2020 ANNUAL REPORT

This Report of the Governing Council consists of the following sections:

• Energy and Carbon Reporting
• Statement of Corporate Governance
• Statement of Internal Control
• Statement of Financial Responsibilities
• Additional Areas of Assurance

Energy and Carbon Reporting

Introduction

The University Group has a mandatory obligation under The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 to disclose its UK energy and greenhouse gas (GHG) emissions. specifically, and as a minimum, we are required to report those greenhouse gas emissions (GHG emissions), if applicable, relating to gaseous fuels, liquid fuels, electricity (grid-supplied), transport fuel from company-owned vehicles and third-party vehicles and the leakage of HFCs from refrigeration equipment. We use intensity ratios (energy performance indicators) to normalize our energy and carbon figures as part of our commitment to the Streamlined Energy and Carbon Reporting (SECR) regulations 2018.

To ensure we achieve the transparency required we have commissioned a third-party, Professional Energy Management Ltd. (PEM) to compile this report. PEM have previously undertaken energy related work for the Group, including compliance with the Energy Performance in Buildings Directive 2010/31/EU and carbon management audits. The Group consists of academic and student residence buildings. The gross internal area (GIA) of these, 190,764m2 at 31 July 2020, has been used to calculate the intensity ratio.

Period

The annual period covered (the ‘period’) for the purposes of the streamlined energy & carbon reporting section is the year ending 31 July 2020.

The first period reporting under these regulations falls within the UK COVID-19 national lockdown that commenced on the 23rd March 2020. The COVID-19 lockdown period in 2020 will have the effect of distorting the figures and will not give a true reflection of normal consumption (based on occupancy and gross internal area). The Group will consider how to account for the impacts of the COVID-19 lockdown during its next reporting round to allow us to compare on a ‘like-for-like’ basis.

Emission Scope

Scope 1

• Emissions resulting from combustion of fuels in stationary sources, e.g., boilers.
• Emissions resulting from the combustion of fuels in company owned/controlled mobile combustion sources (e.g. buses, garden vehicles and cars) – c. 33,000 miles of coach travel by an external provider has been excluded since the partnership has no control over these emissions.
• Fugitive emissions. These emissions resulting from the intentional or unintentional releases, e.g. (HFC) emissions during the use of refrigeration and air conditioning equipment.

Scope 2

• Emissions from the generation of purchased electricity that is consumed in its owned or controlled equipment or operations.

Scope 3

• Business mileage (personal staff vehicles for business purposes, pool cars, leased mini-buses, 9- seaters, hire vans and short-term hire)

Conversion Factors, Emission Factors & Global Warming Potential

The following conversion and emission factors to output energy use in kilo-watt hours (kWh) and tonnes of CO2e (tonnes of carbon dioxide equivalent) have been used.

Conversion Factors

• Diesel transport fuel (litres) to (kWh – gross CV) – multiply by 10.631
• Unleaded transport fuel (litres) to (kWh – gross CV) – multiply by 9.611

Emission Factors (2019)

• Grid supplied electricity (2019 no Transport & Distribution Losses) – 0.2556 kg CO2e/kWh
• Natural gas (gross CV) – 0.18385 kg CO2e/kWh
• Unleaded transport fuel – 2.39 kg CO2e/litre (in tank) does not include well to tank (WTT)
• Diesel transport fuel – 2.62 kg CO2e/litre (in tank) does not include well to tank (WTT)

Global Warming Potential

• HFC release on a mass basis is converted to CO2e using the relevant global warming potential factors in greenhouse gas reporting conversion factors 2019.

Scope and boundary

The boundary includes all the buildings within the Group.

All gaseous fuels combusted on site at the buildings together with all grid supplied electricity is included within the scope. Fuel consumed in vehicles owned by the partnership or a third party is included within the scope. The release of HFC from site-based air conditioning systems is included in the scope. The Group has six solar PV systems and a demonstration wind turbine at its sites.

The Solar PV System negates the need to consume electricity from the grid therefore the carbon benefits are automatically applied through a reduction in grid supplied electricity. All energy consumed by the partnership is in the United Kingdom. Energy Consumption The partnership has numerous buildings, all of these use gas-fired boilers and electricity.

