UCL Professors Honored in Royal Academy & New Year's Honours, UCL East Progress & Financia, Lecture notes of Accounting

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LONDON’S GLOBAL UNIVERSITY

Annual Report and Financial Statements

for the year ended 31 July 20 21

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 20 21

CONTENTS

Page

1 Committee Membership

2 Financial Summary

3 Operating and Financial Review

17 Corporate Governance

19 Responsibilities of the Council of UCL

20 Independent Auditor’s Report to the Members of the Council of UCL

28 Consolidated and Institution Statement of Comprehensive Income

29 Consolidated and Institution Statement of Changes in Reserves

30 Consolidated and Institution Statement of Financial Position

31 Consolidated Statement of Cash Flows

32 Statement of Accounting Policies

39 Notes to the Accounts

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 20 21

FINANCIAL SUMMARY

CONSOLIDATED INCOME & EXPENDITURE ACCOUNT

Tuition fees and education contracts Funding body grants Research grants and contracts Other income Investment income Donations and endowments

£m

£m

TOTAL INCOME 1,609. 5 1,543.

TOTAL EXPENDITURE 1,510. 4 1,337.

Loss on disposal of fixed assets Gain/(Loss) on investments Share of operating profit in joint ventures and associates Taxation Actuarial losses

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 146. 7 200.

Intangible assets Fixed assets Investments Net current assets/(liabilities)

Total assets less current liabilities

Non-current liabilities Pension provisions Other provisions

TOTAL NET ASSETS 1,633. 8 1,487.

Represented by: Endowments Reserves Minority interest

OTHER KEY STATISTICS

Increase/(Decrease) in cash in the year 319.0 (26.8)

Student number Average payroll numbers

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 20 21

OPERATING AND FINANCIAL REVIEW

Operating and Financial Review 2020- 21

The financial statements of UCL are prepared in accordance with the “Statement of Recommended Practice: Accounting for Further and Higher Education 2019” and with reference to the “Regulatory framework for higher education in England” published by the Office for Students (OfS) in February 2018.The OfS also acts on behalf of the Charity Commission as principal regulator of UCL as an exempt charity, in accordance with the Charities Act 2006.

The financial statements include the consolidated results of UCL’s subsidiary companies, details of which are shown at Note 32. These financial statements have been prepared on a going concern basis as described in section 1 of the Statement of Accounting Policies.

The Operating and Financial Review for 2020- 21 comprises five sections covering:

1. UCL’s vision and long-term strategy (UCL 2034);
2. Performance in 2020- 21 in pursuit of this strategy in research, education, innovation and enterprise;
3. The financial review and outlook;
4. UCL’s approach to risk management; and
5. How UCL delivers public benefit.

Over the past year at UCL we have also seen the extraordinary ideas, energy and altruism of our community in action. From providing expertise on SAGE government advisory groups to frontline work in NHS hospitals, our academics, students and staff have played crucial roles in the national response to COVID-19. They have demonstrated the powerful contribution we make to society, and the importance of our world class research to complex global events.

In addition to performance against our strategic themes, this review therefore includes highlights of the work that celebrates not only how we have responded to the pandemic but how our adaptive and resourceful approach has kept vital research active in all subject areas under lockdown.

UCL 2034 is an important statement of vision and aspiration for UCL as a globally leading university and since it was established in 2014 we have consolidated our position as a large and highly successful comprehensive research- intensive university.

While our vision is unchanged, in seven years our sector, our city and the broader external environment have changed dramatically. We have a new President & Provost and we are emerging from a global pandemic during a time of geopolitical and social change. With several institutional strategies at the end of their duration, we will review our progress in research, education and innovation and over the coming year reset our goals for the next period of our development.

The strategy development process will provide us with a framework for choices that are informed by our existing and potential strengths, the aspirations and needs of our community, alumni and partners, and the opportunities in our external environment.

UCL’s President & Provost: Dr. Michael Spence

In January 2021, Dr Michael Spence AC, previously Vice-Chancellor of the University of Sydney, became UCL’s new President & Provost - succeeding Professor Michael Arthur, who stepped down from the post after seven years. Dr Spence is recognised internationally as a leader in the field of intellectual property theory and holds a Doctor of Philosophy from the University of Oxford, where he previously headed Oxford’s Law faculty and Social Sciences division.

Under his leadership, the University of Sydney rose to first in Australia and fourth in the world for graduate employability. He embedded diversity and inclusion in the university’s culture, transformed the undergraduate experience and created strategic partnerships with leading industry, government and community organisations across the globe. In 2017 he was awarded one of Australia’s highest honours, the Companion of Order (AC), for his services to education.

UCL 2034: Vision and Mission

Vision: Our distinctive approach to research, education and innovation will further inspire our community of staff, students and partners to transform how the world is understood, how knowledge is created and shared and the way that global problems are solved.

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device that could be rapidly manufactured and delivered to NHS hospitals. The device, called UCL-Ventura, obtained regulatory approval and was distributed by the thousand to NHS Hospitals across the UK and the Crown dependencies.

Since that point, we have refined and modified the device to create a Mark II version, which has shown up to 70% reduced oxygen consumption in healthy volunteer assessments. To help meet international need, we have also released the designs and manufacturing instructions for free to governments, industry manufacturers, academics and

health experts across the globe.

