UNIVERSITY OF BRIGHTON

Report and Financial Statements

Year ended 31 July 2008

University of Brighton Mithras House Lewes Road Brighton East Sussex BN2 4AT

REPORT AND FINANCIAL STATEMENTS 2007-2008 CONTENTS Page

Operating and Financial Review 1

Membership of the Board of Governors 15

Corporate governance 16

Responsibilities of the Board of Governors 18

Auditors’ report 19

Consolidated income and expenditure account 21

Consolidated and University balance sheet 22

Consolidated cash flow statement 23

Reconciliation of net cash flow to movement in net debt 23

Statement of consolidated total recognised gains and losses 24

Notes to the financial statements 25

Officers and professional advisors 51

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OPERATING AND FINANCIAL REVIEW Introduction The University agreed a new Corporate Plan in May 2007 for the period 2007-2012. It sets out challenging opportunities and targets across the key areas of the University’s activities, under the following headings of: Curriculum; Research; Economic and social engagement; Student and staff experience; Physical environment; and Governance, management and relationships. Overall, 2007/08 has been a very successful year for the University. Highlights include: • Achievement of highest level of assessment by the Quality Assurance Agency of the University’s

taught provision in May. • Achievement of Grade 1 (outstanding) inspections by Ofsted of both further and secondary education

provision. • Graduation of first cohort of 96 students from the Brighton and Sussex Medical School. • Development of new research strategy and Transforming Research publication under the leadership

of the newly appointed Pro Vice Chancellor (Research), Bruce Brown. • Completion of the Profitnet programme of networking and development with SMEs across Sussex. • Award of £3 million HEFCE funding to establish the South East Coastal Communities Programme. • Improvement in student satisfaction rating measured by the National Student Survey from 77% to

81%. • Completion of major pay restructuring exercise. • Commencement of two major building projects on site at Falmer and Moulsecoomb.

Set out below is a review of the University’s operations over the 2007/08 financial year and future plans, together with its financial performance. Curriculum Any successful university such as Brighton is above all a highly complex machine for the development, delivery, retirement, renewal and invention of degree and diploma programmes. We have over five hundred from foundation degrees to professional doctorates. The rate of change is, when we stand back and reflect, quite staggering. In 2007/08 60 new awards were validated, making a total of over 220 in the last four years. A review of some of these sixty provides an insight into how the process of curriculum development enables us to meet our strategic objectives and to respond to new patterns of student and funder demand. The continuing expansion of the creative, media and information industries as defining features of our contemporary world is reflected by new degrees in Moving Image and Screen Studies. The increasing requirement for expertise in issues of sustainable development and climate change underpins BScs in Sustainable Product Design, and Earth and Ocean Sciences. The university’s regional mission and widening participation commitment strongly inform the offering of further degrees including Environmental Biology, Community History and Media Production at University Centre Hastings. And the need to meet the professional needs of a new era and of changing vocational areas has led to the creation of new categories of award – the MDes and the MComp (four year integrated undergraduate/postgraduate programmes) – and the nationally unique foundation diploma, being pioneered in land-based studies at Plumpton College. The speed and extent of such changes belies the occasionally expressed view (often voiced by eager staff as well as impatient politicians) that universities such as Brighton are too slow in making curriculum changes in response to changing circumstances. Indeed the opposite view – that such changes are too rapid to maintain the quality and standards of the education – may be an equally valid concern. To address any such public concerns May 2008 saw a quality audit of all the university’s taught provision by the national Quality Assurance Agency (QAA). The resulting report (published in October 2008) confirms that there can be complete public confidence in the standards of the university’s awards and the quality of the learning opportunities offered to students. This came, of course, as no surprise to us, to our students and graduates or to the employers for whom they now work. The university maintains a very strong and continuous quality assurance process, with an exceptionally high level of external

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involvement. Our courses are regulated and approved by over fifty professional, statutory and regulatory bodies, During 2007/08 we were visited or assessed by (among others): the Royal Institute of British Architects and the Architects Registration Board; the National Council for the Training of Journalists; Lifelong Learning UK; the Higher Education Academy; the British Council; the General Social Care Council; the Health Professions Council; the Nursing and Midwifery Council; the Law Society; the Chartered Institute of Marketing; the Chartered Institute of Information and Library Professionals; the Institution of Engineering Designers; the Royal Pharmaceutical Society of Great Britain; and the Royal College of Veterinary Surgeons. One of the most extensive of such engagements of 2007/08 (as in most years) was with Ofsted, which approves our extensive work in teacher education. The success of both our further and secondary education inspections in gaining Grade 1 (outstanding) added to the existing position of our primary (also Grade 1) to provide us with the highest possible scores in this exceptionally tough inspection regime; the first English university in this position. In addition to these externally required processes we continue to operate a very rigorous internal quality assurance system, with around three hundred external examiners involved in assessment of all our courses and a periodic course review procedure where over fifty courses were reviewed at twenty-seven different events in 2007/08. All periodic reviews, as well as validations, also involve experts external to the university. In all, more than four hundred external examiners, academic auditors, professional inspectors and advisers were involved in scrutinising and reporting on the planning and delivery of the university’s curriculum in 2007/08. Regrettably, few other private or public sector organisations allow such a wide range of independent scrutiny. The result of these processes is that in 2007/08 nearly 5,800 students achieved awards from the university, nearly a quarter being postgraduate awards. Each year we, of course, have then to replace and renew around 35 per cent of our student body. During 2007/08 this was an especially challenging task since the national undergraduate admission system (UCAS) was undergoing a radical change with all candidates having their number of choices reduced from six to five (thus making all previous data on the likely applicant pattern of acceptances redundant). It is an immense tribute to the skill and professionalism of all those involved in the recruitment, marketing and admission of students that we seem likely to achieve a 2008/09 student population neither too great nor too small to meet the requirements of our funding contracts. All these students will benefit from a curriculum that is fully up to date and a demanding assessment regime that ensures that their degree or diploma, once achieved, will be a marker of high academic achievement. One of the more pernicious features of the current obsession with press league tables is the extra points they award to universities for the numbers of firsts and upper seconds awarded; the subtle pressure this produced towards grade inflation is clear. At Brighton we take great trouble to avoid this and the 2008 figures of around 10 per cent of firsts and 46 per cent of upper seconds remain well in line with the sector average and with our own trajectory over a number of years. Graduate employment records remain consistently high with a slight increase in the number of students progressing straight on to higher level qualifications. Among all the successes and achievements of 2007/08 the graduation of the first ninety-six students from the Brighton and Sussex Medical School stands out. This five year Bachelor of Medicine Bachelor of Surgery programme, fully endorsed by the General Medical Council, is among the most in demand nationally. As a joint enterprise by the universities of Sussex and Brighton, it demonstrates our central commitment to the value of partnerships, especially in the delivery of professional and vocational courses. These partnerships may be with schools, hospitals, businesses, public services (such as the police) and voluntary organisations, or with educational bodies – further education colleges (throughout Sussex from Hastings to Crawley to Worthing), international institutions (in France, Germany, Spain, India or Mauritius) or with UK universities. This radically decentralised, dispersed and permeable curriculum demonstrates the University of Brighton’s fundamental character as one which has inverted the traditional stereotype of universities as places from which to allow separation from the world of practical activity, of everyday life and of global turbulence. And as the world shrinks to make Marshall McLuhan’s global village a reality, through instant news and information, via shared environmental impacts and with a single and volatile financial and economic system, so our curriculum plans will respond and innovate, seeking as in the past to offer our students the new qualifications, ideas and skills to make and re-make their futures and those of our national and global destinies.

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It will be, as throughout our full and distinguished 150-year history, a challenging and fulfilling task in which we shall not fail. Research As for all UK universities research policy and development in 2007/08 was dominated by our submission to the Higher Education Funding Council’s (HEFCE) 2008 Research Assessment Exercise. In November 2007, the University of Brighton submitted fifteen of the Units of Assessment. Additionally, the Brighton and Sussex Medical School returned a joint submission from the universities of Sussex and Brighton. We submitted 286 FTE researchers (34 per cent of our academic staff). Of these 53 were returned as early career researchers, illustrating our strong commitment to providing an attractive research environment for the best young academics, both nationally and internationally. £38.51m was returned in grant income and 652 research students reported (these figures cover the whole RAE period of 2001–07). Considerable attention in the submission was given to the quality of research environment, to the group and individual esteem of those returned and to future strategy and plans. The results will be published in December 2008, with the funding consequences known in March 2009.

The university received £4.85m core research funding from HEFCE in 2007/08. Additionally income from research grants continues to underpin a significant aspect of the university’s research activity. The highest proportion of the £4.65m awarded was won by the Faculty of Science and Engineering, whose income was 60 per cent higher than in 2006/07. These grants included six with an individual value of over £250,000. In a number of other subject areas the amount of income awarded decreased (reflecting an increasingly tough competitive research environment), although success rates remained relatively stable. Improving our success in medium and large research grants and contracts is a major priority for the new Research Strategy which is now close to completion. Just under £1.5m of the 2007/08 income won by the university was from central government funds including a £375,000 project awarded to Professor Sergey Mikhalovsky on battlefield wound dressing. The university is also involved in seven projects funded by the European Union’s Framework VII programme, including leading on 3D-COFORM (3D Collection Formation), an €8.45m, 19-partner project managed by Professor David Arnold which will advance the state of the art in 3D-digitisation and make 3D documentation an everyday practical choice for digital documentation campaigns in the cultural heritage sector. Other large collaborative projects involved Professor Valerie Hall (with partners at the universities of Kent and Surrey) with a £5m grant awarded by the National Institute for Health Research to run the South East Research Design Service and Professor Bobby Farsides, from BSMS, with £750k from the Wellcome Trust to investigate the ethics of translational research in relation to human embryonic stem cell research and neuroscience. Research at Brighton continues to play an influential role in national policy, illustrated by four colleagues providing advice to government – Dr Richard Faragher is an expert witness for the House of Lords enquiry into aspects of ageing, Dr Jonathan Chapman spoke at the House of Lords Science and Technology Committee enquiry into waste reduction, Dr Steve Flowers was invited by the Minster of State for Science and Innovation to advise on the future of user-led innovation and Dr Bobbie Farsides has been appointed specialist adviser to the House of Lords European Affairs Committee’s Organ Donation Enquiry. Prestigious prizes and awards won by staff this year include the Commander’s Award for Public Service awarded to Dr Kevin Stone for his work advising on flood defences in New Orleans and the Gill Memorial Award from the Royal Geographical Society, an award for young researchers presented to Dr Kath Browne. Dr Wendy MacFarlane was awarded the State-of-the-Art Lecture for her paper on Use of Stem Cell Technology in the Treatment of Type 1 Diabetes at the triannual International Diabetes Federation Congress. Brighton staff profiled in the press included: Drs Jonathan Chapman and Andre Viljoen (Radio 4), Professor Tara Brabazon (Guardian) Professor Steve Redhead (BBC), Professor Alan Tomlinson (Panorama, Channel 4) and Professor Peter Squires (providing analysis for the Channel 4 series The Street Weapons Commission). Research undertaken by the Community University Partnership Programme has been shortlisted for the Times Higher Education awards.

