Ƶ

Notes to the financial statements

NOTES TO THE FINANCIAL STATEMENTS

1. TUITION FEES AND EDUCATION CONTRACTS(consolidated and university)

2018/19 2017/18

Scottish higher education students

5,858 5,892
Rest of UK students 1,040 1,221
European Union (excluding UK) students 2,585 2,111
Non-European Union students 2,582 2,232
Other fees and discounts (337) (301)
Education contracts 2,195 1,756
Total 13,923 12,911

2. SCOTTISH FUNDING COUNCIL GRANTS(consolidated and university)

2018/19 2017/18

Recurrent grant

Teaching 12,558 12,080
Research

1,174

1,109

Specific grants

Wider access retention premium 597 586
Regional Coherence - Academies programme 219 81
Disabled students premium 54 54
Knowledge exchange / University Innovation Fund 534 350
Scottish Drama Training Network 148 148
Capital maintenance grant released 359 297
Other miscellaneous grants - 133

Deferred capital grants released (note16)

Land & buildings

528

588

Equipment

- -
Total

16,171

15,426

3. RESEARCH GRANTS & CONTRACTS

Consolidated

2018/19

£000

Consolidated

2017/18

£000

University

2018/19

£000

University

2017/18

£000

Research councils

239 271 239 271
UK based charities 132 212 124 202

UK government and health authorities

1,497 1,270 1,484 1,256
UK private sector

7

20 - 7
European funding

81

- 81 -
Other grants & contracts

236

181 239 181
Total

2,192

1,954 2,167 1,917

4. OTHER OPERATING INCOME

Consolidated

2018/19

£000

Consolidated

2017/18

£000

University

2018/19

£000

University

2017/18

£000

Residences, catering and conferences

5,250 5,033 4,884 4,784

Other services rendered

829 611 469 397

Sports centre income

223 234 223 234

Other income

540 599 887 843

Total

6,842 6,477 6,463 6,258

5. INVESTMENT INCOME

Consolidated

2018/19

£000

Consolidated

2017/18

£000

University

2018/19

£000

University

2017/18

£000

Investment income on endowments

-

-

-

-

Other investment income

85

27

84

26

Net return on pension scheme

- - - -
Total

85

27 84 26

6. DONATIONS AND ENDOWMENTS(consolidated and university)

2018/19

2017/18

£000

£000

New endowments

- -

Unrestricted donations

305

239
Total

305

239

7. STAFF COSTS

Consolidated

2018/19

£000

Consolidated

2017/18

£000

University

2018/19

£000

University

2017/18

£000

Wages and salaries

17,855 18,046 17,710 17,925

Restructuring

1,101 - 1,101 -

Social security costs

1,923 1,799 1,923 1,795

Movement on USS provision

698

3 698 3

Other pension costs

5,135

4,193

5,135

4,190

Total 26,712 24,041 26,567 23,913

Emoluments of the Principal and Vice-Chancellor (who was also the highest paid Member of the University Court)

2018/19

£000

2017/18

£000

Professor Petra Wend

Salary

215

210

Employers’ pension contributions

-

-

In lieu of employers’ pension contribution

32 32

Benefits in kind

2 2

Total

249

244

There are no pension contributions for Professor Wend. The Principal opted out of the pension scheme in the previous year. Additional payments equivalent to pensions contributions foregone are included within emoluments. The head of the University’s basic salary is 5.27 times the median pay of staff, where the median pay is calculated on a full-time equivalent basis for the salaries paid by the University to its staff.

Key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the University: this comprises the Executive Board. The total compensation for the year ended 31 July 2019 (including any employers’ pension contributions) was £937,778 (year ended 31 July 2018, £915,390).

University Court members

The University Court members are the trustees for charitable law purposes and are also the directors of the company limited by guarantee for company law purposes. Due to the nature of the University’s operations and the composition of the University Court (being drawn from local public and private sector organisations), it is inevitable that transactions will take place with organisations in which a member of the University Court may have an interest. All transactions involving organisations in which a member of the University Court may have an interest are conducted at arm’s length, and in accordance with the University’s financial regulations and normal procurement procedures. University Court members receive no remuneration in respect of their duties as members of the University Court. A number of members of the University Court, including the Principal and Vice-Chancellor, receive a salary in respect of their employment with the University. Detail of such remuneration is set out below.