In terms of the national response to COVID, leading UCL academics have also been called upon for their expertise to stand on the UK Government’s Scientific Advisory Group for Emergencies (SAGE) and its sub-groups. As a key body informing government decision makers throughout the COVID-19 pandemic, the group has played a crucial role in the direction policy has taken, bringing the latest research to discussions of public health.

UCL was ranked 18th overall in the latest Times Higher world university rankings (2020:16th), coming 5th^ in Europe and 4th^ in the UK respectively, and is 8th^ in the most recent QS World Rankings (2020:10th). The UCL Institute of Education maintained its top place globally for education in the 2021 QS World Rankings for the eighth year running. The Bartlett Faculty of the Built Environment has moved up one place to 2nd in the world for Architecture & the Built Environment, and Archaeology also held its position as 3rd in the world. In total, nine subjects (2020: eight) were ranked in the top 10, including anthropology (6th), anatomy & physiology (7th), pharmacy and pharmacology (7th), geography (9th), psychology (10th) and life sciences & medicine (10th).

There has been some notable recognition of staff in the UCL community in the last year:

• Six UCL professors were elected to the British Academy in 2021, out of a total of 84 elected from UK universities. These are Professor Becky Francis (UCL Institute of Education), Professor Suzanne Kord (School of European Languages, Culture & Society), Professor Susan Michie (Psychology & Language Sciences), Professor Andrew Steptoe (Epidemiology & Health), Professor Sacha Stern (Hebrew & Jewish Studies) and Professor Li Wei (UCL Institute of Education).
• In May 2021, two UCL professors were made Fellows of the Royal Society – Professor Hugh Griffiths (Electronic & Electrical Engineering) and Professor Roger Lemon (Queen Square Institute of Neurology) – and a further five were made Fellows of the Academy of Medical Sciences: Professor Ijeoma Uchegbu (School of Pharmacy), Professor Sir Jonathan Montgomery (Laws), Professor Essi Viding (Psychology & Language Sciences), Professor Lisa Cipolotti (Queen Square Institute of Neurology) and Professor Bryan Williams (Institute of Cardiovascular Sciences).
• In September 2021, four UCL professors were made Fellows of the Royal Academy of Engineering: Professor Paola Lettieri (Chemical Engineering & UCL East), Professor Tiziana Rossetto (Earthquake Engineering), Professor Jade Alglave (Computer Science) and Professor Yiannis Ventikos (Mechanical Engineering).
• Six members of the UCL community were recognised in the 2021 New Year’s Honours and a further four in the Queen’s Birthday Honours list, including Professor David Ormerod QC (Laws) and Professor Alissa Goodman (UCL Institute of Education) both of whom were awarded CBEs.

Theme 2: Integration of research and education, underpinning an inspirational student experience

We inspire our students at every stage of their UCL careers and equip them with the knowledge and skills they need to become leaders in chosen fields – to disrupt, challenge and change the world for the better. We see all our students and staff as partners in the creation of knowledge, and whose opinions and values shape the innovative learning culture that makes UCL unique.

The COVID-19 pandemic had more impact on this theme than on any other, having a profound effect on the education and wider experience for students throughout 2020-21. UCL continued to follow the principles of its Education Strategy 2016- 21 around excellent teaching and research, even though the immediate context changed substantially. Staff have worked exceptionally hard and shown great commitment towards their students over this prolonged period of the pandemic, and the students have displayed remarkable resilience and forbearance. The focus into this year has continued to be safety first, with significant decisions taken in partnership with student leaders.

The Students’ Union sabbatical officers have played a central role in our response throughout the pandemic, providing challenge and advice as we formulated policy and approach to education and the student experience.

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There has been wider engagement too, from student reps raising issues with departments and working in partnership to solve them, to transition mentors supporting our new students through their first months, and Connected Learning interns, students recruited to work with their departments to enhance online learning.

During 2020-21, in common with most of the higher education sector around the world, UCL delivered the majority of its programmes remotely with face-to-face interactions severely limited. The rapid switch from face-to-face written invigilated assessments to online remote assessment was part of this shift and proved successful. We found that students valued the greater authenticity offered by open book and capstone formats. The adaptations made by staff, the hard work of students and the emergency ‘no detriment’ safety net meant that an unusually large number of First class and Distinction awards were made.

At the start of 2020-21 we began the search for a robust system capable of delivering the many benefits of digital assessment. We completed testing in January 2021 and all centrally managed assessments were carried out through the new platform. Looking forward the new platform will give us much greater flexibility to design exams and assessments using a wider range of assessment types. Students will be able to sit exams using their own electronic devices, remotely or in a face-to-face environment using a lock down browser.

Assessment continues to be a focus for enhancement across UCL, especially at programme level. In consultation with the Faculties, the Arena Centre for Research-based Education (Arena) has produced new guidance on assessment types that capture the full range of learning outcomes and how to design an appropriate student assessment load whilst avoiding assessment bunching.

In addition, a number of elements within the BAME awarding gap were closed or eliminated. This has encouraged us to look into the fine-grained detail of what caused the better outcomes for BAME students to see what elements of this assessment practice we can continue.

The total number of students at UCL last year was 48,168, an increase of 9.8% over the previous year’s total headcount (43,863). The most significant element of this rise was accounted for by a 2,003 increase in undergraduate students following the late changes to the awarding of A-levels in August 2020.

