## Engineering Council
Annual Report and Financial Accounts 2020
## **Registered Charity No 286142**
Annual Report and Financial Accounts 2020
## Contents
|Foreword .......................................................................................................................................................3|Foreword .......................................................................................................................................................3|
|---|---|
|Chairman and CEO’s statements .............................................................................................................4||
|1.|Registration statistics as of 31 December 2020 ................................................................................5|
|2.|Strategy and performance in 2020 ....................................................................................................7|
|3.|2020 Activities and Achievements ....................................................................................................7|
|4.|Impact of Covid-19 ......................................................................................................................... 10|
|5.|Risk and compliance ...................................................................................................................... 12|
|6.|Financial review.............................................................................................................................. 14|
|7.|Public benefit report ....................................................................................................................... 16|
|8.|How we operate ............................................................................................................................. 19|
|9.|Statement of Trustees' responsibilities .......................................................................................... 24|
|Independent auditor’s report to the Trustees of The Engineering Council ............................................ 25||
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Annual Report and Financial Accounts 2020
## Foreword
Operating under a Royal Charter, the Engineering Council is charged with regulating the UK engineering profession on behalf of society. We hold the national Register of those who have satisfied their peers of their competence and commitment as Engineering Technicians, Incorporated Engineers, Chartered Engineers and ICT Technicians. We set the education standards for engineering programmes that provide the underpinning knowledge and understanding required to practise engineering, as well as setting standards for professional development. We can only achieve this through the commitment of the entire professional engineering community, supported by academics and employers.
Professional registration provides the benchmark which allows the public to have confidence and trust that the engineers and technicians on our Register have met globally recognised professional standards.
Nearly a quarter of a million men and women are currently listed on our Register. The UK has an ageing population, and with the number of registrants aged over 60 representing over a third of those on the Register, we must continue to work hard to maintain a talent pipeline to meet future skills requirements. We therefore welcome the joint initiatives that are underway to ensure that more people enter professional engineering careers and that those who are already professionally registered remain so throughout their working life. This is a strategic imperative for the nation if we are to meet the engineering and technological needs of the future.
## **Vision:**
That society continues to have confidence and trust in the engineering profession.
## **Mission:**
To maintain internationally recognised standards of competence and commitment for the engineering profession and to license competent institutions to champion the standards for the deliverance of public benefit.
## **What we do, how we do it and why:**
- •Develop and maintain common professional standards for engineering competence and commitment
- •License professional engineering institutions to professionally develop and assess engineers and technicians against the common standards
- What we •Maintain the national Register of professionally registered engineers and
- do technicians •To safeguard the public
- Why we do it •Self-regulation by peer review
- How we do it
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Annual Report and Financial Accounts 2020
## Chairman and CEO’s statements
Any reflection on 2020 must include the highly unusual and challenging nature of this year, with a global pandemic affecting all organisations. These circumstances and the constant change they have created have inevitably had an impact, but we are proud to say that the Engineering Council has adapted to this and found solutions to deliver our core operations. In 2020, we have continued to progress towards the objectives set out in our 2018-2020 Strategic Plan, which – due to current circumstances – has been extended into 2021.
We have focussed on supporting the licensed professional engineering institutions (PEIs) through this challenging time, while maintaining our standards; this is the key balance for the Engineering Council to strike as an effective regulator. This support has included providing guidance on accreditation and advice on virtual professional review interviews, which look likely to continue post-pandemic. We recognise the significant pressures on the engineering community this year and, working with EngineeringUK, froze 2021 registration fees in acknowledgement of this.
Our response to key issues that affect the engineering profession and society at large continued in 2020, progressing the development of a competence framework for engineering professionals working on higher-risk buildings to support the new Building Safety regime, while working towards a Contextualised Register for competent professionals. The Engineering Council is pleased to have supported the development of the UK Cyber Security Council as a member of the Cyber Security Alliance, sharing our expertise on regulatory matters including governance and professional ethics.
We have maintained our governance arrangements, including holding a virtual AGM and EGM successfully. Changes to our Royal Charter, voted on at that EGM, are currently with the Privy Council for its approval. The move to new office premises and change of registered office was a critical project for this year and was delivered successfully, keeping all stakeholders informed.
We published our revised Standards in August 2020 as scheduled, following our periodic Standards Review, as well as an enhanced Course Search database. We responded to the most recent Washington Accord review and engaged extensively with Government and other regulators around the Brexit transition and new requirements.
In 2021, the Engineering Council will announce its new Strategic Plan, setting out our priorities for the next few years as shaped by key stakeholders. In our 40[th] year of operation, we will continue to maintain internationally recognised standards for the engineering profession, champion those standards through the institutions we license and hold the Register of individuals assessed as meeting them.