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Following submission of the RAE, work began on the development of a new research strategy for the university. There was a substantial response from the university community to the online and open consultation events which enabled some key strands of the strategy to begin to take shape. The final strategy will not be published until after the RAE results, however feedback received in the consultation has already resulted in several university-wide activities. Responding to comments on lack of contact between researchers in different schools, a networking event, Brief Encounters, held in July 2008 enabled researchers from across the university to discuss potential collaborations. Sixty-four staff attended, assembling around six over-arching, multidisciplinary themes. It was followed by a celebration of the university’s research in September 2008, at which six £5,000 grants were given to proposals received from teams who had met at the Brief Encounters event. The projects involving 22 staff ranged from The Edible Campus, a project involving four schools and a partner college, to a project on inflammatory bowel disease involving three schools, the University of Sussex and the Royal Sussex County Hospital. An away day for the professoriate held in Spring 2008 considered the institutional role that professors could play as research leaders. A group has since met to consider the strategic value that these senior staff can have outside of formal committee structures. The group has adopted the theme of growing the intellectual capital of the university and is currently considering a series of university-wide initiatives such as increasing the profile of the university through the establishment of a public lecture series or the hosting of international conferences, and the development of research themes which cut across schools and faculties. A research publication, Transforming Research, has been developed over the past academic year. The publication is aimed at an external audience and is focused around the five themes of health, culture, economy, environment and society. Due for publication in November 2008 it provides case studies of individuals and groups conducting work in the university in order to provide a sense of the breadth and depth of our research. Others schemes in the process of implementation include: a university-wide sabbatical scheme which will award ten sabbaticals of £20,000 to buy out teaching allowing researchers to develop a high quality research grant proposal or to produce a research output. Proposalnet will train ten to twelve staff in each faculty in the development of research grant proposals. Run by CENTRIM, it will also train future trainers in order that the scheme can be extended in future years. 2007/08 has been a year in which the RAE submission has marked the successful culmination of a critical phase in the development of the university into an institution with a comprehensive and well-established research economy. The next phase will require a further challenging and radical series of steps to increase our aspirations and to develop a research environment and a research culture to deliver them. We are confident that our new Research Strategy, together with the quality of our research leadership and our new generation of active researchers will enable us to take these steps successfully. Economic and social engagement Last year’s corporate plan aims for Brighton to ‘become recognised as a leading UK university for the quality and range of its work in economic and social engagement and productive partnerships’. In concrete terms, the target of a 7 per cent compounded increase in overall commercial income was exceeded during the 2007/08 year. In social engagement, the university’s Community University Partnership Programme (Cupp) was shortlisted for a Times Higher Education Award and received its first year of core funding from the university. Overall, the above aim will only be achieved by efficient and innovative management, developing the knowledge transfer skills and social engagement potential that already exist across the university as a whole, and above all, understanding and responding to the needs of our market and other partners. The world of economic and social engagement is changing rapidly. Global competition means that innovation is now a necessity for even the smallest of companies and a looming skills’ shortage demands that the development and retention of talent, at all levels, becomes a key competitive necessity for all organisations. Debate about the evolving shape of the public voluntary and community sectors also gathers pace. How these will be affected by the current economic issues remains to be seen.

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These worldwide trends translate well for a university like Brighton. In the UK the widely acclaimed Sainsbury Report – The Race to the Top – seeks to place knowledge transfer and exchange on a sound footing across all UK universities. The fourth round of Higher Education Innovation Fund (HEIF) confirmed funding for three years as part of the basic grant subject to its own specific set of performance metrics. Brighton has done well with a 65 per cent increase projected on average over this three-year period – as long as our performance does not slip relative to other universities. The Leitch Report of 2006 was the clarion call for greater focus on the skills agenda including higher level skills from universities and continuing professional development for those in employment. The two-year ProfitNet programme, funded by the Higher Education Funding Council for England (HEFCE), focusing on the link between universities and SMEs, has just ended. The evaluation shows not only substantial qualitative changes for the approximate 300 companies involved, for example new products, new services, and greater contacts with higher education, but also above average increases in sales and profits. Phase two of the programme is being developed to bring together all ProfitNet programmes in Sussex. This success means that we can now offer ProfitNet more widely in the south-east of England, extend it to other regions, and respond to a growing international interest as other countries see the immense value of SMEs to their economic growth. Linkages with employers are growing in number and strength as the two areas of innovation and talent are now treated with importance. During the year, a major reworking of an undergraduate engineering programme will provide graduates with a focus in a particular industry, by changing the final two years to a continuous programme of work interspersed with assignments in industry. The involvement of industry staff as both mentors and teachers on the programme will considerably enriched the experience. The first cohort started in September 2008. The Sainsbury Report moved the responsibility for knowledge transfer partnerships (KTPs) to the Technology Strategy Board and at the same time doubled the number of programmes nationally. KTPs are one of the major ways that universities can work together with smaller companies, placing a graduate in the company working for two years under academic supervision on a specific strategic project. This year saw the university’s KTP base rise to approximately 120 in the 15 years since its inception. There is a growing interest in providing more focused higher education opportunities in Crawley, and around Gatwick airport. During the year the university was invited to lead the higher education team studying the opportunities for a university centre in Crawley. The government, at the same time, announced a new initiative to fund up to 20 new university centres in the country in the next five years. Work has started on identifying the opportunities and in-depth discussions with local employers to understand their specific needs and how a university centre could meet them. The Beepurple entrepreneurship network has continued to grow, with now over 1200 students, alumni and staff members. Highlights during the year were the National Enterprise Week event – Reality Cheque – which featured four successful University of Brighton graduate entrepreneurs, and the summer school for budding graduate entrepreneurs, now in its second year. At the social end of the engagement spectrum, Cupp won a major HEFCE bid for funds to establish the South East Coastal Communities Programme collaboratively with eight other universities across Kent, Sussex and Hampshire. £3m over three years will fund a range of projects supporting community capacity building and serving to test and demonstrate how best universities and the community sector can work together to mutual benefit. More than 300 undergraduates chose the Learning in the Community module, giving them unparalleled experience of working on a real community-based project and illustrating the extent to which the commitment to community engagement has seized the imagination of teachers, students and community partners alike.

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In January 2008 Community University Partnerships in Practice was published, edited by Angie Hart, Elizabeth Maddison and David Wolff with chapters explaining the conceptual basis and practical reality of CUPP, including 40 authors. The Cupp research helpdesk responded to nearly 100 enquiries and is being launched at University Centre Hastings. The Brighton and Sussex Community Knowledge Exchange bid successfully for a fifth year of HEFCE funding to continue the KTP approach to community engagement projects. This continues to be the first project of its kind in the country. To respond to the growing economic and social engagement opportunities illustrated here, the university created the Business and Community Committee. This year, for the first time, detailed three-year targets were established for each faculty recognising that to ensure full success in the economic and social engagement area the university needs to ensure that these activities and overall approach are embedded in the faculties, relate coherently to research, and to learning and teaching, and reflect strong collaboration between academics and professional staff. Student and staff experience The aims set out in the corporate plan include a commitment to providing an experience of higher education which is challenging and enjoyable for students and staff; which embodies equality of treatment; and which equips its students to be socially purposeful professionals and citizens. Direct support for students comes not only from staff within their own academic school, but also from a range of central support services and from the Students’ Union. The university has been sensitive to the fact that undergraduate students are now required to make a greater financial contribution to the cost of the education, and has therefore invested significant elements of this additional income in areas which provide visible benefits to students. Information Services, for example, which provides library and IT services at all major locations, has been able to purchase over 5,000 new items for libraries, including 415 ebooks, and over 150 new computers to support discipline-specific learning activities in academic schools. Opening hours have been extended, at weekends and around examination times, and additional front-line staff have been provided at peak times. A range of estate improvements have been targeted at student-facing areas, including social spaces and restaurants. The Students’ Union was invited to identify priorities for investment, and was able to invest in its student newspaper, an additional housing and academic caseworker, and a major refurbishment of the junior common room which serves as its main base at Cockcroft. As part of the new arrangements for funding and student support, the university awarded bursaries to 5,900 students, based on an assessment of household income. It also awarded 200 scholarship awards of £1,000 to students who had excelled in the end of year assessments in their first or second year of study. The Students’ Union undertook a major survey of student experience during the year, which was presented as a 108-page document to the Quality Assurance Agency as part of its audit visit. Their overall conclusion was that students reported their university experience to be ‘positive, meaningful and developmental’, and that student responses ‘broadly reflect patterns of overall confidence, happiness and satisfaction’. Nevertheless, there were many points of detail in the report which pointed to the need for action by the university, and on many topics there were striking differences between the experience of students on different courses. The QAA audit team found evidence that issues raised by students were considered effectively at each stage of the university’s quality assurance processes. In the National Student Survey – through which final-year students in all higher education institutions are surveyed – the proportion of Brighton students who expressed overall satisfaction (rating their experience at 4 or 5 on a five point scale) was 81 per cent, up from 77 per cent in the previous year. Brighton and Sussex Medical School students were included in the survey for the first time, with 94 per cent expressing satisfaction, the highest score for any English medical school. Again, there were many variations between subjects, and between topics. Overall, 84 per cent of our students were satisfied with the quality of teaching on their course, but only 63 per cent were equally positive about assessment and feedback. The Academic Standards Committee will be undertaking a programme of work to ensure that good practice is spread and weaknesses are addressed. Although the general level of student satisfaction is satisfactory at 81 per cent, it is only around the sector average.

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Student Services plays an important part in enriching the student experience. It has taken the lead in promoting student volunteering, making 195 placements during the year, while the careers team offered over 150 workshops and 1,500 individual interviews. Over 4,000 students sought advice from the welfare service. Increasingly, Student Services is assisting staff in other departments, by offering sessions on such topics as student mental health, thereby assisting staff with pastoral or service roles which may require them to deal with students in distress. Staff The university’s staff base grew by 2 per cent during 2007/08, reflecting its sound academic and financial position, and its success in winning bids. The growth in administrative posts, including such posts in academic schools, was greater than the growth in academic posts, reflecting the increasing pressure on higher education institutions in the areas of income generation and student support, as well as requirements for extensive monitoring, accountability and self-assessment. Staff turnover has remained stable, at around 4 per cent for academic staff and 10 per cent for administrative staff and 14 per cent for manual staff. The age profile has also remained relatively static, with a median age of 45, save that the number of staff working beyond the age of 65 is growing gradually, with 26 academic staff and 29 support staff in this group. The major pay re-structuring exercise – with principles agreed nationally but detail negotiated locally – was completed during the year. Though the outcome was positive for many staff, with the transfer of all hourly-paid manual staff to incremental salary scales and the creation of 54 further posts at the principal lecturer grade, the process was a challenging one, with many staff feeling that their hopes and expectations had not been met, despite the 7.5 per cent increase in salary costs for University of Brighton staff over the previous year. The revised Equality and Diversity policy was agreed in April 2008. The university seeks to go beyond the minimum legal requirements, and to promote a culture in which equality issues are embedded into daily life and work. It does, however, monitor its population. The proportion of black and ethnic minority staff, at 5 per cent, falls slightly below the local population of 5.8 per cent, though 7 per cent of teaching and research staff fall into these groups. Women outnumber men in the staff population as a whole (57 per cent), though they are not well represented at senior levels (38 per cent). The QAA audit team commented on the university’s extensive arrangements for staff support and development, and found examples of well-conceived examples of successful staff development activities. The annual administrative staff conference was singled out for special mention. The team was less convinced, though, that the process for planning and monitoring development for individual staff (the Staff Development Review scheme) was working effectively, and advised the university to complete its planned review of the scheme as soon as possible. Support for the professional development of academic staff is provided through the Centre for Learning and Teaching. The centre offers a postgraduate certificate in Teaching and Learning in Higher Education, completed by 15 colleagues in 2007/08, as well as a two-day short course on teaching in higher education which is offered four or five times annually, completed by a further 53 staff. The university-wide Learning and Teaching conference took place in July, with sessions offered by both distinguished external speakers and a range of internal staff. Twelve awards were made for teaching excellence, from an initial nomination list of 41, and 31 fellowships were awarded during the year, allowing individuals or groups to fund curriculum development and innovation projects. Physical environment An attractive and efficient working and living environment is an important enabling factor in an academic community, and the university’s Estate Strategy seeks to provide this through a steady programme of building improvement and replacement, supported through best practice in space and facilities management. The Estate Strategy also needs to reflect our aspirations to maintain a sustainable environment through careful energy management and increased attention to recycling and transport.

