Financial Statements for the year ended 31 July 1998 - (1) to No 4495

Oxford University Gazette: Financial Statements 1997-8<br /> (supplement)


Oxford University Gazette


Financial Statements for the year ended 31 July 1998

Supplement (1) to Gazette No. 4495

Wednesday, 16 December 1998

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Contents of the supplement:




Report on the Financial Statements


Scope and Format of the Financial Statements


The financial statements set out in the following pages have been
prepared
in accordance with the requirements of the revised Statement of
Recommended
Accounting Practice entitled Accounting in Higher Education
Institutions
which is applicable to accounting periods commencing on and after
1 August
1994. The financial statements consolidate the accounts of the
University
and its subsidiary companies and associated bodies (other than
the Oxford
University Press, the accounts of which are not permitted to be
included
under the S tatutes and Decrees of the University).

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supplement




Results for the Year ended 31 July 1998


Income rose by 6.9 per cent compared with the previous year, a
significantly
greater increase than the 4.6 per cent experienced in 1996--7.
Funding
Council income increased by 8.1 per cent reflecting a substantial
increase
in research-related assessment exercise. External funding for
research
through grants and contracts also increased substantially, by 6.9
per cent;
the major areas of growth were UK charities (9.6 per cent) and
UK industry
(13.5 per cent). These results illustrate the increasing success
of the
University in the highly competitive field of research funding.

 The University's expenditure rose by 5.6 per cent, again
a higher
figure than for 1996--7, but reflecting the increase in activity
funded
by the increases in income referred to above. Costs generally
continue
to rise at a rate greater than the year on year increase in
Funding Council
grant, which makes success in raising funds from other sources
all the
more important.

 The consolidated surplus for the year was £17.1m.
Within
this total, the surplus on the General Fund, which reflects the
University's
true surplus on operations for the year, was £1.5m, after
transferring
£3m to meet future capital needs, bringing the accumulated
balance
on the General Reserve to £10.8m, a small figure in the
context of
an organisation with an annual turnover now in excess of
£300m. In addition to the transfer to capital reserves from
the current year's operations and the income of £1.5m.
earned on the balances held by the reserves, £6.0m. of the
accumulated income from general endowments was transferred to
capital, making a total available (with the balance brought
forward) of £17.6m. Expenditure from capital reserves
totalled £8.7m, leaving a balance of £8.9m.
The
consolidated surplus is made up as follows:

increase in the undepreciated cost of 
  tangible fixed  assets financed from 
   general funds                               £9.4m

increase in balances held by departments
  and subsidiaries, and committed
  balances                                     £9.6m

increase in accumulated income from
   general endowments                          £(5.2)m

increase in capital reserves                   £1.8m

increase in general reserve                    £1.5m

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The Financial Position of the University


The University's balance sheet has again been strengthened by a
revenue
surplus, the receipt of endowment funds and investment in fixed
assets.
Thus at 31 July 1998, total net assets amounted to £492m,
an increase
of £62m in the year. Tangible fixed assets increased by
£17m
before depreciation, reflecting expenditure on a number of major
projects
including the acquisition of the Oxford station forecourt site
for the
Said Business School. Investments representing endowed funds
increased
from £334m to £378m arising from an increase in
market value
of £35m, new receipts of £3.4m, and £6m from
retained
income. Liquidity remains strong with over £150m of cash
and short
term deposits. The University's reserves now stand at £111m
having
increased from £94m in the year. This total is made up of:
Undepreciated cost of tangible fixed 
   assets financed from general funds      £43.2m  

funds held by departments, subsidiaries 
   or committed balances 
   (including capital funds)               £48.1m  

accumulated income from general
   endowments                              £8.9m  

University general funds                   £10.8m

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supplement



Investment Performance


The University's investments, and their management, play an
important role
in the financial strategy. Market values increased broadly in
line with
standard benchmarks during a year which saw some defensive
restructuring
of the portfolio. Funds handled by external managers include
£273m
in the Trusts Pool and £33m in the Capital Fund, whilst the
balance
on the Deposit Pool, which is managed internally, amounted to
£77m.
Over the year total returns on long term investments have been
broadly
maintained against the benchmarks set by the Investment
Committee, whilst
income exceeded target such that an increase of 4.5 per cent in
the Trust
Pool dividend was payable to constituent trusts, and a
substantial transfer
was made to the income reserve which acts as a cushion against
potential
future shortfalls. The Deposit Pool exceeded its benchmark income
level,
returning 8.5 per cent to depositors. The Investment Committee
is continuing
to review policy and portfolio structure in the light of current
difficulties
in the market.