University Court members

2018/19

£000

Re stated

2017/18

£000

Directors’ emoluments (including pension
contributions)
Fees for services as members of University Court - -
Emoluments (i.e. salaries as members of staff) 568 558
Contributions paid to pension schemes 57 56
Benefits in kind 5 4
630 618

These figures relate to 7 members of staff (2017/18: 7 as restated), including the Principal.

The number of members of staff, including the Principal, who received remuneration (including benefits and excluding pension
contributions) in the following range was:-

Members

2018/19

Numbers

2017/18

Number

Senior postholders
£100,001 to £110,000 2 1
£110,001 to £120,000 1 1
£240,001 to £250,000 1 1
2018/19 2017/18
£000 £000
Compensation for loss of office
Compensation payable in respect of senior post holders - -

Members

2018/19

FTE number

2017/18

FTE number

Average full time equivalent staff numbers by major
category: (consolidated and university)
Academic schools 194 195
Academic services 43 48
Research grants & contracts 33 36
Residences, catering & conferences 26 26
Premises 21 23
Administration & central services 108 113
425 441

8. INTEREST PAYABLE AND OTHER FINANCE COSTS

INTEREST PAYABLE AND OTHER FINANCE COSTS

Consolidated

2018/19

£000

Consolidated

2017/18

£000

University

2018/19

£000

University

2017/18

£000

Loan interest 1,246 1,303 1,246 1,303
Finance lease interest - - - -
Net charge on pension scheme 186 338 186 338
1,432 1,641 1,432 1,641

9. ANALYSIS OF TOTAL EXPENDITURE BY ACTIVITY

ANALYSIS OF TOTAL EXPENDITURE BY ACTIVITY

Consolidated

2018/19

£000

Consolidated

2017/18

£000

University

2018/19

£000

University

2017/18

£000

Academic schools 14,197 13,579 14,197 13,579
Academic services 5,177 5,162 5,177 5,162
Research grants & contracts 1,900 1,712 1,884 1,672
Other services rendered 508 464 236 307
Residences, catering and conferences 3,110 2,961 3,002 2,904
Premises 8,096 7,574 8,096 7,574
Administration & central services 7,845 8,457 7,836 8,454
Other expenses 4,729 2,498 4,729 2,498
Total per income and expenditure account 45,562 42,407 45,157 42,150

10. TAXATION (consolidated and university)

TAXATION (consolidated and university)

2018/19

£000

2017/18

£000

UK Corporation Tax payable - -

11. OTHER OPERATING EXPENSES

OTHER OPERATING EXPENSES

Consolidated

2018/19

£000

Consolidated

2017/18

£000

University

2018/19

£000

University

2017/18

£000

External auditors – audit fees 71 50 66 47
External auditors – non-audit fees - 48 - 48
Internal audit 44 27 44 27
Grants to Ƶ Students Union 240 240 240 240
Other expenses 11,328 11,185 11,073 11,059
11,683 11,550 11.423 11,421

12. TANGIBLE ASSETS
Consolidated and University

TANGIBLE ASSETS

Freehold land & buildings

Owned

£000

Fixtures, fittings & equipment

Owned

£000

Fixtures, fittings & equipment

Held under finance leases

£000

TOTAL

£000

Cost or valuation:
At 1 August 2018 107,486 9,841 1,271 118,598
Disposals at cost - (1,148) - (1,148)
Additions at cost - 1,011 - 1,011
Revaluation of buildings 22,421 - - 22,421
At 31 July 2019 129,907 9,704 1,271 140,882
Depreciation:
At 1 August 2018 6,705 8,578 1,244 16,527
Written off on disposals - (1,148) - (1,148)
Written back due to revaluation (8,193) - - (8,193)
Provided during the year 4,950 758 27 5,735
At 31 July 2019 3,462 8,188 1,271 12,921
Net book amount at 31 July 2019 126,445 1,516 - 127,961
Net book amount at 1 August 2018 100,781 1,263 27 102,701
Analysis of net book amount at 31
July 2019
Financed by capital grant 8,207 - - 8,207
Other 118,238 1,516 - 119,754
126,445 1,516 - 127,961

