Reports and Financial statements 2009 - the University Offices ...

Financial Review
Funding
The sources of income of the University are:
• the Government, which through the Higher Education Funding Council provides a block
grant for teaching and a grant determined by the quality and volume of research through
the Research Assessment Exercise last carried out in 2008
• students through fees charged for instruction and facilities
• research income from publicly funded Research Councils, charitable
foundations, and through collaborations with the private sector
• benefactions and donations for current use
• investment income from our accumulated endowment
• income from services provided to external customers, including the customers of
Cambridge Assessment and Cambridge University Press
• a small but increasing income from commercialization of intellectual property.
Accounting changes
The main investment pool generating endowment and investment income is the Cambridge
University Endowment Fund (CUEF). As described later in this Financial Review the CUEF is
managed on a total return basis, such that the amount distributed for budgetary expenditure
is determined by a formula which has regard to the total return reasonably to be expected
in the long term.The CUEF’s portfolio has been steadily transitioned from direct, incomeyielding
investments to an indirect investment approach intended to maximize total investment
return. A substantial proportion of the CUEF’s current underlying investments yields
little or no income in the form of dividends, interest, and rents. In the year ended 31 July 2009,
distributions by the CUEF exceeded the income received from its underlying investments
by £25.8m (2008: £4.5m), the balance of the distributions being funded by drawing on longterm
capital growth. It is appropriate, for accounting purposes, to ‘look through’ the CUEF to
the underlying investments in order to determine the income receivable by the University.
In these financial statements total endowment and investment income includes the income
from CUEF’s underlying investments rather than the distributions made by the CUEF.
The impact is that endowment and investment income is £25.8m less than it would have
been under the former basis, with a corresponding increase in capital gains. For the individual
trust funds and other endowment funds which have invested capital in the CUEF the full
distribution remains available as income.
Following a review of categorization of income, an element of income from research sponsors
is now classified as Other Income, and certain grants received on an agency basis are now
excluded. Comparative figures for 2007–08 have been restated.
The threshold for capitalization of expenditure on equipment has been increased to £30,000
per item.
58 University of Cambridge Annual Report 2009