Notes to the financial statements

Pension contributions for Professor Wend are in respect of employers’ contributions to the Scottish Teachers’ Superannuation Scheme, and are paid at the same rate as for other employees in that scheme. Employer pension contributions have reduced as a result of the Principal opting out of the pension scheme part way through the year.Additional payments equivalent to pensions contributions foregone are included within emoluments.

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the University: this comprises the Executive Board.The total compensation for the year ended 31 July 2017 (including any employers’ pension contributions) was £888,000 (year ended 31 July 2016, £902,000).

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

These figures relate to eight members of staff (2015/16: six), including the Principal

The valuation of the Craighall campus was carried out at 31 July 2013 by Gerald Eve, Chartered Surveyors.The basis of the valuation, which was carried out in accordance with guidelines issued by the Royal Institution of Chartered Surveyors, is depreciated replacement cost.

The University has a modest collection of works of art and other items of historical interest. No value is included within fixed assets in respect of this collection.

The secured long-term facility with Barclays Bank plc is £33.6 million, and has a final maturity date of 17 December 2024. The loan is secured over the campus site at Musselburgh.The University has entered into a fixed-rate arrangement in

order to protect itself against any significant fluctuations in interest rates.The terms of this arrangement are commercially confidential.

The University has a liability for pension enhancements payable to former members of staff who have taken early retirement in prior years.An actuarial valuation of the amount of this liability was carried out by Hymans Robertson,Actuaries at 31 July 2017, on the basis of valuation prescribed by FRS 102, and using the same set of assumptions as are set out in note 20 in relation to the valuation of the Local Government Pension Scheme.

The University also has a liability to fund the past deficit on the Universities’ Superannuation Scheme (USS).This obligation arises from the contractual obligation with the pension scheme for total payments relating to benefits arising from past performance. Management have assessed future employees within the USS scheme and salary payment over the period of the contractual obligation in assessing the value of this provision.

PENSIONS AND SIMILAR OBLIGATIONS

The University’s employees belong to three principal pension schemes, the Scottish Teachers Superannuation Scheme (STSS),the Local Government Pension Scheme (LGPS) and the Universities Superannuation Scheme (USS). The total pension cost for the year was £3,870,000 (2015/16: £3,539,000).

The fund is valued every three years by professionally qualified independent actuaries using the projected unit method, the rates of contribution payable being determined by the trustees on the advice of the actuaries. In the intervening years, the scheme actuary reviews the progress of the scheme.The actuary has indicated that the resources of the scheme are likely, in the normal course of events, to be sufficient to meet the liabilities as they fall due at the level specified by the scheme regulations.The currently agreed employer’s contribution rate for the University is 18.5%.

Local Government Pension Scheme (LGPS)

Analysis of movement in the market value of the scheme assets

B ) Scottish Teachers’ Superannuation Scheme (STSS)

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

The last audited full actuarial and funding valuation of the scheme was carried out at 31 March 2012. This valuation used the Projected Unit Methodology.With effect from 1 September 2015, the employer contribution rate has been set at 17.2%. Employee contributions are dependant upon the member’s salary bracket.The notional fund at 31 March 2012 amounted to £19.6 billion, and total Scheme liabilities for service amounted to £20.9 billion, giving a notional past service deficit of £1.3 billion.The next valuation will be based on scheme data as at 31 March 2016, and any changes arising from that valuation will be applied from 1 April 2019.

C ) Universities Superannuation Scheme (USS)

The University participates in the Universities Superannuation Scheme (the scheme). Throughout the preceding period, the scheme was a defined benefit only pension scheme until 31 March 2016 which was contracted out of the State Second Pension (S2P).The assets of the scheme are held in a separate trustee-administered fund. Because of the mutual nature of the scheme, the scheme’s assets are not hypothecated to individual institutions and a scheme-wide contribution rate is set. The institution is therefore exposed to actuarial risks associated with other institutions’ employees and is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by Section 28 of FRS 102 “Employee 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. Since the institution has entered into an agreement (the Recovery Plan that determines how each employer within the scheme will fund the overall deficit), the institution recognises a liability for the contributions payable that arise from the agreement to the extent that they relate to the deficit and the resulting expense in the income and expenditure account.

The total cost charged to the consolidated income and expenditure account is £29,000 (2016: £181,000) and included in note 7.The latest available full actuarial valuation of the scheme was at 31 March 2014 (“the valuation date”), which was carried out using the projected unit method.The valuation as at 31 March 2017 is underway. Since the institution cannot identify its share of scheme assets and liabilities, the following disclosures reflect those relevant for the scheme as a whole.

The 2014 valuation was the third valuation for USS under the scheme-specific funding regime introduced by the Pensions Act 2004, which requires schemes to adopt a statutory funding objective, which is to have sufficient and appropriate assets to cover their technical provisions. At the valuation date, the value of the assets of the scheme was £41.6 billion and the value of the scheme’s technical provisions was £46.9 billion indicating a shortfall of £5.3 billion.The assets therefore were sufficient to cover 89% of the benefits which had accrued to members after allowing for expected future increases in earnings

Defined benefit numbers for the scheme have been produced using the following assumptions:

The main demographic assumption used relates to the mortality assumptions. Mortality in retirement is assumed to be in line with the Continuous Mortality Investigation’s (CMI) S1NA tables as follows:

D ) Other pension liabilities

The University has a liability for pension enhancements payable to former members of staff who have taken early retirement in prior years.An actuarial valuation of the amount of this liability was carried out by Hymans Robertson,Actuaries at 31 July 2017, on the basis of valuation prescribed by FRS 102. The total provision in respect of this liability is £3.231 million (2016: £3.395 million).

Amounts received from the Student Awards Agency for Scotland are available solely for students; the University acts only as paying agent.The grants and related disbursements are therefore excluded from the Income and Expenditure Account.