The valuation of the academic estate was carried out at 31 July 2018 by Gerald Eve, Chartered Surveyors. The basis of the valuation, which was carried out in accordance with guidelines issued by the Royal Institution of Chartered Surveyors, is depreciated replacement cost. Having reviewed the relevant indices, management has concluded that no revision is required to the valuation included in the financial statements as at 31 July 2019. The student accommodation was valued as at 31 July 2019, also by Gerald Eve LLP. This valuation was prepared in accordance with the requirements of the RICS Valuation - Global Standards (July 2017 edition) and Financial Reporting Standard 102 and the 2019 Statement of Recommended Practice ‘Accounting for Further and Higher Education’. The valuation was undertaken on a Fair Value basis, equated to Market Value on the assumption of a continuation of the existing use.

Barclays Bank plc holds a standard security, dated 17 December 2014, over the student accommodation situated on the University campus.

The University has a modest collection of works of art and other items of historical interest. No value is included within fixed assets in respect of this collection as it is not considered to be material.

13. INVESTMENTS
Subsidiary Undertaking

Name of undertaking Country of incorporation and
registration
Description of shares held Proportion of nominal value of
shares held (%)
Cost at 1 August 2018
and 31 July 2019 (£)
Ƶ Enterprises Ltd Scotland Ordinary £1 shares 100 100
100

Ƶ Enterprises Limited undertakes activities which, for legal or commercial reasons, are more appropriately channelled through a separate limited company. These activities include vacation letting, conferences and rendering of services (other than research) for a variety of commercial and other organisations. The results of Ƶ Enterprises Limited have been consolidated into the group financial statements.

14. TRADE AND OTHER RECEIVABLES

TRADE AND OTHER RECEIVABLES

Consolidated

2019

£000

Consolidated

2018

£000

University

2019

£000

University

2018

£000

Amounts falling due within one year:
Trade debtors 858 1,040 677 905
Prepayments and accrued income 851 671 784 671
Amounts due from subsidiaries - - 364 406

15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Consolidated

2019

£000

Consolidated

2018

£000

University

2019

£000

University

2018

£000

Secured loans (see note 16) 1,492 32,070 1,492 32,070
Trade creditors 1,886 2,070 1,885 2,015
Social security and other taxation payable 568 552 568 512
Accruals and deferred income 4,238 3,546 4,027 3,422
Unsecured loans 35 35 35 35
Finance lease commitments due within one year - - - -
Total 8,219 38,273 8,007 38,054

The secured long-term loan facility with Barclays Bank plc is £30.6 million, and has a final maturity date of 17 December 2024. The loan is secured over part of the campus site at Musselburgh. The University has entered into a fixed-rate arrangement in order to protect itself against any significant fluctuations in interest rates. The terms of this arrangement are commercially confidential. At 31 July 2018, as a result of an anticipated covenant breach, which was subsequently waived by Barclays Bank plc, the full amount of the outstanding loan was included within Creditors: amounts falling due within one year in line with FRS 102.

16. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Consolidated & University

2019

£000

Consolidated & University

2018

£000

Secured loans (see note 15) 29,086 -
Unsecured loans 125 154
Deferred capital grants 8,207 8,735
37,418 8,889
Analysis of secured loans:-
Due between one and two years 1,492 -
Due between two and five years 4,475 -
Due in five years or more 23,119 -
Total due after more than one year 29,086 -
Due within one year (note 15) 1,492 32,070
Total secured loans 30,578 32,070
Analysis of unsecured loans:-
Due between one and two years 35 35
Due between two and five years 90 86
Due in five years or more - 33
Total due after more than one year 125 154
Due within one year (note 15) 35 35
Total unsecured loans 160 189