In the National Student Survey for undergraduate students, UCL’s overall satisfaction level fell from 80.6% to 75.7%. This reflected the general trend across the sector and was less than the decline reported for the Russell Group as a whole. Overall satisfaction as measured in the Postgraduate Taught Experience Survey dropped slightly from 79.7% to 78.4%, placing UCL in the first or second quartile within the Russell Group for all categories but one.

Theme 3: Research - addressing global challenges

UCL is committed to global innovation, applying a depth and breadth of expertise to complex real-world problems. By fostering cross-disciplinary interaction and by prioritising adaptability, we generate novel insights into and solutions to the challenges facing humanity today.

As a central focus, the UCL Grand Challenges cultivate cross-disciplinary collaborations that explore interconnected solutions in six areas related to matters of pressing societal concern: Global Health, Sustainable Cities, Cultural Understanding, Human Wellbeing, Justice & Equality and Transformative Technology. The past year has seen the UCL Grand Challenges fund 55 separate projects, generate over 100 publications from activity on the new Science Open Collection alone, and establish two major collaborations with the British Academy and the World Bank. The new UCL Research, Innovation & Global Engagement (RIGE) portfolio, formed in April 2021, will further enhance the ways we facilitate our collective institutional impact on the world as well as the public benefit generated by our research and academic colleagues.

UCL has continued to focus its collective research effort on addressing the impacts of the pandemic and we now have almost 300 active research projects related to COVID-19. Our unique open access platform promotes in excess of 2,200 COVID-19 papers published by UCL researchers, and the number of article views through this platform now exceeds 42,000. The UCL Grand Challenges have also supported projects exploring the societal implications of COVID-19, including an ethnographic study of remote working and working with external partners in Sierra Leone and in London to develop crisis translation training for different problems.

UCL academics have been at the forefront of analysis of a wide range of legal responses to the pandemic and their impact around the world too. Lex-Atlas: COVID-19 (LAC19) is a vast international collaboration led by Professor Jeff King of UCL Laws. The project brings together scholars to compare the legal response of over 60 countries – representing a diversity of regions, economies, legal systems and political regime-type. Each country’s experts will report on a number aspects to laws and measures introduced in that country, so that it may be determined how

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opportunity to actively shape UCL’s sustainability vision. In March 2021, UCL was also named the winner of the UK Higher Education sector’s Green Gown Award for Climate Action for our campaign to become a zero-carbon institution by 2030.

UCL is committed to taking practical action to address structural racism at UCL and is in ongoing dialogue with black staff and students in order to listen, learn and decide what additional action needs to be taken. The UCL Sarah Parker Remond Centre for the Study of Racism and Racialisation has developed significantly over the past year, including through the planned 2021 launch of a unique MA Race, Ethnicity & Postcolonial Studies, surveying the history of race and exploring the social and cultural complexities of racialised inequality and injustice viewed on a global scale. The Centre is part of the UCL Institute of Advanced Studies and works closely with partners to provide a focal point for scholarship, teaching and public engagement activities that are addressed to various problems of racial inequality and hierarchy.

More broadly, the Race Equality Implementation Group (REIG) met five times during 2020 - 21 to produce an interim report. The report, sets out the priorities and actions for the next 12-18 months and beyond that REIG believes will make a significant contribution to addressing the systemic and structural barriers to race equity at UCL. The intention is that the report serves as a catalyst for intensified commitment and radical action on race equity by UCL’s leadership, and embeds greater accountability and transparency across UCL about progress towards equity and equality related goals.

The report articulates a vision for race equity at UCL in relation to strategy and culture, staff recruitment, pay, retention and staff progression, and teaching, learning and research. It identifies 35 actions that UCL should take, along with the upfront resource investment required. Examples of the commitments made in the report include: consistent use of race equality data in strategic planning; valuing and incentivising race equity activity; ensuring more diverse decision making; and significantly increasing the number of Black academic staff within UCL by at least 50 over the next 5 years (at present there are 15 members of academic staff who identify as Black).

UCL is currently the only university to hold an Athena SWAN Silver institutional award, a Bronze Race Equality Charter award and to be in the Stonewall Top 100 Index of Inclusive Employers. UCL’s submission for Athena SWAN Silver renewal in 2020- 21 was successful and alongside the recent renewal of our Race Equality Charter was a fantastic achievement.

UCL holds 41 departmental Athena SWAN awards, the most of any UK university including three at Gold level and 17 at Silver, and all departments are actively engaged in the process. UCL has an active community of networks providing targeted support on gender, race, LGBTQ+, disability, faith and to first-generation university students. Throughout the pandemic we transformed our relationship with the Student Union sabbatical officers and the 1, Student Academic Representatives (STARs). Involving students in the complex decision-making processes was fundamentally important from the very start of the COVID-19 crisis. We are committed to building on this success, working with students as partners, as we move into the next strategic phase.

UCL also introduced the Covid-19 Career Support Scheme in 2020- 21. The scheme was developed in 2020 to mitigate the impact of the pandemic on staff where equity and inclusion factors contributed to a disruption of their work, together with potential long-term detriment to careers. These were identified as parents / carers, those on fixed term contracts and particularly researchers. There were six application rounds to the scheme between November 2020 and February 2021 and the allocated budget for the scheme was £0.6m. This funding was predominantly used for childcare (95%) which freed up an average of 37 working hours per person.

