuring our bond-funded property and investment portfolio remains focused on commercial returns.

Within the Academic University, we are targeting a sustainable annual surplus over time, through raising revenues and utilising collective resources more efficiently, while enhancing the academic strengths of the University and investing in our people. We continue to focus on measures that install greater understanding of, and discipline over, the devolved University’s collective finances, supporting the journey to a culture of enhanced financial awareness and responsibility that allows departments to generate additional revenues and save costs, to help fund their local academic activities, while helping the University prioritise its central investment funds. Key to achieving this, will be the continued modernisation of information flows, systems and processes. While these significant endeavours are now in progress, they will take time. Meanwhile, we have started the shift in financial behaviours and targeted academic investment today.

We want to ensure Cambridge has enough resources to maintain its position as a leading world university. This means investing in pay to attract and retain the world’s most promising academics and allowing them to do their best work. It means being able to explore new research frontiers, with fit for purpose buildings and equipment. It means having a working and teaching environment that is fit for a leading university, supported by modern professional services.

This will need a balance of investment in people, IT systems and buildings as well as the commitment to decarbonise the University and galvanise increased philanthropy to boost our ability to deliver the University’s mission. As current stewards of this University, we must navigate these opportunities to deliver to our ambitions while handing on an institution at least as financially strong as the one we inherited.

These are all significant challenges to address, particularly for an institution that is so highly devolved. Nonetheless, with a clear collective mandate there are huge opportunities that can be unlocked. Cambridge has the potential to achieve things that few other universities in the world are capable of.

Anthony Odgers
Chief Financial Officer

CORPORATE GOVERNANCE

1. The following statement is provided by the Council to enable readers of the financial statements to obtain a better understanding of the arrangements in the University for the management of its resources and for audit.

This statement relates to the period covered by the financial statements, and the period up to the date of approval of the audited financial statements.

2. The University endeavours to conduct its business in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership). The University complies with the Voluntary Higher Education Code of Governance as revised in September 2020 by the Committee of University Chairs.

Under the University’s Statutes, the governing body of the University is the Regent House, which comprises some resident senior members of the University and the Colleges, together with the Chancellor, the High Steward, the Deputy High Steward, the Commissary and the external members of the Council. The approval of the Regent House is required for changes to the University’s Statutes and Ordinances and for any other matter for which, in Statute or Ordinance, the University’s approval must be obtained; the Council and the General Board may also decide to seek the Regent House’s approval on questions of policy, which are considered likely to be controversial. The Council of the University is the principal executive and policy-making body of the University, with general responsibility for the administration of the University, for the planning of its work, and for the management of its resources. The Council has a majority of internal members and is chaired by the Vice-Chancellor. Its membership includes four external members, one of whom chairs the Audit Committee (see paragraphs 4 and 7 below). The Statutes provide for the appointment of a Deputy Chair of the Council, normally one of the external members, to take the chair as necessary or when it would be inappropriate for the Vice-Chancellor to do so, in particular in relation to the Vice-Chancellor’s own accountability. The General Board of the Faculties is responsible for the academic and educational policy of the University. The annual reports of the Council and the General Board are published on the University’s website and are submitted to the Regent House for comment and approval.

3. The University is an exempt charity and is subject to regulation by the Office for Students (OfS). The members of the University Council are the charity trustees and are responsible for ensuring compliance with charity law.

4. The Council is advised in carrying out its duties by a number of committees, including the Finance Committee, the Audit Committee, the Planning and Resources Committee, the Human Resources Committee, the Remuneration Committee, and the Committee on Benefactions and External and Legal Affairs. The Finance Committee advises the Council on the management of the University’s assets, including real property, monies and securities. The Audit Committee, which has a majority of external members, governs the work of the internal and external auditors, reporting on these matters directly to the Council. In addition, the Audit Committee reviews the University’s risk management processes to ensure that they are adequate and effective. The Planning and Resources Committee (PRC) and the Human Resources Committee (HRC) are joint Committees of the Council and the General Board. The PRC’s responsibilities include the preparation of the University’s budget. The HRC advises the Council on matters concerning equality and diversity and equal and gender pay, providing an annual equality monitoring report, and on the policy framework governing staff-related matters, including the University’s policy on public disclosure (whistleblowing). The Remuneration Committee is chaired by an external member of the Council and approves market pay cases, incentive schemes and severance pay cases for senior staff as well as payments to external members of University bodies and committees. It provides advice to the Council on remuneration (including on compliance with the Higher Education Senior Staff Remuneration Code), succession planning and diversity, as appropriate, and it also reviews the University’s public disclosures relating to remuneration. The Committee on Benefactions and External and Legal Affairs (CBELA) considers matters likely to have an impact on the reputation of the University, including advising the Vice-Chancellor on the acceptability of donations. The Property Board oversees the development, management and stewardship of the University’s non-operational estate, including the West and North West Cambridge sites. It reports to the Council’s Finance Committee. The Press and Assessment Board advises the Council on matters concerning the University Press & Assessment.

5. Under the terms of the OfS’ Terms and Conditions of funding for higher education institutions and the Terms and Conditions of the Research England grant between the University and the OfS, the Vice-Chancellor is the Accountable Officer of the University.

6. Under the University’s Statutes, it is the duty of the Council to exercise general supervision over the finances of all institutions in the University; to keep under review the University’s financial position and to make a report thereon to the University at least once in each year; to recommend bankers for appointment by the Regent House; and to prepare and publish the annual accounts of the University in accordance with UK‑applicable accounting standards such that the accounts give a true and fair view of the state of affairs of the University.

7. It is the duty of the Audit Committee to keep under review the University’s risk management strategy and implementation; to keep under review the effectiveness of the University’s internal systems of financial and other controls and governance; to advise the Council on the appointment of external and internal auditors; to consider reports submitted by the auditors, both external and internal; to monitor the implementation of recommendations made by the internal auditors; to satisfy itself that satisfactory arrangements are adopted throughout the University for promoting Value for Money (economy, efficiency and effectiveness); to monitor the University’s management and quality assurance of data submitted to the OfS and other bodies; to establish appropriate performance measures and to monitor the effectiveness of external and internal audit; to monitor incidences of fraud and other irregularities and their reporting to OfS as appropriate; to make an annual report to the Council and to receive reports from the OfS and other regulators. Membership of the Audit Committee includes, as a majority, five external members (including the Chair of the Committee), appointed by the Council with regard to their professional expertise and experience.

