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Update on relationship between University and the NIRD Trust

In February, the University was mentioned in an article in the Guardian about the sale of land belonging to the National Institute for Research in Dairying (NIRD) Trust and its implications for the University’s finances.

At the time, the Vice-Chancellor Robert Van de Noort responded to highlight that the University’s finances are sound, and also wrote an article for Times Higher Education (reproduced here) explaining the steps taken to resolve the issue. While the story was not widely followed up by other media, some stakeholders have asked us to clarify certain details, and we’ve been happy to do this.

Some colleagues have also expressed an interest, and so I thought it would be helpful to also give members of the University as full a picture as possible. In recent years, the University has provided more information and context about our accounts in our annual financial statement, in the spirit of openness and transparency. I hope the following information about the NIRD Trust will further help these aims.

What is the NIRD Trust?

The origins of the NIRD Trust date back to the 1920s, and are closely associated with the University’s longstanding work into the study of food, farming and agriculture. In its current form, the Trust exists wholly to pursue its aims of supporting research in these areas at the University of Reading, and to administer the Trust’s assets accordingly.

Until recently, these assets largely consisted of areas of low value farmland used to support dairy farming, including around the University farm near Shinfield. However, since some of this land was allocated as an area for new housing and other development by the local authority, the nature and value of the Trust’s assets have increased significantly and some land was sold for development.  This represented an excellent commercial deal for the Trust and increased the value of its assets considerably.

Financials

The University’s financial accounts do not just cover the main University operation. They include other related entities like connected trusts and subsidiaries in one set of accounts for what is called the University ‘group’. These consolidated accounts are standard practice for a large entity like us, which has lots of different constituent parts.

Following the NIRD land sales, proceeds were received and held in the University’s consolidated accountsThe proceeds from the sales have been used in two main ways.

Since 2014 the NIRD Trust has given £1.45m to fund several projects directly related to the objects of the Trust, such as improvements to facilities at the Centre for Dairy Research. A number of other funding projects are being discussed between the Trust and the University, such as for facilities at the University’s Food Pilot Plant and the Hugh Sinclair Unit for Human Nutrition.

An amount of £77m is currently treated in the University’s accounts as a loan from the NIRD Trust to the University. The total figure of £121m mentioned in our annual accounts for 2017/18 as loans includes this amount from the NIRD Trust and smaller amounts from four other University-related trusts, primarily the University’s Research Endowment Trust.

The University has made sure that these balances have been appropriately stewarded, and are always separately identified. The transactions are treated as ‘intra-group loans’ – that is loans between different parts of the University group. Interest is applied, based on the rates that are applied to short-term cash investments. The interest is recorded in the accounts of NIRD as income on a monthly basis. When the Trust wishes to allocate money in the form of grants, the cash held in the University’s consolidated accounts is used. 

The handling of all these transactions is consistent with normal practice for consolidated group accounts like ours and has been affirmed by our external auditors over many years. 

Governance arrangements

The University is the sole trustee of NIRD and a Trust Committee has carried out the University’s trustee obligations over many years. Having reviewed this arrangement last year, the University concluded that while the assets of NIRD have been actively managed and increased significantly in value, we did not think that the Trust Committee had the right level of independence. We are of course keen to follow good practice in all of our operations, and therefore in November 2018, the committee refreshed its membership and now includes internal and external members with specific expertise. 

This committee is now considering all aspects of the current and future dealings of the Trust, and the University’s relationship with it, and will make recommendations if it considers that any further governance changes are required.

For the purposes of transparency, the University wrote to the two relevant regulators, the Office for Students and the Charity Commission, in December 2018. This was on a precautionary basis to inform them that the above matters (ie that we felt our governance could be improved) had been noted, and advising them of our plan to change the governance of the NIRD Trust.

We are now confident that better governance arrangements are in place relating to the university’s management of the NIRD Trust and we remain of the view that there are no wider implications for the University’s ongoing financial position.

I hope this provides helpful insight into what is a fairly complex accounting issue. I will continue to keep you updated once the review by the independent Trust Committee is complete.

Samantha Foley, Chief Financial Officer

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