Theme 5: London’s Global University

As a global leader in knowledge exchange, enterprise and open innovation with societal impact, we are establishing UCL at the centre of a cluster of organisations that will make London the premier destination for higher education. How we engage with the city and contribute to its improvement for all who live and work here is central to this aim.

In November 2020, the Pro-Vice-Provost (London) Office launched the UCL London Framework at a virtual launch event. This core document defines the purpose of UCL London – to enhance engagement, coordinate relationships and enrich society. It is not a prescriptive way of working, rather it constitutes a platform to raise awareness of the excellent contributions UCL makes to London through our departments and faculties, and to form a targeted way of identifying new opportunities to amplify our impact in London.

One of our goals is to develop genuinely reciprocal, long-term relationships with our local communities; a fantastic example being the London Borough of Camden with whom we have created a Memorandum of Understanding. UCL and Camden already have many aligned initiatives, and through the Memorandum we aim to increase the potential for new collaborations, explore funding opportunities and increase the exposure of the partnership with the intention to develop similar agreements with neighbouring boroughs.

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Over the course of the past year, colleagues from across UCL have continued to impact London and Londoners through their research and activities in a variety of ways:

• UCL experts alongside those from Healthy Streets and Tranquil City have launched the Healthy Streets Index, an interactive map which rates every street in London based on how healthy an area is. Using factors which are known to have the biggest impact on health and wellbeing, the Index has been adopted by the Mayor of London within the Mayor’s Transport Strategy.
• UCL Institute for Global Prosperity has partnered with Camden Council, Lendlease and Camden Giving to develop a new prosperity and wellbeing index for Euston. The Good Life Euston initiative will develop a set of indicators to measure wellbeing in Euston and across the whole of Camden over 18 months. The research collaboration will train and employ 24 citizen social scientists to conduct the research in their communities, measuring the impact of regeneration on local communities.
• Professor Claire Cameron, Institute of Education is leading a project funded by the Economic and Social Research Council and supported by Newham Council to examine the social, economic and health impacts of COVID-19 in pregnant women and families with children under 5 years. The findings will enable the researchers to understand how families in Newham have been adversely affected by the pandemic in order to strengthen recovery plans moving forward.
• UCL’s Centre for Access to Justice, established in Stratford in 2013, has continued to offer free legal advice on social welfare issues supported by students from UCL’s Faculty of Laws. Since the COVID- 19 pandemic the centre has transformed into a remote service: a lifeline of support for vulnerable adults in the area who have been significantly impacted by the pandemic – as well as for many others further afield who have sought help online - and a one-stop guide for the local community in terms of accessing critical services and support.

May 2021 also saw the ‘topping out’ for both the Pool Street West and Marshgate buildings at UCL East: UCL’s state of the art new campus on the Queen Elizabeth Olympic Park in Stratford. Joined on the park by other world-famous London cultural institutions such as Sadler's Wells, BBC Music, University of the Arts London's College of Fashion and the V&A, UCL East is a founding partner of East Bank: the largest cultural and educational district in Europe, working towards shared strategic objectives. Through UCL East, UCL has been establishing a strong relationship with the London Borough of Newham and we are working closely on shared priority projects to respond to grand challenges surrounding sustainability and prosperity.

Construction of the multi-use research and residential centre at Pool Street West began in February 2020 and, once open, the building will be publically accessible with the first three floors dedicated to learning and research space including a cinema, cafes and bespoke public space facilities. Two towers on either side of a main podium will then rise above a landscaped roof terrace, providing living space to 550 students. Although Marshgate will feature predominantly academic activities, it will be publically accessible as well and will include both retail and other community and engagement spaces. The Pool Street West and Marshgate buildings are expected to be completed in time for the start of the 2022 and 2023 academic years respectively.

Theme 6 Delivering Global Impact

We are building a significant reputation internationally through the impact we make in communities abroad, particularly in the ‘Global South East’. We work in partnership with NGOs, health and social care providers, higher education systems, and international business and industry as well as other HEI partners for collaborative academic activities.

Despite the ongoing challenges resulting from COVID-19, UCL’s academics, departments and faculties have continued to work with international partners to achieve fair solutions to global challenges and deliver some truly impactful outcomes.

Working in partnership with the Great Ormond Street Hospital for Children, the UCL Great Ormond Street Institute of Child Health, forms the largest concentration of children’s health research in Europe – with a mission to improve the health and wellbeing of children, and the adults they will become, through world-class research, education and public engagement. One project currently underway is designed to improve quality of newborn care in under-resourced settings in Zimbabwe. Funded initially by UCL, this project has since received £780k funding from the Wellcome Trust, and has seen the development of an integrated, digital, quality improvement tool for hospital-based sick and/or vulnerable newborns.

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of at least 8% of income; total borrowing below 5 times EBITDA (earnings before interest, tax, depreciation and amortisation); and liquidity of at least 80 days from 2022-23 onwards.

The Financial Strategy that defined these financial indicators was developed in 2018 and, since that point, the University’s operations – and therefore progression towards those long-term targets - have been heavily affected by the Covid pandemic. This has included increased student numbers, adapted teaching models, increased costs associated with delivering a COVID-safe campus and reduced costs in areas such as travel.