## **Professor Chris Atkin CEng FRAes and Alasdair Coates BEng (Hons) MSc CEng FICE MCIHT CMIOSH**
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Annual Report and Financial Accounts 2020
## 1. Registration statistics as of 31 December 2020
**FIGURE 1: NEW TITLES ADDED TO THE REGISTER IN 2020 COMPARED TO 2019**
|**EngTech**
**IEng**
**CEng**
**ICT****_Tech_**|**Interim**|**Final**|**Total**|
|---|---|---|---|
||**2019**
**2020**
**Change**
8
10
**25.00%**
61
74
**21.31%**
257
286
**11.28%**
-
-
**-**|**2019**
**2020**
**Change**
5,527
2,687
**-51.38%**
1,346
1,201
**-10.77%**
6,313
5,847
**-7.38%**
332
529
**59.34%**|**2019**
**2020**
**Change**
5,535
2,697
**-51.27%**
1,407
1,275
**-9.38%**
6,570
6,133
**-6.65%**
332
529
**59.34%**|
|**Total**|**326**
**370**
**13.50%**|**13,518**
**10,264**
**-24.07%**|**13,844**
**10,634**
**-23.19%**|
## **FIGURE 2: TOTAL NUMBER OF REGISTRANTS ON THE REGISTER IN 2020 COMPARED TO 2019**
|**EngTech**
**IEng**
**CEng**
**ICT****_Tech_**|**Interim**|**Final**|**Total**|
|---|---|---|---|
||**2019**
**2020**
**Change**
130
134
**3.08%**
1,269
1,217
**-4.10%**
5,795
5,578
**-3.74%**
-
-
**0.00%**|**2019**
**2020**
**Change**
22,814
22,637
**-0.78%**
26,382
25,486
**-3.40%**
174,943
173,358
**-0.91%**
517
898
**73.69%**|**2019**
**2020**
**Change**
22,944
22,771
**-0.75%**
27,651
26,703
**-3.43%**
180,738
178,936
**-1.00%**
517
898
**73.69%**|
|**Total**|**7,194**
**6,929**
**-3.68%**|**224,656**
**222,379**
**-1.01%**|**231,850**
**229,308**
**-1.10%**|
## **FIGURE 3: LOSS OF TITLES ON THE REGISTER IN 2020 COMPARED TO 2019**
|**EngTech**
**IEng**
**CEng**
**ICT****_Tech_**|**Interim**
**2019**
**2020**
**Change**
-4
-6
**-33.33%**
-116
-130
**-10.77%**
-419
-531
**-21.09%**
-
-|**Final**|**Total**|
|---|---|---|---|
|||**2019**
**2020**
**Change**
-1,875
-3,004
**-37.58%**
-1,730
-2,251
**-23.15%**
-8,230
-8,643
**-4.78%**
-31
-149
**-79.19%**|**2019**
**2020**
**Change**
-1,879
-3,010
**-37.57%**
-1,846
-2,381
**-22.47%**
-8,649
-9,174
**-5.72%**
-31
-149
**-79.19%**|
|**Total**|**-539**
**-667**
**-23.75%**|**-11,866**
**-14,047**
**-15.53%**|**-12,405**
**-14,714**
**-15.69%**|
An individual registrant can hold more than one designation or title (for example, such as Chartered Engineer (CEng) and Incorporated Engineer (IEng), or holding CEng with more than one institution), consequently there are more titles recorded on the Register than there are individual registrants.
To help ensure clarity, the report shows the number of ‘titles’ held as well as the number of individual ‘registrants’ this applies to. Whilst the change in numbers is small (less than 0.2%), to ensure an equivalent comparison we have presented 2020 registrants and titles against 2019 registrants and titles.
## **Reinstatements in 2020**
In 2020, there were 1176 reinstatements to the Register. Reinstatements are registrations that have previously been suspended but have returned to the Register within the last three years.
## **New final titles by gender**
Over the last three years the number of new final stage title held by men has fallen by 760. In the same period, new final stage titles held by women have decreased by 13 and (as shown in Table 4) the percentage of female registrants has increased, but by less than 1%. The number of titles held by women and the percentage of registrants who are female are yet to achieve the desired shift, despite the efforts
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## Annual Report and Financial Accounts 2020
being made across the profession to encourage women into both engineering and professional registration.