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Effective management of the estate is an issue of considerable interest to HEFCE as the primary funder of English universities. In October 2007, it required each institution to complete an assessment process to determine whether the quality of estate management was sufficient to relax detailed controls over capital project submissions. The university was judged to have satisfied this requirement, and thus became eligible to receive capital allocations of £16m over three years without any further process of external scrutiny. The university’s formal Estate Strategy draws together its formal policies and plans, and necessarily takes a long term view of estate development, while also identifying agreed projects and their funding sources. The current strategy confirms the university’s intention of continuing to operate on four major campuses in Brighton and Eastbourne, and includes specific projects for each of those. It also recognises that there are a number of uncertainties which could require a major strategic review. Despite eight years of planning and negotiation, it is not yet certain that a football stadium will be built at Falmer. Should those plans not come to fruition, the university would retain land currently scheduled for transfer, and might even have access to the adjacent site. Similar uncertainties apply to land next to the university’s Moulsecoomb campus. Notwithstanding these uncertainties, two major building projects have finally started on site, after prolonged contract negotiations, and are now making good progress. At Falmer, a new academic building of 9000m2 will house the School of Education, the School of Language, Literature and Communication and a number of the Falmer campus major shared facilities, including a large lecture theatre and the new Asa Briggs Hall. The construction work is being carried out by Miller Construction Limited, working from designs initially created by Hopkins Architects, and completion is scheduled for July 2009. The last of the short-life buildings erected when Brighton College of Education opened the Falmer campus in the 1960s will then be demolished. Work has also started on a major building to house the university’s work in biosciences. This will stand at the north-west corner of the Moulsecoomb site, and provide a rather more attractive entrance to the campus for those arriving from Moulsecoomb railway station. The building contract has been placed with Morgan Ashurst, who are working from designs created by Llewelyn Davies Yeang. A range of specialist facilities for the School of Pharmacy and Biomolecular Sciences will be included, as well as high quality general teaching accommodation. Completion of this £23m project is planned for February 2010. These major initiatives have been supported by a large number of smaller projects, all designed to enhance the working and learning environment. These have included the creation of a digital media suite in the Watts Building, the centre for sports journalism in Eastbourne, major refurbishment of a number of entrance areas, and a full programme of window replacement along the Grand Parade main building. New social and catering facilities were brought on stream at Grand Parade, along with the refurbished Sallis Benney Theatre and the Centre of Excellence in Teaching and Learning. Detailed planning has been undertaken for the provision of a new sports hall at Falmer, which is a major base for both curriculum work in sport and for sport by staff and students. Funding for this project has been agreed and design work is currently being completed. The artificial turf soccer pitch at Falmer, constructed in 2006/07, was brought into use at the beginning of the academic year, and has been in intensive use. An important objective of the university’s corporate plan is to increase the stock of student residences, at least to the point at which we can offer a place in halls to every first-year full-time student. This would require the development or acquisition of at least 1000 more bed spaces. There is some evidence that the university is losing some student applicants to other institutions when they find that a halls space is not on offer. Two proposals in recent years – one on the university’s own land, and the other in the city centre – have failed to overcome planning hurdles. Work has therefore begun on planning a major redevelopment of the current residential site at Varley Halls, where an increase in capacity of up to 500 may be possible. Meanwhile, the former Adelphi Hotel in Hastings has been converted by a private developer to the Robert Tressell Hall of Residence, a welcome confirmation that University Centre Hastings is now a mature operation requiring dedicated residences.

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Sustainable development The inexorable increase in energy costs has made it ever more important that the university exerts control over its energy consumption, not a trivial task in an estate of over one hundred separate buildings scattered across over forty miles. The university has met its target of remaining below the sector average on key energy consumption measures, and during 2007/08 reduced its energy consumption and carbon emissions over the previous year. It has also increased the proportion of waste which is recycled to almost double the sector average, and consequently rose 15 places in the People and Planet Green League. Current initiatives in this area include gaining further benefits from the solar thermal installation which heats the swimming pool at Eastbourne, using the energy for the hot water supply to adjacent areas, and using sustainable and recycled materials in new building projects at Falmer and Moulsecoomb. Serious attention now needs to be focused on travel policy and practice. Resources have been allocated for consultancy support to develop a comprehensive travel plan which will need to balance the university’s wish to participate fully in regional, national and international activity with its wish to limit its detrimental impact on the environment. The existing practice of providing season ticket loans and bicycle loans provides some basis for further development, as does the contractual commitment made by students in Eastbourne residences not to bring a car to the town, but these are modest first steps. Governance, management and relationships The university’s Board of Governors brings a wealth of wisdom and experience to the university community. Under the guidance of the Nominations Committee, membership has been carefully refreshed, with Kate Allen, Dr Yvonne Burne, Dr Tim Simpson and Jackie Lythell filling vacancies left by Sir Michael Checkland, Dr Ethlyn Prince, Dame Carol Black and Graham Turner. Alongside its regular business meetings during 2007–08, the Board held seminars on the Research Assessment Exercise and the academic drivers for the Estate Strategy, and devoted a further half-day session to reviewing governance arrangements, including its own performance. The Board also received formal presentations from the dean of the Brighton and Medical School, the dean of the Faculty of Health and Social Science and the head of the Strategic Planning Unit (on widening participation), allowing members to be fully briefed on aspects of the institution’s work. The governance review seminar confirmed the Board’s view that it had a sound relationship with the vice-chancellor and his senior management team. There was an appetite for improving the Board’s understanding of the work of the Academic Board and its subcommittees, though members were sensitive to the need to allow the academic community to make academic judgements. The Board considered and adopted a set of performance indicators – a ‘performance dashboard’ – which would help it come to considered judgements on the university’s performance in the key areas identified in the corporate plan. These include student recruitment and teaching quality, research performance, and commercial and social engagement activity. In each major area, the Board has identified a number of relevant quantitative measures, but also wished to be sure that it understood the qualitative dimensions of performance assessment. In common with other higher education institutions, the university has to maintain an appropriate balance between a collegiate approach to decision making and a more straightforward style of executive management. The collegiate approach is sustained through the Academic Board and its sub-committees, where discussion takes place on all matters academic. The Quality Assurance Agency was able to commend the ‘inclusive and consultative way’ in which the corporate plan was developed, judging that this allowed the university to ‘build on the confidence and aspirations of its staff.’ At the same time, a clear approach to financial management and careful stewardship by managers at all levels has led to a strong financial position. The senior management team benefited from the designation of Professor Bruce Brown as Pro-Vice-Chancellor (Research). His leadership of the university’s submission to the Research Assessment Exercise and review of the university’s research strategy has made a significant contribution to the objectives set out in the corporate plan. At the end of the year, Christine Moon retired from her post as

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Registrar and Secretary, and Clerk to the Board of Governors. She played a major role in maintaining the quality of the university’s governance arrangements, working with three successive chairs, and was a critical source of advice for heads of school dealing with difficult student issues. The university will welcome Carol Burns, from Royal Holloway in the University of London, as her successor in 2008/09. Two deans of faculty were appointed during the year, with Anne Boddington succeeding Bruce Brown as Dean of Arts and Architecture, and David Taylor following Michael Whiting as Dean of Health and Social Science. In the course of the year, plans were laid for the establishment of a new department of Development and Alumni, and Sam Davies moved from the University of Warwick to be its first head. The department will be the focus for the university’s efforts to maintain its relationship with former students and to establish a framework for philanthropic giving. Partnerships and collaboration are key features of the current higher education landscape. The University of Brighton works closely with the University of Sussex, most particularly to host the Brighton and Sussex Medical School, but also in a wider range of joint projects and initiatives. These range from joint academic provision in social work and postgraduate engineering programmes to a joint advisory service for students on sexual health. The relationship is steered by the Joint Planning Group, comprising the senior management teams of both institutions, which meets termly. The two universities have identified a number of potential areas for future collaboration, but also recognise that differences in mission and ethos may sometimes lead them to pursue separate paths. Further education colleges in the region are also valued partners of the university. Higher education work at City College Brighton and Hove, Plumpton College, Sussex Coast College (in Hastings), Sussex Downs College (in Lewes and Eastbourne) is planned and funded through the university. Students on foundation degree programmes are generally able to progress to honours degrees at the university. Higher education courses at Northbrook College (in Worthing) are validated by the university, and students receive University of Brighton degrees on graduating. For the last three years, the University of Brighton has led the Sussex Learning Network, which has brought together the higher education institutions in Sussex (Brighton, Chichester, Sussex and the Open University) and the further education institutions to expand opportunities in higher education for those entering from vocational pathways, rather than through traditional academic routes. The University’s relationships extend beyond the educational field. In the course of the year, work has been undertaken with the local authorities in Brighton and Hove, East Sussex, West Sussex, Crawley, Eastbourne, Hastings, and Worthing and Adur. In each case, there has been a recognition that higher education can bring economic and social benefits to a locality. Much of this work is coordinated by the South East England Regional Development Agency, and by the group of vice-chancellors in the south-east region (Higher Education South-East), chaired by Julian Crampton. Internally, the university has taken steps to improve its planning process. Following the adoption of the corporate plan, faculties, school and departments have prepared more detailed local plans, and have engaged in dialogue with the senior management team over these. Those plans go beyond the setting of financial targets, and include commitments to meeting the objectives set out at university level in the corporate plan. A sound approach to risk management is a vital aspect of governance and management. The Risk Management Steering Group, chaired by the deputy vice-chancellor, reported regularly to the Audit Committee on its assessment of current and emerging risks. An intensive visit by a team of inspectors from the Health and Safety Executive uncovered no unexpected disasters, and found many points to commend. However, there was good advice in the subsequent report on further raising the profile of health and safety and setting strategic goals.

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Financial performance Income and expenditure Income for the year totalled £145.8m, a £10.5 million (8 per cent) increase over 2006/07. Income growth over the past five years has been as follows (£m):

Overall, income has grown by 50 per cent over a five year period and the proportion attributable to funding councils has reduced. The increase relating to academic fees reflects the second year of increased undergraduate fees under the government’s variable fees initiative. The increase in other sources of income reflects a strategy of diversifying income sources and targeting of increases in commercial and other income sources over this period. Expenditure for the year totalled £138.3 million, a £9.4 million (7.3 per cent) increase over 2006/07. Expenditure growth over the past five years has been as follows (£m):

Premises costs have reduced in 2007/08 as more expenditure has been associated with the two new build projects underway and hence been capitalised.

12

The university achieved a surplus of £9.1 million for the year compared to a target surplus of £2.1 million. Investment income was £1.4 million higher than planned owing to realisation of gains on equities, bonds and hedge funds sold during the year. £2.52m of planned expenditure on maintenance and equipment will be completed in 2008/09. Surpluses achieved over the past five years have been as follows:

Balance sheet The university’s reserves at 31 July 2008 comprised: £m Institutional 4.23 Investment 5.18 Devolved 11.79 Maintenance and development 5.26 Depreciation 28.09 Other 12.24 Total 66.79 Less pension liability (FRS17) -32.07 Total revenue reserves 34.72

Cash balances at 31 July 2008 totalled £44.6 million. A new loan of £29m was agreed during the year to fund new buildings at Falmer for the Schools of Education and Language, Literature and Communication and at Moulsecoomb for the School of Pharmacy and Biomolecular Sciences. £6.8 million had been paid against these projects at 31 July from cash balances and grants. The balance of spend on these projects, totalling £44.7m, will be funded from cash balances, grants and the new loan during 2008/09. Ratio of loan servicing costs to turnover The ratio of loan servicing costs to turnover has reduced over the period as loans have been repaid (£7.7m was repaid early in 2005/06). HEFCE operate a guideline upper level for loan servicing costs/turnover of 4 per cent: 2003/04 2004/05 2005/06 2006/07 2007/08 Ratio (%) 2.348 1.844 7.248 1.067 0.986

The ratio will increase in 2009/10 and 2010/11 as a result of the draw down of the new loan.