This methodology follows the GHG Reporting Protocol and uses the 2019 Government emission conversion factors for greenhouse gas company reporting. The conversion factors are updated annually and are generally released each year in June.

We have utilised the 2019 emission factors. Estimates & Omissions There are sound methods in place at all sites to collect refrigerant type and equipment charge capacity to enable emissions to be calculated using the screening method.

Data for fuel used by staff within their own vehicles has been excluded from this report (scope 3 emissions).

Disclosure of information

The disclosure for the period is shown below.

Quantification and reporting methodology

The 2019 HM Government Environmental Reporting Guidelines have been followed. The GHG Reporting Protocol – Corporate Standard and the 2019 UK Government’s Conversion Factors for Company Reporting have also been used. PEM Ltd. have assessed the partnership’s GHG emissions in accordance with the HM Government’s ‘Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance’ (March 2019)* .

Energy Intensity Ratios

The chosen intensity ratio:

• Total gross emissions in metric tonnes tCO2e per m2 , the recommended ratio for the sector. This allows comparison of buildings within the academy and is useful for benchmarking. This intensity ratio is also used for both the Higher Education Statistics Agency data set and Display Energy certificates.

Measures taken to improve energy efficiency

 TUOD already employs good environmental stewardship. The University has six solar photovoltaic (PV) systems installed across its sites. These systems generate approximately 135,000 kWh/yr of clean electricity mitigating the release of 528 tCO2e. In addition, the Kedleston Road site has a demonstration wind turbine and a 374 kWh output combined heat and power (CHP) unit. In 2015 The University produced its first carbon management plan (CMP3). The CMP set aspirations to meet the following targets by 2020/21.

• Electricity (scope 2) – 42.77 kgCO2e/m2
• Gas (scope 1) – 22.16 kgCO2e/m2
• Water (scope 3) – 0.4004 kgCO2e/m2
• Waste (scope 3) – 1.0686 kgCO2e/m2
• Procurement (scope 3) – 150.73 kgCO2e/m2

Further investment in technological energy conservation measures (ECM) are needed in the short-term. ECMs for electricity reduction are replacement of old inefficient T8 fluorescent lighting systems with energy efficient LED alternatives. In addition, the application of further Solar PV to some of the rooftops of the buildings is receiving some attention. The University intends to explore the viability of such schemes in the financial year 2020/21. The primary ECM for space and hot water heating (currently gas and oil fired) will be a major review of space utilization over the next 12 months.

* https://www.gov.uk/government/publications/environmental-reporting-guidelines-including-mandatory-greenhouse-gas-emissions-reporting-guidance

Statement of Corporate Governance

This statement of corporate governance covers the period of the financial statements for the year ended 31 July 2020, and the period up to the date of approval of the audited financial statements.

The establishment of the University of Derby was approved by the Privy Council under the provisions of the Further and Higher Education Act on 14th January 1993. It was subsequently incorporated as a company limited by guarantee on 7th July 1995. The Company Registration number is 3079282. The University became an exempt charity by order of the Privy Council with effect from 30th November 1995 (SI 1995 No 2998). The Office for Students (OfS) is the independent regulator of higher education in England and in October 2018, the University was formally entered in the Register for English higher education providers.

The University is committed to best practice in all aspects of corporate governance. It follows the principles set out in the Committee of University Chairs (CUC) HE Governance Code of Practice and complies with the OfS Public Interest Governance Principles. The Governing Council (GC) is the Board of Directors of the Company; it also comprises the Members of the Company and the Trustees of the Charity. It observes the highest standards of corporate governance and discharges its duties with due regard for the proper conduct of a business that receives public funds, ensuring regularity and propriety in the use of this funding as articulated below. The powers and framework for governance are set out in the Articles of Association and Ordinances.