Analysis of deferred capital grants

Analysis of deferred capital grants

Consolidated & University

2019

£000

Consolidated & University

2018

£000

Opening balance : buildings 8,735 9,323
Opening balance : equipment - -
8,735 9,323
Receivable : buildings - -
Receivable : equipment - -
Release : buildings 528 588
Release : equipment - -
528 588
Closing balance : buildings 8,207 8,735
Closing balance : equipment - -
8,207 8,735

17. PROVISIONS FOR LIABILITIES

Consolidated and University

Pensions

£000

Obligation to fund deficit on
USS Pension

£000

Pension enhancements

£000

Defined Benefit Obligations
LGPS

£000

Total Pensions Provisions

£000

At 1 August 2018 372 3,021 5,823 9,216
Utilised in year (21) (227) - (248)
Transfer (to)/from income & expenditure account 729 217 9,502 10,448
At 31 July 2019 1,080 3,011 15,325 19,416

The University has a liability to fund the past deficit on the Universities Superannuation Scheme (USS). This obligation arises from the contractual obligation with the pension scheme for total payments relating to benefits arising from past performance. The University has assessed future staff levels within the USS scheme and salary inflation over the period of the contractual obligation in assessing the value of this provision. Further information is provided in note 20(C). Since the year end, following the completion of the 2018 actuarial valuation, a new deficit recovery plan has been agreed, of which more details are given in note 20(C). As at 31 July 2019 and assuming all other assumptions used to calculate the provision remain unchanged, this would have resulted in a revised provision of £0.593 million, a decrease of £0.486 million from the current year end provision.

The University also has a liability for pension enhancements payable to former members of staff who have taken early retirement in prior years. An actuarial valuation of the amount of this liability was carried out by Hymans Robertson, Actuaries, at 31 July 2019, on the basis of valuation prescribed by FRS 102, and using the same set of assumptions as are set out in note 20 in relation to the valuation of the Local Government Pension Scheme.

Detail of the movement in the Local Government Pension Scheme (LGPS) provision is set out in note 20(A).

18. ENDOWMENT RESERVES

ENDOWMENT RESERVES

Consolidated and University

Unrestricted

Consolidated and University

Restricted Expendable

£000

Consolidated and University

Restricted Permanent

£000

Restricted Total

£000

Total

£000

Balance at 1 August 2018 - 518 47 565
Income for year - 305 - 305
Expenditure for year - (228) - (228)
At 31 July 2019 - 595 47 642
Represented by:
Capital value - - 35 35
Accumulated income - 595 12 607
- 595 47 642

19. REVALUATION RESERVE

REVALUATION RESERVE

Consolidated and University

2019

£000

Consolidated and University

2018

£000

At 1 August 31,132 31,132
Revaluation Gains 30,614 -
Release to general reserve (334) -
At 31 July 61,412 31,132

20. PENSIONS AND SIMILAR OBLIGATIONS

The University’s employees belong to three principal pension schemes, the Scottish Teachers Superannuation Scheme (STSS), the Local Government Pension Scheme (LGPS) and the Universities Superannuation Scheme (USS). The total pension cost for the year was £5,833,000 (2017/18: £4,196,000).

PENSIONS AND SIMILAR OBLIGATIONS

Consolidated and University

Year ended 31 July 2019

Consolidated and University

Year ended 31 July 2018

The total pension charge is analysed as follows:- £000 £000
Lothian Pension Fund (LGPS) 3,211 2,493
Scottish Teachers Superannuation Scheme 1,642 1,437
Universities Superannuation Scheme 980 266
5,833 4,196

Estimated employers’ pension contributions for the year to 31 July 2020 are £3,615,000.

A ) Local Government Pension Scheme (LGPS)

The Lothian Pension Fund is a funded multi-employer defined benefit scheme, with the assets held in a separate trustee-administered fund to meet long-term pension liabilities to past and present employees. The trustees of the fund are required to act in the best interests of the fund’s beneficiaries. The appointment of trustees to the fund is determined by the scheme’s trust documentation. The trustees are responsible for setting the investment strategy for the scheme after consultation with professional advisors.

