OpenCharities

This text was generated using OCR and may contain errors. Check the original PDF to see the document submitted to the regulator.

2023-12-31-accounts

TRUSTEE BOARD’S REPORT AND ANNUAL ACCOUNTS.

Year Ended 31 December 2023

----- Start of picture text -----
Improving the world through engineering
----- End of picture text -----

The Institution of Mechanical Engineers Incorporated by Royal Charter 1930 Registered Charity in England & Wales No: 206882 Office of the Scottish Charity Regulator No: SC051227

Contents

3 President’s statement

5 Chief Executive’s statement

6

Our strategy and future plans

10

Key performance indicators

13

Key achievements

22

Global Membership

25

Diversity and inclusion

26

Gender pay gap

27

Environmental sustainability and social responsibility

29

Structure governance and management of the Charity

39

55

Financial review Independent Auditor's report to the Members and Trustees of the Institution of Mechanical Engineers

60

62

65

Statement of Trustees' Financial statements Notes to the accounts responsibilities in for the year ended respect of Trustees' 31 December 2023 Annual Report and the Financial statements

98

98 100 Administrative details Images

1

imeche.org

Giles Hartill CEng FIMechE 138[th] President of the Institution of Mechanical Engineers 25 May 2023 to 23 May 2024

2

Annual Report 2023

President’s statement

A close colleague recently said that one's long-term involvement in a programme is only transitory, and we are merely stewards for the next generation; striving to leave it, as a minimum, in a better state than they found it. As I reflect on not just 2023, but on my continuous 20-year voluntary service, and particularly the last six years on the Trustee Board, I find these sentiments to also be very true for IMechE.

Having a clear strategy is core to any organisation’s success. So, for us, 2023 was a momentous year - the dawn of a new beginning as we launched our new IMechE Strategy 2030. We laid out what we aspire to achieve, how we intend to succeed and, most importantly, why. It is our vision of how to transform IMechE into a “global, inclusive and digitally enabled engineering community” to deliver our mission of “improving the world through engineering”.

By 'improving', we mean continuously enhancing the sustainability, safety, performance and reliability of the world we engineer. By 'world', we mean the planet and all its inhabitants, extending beyond humanity to benefit all living things. By 'engineering', we embrace its broadest sense, recognising it as multidisciplinary rather than solely mechanical as we have known for many decades.

We aspire to be truly global, not just a UK-based charity with international members, and will do this through developing international partnerships, building communities of technicians and engineers worldwide who can move easily to work through reciprocal recognition of standards and accreditation.

Our vision is underpinned by our culture and defined by four values – Inclusion, Integrity, Innovation, and Impact. We are committed to creating a culture where every member and employee knows they belong, feels valued and can thrive, working in close partnership. We want to ensure IMechE, and the wider engineering profession, is welcoming to all people with the right skills and knowledge, regardless of their background.

Technicians and engineers are pivotal in finding solutions to today’s major challenges, as we urgently transition to a low carbon economy, and there is much to be gained from skills transfer across different sectors. Solving these challenges requires a diverse blend of individuals to give rise to the innovation that we all need to see. There is huge opportunity

within both our existing and untapped talent pools, especially given the increased frequency of reskilling required due to rapid technological advancements. This is as important as inspiring the next generation to pursue careers in engineering.

And if we are to succeed, we must embrace a 'Digital First' approach. Our journey towards creating the capabilities necessary to deliver all our services in a digitally enabled way, aligning with our global aspirations, is well underway. We are in the development phase for many projects, with new services already being rolled out.

We now have two very clear strategic goals that define our purpose: the first is to “develop, register, and support our members and the wider engineering community to be their best to achieve a more inclusive and sustainable world". This is about ensuring we focus not only on acquiring new members and helping them become professionally registered, but also on supporting them and the community throughout their whole lives.

Our second goal is to “maximise the impact of our community to promote engineering, inform opinion and stimulate innovation for the benefit of society”. If the first goal is about helping individuals to be great technicians or engineers, then the second is about harnessing their expertise, skills and experience to improve the world through engineering.

It has been so exciting for me this year to see firsthand how our members and employees are working in close partnership across the globe, providing thought leadership, mentoring, support services and knowledge sharing. I have been blown away by the immense pride, passion, and enthusiasm I have observed, and for that I am eternally grateful; thank you. I genuinely believe we have improved IMechE, and I look forward to continuing to support our transformation as we continue to redefine what a Professional Engineering Institution is.

Technicians and engineers will change the world, like they have done ever since they existed. To our members all over the planet. There is one simple question to ask yourself: “What do I want to be?” We want you to be the best technician or engineer you can be, and we are here to help and support you.

3

imeche.org

Dr Alice Bunn OBE CEng FIMechE FRAeS

4

Annual Report 2023

Chief Executive's statement

The 2023 report allows us for the first time to track our progress in achieving our three key performance indicators around membership health, membership impact and our finances. Although we only have 2 years’ worth of data, I’m delighted to report that we are trending in a positive direction across all three indicators�you can find out more on page 10. Of course, there is no time for complacency, whilst our financial position is improving we still have some way to go, not least to correct for a period of underinvestment in our estate. Similarly, we are disappointed that the election turnout remains low and will be working with the nominations committee to stimulate a greater engagement. We will also now work with our strategy committee to set hard targets against our performance indicators, rather than just tracking trends.

In line with the new strategy launched in 2023, we are reporting progress against our 2 strategic goals of (1) developing, registering, and supporting our members and the wider engineering community to be their best for a more inclusive and sustainable world, and (2) maximising the impact of our community to promote engineering, inform opinion, and stimulate innovation for the benefit of society, underpinned by our enablers and working throughout as one team with volunteers and staff.

Under our first goal, we were able to increase attendance at our technical and networking events by over 1000 members, and a new membership partnership programme was launched which exceeded its target of attracting 50 new partners in its first year. We have expanded our efforts to support apprentices and those offering apprentice placements, recognising that apprentices will form an important part of our overall engineering community in the future and in line with our value of inclusion. As an End Point Assessment Organisation (EPAO) we delivered 1,364 end point assessments working with 109 training providers, a huge increase of 50% over 2022, which was supported by our End Point Assessment Standards Committee. Early in 2024 we received Ofqual approval for us to award the new machining technician (level 3) pathway for apprentices, following recent changes in both the standard and the eligibility of providers. We were

pleased to be able to solidify key partnerships in Singapore, Malaysia and the Philippines, linking to our vision of being global, inclusive and digitally enabled.

Our impact was keenly demonstrated in the response to our ‘Adapting Industry to Withstand Rising Temperatures and Future Heatwaves’ report; this timely report was picked up in the national media and briefed to the World Trade Organisation in Geneva, and continues to generate interest. We were honoured to be able to recognise our international heritage with awards in India, Australia and Malaysia. Members and staff continue to support the next generation of engineers through our outreach work, this year nearly 2,000 students participated in our work experience programme, and we partnered with the BBC to reach a further 112,500 students. We are delighted to announce that we will be partnering with the Centre for Connected and Autonomous Vehicles to fund the expansion of Formula Student - Artificial Intelligence as part of our ongoing commitment to support the development of skills in the automotive sector and wider engineering profession. Alongside this, our Education and Skills Strategy Board have been at the fore of providing advice to governments, working with the Royal Academy of Engineering and our partner engineering institutions, in particular on T-levels and future skills requirements.

2023 was a positive year for our finances with an increase of £1.2 million to our free reserves, underpinned by another impressive performance from our training company, IMechE Learning and Development. We are committed to continuing the necessary efforts to achieve financial sustainability for the Institution overall. Unfortunately, the increase was also bolstered by an underspend in our boards, committees, divisions and groups. During 2024 we will therefore increase work to ensure that funding for our volunteer communities is transparent and easy to access. Finally, I was humbled by the tremendous efforts of our young members launching their ‘talking together’ initiative on mental health. It would be hard to find a better example of us living our values of inclusivity, innovation, integrity and impact and I whole-heartedly commend their contribution to our Institution’s culture.

5

imeche.org

Our strategy and future plans

In March 2023, the Trustee Board approved ‘Our Strategy 2030’. During the year, a process of roll-out and engagement has resulted in a small number of presentational changes to improve clarity.

1.

Our mission

Improving the world through engineering

2.

Our values

Impact

We make a difference in what we do, taking accountability and ownership for meeting our commitments, and making things happen by succeeding together and excelling as individuals.

Integrity

We do the right thing for IMechE and for one another by being honest, truthful, and authentic, acting with integrity in every decision and action we take.

----- Start of picture text -----
Our
Values
u
pa
cl si
m c
n o
I t
I n
I
y n
t n
ir o
g v
e a
t t
n oi
I n
----- End of picture text -----

Innovation

We find better ways to get things done, innovating to solve problems, drive change, and move our mission forward by making tomorrow better than today.

Inclusion

We work together as one inclusive team, valuing and embracing diversity by communicating and sharing openly, listening actively to others, and celebrating our unique contributions.

6

Annual Report 2023

3.

Our vision

A global, inclusive, and digitally enabled engineering community.

Our engineering community includes those involved in the engineering profession – not just the mechanical engineers who are IMechE members.

4. Our strategic goals

----- Start of picture text -----
Our
Goals
p
D
a
p
m c
hi e
I t
ers velo
b p
m m
e e
M tn
----- End of picture text -----

Impact

Maximising the impact of our community to promote engineering, inform opinion, and stimulate innovation for the benefit of society.

Membership Development Developing, registering, and supporting our members and the wider engineering community to be their best for a more inclusive and sustainable world.

7

imeche.org

5. Our strategic enablers

----- Start of picture text -----
Collaboration
Collaboration
& Partnership
& Partnership
Digital
First Sustainable Sustainable
Finance &
Finance &
Facilities
Facilities
Marketing &
Marketing &
Communication Governance &
Communication Governance
(NEW) (NEW) & LeadershipLeadership
People &
People &
Culture
Culture
----- End of picture text -----

The Evaluation and Continuous Improvement strategic enabler, shown in the 2022 annual report, has been subsumed as a core element within each of the strategic goals and enablers.

8

Annual Report 2023

6.

Our structure

In alignment with our strategic objectives and 2030 vision, a reorganisation was implemented in 2023 to encapsulate four overarching capabilities that mirror the typical lifelong journey of an IMechE member:

Community

----- Start of picture text -----
Enables access to a range of
services such as events and
networking opportunities through
our divisions, groups, and regional/
international committees, fostering
connections, collaboration and a
sense of belonging.
Recognition
Welcomes members into the
Institution, from students and
apprentices to chartered fellows,
facilitating their professional
One
registration and integration into
Team
our community.
Impact
Empowers our community to
contribute to society, whether
through educational advice or
broader policy recommendations
to governments, embodying our
commitment to making a positive
difference.
u
C
al
p
o
it
a
l
&
Fi
m
s
ig r
g
c
D
m
i
m c
s
n
n
u
t
C
o
ti
n
ni
I t
e
E
o
k c
+
I
o
n
t
i
r a
+
x
a ti
t
c
m
M o
i
p
n
e
a
n
r
s
G
e
m
u
o
p
+
t
g
r
l v
u
u
e
+
t
o
m
C r
I
n
i
e
n
&
c
a
c
I s
n
i
F
n
n
y
e
a
e
c
a
t
e
l
p
ci
e
n
t n
o
y
i
l
R
F
i
i
e
i
t
o
P
r
e
+
s
g v
+ e a
tnI noit
----- End of picture text -----

Impact

Empowers our community to contribute to society, whether through educational advice or broader policy recommendations to governments, embodying our commitment to making a positive difference.

Expertise

Provides services that meet the needs of organisations, business communities, and individuals within them, enhancing their professional development and success.

These capabilities and enablers are overseen by the newly-formed IMechE Senior Leadership Team.

By reorganising and connecting the various IMechE communities, staff teams, and engineering organisations, we aim to unlock new opportunities, deliver greater value to our members, and amplify the impact of our activities.

9

imeche.org

Key performance indicators

Membership health

----- Start of picture text -----
2023
Strategic Outcome Performance Indicators
Results Change
Population No. of voluntarily lapsed memberships 4,056  (8.0%)
We want to achieve sustainable
growth in our professional
registration membership No. of professional registrations 2,668  14.0%
Satisfaction No. of active volunteer members 6,006  13.8%
We want to have satisfied and
engaged members
No. of eligible members voting in elections 3,427  (12.5%)
Diversity % of international membership 31.5%  1.3% pts
We want our membership to
reflect the diversity of society
% of female membership 11.5%  0.4% pts
----- End of picture text -----

Impact health

----- Start of picture text -----
2023
Strategic Outcome Performance Indicators
Results Change
Learning
We want to increase the
No. of days of learning events attended 16.6K  0.2%
amount of life-long learning
we support
Influence We want to be a trusted point No. of key influencing events 40  167%
of reference for policymakers,
industry, and current and No. of IMechE policy report citations 5  150%
future engineers
Reach No. of website interactions 2.45M  (61.7%) [◊]
We want to increase our reach
to extend the expertise of HQ
and our members No. of digital downloads 72.6K  (34.2%) [◊]
Social media audience 595K  1.3% [∆ ]
No. of press references 119  164%
----- End of picture text -----*

  • Highlights include being cited in Chris Skidmore’s Net Zero Review and a House of Commons report on Nuclear Energy.

◊ Primarily due to the implementation of the cookie consent banner in Sept 2022, which now makes it more difficult to account for every website interaction.

∆ Our most active channels, LinkedIn and Instagram rose significantly.

10

Annual Report 2023

Key performance indicators (continued)

Financial health

----- Start of picture text -----
2023
Strategic Outcome Performance Indicators
Results Change
Membership income
We want our membership income to Membership income £13.7M  8.1%
support our strategic goals
Income diversity
A greater spread of income % of unrestricted revenue from
increases our resilience and non-subscription sources [† ] 42.1%  2.0% pts
supports our charitable objectives
Free reserves
Our free reserves should enable us Free reserves (3 year rolling average
£7.81M  20.6% [‡ ]
to smooth out market value volatility)
to cope with financial shocks and
take advantage of opportunities
----- End of picture text -----

‡ The increase in free reserves has been generated primarily from our trading companies and through an underspend on member services. During 2024, we will investigate the reasons for the underspend in member services and implement corrective actions. It is our intention to increase the funding to member services by 10% year on year.

11

imeche.org

We launched a policy report on ‘The Role of Engineering in Sport'.

----- Start of picture text -----
12
----- End of picture text -----

Annual Report 2023

Key achievements in 2023

----- Start of picture text -----
Impact
----- End of picture text -----

Positioned as a leading voice and authority in adapting to climate change.

Published ‘Adapting Industry to Withstand Rising Temperatures and Future Heatwaves’ in April 2023. This work was instigated by Dr Tim Fox and the Process Industries Division, in collaboration with the Construction and Building Services Division and the Thermofluids Group, as well as members of other engineering institutions and external subject matter experts from across the world. The report was covered in the Financial Times in the UK and CNBC News in the USA. Later in the year, our Public Affairs and Policy Advisor, Laura Kent, travelled to Geneva to brief the World Trade Organization on the impact and challenges posed by climate extremes on infrastructure worldwide. The coverage of this report raised the profile of IMechE in the policy area of climate change and sustainability.

Demonstrated the importance of engineering in making sport inclusive and sustainable.

Launched the report ‘Inclusive, Innovative, Sustainable: The Role of Engineering in Sport’ alongside a technology showcase at One Birdcage Walk. This work was initiated by Dr Thomas Allen and the Biomedical Engineering Division and has led to the creation of a Sports Engineering Community within the Division.

Supported the ‘BBC Bitesize Schools Tour’ to inspire young engineers.

Partnered with the 'BBC Bitesize Schools Tour', which reached over 112,500 students across 142 secondary schools throughout the UK, providing invaluable insight and inspiration for students to take into their future careers.The Education and Skills Strategy Board approved the collaboration with the BBC which resulted in IMechE members taking part in events in schools. This high-profile education outreach enabled IMechE to highlight the importance of engineering and maximise the impact of our members influencing and inspiring the next generation of engineers.

Provided accessible and inclusive insight into the engineering industry.

The Education and Skills Strategy Board oversees our Virtual Work Experience Programme. This year we saw 1,984 students sign up, with an average 8.4 rating from participants. The programme was especially popular with underrepresented groups, including young BAME males, and 2023 saw a growth in participation across all regions in the UK, including 15 regional cold spots.

13

imeche.org

Our annual student, apprentices and early-career challenges continue to attract competitors from across the globe.

14

Annual Report 2023

Key achievements in 2023 (continued)

Fostered global cooperation through strategic partnerships to advance engineering excellence.

Community

Solidified key partnerships through Memorandums of Understanding and Agreements of Cooperation with the Institution of Engineers Singapore (IES), the Institute of Engineers Malaysia (IEM) and the Philippines Society of Mechanical Engineering.

Promoted a culture of openness within the IMechE community.