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Net liquid assets to current liabilities The ratio of net liquid assets (cash and investments) to current liabilities has increased over the period reflecting the generation of surpluses year on year: 2003/04 2004/05 2005/06 2006/07 2007/08 Ratio 1.022 1.127 1.299 1.592 1.755

The ratio is expected to reduce in 2008/09 as a result of the planned use of cash to fund new buildings. Current assets to current liabilities Similarly, the ratio of current assets to current liabilities has increased year on year, but is expected to reduce for 2008/09: 2003/04 2004/05 2005/06 2006/07 2007/08 Ratio 1.294 1.541 1.708 2.017 2.089

Days of total income represented by debtors Trade debtors as a proportion of total income has increased slightly over the period as a result of the increasing proportion of income derived from tuition fees. A number of initiatives aimed at improving debt collection have been put in place in recent years and further steps are planned for the coming year including earlier billing of tuition fees and earlier commencement of recovery procedures. 2003/04 2004/05 2005/06 2006/07 2007/08

Days 8 9 9 10 11 Liquidity – days expenditure Cash balances are equivalent to 118 days expenditure and have increased relative to expenditure levels over the period: 2003/04 2004/05 2005/06 2006/07 2007/08 Days 73 92 88 98 118

A reduction in this ratio is anticipated for 2008/09 as a result of the planned deployment of cash balances to fund new buildings. Financial risks Financial risks are identified as part of the budget setting process each year and appropriate contingencies incorporated into the budget. Key in-year risks include the level of contract and tuition fees income arising from student recruitment and expenditure subject to inflationary increases. This approach has ensured that target surpluses have been exceeded in recent years. A significant element of funding for capital investment is generated from year on year revenue surpluses. This approach allows the University to maintain flexibility to balance capital and revenue funding requirements year on year. The University maintains a five year financial forecast of income and expenditure as the basis for ensuring that plans are affordable over the medium term. The forecast incorporates the financial implications of current and planned investment in the estate and facilities and the effects of the national pay and grading framework on staff costs. Significant income risks identified are the loss of HEFCE grant funding arising from the withdrawal of funding for students with equivalent or lower qualifications and the outcome of the 2008 Research Assessment Exercise.

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Financial forecast The financial forecast for the period to 2012/13 incorporates increased planned annual surpluses of £3.1m for 2008/09, £4.1m for 2009/10 and £5.1m for 2010/11. Thereafter it is planned to maintain annual surpluses at this level, equating to approximately 3 per cent of annual income, which is considered an appropriate level to achieve ongoing sustainability. Achievement of these targets will require careful management of expenditure and increases in all areas of income over this period in line with the corporate plan targets. Planning is ongoing to: • secure additions to contracted student numbers and funding; • generate additional research and economic and social engagement income from HEFCE, research

council grants and other contracts; • increase international and other full cost student recruitment. Investment funding has been earmarked over the coming year to support plans to increase income in these areas and detailed monitoring arrangements are being put in place. The planned surpluses in future years will support continued investment in the university’s infrastructure and estate in support of the corporate plan.

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MEMBERSHIP OF THE BOARD OF GOVERNORS

Membership of the Board of Governors for the year ended 31 July 2008. Twelve independent members Lord Mogg (Chairman) Ms K Allen Dr Y Burne Dr J Crown (Deputy Chairman) Professor W Dawson Mr D Farmer Judge M Fawcett Mr M Geerts Mr P J Hall Ms J Lythell (from 02.05.08) Dr T Simpson (from 23.11.07) Mr C Thomson Two teachers at the University, Ms A Bone nominated by the Academic Board Dr E Ostler (from 02.05.08) Ms M E Trew (until 29.02.08) Four co-opted members Professor P Ashworth Ms E Brooke (from 23.11.07)

Ms S Jones Mr W Twiggs (until 23.11.07) Vacancy The Vice-Chancellor of the University Professor J Crampton One student of the University, Mr P Gilks nominated by the students Attendance at meetings of the Board of Governors during 2007-08 During 2007-2008 five meetings of the Board were held, in November and December 2007, February, May and June 2008. The attendance record of members was as follows:- Name No. of meetings

attended Name No. of meetings

attended Ms K Allen 4 Mr P Gilks 5 Professor P Ashworth 4 Mr P J Hall 4 Ms A Bone 4 Ms S Jones 5 Ms E Brooke**** 2 Ms J Lythell* 2 Dr Y Burne 4 Lord Mogg 5 Professor J Crampton 5 Dr E Ostler* 2 Dr J Crown 4 Dr T Simpson**** 4 Professor W Dawson 4 Mr C Thomson 5 Mr D Farmer 4 Ms M E Trew*** 2 Judge M Fawcett 4 Mr W Twiggs** 0 Mr M Geerts 5

* Ms J Lythell and Dr E Ostler were eligible to attend two meetings in 2007-08

** Mr W Twiggs was eligible to attend one meeting in 2007-08

*** Ms M Trew was eligible to attend three meetings in 2007-08

**** Ms E Brooke and Dr T Simpson were eligible to attend four meetings in 2007-08

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CORPORATE GOVERNANCE

The University is a higher education corporation with exempt charity status incorporated under the Education Reform Act 1988. The following statement is given to assist readers of the financial statements to obtain an understanding of the Governance procedures applied by the University’s Board of Governors. The Board of Governors is of the view that there is an ongoing process for identifying, evaluating and managing the University’s significant risks, that has been in place for the year ended 31 July 2008 and up to the date of approval of the annual accounts and that the procedures for identifying compliance with the key principles for corporate governance can be demonstrated. The University accords with the internal control guidance on the combined code as deemed appropriate for higher education. The Board of Governors considers that the University has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements. The University is committed to exhibiting best practice in all aspects of corporate governance. This summary describes the manner in which the University has applied the principles set out in Section 1 of the Combined Code on Corporate Governance issued by the London Stock Exchange in June 2006 and guidance provided by the Committee of University Chairmen in August 2006. Its purpose is to help the reader of the financial statements understand how the principles have been applied. The Board of Governors is the University’s Governing Body and is responsible for the University’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board of Governors meets five times a year; and has several committees. These include a Finance and Employment Committee and an Audit Committee which play key roles in ensuring the financial probity of the institution and the identification and the management of risk. The Board of Governors is sensitive to risk management and its consideration permeates all of its deliberations. It receives regular and comprehensive financial and control reports from the senior management team and the Audit Committee. The emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception. The Finance and Employment Committee inter alia recommends to the Board of Governors the University’s annual revenue and capital budgets and monitors performance in relation to the approved budgets. It has responsibility to make recommendations to the Board of Governors on the development and redevelopment of the University’s estate and on the financial implications of such development. It does not have any decision-making powers. It meets four times a year. The Audit Committee meets three times a year with the University’s external and internal auditors in attendance. The committee considers detailed reports from both auditors, together with recommendations for the improvement of the University’s systems of internal control and management’s responses and implementation plans. It also receives and considers reports from the Funding Council as they affect the University’s business, monitors adherence to the regulatory requirements and monitors the management of risk by the University’s senior management team. The Committee has the authority to call for any information from University officers, from internal and external auditors and from others whom it considers necessary to consult in order to discharge its responsibilities. The Nominations Committee ensures that the membership of the Board of Governors is refreshed at appropriate times by individuals of appropriate standing. The Remuneration Committee determines the salaries of senior post-holders. The Student Affairs Committee advises the Board of Governors on all matters concerning the experience of students as members of the University community.

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Each of these committees is formally constituted with terms of reference and chaired by an independent member of the board, and reports regularly to the main Board. The Senior Management Team receives reports setting out key performance and risk indicators and considers possible control issues brought to its attention by early warning mechanisms which are embedded within the operational units and reinforced by risk awareness training. The University maintains a Register of Interests of members of the Board of Governors and of senior officers which may be consulted by arrangement with the Clerk to the Board of Governors. Lord Mogg…………………………………………..Chair of the Board of Governors Dated : 21 November 2008

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RESPONSIBILITIES OF THE BOARD OF GOVERNORS In accordance with the Education Reform Act 1988 and the University’s Instrument and Articles of Government, the Board of Governors of the University is responsible for the administration and management of the affairs of the University and is required to present audited financial statements for each year. The Board of Governors is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the University and to enable it to ensure that the financial statements are prepared in accordance with the Education Reform Act 1988, the Instrument and Articles of Government, the Statement of Recommended Practice: Accounting for Further and Higher Education Institutions and other relevant accounting standards. In addition, within the terms and conditions of a Financial Memorandum agreed between the Higher Education Funding Council for England and the Board of Governors of the University, the Board of Governors through its designated office holder is required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the University and the surplus or deficit and cash flows for that financial year. In causing the financial statements to be prepared, the Board of Governors has to ensure that: • suitable accounting policies are selected and applied consistently; • judgements and estimates are made that are reasonable and prudent; • applicable accounting standards have been followed; • financial statements are prepared on the going concern basis as the University has adequate

resources to continue in operation for the foreseeable future. The Board of Governors has taken reasonable steps to ensure that funds from the Higher Education Funding Council for England and the Training Development Agency for Schools grants are used only for the purpose for which they have been given and in accordance with the Financial Memorandum with the Funding Council and any other conditions which the Funding Council may from time to time prescribe. The key elements of the University’s system of internal financial control, which is designed to discharge the responsibilities set out above, include the following requirements to: • ensure that there are appropriate financial and management controls in place to safeguard public

funds and funds from other sources; • safeguard the assets of the University and to prevent and detect fraud; • secure the economical, efficient and effective management of the University’s resources and

expenditure; • define clearly the responsibilities of, and the authority delegated to, budget managers and senior

budget managers; • ensure a comprehensive planning process, supplemented by detailed annual income, expenditure,

capital and cash flow budgets; • make regular reviews of academic performance and financial results involving variance reporting and

updates of forecast out-turns; • ensure clearly defined and formalised requirements for approval and control of expenditure, with

investment decisions involving capital or revenue expenditure being subject to formal detailed appraisal and review according to approval levels set by the Board of Governors;

• maintain comprehensive financial regulations, detailed financial controls and procedures, approved by the Audit Committee and Board of Governors;

• maintain a professional internal audit team whose annual programme is approved by the Audit Committee.

Any system of internal financial control can, however, only provide reasonable, but not absolute, assurance against material misstatement or loss.

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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THE BOARD OF GOVERNORS OF UNIVERSITY OF BRIGHTON We have audited the group and University financial statements (the ‘‘financial statements’’) of the University of Brighton for the year ended 31 July 2008 which comprise the group income and expenditure account, the group and University balance sheets, the group cash flow statement, the group statement of total recognised gains and losses and the related notes. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Board of Governors, in accordance with paragraph 13(2) of the University's articles of government and section 124B of the Education Reform Act 1988. Our audit work has been undertaken so that we might state to the Board of Governors those matters we are required to state to it in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Board of Governors, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the University’s Board of Governors and Auditors

The University’s Board of Governors responsibilities for preparing the Operating and Financial Review and the group financial statements in accordance with the Account Directions issued by the Higher Education Funding Council for England; the Statement of Recommended Practice: Accounting for Further and Higher Education, applicable law and UK accounting standards (UK Generally Accepted Accounting Practice) are set out in the Statement of Responsibilities on page 18.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and international standards on auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education. We also report to you whether income from funding bodies, grants and income for specific purposes and from other restricted funds administered by the University have been properly applied only for the purposes for which they were received and whether, in all material respects, income has been applied in accordance with the statutes and, where appropriate, with the financial memorandum with the Higher Education Funding Council for England and the Financial Memorandum with the Training and Development Agency for Schools. We also report to you whether in our opinion the Operating and Financial Review is not consistent with the financial statements, if the University has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit.

