A run through the Sussex financial statements 2020
The Sussex University Financial Statements 2019-2020 are now available. This blog post points to some highlights. Financial statements  are made up of the narrative on strategy and governance, the auditor’s report, and then the actual statements of:
(i) Income and expenditure including executive remuneration, p29
(ii) Balance sheet, p30
(iii) Cash flow and changes in reserves, p31-32
A few pages of useful numbered notes accompany the accounts.
Headlines: The operating surplus for the year was £12.7m. There are investment and cash reserves of £250 million. The covenant conditions were met on the outstanding loans of £180 million. Sussex is in a sound financial position, but there is a lot of interesting detail that shines a light on financial priorities.
(i) Statement of Comprehensive Income, p29 plus pp43-44
This has two sections, income and expenditure, and can be thought of as answering the questions ‘are we living within our means?’ or ‘how much came in and how much went out in one year?’ The ‘operating surplus’ does not appear anywhere in the accounts, but currently the management use this term to mean the 'Surplus attributable to the University' (£37.7m) minus the background noise of the USS 'pension adjustment' (£25.0m), leaving £12.7m
Income (below) is looking healthy at £320m. This is broadly the same as last year (1% down) with ‘Tuition fees and education contracts’ up by £7m and ‘Other income’ dropping by just over £10m. (NB the best column to look at is 'Consolidated', which includes income and expenditure by Sussex Estates and Facilities (SEF) in which the University has a controlling interest.)
‘Other income’ is detailed on p40 where we can see it is mainly residences and catering. This is down by £10m.
We know from p4 that Covid resulted in ‘a £7m reduction in residences income’ and ‘a reduction in tuition fee income of £2m due to the cancellation of the International Summer School programme’.
Back to p29. Looking at Expenditure (below), staff costs are up 6%, equivalent to £10m, but remember Employers’ USS pension contributions went up 1.6%, which, according to Council paper SPRC-9-7 'USS rates', will account for over £1.2m of this increase. Voluntary severance cost £3.2m this year (p10). So excluding these contributions, the overall increase in staff costs was less than 4%. Meanwhile staff numbers grew by 1% (p10) against a student number increase of 2% (p9).
It’s worth looking at staffing numbers (below) in a bit more detail, as set out on p43. For a 2% increase in students, and associated 4% increase in tuition fees, we saw an increase of staff of 42, or 1.4%. However ‘Academic’ staff dropped by 2 FTE, ‘Technical’ increased by 1 FTE, and ‘Management and specialist’ increased by 43 FTE. Sussex already has a high and increasing student staff ratio, as reported on p3 of Appendix 6 of November’s League Table Improvement Programme presented to Council. It seems clear that strategic investment in teaching and academic workload is falling behind.
Returning to Expenditure (2nd table above) depreciation is up by £12m to £33m, due to the write off of ‘West Slope buildings’ (locally known as Park Village) that are scheduled to be demolished.
But ‘Other operating expenses’ is interesting. See the table below from p44. Putting aside the eye watering £140k on ‘External auditors remuneration for annual accounts audit’ which is up from £105k last year, why are consultancy fees costing £11.1m? This is from £9.7m last year. What are we consulting on that costs £11.1m, and what are the benefits? Also consultancy was frozen in the FRGs in March 2020. Did we really spend £11m on consultancy in the 8 months from August 2019 to March 2020?
It is also really disappointing to see ‘Scholarships, bursaries and prizes’ down by £2.5m from last year, especially as our student numbers increased from 2018-19 to 2019-20.
Marketing and publicity is down from £3.5m to £2.1m. It is not clear where that leaves student recruitment given our league table challenges.
Also on p44 is the table for 'Access and participation' (see below). This is £8.7m, which is down from 33% of higher fees to 30% according to the Access and Widening Participation Plan 2019-2020, and is £2.4m less than Consultancy fees.
Before moving on, let’s have a closer look at staff costs at the top end of the salary scale. See the table on p43 (partly reproduced below). Excluding the VC, it shows that we now have 64 staff paid over 100k, up from 63 least year. A quick calculation shows that this represents about £8m in basic salaries. Again excluding the VC, the two highest salaries have increased by a total of about £25k.
Meanwhile, 'When the University began to experience the impact of the pandemic, the Vice Chancellor [...] made a voluntary reduction of salary of 10% for the remainder of the spring term' (p42) amounting to a net emolument reduction of £3k compared to last year.
The only mention of the sector-wide UCU Industrial Action over Pay, Inequality, Casualisation and Workload and USS pensions from November 2018 through to March 2019 is under Vice Chancellor’s remuneration, p42: ‘He has led the University with a sure touch through unprecedented challenges Including Covid-19 and industrial action.’
(ii) Balance Sheet, p30
This is split into assets and liabilities counted up at the end of the financial year. Roughly speaking, it asks: ‘what are we worth at this point in time?’ Leading to: could we withstand a shock? And ‘could we develop?’
The total of assets minus liabilities is £370m, which is good. But this includes everything from the Meeting House, to the Basil Spence commissioned chairs and the John Piper Tapestry and Maurice Forsyth-Grant Organ. So we might not want, or be able, to sell them.
But assets also include cash and investments (below in £,000) that we can access readily, and stand at a healthy £256m.
Our amount of long-term debt, £197m includes the Private Placement bonds of £100m, referred to on p50, and which were discussed in the McGettigan report.
(iii) Consolidated Cash Flow and Statement of Changes in Reserves, p31-32
We are not going to worry too much about these. They refer to cash in and out, as opposed to other ways in which the university's financial position can improve or worsen. They are mainly relevant in that a key condition on the covenant for the long-term loans is that adjusted cash flow must exceed a certain threshold. We understand that the unadjusted net cash flow of £38.3m is well above the level needed to exceed this threshold. Get in touch if you spot anything.
(iv) Other points
Governance and Senators
We know it’s a finance document, but there’s also a big section in the Financial Statement on governance (pp 15-24) with not much love for our Senators, who get one tiny paragraph. We remind readers that Senate is ‘responsible for the academic standards and the direction and regulation of academic matters of the University’, and as such is fundamental to the governance of the University.
Conditions of registration
Also there is a diagram at the top of p16, relating to Office for Students conditions of registration for HE institutions. If anyone can make sense of the arrows please get in touch.
A reminder that although the 'Consolidated' column of pp29 and 30 of the Financial Statements includes subsidiaries such as Sussex Innovation Centre Development, Sussex Innovation Centre Management, and Sussex Estates and Facilities (p34), it does not include outsourced staff working at Sussex who are employed by Chartwells and Study Group.
Staff teaching and supporting students at the Sussex International Study Centre are employed directly by Study Group. We have started looking at Study Group’s finances, but this is proving difficult as their historically complex company structure has involved shell companies in Luxembourg owned by private equity companies in the Cayman Islands. However, their new owner Ardian has assets of $103bn so we’ll be asking how that’s being invested in staff and students at the University of Sussex.
Sussex UCU Finance Working Group
 Chapter 3 of An Insiders Guide to Financing & Accounting in HE (2011, basic introduction), Chapter 3 of A guide to Understanding University Finance (2019, with more detail), Studying Institutional Finances and Using Institutional Finances to Challenge Redundancies, Andrew McGettigan (July 2020)