Message from the Bursar
Chris Blencowe was appointed Domestic Bursar at Pembroke in 2005 before taking over as Bursar in 2006. Later in 2013, Chris will be retiring from the Bursarship after a very successful period at the helm. As well as supervising the management of the College estate the Bursar looks after the financial administration of the College, assisted by the Finance Manager and Deputy Bursar, Andrew Enticknap. As well as chairing the College’s Finance Committee, Chris also sits on the College’s Investments Committee which decides how the College’s endowment is invested. This committee is composed of 13 members, 8 Fellows of the College and five external finance professionals who are also Pembroke Members.
In this message Chris reflects on some of the reasons why the College chose to focus on an endowment campaign and the effect that this has had on the finances of the College.
1. The College’s Philosophy of Financial Management
The College’s aim is to generate sufficient annual income to cover its operating costs. In the last couple of financial years we have made a modest surplus which has been invested in the endowment. Our total income last financial year was £13.2M while our expenditure was £13M, including endowment gifts and investment. This equates to a surplus of £208k, up from a surplus of £95k in 2010-11.
In terms of “wealth”, with our current endowment of just under £57M, Pembroke stands at the mid-point, 15th in the colleges’ table. That said, we are much higher up the table in terms of income and expenditure because of the necessary costs of maintaing our important income-generating International Programmes and Corporate Partnership operations.
2. What are the College’s sources of income?
The College’s income is generated from a number of sources. Pembroke retains its share of the student fee and generates income from rents, the Kitchen Fixed Charge and money from student catering. Collectively, these represent around 36% of the College’s income. A significant part of the remainder comes from International Programmes, the Corporate Partnership Programme and modest revenues from conferences. We also drawdown at a rate of just over 4% from our endowment. Finally – and very importantly – gifts and legacy bequests from Members and friends constitute the balance of our income. In terms of our expenditure, around 44% of the costs are staff costs and stipends.
3. Why was the’ Excellence in Perpetuity’ campaign necessary; what was the rationale of its focus on raising money for the endowment?
Although Pembroke had diversified its sources of revenue over the previous two decades, the “funding gap” had appeared and grown, as fees were introduced but failed to keep pace with the actual cost of educating students. Today’s funding gap is roughly £3,500 for both undergraduate and graduate students. This shortfall is directly funded from the College’s endowment.
Our endowment is the fund that provides a perpetual source of income for the College. It is managed with the aim of providing sufficient growth to maintain the real value of the endowment’s capital while also generating income to support the annual operational cash requirements of the College. Increasing the size of the endowment would enable the College to sustain its activities by guaranteeing the income of the College.
Running a campaign with the stated aim of increasing the endowment, and preferably unrestricted endowment, was virtually unheard of among UK educational institutions in at that time. However, this is where a campaign could have the most impact on the College’s finances. Donors who made a donation would be positively impacting on the life of students and Fellows 25, 50 or 100 years from now.
4. How is the College’s endowment managed and how is it used to support the College?
The endowment consists of two roughly equal elements, the general fund and the trust funds. Trust funds must be used on specific projects that had been agreed with a donor – for example the endowment of a studentship or a Fellowship. Income generated by the general fund can be spent according to the College’s priorities. Legacy bequests, unless otherwise specified, are put into the unrestricted endowment.
At a day-to-day level, the College focuses on good husbandry and managing costs. Through delegating budgetary responsibility to Heads of Departments and working closely with them, we have made significant efficiencies. At a broader level, we have pared back how much we draw down from the endowment from close on 5% in 2008 to a little over 4% this year.
The College manages its investments to achieve total real return. In 1992, the College’s endowment stood at around £18M and was distributed almost entirely between property and equity. Now the endowment stands at nearly £57M and is far more diversified, both in terms of managers and investment instruments than it was 20 years ago.
5. What has the money raised during the ‘Excellence in Perpetuity’ campaign supported?
The money so far received has helped the endowment rise by £14M. It has also funded a number of bursaries, studentships and Fellowships as much as significantly increasing the range of hardship support we can offer to our students.
