Corporate Governance Statement
CORPORATE GOVERNANCE STATEMENT
Summary of the Universitys Structure of Corporate Governance
The University is committed to best practice in all aspects of corporate governance.This summary describes the manner in which the University has applied the principles set out in the UK Corporate Governance Code, in so far as they apply to the higher education sector.The University has followed the internal control guidance for directors on the Code as amended by the British Universities Finance Directors Group, and has also aligned its practice fully against the principles set out in the Scottish Code of Good Higher Education Governance published in July 2013.The purpose of this summary is to assist the reader of the financial statements to understand how the principles of good governance set out in both codes have been applied.
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The University is not required to comply with the UK Corporate Governance Code. However, it has reported on its Corporate Governance arrangements by drawing upon best practice available, including those aspects of the UK Corporate Governance Code that it considers to be relevant to the company and best practice, and it has done so throughout the year ended 31 July 2017.The University Court also considers that the University is compliant with the main principles of the Scottish Code of Good Higher Education Guidance and observes its supporting guidelines.
The University Court has adopted a Statement of Primary Responsibilities which includes provisions relating to:
- approving the mission and strategic vision of the Institution, long-term business plans, key performance indicators (KPIs)泭and annual budgets, and ensuring that these have due regard to the interests of stakeholders;
- appointing the Head of the Institution (the Principal) as chief executive officer of the Institution and putting in place suitable arrangements for monitoring his/her performance. Both the appointment and the monitoring of performance泭of the Principal shall include consultation with all members of the University Court;
- ensuring the quality of Institutional educational provision;
- ensuring adherence to the funding requirements specified by the Scottish Funding Council in its Financial Memorandum泭and other funding documents;
- ensuring the establishment and monitoring of systems of control and accountability, including financial and operational泭controls and risk assessment, clear procedures for handling internal grievances and whistleblowing complaints, and for泭managing conflicts of interest; and泭monitoring institutional performance against plans and approved KPIs which, where possible and appropriate, should be泭benchmarked against other comparable institutions.
The full Statement of Primary Responsibilities can be found as part of the Court Members Handbook on the University website
The University Court is responsible for the Universitys system of internal control, and for reviewing its effectiveness.This system relies on management informing the University Court of any potential internal control issues and proposing to the University Court any necessary remedial action. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable, and not absolute, assurance against material mis-statement or loss.
The University Court is satisfied that there is an ongoing process for identifying, evaluating and managing the Universitys significant risks, which has been in place throughout the year ended 31 July 2017 and up to the date of approval of the annual report and financial statements. This process is regularly reviewed by the University Court, and accords with the Turnbull guidance, as applicable to the higher education sector.The University has in place a business continuity and risk management and policy framework for the whole organisation. In addition, each of the key areas within the institution, including the Executive Board, has in place local procedures detailing action to be taken in response to a potential or actual disaster. Risk management is a standing item on the agenda of the Executive Board and the Audit and Risk Committee, and regular reports are made to the University Court.
The University Court comprises lay and other categories of persons appointed under the Universitys Statutory Instrument. The majority are non-executive, and the roles of Chair and Vice-Chair of the University Court are separated from the role of the Universitys chief executive, the Principal and Vice-Chancellor. Under the Statutory Instrument, the University Court delegates to the Principal and Vice-Chancellor the organisation, management and discipline of the University. In discharging
these functions, the Principal and Vice-Chancellor is subject to the general control and direction of, and is accountable to, the University Court but otherwise has all powers and duties of the University Court in relation to these functions.The University maintains a register of interests of members of the University Court and senior officers, which is published on the University website.
To assist members in the performance of their duties, members of the University Court were offered, and attended, several training and development opportunities during 2016-17.These included external training sessions, discrete development and planning away days, as well as presentations on strategic themes relevant to the work of the University at each Court meeting.
Training and development opportunities offered to Court members in 2016/17 included:
- Being an Effective Governor (Leadership Foundation for Higher Education, October 2016)
- Being an Effective Student Governor (Leadership Foundation for Higher Education, September 2016)
- Governor Development: Scotland (Leadership Foundation for Higher Education, February 2017)
- Court Away Days (8 and 9 February 2017)
- Overcoming Unconscious Bias Training (External Provider April 2017).
- Awareness of Prevent Training (WRAP Contest delivered April 2017).
New members also received a formal induction session supported by the Court Members Handbook (published October 2014 and revised version published October 2016).
