Queen Margaret University, Edinburgh is an autonomous Scottish higher education institution. The University’s governing instruments and arrangements are set out under the Queen Margaret University, Edinburgh (Scotland) Order of Council 2007, amended from 1 October 2019 through the Queen Margaret University, Edinburgh (Scotland) Amendment Order of Council 2019. The 2007 Order is made under section 45 of the Further and Higher Education (Scotland) Act 1992.
The University is registered under the Companies Acts as a company limited by guarantee, with its registered office at Queen Margaret University Drive, Musselburgh, East Lothian, EH21 6UU. The University
has been entered into the Scottish Charity Register and is entitled, in accordance with section 13(1) of the Charities and Trustee Investment (Scotland) Act 2005, to refer to itself as a Charity registered in Scotland.
Scope of the financial statements
The financial statements presented on pages 18 to 39 comprise the consolidated results of the University and its subsidiary company, QMU Enterprises Limited. QMU Enterprises Limited undertakes commercial consultancy work, utilising the expertise of the University’s academic and technical staff, and also deals with vacation letting of the University’s student accommodation.
The financial statements have been prepared on a going concern basis in accordance with Financial Reporting Standard 102 (FRS 102) and the Statement of Recommended Practice – Accounting for Further and Higher Education 2015 (SORP 2015), with the Accounts Direction issued by the Scottish Funding Council (SFC) and with the United Kingdom Companies Acts.
Development of strategic plan
In December 2015 the University Court approved the new strategic plan, which had been developed in accordance with the QM150 strategy, details of which are accessible on the University’s website. The QM150 strategy is based around the University’s vision to be a University of ideas and influence.The strategy sets out the mission for the development of the University over a ten year period, culminating in the 150th anniversary of the founding of the institution in 2025.The strategic plan sets out nine overarching goals which the University wishes to achieve in order to allow the delivery of the strategy by 2025.A key element of the plan is the inclusion of key performance indicators which the University Court uses to monitor progress towards the achievement of the goals set out in the plan (both financial and non-financial).The plan also sets out the processes employed to manage the risks which might inhibit this achievement.
Results for the year
The Group’s consolidated results for the year to 31 July 2020 are summarised as follows:-
|Area||2016/17 (£ million)||2015/16 (£ million)|
|(Deficit) for the year||(0.8)||(1.8)|
|Actuarial (loss) in respect of pension schemes||3.0||(1.5)|
|Total comprehensive (expenditure)/ income for the year||2.2||(3.3)|
The main changes in the underlying outturn position compared to 2015/16 were:-
- An increase of £0.1 million in income from tuition fees and education contracts and an increase of £0.4 million in grant income from the Scottish Funding Council;
- An increase of £2.2 million in other operating income, of which £1.8 million relates to a non-recurrent receipt in respect of an outstanding claim;
- An increase of £1.5 million in staff costs, including increases of £0.9 million in salary costs, £0.3 million in National Insurance costs (including the Apprenticeship Levy) and £0.3 million in pension costs;
- A reduction of £0.3 million in other operating expenses;
- An increase in interest payable of £0.1 million reflecting move to a fixed-rate during the year.
QMU Enterprises Ltd generated a profit of £181,000 (2015/16: £229,000), which was passed to the University under deed of covenant.
Cash flows and liquidity
The result for the year, adjusted for the effect of non-cash items and interest, resulted in a net cash inflow of £4.5 million on operating activities (2015/16, £3.3 million inflow). Overall cash balances increased by £0.4 million (2015/16; reduction of £1.2 million). Cash balances at 31 July 2017 of £8.4 million (2016: £7.9 million) represented 85 days’ expenditure (2016: 87 days).
Key performance indicators
In accordance with the recommendations from the Higher Education Financial Sustainability Strategy Group (FSSG), the University Court undertakes a formal annual assessment of the University’s financial sustainability. This process involves reviewing a common set of financial indicators, which have been applied to the University’s historical results and to the financial forecasts measured over a rolling five-year period, so as to reduce the impact of any one-off exceptional items arising in any year.The two key indicators which the University Court has agreed to focus upon to inform its considerations around financial sustainability are:-
Earnings before interest, taxation, depreciation and amortisation (EBITDA); and
Net cash flow from operating activities less interest payable as a percentage of turnover.