8. There are Registers of Interests of Members of the Council, the General Board, the Finance Committee, and the Audit Committee, and of the senior administrative officers. Declarations of interest are made via an annual declaration of interests process. In addition, interests that relate to particular agenda items are noted at the start of each meeting. All members of the Council were routinely asked to self‑certify against the OfS indicators of a ‘fit and proper person’ at the beginning of their tenure as trustees. Council members and senior officers are encouraged to have particular regard to the seven principles of public life, supported by the University’s management and governance arrangements.

MEMBERS OF THE COUNCIL DURING THE YEAR ENDED 31 JULY 2023

The Chancellor:
Lord Sainsbury of Turville

The Vice-Chancellor:
Professor Stephen J. Toope (until 30 September 2022)
Dr Anthony Freeling* (from 1 October 2022 until 30 June 2023)
Professor Deborah Prentice (from 1 July 2023)

Heads of the Colleges:
Professor Dame Madeleine Atkins
Dr Anthony Freeling* (until 9 August 2022)
Mrs Heather Hancock
Professor Pippa Rogerson
Sally Morgan, Baroness Morgan of Huyton (from 10 August 2022)

Professors, Clinical Professors, Readers and Professors (Grade 11):
Professor Richard Penty (until 31 December 2022)
Professor Jason Scott-Warren
Professor Anthony Davenport
Professor Maria Manuel Lisboa (until 2 March 2023)
Professor Richard Mortier (from 15 June 2023)
Professor Sharon Peacock (from 16 May 2023)
Professor Arif Ahmed (from 1 January 2023 until 1 June 2023)

Members of the Regent House:
Dr Ruth Charles (until 31 December 2022)
Dr Nicholas Holmes (until 31 December 2022)
Dr Philip Knox (until 31 December 2022)
Dr Andrew Sanchez (until 31 December 2022)
Dr Zoe Adams
Dr Ann Kaminski
Dr Mike Sewell
Dr Pieter van Houten
Ms Milly Bodfish (from 1 January 2023)
Mr John Dix (from 1 January 2023)
Dr Louise Joy (from 1 January 2023)
Mr Scott Mandelbrote (from 1 January 2023)

Student members:
Ms Zaynab Ahmed (until 30 June 2023)
Mr Sam Carling
Ms Amelia Jabry (until 30 June 2023)
Mr Fergus Kirman (from 1 July 2023)
Mr Vareesh Pratap (from 1 July 2023)

External members:
Ms Gaenor Bagley
Ms Sharon Flood
Professor Sir David Greenaway (until 29 August 2022)
Mr Mark Lewisohn (until 31 December 2022)
Professor Sir Alexander Halliday (from 1 July 2023)
Professor Andrew Wathey (from 1 March 2023)

The Chancellor, external members, student members, Professor Atkins, Mrs Hancock, Baroness Morgan, Dr Adams, Dr Sewell, Mr Dix, Dr Joy and Mr Mandelbrote were not employees of the University during the year. The other members of the Council are or were employees of the University. No member of the Council receives payment for serving as a member of the Council.

* Dr Anthony Freeling ceased to be a Member of the Council on 9 August 2022. He commenced his term as Acting Vice‑Chancellor on 1 October 2022, and rejoined the Council at this date as an employee of the University.

STATEMENT OF INTERNAL CONTROL

1. The Council is responsible for maintaining a sound system of internal control that supports the achievement of policies, aims, and objectives, while safeguarding the public and other funds and assets for which the Council is responsible, in accordance with the Statutes and Ordinances and the Office for Students’ (OfS) Terms and Conditions of funding for higher education institutions and the Terms and Conditions of the Research England grant.

2. The system of internal control is designed to identify the principal risks to the achievement of policies, aims, and objectives, to evaluate the nature and extent of those risks, and to manage them efficiently, effectively, and economically on an ongoing basis. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve policies, aims, and objectives; it, therefore, provides reasonable, but not absolute, assurance of effectiveness.

3. A risk management framework continued to be in place for the year ended 31 July 2023 and up to the date of approval for the financial statements. The framework is in accordance with OfS guidance.

4. The Council is responsible for ensuring that a sound system of internal control is maintained. The following principles of internal control have been established and applied as described below:

(a)The Council receives periodic reports from the Chair of the Audit Committee concerning internal control and risk management, together with the minutes of all meetings of the Audit Committee.

(b)The Audit Committee reviews the University’s policy against bribery and corruption on an annual basis.

(c)The Audit Committee receives regular reports from the University’s internal auditors, Deloitte LLP, which include the internal auditors’ independent opinion on the adequacy and effectiveness of the University’s system of internal control and risk management, together with recommendations for improvement.

(d)The Council has delegated to the Audit Committee the responsibility for reviewing the University’s risk management processes to ensure that they are adequate and effective. Risk management is a standing item on the Audit Committee agenda and is the driving element in the design of the annual internal audit programme of work.

(e)The Audit Committee’s annual report (which is submitted to the Council), sets out how risks are identified and evaluated, how risk management is embedded in ongoing operations and reviews the effectiveness of the risk management framework. The annual report also considers the University’s arrangements for the prevention and detection of corruption, fraud, bribery and other irregularities.

(f)The University’s senior leadership team is responsible for identifying and managing risks across the University’s activities, within the context of the University’s priorities and objectives. The review of risks encompasses business, operational, compliance, financial, and reputational risks.

(g)All identified risks are evaluated using a common framework for scoring that considers both the likelihood and impact of risks becoming a reality. The scoring guidance for evaluating risks prompts risk owners to consider the following categories of impact: finance, compliance, safety, service delivery (operational), reputation, and people.

(h)The risk management framework applies across the University’s institutions, with further guidance and information provided to those who own or manage University, School, Faculty or Departmental risks (primarily through web‑based resources and training). Risk assessment underpins the University’s programme of internal audit work.

(i)The University’s Risk Register identifies those risks that are considered to have a fundamental impact on the University’s ability to deliver its mission or to operate effectively. The risk register is considered and formally approved by the Council at least annually, enabling it to receive direct updates on the evaluation and management of risks.

5. The Council is also responsible for reviewing the effectiveness of the system of internal control. The Council’s review of the effectiveness of the system of internal control is informed by:

(a)the work of the University’s internal auditors, Deloitte LLP, as reported to the Council through the Chair of the Audit Committee, the Audit Committee’s annual report and the minutes of all meetings of the Audit Committee;

(b)the work of the senior officers and the risk owners within the University, who have responsibility for the development and maintenance of the internal control framework; and

(c)comments made by the external auditors in their management letter and other reports.