Under the Financial Memorandum with the Scottish Funding Council (SFC), the University Court is responsible for setting the strategic direction of the University, approval of overall institutional budgets and major developments and the receipt of regular reports from executive officers on the day to day operations of its business and its subsidiary companies.The University Court has five scheduled meetings per annum, and has delegated authority to a number of Committees, as set out below. Each of the Committees of the University Court is formally constituted with published terms of reference, and with membership comprised mainly of lay members of the University Court, one of whom is the Convener.
The Audit and Risk Committee meets at least three times annually to discuss audit, risk and control issues, with the Universitys external and internal auditors in attendance as appropriate.The Committee considers detailed internal audit reports and recommendations for the improvement of the Universitys systems of internal control, together with management responses and implementation plans. It also receives and considers reports from the Scottish Funding Council where such reports impact on the Universitys business, and monitors adherence to the regulatory requirements. It reviews the Universitys annual financial statements. Senior executives attend the Audit and Risk Committee as necessary, but are not members of the Committee.The Committee meets at least annually with the external auditors for independent discussion in the absence of executive officers. The identification, assessment and management of risk is a standing item considered at each meeting of the Committee, and these matters are reported thereafter to the University Court.
The Finance & Estates Committee reviews and recommends to the University Court the Universitys financial strategy, as well as the annual revenue and capital budgets. It monitors performance in relation to approved budgets and borrowings through the use of key performance indicators, and through a review of quarterly and annual financial reports. The Committee also considers matters relating to the development of the Universitys estate.
The Nominations Committee makes recommendations to the University Court on appointments to vacancies in the University Court lay membership, on the appointment of the Chair, on the re-appointment of existing members where appropriate, on appointments to University Court committees and on the appointment of the Chancellor.
The Senior Management Remuneration Committee develops, on behalf of the University Court, senior management remuneration policies and processes for final determination by the University Court.The Committee determines and reviews the salaries and terms and conditions of the Principal and members of the Executive Board in line with agreed policies, and in accordance with good corporate and higher education governance.The Committee also reviews arrangements in place for determining the salaries of those senior staff with Professorial title.
The Executive Board comprises the Principal, the Deputy Principal and five other senior managers. It receives reports on key performance and risk indicators, and possible control issues are brought to its attention. The Executive Board and the Audit and Risk Committee also receive regular reports from the internal auditors.The Audit and Risk Committees role in this area is confined to a high level review of the arrangements for internal financial control.The University Court receives reports as appropriate on risk and control issues from management and the Audit and Risk Committee.
Higher Education Governance (Scotland) Act 2016
The Higher Education Governance (Scotland) Act 2016 (Commencement, Transitory, Transitional and Savings Provisions) Regulations 2016 were laid in Parliament on 24 November 2016, and came into force on 30 December 2016.
The University Court has been engaged in detailed work on the Universitys compliance with the Act since the publication of the original Higher Education (Scotland) Governance Bill, with each provision of the Act being addressed in stages. The University is currently in compliance with key sections of the Act, including the requirements set out for the appointment of the senior lay member, which were addressed by the University when it secured parliamentary approval in 2015 for amendments to its Order of Council.
The majority of the Acts remaining requirements concerning the composition of the governing body are accommodated currently within the Universitys Order of Council, with the exception of the additional category of membership of 2 persons by nomination of a Trades Union. The maximum membership of the University Court will be amended to 25 to accommodate Courts approval that a Senate appointee be retained in membership of the University Court.
The requirements for membership of the academic board of a higher education institution have been met fully, and are in the process of being included in the Senate Standing Orders.The Order of Council does not set out in detail the composition of the Senate, but rather states simply that the Court shall establish a Senate which shall be constituted and regulated in a manner specified by the Court from time to time on the recommendation of the Principal. Consequently, there is no requirement to amend the Order of Council to bring it in line with the legislation.
Revisions to the Universitys Statutory Instrument will be completed during 2017-18.
Review of Effectiveness
The University Court has established as a Key Performance Indicator of the effectiveness of its performance, and of its Committees,full alignment with the Scottish Code of Good Higher Education Governance. The University continues to be in full compliance with the Scottish Code of Good Higher Education Governance, but will review that status, and the continued effectiveness of its Governance arrangements, in light of the provisions set out in the revised Scottish Code published in October 2017.