The impact of COVID is especially notable in the performance for the current financial year, during which certain areas of activity remained depressed and planned activities were delayed into subsequent periods. In that context, the operating surplus achieved of £128.3m (8.0% of income) is highly encouraging and indicative of both the underlying strength of UCL and the robust way in which it has navigated itself through the pandemic. This £128.3m represents the result of the Group as a whole, and reflects UCL’s operating surplus of £110m plus a combined £18m resulting from unrealised gains on UCL’s investments and the consolidation of subsidiaries. The University does not expect to reproduce this level of financial performance year on year though – at least in the short term - once normal operating conditions return.

As with previous years, and in line with the principles underpinning our financial strategy, any surplus generated by the University will be used to sustain investment in infrastructure and the digital estate, support the University’s operations, enhance the student experience and ultimately support UCL in achieving its academic mission. Performance against the other key financial indicators for 2020-21 was as follows: operating cashflow of 16.2% of income (2020: 11.6%), total debt of 3.1x EBITDA (2020: 3.0x) and liquidity of 156 days excluding headroom on short- access debt facilities (2020: 74 days).

USS Pension Provision

Over the previous two years, UCL’s reported results have been materially influenced by significant movements in the value of the USS pension provision. In the case of 2018-19 this was a £254.5m charge to the Statement of Comprehensive Income and Expenditure following an increase in the value of the Scheme’s deficit under the 2017 valuation to £7.5bn. For 2019-20, it was a £159.5m credit to the Statement of Comprehensive Income and Expenditure, following the conclusion of the 2018 valuation which assessed the deficit at £3.6bn.

In each case, a deficit recovery plan was put in place under which a proportion of employer contributions was specifically earmarked to fund past deficits within the scheme. For the most recent 2018 valuation, this was set at 2% of salaries over the period from October 2019 to September 2021 and rising to 6% for the period to March 2028.

As a participating employer, UCL is required to value this commitment to fund past deficits over the prescribed period and to account for it as a provision in its balance sheet. The value of the provision at the prior year-end date amounted to £225m and movement in the current financial year – a reduction of £1m to £224m – reflects the fact that, as at the year-end date, that 2018 recovery plan remains in force.

Under the 2020 valuation however, the deficit has been estimated at £14.1bn. Should current proposals on how to address this deficit be formally agreed by February 2022, as is presently envisaged, a new recovery plan will be put in place which will include an earmarked rate of 6.3% of salaries over the period to March 2038. This will again result in a significant increase to the value of the provision held in UCL’s balance sheet – to an estimated £68 1 m - as well as an estimated £46 6 m charge to the Statement of Comprehensive Income and Expenditure. Further detail on the status and potential outcomes of the 2020 valuation are set out in note 34 of these financial statements (Events after the end of the Reporting Period).

As the commitment under the recovery plan is funded from within existing contribution levels, it does not represent an additional cash outflow for the University and the provision will continue to unwind as employer contributions are paid.

Operating Performance

For the 2020- 21 financial year, UCL’s operating surplus (excluding USS pension charge and consolidated gains on investments) stands at £128.3m: 8.0% of total income and £74.4m (138%) above the £53.9m forecast for the year set in March 2021.

Within UCL alone and excluding subsidiary results, academic activity and professional services support outperformed the forecast by a combined £54.7m. This was primarily due to:

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• COVID and Brexit related delays to planned 2020-21 costs. These included costs to reinstate the campus to pre-COVID operating conditions (delayed by ongoing safety requirements) and equipment purchase costs that could not be incurred due to delays in supplier production and transportation.
• Continuation of reduced cost in areas of activity depressed by COVID, such as those relating to international travel and certain other campus-based costs.
• In year reinvestment of £8m into a number of areas including specialist equipment.
• A lower than expected impact on UCL’s research activity, partially due to UCL’s success in medical and public health research in response to the pandemic.

Additional surplus arising from the Group’s subsidiaries on consolidation accounts for the balance of the increase on forecast. This consolidated surplus contains a £2.5m loss incurred by UCL Residences: the Group’s commercial provider of non-term time accommodation and an entity that saw its operations severely disrupted by Covid-19.

In terms of the broader impact of the covid pandemic, a change to the way in which A-levels were graded resulted in a higher than expected number of students meeting their offer target and, as a result, an increased level of tuition fee income. This additional income was offset by additional costs including the recruitment of extra teaching staff and the provision of online learning and support. Accommodation income was significantly reduced as a result of lower occupation rates as well as by UCL’s decision to refund students unable to return to residences following the 2020 winter break when a further lockdown was announced.

The decision in May 2020 to pause all capital projects other than those that were in-contract or on-site remained in force throughout the 2020-21 financial year and continued to protect cashflow. Despite that pause, peak activity is now being reached on the UCL East development and this has led to a £41.1m increase in capital expenditure against the previous financial year.

Total capital expenditure on the estate for the 2020-21 financial year stood at £244m and included: £151m for UCL East, £25m for the Institute of Neurology Dementia Research Institute, £19m for project PEARL (a world leading facility designed to study human interaction with the built environment) and a further £49m for prioritised enhancements and additions across UCL’s teaching and research space. Forecasts for 2021-22 show that UCL’s capital expenditure will rise further as previously paused projects are reactivated, and £301m has been earmarked for the coming year.

The University’s available cash balance has increased by £319m over the course of the financial year however, largely as a result of our debut bond issuance in June: a £300m, 40 year Sustainability Bond carrying a coupon of 1.625%. This was the UK sector’s first sustainability bond and the lowest coupon rate ever achieved by a UK University bond. In pursuing a public listing, UCL also secured its debut public credit rating with Moody’s of AA stable: placing the University one ‘notch’ higher than the majority of rated UK Universities and on a par with the UK Government; again reflecting the underlying financial strength and resilience of the University.

