27 February 2003 Minutes
Boardof Scrutiny
Minutes of the MeetingHeld at Noon on
Thursday 27 February2003 at Selwyn College
Present: Stephen Cowley, Christopher Forsyth, David Howarth, ElisabethLeedham-Green, Susan Lintott (for the second half of the meeting), RobinLachmann, Jack MacDonald, Timothy Milner, Oliver Rackham, Jennifer Rigby, JohnSpencer, Helen Thompson.
Apologies: Robin Lachmann.
1)Minutes of the meeting of 13 February 2003. Subject to final editing by the Secretary and theChairman, these were approved.
2)Matters arising (other than ones covered below).
a)The Chairman reported that he had written to theRegistrary asking whether the Council had been informed of the nature of theprimate centre when the Report requesting permission to construct the centrewas approved.
b)It was reported that Helen Thompson would meetrepresentatives from SAWAG on 10 March 2003.
3)Governance:
a)Gordon Johnson's THES article. It was reported that the Chairman had written aletter to the THES in response to Gordon Johnson’s article. It was due toappear on 28 February 2003. It was noted that in the article Dr Johnson had notdisclosed that he had been Chairman of the Governance Committee. It wasreported that the Governance Committee had been discharged at the last Councilmeeting.
b)Anne Campbell (including article in Varsity). It was noted that her article (which has sinceappeared on the EducationGuardian website) does not seem to have been based ona balanced briefing (e.g. she suggests that Grace 3 of the governance proposalswould have made the Vice-Chancellor more accountable, and believed that thegovernance proposals addressed the problems that resulted in CAPSA). The Boardwondered who had briefed her.It wasresolved to write to her (including our flysheet and governance response), andto seek a meeting with her.
Action: The Secretary and Chairman to write to AnneCampbell.
c)Planning for the Discussion. It was agreed to hold an extra meeting on 6 March2003 at 12.00 in order to prepare for the Discussion on 11 March 2003. Therewas a Discussion (a) as to the type of person who might serve on a potentialSyndicate, and (b) how the membership of such a Syndicate might be decided(e.g. nominations from multiple bodies such as Council, the General Board, theConsultative Committee, the Audit Committee, the Colleges Committee andpossibly ourselves). It was reported that in his Darwin Lecture Malcolm Granthad advocated a very open and consultative approach as regards his commissionon GM foods; maybe there were lessons there for such a Syndicate.
d)Rerun graces.It was reported that the three Graces that had supposedly passed were beingrerun in order to correct oversights. The Board resolved to have nothing to dowith the rerun of these Graces, and to let that be known to anyone who asked.
4)Planning for the 8th Report. There was a need to start planning for the 8thReport now. There was a need for a meeting with the Registrary before then. Wealso need to try and find someone to provide administrative help. For that weneed a person specification.
Action: David Howarth to write a personspecification.
5)Any other business.
a)The meeting with Malcolm Grant to discuss theFinancial Working Party report will take place on Wednesday 5 March. It wassuggested that the report will suggest lifting the freeze on posts, and willsuggest that we need to plan better for the future.
Action: The Chairman to ask for a copy of thereport in advance of the meeting.
b)It was noted that there would be Scrutiny electionsnext term.
6)The Director of Finance, Andrew Reid. The Director of Finance (DoF) arrived at about13.00. He provided a copy of the auditor’s management letter (both preliminaryand final versions). He noted that the letters were not particularly helpful,but that the Audit had been rigorous, it had been a good exercise, and CUFS hadhelped significantly. The Board thanked him and his team for the improvement inthe presentation of the accounts.
Asregards that Lauterpacht centre, the DoF agreed that it was not finance’sfinest hour. An investment had been double counted by a junior member of staffas a result of an unclear report from CUFS. He informed the Board that the formof the reports from CUFS had now been improved, and procedures had beenimproved. He emphasised how good the training courses for CUFS were, and thatmore of the University needed to go on them. He noted that they took ½ day. Itwas suggested that many PIs did not have ½ day to spare, but that drew littlesympathy from the DoF. The question also arose that if CUFS was so good, and ifthe courses so good, how did the junior member of staff come to make themistake?
Therewas a discussion of the Research Grant Module (RGM). The DoF noted that therewas the odd fundscheck failure and the odd miscalculation of indirect overheads,and that the RGM’s performance was acceptable 99.5% of the time. PIs shouldencounter few problems. The problems were with the invoicing and billing tosponsors, with fundscheck failures and with failures to calculate overheads.Within RSD there were workarounds, but these were manpower intensive (as aresult RSD had had to employ extra staff, especially to clear the backlog). TheUniversity was not billing sponsors as fast as might be ideal, although whatwas going out was reasonably accurate.The University was moving to proper accounts billing, and lessfire-fighting was now needed as workarounds were found. There was now a betterworking relationship with Oracle, with new patches being added (e.g. there hadbeen a recent patch to help cure the fundscheck failures). The DoF stated thatthere should now be only the odd fundscheck failure if a grant was properlysetup, e.g. if failed purchase orders were cleared, and if those using thesystem went on the appropriate training courses.