The second indicator has been adapted from the basket of financial indicators recommended by the FSSG as it is a more appropriate measure for the University, given its relatively high level of borrowings as a proportion of its turnover.The targets are also set at a level which will allow compliance with banking covenants.The results of the annual review undertaken in December 2017, based on a rolling five-year period, were as follows:-
Net cash flow from operating activities less interest payable as a percentage of turnover
Management of principal risks and uncertainties
In common with other universities, Queen Margaret University has to manage its activities whilst facing significant pressures
on its funding as well as on its cost base. Significant risks facing the University include:-
- Funding from government through the Scottish Funding Council (SFC), the University’s main source of income, is likely to suffer from further real-terms reductions over the next few years as a consequence of spending cuts throughout the public sector.
- Recruitment of international students continues to be challenging as a result of difficulties faced by international students in obtaining visas to study in the UK.
- Underlying assumptions contained in the future financial forecasts include an assumption that income from tuition fees and education contracts will increase significantly over the next four years.A review of the University’s academic portfolio has taken place during 2017, which provides an indication that there is scope for the University to increase its income in this area, and progress will continue to be monitored carefully, with possible mitigating actions being planned for in the event that the increase in income is not achieved.
- Pressure on staff costs continues to build, both in terms of pay awards (where the University continues to participate in the UK-wide national negotiating framework) and also in terms of the cost of employers’ National Insurance contributions and the costs of pension provision.
- The full implications of the decision for the UK to leave the European Union are still unclear. However, it is likely that this will have an adverse impact on engagement with both students and staff from EU member states, and will introduce additional hurdles in accessing EU funding for research and other activities.
The Court has also made an assessment of a particular risk around the financial sustainability of the University, in light of an anticipated breach of a bank loan covenant over the next two years. University management is engaged in discussions with the lender, Barclays Bank plc, with a view to agreeing a waiver of the banking covenant.At the date of approval of the financial statements these discussions are continuing. In concluding that the accounts should be prepared on a going concern basis, the Court has taken the view that these discussions will result in an agreement being reached with Barclays Bank plc which will allow the University to continue its operations.
The identification and management of risks is firmly embedded within the University’s structure and processes. The institutional corporate risk register, which includes a description of actions undertaken to mitigate risks, is formally reviewed by the Executive Board and the Audit & Risk Committee as well as being discussed by the University Court.The Court also undertakes, from time to time, an exercise to agree its appetite for risk, and to ensure that residual risks, after the application of mitigating actions, sit within the agreed tolerance.
Borrowings at 31 July 2017 amounted to £33.6 million, (31 July 2016, £35.1 million) relating entirely to a secured loan facility with Barclays Bank plc taken out to fund the campus development at Musselburgh.
The University is involved in three pension schemes, as follows:-
The Lothian Pension Fund, which is part of the Local Government Pension Scheme (LGPS), is a multi-employer defined benefit scheme. The scheme had a deficit at 31 July 2017. The Fund trustees have, in recent years, applied increases to the level of employers’ and employees’ contributions to the scheme in order to recover this deficit position.The University’s share of the fund deficit, as calculated by the scheme actuary, has been shown as a liability at 31 July 2017.
The most recent actuarial review of the Scottish Teachers’ Superannuation Scheme (STSS) was undertaken as at 31 March 2012. As a result of this review, the level of employers’ contribution to this scheme was set at 17.2% with effect from 1 September 2015.As the scheme is unfunded, there can be no surplus or shortfall. Pension contribution rates are set by the scheme actuary to meet the cost of pensions as they accrue.
The Universities Superannuation Scheme (USS) is a defined benefit scheme which is 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 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 University has a liability in respect of its commitment to the USS deficit recovery plan, shown in note 17. The revised plan, along with the changes to scheme benefits, are expected to eliminate the deficit by 2031.