During 2016-17, the University Court received regular updates on actions arising from the externally facilitated review of its effectiveness conducted in 2015,the report of which was discussed in full at the CourtAway Days in February 2016.All actions were completed within the agreed timescale ie by June 2017.The final review report and action plan is available on the University website.
The revised Scottish Code of Good Higher Education Governance was published in October 2017. The University Court will benchmark and align its practice with the updated requirements of that Code during 2017-18.
Throughout 2016/17, the University Court reviewed a full suite of Key Performance Indicators (KPIs) that it has established as part of its wider assessment of its effectiveness. Following the year end, the University Court undertook a review of two KPIs relating to earnings before interest, taxation, depreciation and amortisation (EBITDA) and to net cash flow from operating activities less interest payable as a proportion of turnover, and also a basket of six indicators of financial health as recommended by the UK-wide Financial Sustainability Strategy Group (FSSG). In accordance with the FSSG methodology, these KPIs are measured over a rolling five-year period. As a result of this review, and also a review of six non-financial KPIs, the University Court was able to assure itself that the Universitys academic and other strategies take account of the environment in which it expects to be operating, and are taking the University in a direction where it and its core publicly- funded activities should be financially sustainable.
Equality and Diversity
While responsibility for mainstreaming equality and diversity within the University rests with all staff and students, the University Court is, as a matter of law, responsible for ensuring compliance with the Equality Act 2010 and for ensuring that the University meets its public sector equality duty (PSED) and the specific duties relevant to Scotland. The University Court exercises such oversight through the Equality and Diversity Committee (EDC), which is responsible to the University Court for the development of the strategic framework for equality in service provision and in employment across the University. Embedding equality and diversity in our governance structures and in our strategic planning process is critical to mainstreaming equality and diversity, as is defining responsibilities, setting performance measures and monitoring progress against those measures.The Universitys Mainstreaming Report and Equality Outcomes, which sets out progress on mainstreaming equality and establishes a number of outcomes for the period 2017-2021, was approved by the Court in April 2017泭The report can be found at Equality and Diversity
The Universitys Gender Action Plan, submitted to the SFC in July 2017, re-states the Universitys commitment to ensuring that the University Court (Court), Senate and all committees and decision making bodies of the University are representative of its community. In particular, the University is committed to achieving the following goals and targets:
- Achieving practical gender balance amongst lay members of Court. Practical gender balance will be achieved where the lay membership of Court constitutes not less than 40% of either gender.
- Undertaking an annual review of the equality and diversity characteristics of the Court or as a specific need for review is identified.
- In undertaking any recruitment activity concerning the appointment of lay members of Court, the Court will have regard to equality and diversity characteristics of the Court and will take positive actions to increase the likelihood of applications being submitted from applicants that would enhance the representative character of the Court.
At the time of writing, the gender balance of membership of Court sits at 50% female and 50% male. Equality Monitoring has been introduced for new Court membership, with information collected at the point of appointment.This will be extended to all Court members during 2017/18.
System of Internal Financial Control
The key elements of the Groups system of internal financial control include the following:
- clear definitions of the responsibilities of, and the authority delegated to, heads of academic divisions and support units;
- a comprehensive medium and short-term planning process, supplemented by detailed monthly income and expenditure泭reports, and annual capital budgets;
- monthly review of financial results involving variance and KPI reporting and updates of forecast out-turns;
- clearly defined and formalised requirements for approval and control of expenditure, with investment decisions involving
- significant capital or revenue expenditure being subject to formal detailed appraisal and review according to approval泭levels;
- comprehensive financial regulations, detailing financial controls and procedures;泭an independent professional internal audit team whose annual programme is approved by the Audit & Risk Committee.
The Audit and Risk Committee, on behalf of the University Court, has reviewed the effectiveness of the Groups system of internal financial control as part of a rolling programme.The Committee has formed the opinion that the Universitys systems provide a reasonable basis for maintaining control and ensuring the achievement of economy, efficiency and effectiveness. In reaching its opinion, the Committee has taken into account the opinions of the internal and external auditors.The Committee has noted that University management is continuing to work towards further strengthening of the control environment with a particular focus on those areas of significant risk within the wider control framework. Any system of internal financial control can, however, only provide reasonable, but not absolute, assurance against material mis-statement or loss.
On behalf of the University Court
- Dr Frances Dow, CBE
- Chair
- 6 December 2017
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- Professor Petra Wend
- Principal & Vice-Chancellor
