Integrated Thinking and Reporting

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1 Integrated Thinking and Reporting We are looking for eight universities to take part in a new funder supported project. This is a background document for universities considering participation. A document containing detailed guidance for expressions of interest is also available. An Integrated Report is.. a concise communication about how an organisation s strategy, performance and prospects.. lead to the creation of value over the short, medium and long term IIRC 2013 At a time when universities are facing ever more scrutiny and public accountability some have started to embrace a new way of thinking and reporting based on the Integrated Reporting <IR> Framework. This framework goes further than simply describing an organisation s financial performance and among other things describes its contribution to society, the environment and its own community and stakeholders. The Leadership Foundation is about to start a project which will help universities to explore, test and evaluate the principles of Integrated Reporting. One of the key features of the IR Framework is that it helps organisations consider and communicate a broader notion of value one that goes beyond financial capital, to also incorporate intellectual, human, social, relationship, natural and manufactured capital. The latest figures show the income of the traditional higher education sector in the UK was almost 35 billion in 2015/6, and its expenditure 33 billion. Of that, over 18 billion was used to employ staff. In the same year, the UK s universities educated and developed 2,300,000 students and generated 4.2 billion worth of knowledge exchange activities. In this context it is clear that the creation of value in universities, the integrated thinking that leads to it and the reporting that communicates it, is the domain of the whole leadership team. Together with BUFDG and the IIRC, we invite universities to work with us to ensure all providers of higher education are talking about the value they create. The sector is crucial for the economy and it is important for all stakeholders to recognise just how much it contributes to our society. If universities are to fully realise the benefits that integrated thinking and reporting can bring, then the process needs to expand beyond finance and become a priority for the whole leadership team. Integrated Reporting and Universities - the journey so far In the UK, BUFDG began its first IR project in April The project developed an abridged IR framework intended as a higher education specific introduction to the full framework - to assess the 2014/15 annual reports of six universities. The chosen institutions were fairly representative of the breadth of the sector in terms of geography, size, and specialisms. The final project report (with the introductory higher education framework as an annex) drew out what institutions were doing well, and where there was room for improvement. In March 2017, BUFDG began the second phase of the project. For phase two, BUFDG and four universities agreed to join the International Integrated Reporting network. A specialist panel, convened by the International Integrated Reporting Council (IIRC), then reviewed the universities 2015/16 annual reports and financial statements against the full IR framework. The final project report summarised the findings of the panel s reviews, with the intention that the lessons learned would be of use to them and other universities, wherever they are on their journey toward full IR implementation. 1

2 Between the two BUFDG projects, a new joint report by the World Bank, CIPFA, and the IIRC was published, aimed at public sector leaders. It found that adopting Integrated Reporting had a positive impact on public sector organisations. Whilst UK universities may not be strictly public sector, there s much in the report that s applicable to higher education, and it makes interesting reading whether or not your organisation decides to work towards the framework. Independent research undertaken for the report found that 92% of public sector leaders at organisations that had implemented Integrated Reporting said that it increased understanding of performance and value creation at leadership level and employee level, as well as with the growing external stakeholder base. 87% of leaders said that providers of financial capital better understood their strategy as a result. Beyond the UK, The University of Stellenbosch published its first integrated report in An AICPA article suggests that 10 metrics in an Integrated report at Florida State University can provide assurance that the spending of billions of dollars on education should be linked to what has been accomplished with those dollars and such reporting is enhanced when both financial and non-financial reports have a high degree of independent assurance. Who is the Leadership Foundation project for? "University stakeholders might expect them to report their contribution to solving the world s challenges and developing leaders with the skills to do so. In reality, very few universities adequately incorporate these issues into strategy or have a comprehensive, joined-up approach to engaging stakeholders, Professor Carol Adams, Durham University Business School. The results of a recent (Spring 2017) survey of University Finance Directors suggest a mixed attitude towards <IR> and although 80% of institutions are working to adopt at least some of the principles, just 16% are convinced enough by the benefits to be working towards a full adoption. However, BUFDG highlights that to be successful this initiative should not sit with the FD alone. The Leadership Foundation project seeks to have at least two, and preferably three members of a university s top team involved in the project. It is not anticipated that all three will engage in all of the activities in the whole programme, but the project is designed to ensure that integration across the university is more likely with this approach. The Leadership Foundation would like expressions of interest from universities who can put forward a team including the following indicative roles: A senior operations and/or finance professional. A leadership team representative responsible for strategy. A leadership team representative with either a governance or student facing role. We will also be asking for confirmation of support from your vice-chancellor in all expressions of interest. Benefits of participation Participating university leaders will have the opportunity to: Inform their thinking on developing the organisations business model. Consider the broader notion of value, and what it means for institutional goals and performance management. Explore the role that governance and leadership play in creating institutional value. Understand the benefits other organisations have gained from integrated thinking and integrated reporting, and what benefits could be realised at your own institution. 2