6. Deloitte LLP, as the University’s internal auditors, provided reasonable assurance over the overall adequacy and effectiveness of the University’s arrangements for risk management, governance, value for money and internal controls, except for certain ongoing focus areas where the University is taking steps to further enhance controls. No significant control weaknesses or failures which require disclosure were identified during the 2022–23 financial year, or up to the date of approval of the financial statements.

STATEMENT OF THE RESPONSIBILITIES OF THE COUNCIL

Under the University’s Statutes and Ordinances, it is the duty of the Council to prepare and to publish the annual accounts of the University in accordance with UK applicable accounting standards such that the accounts give a true and fair view of the state of affairs of the University.

The Council is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the University.

In preparing the financial statements, the Council is required to:

(a)select suitable accounting policies and then apply them consistently;

(b)make judgements and estimates that are reasonable and prudent;

(c)state whether applicable accounting standards have been followed;

(d)prepare the financial statements on a going concern basis unless it is inappropriate to presume that the University will continue to operate;

(e)ensure that income has been applied in accordance with the University’s Statutes and Ordinances, the Terms and Conditions of funding for higher education institutions, the Terms and Conditions of the Research England grant, and the funding agreement with the National College for Teaching and Leadership; and

(f)safeguard the assets of the University and take reasonable steps to prevent and detect fraud and other irregularities.

 

INDEPENDENT AUDITORS’ REPORT TO THE COUNCIL OF THE UNIVERSITY OF CAMBRIDGE

Report on the audit of the financial statements

Opinion

In our opinion, The Chancellor, Masters, and Scholars of the University of Cambridge (‘University of Cambridge’) Group financial statements and the University financial statements (the ‘financial statements’):

•give a true and fair view of the state of the Group’s and of the University’s affairs as at 31 July 2023 and of the Group’s and of the University’s income and expenditure, gains and losses, changes in reserves and of the Group’s cash flows for the year then ended;

•have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, and applicable law); and

•have been properly prepared in accordance with the requirements of the Office for Students’ Accounts Direction (OfS 2019.41).

We have audited the financial statements, included within the Reports and Financial Statements (the ‘Annual Report’), which comprise: the Consolidated and University statements of financial position as at 31 July 2023; the Consolidated and University statements of comprehensive income; the Consolidated and University statements of changes in reserves, the Consolidated statements of Cash Flows for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.

Our opinion is consistent with our reporting to the Audit Committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

In September 2021, the Group acquired Cogbooks Limited and its subsidiaries (‘Cogbooks’). Cogbooks is immaterial to the Group and did not therefore form part of our evidence in respect of the audit of the Group’s consolidated financial statements.

At the time of the acquisition Cogbooks was not an audit client of PwC and PwC were providing permissible statutory accounts and tax return preparation services for the financial year to 31 July 2021. These services, which are not permissible for any controlled undertaking of the Group, were not terminated within three months of the acquisition and the continuation of these services amounted to breaches of paragraphs 1.27 and 5.40 of the FRC’s Revised Ethical Standard 2019. The services were completed in April 2022.

We confirm that, based on our assessment of these breaches, including the nature and scope of the services, and the subsequent actions taken, the provision of the services did not affect our professional judgement in connection with our audit of the year ended 31 July 2022 and we remained objective and independent. Other than the matter referred to above, and to the best of our knowledge and belief, we declare that no other non‑audit services prohibited by the FRC’s Revised Ethical Standard 2019 were provided to the Group.

We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Revised Ethical Standard 2019, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Other than those disclosed in Note 15 to the financial statements, we have provided no non‑audit services to the University or its controlled undertakings in the period under audit.

Our audit approach

Overview

Audit scope

•The scope of our work covered the financially significant components, including the Academic University, Cambridge University Press and Assessment, and the Cambridge University Endowment Fund. We conducted a full scope of audit for each of these components.

•These audit procedures covered 95% of the Group’s income and 94% of the Group’s total assets.

Key audit matters

•Rights and obligations relating to research debtors and donations and endowment income (Group and University)

•Valuation of complex pooled investment vehicle assets (Group and University)

•Valuation of investment properties (Group and University)

•Valuation of pension schemes liabilities (Group and University)

Materiality

•Overall Group materiality: £23.3 million (2022: £21.8 million) based on 1% of total income.

•Overall University materiality: £20.0 million (2022: £19.0 million) based on 1% of total income capped by Group materiality allocation.

•Performance materiality: £17.5 million (2022: £16.4 million) (Group) and £15.0 million (2022: £14.3 million) (University).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

The key audit matters below are consistent with last year.