Spearheaded by our Young Members, the ‘Talking Together’ initiative fosters an open dialogue surrounding the important topic of mental health. These short videos provided valuable perspectives and guidance to members and included a conversation with IMechE President Giles Hartill and insights from Dan Jones of Mercedes AMG HPP on remaining focused under pressure.

Strengthened the Institution’s global network.

Established a variety of exciting new committees and student chapters, including the Aerospace Division Young Members Committee plus five international student chapters, expanding our engagement and reach in Pakistan, Indonesia, Sri Lanka and the Philippines.

Empowered young engineers from across the globe.

Our annual student, apprentices and early-career challenges, such as Formula Student and the Railway Challenge, continue to attract competitors from across the globe, welcoming 37 countries in 2023 including Macedonia, Saudi Arabia, Poland, Nigeria, Taiwan and Mexico.

Extended the reach of our ‘Engineering Heritage Awards’.

Our Engineering Heritage Awards honour the pivotal role of mechanical engineering in shaping our past and present. In 2023, all awards were presented outside the United Kingdom, highlighting the Institution’s global reach. Among those awarded were the Express’ EIR-21 locomotive (India) and the Tanjung Tualang Tin Dredge No.5 TT5 (Malaysia).

15

imeche.org

We launched our new Membership Partner offering for organisations.

16

Annual Report 2023

Key achievements in 2023 (continued)

Engaged with Industry and Academia to support the engineering profession.

Recognition

Our commitment to supporting our profession and our members is highlighted through our accreditation activities, which include 22 university accreditation visits and 53 company accreditation visits. Our collaborative efforts with industry, the development of the new Membership Partner offering, and the ongoing series of events promoting IMechE, which attracted a global attendance of 15,663 delegates, all underscore our commitment to upholding stringent accreditation standards and supporting the development of engineers and technicians.

Demonstrated our commitment to the development of apprentices.

Supported engineering apprentices through the delivery of 1,578 End Point Assessments for the level 3 Engineering Technician qualification, working with 109 training providers and colleges. The rigorous scrutiny of our processes by the End Point Assessment Standards Committee ensures their validity, reinforcing our dedication to high standards. This collective effort helps to contribute to the quality of our engineering workforce but also fosters a more inclusive world by equipping apprentices with the skills to navigate global challenges.

Recorded highest ever revenue for ‘Learning and Development’.

Expertise

Impressive growth post-pandemic was driven by the business plan innovation target to design and deliver 12 new courses in 2023. This was achieved with new titles featuring Hydrogen, Artificial Intelligence and Coding techniques. Our training portfolio now offers over 200 courses across 13 technical and non-technical categories. We delivered over 10,000 delegate days in 2023 and, within our direct-tobusiness offering, the number of customers grew by 30%, giving us a superb platform for growth in 2024.

Created opportunities for engineers to address challenges in the hydrogen economy.

Following the Government’s commitment to achieve net-zero emissions by 2050, hydrogen is stated to play a role in tackling climate change. 200 engineers attended our conference ‘Engineering Challenges in the Hydrogen Economy’ making it the best attended conference of 2023.

17

imeche.org

We are making progress towards becoming more global, inclusive and digitally enabled.

18

Annual Report 2023

Key achievements in 2023 (continued)

Laid strong foundations for the digital transformation, led by our 2030 strategy.

Digital First

The Digital, Data, and Innovation team are on track to complete process mapping for all business functions within IMechE by the end of 2024. This phase is crucial in understanding what digital capabilities we will be able to offer to members in the future. Whilst process mapping is ongoing, tactical changes have been implemented wherever possible to improve our volunteer and member experiences. We are proud to have supported IMechE's first digital-first subscriptions campaign by implementing changes to the online payments page and moving to a new mailing platform to deliver communications.

Successfully implemented an integrated Library Catalogue.

Enabled the IMechE Library to be seamlessly discoverable on the globally recognised WorldCat library union catalogue, which has both enhanced the user experience and resulted in resource savings and workflow efficiencies.

Sustainable Sustainable Finances and Finances and FacilitiesFacilities

Our headquarters have been the greatest risk on our corporate register for the past five years, as noted in our Annual Reports. Balancing funding for general Institution activities with maintenance costs has made addressing the financial risk associated with our Birdcage Walk property a priority.

Extensive analysis over recent years has explored options for the headquarters' future, considering our financial situation, operational requirements, and long-term strategy. The Headquarters Programme Board (HQPB), established in 2023, provided recommendations and resolutions to the Trustees, engaging external experts to enhance our risk understanding and provide assurance.

The work has benefitted significantly from the expertise of Chris O'Boyle, co-opted appointee to the Trustee Board through a Nominations Committee process, and advice from Council members. The Trustees are seeking to balance the Institution's requirements with the heritage of Birdcage Walk. They are drawing on the expertise and experience of HQPB and Council, and a member vote is planned for 2024. Trustees are engaging with the Council to finalise the recommendation and resolution terms. While progress has been slower than anticipated, thorough analysis and consultation are essential for making the right decision.

While we work towards this decision, our investment in building maintenance has been deliberately kept below depreciation, pending the outcome of our deliberations on the building's future.

19

imeche.org

We have set up a sports engineering community to help position IMechE as a leading Institution in this field.

20

Annual Report 2023

Key achievements in 2023 (continued)

Governance & Leadership

On 1 November 2023, the Institution held its first Summit meeting, bringing together representatives of each of the Trustee Board, Council and Executive team. The Summit identified key issues that the Institution needs to address:

In response, the IMechE Operations Group was formed to address these issues.

It was recognised that Task and Finish groups already existed on the future of our headquarters and our trading companies, reporting to the Trustee Board, and these will continue to deliver the objectives set. Additionally, two other Task and Finish groups were created:

These Task and Finish groups include representatives from all senior Boards within the Institution to ensure a representative selection of the membership.

The IMechE Operations Group meets monthly and is already making good progress. A second summit meeting is scheduled for 2024, with a report to be issued to the Institution’s membership following that meeting.

21

imeche.org

Global Membership

Figure 1: Number of members in each of the Institution's global regions.

----- Start of picture text -----
TOTAL
110,759
BRITISH ISLES
75,78 4
AMERICAS
1,834
----- End of picture text -----

22

Annual Report 2023

----- Start of picture text -----
EUROPE
5,818
----- End of picture text -----

----- Start of picture text -----
MIDDLE EAST
& AFRICA
7,910
----- End of picture text -----

----- Start of picture text -----
NE ASIA
4,552
SE ASIA
6,326
SOUTH ASIA
7,067
OCEANIA
1,468
----- End of picture text -----

23

imeche.org

We want to build an engineering profession that is accessible and inclusive to all.

24

Annual Report 2023

Diversity and Inclusion

Inclusion sits at the heart of the Institution’s 2030 strategy, and we continue working with our members and employees to ensure we are building a global, inclusive and digitally enabled engineering community.

We launched a range of exciting initiatives in 2023, including new partnerships, a training programme and the creation of our first Culture Ambassador Network.

The Network, headed by Emma Bould CEng FIMechE as Member Network Lead and Farah Baksh as Employee Network Lead, aims to ensure everyone feels supported, included, and has a voice within our organisation. The Network will work collaboratively to provide guidance, support, and resources to members and employees while also actively encouraging conversations about people and culture.

Last year, we formed partnerships with the Association of Black and Ethnic Minority Engineers (AFBE-UK), Women’s Engineering Society (WES), Business Disability Forum (BDF) and SheCanEngineer to ensure together we build an engineering profession which is accessible and inclusive to all.

Training continues to be a key part of our D&I strategy. We launched a virtual D&I Learning Programme ‘Creating Inclusion’ for members and employees. The programme has been designed to meet a variety of learning needs and includes tools ranging from pre-recorded webinars to fact sheets and a podcast.

The D&I Committee has recruited a new Chair Holley Reece-Barkell who will start in her role on 1 May 2024. We would like to thank Isobel Pollock-Hulf OBE, who is stepping down from the role after five years for her huge contribution to leading and launching our D&I strategy.

We celebrated the 100th anniversary of Verena Holmes being elected our first woman member on 22 February 1924. We have commissioned a portrait of Verena Holmes which is now hanging in Birdcage Walk.

25

imeche.org

Gender pay gap

The Institution employs fewer than the requisite of 250 employees and does not have to publish gender pay gap information. However, as part of its commitments to its values and to demonstrate transparency, we have made the decision to publish gender pay gap information annually.

In 2023, male employees were paid on average 13.3% more than female employees (2022 12.7%).

This is due to the proportion of men being significantly higher in the higher two quartiles (58.8%, 2022: 59%) than the lower two quartiles (41.2%, 2022: 40%).

Within the individual quartiles pay is very close with female pay ranging from 101% to 103% of the mean (2022 : 99% to 103%) of the quartile and being higher in all four (2022: three) of the four quartiles.

Figure 2: Split of staff by pay quartile

----- Start of picture text -----
100%
90% 19.2% 20.0%
31.3% 30.2% Q1
80%
Q2
70% 22.8% 20.6%
Q3
60%
27.5% 28.9% Q4
50%
29.3% 30.0%
40%
30% 20.7% 20.1%
20%
28.7% 29.3%
10% 20.5% 20.8%
0%
M (2023) M (2022) F (2023) F (2022)
----- End of picture text -----

26

Annual Report 2023

Environmental sustainability and social responsibility

The Institution remains committed to reducing its environmental impact and enhancing its social responsibility as a means of achieving greater sustainability.

In advance of making any decision about the future of our headquarters at Birdcage Walk, one of our primary objectives is to ensure that, whatever the outcome, sustainability and a reduction in our carbon footprint remain central to any planning process.

The Facilities Team is continuing to lead on green initiatives, achieving a significant milestone in 2023 by eliminating single-use plastics in the disposable supplies used across the Institution.

Our Energy Performance Certificate was renewed in June 2023 and, thanks to the ongoing programme of replacing end of life fluorescent lightbulbs with an equivalent LED version, our carbon rating reduced from 121 to 109.

Despite working within the constraints of a heritage building, we are committed to the improvement of our environmental performance and have seen a reduction in our energy consumption compared to 2022. Our annual electricity consumption in 2023 decreased from 539 MWh to 429 MWh, while our gas consumption decreased from 737 MWh to 723 MWh.

Additionally, almost 80% of our electricity is now sourced from renewables. Looking ahead, we aim to shift away from natural gas as our existing heating systems approach the end of their lifecycle.

27

imeche.org

Our International Strategy Board met in London this year, during our Volunteer Engagement Week.

28

Annual Report 2023

Structure Governance and Management of the Charity

The Institution is governed by a Trustee Board comprising members of the Institution elected to office by Corporate and Associate Members, through an annual election process. Essential training is provided at the start of each election term for all Trustees and additional specific training provided as required related to specific activities or skills growth.

Trustee Board

Trustee Board
President Giles Hartill(25.05.2023 to 23.05.2024)
Dr Clive Hickman OBE(elected 23.05.2024)
Deputy President Dr Clive Hickman OBE(until 25.05.2023)
Matt Garside
Dr Richard Judge(elected 23.05.2024)
Vice Presidents Simon Evans
Dr Richard Judge(until 23.05.2024)
Prof David Nowell
International Vice President Chris Chong(elected 23.05.2024)
Ordinary Members Abbey Addison
Bridget Eickhof(until 23.05.24)
Ruth Shilston
Chanaka Wanniarachchi(until 23.05.2024)
Darren Sharpe(elected 23.05.2024)
Member ordinarily resident overseas Chis Chong(until 23.05.2024)
Member under 30 Joshua Thomson-Smith
Trustees retired or resigned in year(between 25.05.2023 and 23.05.2024)
Past President Phil Peel
Vice President Heather Clarke
Helena Rivers
International Vice President Vijay Raman
Member under 30 Ross O’Brien
Ordinary Member Emeritus Prof. Graeme Britton

Trustees typically meet eight times a year with additional meetings as required. Trustees are invited and attend as observers at Council meetings.

Senior Management Team

The Chief Executive is responsible for the daily management of the Institution in accordance with the Royal Charter and By-laws and the direction of the Trustee Board, and the organisation and deployment of the Institution’s employees. Five Directors support the delivery of the Chief Executive’s responsibilities.

Chief Executive Dr Alice Bunn, OBE Director of Commercial and Finance Sean Fox Director Human Resources Bims Alalade Director Member Operations Joanna Horton Director Engineering Policy and Impact James Partington Director of Digital, Data and Innovation Jake Fraser

29

imeche.org

Structure Governance and Management of the Charity (continued)

Boards and Committees

The Trustee Board is directly supported by the work of its governance sub-committees and through the work of its advisory bodies. Responsibility for core Learned Society functions is delegated to operational boards and committees.

Audit and Risk Committee (ARC) Finance Board (FB) with PEP Limited Board as a Sub-committee Nomination Committee (NOMCO) Remuneration Committee (REMCO) Strategy Committee (STRATCOM) Trustee Board Awards Committee (TBAC) Council TRUSTEE Diversity & Inclusion Committee (D&I) BOARD Education and Skills Strategy Board (ESSB) Engineering Heritage Awards Committee (EHA) International Strategy Board (ISB) with International Young Members’ Committee as a Sub-committee Qualifications and Membership Board (QMB) Regional Strategy Board (RSB) Technical Strategy Board (TSB) Young Members Board (YMB)

30

Annual Report 2023

Structure Governance and Management of the Charity (continued)

Boards and Committees (continued)

Governance

Advisory

Operational

Structure of local operations

Every member is assigned to an Institution region aligned to the defined geographical areas under the remits of the Regional Strategy Board and the International Strategy Board.

The RSB and ISB networks alongside the Divisional Centres are the key mechanism for the Institution's engagement with members at a local level.

The UK and Republic of Ireland operations are structured into 16 regions and the international operations into 7 regions, each of which is overseen by a committee of volunteers. Regional Committees comprise elected positions such as Chair, Vice Chair, Secretary, and Treasurer, whose work is supported by other volunteer members.

Regional operations can be further delineated into a regional sub-structure comprising local Branches, Areas, Young Member Panels and include Division Centres located near to industry hubs.

31

imeche.org

Structure Governance and Management of the Charity (continued)

Membership volunteering

The extent and success of the Learned Society’s engagement and activities is dependent on the commitment and efforts of our volunteer members who are supported by professional and well-trained staff.

The Trustee Board would like to thank the thousands of members around the world who freely volunteer their time to support the Institution in all parts of its Learned Society and membership activities. Institution members give their time on a purely voluntary basis as members of the Trustee Board, governance committees, advisory bodies, operational boards and committees, and across the regional and international networks.

Member volunteers are also crucial in the delivery of Professional Reviews, accreditation visits, STEM based activities, local events, mentoring, student challenges, to name just a few of the many opportunities to connect with the Institution. Without this support many of our activities or meetings would not be possible.

Provision of free facilities

The Institution pays for most of the external facilities that it uses, particularly at national level. Locally, in the Regions and Centres, there is some dependence on the provision of free facilities to hold meetings and activities.

Charity Commission of England & Wales and Office of the Scottish Charity Regulator

The Institution takes seriously its responsibilities and duties as a large charity and is focused on continuously improving its governance framework to fully comply with its statutory and regulatory obligations and to demonstrate best practice.

In 2023, the merging of the governance, risk and internal audit teams fostered a more collaborative approach and has led to best practice governance principles being embedded across the team.

In the spirit of continuous improvement, a summit of senior volunteers and staff from across the Institution met in 2023 to discuss the best governance and operating model for the Institution as it entered its new strategic period. This initiative led to the establishment of two “task and finish groups” (page 21), comprising members and staff and reporting to the Trustee Board. Work will continue into 2024.

Trustees agreed upon an updated policy framework with a structured and scheduled plan for renew and review. This has provided assurance that appropriate policies are in place and reviewed regularly, ensuring that any legislative or regulatory changes are acted on promptly and reflected in our policies and procedures. This work culminated in a new complaints policy and framework, approved by Trustees in December 2023, that will be rolled out across 2024.

We continue to ensure that Trustees and other volunteers receive relevant training to make sure that their responsibilities are fully understood. This includes legal briefings on fiduciary duties, mandatory GDPR training and access to the Institution’s well established diversity training which helps promote our values and behaviours.

32

Annual Report 2023

Structure Governance and Management of the Charity (continued)

Activities in Scotland

The IMechE has a substantial community of around 10,000 members in Scotland, supported by the Scottish Region Committee. This committee operates actively in Glasgow, Edinburgh, Aberdeen, and Thurso, arranging a variety of events, both technical and social. The Scottish Region Annual Dinner, held in Glasgow in October, is a notable event.

The Glasgow Young Members have demonstrated innovation by successfully organising events on Diversity and Inclusion in March, Business Start Ups in May, and a Careers event in October. Despite challenges such as storm Babet impacting member attendance at the region’s Annual Dinner, enthusiasm within the community remains steadfast.