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The Year 2000 problem


There has been a considerable amount of publicity regarding the
potential
problem caused by computers and allied equipment which may
malfunction
as a result of the millennium. This is a complex and pervasive
issue since
the operation of the University's business depends not only upon
its own
computer systems but also to some degree on those of its
suppliers and
customers. Council has initiated a project to determine the
potential risks
to the University's activities arising from the date change to
the year
2000. Once this phase is completed, the likely impact on
activities can
be assessed and prioritised action plans developed to deal with
the key
risks. Much of the cost of dealing with this problem will be
subsumed into
normal departmental finances, but central contingencies exist to
deal with
any University-wide difficulties. Essential central systems are
already
being comprehensively checked and it is understood that no
significant
problems are foreseen in this area.


Conclusion


In 1996--7 the University was awaiting the outcomes of the
Dearing report,
the research assessment exercise and the policies of the new
government.
With a further year behind it, these outcomes are somewhat
clearer. The
Dearing report has led to a review of college fees by the
government, and
an emphasis within the higher education sector on issues of
access. These
have impacted on funding and planning, not least in clarifying
that there
is unlikely to be significant growth in funded undergraduate
numbers within
higher education, whilst cuts in resources, referred to as
`efficiency gains', continue, albeit at a reduced
level, and funding for the collegiate university will be further
reduced
by £6.5m at current prices over the next ten years through
the college
fees settlement. It seems therefore that the proportion of public
funding
within the University budget will continue to decline and that
alternative
sources must be sought with increased vigour. A new feature of
the financial
landscape is the increasing number of special initiatives, often
funded
partly by government and partly by private sources in
partnership, such
as the University Challenge Fund to foster technology transfer,
and the
Joint Infrastructure Fund to renew outworn research facilities.
Whilst
any new money is to be welcomed, these initiatives generate
problems; new
buildings bring new costs; funding is usually non-recurrent and
leaves
the institution to meet future costs. These opportunities
therefore have
to be approached with caution and financial rigour to ensure that
the University
derives genuine long term benefit.

As mentioned above, the University secured a significant
increase
in research funding during the year, both from HEFCE and from
external
sources. One of the outcomes of that research activity has been
an increasingly
successful technology transfer operation through Isis Innovation
Limited.
Since the last report, a number of new spin-off companies have
been set
up, and three existing companies have come to the market. Shares
held by
the University in these companies, and other similar enterprises,
have
a combined value of £28m, representing a substantial asset
and one
which the University intends to use to create further investment
in its
business.

Despite the concerns outlined above, the University
remains committed
to its academic mission, and has further refined its financial
strategies
to allow it to develop in new directions. Increased resources
have been
made available to Isis Innovation to stimulate the return on our
intellectual
property portfolio. There are many projects in progress such as
the Said
Business School and Wellcome Trust Centre for Human Genetics
which will
bring further long term benefits and strengths. The University
has set
up a Research Development Fund to stimulate new concepts; it is
investing
in strategic sites in Oxford to safeguard its ability to grow.
This indicates
that the University is actively planning for the future and has
confidence
that difficulties, if approached with care in the context of a
comprehensive
strategic planning framework, can be overcome.

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supplement




Consolidated Income and Expenditure Account


for the year ended 31 July 1998









































1998 1997
£000 £000
Income
Grants from the Higher Education Funding Council
for England
88,476 81,875
Grants from the Teacher Training
Agency
591 599
Academic fees and support grants 38,467 37,439
Research grants and contracts 114,449 107,031
Other operating income 41,141 39,615
Endowment income and interest
receivable
21,593 18,357
TOTAL INCOME 304,717 284,916
Expenditure
Staff costs 158,426 153,306
Depreciation 20,355 24,118
Other operating expenses 107,898 94,126
Interest payable 961 833
TOTAL EXPENDITURE 287,640 272,383
Surplus for the year 17,077 12,533