Key audit matter	How our audit addressed the key audit matter
Rights and obligations relating to research debtors and donations and endowment income (Group and University) Refer to Note 3(e) (Statement of significant accounting policies – Recognition of income), Note 4(a)(i) (Critical judgements in applying the Group’s accounting policies – Revenue recognition), Note 7 (Research grants and contracts), and Note 9 (Donation and endowments). The Group’s total income includes research grants and contracts amounting to £569.5 million (2022: £551.8 million) and donations and endowments of £132.4 million (2022: £52.8 million). Research grant income is typically recognised when the terms of the grant or contract are met, primarily as relevant expenditure is incurred. Often there will be timing differences between when cash is received and when recognition criteria are met, which requires income to be accrued or deferred, resulting in a risk of inappropriate revenue recognition at the year end and potential clawback. The risk of clawback after payment is low as the funder would have reviewed the invoice/claim made by the University (including any potential reporting requirements) and approved payment on this basis. Therefore the significant risk specifically lies in the rights and obligations of the unbilled and billed but unpaid portions of grant income recognised and the recoverability of the research debtor and accrued income at year end. For donation and endowment income, the Group is entitled to recognise income when terms and conditions of the donation agreements and/or contracts are met. There is a degree of judgement involved in interpreting terms and conditions. Therefore the significant risk specifically lies in the rights and obligations of the donations and endowments, due to the potential incorrect interpretation of when contract terms determine the entitlement and right to the revenue.	We understood and evaluated the design and operating effectiveness of controls addressing research income and donation; We have performed procedures over a sample of revenue items to test the rights and obligations to research income that is unpaid at year-end and tested the recoverability of these balances through our testing of both the billed and unbilled research income debtors (accrued income); and We have performed testing over samples of billed and unbilled research debtors. Where available we have agreed balances to subsequent cash receipts. If balances remain unpaid after year end, we have tested and challenged whether the expenses claimed are allowable based on grant agreements, where appropriate we have analysed the nature of expenditure incurred in the year, assessed the ability of the funders to pay, reviewed audit reports for sponsors to identify any issues with the claim, and considered if debtors include claims for costs in excess of the amount agreed with funders. We have no matters to report. We have performed procedures over a sample of donations and endowments and agreed these to cash received and verified that they are recognised in accordance with the performance conditions in the underlying agreements, with a particular focus on larger individual donations. We have no matters to report.
Valuation of complex Pooled Investment Vehicle (PIV) assets (Group and University) Refer to Note 23 (Non-current investments – other investments), Note 26 (current asset investments) and Note 12 (Investment income) and Note 36 (Pension schemes) where the pension assets are detailed. Cambridge University Endowment Fund (‘CUEF’) As explained in Note 12, the CUEF is a unitised fund constituted by Trust Deed with the University as sole trustee holding the property of the CUEF on trust for unit holders. The total CUEF fund value is £4,087.2 million (2022: £4,000.5 million), of which the University’s share is £3,778.1 million (2022: £3,756.1 million), and is recorded as part of non-current asset investments – other investments and comprises 92% (2022: 94%) of the balance. The remainder of the CUEF’s investments are recorded within current assets as CUEF units held on behalf of other entities. The valuation of the CUEF units, used by the various components of the Group in determining their investment valuations, is key. Within the CUEF, a large proportion, approximately £3.1 billion of pooled investment vehicles (PIVs) carry an increased risk of valuation error due to the lack of an observable market price, judgements required in the valuation of the underlying assets, and asset valuations being estimated using management assumptions as monthly pricing is not available for the accounts preparation process. For the quarterly valued pooled investment vehicles making up approximately £1.2 billion, there is also a significant level of judgement within the roll-forward performed by management from 30 June valuations (for funds valued only quarterly) to 31 July. This exercise has been performed by management using movements in relevant indices, currency and cash flow movements, to estimate the monthly movement. Indices have been selected based on the nature of the fund, but are considered a proxy, given the complex nature of the funds. The overall movement in valuation from June 2023 to July 2023 was £116.7 million. Of this £85.2 million related to the roll forward exercise performed by management in which the selection of the indices is considered subjective. Pension scheme assets The pension asset for the Cambridge University Assistants’ Contributory Pension Scheme (‘CPS’) totals £842.8 million (2022: £815.5 million), of which £167.4 million are complex assets. This equates to around 20% of the assets being more complex and represents the significant audit risk. These more complex assets are PIVs, which, per our assessment, have been classified as more complex in nature. We focused on these investments given the significance of the balances, the range and diversity of sources of valuations, and recognition that investment valuations by their nature are subjective.	We understood and evaluated the design and operating effectiveness of controls addressing the valuation of pooled investment vehicles. For PIVs held within both the CPS pension scheme and CUEF, we have obtained independent confirmations from fund managers. For those funds which are classified as more complex for both CUEF and pension scheme assets, additional procedures were undertaken to assess the reliability of the valuation. This included the following procedures where we assessed information which either corroborates or contradicts the confirmed value provided by the investment manager: •Obtaining and reviewing control reports and bridging letters (where available); •Obtaining copies of the most recently audited financial statements of the fund and comparing the unaudited valuation statement received from the fund as at the fund’s year end to the audited financial statements to assess whether there are material changes to the valuation as a result of the fund’s audit; •Obtaining recent transaction listings where available to assess the transactional price when compared to the year end price; and •Performing an internet search of the investments to identify contradictory information to the valuation. We have no matters to report in respect of this exercise. In relation to the CUEF roll forward for quarterly valued PIVs, indices were applied to estimate the values at 31 July 2023 and we performed additional procedures. These included: •Assessing the completeness of PIVs by agreeing client working papers to the JPM Custodian report obtained directly by us; •For a sample of funds testing the suitability of the indices selected by reference to the investment strategy and underlying assets of the respective funds; •Agreeing a sample of known capital movements to the Custodian’s records; •Recalculating the application of the above elements on a sample basis; and •Considered funds which had the largest differences between management estimate and actual valuation for those assets where statements were received and assessed if the underlying benchmark used remains appropriate. Overall we have concluded that the roll forward approach applied to the less frequently priced PIVs and indices selected provides a reasonable estimate of the valuation at 31 July 2023 on a portfolio basis. We have no matters to report in respect of this area.
Valuation of investment properties (Group and University) Refer to Note 23(b) (Non-current investments – Investment Property). The Group’s and University’s investment property comprises the investment properties in the Academic University, made up of the North West Cambridge (‘NWC’) development of £276.1 million (2022: £346.4 million), and a range of other residential and non‑residential properties of £232.9 million (2022: £215.8 million). The Group and University also holds investment properties within the CUEF, £33.6 million (2022: £80.8 million) and the Northdown and Wood Mews Limited Partnerships, £140.9 million (2022: £147.7 million). The majority of the properties are valued by independent external valuers. There are a considerable number of judgemental assumptions applied across the different property valuations including: discount rate, rental growth (which for key worker housing is linked to assumed salary growth, where appropriate), operating costs, yields, and expected sales prices for those units for sale. A valuation of this nature has a material risk of fraud and error given that it, firstly, involves a number of subjective assumptions and, secondly, depends upon the inputs to the valuation being consistent with the facts, land usage and plans. Although the use of independent external valuers significantly mitigates the risk of inappropriate assumptions / methodology being used, the magnitude of the balance means that small changes in assumptions could lead to potentially material variances.	We understood and evaluated the design and operating effectiveness of controls addressing the valuation of investment properties; We have tested a sample of the valuations performed by the University’s external valuers including the more significant North West Cambridge (‘NWC’) properties owned directly by the University, the CUEF and its related property vehicle interests as well as those owned by Northdown. We have performed audit procedures over a sample of the inputs included within the valuations, as well as challenging the methodology and key assumptions used by the valuers where appropriate. Although there are certain judgements that have been taken in relation to valuation approaches we have not noted any bias in the estimates / judgements. Some key judgements are noted as being: •Estimated future site wide infrastructure costs for development of Phase 2 and Phase 3 of NWC currently valued at £84.8 million higher than budgeted. This reduces the value of investment properties in the NWC portfolio. We consider the estimate reasonable based on the evidence obtained. •The largest single contributor to the NWC development is the ‘key worker housing’ which equates to 38% of the total value. The valuer has adopted a discount rate of 6%, which is consistent with the prior year. Management, with the support of their valuation expert, supported the consistent discount rate as being reflective of their long term view given the duration of the cash flows. Management’s experts further supported the discount rate applied by the strong underlying investment credentials of the product concerned, being high quality, well-let key-worker housing supplying the needs of one of the world’s leading universities. We considered the valuation reasonable on this basis. •For the properties in the NWC portfolio, we reviewed a sample of individual components of the development, agreeing estimates back to supporting evidence (including to sales contracts already in place, third party valuations, evidence in support of current rental income and the assumed salary growth, which we assessed for consistency with the assumptions made elsewhere in the financial statements and to detailed plans and related planning approvals). Our internal valuation experts assisted us with our assessment of the assumptions that feed into the valuation (including discount rates, expected rental yields and sales proceeds), as well as with a review of the valuation methods, and the appropriateness of the comparators and benchmarks used by management’s external valuation experts. In relation to the other investment properties we tested a sample of properties, in particular: •We agreed the estimates back to supporting documentation (including lease agreements); and •We used our internal valuation experts to assist us in assessing the valuation methods and the appropriateness of the assumptions used. We concluded that they all sit within external market ranges, where available, are consistent with underlying support and in line with our own expectations. Based on the procedures performed, we found the methodologies used in preparing the valuations were appropriate and the key assumptions were supportable in light of available evidence and did not identify any contradictory evidence as part of our audit work performed.
Valuation of pension schemes liabilities (Group and University) Refer to Note 30 (Pension liabilities) and Note 36 (Pension schemes). The Group has defined benefit pensions plans with net liabilities of £427.5 million (2022: £790.9 million) and the University has defined benefit pension plans with a net liability of £411.5 million (2022: £776.3 million). The asset side contributing to these net liabilities is referred to above as part of the key audit matter for Valuation of complex Pooled Investment Vehicle (PIV) assets. There are four main schemes contributing to the liability: The Cambridge University Assistants’ Contributory Pension Scheme (CPS) has a closing defined benefit obligation of £905.4 million (Group and University) The Cambridge University Press UK defined benefit schemes have a closing defined benefit obligation of £259.6 million (Group and University). This includes the Press Contributory Pension Fund (PCPF) and the Press Senior Staff Pension Scheme (PSSPS), together referred to as ‘Press schemes’ The University and Group also hold a liability in respect of the deficit reduction agreement for the multi-employer Universities Superannuation Scheme (‘USS’) of £348.9 million and £334.4 million respectively. This scheme is accounted for as a wholly defined contribution scheme as the University is unable to identify its share of the underlying assets and liabilities of the scheme. For the CPS and Press schemes, the present value of the defined benefit obligation is affected by actuarial assumptions, such as discount rates, inflation and life expectancy, depending upon the individual circumstances of the scheme. A change in these actuarial assumptions can have a significant financial impact on the year end pension liability. In addition, the liability recognised in relation to USS reflects the net present value of contributions payable under the agreed USS deficit recovery plan. Key assumptions include discount rates and changes in staff costs (comprising both staff numbers and salary inflation) over the duration of the scheme. The deficit recovery plan was agreed following the results of the 2020 actuarial valuation. An updated valuation exercise has been undertaken at the valuation date of 31 March 2023, which had not been finalised at 31 July 2023.	In respect of the CPS and the Press Contributory Pension Fund and the Press Senior Staff Pension Scheme (together ‘Press’) defined benefit schemes, we obtained the pension valuation reports from the external actuaries. With the assistance of our internal actuarial experts we compared the inflation rates and discount rates used in the valuation of the pension liability by the external actuary to our internally developed benchmarks and considered the consistency of assumptions against the prior year. We used our actuarial experts to challenge and assess the reasonableness of the key assumptions used by the University’s and Press and Assessment’s actuaries in the valuation reports such as discount rate, inflation, salary / pension increases, mortality and challenged them in relation to our own benchmarks to ensure they were within appropriate ranges. We have also assessed the methodology to support the financial assumptions that have been updated in the year. We performed testing over the census data on which the valuation is based. We obtained an understanding of the checks performed by the Actuary on the completeness of the data. We agreed a sample of member records between the administration records and the actuary’s records to confirm consistency of data. For a sample of new joiners in the year we also agreed the start dates and salary data to HR records. Based on the procedures performed above, we found the methodologies and assumptions used by management in the valuation of CPS and Press to be reasonable. In respect of the USS deficit recovery provision we have tested the contribution data and key assumptions and were satisfied that those used for the USS provision were reasonable. Our actuarial experts have confirmed the integrity of the underlying model used for the calculation of the closing liability. Based on the procedures performed above, we found the methodologies and assumptions used by management in the valuation of USS to be reasonable.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the University, the accounting processes and controls, and the industry in which they operate.