Additionally, the Institution's Upstream Oil and Gas committee, part of the Process Industries Division, held a seminar titled "Managing Ageing Offshore Assets" in June 2023. Hosted at the Net Zero Technology Centre in Aberdeen, the event featured presentations from industry speakers including the NZTC's Chief Operating Officer, experts from the HSE, Net Zero Transition Authority, Harbour Energy, and others.

Internal control

Internal control systems provide reasonable but not absolute assurance against material misstatement or loss, and cover measures to identify and manage risk.

In 2023:

Employee engagement

The Institution benefits from a diverse workforce committed to embodying its values in their daily work. Employees actively participate in engagement initiatives designed to foster a positive workplace environment.

IMechE collaborates with its employees through various channels, striving to attract and retain skilled and engaged staff. The organisational culture encourages employee involvement and feedback, facilitated by the Employee Engagement Group and its workstreams. Notably, this group oversees the annual employee recognition awards and the employee strategy day, providing opportunities for staff to contribute to the organisation's direction. Regular team briefings are also held to ensure employees are kept informed about the Institution’s activities.

The Institution demonstrates its commitment to employee wellbeing by offering a range of benefits, including a focus on mental health awareness through seminars and annual training for both employees and managers. In the last year there have also been webinars covering other areas such as financial health to all employees.

As part of an organisational restructure, several Associate Director roles were converted or created to align with IMechE’s capabilities and enablers. The Executive Team and Associate Directors collectively form the senior leadership team responsible for implementing the Institution’s strategy.

33

imeche.org

Structure Governance and Management of the Charity (continued)

Arrangements for setting the pay and remuneration of key personnel

The remuneration of all staff is reviewed and approved annually by the Remuneration Committee. The Committee ensures arrangements are affordable and fair and designed to motivate and reward performance. Remuneration is benchmarked periodically using external surveys and sector data.

Public Benefit statement

The Trustees confirm that they have complied with the duty in Part 1, Section 4 of the Charities Act 2011 to have due regard to the Charity Commission’s general guidance on public benefit, ‘Charities and Public Benefit’.

The charitable objective of the Institution is to promote the development of Mechanical Engineering to benefit 'the general public/mankind' as detailed in the Royal Charter. The Trustees ensure that this purpose is carried out for the public benefit by delivering services that are valued by our members and setting standards of achievement for engineers, thereby engendering public confidence and trust.

Membership is open to people who are pursuing a career or have an interest in mechanical engineering.

The Institution actively pursues the development of debate and action on topics for the betterment of society that relate to mechanical engineering. The Institution provides free literature, free lectures and free access to the library to encourage members of the public to engage in the improvement of the world through engineering.

Modern slavery: Commitment statement

IMechE is committed to preventing acts of modern slavery and human trafficking from occurring within its business and supply chain, and suppliers. As part of our commitment to combating modern slavery, we will continually review the requirements of the MSA 2015 and when appropriate, consider implementing appropriate modern/anti-slavery policies and processes within the organisation. In considering whether to implement the above, we study:

Refugee status

IMechE provides two years of free Affiliate membership to engineers holding recognised refugee status. This membership grants full access to all IMechE activities, including both central and regional events, facilitating connections with fellow engineers and potential employers. Additionally, they can utilise all Library services and access Support Network. By extending this support, we aim to assist refugees in resettling and rebuilding their personal and professional lives in the UK. To date, IMechE has welcomed five engineers through this programme.

In response to a national state of emergency declared by the Sri Lankan government, IMechE also extended support to its members by helping with their subscription fees for a temporary period.

34

Annual Report 2023

Structure Governance and Management of the Charity (continued)

Risk Management

The corporate risk register is maintained by a Risk Manager who works closely with the Executive Team and all departmental managers. The Executive Team regularly update the record with oversight from the Audit and Risk Committee in accordance with the Institution's Risk Policy.

Risk issues identified may impact the Institution’s strategy, finances, regulation and reputation, so their identification, documentation and treatment are vital in mitigating high priority or high impact areas, as well as confirming the Institution’s risk appetite.

The Corporate Risk Register is reviewed at the Trustee Board level to ensure that, where possible, risks are being mitigated and managed effectively. The register is presented annually to the Trustee Board and reviewed more frequently by the Audit and Risk Committee to ensure risks are managed effectively and remain relevant.

Overall responsibility for risk management rests with the Trustee Board. Comprehensive risk registers are maintained at the department level with a consistent approach to risk being adopted throughout the organisation. The COVID-19 pandemic generated additional risk reviews necessitated by the frequent changes to Government guidelines and the impact of the pandemic on the Institution’s operations.

Risk Appetite statement 2023

Introduction

Risks associated with the Institution can be described as events that may or may not happen, that could lead to the Institution not achieving its stated objectives, be they strategic or operational.

The Institution’s risk appetite can be described as the level of risk that the Institution is willing to tolerate (carry) whilst achieving its stated objectives, including financial and operational priorities.

The Institution’s priorities include (but are not limited to):

Our approach

The Institution’s approach to risk is to identify activities that could impact its business objectives. Where activities or potential activities are identified, they are evaluated and recorded as risks. Evaluating risks allows the Institution to assess whether they are within the Institution's risk appetite in their current state. Where identified risks are not within risk appetite additional measures need to be implemented to reduce the probability or impact of them occurring, thus bringing them within risk appetite.

The Institution’s risk appetite is linked inextricably to our ability to measure and manage risks. We use several methods to achieve this by implementing policies, procedures, conducting regular reviews and updates as well as assurance processes (internal audits). This approach provides the Institution with an opportunity to make improvements to the business and charity.

The Institution will only accept a risk where the potential benefit or detriment to the business is understood and where sensible measures can be put, or are in place, to control or mitigate the risk. As risks bear a cost, they are also expressed in financial terms, thus allowing the financial impact on the Institution to be evaluated. The Institution’s approach to risk is proactive.

A review of risk types (and the associated tolerance/ appetite for each) is underway.

35

imeche.org

Structure Governance and Management of the Charity (continued)

Major organisational risks

Like many other organisations, the Institution has faced various challenges and pressures in recent years. Looking back over recent years, we have established a strategy that outlines our future direction and addressed issues such as the COVID-19 pandemic, and inflationary cost pressures. Through internal audits and external reviews, we have ensured compliance with Engineering Council requirements to maintain our accreditation and core regulatory standards. However, there are still areas where significant strategic risks and issues persist. The table below highlights our immediate priorities, including areas where significant risks have materialised into issues that require attention.

Theme Risk to be addressed Mitigation
Governance of The cumulative impact of a variety of incidents over Action is needed to strengthen compliance with legal
trading subsidiaries recent years, each of relatively low impact in isolation, requirements and Charity Commission guidelines.
have highlighted issues and vulnerabilities in how we
govern and manage our trading subsidiaries.		 We have already taken steps to address the more
straightforward issues. Several actions relate
A common theme relates to blurred accountabilities,
potential conficts of loyalty, and poor information
fows in some areas.
The write-of of part of a loan between PEP/IMechE
will be revisited following a Serious Incident Report to		 to more consistently robust implementation of
frameworks that already exist.
A more comprehensive review is underway
and planned for completion during 2024 (with
implementation over the next 6 – 12 months).
the Charity Commission.
Financial
management		 External audits give us confdence in the robustness
of fnancial accounts. However, a high turnover
of people in our fnance teams and overly complex
fnancial processes have combined to result in
signifcant costs.
Those costs are both direct (e.g. higher than budget
workforce) and indirect (e.g. mitigating delays to
audit and to decision making in the absence of reliable
data or overly stretched teams).		 There is to be renewed focus on fnances: frst by
getting a grip on existing processes and information,
to restore confdence and ensure we are able to
provide decision-makers with reliable, timely data.
We will develop and prioritise a programme of work
that simplifes our fnancial processes and decision
making, while building in-house capability and
systems.
Sustainable
fnances		 Our Institution has been living beyond its means for
many years. The origins of our fnancial issues stem
back at least a decade. It has led to reduced member
services, underinvestment in our HQ building and
erosion of free reserves.		 We need to embed the new practices put in place
over recent years, including:
• Moving from a one year to a rolling three year
budget (with the intent to extend this to fve years)
that aligns with our strategic priorities.
We are making good progress in tackling the issues, • Steadily rebuilding free reserves.
building on actions stemming from the 2018 reviews
to replenish our free reserves, but there is still a
lot to do�including resolving questions about the		 • Strengthening the transparency of our fnancial
decision making.
future of our HQ and our trading subsidiaries. We need to resolve questions about our
There has been insufcient clarity and visibility
of fnancial decision making. Lacking shared
understanding makes it harder for us to think		 headquarters and trading subsidiaries, which
signifcantly impact future fnances.
We also need to explore options for augmenting
critically and collectively about priorities. This membership income (95% of our income) with
has been addressed in part through strengthened alternative sources of revenue that are consistent
engagement with Council, and with a young member with our purpose and strategic goals.
and a council member joining Finance Board.

36

Annual Report 2023

Structure Governance and Management of the Charity (continued)

Theme Risk to be addressed Mitigation
Governance
processes		 Governance systems are complex and lack clarity
in places. Governance processes in some areas are		 A summit attended by senior volunteers and staf
was held in 2023 and discussed governance and the
cumbersome and time consuming.
Historic record keeping is weak in some areas which
can exacerbate the unclarity in certain areas.		 operating model of the Institution. A number of “task
and fnish” groups have been created focusing on
key areas such as the management system and the
overall purpose of the Institution. Work continues
improving the corporate policy library.
A review against the Charity Governance Code was
completed in 2023 and this is now scheduled as an
annual exercise to review that we are meeting our
obligations.
The cost of
maintaining the
property assets		 The cost of running and maintaining property assets
continues to increase signifcantly. Our premises
continue to require major repair and upgrade works		 A Programme Board has been established to review
all options with regards to the future of the building
and recommend appropriate options to the Trustee
due to its age and condition. A costing exercise took Board. There is an information campaign and
place in 2022, with the cost of building repairs to meet ongoing consultation underway engaging with the
current standards rising substantially. membership on the issue. This will lead to a Special
The future of the head ofce is therefore a key issue.
A recommendation to sell all or part of the building,		 Meeting where member approval will be sought on
the approach.
requires a 2/3 majority vote by the membership.
There is a risk that if this is not achieved the issue will
remain without resolution.
IT infrastructure and
cyber security		 IT infrastructure and operations continue to pose
a signifcant risk to the Institution, in large part due
to IT systems and processes which have become		 Recruitment and development of an in-house IT
team with structured training to upskill staf is
underway. There are projects focussing on further
obsolete and require complete replacement. Cyber migration, development and maintenance of existing
security remains a continuing high risk, as it does to infrastructure such as moving servers out of OBW.
all organisations, however legacy systems naturally Other work includes process mapping of as�is
pose a higher risk. business processes and technology dependencies
to enable robust change management, improved
contract management of underperforming
contracts. We are improving our security posture
where permissible using tactical changes and
policy enforcement.

37

imeche.org

Our scholarships and awards support engineering students at the start of their careers.

38

Annual Report 2023

Financial review

Financial results

The key objective in improving the financial position of the Institution is to provide secure financial underpinnings to deliver the Trustees’ strategy to develop the engineering community to improve the world through engineering. The Institution runs commercial ventures and invests in innovation as part of supporting its overall charitable purpose.

In 2023, overall income rose 9% to £30.2M (2022: £27.9M) with significant growth in charitable income including:

Operating expenditure rose 5% to £29.1M (2022: £27.7M) resulting in an operating surplus of £1.2M (2022: £0.2M). Non-operating costs included a £0.2M gain on investments (2022: £1.6M loss) and a £0.3M actuarial loss (2022: £0.3M loss) on the pension fund scheme (see note 10 for full details) resulting in a net movement of funds (operating and non-operating) of a £1.1M surplus (2022: £1.2M deficit).

Figure 3: Income and expenditure trends 2014–2023 £’000s

----- Start of picture text -----
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
restated restated
Other Income/Expenditure (RH axis)
Operating Surplus/Deficit (RH axis)
Operating Income (LH axis) Operating Expenditure (LH axis)
----- End of picture text -----

39

imeche.org

Financial review (continued)

Financial results (continued)

Charity-only income and expenditure

To assist members in understanding a summary of Charity income and expenditure has been developed in a non-statutory format.

Figure 4: Sources of income (charity, unrestricted)

----- Start of picture text -----
1.4%
1.5%
0.1%
4%
93%
4%
----- End of picture text -----

----- Start of picture text -----
Membership subscriptions
Rent from tenants
End Point Assessment surplus
Investment income
Legacies
----- End of picture text -----

Income includes membership subscriptions, rent from tenants, investment income, end point assessment (the only department with a net income before allocated overheads) and legacies received. Legacies are only 0.1% of income in 2023, so are not visible on the graph.

40

Annual Report 2023

Financial review (continued)

Financial results (continued)

Figure 5: Charity only expenditure

----- Start of picture text -----
2023
7%
30%
13%
15%
18%
17%
----- End of picture text -----

----- Start of picture text -----
2022
6%
12%
33%
14%
17% 18%
----- End of picture text -----

Membership Development Sustainable Finance and Facilities Impact Governance and Leadership Digital First People and Culture

All departments with net expenditure have been allocated over the strategic goals and enablers. Depreciation has been excluded from the totals and replaced by capital expenditure as a better measure of in-year activity.

41

imeche.org

Financial review (continued)

Financial results (continued)

Charity reserves

The policy on reserves is to calculate a target of specific reserves to cover:

The reserves target is £10.0M (2022: £11.6M). The decrease is due to an updated estimate of costs that might be required for emergency repairs of the building, drawing on recent data and cost information collected by the HQ Programme Board. This is now estimated at £5.4M (2022: £7M), with the more general provision for major risks held at £4.6M (2022: £4.6M). Once a decision is taken on a future building, the reserves will be revisited. There is an expectation that a specific designated fund will then be established to cover future refurbishment costs.

As of 31 December 2023, the calculation of free reserves was:

2023 2022
£’000 £’000
Total Charity funds excluding pension liability 34,564 33,454
Less: Endowment funds (11,187) (10,618)
Less: Restricted income funds (3,716) (3,438)
Unrestricted funds 19,661 19,398
Less: Mixed motive investments (2,602) (3,082)
Less: Intangible assets (3,085) (3,446)
Less: Tangible assets (5,665) (5,897)
Less: Current year pension defcit payments (500) (500)
Free reserves 7,809 6,473

The main action to bring free reserves back to target is the future head office project. Following on from the two previous working groups, a HQ Programme Board was established in 2023 and it is expected that a resolution will be put to members in 2024 to approve a proposal to resolve the issue.

42

Annual Report 2023

Financial review (continued)

Financial results (continued)

Figure 6: Trends in unrestricted and free reserves 2014–2023 £’000s

----- Start of picture text -----
25,000
20,000
15,000
10,000
5,000
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
restated restated restated
Free reserves
Unrestricted
Unrestricted exc. pension fund
----- End of picture text -----

Since 2021, the pension fund has been in surplus (see Note 10 to the accounts for more details). Although deficits are shown in the accounts, we are not allowed to recognise surpluses so, since 2021, the ‘Unrestricted’ and ‘Unrestricted exc. pension fund’ values are the same.

43

imeche.org

Financial review (continued)

Trading Entities

The Institution operates its trading activities through its 100% owned subsidiary Professional Engineering Projects Limited, which itself has two active subsidiaries IMechE Fife NDT Limited (UK) and Sonaspection Worldwide, which acts as the holding company for Sonaspection International Limited (UK) and Sonaspection Inc (USA). Non-consolidated results for each of the legal entities are presented in Note 2 (net incoming resources) of the financial accounts.

The whole of the Institution’s trading activities are collectively referred to as the PEP Group (PEP), which has four main operating businesses:

Business area Legal entity
IMechE Argyll Ruane (IAR) Market leaders in the provision of training, Division of PEP Ltd +
examination and consultancy services to IMechE Fife NDT Ltd
the non-destructive testing (NDT) and
coatings sectors
Learning & Development (L&D) Provision of professional engineering and Division of PEP Ltd
management training courses
One Birdcage Walk (OBW) Provision of venue hire, with catering and Division of PEP Ltd
other support for events at the London HQ
Sonaspection Market leading global manufacturer of
fawed specimens for the NDT industry
(UK and US operations)		 Sonaspection
International Ltd
+ Sonaspection
Incorporated

The trading performance of these four businesses is overseen by the Board of Professional Engineering Projects Limited. This is chaired by a Trustee (Vice-President), who is also deputy chair of the Finance Board. The PEP Limited Board is directly accountable to the Finance Board (chaired by a Deputy President), which provides oversight of commercial activities as an integral part of its responsibilities for the Institution’s finance, and ultimately to the Trustee Board. Both the PEP Limited and Finance Boards have external members who are senior members of the Institution or appropriately qualified independent members. They are supported as required by external professional advice.

The PEP Limited Board reviews the annual plan and three-year strategy for each of the operating businesses. Related financial metrics are approved by the Finance Board as part of the overall Institution’s financial processes. Financial and commercial performance is monitored by the PEP Limited Board, with a summary provided through its regular reports to the Finance Board.