Further detail on income and expenditure for the year is set out below.

Source of income

£m % £m %

Funding Councils 221.4 14 2 27.9 15

Academic fees 732.9 45 613.7 40

Research contracts 476.9 30 467.7 30

Other operations 146. 0 9 200.5 13

Interest 5.6 - 7.3 -

Donations and Endowments 26.7 2 26.6 2

Total 1 ,609.4 1,543.

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In June 2021 and as part of the funding strategy for the existing capital programme, UCL successfully raised £300m in long-term borrowing though the issue of its debut public bond: a 40 year sustainability bond with a coupon rate of 1.625%. This was the first sustainability bond issued by the sector and, at the point of issue, carried the lowest interest rate of any University bond. The bond is repayable in full in 2061 and the £300m liability sits within creditors due in over one year in the balance sheet.

As at the year-end date, UCL also had combined drawings of £280m against its debt facilities and this related wholly to the credit facility held with the European Investment Bank: the terms of which structure repayment over a 30 year period to 2048 with capital repayment commencing in June 2026. As to mid-term liquidity support, UCL holds a £150m revolving credit facility (RCF) with Natwest, which was entered into in January 2020, and provides rolling access to a maximum of £150m across a 7 year term. As at 31 July 2021, nothing had been drawn against the RCF leaving £150m of headroom.

Financial outlook

The national and international context for higher education is continuing to experience an exceptional degree of uncertainty and change as a result of the COVID pandemic, along with many other parts of our economy and social infrastructure. Attempting to map the financial outlook is even more challenging than usual but UCL is resilient and remains well placed to continue to pursue its strategic aims and thrive as the future landscape develops.

We have delivered a large-scale deployment of technology and digital solutions to support delivery of teaching and learning support to our students, and to enable new ways of working for academic staff, researchers and those in professional services. However patterns of educational delivery settle in future, this will serve us and our students well and ensure we can continue to strive for further improvements in teaching quality, educational outcomes and in the student experience.

We have incurred substantial additional expenditure in ensuring that the campus is COVID-safe for students and staff and are providing face-to-face teaching for all students able to get to campus, with the option of online teaching for those students unable to travel. The need to provide adequately for operational risks mean that the results for the 2021 - 22 financial year are expected at this time to be depressed, although our budget currently projects a surplus of circa 3%.

This has taken account of the importance of the 2021-22 year as we hope to emerge more fully from the pandemic, the need to support the student experience and the impact on students and staff. The extent to which the impact will continue into 2021-22 remains uncertain, though our forecast is for an operational performance that resumes its previously planned trajectory. UCL is live to the potential for continued volatility though and continues to map and actively track a range of risks in its financial planning.

As usual, any surplus generated by the University will be used to sustain investment in infrastructure and the digital estate, support the University’s operations, enhance the student experience and ultimately support UCL in achieving its academic mission. Notably, our most substantial capital projects - UCL East Phase 1 and the construction of the new headquarters for the Institute of Neurosciences and the national Dementia Research Institute - have continued throughout the pandemic and involve capital expenditure in excess of £ 24 0m for 2021 - 22.

The landscape in terms of UK higher education policy remains uncertain, though currently stable. Once the Government and the relevant funding/regulatory bodies are able to turn their attention away from other matters, we might expect to see new policy developments emerging and we will need to monitor those closely. Encouragingly, the Government have re-confirmed their commitment to increasing research spending to a level of 2.4% of GDP. UCL currently receives around £150m per annum recurrent research funding from Research England and expects to perform well in the REF 2021 which will determine the equivalent level of funding from 2022-23 onwards, unless delayed.

UCL will continue to monitor these external environmental pressures and assess the likely impact – positive or negative – on its financial position. Through its strength of reputation, global ranking, continued growth in student applications and positioning at the centre of both national and European research agendas, UCL remains well-placed to weather this uncertainty.

USS Pension Scheme

UCL participates in a number of pension schemes, the most significant of which is the Universities Superannuation Scheme (USS). The Trustee’s last completed valuation of the scheme took place as at 31 March 2018 and assessed the scale of the deficit to be £3.6bn (2017 valuation £7.5bn). Contributions increased to 30.7% in total from 1

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OPERATING AND FINANCIAL REVIEW

October 2019 (members 9.6% and employers 21.1%) and were due to increase again from October 2021 to 34.7% (members 11.0% and employers 23.7%) resulting in an anticipated additional cost to UCL of £12.5m per year.

Since that point, a further valuation as at 31 March 2020 has been undertaken and is now near to conclusion. In order to address a 2020 deficit estimated at £14.1bn, a joint resolution to reform future member benefits and increase covenant support to the Scheme from employers has been agreed. Should this proposal remain unchanged through the remaining statutory consultation with affected employees, a new schedule of contributions will come into force and the October 2021 increase will be limited to a total 0.5% (0.2% members and 0.3% employers): representing an increased cost of £1.4m per year for UCL against pre-October contributions and an £11.1m saving against the previously scheduled rate increase under the 2018 valuation.

This employer rate of 21.4% would then remain in place until 31 March 2028 subject to review following the next actuarial valuation.