We read the Operating and Financial Review, other information contained in the Annual Report and the corporate governance statement and consider the implications for our report if we become aware of any apparent misstatements within them or material inconsistencies with the financial statements.

Basis of opinion

We conducted our audit in accordance with international standards on auditing (UK and Ireland) issued by the Auditing Practices Board and the Audit Code of Practice issued by the Higher Education Funding Council for England. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the University’s Board of Governors in the preparation of the financial statements and of whether the accounting policies are appropriate to the group and University’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

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Opinion

In our opinion:

the financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of affairs of the University and the group as at 31 July 2008 and of the University’s / group’s surplus of income over expenditure for the year then ended;

the financial statements have been properly prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education;

in all material respects, income from the Higher Education Funding Council for England, the Training and Development Agency for Schools, grants and income for specific purposes and from other restricted funds administered by the University during the year ended 31 July 2008 have been applied for the purposes for which they were received; and

in all material respects, income during the year ended 31 July 2008 has been applied in accordance with the University’s statutes and, where appropriate, with the financial memorandum with the Higher Education Funding Council for England and the Financial Memorandum with the Training and Development Agency for Schools.

KPMG LLP Chartered Accountants Registered Auditor 1 Forest Gate Brighton Road Crawley West Sussex RH11 9PT 21 November 2008

CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT Year ended 31 July 2008

21

Note 2008

£’000

2007

£’000 INCOME Funding Council grants 2 67,689 67,707 Academic fees and support grants 3 49,762 42,153 Research grants and contracts 4 5,867 6,528 Other operating income 5 18,782 16,589 Endowment and Investment Income 6 3,689 2,289

TOTAL INCOME 145,789 135,266 Less share of joint venture income 32 (7,594) (6,648)

GROUP INCOME 138,195 128,618

EXPENDITURE Staff costs 7 83,066 76,018 Depreciation 11 3,308 3,995 Other operating expenses 8b 51,022 47,929 Interest payable 9 947 975

TOTAL EXPENDITURE 138,343 128,917 Less share of joint venture expenditure 32

(6,379) (4,667)

GROUP EXPENDITURE 131,964 124,250

Surplus after depreciation of assets at valuation and before tax 6,231 4,368 Share of surplus in Joint Venture 32 1,215 1,981 Deficit for year transferred to accumulated income in

endowment funds

4

24

Surplus after depreciation of assets at valuation and tax 10, 17

7,450 6,373

Difference between an historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount

16

1,642

2,306

HISTORICAL COST SURPLUS 9,092 8,679

The consolidated income and expenditure of the University and its subsidiaries relate wholly to continuing operations.

BALANCE SHEET As at 31 July 2008

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Consolidated University 2008 2007 2008 2007 Note £’000 £’000 £’000 £’000 FIXED ASSETS Tangible assets 11 142,488 136,942 144,917 139,421 Investments 20 84 84 84 84 Joint Venture assets 32 4,612 4,149 - - Joint Venture liabilities 32 (1,204) (1,956) - -

145,980 139,219 145,001 139,505 CURRENT ASSETS Short term investments 30 8 7,025 - 7,015 Stock 1(e) 137 131 74 68 Debtors 12 8,352 9,134 11,059 10,971 Cash at bank and in hand 28 44,603 27,675 44,131 26,872

53,100 43,965 55,264 44,926 CREDITORS: amounts falling due within one year

13

(25,414)

(21,801)

(24,508)

(20,869)

NET CURRENT ASSETS 27,686 22,164 30,756 24,057 TOTAL ASSETS LESS CURRENT LIABILITIES 173,666 161,383 175,757 163,562 CREDITORS: amounts falling due after

more than one year

14

(10,711)

(11,368)

(10,688)

(11,368) NET ASSETS EXCLUDING PENSION LIABILITY

162,955 150,015 165,069 152,194 Net Pension Liability 19(d) (32,068) (17,390) (32,068) (17,390)

NET ASSETS INCLUDING PENSION LIABILITY 130,887 132,625 133,001 134,804

Deferred Capital Grants 15 17,196 13,310 17,196 13,310 Endowments 18 67 71 67 71 CAPITAL AND RESERVES Revenue reserve excluding pension liability 66,791 56,091 68,905 58,270 Pension Liability 19(d) (32,068) (17,390) (32,068) (17,390)

Revenue reserve including pension liability 17 34,723 38,701 36,837 40,880 Revaluation reserve 16 78,901 80,543 78,901 80,543

Total Reserves

113,624 119,244 115,738 121,423

Total Funds 130,887 132,625 133,001 134,804

These financial statements were approved by the Board of Governors on 21 November 2008 Signed on behalf of the Board of Governors Lord Mogg …………………………….……………………….............Governor and Chair of Governing Body Professor Julian Crampton …………………………………….…..Governor and Vice-Chancellor The notes on pages 25 to 50 form part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENT Year ended 31 July 2008

23

Note 2008

£’000

2007

£’000 Net cash inflow from operating activities 23 11,108 6,180

Returns on investments and servicing of finance 24 2,766 853 Capital expenditure and financial investment 25 (3,473) (376)

Net cash inflow before use of liquid resources and financing

10,401 6,657

Management of liquid resources Deposit 7,017 155 Financing 26 (490) (468)

Increase in cash 28 16,928 6,344

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Year ended 31 July 2008 2008

£’000 2007

£’000 Increase in cash in the year 16,928 6,344 Repayment of debt 490 468

Changes in net debt from cash flows 28 17,418 6,812 Net debt at beginning of year 28 16,186 9,374

Net funds at end of year 28 33,604 16,186

STATEMENT OF CONSOLIDATED TOTAL RECOGNISED GAINS AND LOSSES Year ended 31 July 2008

24

2008

£’000

2007

£’000 Surplus after depreciation of assets at valuation and tax 7,450 6,373 Actuarial (liability)/gain recognised pensions. Note 19(d) (13,069) 3,601 Reduction in endowments (4) (24) Unrealised loss on investments (1) (297)

Total recognised (losses)/gains relating to the year (5,624) 9,653

RECONCILIATION

2008

£’000

2007

£’000 Opening reserves and endowments 119,315 109,662 Total recognised (losses)/gains for the year (6,035) 9,653

Total reserves and endowments 113,280 119,315

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

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1. ACCOUNTING POLICIES

a) Accounting convention

The financial statements are prepared under the historical cost convention, as modified by the revaluation of certain tangible fixed assets, and in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education (2007) and applicable accounting standards.

Repair and maintenance of buildings costs are treated in line with the requirements of FRS 15 ‘Tangible Fixed Assets’ in that they are treated as revenue expenditure unless there is a clear indication that such repairs will enhance the economic benefits of the tangible asset, in excess of the previously assessed standard of performance.

FRS 18 ‘Accounting Policies’ has been adopted and the Board is satisfied that the current accounting policies are the most appropriate for the University.

b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the University and its subsidiary undertakings as well as the University’s share of the joint venture, the Brighton and Sussex Medical School (Note 32). Although the University exercises a measure of control over the Students’ Union, this is not considered to be control as defined by Financial Reporting Standard 2. Therefore, the consolidated financial statements do not include the results of the Students’ Union.

c) Recognition of Income Income from tuition fees is recognised in the period for which it is received and includes all fees

chargeable to students or their sponsors. All income from short-term deposits and endowments is credited to the income and expenditure

account in the period in which it is earned. Income from specific endowments not expended is transferred from the income and expenditure account to specific endowments.

Income grants received during the year in support of general or specific revenue activities of the University are credited directly to the Income and Expenditure Account. Capital grants are released to the Income and Expenditure Account over the estimated useful lives of the related assets purchased with the grants. Capital grants received in advance of expenditure are carried forward as receipts in advance. The amount of capital grants relating to the non-depreciated element of fixed assets is carried forward as a creditor.

d) Tangible fixed assets

i) Land and buildings Land and buildings are stated at cost, or in the case of buildings in use at 31 July 1999, at

valuation. Land and buildings were valued on 31 July 1999 at depreciated replacement cost by Stiles

Harold Williams, a firm of independent chartered surveyors. The transitional rules set out in FRS 15 ‘Tangible Fixed Assets’ have been applied on

implementing FRS 15. Accordingly, the book values at implementation have been retained.

Buildings in the course of construction are accounted for at cost, based on the value of architects certificates and other direct costs incurred to 31 July. They are not depreciated until they are brought into use.

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

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ii) Rentals in respect of operating leases are charged to the income and expenditure account as incurred.

iii) Depreciation is charged so as to write off fixed assets in equal annual instalments over their

estimated useful lives. The minimum rates of depreciation are as follows:

Vehicles 33% per annum Computer equipment 33% per annum Other equipment 20% per annum Buildings 2% per annum

Land is not depreciated. A review for impairment of fixed assets is carried out if events or changes in circumstances

indicate that the carrying amount of any fixed asset may not be recoverable. iv) Equipment and vehicles are shown as disposed of within the books of accounts once fully

depreciated. Assets purchased for less than £10,000 are not capitalised and are written off to the income and

expenditure account in the year of purchase.

e) Stocks

Stocks, which consist of goods for resale, are stated at the lower of cost and net realisable value.

f) Taxation

The University is an exempt charity within the meaning of Schedule 2 of the Charities Act 1993 and as such is a charity within the meaning of Section 506 (1) of the Taxes Act 1988. Accordingly, the University is potentially exempt from taxation in respect of income or capital gains received within categories covered by Section 505 of the Taxes Act 1988 or Section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that such income or gains are applied exclusively for charitable purposes. The University receives no similar exemption in regard to Value Added Tax (VAT) and so is only able partially to recover the VAT input tax suffered.

g) Research grants and contracts

Income from ongoing research grants and contracts is included in the income and expenditure account to match the amount of expenditure incurred during the year.

h) Accounting for pensions

The University staff are able to join either the Teachers Pension Scheme operated by the Department for Children, Schools and Families or the Local Government Pension Scheme operated by the East Sussex County Council, as detailed in note 19(d). Additionally, the University has agreed with the Universities Superannuation Scheme that new staff who are in membership as at the date of joining the University of Brighton may remain members of that scheme. These are defined benefit schemes and contributions, including the capitalised cost of enhanced early retirement, are charged to the income and expenditure account as they become payable in accordance with the rules of the scheme.

i) Leased assets

Assets held under finance leases and hire purchase contracts are capitalised at their fair value at the inception of the leases and are depreciated over their estimated useful lives. The finance charges are allocated over the period of the lease in proportion to the capital amount outstanding. Costs in respect of operating leases are charged on a straight line basis over the lease term.

j) Investments Fixed asset investments that are not listed on a recognised stock exchange are carried at historical

cost less any provision for permanent impairment in their value. Current asset investments, which may include listed investments, are stated at the lower of cost and net realisable value.