Queen Margaret University aims to promote entry to, and provide education at, undergraduate and postgraduate level to a diverse range of students, whatever their background. In assessing candidates for admission to the University, we are committed to the principles of fairness, transparency, and widening participation. We offer a range of recruitment, outreach, pre and post entry activities to raise aspiration, encourage access and maximise retention from under-represented groups in line with our Student Experience strategy, and underpinned by the University’s Outcome Agreement with the Scottish Funding Council.
The University has participated in the National Student Survey (NSS) since 2010. The 2017 institutional results, while not directly comparable to previous years, saw a disappointing reduction in levels of satisfaction which reversed a sustained and steady increase since first participation.There were strong results for a number of subject areas. Publicity Studies (PR & Media and PR, Marketing & Events), is ranked top in the UK and top in Scotland; Marketing (PR, Marketing & Events) is joint top in the UK and top in Scotland; Nursing is joint top in both the UK and Scotland; and Sociology (Public Sociology and Psychology & Sociology) is also top in Scotland. A detailed action plan has been developed in response to the overall survey results, and regular progress reports are being provided to senior committees of the University.
Our refreshed Employability Strategy brings together in a single document our approach to employability, with the primary objective of providing equitable employment and careers education to all student and graduates and providing a public statement of our commitment to the success of our students. We consider that our efforts are being rewarded. Our HESA performance indicator for employability (published in July 2017, and based on 2015-16 data) is 98.2%. This places us top in Scotland for graduate employment and third in the UK
The University seeks to take account of the views of the student body. The Student President and one other student representative are full members of the University Court and the Senate, and there is student representation on all other major committees of the University.A member of Court sits on the Students’ Union Board of Trustees, and senior members of staff, including the Principal, engage with the Students’ Union from time to time to explain aspects of the University’s operations and plans and to answer questions from student representatives.The Deputy Principal, University Secretary and the SU Sabbatical Officers meet regularly as the Student Union Partnership Board to discuss issues of common concern and interest, and a Student Partnership Agreement has been put in place between the University and the Students’ Union.The University also provides an annual grant to the Students’ Union.
The University has one of the “greenest” campuses in the UK, which received a BREEAM “excellent” rating. Sustainability remains at the heart of the University’s activities, which has been recognised through a number of green awards.
In order to address the risks set out above, and also to take advantage of further opportunities as they arise, the University is continuing to focus on ensuring that its academic, infrastructure, human resources and financial strategies are closely aligned. A review of the academic portfolio has been undertaken, the results of which will be used to ensure that the University is able to achieve the objectives set out in the QM150 strategic plan, which will allow the University to continue to generate an adequate level of cash in the short- to medium term and to maintain an adequate level of reserves.The Court carries out regular monitoring of the University’s financial sustainability, as described above.
The likely impact of the UK’s exit from the European Union on the University’s operations and financial plans remains uncertain.The University has identified a number of elements which it will require to monitor as the Brexit negotiations continue.These include:-
- the impact on tuition fees from EU students (and any consequential impact on EU student numbers choosing to study at Queen Margaret University);
- the ability to access research and other funding from EU institutions;
- the status of staff from within the remaining EU (and the University’s ability to attract and retain such individuals); and
- the attractiveness of the University as a partner institution for collaborative work with Universities based in the remaining EU.
The funding environment for Scottish higher education institutions remains challenging, as the level of funds available to the Scottish Government and the Scottish Funding Council continues to decline in real terms.The financial challenges facing the University are highlighted in the financial sustainability indicators set out above, and in particular the EBITDA indicator, for which the five-year average is below the target level.The next two years will be a particular challenge, as the University moves towards a revised model of delivery, informed by the outcomes from the recent portfolio review. The long term financial health of the University will continue to depend upon its ability to grow and diversify its income base, and to control costs. Work therefore continues on developing further new and increased sources of income with a view to ensuring that the University can achieve its objective of long-term sustainability.
On behalf of the University Court
Dr Frances Dow, CBE Chair
6 December 2017