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Financial Statements 2018/19


Risks


The University is exposed to a number of risks as a result of several external factors including changes in Government policy and legislation, our future relationship in the European Union and increased competition for student recruitment.


Actions are being taken to mitigate those risks that threaten the achievement of the University’s strategic aims. The University has a well-established set of procedures to assess and manage risks at both the corporate and departmental level which includes the corporate risk register.


The key risks which could directly threaten financial sustainability are outlined below:


—Post-18 Review in to Education and Funding


The Government’s Review of Post-18 Education and Funding reported in May 2019. One of the headline recommendations was a tuition fee freeze for three more years to 2022-23 and reduction in fee cap for new entrants from 2021/22 to £7,500 for Home and EU Undergraduates, with a further proposal that the balance in funding to be made up by the Government with a focus on high value subjects. At present it is not clear which of the report’s recommendations will be taken up by the Government.


The University will continue to plan for a variety of scenarios and to proactively influence Government and other stakeholders. Our strategy seeks to mitigate for the uncertainty by looking to further diversify our income streams and ensuring we are pro-active in managing our cost base.


— Failure to achieve student recruitment and retention targets


Tuition fees are a substantial proportion of total income, being dependant on both strong recruitment and retention to ensure a level of surplus in line with forecast. Increased competition for a reducing number of 18 year olds has further increased the risk in this area.


The University will mitigate the risk of volatility in the UK/ EU undergraduate student cohort through the continuous review of its course portfolio, assessing our areas of strength, identifying the areas at risk and deciding on the most sustainable curriculum. The University also has strategies in place to improve student retention.


A key aim of the University strategy is designed to improve the student learning experience, including providing an inspiring choice of courses and learning pathways that empower students with ambition, skills and knowledge to succeed.


— Impact of Brexit


There still remains ongoing uncertainty over the Brexit negotiations and the potential impact on our recruitment and retention of both staff and students from the EU, as well as having a wider impact on research and innovation, such as access to EU research funding.


The University aims to mitigate against these risks both through sound financial and strategic planning and through playing an influential role in engaging with policy makers in actively shaping policy and agenda-setting.


— Unaffordable operating and pension costs


In the current economic climate costs are rising at a higher rate than income with significant pressures from legislative compliance, non-pay inflation, rising employer pension costs and exchange rate volatility.


The University has effective cost control measures in place as part of its management of operations to mitigate rising costs.


Pension costs and contributions are not within the University’s direct control and in recent years we have seen increases in pension costs that impact on the University’s income and expenditure.


The LGPS balance sheet deficit has a dependency on actuarial valuation assumptions. The University engages with the Trustees and actuaries of the LGPS to ensure the valuation of its share of assets and liabilities in the fund are correctly stated and to influence the fund’s investment strategy.


The employer’s contribution rate for the Teachers’ Pension Scheme increased in September 2019 by 7.1%. The University is managing for this increase by exercising sound financial planning and prudent cost control.


— Insufficient capital funds to support infrastructure developments


The University makes long term investments in its campus wide estates developments. In addition to the bank secured loans that have in part funded recent infrastructure investments it depends on making sufficient financial surpluses in order to reinvest in the future capital expenditure programme. Detailed medium and long term planning and regular in-year monitoring of the financial position mitigate against the risk of insufficient funds and cash flows.


The University’s Board of Governors Committee reviews the key risks throughout the year so that appropriate mitigating actions are taken and monitored.


Middlesex University 55


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