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

27

k) Provisions Provisions are recognised when the University has a present legal or constructive obligation as a result

of a past event. It is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

2. FUNDING COUNCIL GRANTS 2008

£’000 2007

£’000 Recurrent Grants Higher Education Funding Council for England (HEFCE) 51,357 50,269 Training & Development Agency for Schools (TDA) 7,568 7,008

TOTAL RECURRENT GRANTS 58,925 57,277

Specific Grants (HEFCE) Project Capital 1,363 1,251 Higher Education Innovation Funds 1,686 1,337 Strategic Development Fund 2,596 2,590 AimHigher 845 913 CETL – Learning through Design 595 2,249 CUPP (SECCP) 64 - Science Research Investment Fund - 356 Learning & Teaching Development 664 658 Support Access Administration 20 25

Sub Total HEFCE Specific Grants 7,833 9,379

Specific Grants (TDA) Graduate Teacher Programme 145 143 Science Pilot Scheme 55 - Training Salaries Administration element 48 43 ICT E-Portfolio 26 - Maths Pilot Scheme 22 - Referral Premiums 21 25 Ethnic Priorities 7 8 Employment based recruitment premiums 6 - Spanish Primary languages programme 5 - Secondary Subject Shortage Scheme 4 9 Mathematics & Science Premium - 62 IT Funding - 93 QTS Standards Support - 57

Sub Total TDA Specific Grants 339 440

TOTAL SPECIFIC GRANTS 8,172 9,819

Deferred Capital Grants (HEFCE) Buildings 270 269 Equipment 322 342

TOTAL DEFERRED CAPITAL GRANTS 592 611

67,689 67,707

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

28

3. ANALYSIS OF ACADEMIC FEES AND SUPPORT GRANTS 2008

£’000 2007 £’000

Full Time Undergraduate 26,722 21,051 Postgraduate 1,708 1,571 Part Time Undergraduate 1,013 834 Postgraduate 3,216 2,711 Other NHS contracts 12,264 12,610 Short course fees 1,156 918 Medical School 2,474 1,716 Other 1,209 742

49,762 42,153

4. RESEARCH GRANTS AND CONTRACTS

2008 £’000

2007 £’000

European Commission 1,090 2,164 UK Government 1,994 1,515 Research Council 1,149 1,062 UK based charities 554 440 UK industry & public corporations 979 1,226 Other 101 121

5,867 6,528

5. OTHER OPERATING INCOME

2008

£’000

2007

£’000

Residences, catering and conferences 11,052 9,848 Other services rendered 5,856 4,921 Other income 1,874 1,820

18,782 16,589

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

29

6. ENDOWMENT AND INVESTMENT INCOME

2008 £’000

2007 £’000

Income from short-term investments 3,389 1,905 Income from Permanent Endowments (note18) 1 1 Income from Expendable Endowments (note 18) 2 2 Net return on pension schemes 297 381

3,689 2,289

7. STAFF

2008

£’000

2007

£’000 Consolidated Wages and salaries 67,012 61,778 Social security costs 5,317 4,996 Other pension costs (note 19) 10,737 9,244

83,066 76,018

University’s share of Joint Venture Wages and salaries 2,748 1,986 Social security costs 269 204 Other pension costs (note 19) 340 250

3,357 2,440

University and Subsidiaries excluding Joint Venture Wages and salaries 64,264 59,792 Social security costs 5,048 4,792 Other pension costs (note 19) 10,397 8,994

79,709 73,578

Emoluments of the Vice-Chancellor £ £ Professor Julian Crampton Salary 175,000 160,000 Pension contributions (note 19) 24,500 22,400 Benefits in kind 9,657 9,657

209,157 192,057

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

30

The remuneration of other higher paid staff, excluding employer’s pension costs, was as follows: 2008 2007 No. No. £100,000 - £110,000 3 - £110,000 - £120,000 1 1 £120,000 - £130,000 2 1 £130,000 - £140,000 1 - £140,000 - £150,000 1 - £150,000 - £160,000 1 1 £160,000 - £170,000 1 1 £170,000 - £180,000 - 1 £180,000- £190,000 1 -

10 (2007 – 4) of the above staff are employed by the joint venture (see Note 32)

2008 No.

2007 No.

Average staffing numbers (full time equivalent) Senior managers 12 12 Teaching and research 912 907 Administrative 926 896 Technical 137 135 Manual and craft 223 216

2,210 2,166

These staff numbers exclude BSMS staff employed on the Joint Venture and exclude all casual staff.

8a. ANALYSIS OF EXPENDITURE BY ACTIVITY

Staff

Costs

Depreciation

Other operating expenses

Interest payable

Total 2008

Total 2007

£000 £000 £000 £000 £000 £000 Academic Departments

53,003 391 15,098 - 68,492 61,668

Academic Services

4,768 113 4,919 - 9,800 8,294

Research Grants and Contracts

3,161 - 1,256 - 4,417 4,112

Residences, Catering and other operations

2,830 481 7,177 685 10,488 9,558

Premises 4,464 2,282 8,062 262 15,755 17,102 Administration 10,217 41 11,607 - 21,865 21,157 Other expenses 4,623 - 2,903 - 7,526 7,026

Total per income and expenditure account

83,066 3,308 51,022 947 138,343 128,917

Comparative 2007 76,018 3,995 47,929 975 128,917

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

31

8b. ANALYSIS OF OTHER OPERATING EXPENSES 2008

£’000 2007

£’000 Agency and contract staff 3,530 3,177 Auditors’ remuneration* 66 62 Bad debt expense 126 (22) Books and periodicals 1,556 1,328 Catering and bar provisions 1,271 970 Cleaning and waste disposal 583 490 Consultancy 1,860 2,403 Energy 1,692 1,755 Enhanced pension capital and interest 113 78 Equipment and materials 8,583 6,915 Exam and registration fees 31 30 External examiners 194 248 Facilities management fee 795 759 Federal colleges 4,294 4,505 Field course expenses 372 347 Grants to students 3,314 1,972 Insurances 471 480 Maintenance of buildings and grounds 6,129 7,390 Mentorship payments 675 579 Other employee expenses 749 743 Printing 1,203 1,061 Publicity and advertising 1,318 1,132 Rent, rates and water 4,782 4,426 Students accommodation 365 186 Students Union grant 747 696 Subscriptions 408 549 Telephones and postage 973 995 Transport 2,113 1,969 Miscellaneous 2,709 2,706

∗ In addition, the current external auditors have been paid £43,511 (VAT inclusive) for other services in the year (2007: £58,514).

51,022 47,929

9. INTEREST PAYABLE

2008

£’000 2007

£’000 Bank and other loans not wholly repayable within 5 years 635 678 Finance leases 312 297

947 975

10. SURPLUS ON CONTINUING OPERATIONS FOR THE PERIOD

2008 £’000

2007

£’000 University surplus for the period 7,384 7,468 Intra group surplus on sale of asset - (2,479) Depreciation on intra group asset sale 50 - Surplus generated by the subsidiary undertakings 16 1,384

7,450 6,373

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

32

11. TANGIBLE FIXED ASSETS Land and Buildings Vehicles Equipment Total £’000 £’000 £’000 £’000 Consolidated Valuation/Cost At 1 August 2007 - valuation 122,485 - - 122,485 - cost 37,122 89 2,636 39,847 Additions 8,445 140 281 8,866 Disposals - (30) - (30)

As at 31 July 2008 168,052 199 2,917 171,168

Accumulated Depreciation At 1 August 2007 24,094 34 1,262 25,390 Depreciation on disposals - (18) - (18) Charge for the year 2,744 24 540 3,308

As at 31 July 2008 26,838 40 1,802 28,680

Net Book Value At 31 July 2008 141,214 159 1,115 142,488 At 31 July 2007 135,513 55 1,374 136,942 Analysis of Funding Inherited 78,901 78,901 Financed by capital grant 16,520 - 998 17,518 Other 45,793 159 117 46,069

Net Book Value at 31 July 2008 141,214 159 1,115 142,488

The transitional rules set out in FRS 15 ‘Tangible Fixed Assets’ have been applied on implementing FRS 15. Accordingly, the book values at implementation have been retained. Land and buildings were valued on 31 July 1999 at depreciated replacement cost by a firm of independent chartered surveyors. Included within land and buildings is property with a net book value of:

2008 2007

Held under finance lease £3.5m £3.6m Assets in the course of construction £13.4m £4.9m The depreciation charge of assets held under finance lease for the year was £80,840 (2007: £80,840). If the inherited land and buildings had not been valued they would have been included at the following amounts:

£ Cost Nil Aggregate depreciation based on cost Nil

Net book value based on cost Nil

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

33

11. TANGIBLE FIXED ASSETS (CONTINUED) Land and Buildings Vehicles Equipment Total £’000 £’000 £’000 £’000 University of Brighton Valuation/Cost At 1 August 2007 - valuation 117,177 - - 117,177 - cost 44,122 89 2,636 46,847 Additions 8,445 140 281 8,866 Disposals - (30) - (30)

As at 31 July 2008 169,744 199 2,917 172,860

Accumulated Depreciation At 1 August 2007 23,307 34 1,262 24,603 Depreciation on Disposals - (18) - (18) Charge for the Year 2,794 24 540 3,358

As at 31 July 2008 26,101 40 1,802 27,943

Net book value At 31 July 2008 143,643 159 1,115 144,917 At 31 July 2007 137,992 55 1,374 139,421 Analysis of Funding Inherited 78,901 78,901 Financed by capital grant 16,520 - 998 17,518 Other 48,222 159 117 48,498

Net book value at 31 July 2008 143,643 159 1,115 144,917

The transitional rules set out in FRS 15 ‘Tangible Fixed Assets’ have been applied on implementing FRS 15. Accordingly, the book values at implementation have been retained. Land and buildings were valued on 31 July 1999 at depreciated replacement cost by a firm of independent chartered surveyors. Included within land and buildings is property with a net book value of: 2008 2007 Held under finance lease £3.5m £3.6m Assets in the course of construction £13.4m £4.9m The depreciation charge of assets held under finance lease for the year was £80,840 (2007: £80,840). If the inherited land and buildings had not been valued they would have been included at the following amounts:

£ Cost Nil Aggregate depreciation based on cost Nil

Net book value based on cost Nil

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

34

12. DEBTORS

Consolidated University 2008

£’000 2007

£’000 2008

£’000 2007

£’000 Due within one year: Trade debtors 4,480 3,887 3,949 3,362 Amounts due from group undertakings - - - 179 Prepayments and accrued income 3,849 5,247 7,110 7,430

8,329 9,134 11,059 10,971

Due after one year: Trade debtors 23 - - -

TOTAL DEBTORS 8,352 9,134 11,059 10,971

13. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Consolidated University 2008

£’000 2007

£’000 2008

£’000 2007

£’000 Finance Lease 89 68 89 68 Building project loans 442 426 442 426 Trade creditors 785 1,332 785 1,332 Amount owed to subsidiary undertakings - - 190 - PAYE creditors 1,676 1,534 1,676 1,535 HM Revenue and Customs – VAT 352 366 300 315 Funding Councils 123 492 123 492 Superannuation Funds 1,096 933 1,096 933 Other creditors 1,448 1,462 1,197 1,278 Accruals and Deferred Income 19,403 15,188 18,610 14,490

25,414 21,801 24,508 20,869

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

35

14. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

Consolidated University 2008

£’000 2007

£’000 2008

£’000 2007

£’000 Loan re: building project - student residences (i) 4,966 5,092 4,966 5,092 Grand Parade 4th 1,425 Wing building (ii) 1,742 1,425 1,742 Finance lease (iii) 4,077 4,161 4,077 4,161 H M Revenue and Customs – VAT (iv) 220 373 220 373 Accruals and Deferred Income 23 - - -

10,711 11,368 10,688 11,368

(i) This comprises a bank loan bearing interest at 9.16% per annum, repayable by instalments by

April 2022.

This loan is secured by fixed charges over various University properties. (ii) Bank loan with interest fixed at 8.79% per annum, repayable by 2013. Loan secured by fixed

charge over the freehold of various University properties. (iii) In 1995 the University entered into a lease and leaseback transaction of one of its freehold

properties. The University received £4m proceeds and entered into a finance lease for 30 years.

The finance lease is secured by a first fixed charge over the freehold of various University properties.

The repayments are based on variable interest rates, which were 5.8125% at 31 July 2008.

(iv) Repayment due under the capital goods scheme.

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

36

14. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (continued)

Consolidated University 2008

£’000 2007

£’000 2008

£’000 2007

£’000 Analysis of Loan Repayments Total Loans In one year or less or on demand 442 426 442 426 In more than one year but not more than two years 462 443 462 443 In more than two years but not more than five years 1,527 1,453 1,527 1,453 In more than five years 4,402 4,938 4,402 4,938

6,833 7,260 6,833 7,260

Obligations under Finance Leases Falling Due as

follows: Consolidated and

University 2008

£’000 2007

£’000 Minimum lease payments payable Within one year 470 457 Within two to five years 5,424 1,983

Over year five - 3,911

5,894 6,351 Finance charges allocated to future periods (1,728) (2,122)

4,166 4,229

The 2008 figures assume that the University will choose to end this contract at its next available break clause – 30 August 2012.