Alternatively, should the proposal not be ratified and brought into effect by 28 February 2022, a fall-back schedule of contributions will apply. This would see employer contributions revert to the original 23.7% of salary in April 2022, increase again to 27.1% of salary in October 2022 (£28.9m per annum higher than the pre-October 2021 reference point) and rising gradually to 38.2% from October 2025 (£82.4m per annum higher than pre-October 2021 reference point). Employers have been clear that this fall-back schedule of contributions remains unaffordable.

Managing risk

UCL has a mature process for identifying, reviewing and monitoring those risks that pose the greatest threat to the achievement of its academic objectives. Institutional risks are captured through the strategic risk register, which is reviewed by the full senior management team and each risk is assigned an owner. Controls and actions are identified to mitigate the risk, and an assessment is made of impact and likelihood, both inherent and residual (post- mitigation). The outcome of this assessment leads to a grading which results in the categorisation of risks between intolerable, severe and manageable.

For the 2020-21 financial year, a register of Covid-related risks has also been maintained alongside the core “business as usual” risk register to enable active oversight of each set individually. This recognised that 2020-21 has been a year of transition for UCL - from remote back to on-campus operations - and the intention is to re-combine the two registers for the 2021-22 risk cycle.

Action is being taken in respect of all the identified strategic risks but most urgently in respect of those with the highest severity rating. The risk judged to have the highest residual (i.e. post-mitigation) impact rating was the potential for staff industrial action in light of sector tensions around pay and pensions. Pay and pensions are negotiated nationally and UCL is therefore unable to significantly influence the outcome; nevertheless the University remains committed to representing staff views effectively on both of these issues and to ensuring a programme of clear communication to staff throughout. A targeted plan to minimise disruption – particularly to students and the student experience - in the event of industrial action is also in development.

Two further emerging risks have also been added to the strategic risk register in 2020-21: the first concerned with ensuring that sufficient measures are in place to enable delivery of UCL’s own net zero carbon targets for 2024 and 2030, and the second focussed on ensuring that adequate space for research can be accessed now and in the future to avoid the loss of productive effort, missed opportunities and reputational damage with funders.

In the case of the former, UCL is building a pan-institutional Net Zero Carbon Plan that will detail the actions to be taken access all operation areas, is developing the governance framework to sit behind it, and will integrate its sustainability commitments into other operational strategies such as Finance and Estates to ensure a consistent and holistic approach. Addressing the second requires both short and long term actions: bolstering the current process for overseeing and managing research space, whilst also considering the development of bespoke space management systems.

Notable Covid-specific risks include: the potential deterioration of the physical and mental wellbeing of students and staff; increases in existing social, education and career related inequality brought about by Covid-19; and UCL’s ability – under current working conditions - to maintain its level of compliance across an increasing complex regulatory environment. In each case, a wide range of measures has been taken and resources committed to addressing the risk and to ensuring adequate support is provided for staff and students, whatever their circumstances.

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 20 21

CORPORATE GOVERNANCE

UCL is committed to exhibiting best practice in all aspects of corporate governance and endeavours to conduct its business in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership).

In 2019- 20 , UCL’s governing body, the Council, commissioned an external review of its effectiveness, including an exercise to benchmark UCL’s governance practices against the six primary elements of Higher Education Governance set out in the Higher Education Code of Governance, published by the Committee of University Chairs (CUC) in September 2020. The review found that, overall, UCL’s governance practice, principles, process and values were compliant with the CUC code. The review nevertheless made a number of recommendations for ways in which UCL might strengthen its governance in light of best practice. Council established a working group to consider these matters and report back to Council, and in February 2021 approved a number of the working group’s recommendations.

Council and other UCL committees have also continued to meet, albeit remotely, throughout the Covid-19 pandemic and in doing so, both Council and the relevant committees have kept the financial impact of Covid-19 under review as well as the impact on students, staff and other key stakeholders,

In this context, the summary below describes the manner in which UCL has sought to ensure that the best principles of governance and management are maintained in a manner appropriate to the nature and character of the institution.

The Council is responsible for the system of internal control operating within UCL and its subsidiary undertakings (“the Group”) and for reviewing its effectiveness. Such a system can only provide reasonable, and not absolute, assurance against material misstatement or loss, and cannot eliminate business risk. The Council identifies areas for improvement in the system of internal control, based on reports and views from the Audit Committee, Academic Board and other committees.

At its November meeting each year, the Council carries out an annual assessment for the year ended 31 July by considering a report from the Audit Committee, and taking account of events since 31 July. The Council is of the view that there is an on-going process for identifying, evaluating and managing the Group’s key risks and internal controls, that it has been in place for the whole of the year ended 31 July 20 21 and that, up to the date of approval of the annual report and financial statements, the process has been subject to regular review. The Council approaches this responsibility from the perspective of discharging its duties, as specified in the “Regulatory framework for higher education in England” published by the OfS in February 2018.

In accordance with the Statutes of UCL, the Council comprises external members, the President and Provost (Provost hereafter), elected academic staff members and student members (in numbers specified by Statute). The Statutes provide for the distinct roles of Chair and Vice-Chair of the Council, the Treasurer, and of UCL's Chief Academic and Administrative Officer, the Provost. The powers and duties of the Council are set out in the Statutes; the Council has adopted a Statement of Primary Responsibilities and a delegation framework. The Council holds to itself the responsibilities for the on-going strategic direction of UCL, approval of major developments and the receipt of regular reports from UCL officers on the day-to-day operation of its business and its subsidiary companies. The Council also acts as the board of trustees in the context of UCL’s status as an exempt charity and in line with the responsibilities thereby incurred.