The following information is based upon a full actuarial valuation of the fund at 31 March 2017 updated to 31 July 2019 by a qualified independent actuary, Hymans Robertson LLP.

Assumptions at 31 July 2019 31 July 2018 31 July 2017
Pension increase rate 2.4% 2.4% 2.5%
Salary increase rate 4.1% 4.1% 4.5%
Discount rate 2.1% 2.8% 2.7%

The fund is valued every three years by professionally qualified independent actuaries using the projected unit credit method, the rates of contribution payable being determined by the trustees on the advice of the actuaries. In the intervening years, the scheme actuary reviews the progress of the scheme. The actuary has indicated that the resources of the scheme are likely, in the normal course of events, to be sufficient to meet the liabilities as they fall due at the level specified by the scheme regulations.

The currently agreed employer’s contribution rate for the University is 19.5%. This is due to increase to 20.0% from 1 April 2020.

20. PENSIONS AND SIMILAR OBLIGATIONS (continued)

A ) Local Government Pension Scheme (LGPS) (continued)

The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescales covered, may not necessarily be borne out in practice. The current mortality assumptions, which are consistent with those used for the latest formal funding valuation, include sufficient allowance for future improvements in mortality rates. The assumed life expectations on retirement at age 65 are:-

Members

31 July 2019

No. of years

31 July 2018

No. of years

Current pensioners
Males 21.7 21.7
Females 24.3 24.3
Future pensioners
Males 24.7 24.7
Females 27.5 27.5

Analysis of the amount shown in the balance sheet

Members

Value at 31 July 2019

£000

Value at 31 July 2018

£000

Value at 31 July 2017

£000

Value at 31 July 2016

£000

Value at 31 July 2015

£000

Estimated employer assets (A) 63,223 57,343 57,322 50,644 40,901
Present value of scheme liabilities (77,851) (62,495) (68,492) (63,303) (50,918)
Present value of unfunded liabilities (697) (671) (701) (769) (804)
Total value of liabilities (B) (78,548) (63,166) (69,193) (64,072) (51,722)
Net pension liability (A) – (B) (15,325) (5,823) (11,871) (13,428) (10,821)

Analysis of movements in the present value of the scheme liabilities

scheme liabilities

31 July 2019

£000

31 July 2018

£000

Opening defined benefit obligation 63,166 69,193
Current service cost 2,276 2,580
Interest cost 1,789 1,891
Contributions by members 437 424
Actuarial losses 11,019 (9,683)
Past service costs 1,074 -
Unfunded benefits paid (49) (48)
Benefits paid (1,164) (1,191)
Closing defined benefit obligation 78,548 63,166

Analysis of movement in the market value of the scheme assets

scheme assets

31 July 2019

£000

31 July 2018

£000

Opening fair value of employer assets 57,343 57,322
Expected return on assets 3,660 (2,006)
Contributions by members 437 424
Contributions by employer 1,334 1,241
Contributions in respect of unfunded benefits 49 48
Actuarial (losses)/gains 1,613 1,553
Unfunded benefits paid (49) (48)
Benefits paid (1,164) (1,191)
Closing fair value of employer assets 63,223 57,343

20. PENSIONS AND SIMILAR OBLIGATIONS (continued)

A ) Local Government Pension Scheme (LGPS) (continued)

Guaranteed minimum pension (GMP) was accrued by members of the Local Government Pension Scheme (LGPS) between 6 April 1978 and 5 April 1997. The value of GMP is inherently unequal between males and females for a number of reasons, including a higher retirement age for men and GMP accruing at a faster rate for women. However overall equality of benefits was achieved for public service schemes through the interaction between scheme pensions and the Second State Pension.

The introduction of the new Single State Pension in April 2016 disrupted this arrangement and brought uncertainty over the ongoing indexation of GMPs, which could lead to inequalities between men and women’s benefits. As an interim solution to avoid this problem, GMP rules were changed so that the responsibility for ensuring GMPs kept pace with inflation passed in full to pension schemes themselves for members reaching state pension age between 6 April 2016 and 5 April 2021. This new responsibility leads to increased costs for schemes (including the LGPS) and hence scheme employers. The fund’s actuary has carried out calculations in order to estimate the impact that the GMP indexation changes will have on the liabilities of Queen Ƶt University for financial reporting purposes. The estimate assumes that the permanent solution eventually agreed will be equivalent in cost to extending the interim solution to all members reaching state pension age from 6 April 2016 onwards.