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

37

15. DEFERRED CAPITAL GRANTS (HEFCE)

Consolidated and University Funding

Councils £’000

As at 1 August 2007 Equipment 998 Buildings 12,312

13,310

Cash Received Equipment -

Buildings 4,478

4,478

Released to Income and Expenditure Equipment (322) Buildings (270)

(592)

As at 31 July 2008 Equipment 676 Buildings 16,520

17,196

16. REVALUATION RESERVE

Consolidated University £’000 £’000

Revaluations as at 1 August 2007 80,543 80,543 Transfers from revaluation reserve to revenue reserve in respect of:

- Depreciation (1,642) (1,642)

As at 31 July 2008 78,901 78,901

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

38

17. REVENUE RESERVE

Consolidated University £’000 £’000 Surplus after depreciation of assets at valuation 7,450 7,384 FRS 17 actuarial loss (13,069) (13,069) Unrealised loss on investments (1) - Transfers from revaluation reserve in respect of depreciation on revalued assets 1,642 1,642

Historical Cost (Loss) (3,978) (4,043) Balance as at 1 August 2007 38,701 40,880

Balance at 31 July 2008 34,723 36,837

18. ENDOWMENTS

Restricted Expendable

Restricted Permanent

Restricted Total

Capital Value 54 12 66 Accumulated Income - 5 5

As at 1 August 2007 54 17 71 Income for the year 2 1 3

Expenditure for the year (4) (3) (7)

As at 31 July 2008 52 15 67

Represented by: Capital Value 54 12 66 Accumulated Income (2) 3 1

52 15 67

Consolidated and University £’000 Year Ended Year ended 2008 2007 Balance as at 1 August 2007 71 95 (Decrease) in cash balances (4) (24)

Balance as at 31 July 2008 67 71

Represented by Bank Balances 67 71

Endowments are held as cash.

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

39

19. PENSIONS

(a) Pension Contributions

The two principal pension schemes for the University’s staff are the Teachers Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS). Additionally, the University has agreed with the Universities Superannuation Scheme (USS) that new staff who are in membership as at the date of joining the University of Brighton may remain members of that scheme. The assets of the Schemes are held in separate administered funds. The schemes are defined benefit schemes, which are externally funded and are valued every three years for LGPS and every five years for TPS and by actuaries using the projected unit method, the rates of contribution payable being determined by the trustees on the advice of the actuaries. TPS provides benefits based on final pensionable salary for academic staff, LGPS provides similar benefits for support staff, including research and manual staff, subject to the rules of eligibility. USS provides similar benefits. Pension costs are assessed using the projected-unit method.

(b) TPS

The TPS is an unfunded pension scheme which is externally funded and contracted out of the State Second Pension (S2P). The Secretary of State for Children, Schools and Families makes statutory regulations under the Superannuation Act 1972, which govern it. Under the definitions set out in the Financial Reporting Standard FRS 17 ‘Retirement Benefits’, the TPS is a multi-employer pension scheme. The University is unable to identify its share of the underlying (notional) assets and liabilities of the scheme. Accordingly, the University has used the exemption in FRS 17 and contributions to the scheme have been accounted for as if it were a defined contribution scheme.

(c) USS

The University participates in the Universities Superannuation Scheme (USS), a defined benefit scheme which is externally funded and contracted out of the State Second Pension (S2P). The assets of the scheme are held in a separate trustee-administered fund. The University is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by FRS 17 ‘Retirement Benefits’, accounts for the scheme as if it were a defined contribution scheme. As a result, the amount charged to the income and expenditure account represents the contributions payable to the scheme in respect of the accounting period. The appointment of directors to the board of the trustee is determined by the company’s Articles of Association. Four of the directors are appointed by Universities UK; three are appointed by the University and College Union, of whom at least one must be a USS pensioner member; one is appointed by the Higher Education Funding Councils; and a minimum of two and a maximum of four are co-opted directors appointed by the management committee. Under the scheme trust deed and rules, the employer contribution rate is determined by the trustee, acting on actuarial advice. The latest actuarial valuation of the scheme was at 31 March 2005. The valuation was carried out using the projected unit method. The assumptions which have the most significant effect on the result of the valuation are those relating to the rate of return on investments (ie the valuation rate of interest), the rates of increase in salary and pensions and the assumed rates of mortality. In relation to the past service liabilities the financial assumptions were derived from market yields prevailing at the valuation date. It was assumed that the valuation rate of interest would be 4.5% per annum, salary increases would be 3.9% per annum (plus an additional allowance for increases in salaries due to age and promotion and a further amount of £800m of liabilities to reflect recent experience) and pensions would increase by 2.9% per annum. Standard mortality tables were used as follows: Pre-retirement mortality PA92 rated down 3 years Post-retirement mortality PA92 (c=2020) for all retired and non-retired members

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

40

Use of these mortality tables reasonably reflects the actual USS experience but also provides an element of conservatism to allow for further small improvements in mortality rates. The assumed life expectations on retirement at age 65 are: Males 19.8 years Females 22.8 years At the valuation date, the value of the assets of the scheme was £21,740 million and the value of the past service liabilities was £28,308 million indicating a deficit of £6,568 million. The assets therefore were sufficient to cover 77% of the benefits which had accrued to members after allowing for expected future increases in earnings. The actuary also valued the scheme on a number of other bases as at the valuation date. Using the minimum funding requirement prescribed assumptions introduced by the Pensions Act 1995, the scheme was 126% funded at that date; under the Pension Protection Fund regulations introduced by the Pensions Act 2004 it was 110% funded; on a buy-out basis (ie assuming the scheme had discontinued on the valuation date) the assets would have been approximately 74% of the amount necessary to secure all the USS benefits with an insurance company; and using the FRS 17 formula as if USS was a single employer scheme, the actuary estimated that the funding level would have been approximately 90%. Since 31 March 2005 the funding level of the scheme has undergone considerable volatility. The actuary has estimated that the funding level had increased to 91% at 31 March 2007 but that at 31 March 2008 it had fallen back to 77%. This fluctuation in the scheme’s funding level is due to a combination of the volatility of the investment returns on the scheme’s assets in the period since 31 March 2005 compared to the returns allowed for in the funding assumptions and also the changing gilt yields, which are used to place a value on the scheme’s liabilities . These estimated funding levels are based on the funding levels at 31 March 2005, adjusted to reflect the fund’s actual investment performance and changes in gilt yields (ie the valuation rate of interest). On the FRS17 basis, using a AA bond discount rate of 6% based on spot yields the actuary estimated that the funding level at 31 March 2008 was 104%. An estimate of the funding level measured on a buy-out basis was approximately 78%. The institution contribution rate required for future service benefits alone at the date of the valuation was 14.3% of pensionable salaries but the trustee company, on the advice of the actuary, decided to maintain the institution contribution rate at 14% of pensionable salaries. Surpluses or deficits which arise at future valuations may impact on the institution’s future contribution commitment. The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:

Assumption Change in assumption Impact on scheme liabilities

Valuation rate of interest Increase/decrease by 0.5% Decrease/increase by £2.2 billion

Rate of pension increases Increase/decrease by 0.5% Increase/decrease by £1.7 billion

Rate of salary growth Increase/decrease by 0.5% Increase/decrease by £0.5 billion

Rate of mortality More prudent assumption (mortality used at last actuarial valuation, rated down by a further year)

Increase by £0.8 billion

USS is a “last man standing” scheme so that in the event of the insolvency of any of the participating employers in USS, the amount of any pension funding shortfall (which cannot otherwise be recovered) in respect of that employer will be spread across the remaining participant employers and reflected in the next actuarial valuation of the scheme. The trustee believes that over the long-term equity investment and investment in selected alternative asset classes will provide superior returns to other investment classes. The management structure and targets set are designed to give the fund a bias towards equities

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

41

through portfolios that are diversified both geographically and by sector. The trustee recognises that it would be possible to select investments producing income flows broadly similar to the estimated liability cash flows. However, in order to meet the long-term funding objective within a level of contributions that it considers the employers would be willing to make, the trustee has agreed to take on a degree of investment risk relative to the liabilities. This taking of investment risk seeks to target a greater return than the matching assets would provide whilst maintaining a prudent approach to meeting the fund’s liabilities. Before deciding to take investment risk relative to the liabilities, the trustee receives advice from its investment consultant and the scheme actuary, and considers the views of the employers. The strong positive cash flow of the scheme means that it is not necessary to realise investments to meet liabilities. The trustee believes that this, together with the ongoing flow of new entrants into the scheme and the strength of covenant of the employers enables it to take a long-term view of its investments. Short-term volatility of returns can be tolerated and need not feed through directly to the contribution rate. The actuary has confirmed that the scheme’s cash flow is likely to remain positive for the next ten years or more. The next formal triennial valuation is due at 31 March 2010. The contribution rate will be reviewed as part of each valuation.

(d) LGPS

The University is a member of the East Sussex County Council (ESCC) Local Government Pension Scheme, a funded defined benefit scheme in the UK. It is contracted out of the State Second Pension (S2P). A full actuarial valuation was carried out at 31 March 2007 and an interim review on 31 July 2008 by a qualified independent actuary. The major assumptions used by the actuary were:

2008 2007 2006 Rate of increase in salaries 5.3% 5.2% 4.7% Rate of increase in pensions in payment 3.8% 3.7% 3.2% Discount rate 6.4% 6.2% 5.2% Inflation assumption 3.8% 3.7% 3.2%

The assets in the LGPS scheme and the expected rate of return were:

2008 2007 2006

Long term return %

Fund value £ million

Long term return %

Fund Value £ £ million

Long term return %

Fund value £ million

Equities 7.8 58.156 8.7 60.581 7.9 52.998 Bonds 5.7 12.528 5.2 11.353 4.8 11.094 Property 5.7 8.402 7.2 9.799 5.4 8.810 Cash 4.8 5.8 10.689 4.5 11.949

9.245 89.775 93.682 82.147

The following amounts relating to the University of Brighton were measured in accordance with the requirements of FRS 17: Analysis of amount shown in the balance sheet 2008

£ million 2007

£ million University’s estimated asset share 89.775 93.682 Present value of University’s scheme liabilities (121.843) (111.072) Deficit in the scheme – Net Pension Liability (32.068) (17.390)

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

42

Analysis of amount charged to operating surplus 2008 £ million

2007 £ million

Current service cost 4.547 5.066 Past service cost 1.368 0.040

5.915 5.106 Analysis of amount credited to other finance income 2008

£ million 2007

£ million Expected return on pension finance assets 7.325 5.785 Interest on pension scheme liabilities (6.998) (5.404) Net return 0.327 0.381 Analysis of amounts recognised in statement of total recognised gains and losses (STRGL)

2008 £ million

2007 £ million

Actual return less expected return on pension scheme assets (13.110) 3.246 Changes in assumptions underlying the present value of scheme liabilities

0.041

0.355

Actuarial (loss)/gain recognised in STRGL (13.069) 3.601

Analysis of movement in the market value of the scheme assets

2008 £ million

2007 £ million

As at 1 August 2007 93.682 82.147 Contributions by members 1.579 1.387 Contributions by the employer 4.169 3.459 Benefits paid (3.870) (2.403) Expected return on assets 7.325 5.785 Actuarial (loss)/gain (13.110) 3.307 As at 31 July 2008 89.775 93.682 Analysis of movements in the present value of the scheme’s liabilities

2008 £ million

2007 £ million

At beginning of year 111.072 101.872 Current service cost 4.547 5.066 Contributions by members 1.579 1.387 Past service cost 1.544 0.040 Benefits paid (3.887) (2.342) Interest costs 7.003 5.404 Impact of settlements and curtailments 0.026 - Actuarial loss (0.041) (0.355) At end of year 121.843 111.072

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

43

Amounts for the current and previous accounting period

Year ended 2008

Year ended 2007

Year ended 2006

Year ended 2005

Year ended 2004

Fair value of employer assets 89.775 93.682 82.147 71.443 57.127

Present value of defined benefit obligation

(121.843) (111.072) (101.872) (90.668) (69.422)

(Deficit) (32.068) (17.390) (19.725) (19.225) (12.295) Experience gains/(losses) on assets

(13.110) 3.246 4.264 8.217 1.433

Experience gains/(losses) on liabilities

(2.002) 0.218 0.072 (4.316) (0.006)

Mortality Assumptions

The current mortality assumptions include sufficient allowance for future improvements in mortality rates. The assumed life expectations on retirement at age 65 are as follows and are based on the PFA92 and PMA92 tables, year of birth, medium cohort projection for pensioners and non-pensioners

Retiring today Males 21.9 Females 24.8 Retiring in 20 years Males 23.0 Females 25.9

(e) Successor Authority

Were the University of Brighton to close and there were no successor establishment, the Secretary of State would become the compensating authority.