Action: The Secretary to check re fundscheckfailures.
Insummary, a solution to the RGM problems seems to be in sight. The problems thatremain should not be affecting departments and/or PIs, although the reportingfrom the RGM still needs to be made more user friendly.
TheDoF explained that he was the University’s risk officer, and was on theUniversity’s risk committee. He believed that Malcolm Grant had chosen themembers of the committee who include the Treasurer (who had Y2K experience),Andrew Thompson, the Chairman of the Audit Committee, Malcolm Longair (as arepresentative of a large science department), and Anne Davis. One of the aimsof the committee was to embed a risk culture. The DoF agreed that risk had notalways been evaluated effectively, and that he thought that if the riskcommittee had existed both CMI and CAPSA would have been looked at differently.He thought that the risk committee could help in improving decisions.
TheDoF reported that about 20% of the members of the Assistant Staff Pension Fundare members of CUP and UCLES. As a result provisions of FRS17 can be used sothat the pension fund does not appear on the balance sheet. In July 2000 therewas about 135% cover on the Minimum Funding Requirement (MFR), but of coursesince then there have been significant falls in the price of equities as aresult of the bear market. Questions were asked as to whether MFR was thecorrect measure to assess the viability of the fund, as to what the position ofthe fund was in July 2002 and what it was likely to be in July 2003, as towhether there would be a deficit and a possible hit to reserves if the fundwere brought onto the balance sheet, and as to whether the Financial WorkingParty had considered this risk. The DoF stated that the risk was beingmonitored, but it was not clear to the Board that the University had adequatelyassessed the risk (even though it was apparently not forced to by FRS17).
Therewas a discussion of the fund for land and buildings. Members of the Board notedthat asset sales reduce income and therefore asked whether that reduction inincome had been fully taken into account. Similarly had the rate of return oncash (as a result of a sale) been taken into account, and which body decidedwhich assets should be sold? It was not clear to the Board who saw the wholepicture.
TheDoF described the structure of the Finance Division. There are threesubdivisions: financial operations (headed by a Principal Assistant Treasurer),financial services (headed by the Deputy Treasurer), and financial systems.
The DoF was asked about the financial implicationsof the Freedom of Information act. He said that such matters had not yet beenconsidered in detail.
TheBoard asked about the cost of legal advice, and the significant increase inlegal costs the occurred last year. The DoF said that he had noted the increasepreviously, and investigated it; however he could not recall the detailsimmediately (although he thought that the EU procurement had not been asignificant expense). He said that David Parsons (based in RSD) was theUniversity’s corporate lawyer. He said that costs incurred in a planningappeal, e.g. that over the primate house, would be charged to relevant projectrather than being charged to central funds. He repeated that he was concernedwith value for money, and would seek it by tendering, etc. When asked about howone assesses value for money for legal services, the DoF said that was really aquestion for the Registrary.
Whenasked about the accounts of the Museum of Archaeology and Anthropology the DoF said thatStatutes trump Ordinances that trump the “blue book”. The Board approved.
TheDoF was asked why the expenditure on general consultancy had increasedsignificantly in the last year. He promised to come back with an answer.
TheDoF was asked about the HEFCE audit letter. He said that the Board should askfor that from the Registrary. He noted that the Auditors had not signed off theaccounts as being true and fair. He said that a working group was investigatingwhat to do with the accounts as regards integrating the Press and LocalExaminations Syndicate account.
Inresponse to a question the DoF noted that the securities element of theendowment (about 60%) was managed by one firm. He said that the investment committeewas happy with the risk of having all the University’s endowment funds with onefund manager, but thatthe investmentcommittee reviewed this decision regularly. He said that counter party risk,investment style, management style, etc. were discussed regularly at theinvestment committee. The Board tentatively raised the question as to whetherit might see the minutes. The DoF said the committee were not wedded tomanagement by one firm and had moved from Foreign & Colonial. The questionwas raised as to whether the Wood-Mackenzie performance index is the rightbenchmark; the DoF had no firm view. He said that the investment committee didassess risks. The Board wondered whether the same academic discipline wasapplied within such committees as to research. The Board noted that themanagement letter had raised the issue of the management of investments.
TheDoF said that it was conventional for a development office to costapproximately 15 –20% of the funds raised. When asked whether the developmentoffice was value for money he referred to the development office’s own Report.The Board noted that it was difficult to identify from the accounts what fundshad been raised by the University, e.g. it was difficult to identify donations.
7)Date of the next meeting. The next meeting will be held on Thursday 6 Marchat noon in Selwyn College.