## **FIGURE 4: NEW FINAL STAGE TITLES BY YEAR, BY REGISTRATION TITLE, BY GENDER, 2018-2020**
|**2018**
**2019**
**2020**||**EngTech**|**IEng**|**CEng**
**ICT****_Tech_**|**Total**
**% of total**
**new titles**|
|---|---|---|---|---|---|
||Male|3,180|1,207|
5,335
17|9,739
89.22%|
||Female|221|83|
870
3|1,177
10.78%|
||Male|4,926|1,241|
5,325
264|11,756
89.43%|
||Female|321|89|
962
18|1,390
10.57%|
||Male|2,483|1,099|
4,936
461|8,979
87.48%|
||Female|173|87|
863
41|1,164
11.34%|
||Gender not
specified|31|15|
48
27|121
1.18%|
## **International registrations**
## **FIGURE 5: INTERNATIONAL FINAL STAGE TITLES**
||**2020**|**2019**|
|---|---|---|
|EngTech|1,357|1,381|
|IEng|2,832|2,947|
|CEng|41,563|41,428|
|ICT_Tech_|20|17|
|Total|45,772|45,773|
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Annual Report and Financial Accounts 2020
## 2. Strategy and performance in 2020
## **FIGURE 6: ENGINEERING COUNCIL'S STRATEGIC PLAN 2018-2020**
## 3. 2020 Activities and Achievements
The Engineering Council took on work not included in our Strategic Plan in 2019, in response to new issues that arose on behalf of the profession. During 2020, these workstreams have been incorporated into existing objectives, as we continued to invest time and resource in these strategically important areas.
## **Provide public benefit**
1. Maintain the Engineering Council’s position as an effective and well-respected regulator of the profession
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## Annual Report and Financial Accounts 2020
Work on the Mutual Recognition of Professional Qualifications (MRPQ) has intensified in 2020 as the transition period came to an end and the UK ceased to be part of the EU Customs Union and Single Market. We have worked closely with the Department for Business, Energy & Industrial Strategy (BEIS) in our capacity as a competent authority, updating the professional engineering institutions we licence. We have also published a webpage on the transition, to keep registrants and the engineering community informed of the latest position: www.engc.org.uk/brexit
Revisions to the Engineering Council’s Charter and Byelaws were voted on and accepted at an Extraordinary General Meeting (EGM) held remotely in July 2020.
To enhance the training, support and guidance we offer volunteers, we are developing an action plan based on our Volunteer Management Strategy.
Our Engineering Ethics Reference Group (EERG), run jointly with the Royal Academy of Engineering (RAEng), is now well established and working at a strategic level. Proposed priorities for the future have been presented to the Professional Engineering Committee and recommendations for action on enhancing the engineering profession’s culture of ethical behaviour will be produced in early 2021.
2. Ensure that no barriers exist for anyone appropriately qualified to become professionally registered
Based on the engineering footprint agreed with the RAEng and EngineeringUK, we published ‘Mapping the UK’s Engineering Workforce’. This report was sent to all MPs, highlighting that 18% of the UK working population work in engineering and at least 15% of the working population of every region are in engineering jobs.
We applied accessibility principles to the revised Standards documents published in 2020, making them clearer and easier to use for all stakeholders.
Our first Diversity & Inclusion (D&I) workshop for PEI staff was held in November 2020 and we began discussions with PEIs on promoting provisions for career/carer breaks and CPD support available to those returning to work, as well as developing guidance on accommodating access needs in the professional registration process.
3. Ensure that the Engineering Council is operationally sound and is recognised by stakeholders as delivering value for money
Implementing our ICT Strategic Plan 2018-2020 has enabled enhancements to our IT systems and supported Engineering Council staff in successfully working remotely since March 2020. This included holding an Annual General Meeting (AGM), EGM and our usual calendar of Board, committee and Panel meetings online.
After a successful recertification against quality management standard ISO9001:2015, we continue to investigate other means of quality recognition, such as ISO 27001. We have continued to integrate quality management into our business planning and formalised business improvement processes.
We have made significant improvements to our people management policies and practices in 2020. This includes benchmarking our competence framework and formalising arrangements for remote working.
## **Maintain a globally recognised standard**
4. Widen engagement with key stakeholders on the promotion of the Register and the Standard
We continued to be an active participant in the Industry Competence Steering Group (CSG), established to take forward the recommendations of Dame Judith Hackitt’s Independent Review of Building Regulations and Fire Safety. The final report of the CSG, Setting the Bar, was published in October 2020: www.engc.org.uk/buildingsafety
We worked with UKAS to further develop proposals for third party oversight of bodies undertaking assessment and re-assessment of the competence of individuals whose work impacts on building safety.
We established a Steering Group to take forward the development of a Contextualised Register to support the new building safety regime. This will facilitate engineering professionals becoming registered as competent to work on higher-risk buildings and is expected to be a project across multiple years.
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## Annual Report and Financial Accounts 2020
We continue to support the development of Recognised Standards for specific sectors, including the Electrician Engineering Technician (EngTech) Standard produced by the Institution of Engineering and Technology (IET) and proposed standards from the work of the Cyber Security Council (CSC).