The estimate as it applies to Queen Ƶt University is that total liabilities could be 0.23% higher as at 31 July 2019, an increase of approximately £174,000. This increased liability has been reflected in the revised accounting report as a past service cost. These numbers are approximate estimates based on employer data as at 31 March 2017 and will be revised at the upcoming valuation.

B ) Scottish Teachers’ Superannuation Scheme (STSS)

The STSS is an unfunded multi-employer defined benefit scheme. The Scheme is financed by contributions from employers and current members of the Scheme. The contributions paid to the Scheme fall into general government revenues. There is no actual fund of assets but an account is maintained of a notional fund made up of contributions paid by employers and members, supplemented by a return on the notional fund at a pre-determined rate and reduced by benefits as and when they are paid to retired and former members of the Scheme. The University is unable to identify its share of the underlying assets and liabilities of the scheme. Accordingly, the University has accounted for its contributions as if it were a defined contribution scheme. The University has no obligation for other employers’ obligations to the multi-employer scheme.

The last full actuarial and funding valuation of the scheme was carried out at 31 March 2016. This valuation used the Projected Unit Methodology, and was carried out in accordance with the Public Service Pensions (Valuations and Employer Cost Cap) Directions 2014 (as amended). As a result of this valuation, the employer contribution rate has increased from 17.2% to 23.0% with effect from 1 September 2019. Employee contributions are dependent upon the member’s salary bracket. The notional fund at 31 March 2016 amounted to £21.5 billion, and total scheme liabilities for service amounted to £22.8 billion, giving a notional past service deficit of £1.3 billion, which is being repaid by a supplementary rate of 4.3% of employers’ pension contributions over a 15-year period from 1 April 2019. This contribution is included in the 23.0% employers’ contribution rate.

As the scheme is unfunded, there can be no deficit or surplus to distribute on the wind-up of the scheme or withdrawal from the scheme.

C ) Universities Superannuation Scheme (USS)

The University participates in the Universities Superannuation Scheme, which is a hybrid pension scheme, providing defined benefits (for all members), as well as defined contribution benefits. The assets of the scheme are held in a separate trustee-administered fund. Because of the mutual nature of the scheme, the scheme’s assets are not attributed to individual institutions and a scheme-wide contribution rate is set. The University is therefore exposed to actuarial risks associated with other institutions’ employees and is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. As required by Section 28 of FRS 102 “Employee benefits”, the University therefore accounts for the scheme as if it were a wholly defined contribution scheme. As a result, the amount charged to the consolidated Statement of Comprehensive Income and Expenditure represents the contributions payable to the scheme in respect of the accounting period.

The University has entered into an agreement (the Recovery Plan) that determines how each employer within the scheme will fund the overall deficit). In accordance with the requirements of the SORP, the University recognises a liability for the contributions payable that arise from the agreement (to the extent that they relate to the deficit), and therefore an expense is recognised.

The latest available complete actuarial valuation of the Retirement Income Builder section of the Scheme is at 31 March 2017 (the valuation date), which was carried out using the projected unit method. As at the year end a valuation as at 31 March 2018 was underway but not yet complete. Since the University cannot identify its share of the assets and liabilities in the Retirement Income Builder section of the scheme, the following disclosures reflect those relevant for the section as a whole.

The 2017 valuation was the fourth valuation for USS under the scheme-specific funding regime introduced by the Pensions Act 2004, which requires schemes to adopt a statutory funding objective, which is to have sufficient and appropriate assets to cover their technical provisions. At the valuation date, the value of the assets of the scheme was £60.0 billion and the value of the scheme’s technical provisions was £67.5 billion indicating a shortfall of £7.5 billion and a funding ratio of 89%.