In summary, the GC:

• Determines the educational character and academic direction and integrity of the University;
• Ensures that students benefit from a valuable learning experience;
• Approves the mission and strategic aims of the University;
• Ensures the establishment and monitoring of systems of control and accountability;
• Ensures that the University fulfills its legal obligations;
• Ensures that there are procedures for handling internal grievance, conflicts of interest, fraud and corruption so as to ensure that staff can raise matters of concern;
• Ensures that processes are in place to monitor and evaluate the performance and effectiveness of the University, and,
• Monitors and evaluates the performance and effectiveness of the GC itself and conducts its business in accordance with best practice

Corporate Governance Arrangements

GC meets formally at least four times per year and in addition holds two strategic planning events with the ViceChancellor’s Executive (VCE) and the Academic Board. It has a number of formally constituted committees, each of which has clearly defined, delegated responsibilities, as outlined in the table below.

Members of Governing Council and Directors

The biographical details of the current members of GC can be viewed on the University’s website.

Student and staff representative membership is included in the composition of the GC and all Committees with the exception of the ARC, which comprises independent governors and a student representative member.

To provide further transparency about the business of the GC minimally redacted minutes of the meetings of the following are published on the University’s website, once approved.

• GC (2010 onwards)
• Remuneration Committee (July 2017 onwards)
• ARC (October 2019 onwards)
• SFPC (October 2019 onwards)

Effectiveness of Governance Arrangements

Following a procurement tender process, BDO were appointed to undertake an external governance effectiveness review in 2019 in line with the CUC’s HE Code of Governance. The review focused in particular on the University’s compliance with the Public Interest Governance Principles as set out in the OfS’ regulatory framework conditions of registration. The recommendations arising from that review were addressed through work of the ARC and Nominations Committees, with oversight from GC.

The University has assessed through self-declaration and further checks, and satisfied itself that governors and members and the VCE can be considered ‘Fit and Proper’ persons. Through its annual report to GC, ARC has provided assurance regarding the rigour and review of the process by which statutory data returns are formally monitored and submitted to relevant regulatory bodies by the University to safeguard timely and accurate outputs.

Following the COVID-19 pandemic outbreak, leading to lockdown on March 23rd, ARC received full reports from the VCE team on plans to adapt to on-line teaching delivery to protect the student experience, progression, achievement and completion. A governance reporting structure was established with decision making and approvals residing with the University’s Business Interruption Gold Command. ARC and GC were briefed throughout the period on risks, mitigations and plans to return to campus from September 2020. This included presentation of financial scenario modelling for 2020/21 budget planning and September 2020 recruitment.

GC has maintained oversight of and assurance regarding the adequacy and effectiveness of the University’s compliance with the OfS’ ongoing conditions of registration and in turn the OfS Terms and Conditions of Funding (2018.15 and 2019.12).

Governors’ skills and experience are reviewed annually through a health check questionnaire considered by the Nominations Committee. This process highlights gaps and enables the Chair and Clerk of GC to plan how to address any issues that arise. The Chair meets with each member of the GC annually to discuss the effectiveness of GC and to provide feedback on individual performance. New governors receive an induction handbook and are invited to meet the Chair of GC, the Clerk and members of the VCE. They are also required to undertake mandatory training in Prevent awareness and the General Data Protection Regulation. Other training and development opportunities are made available, usually through the AdvanceHE development programme.

When considering the succession planning and refreshment of the board due regard is given to diversity among the members of GC. Nominations Committee undertook a search for two co-opted advisers to join ARC, using the services of an external recruitment consultancy. Peridot Partners have a proven track record in finding high quality non-executive applicants in the sector. This served not only to strengthen the membership of ARC, but is considered to be a pipeline for future succession planning to GC.

Throughout its activities GC has strived to develop a diverse membership. During the year and up to the date of the approval of the financial statements, the governing body comprised 11 male and 14 female members and included four members from a BAME background.

GC delegates power to the Remuneration Committee to determine the remuneration and the bonus payments due to senior post holders. The Remuneration Committee’s Terms of Reference are aligned to the CUC HE Senior staff Remuneration Code. GC receives an annual report from the Remuneration Committee which was approved by GC in November 2020. This report is published on the University’s website.

SFPC advises GC on matters relating to the short and long term future of the University. It monitors both corporate strategy and the forward looking financial position including cash flow and investment priorities, taking into account the University’s responsibilities for employment, safeguarding, equality, diversity and for corporate risk management and long term sustainability. SFPC has kept a particularly close scrutiny of the University’s liquidity position in light of the requirement from the regulator for registered institutions to report if annual liquidity was likely to fall below 30 days. The University was not required to report on this matter.