44

Annual Report 2023

Financial review (continued)

Trading Entities (continued)

Strategic direction for Trading Entities

A refreshed strategic direction for PEP has been agreed by the Trustee Board. The intent is to focus on those commercial activities where IMechE is well placed to add value as an owner, to explicitly align commercial and charity strategic goals, and to achieve this with appropriate commercial discipline, profitability and acceptable risk.

This refreshed direction takes us beyond simply seeing our trading activities as a source of income, instead recognising the important contribution they can make to advancing IMechE’s strategic goals. We are keen to see the collective experience and expertise of our members, employees and trading businesses harnessed in ways that add direct value for our membership and that advance knowledge, innovation and impact across the engineering communities we form part of.

As a result, there is increasing interaction between PEP and various teams/groups across the Charity, with mutual value already being added through the synergies that exist. The Learning and Development business is being more closely integrated into the activities of the IMechE, while retaining its commercial ethos, to support and enable strategic ambitions for a more cohesive IMechE learning offering to engineers and engineering businesses. The venue hire business, One Birdcage Walk, has been providing direct support to the Charity as part of professionalising our own use of our HQ building.

Future ownership options for IAR and Sonaspection are being actively explored. A more entrepreneurial, commercially focussed ownership could give these businesses and their people the greatest scope to take advantage of their strong market position, and to benefit from the many opportunities that exist. This may lead to their divestment during 2024.

Alongside these developments, consideration is being given to future governance of the PEP Group, with clearer separation from the Charity. The intent is to take this forward during 2024. This includes plans to rationalise PEP’s dormant subsidiaries and to simplify unnecessarily complex structures. All IAR’s operational activities were brought together within a single legal entity (IMechE Fife NDT Limited) with effect from 19 July 2024.

There is increasing awareness that current frameworks for managing and governing trading subsidiaries need to be revisited, to ensure that IMechE fulfils the obligations set by charity law and guidance. Actions have already been taken to address identified risks and a more comprehensive review is underway. This is planned for completion during 2024, and will take account of any divestments over this period. Implementation will be over the next 6 – 12 months and expected to involve substantive changes.

45

imeche.org

Financial review (continued)

Trading Entities (continued)

Overall trading performance

Financial metrics for the overall PEP Group are as follows, with further detail in Note 2 to the accounts.


ccounts.
All £M 2023 2022 Notes
Revenue 10.62 10.10 2023 includes £0.4M internal IMechE trading
Proft before interest from
operating activities		 0.58 0.03
Revaluation of investment (1.24) - Reduced holding value of Sonaspection by
£840k and IAR by £400k
(Loss)/proft before interest
and tax		 (0.66) 0.03
Interest and tax (0.27) (0.15) £287k interest to IMechE (2022: £148k)
(Loss) for the year (0.93) (0.1)

PEP Ltd received a dividend of £450k from Sonaspection International, which nets out on consolidation of overall profit/(loss) for the year at PEP Group level.

Trading performance for the PEP Group showed a significant turnaround in trading profitability following the actions taken in 2022. It has now largely recovered from market downturns caused by COVID-19. Revenue increased to £10.6M, of which £0.4M is linked to internal trading with IMechE relating to the Charity’s own use of its HQ building (Nil in 2022). This gives 1% growth on external revenue, taking it to £10.2M (2022: £10.1M).

Loss before interest and tax (PBIT) was (£0.66M) (2022: profit £0.03wM) at budgeted exchange rates. The loss largely reflected a £1.24M negative impact from the revaluation of PEP’s investment in its subsidiaries. This revaluation was triggered by the decision to divest.

Results for the four businesses are summarised below. The standout performer in absolute terms was L&D, which recorded its highest ever turnover. The biggest turnaround was IAR’s reversal of a (£0.59M) PBIT loss in 2022 to almost reach break-even (£0.04M).

A working capital deficit that had grown over the past 5 years (owed by PEP to IMechE) was reduced from £1.73M at the end of 2022 to £0.78M at the end of 2023. This had built up due to a combination of factors, including the COVID-19 period and losses incurred during the start-up of IAR Fife. The repayment was made possible by the PEP Group’s stronger trading performance, together with a £450k dividend payment from Sonaspection to PEP Limited (2022: Nil). The intent remains to progressively reduce this deficit and to clear it at the earliest opportunity.

The £287k (2022: £148k) interest payment to IMechE is for a long-term loan set up in 2019 to replace £5.1M of the intercompany short-term debt owed by PEP to IMechE at that time. A further £2k interest payment relates to COVID bounce back loans.

Retained loss after interest and tax was (£1.4M) loss for the group (2022: (£0.01M) profit). PEP Limited does not have distributable reserves, and no dividend was payable.

46

Annual Report 2023

Financial review (continued)

Trading Entities (continued)

Longer-term trends

Overall trading performance for the PEP Group has now largely recovered from the COVID-19 downturn. Turnover trends for the PEP Group since 2019 show this recovery. The underlying trading profitability is also improving, although the revaluation of investments resulted in £1.24M impact on PBIT in 2023.

The outlook for 2024 and beyond is one of continuing modest growth. This will be influenced by the potential divestments of IAR and Sonaspection during 2024, and by decisions relating to IMechE headquarters affecting OBW and L&D in future years.

Figure 7: PEP Group performance

2019 2020 2020 2021 2022 2023
Turnover £M PBIT £M
Data in chart 2019 2020 2021 2022 2023
Turnover £M 9.76 6.46 6.35 9.83 10.22†
PBIT £M 0.65 (0.73) (0.21) 0.16 (0.66)††

Notes: All figures taken from previous IMechE annual reports: turnover taken from SOFA (which included intra-group consolidation adjustments), profits from Note 2 excluding intra-PEP Group dividends.

47

imeche.org

Financial review (continued)

Trading Entities (continued)

IMechE Argyll Ruane (IAR)

IMechE Argyll Ruane (IAR)
Revenue (£M) PBIT (£M)
2023 2022 2023 2022
IAR (Shefeld) 2.51 2.45 (0.03) (0.43)
IMechE Fife NDT 0.65 0.47 (0.01) (0.16)
IMechE Argyll Ruane 3.16 2.92 (0.04) (0.59)

IAR markedly improved its profitability in 2023, with the business much closer to breakeven. This benefitted from the restructuring and reductions in cost base that took place towards the end of 2022, refreshed pricing to better reflect the quality of its services, and rebalancing its sales mix. Further progress and a positive PBIT is anticipated in 2024.

Revenue also increased by 8% (to £3.16M). This includes, after making cumulative losses of £(273)k in 2021 and 2022, encouraging growth in its Fife operation to break even in 2023. This is beginning to show the potential of a foothold in the Scottish market.

During 2023, the Sheffield based IAR trade is within PEP Limited while the trade of the Fife based site is within IMechE Fife NDT Limited. On 19 July 2024, the trade, assets and liabilities of IAR were transferred to IMechE Fife NDT Limited to create a single legal entity for this business. This strengthens branding, reduces administration costs and matches the integrated management of the business.

Learning & Development

Learning & Development
Revenue (£M) PBIT (£M)
2023 2022 2023 2022
Public programmes 1.17 1.00 0.34 0.28
Company programmes 1.53 1.46
Learning & Development 2.70 2.46 0.34 0.28

Our training business continued to grow during 2023, recording its highest ever turnover of £2.7M. This achievement was despite the business being affected by the transport strikes in 2023. The biggest growth in revenue came from our public programme of courses (which are available to all).

This revenue growth, together with a decision to defer recruitment as plans developed for the closer integration of L&D with IMechE, produced a large profit boost for 2023. Importantly, planned investment in the business has been sustained with the product development target of £100k reached. In addition, a new brochure covering all of L&D offerings has been launched as part of raising market awareness of the training available (with discounted fees for our members).

Modest growth is expected to continue in 2023. This will benefit from the launch of two major new programmes: Early Career Development Programme, an 18-month professional development programme for engineers at the start of their careers; and Aspiring Engineering Director Programme, a multi-day intensive programme to enable leaders to become high-performing directors.

48

Annual Report 2023

Financial review (continued)

Trading Entities (continued)

Sonaspection

Sonaspection
Revenue (£M) PBIT (£M)
2023 2022 2023 2022
Sonaspection UK 1.94 2.56 (0.01) 0.24
Sonaspection US 1.13 1.01 0.05 (0.16)
Sonaspection 3.07 3.57 0.00 0.08

Note: US$ converted to GB£ at constant exchange rate of $1.25 = £1

Sonaspection had a challenging year, with delays to orders in the early part of 2023 as customers deferred their projects to later in the year. Although some reduction in income was anticipated as the major programme of work for Hinckley C reached its conclusion, and the impacts of these delays was more marked than expected.

Action was taken to mitigate impacts on profit by rebalancing workloads across the UK and US operations, which enabled PBIT for the combined business to remain just above breakeven. Overall performance was helped by receipt of $0.1M (£0.87M) of tax credits in the US.

By the end of 2023, orders and work volumes were approaching more usual levels. This, together with a rephasing of some projects, enabled a positive start to 2024. Taken together with a healthy sales pipeline, there is an expectation of the business returning to its more usual profit levels in 2024.

One Birdcage Walk (Venue Hire)

Revenue (£M) PBIT (£M)
2023 2022 2023 2022
External trading 1.32 1.14 0.29 0.28
Internal IMechE 0.40 - (0.02) -
One Birdcage Walk 1.72 1.14 0.27 0.28

Our venue hire business, trading under the ‘One Birdcage Walk’ brand, continued to perform strongly. Its external turnover grew to £1.32M (16% growth), which is just below the pre-COVID peak of £1.35M. Had there not been so much transport disruption it would likely have exceeded this. Modest growth in both revenue and profits is expected to continue into 2024, with hope of a less-disrupted transport market. The future of One Birdcage Walk is inherently connected to the decision on the future of the HQ building. It is likely to close for an extended period while refurbishment work is carried out, but this will not happen during 2024.

During the year, capabilities within OBW were also deployed to support a professional event service for member activities in HQ. This new arrangement has worked well and is widely seen to be adding value. Given the materiality of this internal trading revenue, we have taken care to distinguish this from external income. We will sustain the service but review the trading mechanism in 2024.

49

imeche.org

Financial review (continued)

Balance sheet

Through the Stephenson LLP fund, we invested in early-stage innovation companies until November 2018, in line with our charitable aim of being an impulse to innovation. Further investment is now on hold, outside of the costs necessary to operate the fund for the remainder of its life. At the end of 2023, we had invested £1.9M in 11 companies (2022: £1.9M in 11). The market value of these investments was £2.6M at the end of 2023 (2022: £3.1M), a decrease of £0.5M (2022: £0.2M increase).

Our listed investments increased to £18.7M (2022: £18.2M) after sales of £0.2M (2022: nil), due to market value movements.

Intangible assets declined by £0.4M (2022: no change) to £3.1M (2022: £3.5M), with amortisation exceeding investment as the value of digital modernisation assets in use has increased.

Tangible fixed assets decreased by £0.2M (2022: £0.4M decrease) to £5.7M (2022: £5.9M). Investment in land and property remains low while the future head office project is in the planning stages.

The pension fund remained at a nil deficit at the end of 2023 (2022: nil). The fund is actually in surplus by £2.3M (2022: £1.3M) but the surplus cannot be recognised as there is no provision for it to be returned to the employer. The gross position of the fund is that a 0.5% reduction in interest rates leads to a £2.7M increase in pension liabilities (2022: £2.6M) but this is substantially hedged with very little net exposure. The aim of the Trustees of the pension fund and the Institution is to transfer the total risk to an acceptable financial vehicle, such as an insurance company, in the medium-term, which requires a significantly larger surplus.

Overall group reserves increased to £34.6M from £33.5M in 2022. The Institution continues to remain financially sound. The Trustee Board is committed to maintaining financial prudence and, in particular, making an overall surplus and increasing free reserves.

Due to recent legal advice, the Trustees have concluded that a 2022 decision to write off a debt owed to IMechE by IMechE's trading subsidiary Professional Engineering Projects Limited (PEP Ltd) was incorrect. Professional advice is that this should be addressed in our 2024 accounts following a revision to the associated agreements. This would restore the Charity's financial position to the same state as it would have been had the write-off never taken place. This has been reported to the Charity Commission in the usual way for such instances, and the Charity Commission have confirmed that this is the appropriate treatment.

50

Annual Report 2023

Financial review (continued)

Degree of financial dependency

The Institution is dependent on the voluntary efforts of its members. However, there is no significant degree of dependence on any single member or small group of members in respect of voluntary effort or financial contributions.

Income from events and publications is also derived from a significant number of independent sources. However, the success of these activities is dependent on the general state of the economy.

Going concern

The Trustees have considered several factors in concluding that the adoption of a going concern basis in the preparation of these financial statements is appropriate. These factors have included a summary of the key risks and uncertainties in the context of the Institution’s operations and a review of the budgets and forecasts, including cash flows and sensitivity analysis. The future forecast considers the mitigating actions the Institution has taken and considers both immediate liquidity and longer-term solvency, together with the impact on reserves.

Working capital requirements are met through a combination of income received from the Institution’s activities, including commercial activities undertaken in the Institution’s trading subsidiaries. The Institution has the ability to drawdown against funds held within the Institution’s unrestricted investment portfolio if required. The Institution does not have any debt facilities but has £0.1M of COVID-19 bounce back loans within the trading subsidiaries.

Membership income is a key income stream and the Institution continues to ensure the delivery of value from being a member to guard against any decline.

IMechE's future financial plans, budgets, reserve levels and cash flow forecasts for a period of more than 12 months from the date of the signature of the accounts have been prepared by management and reviewed by the Trustees. There are no material uncertainties related to events or conditions that cast significant doubt upon the entity's ability to continue as a going concern.

As detailed above, Trustees have reviewed sensitivities and approved a 2024 budget reflecting expected levels of income to increase free reserves by £500K during the year.

Having regard to the above, the Trustees believe it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

51

imeche.org

Financial review (continued)

Summary of funds and investments

General

A description of all the various funds included within the Institution’s accounts is provided below.

Investment policy and returns

The Trustee Board has established an investment policy, which is reviewed on an annual basis. The policy includes the following principles:

  1. A diversity of investments will be held, in so far as is appropriate to the fund concerned. This may be achieved via a pooled investment vehicle like a unit trust or investment trust.

  2. Investment policy will be appropriate to the needs of the fund.

  3. Appropriately authorised investment managers will be employed.

  4. Appropriately authorised nominees may be employed to hold individual stocks and shares. The investment managers work towards the following objectives:

Reserve Fund, General Trust and James Clayton Trust

Target asset allocations have been set for each fund with the objective of outperforming the relevant composite benchmark by 0.5% over rolling three-year periods. The composite benchmark being calculated using the asset allocations and an appropriate index for the asset class.

Other Trusts

Funds are invested in special pooled funds restricted to Charity use. It is not appropriate to set individual objectives for these investments. However, performance is compared against statistics prepared by the investment management company.

A summary of the total annual rates of return (income and capital) achieved on investments during 2023 and 2022 is as follows:


nvestments during 2023 and 2022 is as follows:
2023 2022
% %
Reserve Fund 5.8 (6.7)
General Trust 5.8 (6.8)
James Clayton Trust 5.8 (6.8)
Charities Ofcial Investment Fund income units 12.4 (9.1)
Whitworth - Charishare 7.9 (0.2)
Whitworth - Charinco 6.0 (17.3)

52

Annual Report 2023

Financial review (continued)

Summary of funds and investments (continued)

Figure 8: Investment and pension fund trends in gains and losses 2014–2023 (£’000s)

----- Start of picture text -----
10,000
8,000
6,000
4,000
2,000
0
2014 2015
2016 2017 2018 2019 2020 2021 2022 2023
restated restated restated restated
(2,000)
(4,000)
(6,000)
(8,000)
Investments 3-year rolling average Investments annual result
Pension fund 3-year rolling average Pension fund annual result
----- End of picture text -----

53

imeche.org

We encourage employee involvement and feedback, facilitated by our Employee Engagement Group and its workstreams.

54

Annual Report 2023

Independent Auditor's report to the Members and Trustees of the Institution of Mechanical Engineers

Opinion on the financial statements

In our opinion, the financial statements:

We have audited the financial statements of the Institution of Mechanical Engineers (“the Parent Charity”) and its subsidiaries (“the Group”) for the year ended 31 December 2023, which comprise the consolidated statement of financial activities, consolidated balance sheets, consolidated statement of cash flows and notes to the accounts, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remain independent of the Group and the Parent Charity in accordance with the ethical requirements relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Conclusions related to going concern

In auditing the financial statements, we have concluded that the Trustees’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Charity’s ability to continue as a going concern for a period of at least 12 months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Trustees with respect to going concern are described in the relevant sections of this report.

