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Another Reading update: this time with some questions answered

May 9, 2019

As outlined in previous blog posts, I first contacted Reading about the money the university owes to its trusts in mid-January. On April 10th, I finally received an email responding on the record to the questions I had raised. That statement was worded in confusing fashion so it has taken a bit of time to have things clarified.

The main development: Reading has now revealed that the £120million is owed to more than one of its trusts (and not simply the National Institute for Research in Dairying – NIRD). The table provided compares the amount owing at the end of July 2018 (end of year for the 2017/18 accounts) with end of January 2019.

owed to trusts

Reading goes on to argue that these loans do not represent external debts, but interest is being levied. The university provided particular detail on the £77million owed to NIRD (though it subsequently confirmed that all the loans are being treated in the same way). The money outstanding is being 

“treated as a loan with an interest rate applied using the weighted average return on short term cash investments. Interest is payable on these sums and is rolled up in the balance on a monthly basis and recorded as such in the accounts. The sum is technically repayable on demand, and is therefore accounted as being repayable within one year. This is consistent with accounting practice for intra-group transactions. This approach has been endorsed by previous and current auditors.”

NIRD exists to advance research into agriculture and dairy at Reading. The statement goes on to specify recent NIRD-related projects at Reading:

“Since 2014 NIRD has funded several projects directly related to the objects of the Trust totalling £1.45m, including specialist equipment for measuring emissions from dairy farming, improvements to facilities at the Meat and Growth Research unit, and expansion of cowsheds for housing cattle at Hall Farm in Shinfield.”

£1.45million over the last five years is not very much and indicates a potential problem for Reading in finding £77m worth of relevant projects to finance over the coming years. (the new vice-chancellor used an Open Letter in February to explain that “all considerable net proceeds of the sale will over time be reinvested in research in food and agriculture at the University”).

Reading’s latest missive further specifies that:

“The University is currently in discussions with NIRD on funding for a number of eligible projects. These include funding research facilities at the University’s Food Pilot Plant, which is involved in numerous studies and trials into milk and other dairy products, and the Hugh Sinclair Unit for Human Nutrition, which undertakes research into the impact of nutrition on human health and disease, including cardiovascular disease.”

No costing for these possible projects is provided. It is worth emphasising that Reading would have to divert sums from elsewhere to cover these plans as it has spent the money the trusts have loaned the university. This has financial implications for the operation of the university. The unrealistic treatment of the loans as payable on demand allows Reading to avoid specifying a timescale by which the balances should be settled.

Finally, Reading confirms that an independent committee with “external specialist legal advice” has been established to represent the interests of NIRD.

“The independent committee representing the NIRD Trust was set up to consider all aspects of the current and future dealings of the Trust and the University’s relationship with it. This includes considering spending plans using the proceeds of the sale of land at Shinfield in the form of grants. The committee is fully independent and no specific remit or time limit was set for reporting.

“The issue was fully investigated and reported to the then Acting Vice-Chancellor in November 2018 at which point we sought external specialist legal advice, the independent panels were set up, and in December 2018 the University informed [Charity Commission] and OfS.

“Our correspondence with OfS and CC was on a precautionary basis to inform them that the above issues had been identified and advised them of our plan to review and improve the governance of the NIRD Trust. While the detail of the letters are confidential, both CC and OfS provided acknowledgement of the information and CC asked for further information which was provided.”

So with regard to NRID there are several strands of the issue that are still to be resolved.

But overall, the university owes £120m to its associated trusts. Money it does not currently have and which has to be generated from other activities in order to settle the claims, even if the loans are converted to grants. In short, the financial situation at Reading is much worse that would appear from simply looking at the “consolidated” figures in its financial statement and it is not clear how its future performance will be affected.

Other universities with trusts of this kind do not appear to have got themselves into this mess. 

 

 

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