The FEGC oversees the quality of Further Education teaching and learning at the University. It reports to GC on educational character, FE strategy and sustainability and the effectiveness of FE management. During the year GC has approved that a change is required to the focus of FEGC in order to more fully align with the Education Inspection Framework, the skills and apprenticeships agenda. Going forward the composition and terms of reference of FEGC will be revised.

GC has taken reasonable steps to ensure that funds from OfS and other public funding bodies are used only for the purposes for which they have been given and in accordance with the terms and conditions of those funding bodies. This is achieved through ensuring that appropriate financial and management controls are in place to safeguard public funds and University assets, as set out in the following section.

University Court

The University’s Articles of Association state that there shall be a University Court. This is a forum of critical and supportive friends of the University. During the year membership has remained at around 200 members, comprising external associates and friends, together with governors and senior managers of the University. Meetings of Court are presided over by the Chancellor, William Cavendish, Earl of Burlington. Three meetings of Court took place during 2019/20.

Statement of Internal Control

This statement of internal control covers the period of the financial statements for the year ended 31 July 2020, and the period up to the date of approval of the audited financial statements.

The approach to internal control is risk-based, including an evaluation of the likelihood and impact of risks becoming a reality. The system of internal control is based on an ongoing process designed to identify the principal risks to the achievement of policies, aims and objectives: to evaluate the nature and extent of those risks; and to manage them efficiently, effectively and economically. This process has been in place for the year ended 31 July 2020 and up to the date of the approval of the financial statements. However, it is important to note that no system of internal control can provide absolute assurance.

GC acknowledges its responsibility for ensuring that a sound system of internal control is maintained. This responsibility includes the identification and management of risk as an ongoing process linked to achieving the organisation’s objectives. GC has established an ARC, which is responsible for assuring it about the adequacy and effectiveness of:

• Risk management, control and governance
• Economy, efficiency and effectiveness (VFM)
• The management and quality assurance of data

It is the role of ARC to advise and assist GC in respect of the entire assurance and control environment of the institution. This in turn assists to ensure compliance with the OfS General Ongoing Condition G2: Terms and conditions of financial support.

GC’s review of the effectiveness of the system of internal control is informed by the work of internal auditors, not employed by the University, who operate to the standards set out under Annex C of the Terms and Conditions of Funding for Higher Education Institutions published by the OfS. It is also informed by ARC, which has oversight of internal audit and reports annually to GC for its approval of the effectiveness of risk management and the system of internal control; by the work of the VCE and the risk managers within the University who have responsibility for the development and maintenance of the internal control framework; and by comments made by the external auditors in their management letter and other reports.

GC confirms that there is an ongoing process for identifying, evaluating and managing the University’s significant risks. ARC meets at least four times per year and along with the GC receives a Strategic Risks report to each of its meetings. The University has seven Strategic Risks that play a significant role in delivering successful outcomes against the University’s Corporate Plan and Strategic Objectives. Across them the Strategic Risks cover business, operational and compliance risk as well as financial risk. GC, SFPC and ARC also received and discussed regular Business Continuity reports and was able to gain assurance of management’s control over its arrangements, particularly during the COVID-19 lockdown period.

Upon the recommendation of ARC, GC appoints an internal auditor to provide assurance about the University’s internal control arrangements. ARC receives reports on internal control and risk at each meeting, monitored against an agreed plan of internal audit work. The development of the plan is founded on a risk-based assessment and through discussion with VCE, submitted for approval by ARC. Recommendations arising from the internal auditor’s workplan are reported to and monitored by ARC in order to ensure risk assessment and internal control is embedded in the University’s ongoing operations. This in turn contributes to the University’s delivery of value for money for both students and the tax-payer.

GC confirms, based on the audit conducted by the internal auditor, that it is able to provide assurance that the University’s risk management system is operating effectively and that the University is compliant with OfS requirements.