55

imeche.org

Independent Auditor’s report to the Members and Trustees (continued)

Other information

The Trustees are responsible for the other information. The other information comprises the information included in the Trustee Board’s Report and Annual Report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which The Charities (Accounts and Reports) Regulations 2008 and The Charities Accounts (Scotland) Regulations 2006 requires us to report to you if, in our opinion;

Responsibilities of Trustees

As explained more fully in the Statement of Trustees’ Responsibilities, the Trustees are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Trustees determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Trustees are responsible for assessing the Group’s and the Parent Charity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustees either intend to liquidate the Group or Parent Charity or to cease operations, or have no realistic alternative but to do so.

56

Annual Report 2023

Independent Auditor’s report to the Members and Trustees (continued)

Auditor’s responsibilities for the audit of the financial statements

We have been appointed as auditor under section 151 of the Charities Act 2011 and section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act 2005 and report in accordance with the Acts and relevant regulations made or having effect thereunder.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Non-compliance with laws and regulations

Based on:

we considered the significant laws and regulations to be the Charities Act 2011 in the UK, UK GAAP and UK tax legislation.

The Group is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the Charity Commission.

Our procedures in respect of the above included:

57

imeche.org

Independent Auditor’s report to the Members and Trustees (continued)

Fraud

We assessed the susceptibility of the financial statements to material misstatement, including

fraud. Our risk assessment procedures included:

Based on our risk assessment, we considered the areas most susceptible to fraud to be management override of control and income recognition.

Our procedures in respect of the above included:

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

58

Annual Report 2023

Independent Auditor’s report to the Members and Trustees (continued)

A further description of our responsibilities for the audit of the financial statements is located at the Financial Reporting Council’s (“FRC’s”) website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Charity’s Trustees, as a body, in accordance with Part 4 of The Charities (Accounts and Reports) Regulations 2008 and the Charities and Trustee Investment (Scotland) Act 2005. Our audit work has been undertaken so that we might state to the Charity’s Trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Charity and the Charity’s Trustees as a body, for our audit work, for this report, or for the opinions we have formed.

BDO LLP, Statutory Auditor Office Location, UK

Date: 1 August 2024

BDO LLP is eligible for appointment as auditor of the Charity by virtue of its eligibility for appointment as auditor of a company under section 1212 of the Companies Act 2006. BDO LLP is a limited liability partnership registered in England and Wales (Reg N OC305127).

59

imeche.org

Statement of Trustees' responsibilities in respect of Trustees' Annual report and the Financial statements

Under the trust deed and rules of the Charity and charity law, the Trustees are responsible for preparing the Trustees’ Annual Report and the financial statements in accordance with applicable law and regulations.

Charity law requires the Trustees to prepare financial statements for each financial year. The Trustees have elected to prepare the financial statements in accordance with FRS102, the Financial Reporting Standard applicable in the UK and Republic of Ireland.

The group and charity’s financial statements are required by law to give a true and fair view of the state of affairs of the group and the Charity and of the Group’s excess of income over expenditure for that period.

In preparing these financial statements, generally accepted accounting practice entails that the Trustees:

The Trustees are required to act in accordance with the trust deed and the rules of the Charity, within the framework of trust law. They are responsible for keeping proper accounting records, sufficient to disclose at any time, with reasonable accuracy, the financial position of the Charity at that time, and to enable the Trustees to ensure that, where any statements of accounts are prepared by them under section 132(1) of the Charities Act 2011, those statements of accounts comply with the requirements of regulations under that provision. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Charity and to prevent and detect fraud and other irregularities. The Trustees are responsible for the maintenance and integrity of the financial and other information included on the Charity’s website.

Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

60

Annual Report 2023

Statement of Trustees’ responsibilities (continued)

Fundraising

The Charity had no fundraising activities requiring disclosure under S162A of the Charities Act 2011.

Disclosure of Information to Auditor

The Trustees who held office at the date of approval of this Trustees’ Annual Report confirm that, so far as they are each aware, there is no relevant audit information of which the Institution’s auditor is unaware; and each Trustee has taken all the steps that he/she ought to have taken as a Trustee to make himself/herself aware of any relevant information and to establish that the Institution’s auditor is aware of that information. The financial statements have been prepared in accordance with the accounting policies set out in the notes to the accounts and comply with the Charity’s governing documents, the Charities Act 2011 and Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with FRS102, the Financial Reporting Standard applicable in the UK and Republic of Ireland, published on 16 July 2014.

This annual report was approved by the Trustee Board on 1 August 2024 and was signed on its behalf by:

Dr Clive Hickman OBE President

Dr Richard Judge Chair, Finance Board

61

imeche.org

Financial statements

Year ended 31 December 2023

Consolidated Statement of Financial Activities Restated
Notes Unrestricted Restricted Endowment 2023 2022
Funds Funds Funds Total Total
Income and Endowments from: £’000 £’000 £’000 £’000 £’000
Donations and Legacies – 22 – 22 21
Charitable Activities
Membership Subscriptions 13,739 – – 13,739 12,706
Groups, Divisions and Events 2,114 – – 2,114 1,621
Professional Development and Membership 198 – – 198 211
Information and Library Services 5 – – 5 4
Apprentice End Point Assessment 2,805 – – 2,805 2,243
Other Trading Activities
Venue hire, Training, Exam services, Consultancy, Flawed samples 10,076 – – 10,076 9,826
Marketing, Advertising and Merchandise 29 – – 29 7
Investments
Interest and Dividends 14 226 569 – 795 701
Other
Other income 2 26 – – 26 4
Rents receivable 439 – – 439 524
Total 29,657 591 – 30,248 27,868
Expenditure on:
Raising Funds
Non-Charitable Trading Activities 9,985 – – 9,985 10,502
Investment Management Costs 6 9 – 15 16
Charitable Activities
Groups, Divisions and Events 5,569 – – 5,569 5,236
Marketing 2,400 – – 2,400 2,182
Membership Development 2,344 – – 2,344 2,148
Apprentice End Point Assessment 2,930 – – 2,930 2,178
Professional Development 1,071 – – 1,071 914
Information and Library Services 875 – – 875 804
Membership Subscriptions 2,888 – – 2,888 2,617
Tenants and Public Facilities 536 – – 536 495
Prizes, Awards and Scholarships – 452 – 452 589
Total 3 28,604 461 – 29,065 27,681
Netgains/(losses) on investment assets 13/14 (473) 138 569 234 (1,582)
Net income/(expenditure) 580 268 569 1,417 (1,395)
Transfer between funds (10) 10 – – –
Net income/(expenditure) after transfers 570 278 569 1,417 (1,395)
Other recognised losses
Actuarial (losses) on defned beneft pension scheme 10 (307) – – (307) (301)
Net movement in funds 263 278 569 1,110 (1,696)
Reconciliation of funds
Total funds brought forward 22 19,398 3,438 10,618 33,454 35,150
Total funds carried forward 22 19,661 3,716 11,187 34,564 33,454

The notes to the accounts numbered 1 to 29 form parts of these accounts.

62

Annual Report 2023

Financial statements (continued)

Statement of Financial Activities Restated
Unrestricted Restricted Endowment 2022
Funds Funds Funds Total
Comparative Information £’000 £’000 £’000 £’000
Total income 27,312 556 – 27,868
Total expenditure (27,110) (571) – (27,681)
Net investment losses (219) (139) (1,224) (1,582)
Actuarial losses on defned beneftpension scheme
Net movement in funds		 (301)
(318)		 –
(154)		 –
(1,224)		 (301)
(1,696)

There were no other recognised gains or losses other than those listed above and the net income for the year. All the Group's financial activities in this and the prior year were continuing.

Consolidated Balance Sheets as at 31 December 2023 Group Institution Institution
Notes 2023 2022 2023 2022
£’000 £’000 £’000 £’000
Fixed Assets
Intangible assets 11 3,085 3,446 2,802 3,172
Tangible assets 12 5,665 5,897 5,044 5,168
Investments: listed 14 18,685 18,155 11,760 11,366
Investments: mixed motive
Total fxed assets		 13 2,602
30,037		 3,082
30,580		 2,602
22,208		 3,082
22,788
Current Assets
Stocks 15 227 191 11 12
Debtors 16 3,843 3,393 7,226 7,423
Cash at bank and in hand 8,985 7,537 8,273 6,424
Total current assets 13,055 11,121 15,510 13,859
Liabilities
Creditors: amounts fallingdue within oneyear 17 8,486 8,184 7,229 6,687
Net current assets 4,569 2,937 8,281 7,172
Total assets less current liabilities 34,606 33,517 30,489 29,960
Creditors: amounts fallingdue after oneyear 18 43 63 – –
Net assets excluding pension liability 34,564 33,454 30,489 29,960
Defned beneftpension scheme liability
Total net assets		 10
22		 –
34,564		 –
33,454		 –
30,489		 –
29,960
The Funds of the Charity
Endowment funds 11,187 10,618 6,993 6,632
Restricted income funds 3,716 3,438 927 720
Unrestricted funds 19,661 19,398 22,569 22,608
Total unrestricted funds 19,661 19,398 22,569 22,608
Total Charityfunds 21 34,564 33,454 30,489 29,960

The consolidated statement of financial activities is for the Group as a whole. The Charity’s total income for the year was £20,353k (2022: £18,096k). The Charity’s total funds increased by £529k in the year (2022: £2,034k decrease).

The financial statements were approved by the Trustee Board on 1 August 2024 and were signed on its behalf by:

Dr Clive Hickman OBE, President

Dr Richard Judge, Chair, Finance Board

The notes to the accounts numbered 1 to 29 form part of these accounts. Charity Registration No: 206882.

63

imeche.org

Financial statements (continued)

Consolidated Statement of Cash flows

Consolidated Statement of Cash flows
Notes 2023 2022
£’000 £’000
Cash fows from operating activities:
Net cashprovided by operating activities		 25 1,594 848
Cash fows from investing activities:
Dividends, interest and rent from investments		 14 795 701
Purchase of property, plant and equipment 12 (357) (311)
Proceeds from sale of property, plant and equipment 41 7
Purchase of mixed motive investments 13 (36) (36)
Purchase of intangible assets 11 (780) (864)
Proceeds from sale of investments 14 210 –
Net cash used in investing activities (127) (503)
Cash fows from fnancing activities:
Bank loan repayments		 (19) (18)
Net cash fows used in fnancing activities
Change in cash and cash equivalents in the reporting period		 (19)
1,448		 (18)
327
Cash and cash equivalents at the beginningof the reporting period 7,537 7,210
Cash and cash equivalents at the end of the reporting period 8,985 7,537

The notes to the accounts numbered 1 to 29 form part of these accounts.

Group

Analysis of Changes in Net Debt

Balance Cash Flows Balance
01.01.2023 31.12.2023
£’000 £’000 £’000
Cash and cash equivalents
Cash awaiting investment 41 3 44
Cash at bank and in hand 7,537 1,448 8,985
7,578 1,451 9,029
Borrowings
Debt due within one year (19) (1) (20)
Debt due after oneyear (63) 20 (43)
(82) 19 (63)
Total 7,496 1,470 8,966

64

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023

1. Accounting Policies

The Charity is registered with the Charity Commission (Reg N. 206882), domiciled in the UK and is a public benefit entity and incorporated by Royal Charter in 1930. The address of the registered office is 1 Birdcage Walk, London SW1H 9JJ.

a) Basis of preparation

The Financial Statements have been prepared in accordance with the Charities SORP, FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and applicable UK charity law.

The Financial statements have been prepared to give a true and fair view and have departed from The Charities (Accounts and Reports) Regulation 2008 only to the extent required to give a true and fair view. This departure has involved following Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS102) effective 1 January 2019 rather than the Accounting and Reporting by Charities: Statement of Recommended Practice effective from 1 April 2005, which has since been withdrawn.

The annual accounts have been prepared on the historical cost basis of accounting, modified by the recognition of certain financial assets and liabilities measured at fair value.

b) Going concern

The Trustees have considered several factors in concluding that the adoption of a going concern basis in the preparation of these financial statements is appropriate. These factors have included a summary of the key risks and uncertainties in the context of the Institution’s operations and a review of the budgets and forecasts, including Cash flows and sensitivity analysis. The future forecast considers the mitigating actions the Institution has taken and considers both immediate liquidity and longer-term solvency, together with the impact on reserves.

Working capital requirements are met through a combination of income received from the Institution’s activities, including commercial activities undertaken in the Institution’s trading subsidiaries. The Institution has the ability to drawdown against funds held within the Institution’s unrestricted investment portfolio if required. The Institution does not have any debt facilities but has £0.1M of COVID-19 bounce back loans within the trading subsidiaries.

Membership income is a key income stream and the Institution continues to ensure the delivery of value from being a member to guard against any decline. The experience of 2021 has been incorporated into future forecasts.

65

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

1. Accounting Policies (continued)

c) Basis of consolidation

Consolidated figures for the Institution and group companies (see note 2 to the accounts) have been included in these financial statements for the year ended 31 December 2023. Companies acquired by the group are consolidated on an acquisition basis i.e. fair values are attributed to the Group’s share of the net tangible assets and where the cost of acquisition (being the fair value of the purchase consideration and the expenses of the acquisition) is greater than the fair values attributable to such net assets, the difference is treated as goodwill. The assets and liabilities of the subsidiaries have been included with those of the Charity on a line by line basis.

d) Income

Income is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. No amounts are included in these financial statements for the services donated by volunteers.

With the exception of Membership Income, all income is included in SOFA when the Institution is legally entitled to the income and the amount can be quantified with reasonable accuracy.

Legacies and donations are recognised when all the criteria have been met; entitlement when the Institution has been notified of distribution or legacy is received, the value is reliably measured and the likelihood of receiving the legacy is probable.

Pecuniary legacies are recognised when probate is in place. Residuary legacies are recognised when probate is granted, a copy of the will has been received to confirm the Institution’s entitlement, and there is sufficient information to value them. In practice this is usually when the assets and liabilities statement is received. Reversionary interests involving a life tenant and contentious legacies are not recognised.

Membership subscription income is accounted for on the basis of the amount receivable for the year. Accordingly, the amounts received during the year in relation to future years are deferred. Members who join in the final quarter of the year are not charged subscriptions by the Institution for that year. The annual subscription payment received is treated as relating entirely to the following year and is deferred.

Income from consultancy and flawed samples categories is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. When the outcome cannot be estimated reliably, income is recognised only to the extent of the expenses recognised that are recoverable.

Income from events, apprentice end-point assessment, venue hire, training and exam services, are recognised on the basis of the amount receivable in the period in which the event takes place. Income from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, the amount can be measured reliably, and it is probable that the economic benefits associated with the transaction will flow to the entity.

Interest and dividends are recognised when receivable.

66

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

1. Accounting Policies (continued)

e) Tangible fixed assets

Tangible fixed assets are stated at cost less depreciation. Depreciation is calculated so as to write off the cost of fixed assets on a straight line basis at the following rates:

Freehold buildings: Building improvements 2% on original purchases 4% on improvements per annum Leasehold buildings: Building improvements 2% or over the period of the lease if quicker per annum Furniture and equipment: 20 - 33.3% per annum Plant and equipment: 10 - 20% per annum

Freehold land is not depreciated.

Fixed assets are regularly reviewed to consider whether they have been impaired and to ensure that the depreciation costs reflect their working life. Expenditure below £1,000 is not capitalised, except laptops/computers.

f) Goodwill

Goodwill represents the excess of the cost of acquisition of incorporated and unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill shall be considered to have a finite useful life, and shall be amortised on a systematic basis over its economic life of five years.

Where there are indications of impairment, an impairment review is undertaken to assess a recoverable amount, which considers a service potential and not cash flows.

g) Website and digital transformation costs

Website costs are capitalised when it is probable that the expected future economic benefits that are attributable will flow to the Group and their costs can be reliably measured. Website and Digital Transformation costs are initially recognised at cost and amortised over the expected useful life of five years.

h) Impairment of tangible and intangible assets

At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.

Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

67

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

1. Accounting Policies (continued)

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future Cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in SOFA, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried in at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

i) Financial assets

The Group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS102 to all of its financial instruments.

Financial assets are recognised in the Charity statement of financial position when the Group becomes party to the contractual provisions of the instrument.

Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.

j) Financial liabilities

Basic financial liabilities are initially measured at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Other financial liabilities classified as fair value through profit or loss are measured at fair value.

k) Investments

Listed investments are stated at market value, valued at their bid price, at the balance sheet date. It is the Group’s policy to keep valuations of stock exchange listed investments up to date, such that when investments are sold there is no gain or loss arising relating to prior years. As a result the statement of financial activities does not distinguish between the valuation adjustments relating to sales and those relating to continued holdings, as they are together treated as changes in the value of the investment portfolio throughout the year.

68

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

1. Accounting Policies (continued)

Investments not listed on a recognised stock exchange are valued at fair value, unless there is no reliable basis of valuation, in which case they are valued at cost.