The Council met twelve times during the year (including an away day). It has several committees, including Finance Committee, Audit Committee, Remuneration and Human Resources Strategy Committee and Nominations Committee. All of these Committees are formally constituted with Terms of Reference.

The Finance Committee comprises external members, the Provost and academic staff members, and is chaired by the Treasurer. The Committee met eleven times during the year. Among other things, it recommends to the Council UCL's annual revenue and capital budgets, the acquisitions or disposals of land or buildings, monitors performance in relation to the approved budgets and reviews UCL's annual financial statements with regard to UCL’s financial performance and strategy.

The Committee also receives and considers reports from the Office for Students (OfS) and UK Research and Innovation (UKRI) as they affect UCL's business and monitors adherence with the regulatory requirements.

The Investments Committee, which reports to Finance Committee, is chaired by the Treasurer and comprises up to three other external members with investment expertise appointed by Council. It governs, manages and regulates the investments of UCL.

The Audit Committee, which meets at least four times annually, is chaired by an external member of Council and comprises a majority of external members. The Committee considers reports from the Internal Auditors arising from their audits, which highlight significant issues and management’s response thereon, and reviews the conclusions of this work. The Audit Committee also approves the annual programme of UCL’s external provider of Internal Audit Services. Plans are drawn up based on assessment of the relative risks in relation to the UCL2034 Strategy, the significance of each operating area and their materiality in the context of overall UCL activity.

In complying with the UK Corporate Governance Code paragraph 29, in as far as it is applicable to higher education, (‘The board should monitor the company’s risk management and internal control systems and, at least annually, carry out a review of their effectiveness and report on that review in the annual report’), the Audit Committee conducts a high level review of the arrangements for internal control and data quality, with regular consideration of risk and

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CORPORATE GOVERNANCE

control, as well as of the adequacy and effectiveness of procedures surrounding the management and quality assurance of data submitted to the Higher Education Statistics Agency (HESA), the OfS, the UKRI, the Student Loans Company, and other bodies. Review is based on reports received from the Chief Operating Officer and the chair of the Risk Management Working Group, and emphasis is given to obtaining the relevant degree of assurance and not merely reporting by exception. The results of this review are then reported to Council.

The Committee is also responsible for meeting with the External Auditor to consider the nature and scope of the annual audit, and thereafter discuss audit findings and the internal control report arising out of the audit of the annual financial statements. The Audit Committee reviews the annual financial statements, paying particular attention to financial disclosures, accounting adjustments and control issues. Whilst UCL officers attend the meetings of the Audit Committee as necessary, they are not members of the Committee, and the Committee meets from time to time with the Internal and External Auditors on their own for independent discussions.

The Risk Management Working Group is chaired by the Chief Financial Officer and takes overall responsibility for ensuring that the significant risks to UCL’s corporate objectives are regularly reviewed, assessed, monitored and reported upon appropriately within UCL. It actively monitors and reports to the Provost’s Senior Management Team (SMT) on progress, with agreed actions, on all the identified risks, other than those directly monitored by the Provost’s SMT. It is also responsible for developing and providing documentation and guidance on the risk assessment process and regularly revises and updates the risk assessment criteria.

The Academic Board is a large body of over 1,700 members that provides advice to Council on a range of matters that have a bearing on UCL’s academic activity. The Academic Committee, which makes reports to both the Academic Board and Council, is responsible for, among other things, monitoring the effectiveness of UCL’s academic strategies, policies and procedures in respect of the management of research, teaching and learning, the definition and maintenance of academic standards and the enhancement of the quality of the student experience.

The Nominations Committee considers the filling of vacancies in the external membership of Council and the membership of other UCL Committees, and maintains an overview of Committee membership more generally.

The Remuneration and Human Resources Strategy Committee is chaired by the Vice-Chair of Council and comprises four other members of Council, including the Chair. The Committee determines the annual remuneration of senior officers of UCL, including non-clinical staff earning a salary of £180,000 or more, and where necessary decides on any severance payments. The Provost is not a member of the Committee and has always been excluded from discussions relating to his own remuneration package.

The Remuneration and Human Resources Strategy Committee also receives a report of the annual review of all non- clinical professorial salaries and administrative equivalents earning £150,000 or more. The remuneration of these staff is determined by the Provost in consultation with relevant Vice-Provosts and Deans and the Director of Human Resources. Salary levels are set to attract and retain members of staff for the successful operation of UCL, both academically and administratively, whilst being mindful of financial constraints and internal relativities. Modest awards are also made from time to time for exceptional individual performance. No remuneration is paid to external members of the Council or any of its Committees.

'The Trade Union (Facility Time Publication Requirements) Regulations 2017 require us to publish information on Trade Union facility time relating to a specific 12 month period. UCL's most recent data for the reporting period to 31 March 2021 is available on our website at: https://www.ucl.ac.uk/human-resources/policies/2021/sep/trade-unions. Facility time is the provision of paid or unpaid time off from an employee’s normal role to undertake Trade Union duties and activities. There is a statutory entitlement to reasonable paid time off for undertaking union duties.