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Note of Historical Cost Surpluses


for the year ended 31 July 1998













1998 1997
£000 £000
Surplus as reported above 17,077 12,533
Difference between historical cost profit on
disposal of
fixed asset investments and the actual profit on disposal
calculated on
the carrying value prior to disposal
- -
Historical cost surplus 17,077 12,533

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Balance Sheets


as at 31 July 1998









































































Consolidated University
1998 1997 1998 1997
£000 £000 £000 £000
Fixed assets
Tangible fixed assets 139,951 121,024 139,465 120,576
Fixed asset investments 44,290 52,069 45,581 53,360
less amounts attributable to outside
bodies
(40,162) (34,658) (40,162) (34,658)
Net asset investments 4,128 17,411 5,419 18,702
144,079 138,435 144,884 139,278
Endowment fixed asset investments 378,428 334,100 378,428 334,100
Current Assets
Stocks 1,872 1,839 610 566
Research grants and contracts debtors 13,939 20,572 13,939 20,572
Other debtors and prepayments 19,845 23,735 19,211 22,498
Current asset investments 134,213 93,210 134,213 93,210
Cash at bank and in hand 17,522 14,000 15,666 13,360
Creditors
Amounts falling due within one year (115,662) (85,874) (112,092) (82,817)
Net current assets 71,729 67,482 71,547 67,389
Total Assets less Current Liabilities 594,236 540,017 594,859 540,767
Creditors
Amounts falling due after more than one
year
(998) (19,111) (998) (19,111)
Provisions for liabilities and
charges
(5,475) (4,148) (5,993) (4,329)
Total assets less liabilities 587,763 516,758 587,868 517,327
Deferred Capital Grants (96,210) (86,682) (96,210) (86,682)
Total net assets 491,553 430,076 491,658 430,645
Endowments
Specific 329,368 291,195 329,268 291,195
General 49,160 42,905 49,160 42,905
378,428 334,100 378,428 334,100
Reserves
Income and expenditure account 110,989 93,912 111,094 94,481
Revaluation reserve 2,136 2,064 2,136 2,064
113,125 95,976 113,230 96,545
Total Funds 491,553 430,076 491,658 430,645

The financial statements were approved by the Curators of the
University
Chest on 27 November 1998.

C.R. LUCAS

Vice-Chancellor

W. HAYES

Chairman of the Curators of the University Chest

J.R. CLEMENTS

Secretary to the Curators of the University Chest NAME="5Ref">

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Consolidated Cash Flow Statement


for the year ended 31 July 1998























































1998 1997
£000 £000
Net Cash Inflow from Operating
Activities
25,429 551
Returns on Investments and Servicing of
Finance
Income from endowments received 15,658 14,286
Other income from investments and interest
received
13,036 6,919
28,694 21,205
less amounts paid to outside
bodies
(1,161) (1,110)
27 ,553 20,095
Interest paid (163) (72)
Net cash inflow from returns on investments and
servicing
of finance
27,370 20,023
Capital Expenditure and Financial
Investment
Payments to acquire tangible fixed
assets
(39,338) (36,783)
Net realisation/(acquisition) of fixed asset
investments
13,354 (95)
Net realisation/(acquisition) of endowment asset
investments
(21,608) (4,749)
Net (acquisition) of current asset
investments
(785) (500)
Capital grants received 29,069 21,689
Endowments received 3,361 3,572
Net cash (outflow)/inflow from capital
expenditure and
financial investment
(15,947) (16,866)
Acquisitions and disposals - -
Net cash inflow before use of liquid resources
and financing
36,852 3,708
Management of liquid resources (59,719) (3,753)
Financing
Net mortgages and loans
(repaid)/acquired
(3) (1)
(Decrease)/Increase in Cash (22,870) (46)

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Consolidated Statement of Total Recognised Gains and Losses


for the year ended 31 July 1998























1998 1997
£000 £000
Surplus for the year 17,077 12,533
Appreciation of fixed asset
investments
72 15
Appreciation of endowment asset
investments
34,859 34 ,710
Specific endowment income retained for the
year
6,108 3,019
New endowments received 3,361 3,572
Total Recognised Gains Relating to the
Year
61,477 53,849
Prior year adjustment - -
Total Gains Recognised Since Last Financial
Statements
61,477 53,849

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