Mixed motive investment

The Institution formed a limited partnership with Stephenson LP in January 2014 to make venture capital investments into a portfolio of companies involved in or associated with young innovative engineering businesses. This investment has a genuine mixed motive because investment is being made both for financial return but also to advance engineering. The investment is held at fair value based on the most recent share sale prices of the underlying investments, less any impairment. If there is objective evidence of impairment, then an immediate impairment loss is recognised in the statement of financial activities.

l) Foreign currency

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to Statement of Financial Activities.

m) Expenditure

Expenditure is included in the Statement of Financial Activities on an accruals basis and is recognised once there is a legal or constructive obligation to transfer economic benefit to a third party, it is probable that a transfer of economic benefits will be required in settlement and the amount of the obligation can be measured reliably.

n) Stocks

Stock classified as finished goods per sale are stated at the lower of cost and net realisable value using the FIFO method. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

Work-in progress is assessed on an individual basis based on the stage of completion of the contract which is estimated using combination of the milestones in the contract and the time spent to date compared to the total time expected to be required to undertake the contract. Estimates of the total time required to undertake the contracts are made on a regular basis and subject to management review. These estimates may differ from the actual results due to a variety of factors such as efficiency of working, accuracy of assessment of progress to date and client decision making. See note 15 for the disclosure of the amount of work in progress as at the balance sheet date. Net realisable value is the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

o) Retirement benefit

The Charity operates a defined benefit pension scheme which was closed to new members in 2002 and is also closed to future accrual. It also operates a defined contribution scheme open to existing staff. Defined benefit pension scheme assets are measured using market values. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high-quality corporate bond of equivalent term and currency to the liability. For the defined benefit pension

69

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

1. Accounting Policies (continued)

scheme, the current service costs, gains and losses on settlements and curtailments, and administrative costs are charged to expenditure. They are included as part of staff costs. Actuarial gains and losses are recognised immediately in ‘Other recognised gains/ (losses)’. For the defined contribution scheme, the amounts charged to expenditure in respect of pension costs and the post-retirement benefits are the contributions payable in the year.

p) Operating leases

Rents payable under operating leases are recognised in the Statement of Financial Activities in the year in which they fall due. Future commitments under operating leases are disclosed in the notes to the financial statements.

q) Grant commitments

Scholarships are awarded for a period of study, usually three academic years, with the students’ progress being assessed on an annual basis. Expenditure is not accrued beyond each academic year as future payments are subject to a review by the relevant panel, which therefore has discretion to terminate the funding agreement in case the performance related conditions are not met. Prizes are paid in one instalment at the beginning of the academic year, with the exception of scholarships through the Whitworth fund, annual instalment. Multi-year grants that do not meet the recognition criteria are disclosed as contingent liabilities in the notes to the financial statements.

r) Critical accounting estimates and judgements

In the application of the accounting policies, the Trustees are required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgements and estimates are also required for the allocation of support costs to the expenditure headings in the Statement of Financial Activities, as set out in Note 3.

The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities have been outlined as follows.

• Intangible fixed assets

The majority of the cost of intangible fixed assets are based on the capitalisation of both internal and external staff costs. These are allocated to specific projects based on a monthly review of time spent and development output conducted by the Chief Technology Officer, for the Charity's digital modernisation programme, or the relevant General Manager, for commercial training course development.

An annual review is conducted to assess the carrying value of the projects against future expected economic benefits.

70

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

1. Accounting Policies (continued)

• Unlisted investments

The Group makes an estimate of the fair value of unlisted investments based on the last price paid for shares and subject to an impairment review for any material changes in circumstance since the last share sale.

• Actuarial assumptions in respect of defined benefit pension schemes

The application of actuarial assumptions relating to defined benefit pension schemes is incorporated in the financial statements in accordance with FRS102. In applying FRS102, advice is taken from independent qualified actuaries. In this context, significant judgement is exercised in a number of areas, including future changes in salaries and inflation, mortality rates and the selection of appropriate discount rates.

• Bad debt provision

The Group makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtors, the aging profile of debtors and historical experience.

s) Reserves

Unrestricted funds are those available for application against any of the Charity’s objectives. Restricted funds are those only available for certain purposes defined by the provider of the original funds. Permanent endowment funds are those where the original gift may not be spent, only any income on those funds, which is placed into a related restricted fund. Expendable endowment funds are those where both the income and the original capital may be spent.

t) Taxation

As a charity the Institution is exempt from corporation tax. The tax expense represents the sum of the corporation tax currently payable and deferred tax in the commercial subsidiaries. The companies’ liabilities for current tax are calculated using tax rates that have been enacted or substantively enacted by the reporting end date. Input VAT relating to taxable activities is fully recoverable, and relating to exempt and out of scope activities is irrecoverable. VAT on support costs is partially recoverable, with the recoverable percentage being recalculated each year. Any irrecoverable VAT is recognised as an expense through support costs in the period to which it relates.

u) Heritage assets

Heritage assets comprise:

Additions to heritage assets are made by donation. Reliable and relevant information on the cost of many of the assets is therefore not readily available and there is a lack of comparable market values. As such, none of these assets are recognised in the accounts. Moreover, the Trustees do not consider that a reliable estimate of the fair value can be obtained without incurring costs that would exceed the benefits provided.

71

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

2. Net Incoming/(Outgoing) resources

The consolidated results for the Institution are presented in the statement of financial activities. These include the activity of the parent charity, The Institution of Mechanical Engineers, and the activities of its 100% owned subsidiaries, as detailed below. The incoming resources of the Institution alone for 2023 were £20,348k (2022: £18,096k), and resources expended in 2023 were £19,430k (2022: £18,601k).

Other Income

Other Income
2023 2022
£’000 £’000
Administration fee for Whitworth Scholarship Fund 12 –
Proft on disposal of fxed assets 14
26		 4
4

Subsidiary Companies

Professional Engineering Projects Limited, registered in England and Wales (Reg N 01103638), was established by the Institution as an organisation from which it could conduct the majority of its publishing activities, including the magazines that are made available to members. Whilst this main trade was disposed of during 2010, the company continues to carry on trading in non-charitable activities, mainly provision of training to engineers.

The company also has four wholly owned subsidiary companies, IMechE Services Limited (Reg N 01361114), IMechE Fife NDT Limited (Reg N 01917207), Siantonas Ball Limited (Reg N 01655732), Sonaspection Worldwide Limited (Reg N 04891363), all registered in England and Wales, which carry on non-charitable trading activities. These activities are consolidated on a line by line basis with the relevant amounts described as "Other non-charitable trading activities" under Incoming Resources and Resources Expended in the Consolidated Statement of Financial Activities. Both IMechE Engineering Training Solutions Limited (previously ArgyllRuane Limited) and Siantonas Ball Limited became dormant on 1 January 2014.

Sonaspection Worldwide has two wholly owned subsidiary companies, Sonaspection International Limited (Reg N 02050101) registered in England and Wales and Sonaspection Inc registered in the United States of America, which carry on non-charitable activities. These activities are consolidated at group with the relevant amounts described as "Other noncharitable trading activities" under Incoming Resources and Resources Expended in the Consolidated Statement of Financial Activities.

The whole of the issued share capital of Professional Engineering Projects Limited (£2) is held by nominees on behalf of the Institution. A summary of the subsidiaries profit and loss account is shown below. Audited accounts are filed with the Registrar of Companies for the individual companies. These figures are subject to the adjustments mentioned above prior to their incorporation in the Consolidated Statement of Financial Activities.

The Whitworth Scholarships Fund, Charity Reg N 313756, was established in 1868 under a deed of covenant and trust between Sir Joseph Whitworth and the then President of the Committee of Council on Education. The Fund is now governed under the terms of a Scheme made by the Charity Commissioners for England and Wales dated 11 December 2001, with the Institution of Mechanical Engineers as the controlling entity.

72

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

2. Net Incoming/(Outgoing) resources (continued)

Subsidiary Companies 2023

Subsidiary Companies 2023
PEP Ltd Sona Int’l Sona Inc IMechE IMechE
Services Fife NDT
£’000 £’000 £’000 £’000 £’000
Turnover 6,903 1,942 1,130 – 652
Cost of sales (2,769) (1,079) (630) – (342)
Grossproft
Distribution costs		 4,134
–		 863
(62)		 500
–		 –
–		 310
–
Administration costs (3,580) (812) (451) (4) (318)
Operating proft/(loss)
Write down of investment value		 554
(1,240)		 (11)
–		 49
–		 (4)
–		 (8)
–
Dividends receivable 450 – – – –
(Loss)/proft before interest and tax
Interest payable to the Institution		 (236)
(287)		 (11) 49 (4) (8)
Taxation – 13 – – –
Dividendspayable (450)
(Loss)/proft for theyear
Total assets		 (523)
3,446		 (448)
2,170		 49
430		 (4)
–		 (8)
1,112
Total liabilities (6,633) (239) (679) (28) (663)
Total funds with (Defcit)/funds (3,187) 1,931 (249) (28) 449

Subsidiary Companies 2022

PEP Ltd Sona Int’l Sona Inc IMechE IMechE
Services Fife NDT
£’000 £’000 £’000 £’000 £’000
Turnover 6,041 2,557 1,028 – 469
Cost of sales (2,308) (1,438) (710) – (354)
Grossproft
Distribution costs		 3,733
–		 1,119
(57)		 318
–		 –
–		 115
(1)
Administration costs (3,812) (715) (425) (3) (247)
Operating (loss)/proft
Interestpayable to the Institution		 (79)
(148)		 347
–		 (107)
–		 (3)
–		 (133)
–
(Loss)/proft before tax
Taxation		 (227)
–		 347
2		 (107)
–		 (3)
–		 (133)
–
(Loss)/proft for theyear
Total assets		 (227)
4,707		 349
2,755		 (107)
588		 (3)
–		 (133)
582
Total liabilities (7,371) (375) (860) (23) (124)
Total (defcit)/funds (2,664) 2,380 (272) (23) 458

73

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

3. Expenditure

All expenditure is accounted for on an accruals basis and has been classified under headings that aggregate all costs related to that category.

For administrative purposes the Institution is divided into a number of directorates and then subdivided into departments. Accounting records permit the costs and revenues of all departments to be determined accurately.

The classification of costs in the Consolidated Statement of Financial Activities utilises this information to show expenditure broken-down into broad functional areas.

Where costs cannot be directly attributed to a particular heading, they have been allocated to activities on the basis of headcount and floor area.

Total Resources Expended 2023

Total Resources Expended 2023
Direct Allocated Total
Costs Support 2023
Costs
£’000 £’000 £’000
Raising funds
Non-Charitable Activities 9,533 452 9,985
Investment Management Costs 15 – 15
Charitable activities
Marketing and Policy 929 1,471 2,400
Groups, Divisions and Events 3,522 2,047 5.569
Business Development 1,179 1,165 2,344
Apprentice End Point Assessment 2,605 325 2,930
Professional Development 405 666 1,071
Library 522 353 875
Membership 1,104 1,784 2,888
Public facilities – Birdcage Walk – 536 536
Prizes, Awards and Scholarships 452 – 452
Total resources expended 20,266 8,799 29,065
Total Resources Expended 2022 (restated)
£’000 £’000 £’000
Raising funds
Non-Charitable activities 9,691 811 10,502
Investment Management Costs 16 – 16
Charitable activities
Marketing and Policy 993 1,189 2,182
Groups, Divisions and Events 3,516 1,720 5,236
Membership Development 1,141 1,007 2,148
Apprentice End Point Assessment 1,956 222 2,178
Professional Development 353 561 914
Library 484 320 804
Membership 1,069 1,548 2,617
Public Facilities – Birdcage Walk – 495 495
Prizes, Awards and Scholarships 589 – 589
Total resources expended 19,808 7,873 27,681

74

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

3. Expenditure (continued)

Allocated Support Costs
2023 Governance &
Management		 Finance Information
Technology		 Facilities &
Depreciation		 Defned
Beneft
Pension		 Total
Scheme
£’000 £’000 £’000 £’000 £’000 £’000
Non-Charitable Activities 18 23 262 149 – 452
Marketing 633 163 254 383 38 1,471
Groups, Divisions and Events 882 227 353 532 53 2,047
Business Development 502 129 201 303 30 1,165
Apprentice End Point Assessment 144 37 57 87 – 325
Professional Development 287 74 115 173 17 666
Information and Library Services 144 37 57 106 9 353
Membership Subscriptions 768 198 308 464 46 1,784
Tenants and Public Facilities – – – 536 – 536
Total 3,378 888 1,607 2,733 193 8,799
2022
£’000 £’000 £’000 £’000 £’000 £’000
Non-Charitable Activities 137 180 356 138 – 811
Marketing 465 87 261 339 37 1,189
Groups, Divisions and Events 673 126 377 490 54 1,720
Business Development 394 74 220 287 32 1,007
Apprentice End Point Assessment 90 17 50 65 – 222
Professional Development 219 41 123 160 18 561
Information and Library Services 120 22 67 101 10 320
Membership Subscriptions 606 113 339 441 49 1,548
Tenants and Public Facilities – – – 495 – 495
Total support costs allocated 2,704 660 1,793 2,516 200 7,873

Support costs comprises finance, IT, HR, maintenance and running costs of One Birdcage Walk, closed defined benefit pension costs, governance and management of IMechE.

These costs are allocated to IMechE’s charitable and commercial activities on a pro-rata basis using headcount or floor area.

75

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

4. Taxation

The Institution is considered to pass the tests set out in Paragraph 1, Schedule 6 of the Finance Act 2010 and therefore it meets the definition of a charitable trust for UK income tax purposes. Accordingly, the Charity is potentially exempt from taxation in respect of income or capital gains received within categories covered by Part 10 of the Income Tax Act 2007 or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied exclusively to charitable purposes.

The Charity's trading subsidiaries are subject to corporation tax; however all of their taxable profits are paid to the Institution under gift aid.

5. Transactions with members of the Trustee Board

5. Transactions with members of the Trustee Board
2023 2022
£’000 £’000
Travel and subsistence expenses 33 25
No. No.
Number of members reimbursed 14 6

All Trustee costs are reimbursements to Trustees for costs incurred in fulfilling their duties.

The Trustees nor any person connected with them receive remuneration.

6. Indemnity Insurance

6. Indemnity Insurance
2023 2022
£’000 £’000
Indemnityinsurancepremiumspaid 11 10

During 2023 the Institution paid for two insurance policies, covering professional indemnity and the liabilities of Trustees and 'directors and officers'. Cover applies to the Trustee Board, ordinary members involved with Institution affairs and employees.

76

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

7. Staff employed

7. Staf employed
2023 2022
No. No.
Average numbers of staf employed throughout the year:
The Institution of Mechanical Engineers		 149 137
Professional Engineering Projects Limited 45 49
Sonaspection International Limited 19 21
Sonaspection Incorporated 9 11
IMechE Fife NDT Limited 5 6
Total employees 227 224
8. Employment costs 2023 2022
£’000 £’000
Salaries and benefts
Employer’s social security costs		 10,636
1,045		 9,908
1,046
Employer’spension costs 551 557
Total 12,232 11,511

The numbers of employees whose emoluments, excluding employer's pension contributions, exceeded £60,000 are analysed as follows:


exceeded £60,000 are analysed as follows:
2023 2022
No. No.
£60,001 – £70,000 16 15
£70,001 – £80,000 13 9
£80,001 – £90,000 4 6
£90,001 – £100,000 6 4
£100,001 – £110,000 1 2
£110,001 – £120,000 1 1
£120,001 – £130,000 1 1
–
£130,001 – £140,000 1
£150,001 – £160,000 – –
£170,001 – £180,000 – 1
£180,001 – £190,000 2 1
Total 45 40

42 of the above employees are members of the defined contribution scheme and none (2022: 40) are active members of the defined benefit scheme. The Institution contributed £237,302 as employer pension contributions (2022: £233,403) for these members into the defined contribution scheme.

During the year, key management received remunerations and benefits of £1,074,506 (2022: £733,328). The remuneration of key management consists of salary, employers' national insurance contributions, pension contributions and benefits in kind. Number of Directors in 2023: 6 (2022: 5)

77

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

8. Employment costs (continued)

The Charity designated six directors as key management personnel.

Highest paid Director - Dr Alice Bunn (2022: Dr Alice Bunn)

2023 2022
£’000 £’000
Salary 181 163
Benefts
Total		 4
185		 10
173

Two employees were made redundant during the year (2022:6). The cost of redundancies of £6,774 was paid during 2023 (2022: £141,292). Included within these costs were ex-gratia costs of £2,538 payable to one person (2022: £43,562 to five people).

9. Auditor’s remuneration

9. Auditor’s remuneration
2023 2022
£’000 £’000
Fees for: the audit of group fnancial statements
Fees for: the audit of other group companies		 116
37		 101
47
Fees for: in relation to theprioryear audit – 7
Total 153 155

10. Pensions

The Institution operates a defined benefit pension arrangement called the Institution of Mechanical Engineers Staff Pension & Life Assurance Scheme (the Scheme). The Scheme is closed to new members with an effective date of 5 September 2002, and is closed to future accrual. The most recent comprehensive actuarial valuation of the Scheme was carried out as at 31 December 2023, and the next valuation of the Scheme is due as at 31 December 2026.