(f) Employer contribution rates as notified by scheme administrators

TPS 01.04.00 to 31.03.02

01.04.02 to 31.03.03 01.04.03 to 31.12.06 01.01.07 to date

7.40% 8.35% 13.5% 14.1%

LGPS 01.04.04 to 31.03.05

01.04.05 to 31.03.06 01.04.06 to 31.03.07 01.04.07 to 31.03.08 From 01.04.08

10.1% 12.1% 14.1% 15.7% 16.7%

USS 01.01.97 to date 14.00%

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

44

20. INVESTMENTS HELD AS FIXED ASSETS

Consolidated

University

2008 2007 2008 2007 £’000 £’000 £’000 £’000

Associated companies 84 84 84 84

84 84 84 84

As at 31 July 2008, the University’s interests in subsidiary and associated undertakings were as follows: Interest Cost Class of

Shares Activity

University of Brighton Trading Company Ltd

100% £100 Ord. Provider of commercial services to public and private sector.

CVCP Properties Ltd 0.8% £34,158 Ord. Purchase of lease and

refurbishment of Woburn House, the London office of Universities UK.

Biotec Laboratories Ltd 0.43% £194 Ord. The manufacture and distribution

of diagnostic reagents, plus rights to develop and market a new test for the diagnosis and treatment of tuberculosis.

Brighton Environmental Body Ltd

Subsidiary * Research projects under ENTRUST

University of Brighton Foundation LeNSE Ltd

-

11.1%

£50,000

-

Ord.

Charitable trust for the advancement of education. Provider of University IT network infrastructure in South-East.

All of the above entities were registered in England and Wales.

* Company limited by guarantee.

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

45

21. LEASE OBLIGATIONS

At 31 July 2008 the University was committed to making the following payments during the next year in respect of operating leases for land and buildings:

Consolidated and University £’000

Leases which expire: Between two and five years 2 After five years 2,789

2,791

22. CAPITAL COMMITMENT

Consolidated University 2008

£’000 2007

£’000 2008

£’000 2007

£’000 Commitments contracted 38,157 - 38,157 - Authorised, not committed 9,000 24,523 9,000 24,523

47,157 24,523 47,157 24,523

23. RECONCILIATION OF CONSOLIDATED OPERATING SURPLUS TO NET CASH INFLOW FROM OPERATING ACTIVITIES

2008

£’000

2007

£’000 Surplus before tax 7,450 6,373 Depreciation and impairment charge 3,308 3,995 Deferred capital grants and lease premium released to income (592) (611) Investment income (3,719) (1,905) Interest payable 947 975 (Increase) in stocks (6) (59) Decrease/(Increase) in debtors 774 (206) Increase/(Decrease) in creditors 2,553 (1,370) Actuarial (loss)/gain on Local Government Pension Scheme (13,069) 3,601 Unrealised loss on investments (1) (297) Investment in Joint Venture (1,215) (1,981) Increase/(Decrease) in pension liability 14,678 (2,335)

11,108 6,180

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

46

24. RETURN ON INVESTMENTS AND SERVICING OF FINANCE

2008 £’000

2007 £’000

Interest received 3,727 1,875 Movements on Endowment Fund (4) (24) Interest paid on loans and finance lease (957) (998)

2,766 853

25. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT

2008 £’000

2007 £’000

Payments to acquire fixed assets (7,963) (1,637) Proceeds from sale of fixed assets 12 - Deferred capital grants received 4,478 1,261

(3,473) (376)

26. FINANCING

2008 £’000

2007 £’000

Receipt of new loans - - Repayment of building loans and finance lease (490) (468)

(490) (468)

27. ANALYSIS OF CHANGES IN FINANCING

2008 Finance

leases £’000

2008 Mortgages

& loans £’000

2007 Finance

leases £’000

2007 Mortgages

& loans £’000

Balance as at 1 August 4,229 7,260 4,264 7,693 Capital repayments (63) (427) (35) (433)

Balance as at 31 July 4,166 6,833 4,229 7,260

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

47

28. ANALYSIS OF CHANGES IN NET DEBT

At 1 August 2007

£’000

Cash Flows £’000

Other changes

£’000

At 31 July 2008

£’000

Cash at bank 27,675 16,928 - 44,603 Debt due within one year (494) (37) - (531) Debt due after one year (10,995) 527 - (10,468)

16,186 17,418 - 33,604

29. ACCESS TO LEARNING FUNDS

Consolidated and University 2008

£’000 2007

£’000 Brought forward from previous year 294 133 Funding Council Grants 469 818

763 951

Disbursement to students (638) (654) Audit fees (3) (3)

(641) (657)

Balance unspent at 31 July 2008 122 294

Access to Learning Fund grants are solely available for full-time undergraduate EU/UK students. The University acts as a paying agent only. The grants and related disbursements are therefore excluded from the income and expenditure account. The balance unspent is included in accruals and deferred income per note 13.

30. SHORT TERM INVESTMENTS

Consolidated

2008 2007 Consolidated

Book Cost £’000

Consolidated Market Value

£’000

Consolidated Book Cost

£’000

Consolidated Market Value

£’000 Corporate Bonds - - 5,075 5,075 Unit Trusts 9 8 561 787 Hedge Funds - - 1,389 1,717

9 8 7,025 7,579

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

48

University

2008 2007 University

Book Cost £’000

University Market Value

£’000

University Book Cost

£’000

University Market Value

£’000 Corporate Bonds - - 5,075 5,075 Unit Trusts - - 551 777 Hedge Funds - - 1,389 1,717

- - 7,015 7,569

31 PRIOR YEAR RECLASSIFICATION

In order to make the accounts more consistent and due to a change in the SORP in respect of endowment funds, a number of minor reclassifications have taken place. There is no effect on the declared surplus for that year. Changes

Income Research Grants and Contracts 868 Other operating income (1,249) Endowment and investment income 384

3

Expenditure Staff costs 203 Other operating expenses (176)

27

Deficit for year transferred to accumulated income in Endowment Funds 24

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

49

32. BRIGHTON & SUSSEX MEDICAL SCHOOL

Income and Expenditure Account for the year ended 31 July 2008

Brighton Sussex Total 2007 £’000 £’000 £’000 £’000

Income HEFCE grant 3,672 3,672 7,344 9,074 NHS funds 1,679 1,679 3,358 2,246 Academic fees 795 795 1,590 1,186 Research grants & contracts 305 914 1,219 991 Other 1,143 1,143 2,286 520 _____ _____ _ ____

__ ___

Total Income 7,594 8,203 15,797 14,017 _____ _____ _ ____

__ ___

Expenditure Staff costs 3,357 3,854 7,211 5,008 Other operating expenses 3,022 3,106 6,128 4,953 _____ _____ _____

_____

Total Expenditure 6,379 6,960 13,339 9,961 _____ _____ _ ____

__ ___

Surplus on continuing operations 1,215 1,243 2,458 4,056

Balance Sheet of the Community Chest As at 31 July 2008 Brighton Sussex Total 2007 £’000 £’000 £’000 £’000 Fixed Assets 741 775 1,516 1,679 Current Assets Debtors 496 511 1,007 1,450 Cash at bank and in hand 3,375 3,902 7,277 5,609 _____ _____ _____

_____

Total Current Assets 3,871 4,413 8,284 7,059 _____ _____ _ ____

__ ___

Current Liabilities Deferred income - - - (1,063) Creditors (495) (764) (1,259) (1,422) ____ _ ___ _____

_____

Total Current Liabilities (495) (764) (1,259) (2,485) _____ _____ _ ____

__ ___

Net Assets 4,117 4,424 8,541 6,253 Deferred Capital Grants (709) (709) (1,418) (1,588) _____ _____ _____

_____

Revenue Reserves 3,408 3,715 7,123 4,665 _____ _____ _____ _____

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

50

Explanatory Notes: (i) Background

The Brighton & Sussex Medical School (BSMS) was formed as an equal partnership between the Universities of Brighton and Sussex. BSMS, in turn, has partnership arrangements with the Brighton & Sussex Universities Hospital Trust (BSUHT) and other NHS Trusts in Kent, Surrey and Sussex area. However, it is currently agreed that the University of Sussex will be allocated 100% of the income and expenditure relating to oncology research. Under the administrative arrangements for the School it was agreed that while the financial statements of each University will formally incorporate only a part of BSMS activities, each will carry an identical note which sets out the total financial position of BSMS. All revenue income received in respect of BSMS by each University is to be transferred to a “community chest”, managed initially by the University of Sussex. Expenditure incurred by each university on behalf of BSMS is reimbursed from the community chest. In September 2003 the School received its first cohort of students. Facilities have been provided at each of the universities, at BSUHT and at other Trusts in the area. These developments are being funded by HEFCE at the universities and at the NHS Trusts by specific capital grants from the NHS.

(ii) Accounting arrangements

The income and expenditure of the BSMS for the year ended 31 July 2008 is reflected in the audited Financial Statements of both universities. Each University has included its share of the gross assets and liabilities of the joint venture and its share of turnover and surplus.

(iii) Cash at bank and in hand The balance of £7.277m was held on behalf of the School at 31 July 2008 by the University of Sussex to

meet expenditure commitments in future years, to be settled by claims for reimbursement of expenditure from each University.

(iv) Capital Commitments As at 31 July 2008 the school had a capital commitment, authorised but not committed of £nil (2007: £nil).

NOTES TO THE FINANCIAL STATEMENTS Year ended 31 July 2008

51

OFFICERS & PROFESSIONAL ADVISERS SENIOR MANAGEMENT TEAM Professor Julian Crampton - Vice-Chancellor David House - Deputy Vice-Chancellor Professor Bruce Brown - Pro-Vice-Chancellor – Research Professor Stuart Laing - Pro-Vice-Chancellor – Academic Affairs Colin Monk - Pro-Vice-Chancellor – Business & Marketing Sue McHugh - Director of Finance Christine Moon - Registrar & Secretary CONTACT ADDRESS Mithras House Lewes Road Brighton East Sussex BN2 4AT BANKERS Barclays Bank PLC 139-142 North Street Brighton East Sussex BN1 7RU FUND MANAGERS Cazenove Fund Management Limited 12 Moorgate London EC2R 6DA SOLICITORS Burt Brill & Cardens Berwin Leighton Paisner 30 Old Steyne Adelaide House Brighton London Bridge East Sussex London BN1 1FL EC4R 9HA AUDITORS KPMG LLP Chartered Accountants 1 Forest Gate Brighton Road Crawley RH11 9PT