END-YEAR FLEXIBILITY

  The Committee has asked questions in respect of EPSRC, ESRC, MRC and NERC (unless otherwise stated). Responses are set out below.

COMMITTEE QUESTION 1

  A breakdown of the EYF stocks, including amounts drawn down and carried forward in each year since 2000-01.

Answer

  The attached table at Annex 1 shows the EYF balances for the four Councils since 2000-01. The RAB regime commenced in 2001-02, so the EYF amounts for 2000-01 were originally captured on the basis of shadow RAB records and some EYF amounts were low or zero. Until recently, there was not a formal distinction between resource near-cash and resource non-cash in the EYF records but we have included a breakdown wherever possible. The adjustment to the previous year's outturn is the final post-audit adjustment to what were provisional ie pre-audit figures. The adjustments to cumulative outturn are, in effect, changes to the allocations to Councils made as part of the SR2004 allocation process. The annual totals show a trend of EYF balances building up but OST and the Councils have recently been working at driving the balances down.

COMMITTEE QUESTION 2

  A note explaining the use being made of stocks of End Year Flexibility brought forward from 2004-05. This should include a breakdown of amounts drawn down so far in 2005-06, including amounts both approved in the Winter Supplementary Estimate and sought in the forthcoming Spring Supplementary Estimate.

Answer

  The following table shows the EYF drawn in 2005-06, and the breakdown by category.

£,000	Resource Near cash	Resource Non-cash	Capital Grants	Capital	Total
ESRC	374	0	2,000	0	2,374
EPSRC	-14,981	329	14,652	0	0
NERC	2,300	10,600	100	0	13,000
MRC	9,689	10,205	0	2,920	22,814

  We are informed by the Councils that:

ESRC has drawn £2 million EYF to fund capital grants—these are on major surveys to create international datasets. Because they have no available capital grant EYF balance brought forward, the Council has drawn resource near-cash and is has vired the requirement to the capital grants budget.

  EPSRC did not draw down any EYF but did use the Supplementary Estimate process to transfer £14.981 million from resource near-cash to capital grants.

  NERC has drawn £10.6 million resource non-cash EYF, which is mainly for the Centre for Ecology and Hydrology (CEH) restructuring and Halley V decommissioning but also for increased depreciation, and £2.3m of core resource which is needed to compensate for loss of income relating to the restructuring.

  For MRC, £2.9 million of capital EYF is needed for construction of the Laboratory for Molecular Biology and also for refurbishment projects at the Animal Health Research Institute. £9.7 million of resource EYF is needed for initiatives which had slipped from previous years; £10.2 million of non-cash EYF is required for MRC restructuring provisions and also for non-cash costs relating to the additional capital mentioned above.

COMMITTEE QUESTION 3

  The latest DEL Outturn Statements, or similar management information, for the nine months to the end of December 2005, along with a note explaining a) any significant variances in actual income or expenditure against the budgets and b) any anomalies in spending patterns throughout the year which may influence the reported figures.

Answer

  The end-December 2005 monthly management returns for each of the four Councils are attached at Annex 2. The expenditure figures are shown net of income, as required by the budget framework.

(a)  Commentaries on the variances between net expenditure and budgets (including EYF drawn down) based on information from each Council are as follows:

ESRC: Forecast outturn on resource is an overspend of £1.7 million and on capital, an underspend of £2.6 million. These are relatively minor variations against budget.

EPSRC: Forecast outturn on resource is an underspend of £21.8 million; which has arisen as a result of the misinterpretation of the original forecast in relation to drawdown of EYF (£21 million). On capital, a small overspend of £0.8 million is forecast which will be resolved by virement from resource.

MRC: Forecast outturn on resource is an underspend of £11.1 million; this is due to downward revisions in Institutes forecasts of spending on their research activities, and also a net £4 million reduction in Head Office and Corporate costs . On capital, an underspend of £6.9 million is forecast is due to slippage in project spend.

NERC: Forecast outturn on resource is an underspend of £8 million; this has arisen mainly because of slippage in collaborative centre contracts and directed programmes (£12 million), offset by increase spend on capital grants (£5 million). On capital, an overspend of £0.8 million is forecast which will be resolved by virement from resource.

  For the purposes of these reports, all Council budgets are flat profiled across the year ie equal amounts each month. But in practice Councils spending varies month-by-month depending on the precise timing of calls for proposals and decisions on research grants. Several Councils, including MRC and NERC, forecast higher levels of expenditure in the final quarter of the year (January to March).

COMMITTEE QUESTION 4

  A note on the reasons why the MRC received a budget in excess of its needs in respect of its non-cash resource budget.

Answer

  Following the requirement for "shadow" accounting within AME for non-cash in the SR2000 regime, MRC found that they had over-estimated their requirements for the years of the SR2002 settlement. This resulted in the non-cash under-expenditure referred to. This amounted to £6.8 million in 2003-04 and £15.7 million in 2004-05. This position is being corrected in the SR04 period.

COMMITTEE QUESTION 5

  A note on any instances in other Research Councils when there has been significant under-funding of, or over-provision for, non-cash costs over the last three years.

Answer

  Individual Council variances of £1 million or more are as follows:

NERC have non-cash EYF of £25.5 million brought forward from 2004-05. This relates to provisions from the pre-RAB era which have subsequently been unwound resulting in the re-crediting of non-cash resource.

BBSRC overspent on non-cash in 2004-05 by £17.9 million, mainly because of exceptional provisions required in that year.

CCLRC overspent on non-cash by £26.7 million in 2004-05 as a result of exceptional provisions for restructuring.

PPARC underspent on non-cash by £2.9 million in 2003-04 and by £2.5 million in 2004-05 in order to create an EYF reserve for later restructuring.

EPSRC underspent on non-cash by £4.6 million in 2003-04 and by £4.3 million in 2004-05, in order to create an EYF reserve for later spending.

COMMITTEE QUESTION 6

  A note comparing the budget allocated to MRC for non-cash costs to non-cash outturn for the last three years.

Answer

  The following table shows the relevant figures for 2003-04 and 2004-05. For 2002-03, non-cash was not a control total in the then RAB regime.

£000	Outturn	Budget	Underspend
2002-03	27,066	56,679	29,613
2003-04	33,855	40,665	6,810
2004-05	24,798	40,479	15,681
Total			52,104
March 2006