A defined contribution pension plan has been established for employees who are not eligible to join the defined benefit pension scheme. The Institution has agreed to match employee contributions to the defined contribution plan up to a maximum of 10% of salary. There is an outstanding contribution at the end of the financial year of £128,138 (2022: £112,661).

The pension cost charge for the period represents contributions payable by the Institution to the defined benefit pension plan and amounted to £500,000 (2022: £500,000).

78

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

10. Pensions (continued)

Assumptions
Assumptions 2023 2022
% %
Price infation (RPI)
Price infation (CPI)
Salary increases		 2.90
2.50
3.40		 3.00
2.60
3.50
Return on assets * *
Discount rate 4.50 4.70

Mortality assumptions used in 2023 and 2022 are based on the S3PxA tables adjusted to reflect the broad wealth characteristics of each member. Future improvements are assumed to be in line with the CMI projection model, assuming improvements have peaked. The long term improvement is assumed to be 1.25% p.a. (2022: 1.25% p.a.), with weight parameters of 25% (2022: 15%). Members are assumed to take 80% of the maximum cash at retirement.

The assumptions result in life expectancies as follows:

31/12/23 31/12/22
years years
Male aged 45 88.6 87.7
Male aged 65 87.4 86.5
Female aged 45 91.5 90.6
Female aged 65 90.1 89.2

Current asset split

Current asset split
Bid values as at
31 Dec 2023
£’000
Equities 18,263
Liability Driven Investments 17,700
Corporate Bonds 4,255
Global Asset Backed Securities 2,060
Cash 168
Annuities 35
Total assets 42,481

79

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

10. Pensions (continued)

Balance Sheet

Balance Sheet
2023 2022
£’000 £’000
Fair value of plan assets 42,481 40,370
Present value of funded obligations (40,183) (39,067)
Surplus in scheme 2,298 1,303
Efect of asset ceiling
Net defned beneft asset		 (2,298)
2,298		 (1,303)
1,303

Amount Recognised in SOFA

Amount Recognised in SOFA
2023 2022
£’000 £’000
Current service cost 200 200
Interest on liabilities 1,790 1,071
Interest on assets (1,858) (1,108)
Interest on efect of asset ceiling
Total charge to SOFA		 61
193		 35
198

Remeasurements over the period

2023 2022
£’000 £’000
(Gain)/Loss on assets in excess of interest (1,947) 21,387
Experience losses on liabilities 596 2,048
Gains from changes to demographic assumptions (110) (719)
Losses/(gains) from changes to fnancial assumptions
Losses/(gains) from change in efect of asset ceiling
Total remeasurements		 834
934
307		 (21,762)
(653)
301

Change in the Value of Assets

Change in the Value of Assets
2023 2022
£’000 £’000
Fair value of assets at start ofperiod 40,370 62,437
Interest on assets 1,858 1,108
Company contributions 500 500
Benefts paid (including expenses)
Return on assets less interest		 (2,194)
1,947		 (2,288)
(21,387)
Fair value of assets at end ofperiod 42,481 40,370
Actuarial return on assets 3,805

80

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

10. Pensions (continued)

Change in Value of the DB Liabilities

Change in Value of the DB Liabilities
2023 2022
£’000 £’000
Value of liabilities at start ofperiod 39,067 60,516
Current service cost 200 200
Interest on liabilities 1,790 1,071
Benefts paid (including expenses)
Experience losses on liabilities		 (2,194)
596		 (2,288)
2,048
Changes to demographic assumptions (110) (719)
Changes to fnancial assumptions
Value of liabilities at end ofperiod		 834
40,183		 (21,762)
39,066

Reconciliation of Effect of Asset Ceiling

Reconciliation of Effect of Asset Ceiling
2023 2022
£’000 £’000
Efect of asset ceiling at start ofperiod
Interest on efect of asset ceiling
Actuarial losses/(gains) on efect of asset ceiling
Efect of asset ceiling at end ofperiod		 1,303
61
934
2,298		 1,921
35
(653)
1,303

Sensitivity of the Value placed on the Liabilities

Sensitivity of the Value placed on the Liabilities
Approximate efect on liability
£’000
Discount rate ‐0.5% p.a. + 2,662
Infation +0.5% p.a.
Long term rate of mortaility improvement increased to 1.5% p.a.		 + 1,301
+ 272

Projected SOFA Charge for next period

Projected SOFA Charge for next period
2024
£’000
Current service cost 200
Interest on liabilities 1,766
Interest on assets (1,876)
Interest on efect of asset ceiling
Total charge to SOFA		 103
193

The Institution expects to pay contributions of £500,000 in the year to 31 December 2024.

81

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

11. Fixed assets – Intangible assets

Group Goodwill Website & WIP Total
DT costs
£’000 £’000 £’000 £’000
Cost
At 1 January 2023 5,232 6,569 – 11,801
Additions – 590 190 780
Disposals, movements – – – –
At 31 December 2023 5,232 7,159 190 12,581
Depreciation
At 1 January 2023 5,232 3,123 – 8,355
Amortisation charged – 1,141 – 1,141
Disposals, movements – – – –
At 31 December 2023 5,232 4,264 – 9,496
Net Book Value
At 31 December 2023 – 2,895 190 3,085
At 1 January2023 – 3,446 – 3,446
Institution
£’000 £’000 £’000
Cost
At 1 January 2023 6,099 – 6,099
Additions 502 183 685
At 31 December 2023 6,601 183 6,784
Depreciation
At 1 January 2023 2,927 – 2,927
Amortisation charged 1,055 – 1,055
Impairment – – –
At 31 December 2023 3,982 – 3,982
Net Book Value
At 31 December 2023 2,619 183 2,802
At 1 January2023 3,172 – 3,172

Website and digital modernisation programme, platform costs

The intangible assets for the Institution is represented by Website and Digital Modernisation (DM) costs. The website development was completed in March 2016 and begun being amortised from April. The DM projects started to come into use during 2019 although there are still significant amounts still in development. Both website and DM costs were purchased and developed by the Institution.

82

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

12. Fixed assets – Tangible assets

Group Land & Furniture & Total
Property Equipment
£’000 £’000 £’000
Cost
At 1 January 2023 10,813 2,548 13,361
Additions 70 287 357
Disposals, movements – (50) (50)
At 31 December 2023 10,883 2,785 13,668
Depreciation
At 1 January 2023 5,538 1,926 7,464
Disposals, movements – (32) (32)
Amount charged 352 219 571
At 31 December 2023 5,890 2,113 8,003
Net Book Value
At 31 December 2023 4,993 672 5,665
At 1 January2023 5,275 622 5,897
Institution
£’000 £’000 £’000
Cost
At 1 January 2023 10,360 1,173 11,533
Additions 66 253 319
At 31 December 2023 10,426 1,426 11,852
Depreciation
At 1 January 2023 5,413 952 6,365
Amount charged 300 143 443
At 31 December 2023 5,713 1,095 6,808
Net Book Value
At 31 December 2023 4,713 331 5,044
At 1 January2023 4,947 221 5,168

The Institution’s head office at One Birdcage Walk is included in Land and Property above at its depreciated historical cost. The Trustees believe that its open market value is significantly in excess of this historical cost based on carrying value.

The Institution owns the freehold of One Birdcage Walk and its head office. Whilst part of the building is let out to third parties, the entire property is accounted for within tangible fixed assets at cost less depreciation as the fair value of the investment property component cannot be reliably measured without undue cost or effort.

83

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

12. Fixed assets – Tangible assets (continued)

Heritage assets

The Institution holds a collection of heritage assets relating to the history of the Institution itself and the wider history of mechanical engineering, which includes printed works, pictures, and other artefacts. All these items have been donated to the Institution some time ago and so information on their cost or valuation is not available and cannot be obtained at a cost commensurate with the benefit to the users of the accounts and the Charity.

The collection is broadly split into the following categories:

Printed works

The Institution has one of the strongest specialist engineering libraries in the UK, holding unparalleled physical collections relating to mechanical engineering and comprising over 90,000 titles. These range from very early works such as Theatrum instrumentorum et machinarum, published in 1578, to extensive scarce nineteenth� and early twentieth� century works to current reference works and British Standards. Subjects covered include fluid mechanics, tribology, combustion engines, automotive engineering, environment and emissions, risk and reliability, energy, machine tools and pressure vessels.

Archives

The archive collection dates from 1726 and is comprised of documents, volumes, engineering drawings, digital files and an extensive photographic collection relating to engineers, engineering firms and engineering products. The collection also includes the business and administrative records of the Institution of Mechanical Engineers as well as the Institution of Locomotive Engineers and the Institution of Automobile Engineers.

Works of art and artefacts

The collection is comprised of over 50 portraits and busts of prominent engineers including many former Presidents of the Institution and over 100 artefacts including models, instruments and personal items of engineers.

The Institution’s collections are managed by the Information and Library Service according to the relevant professional standards for each format of material. Expenditure, which in the Trustees’ view is required to preserve or clearly prevent deterioration of individual collection items, is recognised in the income and expenditure account when it is incurred.

There have been nil donations made in 2023 (2022: 4) No further additions or disposals of heritage assets were made in the last three years.

84

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

13. Investments – Mixed motive

Group and Institution

Group and Institution
2023 2022
Cost Market Cost Market
Value Value
Analysis of investments UK £’000 £’000 £’000 £’000
Stephenson LLP 1,915 2,602 1,879 3,082
2023 2022
Movement of investments £’000 £’000
Market value at 1 January 3,082 2,907
Acquisitions 36 36
Net investment (loss)/gain (516) 139
Market value at 31 December 2,602 3,082
Unrealised investment gain at 31 December 677 1,193

14. Fixed Assets – Investments

Group

Group
2023 2022
Cost Market Cost Market
Value Value
Analysis of investments UK £’000 £’000 £’000 £’000
Fixed Interest Unit Trusts 170 483 170 474
Equities Unit Trusts 1,257 6,442 1,312 6,314
Charities Ofcial Inv. Fund Income Units
Cash		 1,067
44		 3,380
44		 1,066
41		 3,091
41
Property– let on 999year lease 9 9 9 9
2,547 10,358 2,598 9,929
Multi Asset Funds 7,801 8,327 7,815 8,226
Total Investments 10,347 18,685 10,413 18,155

85

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

14. Fixed assets – Investments (continued)

Analysis of funds and ranges 2023 2022
Cost Market Cost Market
Value Value
£’000 £’000 £’000 £’000
Reserve Fund – Unrestricted
Free range 3,024 3,152 3,028 3,111
3,024 3,152 3,028 3,111
Whitworth Scholarships Fund
Restricted 765 2,731 819 2,803
Endowment 662 4,194 663 3,986
1,427 6,925 1,482 6,789
General Trust
Wider range 3,373 3,678 3,378 3,632
3,373 3,678 3,378 3,632
James Clayton
Wider range 1,449 1,542 1,450 1,523
Special –property 9 9 9 9
1,458 1,551 1,459 1,532
Education and Research
Charities Ofcial Inv. Fund Income Units
Sundry Small Trusts
Charities Ofcial Inv. Fund Income Units		 829
237		 2,602
777		 829
237		 2,380
711
10,348 18,685 10,413 18,155

The above figures refer to investments held by the Group, the figures for the Institution exclude the investments held by the Whitworth Scholarships Fund.

The investments of the Reserve Fund, General Trust and James Clayton Trust are managed by Schroder & Co Limited. Investments of the Whitworth Scholarships Fund are managed by Blackrock Investment Management (UK) Limited. The let property is part of the James Clayton Trust Fund and was included as part of assets left to the Institution in the will of the late James Clayton. A summary of the investment powers can be found in the Administrative Details section.

The carrying value of investments in subsidiaries amounted to £2.

86

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

14. Fixed assets – Investments (continued)

Movement of investments 2023 2022
£’000 £’000
Market value at 1 January 18,114 19,835
Sales proceeds (210) –
Net investmentgain / (loss) 737 (1,721)
Market value (excludingcash) at 31 December 18,641 18,114
Cash awaiting investment 44 41
Total market value at 31 December 18,685 18,155
Historic cost at 31 December (10,348) (10,413)
Unrealised investmentgain at 31 December 8,337 7,742
Interest and dividends 2023 2022
£'000 £'000
Dividends receivable from unit trusts 699 689
Bank interest ‐general funds 96 12
795 701

All the dividend and loan stock interest arises from the investments detailed above.

15. Stocks

15. Stocks
Group Institution
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Work in progress 51 29 – –
Finishedgoods andgoods for resale 176 162 11 12
227 191 11 12

87

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

16. Debtors

16. Debtors
Group Institution
2023 2022 2023 2022
Amounts due within 1 year: £’000 £’000 £’000 £’000
Trade debtors 2,428 2,439 666 664
Other debtors incl VAT, other taxes 213 57 203 55
Prepayments and accrued income 1,202 897 912 699
Amounts due fromgroupcompanies – – 1,166 1,726
3,843 3,393 2,947 3,144

Amounts due after more than 1 year:

Amounts due after more than 1 year: 3,843 3,393 2,947 3,144
Loans due fromgroupcompanies – – 4,279 4,279
3,843 3,393 7,226 7,423

Loans from group companies are charged interest at a rate of 2% above the National Westminster Bank base rate.

The loan was provided to Professional Engineering Projects Limited to permanently fund the acquisitions of the trading companies acquired between 2011 and 2015. It is repayable on 53 weeks’ notice or by any net proceeds of the sale of the acquired companies.

As a result of recent legal advice, the trustees have concluded that a decision made in 2022, to write-off a debt owed to IMechE by IMechE’s trading subsidiary Professional Engineering Projects Limited (‘PEP Limited’), was incorrect. Professional advice is that this should be addressed in our 2024 accounts and should restore the Charity’s financial position to that same state as it would have been had the write-off never taken place. This has been reported to the Charity Commission in the usual way for such instances, and the Charity Commission have confirmed that this is the appropriate treatment.’

17. Creditors – Amounts falling due within one year

Group Institution
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Trade creditors 1,045 866 698 586
Other creditors 192 156 178 157
Amounts due to group companies – - 389 –
Accruals 1,229 1,429 716 879
Grants payable 45 174 – –
Bank loan 20 19 – –
Taxation and social security 614 1,021 554 928
3,145 3,665 2,535 2,550
Deferred income 5,341 4,519 4,694 4,137
Total creditors 8,486 8,184 7,229 6,687

Deferred income represents the value of membership subscriptions, property rents, and event income received in respect of the next calendar year.

88

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

17. Creditors – Amounts falling due within one year (continued)

Reconciliation of deferred income: Group Institution
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Balance at 1 January 4,519 4,814 4,137 4,267
Amount released to income (4,806) (4,806) (4,264) (4,264)
Amount deferred in theyear 5,628 4,511 4,821 4,134
Balance at 31 December 5,341 4,519 4,694 4,137

18. Creditors – Amounts falling due greater than one year

Group Institution
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Bank loan 43 63 – –

The bank loans were issued under the COVID-19 'Bounce-back' scheme in January 2021. No interest charges or repayments were due for the first 12 months. The loan now bears interest at 2.5% and is repayable over a five year period.

19. Operating Lease commitment

The operating lease charges represent leasehold leases from third parties. The leases are negotiated over terms of 10 years and rentals are fixed for two years. All leases include a provision for five-yearly upward rent reviews according to prevailing market conditions. The next rent review will take place in 2024. The total of future minimum lease payments under non-cancellable operating leases for each of the following periods is:

2023 2022
£’000 £’000
Within one year 111 115
Between one and fve years
Over fveyears		 494
152
757		 475
251
841

89

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

20. Grant commitments

These sums have been provisionally approved as grants to be made to current scholars for completion of their studies. Because the Trustees have further actions to take on them before releasing for payment, they have not been accrued in this year's accounts. No discounting has been applied to grant commitments due in more than one year.