3 What will the programme cover? At this stage the Integrated Thinking and Reporting project is anticipated to tackle broad themes on the integrated thinking and integrated reporting journey, such as: Articulation of the business model and value creation model. Making the most of the organisations capitals, (resources), to underpin performance management and business development. Value creation over different time horizons promoting a long term, sustainable approach to strategic decision making. Stakeholder relationships and how they can create or destroy value. Stakeholder perception of value - particularly that of governors and students. At an early stage in the project the participating universities will hear from: Senior representatives from the funding council(s), discussing the sector perspective and debating how integrated thinking and reporting can help articulate value for money. Stakeholders who have been involved in implementing integrated reporting in other sectors, e.g., the accounting profession bodies, professional firms or organisations outside of the sector. Project Outputs and Outcomes It is the intention of the Leadership Foundation to: Create a think tank through which eight institutions will hold workshops to explore integrated thinking and reporting in a facilitated and structured programme of activity. Create a resource for those in the sector wanting insights, guidance and signposting. This will come through blogs or articles from our workshops and signposting to and from our stakeholders. Publish some illustrative case studies and leadership insights of good practice. In particular looking at the International Integrated Reporting Framework from the higher education perspective. Holding a symposium, involving participants and other stakeholders to showcase and consider future options for integrated thinking and reporting in the sector. Suggest a range of options for HEI s to continue their Integrated Thinking and Integrated Reporting journey. 3

4 Annex 1 - The International <IR> Framework The Framework was released in 2013 following extensive consultation and testing by businesses, the public sector, regulators, standard setters, the accounting profession, NGOs and investors in all regions of the world. Early testing of the concepts involved 140 organisations and investors from 26 countries participating in the <IR> Pilot Programme. The purpose of the Framework (a 30-page document) was to establish Guiding Principles and Content Elements that govern the overall content of an integrated report, and to explain the fundamental concepts that underpin them. It explains that <IR> is consistent with developments in financial and other reporting, but an integrated report also differs from other reports and communications in a number of ways. In particular, it focuses on the ability of an organisation to create value in the short, medium and long term, and in so doing it: Has a combined emphasis on conciseness, strategic focus and future orientation, the connectivity of information and the capitals and their interdependencies. Emphasizes the importance of integrated thinking within the organisation. The IIRC The International Integrated reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. The coalition promotes communication about value creation as the next step in the evolution of corporate reporting. The IIRC s mission is to establish Integrated reporting and thinking within mainstream business practice as the norm in the public and private sectors. It hopes to see capital allocation and corporate behaviour aligned with wider goals of financial stability and sustainable development. The IIRC and members of its network use the shorthand <IR> in much of their communication. BUFDG Integrated Reporting is a framework for helping organisations tell their stories in a more engaging and effective way Integrated Reporting <IR> in HE, BUFDG, 2016 The British Universities Finance Directors Group (BUFDG) is the representative body for Higher Education finance staff in the United Kingdom. Its members are the Directors of Finance and Chief Financial Officers of almost all UK higher education institutions (HEIs). Its work supports over 5,000 higher education employees in over 170 universities. BUFDG is an active and open partner to the higher education sector. It works closely with other sector representative, charitable, and regulatory organisations for the benefit of its members. BUFDG is an association run under the umbrella organisation Professional HE Services Ltd (PHES), of which it is the founding member. PHES is a not-for-profit company limited by guarantee, and is owned entirely by its member higher education institutions. 4

5 Annex 2 - Sources of further advice, information and guidance General guidance The International <IR> Framework - The International Integrated reporting Council - IIRC Examples Database - IIRC guidance and resources - EY/IIRC Background Paper on Value Creation - IIRC/CIPFA/World Bank on Value Creation in the Public Sector - Accountancy Institutes IFAC International Federation of Accountants 1 USA All these institutes search functions will reveal resources on integrated reporting. ACCA Association of Chartered Certified Accountants UK - CIPFA Chartered Institute of Public Finance and Accountancy UK - ICAEW Institute of Chartered Accountants in England and Wales UK - ICAS Institute of Chartered Accountants of Scotland UK - CIMA Chartered Institute of Management Accountants UK - IMA - Institute of Management Accountants USA - Chartered Accountants Worldwide USA - AIA - Association of International Accountants UK - AICPA - American Institute of Certified Public Accountants USA - AAT - Association of Accounting Technicians UK - CICA - Canadian Institute of Chartered Accountants Canada - CAANZ - Chartered Accountants Australia and New Zealand (CAANZ) - CPA Australia - Hong Kong Institute of Certified Public Accountants - Institute of Certified Public Accountants in Ireland - ICAI - Institute of Chartered Accountants in Ireland - ISCA - Institute of Singapore Chartered Accountants - MIA - Malaysian Institute of Accountants - SAICA - South African Institute of Chartered Accountants - Audit and accountancy firms and other bodies The following firms have special areas of their websites devoted to <IR> EY - Deloitte - KPMG - PwC - Global Reporting Initiative IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies 5