Physically, it has enabled the College to purchase and convert Botolph House into Chris Adams House, providing rooms for teaching and offices for Fellows. We have been able to increase the amount of student accommodation through the purchase of Waterloo House on Lensfield Road and the houses on the corner of Trumpington Street and Fitzwilliam Street, increasing our student accommodation by 37 rooms. We have undertaken long-overdue renovation and modernisation of facilities in the Chapel and the Hall and a new Graduate Parlour has been built in M staircase. We have also refurbished the sports pavilion and built an on-site flat above it for the groundsman.
6. What difference has the campaign made to the College’s future?
As long as we manage this opportunity well, this is a great foundation for us to build on. It has already allowed us to be innovative in the way we have structured our student support following the introduction of the £9,000 fee. We have been able to support research seminars for our own Fellowship. One example of this is the support we have been able to give Professor Charles Melville for the Cambridge Shahnameh Project. The most important consequence of this success, however, is the confidence it gives us to continue to be innovative and to plan for further significant projects such as our ambitions for the University’s Mill Lane site.
7. What challenges does the College face in the future?
First, we cannot rest on our laurels in terms of supporting our primary purpose of teaching. We will, therefore, need to continue to expand the range of support for students, not only undergraduates but also graduates. We also need to continue to attract and retain the best academics in our Fellowship.
Next, there remains the concern that our various income streams are potentially vulnerable. There is always the possibility of a freak occurrence, for example if another Icelandic volcano erupts, leading to the cancellation of flights, impacting on our International Programmes courses, or if another financial downturn reduces the appetite for engagement in our Corporate Partnerships.
The effect of the 2008 economic crisis saw a shrinking of the endowment. It was not as bad for us as it was for others but we have to be wise in our investments and remember we are a perpetual, not short-term, institution. In time we need to continue to increase the value of our endowment, to well over nine figures.
Finally, we need to realise that we have no automatic right to the successes we have enjoyed in recent years.
8. And what are the opportunities?
We will continue to nurture and expand our Corporate Partnership Programme and our International Programmes courses. In both we have formed useful links in China and it will be exciting to see where they will take us.
We are actively leading the way and influencing the University through our plans for student support and research initiatives. There is also the potential and important redevelopment of the Mill Lane site along with three neighbouring colleges. That would allow us to expand the amount of accommodation close to the College site, although this is not to rule out any of the opportunities offered by the expansion of the University’s North-West Cambridge development. The simple fact is that we have very little rattle room or spare capacity and we need to meet our longer term objectives and, particularly, the challenge of housing an ever-growing population of graduate students.
9. The University has announced that it will issue a £350M bond, what’s your view on this?
It is certainly makes sense for the University and enables it to unlock the growth and financial potential of its North West Cambridge site. I feel there may be scope for colleges to follow suit on a smaller scale, either as part of the University’s move, or collectively and discretely as colleges. Raising a little capital at those advantageous rates could certainly provide a financial safety net for our ambitions on the Mill Lane site.
10. What is the College’s position on financial independence for the University?
It depends what we mean by independence. If it were to result in a substantial increase in fees generally, then I think we need to be very careful. There is no doubt that the colleges and University could market their student places internationally at a far higher fee, while still maintaining very high standards. And there may be a case for doing this on some courses at graduate level. But my simple, perhaps old-fashioned, view is that one of the important roles the University fills is as a strategic, national asset. The Tripos is the Blue Riband of degrees and the opportunities afforded to undergraduate are without parallel. Ensuring that the most able UK undergraduates – whatever their backgrounds – are the principal recipients of this exceptional product, and that they go out and change the world for the common good, has to be the most important of our priorities.
11. Finally, from your point of view as the Bursar, how important is fundraising and the engagement of alumni to the College?
The support of our Members is vital. It provides us with energy, direction, innovation and ambition. We do so much with what we have got, but we’re always looking for ways to do more. We want to be a centre of excellence for research and maintain the quality of support and teaching for the most able undergraduates and graduates and we will continue to need Members’ much-valued support to do this.
(Photo: Steve Bond)