Group Institution
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Scholarship commitments due within one year 204 153 38 82
Scholarshipcommitments due after oneyear 242 395 8 46
Total scholarship commitments 446 548 46 128

21. Analysis of Group Net Assets between funds

Group

Group
2023
**Unrestricted ** Endowment Restricted Total
Fund balances at 31 December 2023
are represented by:		 £’000 £’000 £’000 £’000
Intangible fxed assets
Tangible fxed assets
Investments: listed		 3,085
5,665
3,152		 –
–
12,794		 –
–
2,739		 3,085
5,665
18,685
Investments: social 2,602 – – 2,602
Current assets and liabilities 5,200 (1,607) 977 4,570
Non‐current liabilities (43) – – (43)
19,661 11,187 3,716 34,564
2022
Total
Fund balances at 31 December 2022
are represented by:		 £’000 £’000 £’000 £’000
Intangible fxed assets
Tangible fxed assets
Investments: listed		 3,446
5,897
3,111		 –
–
12,218		 –
–
2,826		 3,446
5,897
18,155
Investments: social 3,082 – – 3,082
Current assets and liabilities 3,925 (1,600) 612 2,937
Non‐current liabilities (63) – – (63)
19,398 10,618 3,438 33,454

90

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

21. Analysis of Group Net Assets Between Funds (continued)

Institution

2023
**Unrestricted ** Endowment Restricted Total
Fund balances at 31 December 2023
are represented by:		 £’000 £’000 £’000 £’000
Intangible fxed assets
Tangible fxed assets
Investments: listed		 2,802
5,044
3,152		 –
–
8,600		 –
–
8		 2,802
5,044
11,760
Investments: social 2,602 – – 2,602
Current assets and liabilities 8,969 (1,607) 919 8,281
22,569 6,993 927 30,489
2022
Total
Fund balances at 31 December 2022
are represented by:		 £’000 £’000 £’000 £’000
Intangible fxed assets
Tangible fxed assets
Investments: listed		 3,172
5,168
3,111		 –
–
8,232		 –
–
23		 3,172
5,168
11,366
Investments: social 3,082 – – 3,082
Current assets and liabilities 8,075 (1,600) 697 7,172
22,608 6,632 720 29,960

22. Capital and Income Funds – analysis

Group

Group
Balance Incoming Resources Balance
01.01.2023 Resources Expended Losses Transfer 31.12.2023
£’000 £’000 £’000 £’000 £’000
Unrestricted funds
Institution, reserve fund and PEP Ltd 19,398 29,657 (28,604) (780) (10) 19,661
Restricted funds
Whitworth Scholarships Fund 2,718 240 (308) 138 – 2,788
General Trust (includes legacy) – 163 (80) – – 83
James Clayton Trust 81 69 (29) – – 121
Trust for Education and Research 365 73 (36) – – 402
Clive Hickman Fund – 22 – – – 22
Sundrysmall trusts 274 24 (8) – 10 300
3,438 591 (461) 138 10 3,716
Endowment funds
Whitworth Scholarships Fund 3,986 – – 208 – 4,194
General Trust 2,545 – – 51 – 2,596
James Clayton Trust 1,459 – – 21 – 1,480
Trust for Education and Research 2,113 – – 222 – 2,335
Sundrysmall trusts 515 – – 67 – 582
10,618 – – 569 – 11,187
Total funds 33,454 30,248 (29,065) (73) – 34,564

91

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

22. Capital and income funds – Analysis (continued)

Institution
Balance Incoming Resources Balance
01.01.2023 Resources Expended Losses Transfer 31.12.2023
£’000 £’000 £’000 £’000 £’000
Unrestricted funds
Institution, Reserve Fund 22,608 20,002 (19,252) (780) (10) 22,568
Restricted funds
General Trust (includes legacy) – 163 (80) – – 83
James Clayton Trust 81 69 (29) – – 121
Trust for Education and Research 365 73 (36) – – 402
Clive Hickman Fund – 22 – – – 22
Sundrysmall trusts 274 23 (8) – 10 299
720 350 (153) – 10 927
Endowment funds
General Trust 2,545 – – 51 – 2,596
James Clayton Trust 1,459 – – 21 – 1,480
Trust for Education and Research 2,113 – – 222 – 2,335
Sundrysmall trusts 515 – – 67 – 582
6,632 – – 361 – 6,993
Total funds 29,960 20,352 (19,405) (419) – 30,489

92

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

23. Trust and Prize Fund individual accounts

General Trust

Benefactors comprise

James Bates Horace Bedford Charles Sharpe Beecher William Bennett Joseph Bramah T H Carr Thomas Andrew Common Gresham Cooke Winifred Smart Crabtree George Curry Bernard Incledon Day Bryan Donkin H V Disney A H Duncan Christian Peter Dunkel John Edward Elliott James Moir Forbes Sir Hugh Ford Winifred Foreman Andrew Fraser Thomas Lowe Gray Donald Julius Groen

Thomas Bernard Hall Herbert Edward Hancocke Francis Hewlett Lord Hinton of Bankside Shirley Nelson Howe Robert Herbert Innes Kenneth Harris James Anne Labrow Olive Mary Main Ernest William Moss The Reactionaries Charles Howard Readman William Sweet Smith A M Strickland Clifford S Steadman Thomas Stephen Thatcher Bros. Fredrick Barnes Waldron Edwin Walker Neil Watson Viscount Weir Frau May Borner Wylie

Trust for Education and Research

Benefactors and Predecessor Trusts comprise

John F Alcock Memorial Prize Alfred Rosling Bennett Premium Carl Louis Breedon Clarence Noel Goodall Henry Stacey Cattermole Charles S Lake Engineering Applied to Agriculture Filtration Rover Midlander M M Flatman T A Stewart Dyer Thomas Hawksley Fredrick Harvey Trevithick Sir Seymour Briscoe Tritton Helen‐Shaw National Certificate Mrs P M Lowery Stanley Herbert Whitelegg Manville Bequest Scholarship Safety Award in Mech. Engineering Starley Premium E May George Stephenson Research Ludwig Mond Herbert Ackroyd Stuart F G Moore The Students Aid Arthur Morley Higher National Diploma Water Arbitration John Player Lectureship Willans Premium Raymond Coleman Prescott Scholarship L Marson William Alexander Agnew Meritorious Margaret Winifred Astridge Alastair Graham‐Bryce Frank Radcliffe

The above trust funds are under the trusteeship of the Institution of Mechanical Engineers. Because of the limited space available, the information presented is, of necessity, brief. If you would like more details, please contact the Secretary to the Trustee Board Awards Committee.

93

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

24. Related Party transactions

24. Related Party transactions
2023 2022
£’000 £’000
Amounts due from Professional Engineering Projects Limited 168 1,050
Amounts due from IMechE Services Limited 18 17
Amounts due from Sonaspection International Limited 12 68
Amounts due from IMechE Fife NDT Limited 571 442
Loan due from Professional Engineering Projects Limited 4,279 4,279
All amounts are considered to be repayable on demand during the year except the
loan which has a 53-week notice period of repayment
2023 2022
£’000 £’000
Transactions with Professional Engineering Projects Limited – (4)
Professional Engineering Projects Limited
Amounts due from/to Siantonas Ball Limited (223) (223)
Amounts due from/to IMechE Fife NDT Limited (218) (218)
Amounts due from/to Sonaspection International Limited (69) (158)
Transactions with IMechE Fife NTD Limited 63 106
Transactions with Sonaspection International Limited 13 (90)

Dr Clive Hickman, appointed as Trustee on 25 May 2022, is the Chair at The Manufacturing Technology Centre Limited and its subsidiary, MTC Operations Limited. In 2023, the Institution and its subsidiaries paid the MTC Group £32,684 (2022: £26,157) for event attendance, and catering and venue hire services. The Institution and its subsidiaries charged the MTC Group Nil (2022: £17,992) for event attendance, accreditation fees, and standard samples. At 31 December 2023, the balance receivable was Nil (2022: nil) and the balance payable was Nil (2022: nil). Dr Clive Hickman made a donation of £22,125 (2022:nil)

Neil Kelly is a Director of Sonaspection International Limited appointed on 29th June 2020, whose close related family member is the owner of Kelly Contracting. Kelly Contracting provide electrical material and labour and have been providing a service for a number of years. Kelly Contracting charged £889 during the year to 31 December 2023 (2022: £3,222). Kelly Contracting has a balance payable as at 31 December 2023 of Nil (2022: nil).

94

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

25. Reconciliation of Net Income/(Expenditure) to net Cash flow from Operating activities

2023 2022
£’000 £’000
Net income/(expenditure) for the reporting period
(as per the statement of fnancial activities):		 1,417 (1,395)
Adjustments for:
Gain on disposal of tangible assets (14) (4)
Amortisation 1,141 948
Depreciation charges 571 710
Dividends and interest (795) (701)
Increase in debtors (450) (218)
Increase in creditors excluding loans 301 172
(Increase)/decrease in stocks (36) 55
(Gain)/losses on investments (234) 1,582
Net cashprovided by operating activities beforepension scheme costs 1,901 1,149
Decrease in defned beneft pension scheme costs (307) (301)
Net cashprovided by operating activities 1,594 848

26. Financial Instruments

26. Financial Instruments
Group Institution
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Financial assets measured at amortised cost 11,709 10,224 9,031 7,208
Financial liabilities measured at amortised cost 2,530 2,707 1,590 1,622
Financial assets measured at fair value 21,287 21,237 14,362 14,448

95

imeche.org

Notes to the accounts for the year ended 31 December 2023 (continued)

27. Consolidated Statement of Financial activities

Restated
Unrestricted Restricted Endowment 2022 2021
Funds Funds Funds Total Total
Income and Endowments from: £’000 £’000 £’000 £’000 £’000
Donations and Legacies 21 – – 21 113
Charitable Activities
Membership Subscriptions 12,706 – – 12,706 12,436
Groups, Divisions and Events 1,621 – – 1,621 1,117
Professional Development and Membership 211 – – 211 174
Information and Library Services 4 – – 4 3
Apprentice End Point Assessment 2,243 – – 2,243 1,172
Other Trading Activities
Venue hire, Training, Exam services, Consultancy,
Flawed samples		 9,826 – – 9,826 6,353
Marketing, Advertising and Merchandise 7 – – 7 –
Investments
Interest and Dividends 145 556 – 701 637
Other
Other income 4 – – 4 91
Rents Receivable 524 – – 524 506
Total 27,312 556 – 27,868 22,602
Expenditure on:
Raising funds
Non-charitable Trading Activities 10,502 – – 10,502 7,015
Investment Management Costs 6 10 – 16 10
Charitable Activities
Groups, Divisions and Events 5,236 – – 5,236 4,369
Marketing 2,182 – – 2,182 1,686
Membership Development 2,148 – – 2,148 2,395
Apprentice End Point Assessment 2,178 – – 2,178 1,162
Professional Development 914 – – 914 763
Information and Library Services 804 – – 804 801
Membership Subscriptions 2,617 – – 2,617 2,527
Tenants and Public Facilities 495 – – 495 400
Prizes, Awards and Scholarships 28 561 – 589 735
Total 27,110 571 – 27,681 21,863
Net (losses)/gains on investment assets (219) (139) (1,224) (1,582) 1,776
Net (expenditure)/income (17) (154) (1,224) (1,395) 2,515
Other recognised (losses)/gains
Actuarial (losses)/gains on defned beneft pension scheme
Net movement in funds		 (301)
(318)		 –
(154)		 –
(1,224)		 (301)
(1,696)		 9,425
11,940
Reconciliation of funds
Total funds brought forward 19,716 3,592 11,842 35,150 23,368
Opening balance adjustment – – – – (158)
Total funds brought forward, as restated 19,716 3,592 11,842 35,150 23,210
Total funds carried forward 19,398 3,438 10,618 33,454 35,420

96

Annual Report 2023

Notes to the accounts for the year ended 31 December 2023 (continued)

28. Restatement of 2022 Accounts

During 2022, there was an intra-group transaction where £842k of a loan from the Charity to Professional Engineering Projects Limited, which had previously been formalised as a loan relating to the purchase of Amber Train Limited. This should have been eliminated on consolidation but was shown, in error, as both income within ‘Other trading activities and expenditure' within ‘Non-charitable trading activities’. There was no net effect on the reported surplus or on any balance sheet accounts.

Total resources expended 2023

Total resources expended 2023
2022 2022
as reported Adjustment restated
£’000 £’000 £’000
Other trading activities
Venue hire, Training, Exam Services, Consultancy,
Flawed Samples		 10,668 (842) 9,826
Expenditure on:
Non-charitable trading activities 11,344 (842) 10,502

29. Post Balance Sheet event – Asset transfer

On 1 January 2024, the Professional Engineering Projects Limited subsidiary sold the trade and related assets of the business trading under the IMechE Argyll Ruane brand to its wholly-owned subsidiary, IMechE Fife NDT Limited. The sale took place at book value for a sale price of (£204,767), which is a payment due to the acquiring company comprising:

£’000
Intangible fxed assets
Tangible fxed assets
Debtors		 234,996
118,363
416,402
Bank and cash 270,220
Creditors (200,205)
Intercompanybalances (1,044,543)
Total (204,767)

97

imeche.org

Administrative details

Name

The Institution of Mechanical Engineers

Address of principal office

1 Birdcage Walk, Westminster, London, SW1H 9JJ

Charity registration numbers

Charity Commission of England & Wales: The Institution and subsidiary prize and award funds are registered under 206882.

The Whitworth Scholarship Funds are registered under 313756.

Office of Scottish Charity Regulator: The Institution is registered under SC051227.

Governing document and constitution

The Institution was founded in 1847 and was incorporated by Royal Charter in 1930. Digital copies of the Royal Charter and By-Laws are available from the Corporate Governance team via governance@imeche.org.

Trustees

The Trustee Board comprises the President, two Deputy Presidents, three Vice-Presidents, an International Vice-President and five or more ordinary members. All Trustees are elected by the Corporate and Associate Membership of the Institution. Trustees are required to retire after a maximum of 3 years in post.

Trustees met eight times for Board Meetings supported by the Executive team during 2023.

Number of Number of
meetings meetings
attended in session
Addison, Abbey (appointed 14.07.2023) 3 4
Britton, Professor Graeme (retired 25.05.2023) 3 3
Chong, Chris 8 8
Clarke, Heather (retired 25.05.2023) 3 3
Eickhof, Bridget
Evans, Simon (elected 25.05.2023)		 6
5		 8
5
Garside, Matt 5 5
Hartill, Giles (President from 25.05.2023 to 23.05.2024) 8 8
Hickman, Dr Clive (President from 23.05.2024) 8 8
Judge, Dr Richard 7 8
Nowell, Professor David 7 8
O’Brien, Ross (retired 25.05.2023) 1 3
O’Boyle, Christopher (appointed 13.02.2024) - -
Peel, Phil (retired 25.05.2023) 3 3
Raman, Vijay (resigned 09.09.2023) 5 5
Rivers, Helena (retired 25.05.2023) 3 3
Shilston, Ruth 5 5
Thomson-Smith, Joshua 4 5
Wanniarachchi, Chanaka (appointed 27.09.2023 to 23.05.2024) 2 2

Elected’ and ‘retired’ relate to the normal transition of Trustees at the beginning and end of their periods of elected office. ‘Appointed’ and ‘resigned’ relate to other changes outside this normal process.

98

Annual Report 2023

Administrative details (continued)

Chief Executive

Dr Alice Bunn, OBE

Appointed 05.07.2021

Key management personnel

This includes the Chief Executive and five Directors: Director of Commercial and Finance Sean Fox

Sean Fox Appointed 12.10.2017 Resigned 31.07.2024 Bims Alalade Appointed 19.03.2018 Joanna Horton Appointed 01.03.2018 James Partington Appointed 24.10.2022 Jake Fraser Appointed 01.08.2023

Director Human Resources Director Member Operations Director Engineering Policy and Impact Director of Digital, Data and Innovation

Professional advisers

Auditor:

BDO LLP, Baker Street, London W1U 7EU

Bankers:

National Westminster Bank PLC PO Box 113, Cavell House, 2A Charing Cross Road, London WC2H 0PD

CAF Bank Limited

25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4JQ

Investment managers:

Schroder & Co Limited 12 Moorgate, London EC2R 6DA Blackrock Investment Management (UK) Limited 33 King William Street, London EC4R 9AS CCLA Investment Management Limited 80 Cheapside, London EC2V 6DZ

Solicitors:

Mills & Reeve LLP Botanic House, 1 Hills Road, Cambridge CB2 1PH

Bristows 100 Victoria Embankment, London EC4Y 0DH

Pension advisers:

Barnett Waddingham LLP Decimal Place, Chiltern Avenue, Amersham HP6 5FG Lane, Clark & Peacock LLP 95 Wigmore Street, London W1U 1DQ

99

imeche.org

Images

Cover King Fahd University of Petroleum & Minerals at UAS Challenge 2023 ©IMechE
Page 2 Giles Hartill ©IMechE
Page 4 Dr Alice Bunn ©IMechE
Page 12 Panel discussion at the sports engineering report launch ©IMechE
Page 14 Team ASU Racing from Ain Shams University in Egypt at Formula Student 2023 ©IMechE
Page 16 Global Membership Development Farah Baksh and Miles Pixley visit Jaguar Land Rover for the
JLR membership partnership signing ©JLR
Page 18 Professional Engineering magazine on a mobile phone ©IMechE
Page 20 Cover of Sustainable, Inclusive, Innovative: The Role of Engineering in Sport Report ©IMechE
Page 24 Competitors at the IMechE Railway Challenge ©IMechE
Page 28 International Strategy Board and members of staf during the 2023 Volunteer Engagement Week ©IMechE
Page 38 Whitworth Scholarship Award Holder ©IMechE
Page 54 IMechE employees gathered at the HQ staf room ©IMechE

100

Annual Report 2023

Institution of Mechanical Engineers

One Birdcage Walk London SW1H 9JJ

imeche.org