In relation to scoping our work, the following were considered significant components – the Academic University, Cambridge University Press and Assessment, and the Cambridge University Endowment Fund.

The impact of climate risk on our audit

As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the Group’s financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the Group’s and University’s financial statements.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

	Financial statements – Group	Financial statements – University
Overall materiality	£23.3 million (2022: £21.8 million)	£20.0 million (2022: £19.0 million)
How we determined it	1% of total income	1% of total income
Rationale for benchmark applied	A key performance indicator for the Group and this is a generally accepted measure applied when auditing organisations with social objectives, to calculate overall materiality.	A key performance indicator for the University and this is a generally accepted measure applied when auditing organisations with social objectives, to calculate overall materiality.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £20.0 million and £23.3 million. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £17.5 million (2022: £16.4 million) for the Group financial statements and £15.0 million (2022: £14.3 million ) for the University financial statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1.2 million (Group audit) (2022: £1.0 million) and £1.0 million (University audit) (2022: £1.0 million) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

Our evaluation of the Council’s assessment of the Group’s and the University’s ability to continue to adopt the going concern basis of accounting included:

•We reviewed management’s analysis and models, and how these have been applied to a going concern assessment period to 31 July 2030. These included base forecast assumptions and a set of stress tests and considered whether these were reasonable and appropriate in light of our knowledge of the Group, University and sector and past performance.

•We have confirmed the mathematical accuracy of the model.