Statement of Financial Responsibilities

Statement of Directors’ Responsibilities in respect of the Strategic Report, the Report of the Governing Council and the Financial Statements

Company law, along with the terms and conditions of ongoing registration with the OfS, requires the GC, through its Accountable Officer, to prepare and present audited financial statements for each financial year. Under that law they have elected to prepare the University financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The terms and conditions of funding further require the financial statements to be prepared in accordance with the 2019 Statement of Recommended Practice – Accounting for Further and Higher Education, in accordance with the requirements of the Accounts Direction issued by the OfS.

Under company law GC must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the University and of its income and expenditure, gains and losses and changes in reserves for that period. The University has complied with the terms and conditions of funding set out within documents OfS 2018.15 and OfS 2019.12.

In preparing each of the University financial statements, GC are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• assess the University’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the parent University or to cease operations or have no realistic alternative but to do so.

GC is responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that its financial statements comply with the Companies Act 2006.

They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the University and to prevent and detect fraud and other irregularities.

GC is also responsible for ensuring that:

• funds from whatever source administered by the University for specific purposes have been properly applied to those purposes and managed in accordance with relevant legislation;
• funds provided by OfS and Research England have been applied in accordance with the terms and conditions attached to them;
• there are appropriate financial and management controls in place to safeguard public funds and funds from other sources; and
• the University’s resources and expenditure are managed efficiently and effectively.

GC is responsible for the maintenance and integrity of the University and Group’s financial information included on the University’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Additional areas of assurance

Prevent Duties

GC received a copy of the University’s submission to OfS on the University’s ongoing compliance with its Prevent duties. It received additional assurances that existing governance and oversight had been widened and further strengthened to include the other strands of the CONTEST strategy. The University believes it has demonstrated due regard to the Prevent Duty and is not at risk of non-compliance with Prevent.

The OfS has previously indicated the holistic approach by the University of the CONTEST strategy and action plan as an area of good practice to be shared with the sector.

Duty to promote the success of the group

GC and VCE, both individually and together have acted in the way, they consider to be in good faith, would be most likely to promote the success of the Group for the benefit of the members, and in doing so have regard to the matters set out in s172(1) (a) to (f) of the Companies Act.

The likely consequences of any decision in the long term

The Group’s purpose is to provide high quality learning opportunities to learners in the UK and internationally who wish to enhance their career and earning potential. We are part of a sector which is well placed to help the Government respond to recession through developing key skills in the workforce and innovation through research. We have strong financial performance, tight budgetary controls and our going concern modelling shows we are a resilient organisation that can withstand and respond to the uncertain external environment.

The interests of Group employees

Our employees across the Group are fundamental to our mission, which is why they are at the heart of our strategy. The health, safety and well-being of our employees is one of our primary considerations and we have actively engaged with employees throughout the year to ensure staff are fully supported in their roles.

The need to foster the Group’s business relationships with suppliers, customers and others

Our stakeholders are core to our organisation, and we emphasise the fundamental importance of high-quality services and trust. We aim to act responsibly and fairly in how we engage with our suppliers, our stakeholders and our regulator; all of whom are integral to the successful delivery of our purpose and strategy.

The impact of the Group’s operating on the community and the environment

Operating in a recognised area of social immobility, the University has a strong focus on widening access to higher education in its community. We are ranked second out of the 132 UK universities by HEPI for fair access and believe higher education should be equitable, inclusive and open to all with the ambition and desire to learn.

We have a keen awareness of our impact on the local, national and global environment, and we are particularly conscious of our responsibilities. The University has an Environmental Management System in place that ensures we continue to manage our environmental impacts, comply with environmental legislation and commit to protecting and enhancing the environment.

The desirability of the Group maintaining a reputation for high standards of business conduct

Our intention is to behave responsibly and ensure that management operate the business in a responsible manner. We operate within the high standards of business conduct and good control set out in our Statements of Governance and Internal Control, and therefore the company demonstrates the highest standards of governance.

The need to act fairly between members of the Group

Our intention is to behave responsibly towards all parts of our Group and our stakeholders and treat them equally and fairly, so all benefit from the successful delivery of our plan.

Disclosure of information to auditors

The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Group’s auditors are unaware; and each director has taken all the steps that s/he ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. KPMG LLP was re-appointed as the University’s auditors in January 2021.

This report is signed-off by members of the Governing Council, January 2021.

List of Governing Council members