•We validated the liquidity position of the Group and in particular the extent of unrestricted and available cash and equivalent resources, and considered the extent of headroom these resources provided against the stress tests.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and the University’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In auditing the financial statements, we have concluded that the Council’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group and the University’s ability to continue as a going concern.

Our responsibilities and the responsibilities of the Council with respect to going concern are described in the relevant sections of this report.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The Council is responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

Responsibilities for the financial statements and the audit

Responsibilities of the Council for the financial statements

As explained more fully in the Statement of the responsibilities of the Council set out on page 316, the Council is responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Council is also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Council is responsible for assessing the Group and the University’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Council either intends to liquidate the Group and the University or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to the Office for Students Regulatory Framework under the Charities Act 2011 including the terms and conditions of funding and employment legislations, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Office for Students’ Accounts Direction (OfS 2019.41) and tax regulations. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate income, misappropriation of assets and the potential for management bias in significant accounting estimates. The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work.

Audit procedures performed by the Group engagement team and/or component auditors included:

•Discussing with management, internal legal counsel and review of internal audit reports, including consideration of known or suspected instances of non-compliance with laws and regulations, and fraud;

•Inquiry of entity staff in tax and compliance functions to identify and instances of non-compliance with laws and regulations;

•Assessment of matters reported on the Group’s whistleblowing process and the results of management’s investigation of such matters;

•Reviewing correspondence between the University, the Office for Students and other regulators in relation to compliance with laws and regulations;

•Inspecting the Group and University’s minutes to ensure we have identified any possible non-compliance reported internally;

•Challenging assumptions and judgements made by management in their significant accounting estimates and judgements, in particular in relation to the recoverability of research debtors, the valuation of investment properties, the valuation of complex PIV’s, valuation of the CPI‑linked listed bond and pension scheme liabilities valuation;

•Performing procedures to ensure the financial statements are appropriately prepared and disclosed in line with the Office for Students’ Accounts Direction (OfS 2019.41);

•Identifying and testing journal entries, in particular focusing on unusual account combinations to revenue, entries related to cash disbursement outside the normal purchasing and payables cycle, and entries containing the names of related parties of the Group and the University;

•Incorporation of an element of unpredictability around the nature, timing or extent of our testing and performed testing over the approval process for changes to vendor details, and over approval of expenditure relating to North West Cambridge; and

•Performing department visits: attending selected departments on a rotational basis to make inquiries with finance staff and verify that controls relating to management override were consistent with Group and University policies.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the Council in accordance with the Charters and Statutes of the University and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other required reporting

Opinions on other matters prescribed in the Office for Student’s Accounts Direction (OfS 2019.41)

In our opinion, in all material respects:

•funds from whatever source administered by the University for specific purposes have been properly applied to those purposes and, if relevant, managed in accordance with relevant legislation;

•funds provided by the Office for Students and UK Research and Innovation (including Research England) have been applied in accordance with the relevant terms and conditions.

Under the Office for Students’ Accounts Direction, we are required to report to you, if we have anything to report in respect of the following matters:

•The University’s grant and fee income, as disclosed in Note 10 to the financial statements, has been materially misstated; or

•The University’s expenditure on access and participation activities for the financial year, as disclosed in Note 16 to the financial statements, has been materially misstated.

We have no matters to report arising from this responsibility.

Appointment

Following the recommendation of the Audit Committee, we were appointed by the members on 23 January 2009 to audit the financial statements for the year ended 31 July 2009 and subsequent financial periods. The period of total uninterrupted engagement is 15 years, covering the years ended 31 July 2009 to 31 July 2023.

Andy Grimbly (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Cambridge

27 November 2023

CONSOLIDATED AND UNIVERSITY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JULY 2023

	Notes	Group Year ended 31 July 2023 £m	(restated*) Group Year ended 31 July 2022 £m	University Year ended 31 July 2023 £m	(restated*) University Year ended 31 July 2022 £m
Income
Tuition fees and education contracts	5	390.1	376.2	372.7	362.5
Funding body grants	6	207.6	197.3	207.6	197.3
Research grants and contracts	7	569.5	551.8	555.8	540.9
Examination, assessment and publishing services	8	991.0	860.1	814.4	703.2
Donations and endowments	9	132.4	52.8	127.7	43.9
Other income	11	178.0	160.7	196.8	138.9
Investment income	12	49.7	39.2	45.5	33.3
Total income	13	2,518.3	2,238.1	2,320.5	2,020.0
Expenditure
Staff costs
– Excluding impact of change in USS deficit recovery contributions		1,095.8	1,044.4	976.7	944.2
– Change in USS pension deficit recovery provision contributions	14, 30	(75.2)	260.8	(76.6)	253.3
	14	1,020.6	1,305.2	900.1	1,197.5
Other operating expenditure	15	1,197.7	1,029.3	1,117.4	931.4
Amortisation	15, 20	37.2	29.7	30.4	26.0
Depreciation	15, 21	99.2	100.8	97.2	98.6
Interest and other finance income	15, 17	(36.8)	(144.6)	(37.0)	(144.7)
Total expenditure		2,317.9	2,320.4	2,108.1	2,108.8
Surplus/(deficit) before other gains and losses and share of surplus in joint ventures and associates		200.4	(82.3)	212.4	(88.8)
Share of operating surplus in joint ventures and associates		0.2	0.4	–	–
Gain on disposal of fixed assets		–	7.5	–	7.8
Gain on other investments	23a	66.4	201.9	75.6	159.8
(Loss) on investment property	23b	(62.5)	(2.9)	(62.5)	(2.9)
Surplus for the year before taxation		204.5	124.6	225.5	75.9
Taxation	18	(5.6)	(4.4)	(2.0)	(1.2)
Surplus for the year		198.9	120.2	223.5	74.7
Other comprehensive income / (expense):
Actuarial gain	30, 31	286.4	596.0	287.0	595.9
(Loss)/gain arising on foreign currency translation		(6.3)	1.2	(0.6)	(0.6)
Total comprehensive income for the year		479.0	717.4	509.9	670.0
Represented by:
Endowment comprehensive (expense)/income for the year		(7.8)	98.7	(3.9)	92.2
Restricted comprehensive income for the year		64.1	7.7	64.3	7.5
Unrestricted comprehensive income for the year		422.7	611.0	449.5	570.3
		479.0	717.4	509.9	670.0

Group total comprehensive income includes £4.5m (2022: £5.0m) attributable to non-controlling interests.

* Refer to Note 43 on page 385 for details of the restatement.

CONSOLIDATED AND UNIVERSITY STATEMENTS OF FINANCIAL POSITION AS AT 31 JULY 2023

	Note	Group 31 July 2023 £m	Group 31 July 2022 £m	University 31 July 2023 £m	University 31 July 2022 £m
Non-current assets
Intangible assets and goodwill	20	119.8	105.4	110.4	93.2
Tangible assets	21	2,763.4	2,749.3	2,759.8	2,748.0
Heritage assets	22	101.8	82.2	101.7	82.1
Investments – other investments	23a	4,356.6	4,207.2	3,727.7	3,541.2
Investments – investment property	23b	509.0	562.2	509.0	562.2
Investments in joint ventures	23a	7.5	7.8	–	–
		7,858.1	7,714.1	7,208.6	7,026.7
Current assets
Stock and work in progress	24	53.5	52.4	46.8	45.8
Trade and other receivables	25	478.0	423.7	529.7	437.2
Investments	26	829.9	843.5	1,454.6	1,484.4
Cash and cash equivalents	27	399.3	553.3	287.5	450.5
		1,760.7	1,872.9	2,318.6	2,417.9
Creditors: amounts falling due within one year	28	(1,098.9)	(1,099.7)	(1,748.5)	(1,725.3)
Net current assets		661.8	773.2	570.1	692.6
Total assets less current liabilities		8,519.9	8,487.3	7,778.7	7,719.3
Creditors: amounts falling due after more than one year	29	(909.8)	(983.8)	(884.1)	(970.2)
Pension liabilities	30	(427.5)	(790.9)	(411.5)	(776.3)
Other retirement benefits liabilities	31	(14.9)	(19.7)	(14.9)	(19.7)
Total net assets		7,167.7	6,692.9	6,468.2	5,953.1
Restricted reserves
Income and expenditure reserve – endowment	32	2,469.1	2,476.9	2,119.1	2,123.0
Income and expenditure reserve – restricted	33	254.2	190.1	253.8	189.5
Unrestricted reserves
Income and expenditure reserve – unrestricted		4,444.4	4,025.9	4,095.3	3,640.6
Total reserves		7,167.7	6,692.9	6,468.2	5,953.1

Group unrestricted reserves includes £6.0m (2021–22: £6.8m) attributable to non-controlling interests.

The financial statements on pages 325 to 385 were approved by the Council on 27 November 2023 and signed on its behalf by:

 

CONSOLIDATED AND UNIVERSITY STATEMENTS OF CHANGES IN RESERVES FOR THE YEAR ENDED 31 JULY 2023

	Note	Endowment £m	Restricted £m	Unrestricted £m	Total £m
Group
Balance at 1 August 2021		2,378.2	182.4	3,418.9	5,979.5
Surplus for the year ended 31 July 2022		98.7	7.7	13.8	120.2
Other comprehensive income		–	–	597.2	597.2
Total comprehensive income for the year ended 31 July 2022		98.7	7.7	611.0	717.4
Dividend paid to non-controlling interest		–	–	(3.7)	(3.7)
Other movements		–	–	(0.3)	(0.3)
Balance at 31 July 2022		2,476.9	190.1	4,025.9	6,692.9
Surplus for the year ended 31 July 2023		(7.8)	64.1	142.6	198.9
Other comprehensive income		–	–	280.1	280.1
Total comprehensive income for the year ended 31 July 2023		(7.8)	64.1	422.7	479.0
Dividend paid to non-controlling interest		–	–	(4.3)	(4.3)
Other movements		–	–	0.1	0.1
Balance at 31 July 2023		2,469.1	254.2	4,444.4	7,167.7
University
Balance at 1 August 2021		2,030.8	182.0	3,070.3	5,283.1
Surplus for the year ended 31 July 2022		92.2	7.5	(25.0)	74.7
Other comprehensive income		–	–	595.3	595.3
Total comprehensive income for the year ended 31 July 2022		92.2	7.5	570.3	670.0
Balance at 31 July 2022		2,123.0	189.5	3,640.6	5,953.1
Surplus for the year ended 31 July 2023		(3.9)	64.3	163.1	223.5
Other comprehensive income		–	–	286.4	286.4
Total comprehensive income for the year ended 31 July 2023		(3.9)	64.3	449.5	509.9
Other movements	37	–	–	5.2	5.2
Balance at 31 July 2023		2,119.1	253.8	4,095.3	6,468.2

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2023

	Notes	Group Year ended 31 July 2023 £m	Group Year ended 31 July 2022 (*restated) £m
Cash flow from operating activities
Surplus for the year before taxation		204.5	124.6
Adjustments for non-cash items:
Depreciation	15, 21	99.2	100.8
Amortisation of intangible assets	15, 20	37.2	29.7
Gain on investments		(3.9)	(199.0)
Impairment of investments		8.9	–
Increase in stock and work in progress	24	(1.1)	(5.7)
(Increase)/Decrease in trade and other receivables		(54.3)	11.3
Increase in creditors		13.7	17.5
Revision of USS deficit recovery provision recognised in the year	14, 30	(75.2)	260.8
Other pension costs less contributions payable	30	(6.2)	20.9
Other retirement benefit costs less contributions payable	31	(0.1)	(0.4)
Receipt of donated assets	22	(19.1)	(4.8)
Currency adjustments		6.5	(0.9)
Adjustments for investing or financing activities:
Investment income	12	(49.7)	(39.2)
Interest payable	17	21.2	21.5
Credit for revaluation of index linked bonds	17	(85.4)	(182.2)
New endowments	9	(10.5)	(4.7)
Capital grants and donations		(53.8)	(45.1)
Share of joint venture and associates net surplus		(0.2)	(0.4)
Gain on the sale of fixed assets		(0.1)	(7.9)
Net cash inflow from operating activities before taxation		31.6	96.8
Taxation	18	(5.6)	(4.4)
Net cash inflow from operating activities after taxation		26.0	92.4
Cash flows from investing activities
New endowments	9	10.5	4.7
Capital grants and donations		53.8	45.1
Proceeds from sales of fixed assets		0.2	8.5
Proceeds of sales: North West Cambridge		–	13.2
Proceeds from sales of other non-current asset investments		13.3	29.6
Net disposal of other current asset investments		34.8	97.6
Investment income	12	49.7	39.2
Payments made to acquire intangible assets	20	(52.0)	(36.3)
Payments made on purchase of a business		–	(4.7)
Payments made to acquire fixed assets		(112.0)	(124.6)
Payments made to acquire heritage assets		(0.5)	–
Acquisition of CUEF investment assets		(50.8)	(179.8)
Payments made to acquire other non-current asset investments		(165.2)	(273.6)
Payments made re North West Cambridge development costs		(8.6)	(5.9)
Net cash outflow from investing activities		(226.8)	(387.0)
Cash flows from financing activities
Interest paid		(21.0)	(21.0)
Dividend payment to non-controlling interest	34	(4.3)	(3.7)
Drawdown of secured CUEF borrowings		–	40.4
Colleges and Associated bodies – CUEF subscriptions		28.8	60.8
Colleges and Associated bodies – CUEF redemptions		(0.1)	–
Colleges and Associated bodies – CUEF distributions		(12.2)	(9.8)
Net cash (outflow)/inflow from financing activities		(8.8)	66.7
Reduction in cash and cash equivalents in the year		(209.6)	(227.9)
Cash and cash equivalents at beginning of the year		773.6	1,001.5
Cash and cash equivalents at end of the year		564.0	773.6
Represented by:
Cash and cash equivalents	27	399.3	553.3
Cash and cash equivalents – CUEF	23	164.7	220.3
		564.0	773.6

* Refer to Note 43 on page 385 for details of the restatement.

 

Notes to the financial statements for the year ended 31 July 2023

Notes to the financial statements for the year ended 31 July 2023

 

APPENDIX 1: SUMMARY CONSOLIDATED FINANCIAL INFORMATION

Financial summary (unaudited)

The financial summary set out below has been derived from the audited consolidated financial statements of the University for the five years ended 31 July 2023. It should be read in conjunction with the consolidated financial statements and related notes.

(a) Summary consolidated statement of comprehensive income (£m)	2023	2022	2021	2020	2019
Total income	2,518.3	2,238.1	2,176.9	2,074.9	2,192.0
Total expenditure	(2,317.9)	(2,320.4)	(2,073.2)	(1,969.8)	(2,307.5)
Surplus/(deficit) before other gains and losses	200.4	(82.3)	103.7	105.1	(115.5)
Share of operating surplus/(deficit) in joint ventures	0.2	0.4	1.4	(0.8)	1.5
Gain on disposal of fixed assets*	–	7.5	(1.1)	4.7	–
Gain/(loss) on investments	3.9	199.0	781.6	(22.3)	235.1
Surplus for the year before taxation	204.5	124.6	885.6	86.7	121.1
Surplus for the year	198.9	120.2	883.5	84.7	117.3
Actuarial gain/(loss)	286.4	596.0	30.0	(156.8)	(208.2)
Other comprehensive (loss)/income for the year	(6.3)	1.2	(2.8)	(2.8)	–
Total comprehensive income/(expense) for the year	479.0	717.4	910.7	(74.9)	(90.9)
Represented by:
Endowment comprehensive (expense)/income for the year	(7.8)	98.7	445.7	(38.8)	115.6
Restricted comprehensive income for the year	64.1	7.7	129.0	126.2	121.5
Unrestricted comprehensive income/(expense) for the year	422.7	611.0	336.0	(162.3)	(328.0)
	479.0	717.4	910.7	(74.9)	(90.9)
Adjusted consolidated statement of comprehensive income
Surplus for the year	198.9	120.2	883.5	84.7	117.3
Less: (Gain)/loss on investments	(3.9)	(199.0)	(781.6)	22.3	(235.1)
Less: CPI-linked bond fair value adjustment	(85.4)	(182.2)	17.0	98.8	51.5
Less: USS pension deficit recovery reflected in staff costs	(75.2)	260.8	6.1	(160.4)	230.7
Less: Donation, endowment and capital grant income	(182.1)	(95.9)	(221.2)	(199.8)	(218.6)
Add: CUEF income (distribution basis)	138.2	121.5	116.0	112.1	105.0
Adjusted operating (deficit)/surplus for the year	(9.5)	25.4	19.8	(42.3)	50.8

(b) Summary consolidated statement of financial position (£m)	2023	2022	2021	2020	2019
Non-current assets	7,858.1	7,714.1	7,217.9	6,511.3	6,528.1
Current assets	1,760.7	1,872.9	2,005.2	1,765.1	1,770.4
Total assets	9,618.8	9,587.0	9,223.1	8,276.4	8,298.5
Current liabilities	(1,098.9)	(1,099.7)	(993.2)	(966.6)	(1,038.7)
Non-current liabilities	(1,352.2)	(1,794.4)	(2,250.4)	(2,240.8)	(2,115.0)
Net assets	7,167.7	6,692.9	5,979.5	5,069.0	5,144.8
Income and expenditure reserve – endowment	2,469.1	2,476.9	2,378.2	1,932.5	1,971.3
Income and expenditure reserve – restricted	254.2	190.1	182.4	153.5	128.3
Income and expenditure reserve – unrestricted	4,444.4	4,025.9	3,418.9	2,983.0	3,045.2
Total reserves	7,167.7	6,692.9	5,979.5	5,069.0	5,144.8
Net (debt)/cash	(1.0)	105.0	150.3	(32.2)	(84.7)
Less: CPI-linked bond fair value adjustment (cumulative adjustment)	(100.3)	(14.9)	167.3	150.3	51.5
Add: accretion of CPI-linked bond (cumulative adjustment)	(34.8)	(25.1)	(15.6)	(9.0)	(7.3)
Adjusted net (debt)/cash	(136.1)	65.0	302.0	109.1	(40.5)

(c) Summary consolidated statement of cash flows (£m)	2023	2022	2021	2020	2019
Net cash inflow from operating activities after taxation	26.0	92.4	119.2	123.5	124.4
Net cash (outflow)/inflow from investing activities	(226.8)	(387.0)	405.9	(314.2)	(292.6)
Net cash (outflow)/inflow from financing activities	(8.8)	66.7	(77.9)	12.5	45.4
(Reduction)/increase in cash and cash equivalents in the year	(209.6)	(227.9)	447.2	(178.2)	(122.8)
Cash and cash equivalents at end of the year	564.0	773.6	1,001.5	554.3	732.5

* Prior to 2019–20, any gain/loss on disposal of fixed assets was included in ‘other income’ and not separately disclosed on the face of the statement of comprehensive income.