5. Safeguard and promote UK registration standards internationally
Our Board approved a proposal by IET for a pilot in offering professional registration, against UK-SPEC, in Mandarin. We anticipate the IET project, with representation from the Engineering Council, will begin in Q1 2021
Our 2017/8 Washington Accord Review was concluded with the Engineering Council being given a sixyear authorisation until 2023, confirming that our accreditation standards and processes are substantially equivalent to the Washington Accord benchmark.
We became a founder member of ENGINET, a group of European regulators from Spain, Portugal, France, Italy and the Netherlands. ENGINET members will work towards mutual recognition based on the assessment of professional competence.
We coordinated a response to the BEIS consultation on the future of mutual recognition of overseas professional qualifications and worked alongside other professions in BEIS/Department for International Trade (DIT) advisory groups, providing input into forthcoming UK Trade Agreements
6. Ensure that the needs and expectations of stakeholders are being met
We published the Approval and Accreditation of Qualifications and Apprenticeships (AAQA) Standard to support the recognition of a broader range of vocational and technical programmes, began updating the ICT _Tech_ Standard to align with the revised UK-SPEC, and developed, tested and launched a unified public recognised course search and underlying qualifications database, replacing the earlier degree and technician qualifications databases.
Supporting the PEIs in delivering registrant messages, we ran workshops for PEI staff, published the 2020/21 Pocket Guide to Registration with updated profiles of all PEIs and Professional Affiliates and continued to extend our range of registrant case studies, making this as diverse as possible.
We continued to maintain and improve **my** careerpath in response to user feedback and consulted PEIs on its future direction, reviewed our current Guidance Note on CPD and created a three-year CPD plan for the Professional Development Steering Group.
## **Meet future needs**
7. Ensure that the regulatory needs of the profession are being met
We published our revised Standards, updated through a wide-ranging consultation process, in August 2020 and continue to support stakeholders as they implement these changes ahead of the transition deadlines.
We continued to work with university employers through the Technician Commitment and engaged with engineering employers as we started developing guidance on AAQA. We are consulting on the evolution of our employer programme as part of our new Strategic Plan.
We completed the review of our ‘Guidance on Sustainability’, for publication in early 2021, and started consultation on revisions to our ‘Guidance on Risk’.
8. Ensure that all regulatory functions remain fit for purpose and support the Standard
Work on understanding the future of assessment has begun, ensuring continued fit with good assessment practice following the publication of our revised Standards, including learning from remote assessment.
We have successfully implemented our risk-based approach to Licensing, incorporating annual deskbased risk assessments and enhancing the effectiveness of our regulatory regime.
We have put in place an organisation-wide ‘Register Programme’ that brings together all related work, including the development of a publicly searchable Register and registrant portal.
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## Annual Report and Financial Accounts 2020
9. Ensure that the engineering profession’s pathways to registration remain appropriate for the needs of future stakeholders
We completed the first two phases of agency-led work to test out concepts relating to pathways to professional registration and titles. The next phase will be quantitative information gathering, including a physical workshop, when circumstances permit this being carried out.
We completed our Knowledge Profile Research Project in Q1 2020, with its findings accepted by RSC and QAC; this work will inform our work on understanding the future of assessment.
We published ‘Mapping the UK’s Engineering Workforce’, analysing external Office for National Statistics (ONS) data to set out the size and make-up of the UK’s engineering workforce, which forms the future pipeline of registrants.
## **Going forward**
We have started the consultation process to create our next Strategic Plan, to start from 2021, with the overall goal that the Engineering Council maintains its ability to meet the needs of the profession, key stakeholders and society.
Our objective is to maintain the public’s confidence in the engineering profession through greater promotion of:
- the Engineering Council’s regulatory work
- its leadership role within the engineering community, and
- an increase in a diverse and engaged registrant population.
## 4. Impact of Covid-19
## **Introduction**
Following the outbreak of Covid-19 and the subsequent nationwide lock which started in March 2020 Engineering Council staff made a successful transition to working from home, and continued to do so, in the main, throughout 2020 and in to 2021. Although some staff were able to return to the office for short periods, subsequent lockdowns meant that working from home became the ‘norm’ in 2020. Throughout the whole period Engineering Council staff have continued to work closely with the PEIs and other bodies, particularly with respect to licensing, registration, and accreditation activities. All board, committee, panel and working group meetings have continued on-line.
The following assessment of the impact of Covid-19 and the ensuing lockdown on the organisation and its operations was undertaken in June 2020 and resulted in a change of assessment of the relevant risk item on the Trustees Risk Register. The impact assessment was reviewed and updated in February 2021 taking in to account the impact of the previous twelve months on Engineering Council staff and operations, and the organisation’s ability to continue to deliver its strategic and business plans throughout 2021 should home working remain in place during the year.
## **Risks**
**Financial risk** – **Income** – the organisation does not believe that Covid-19 has had or will have an impact on its income. Its main income stream is the annual grant from EngineeringUK. This grant is agreed by the Board of EngineeringUK, (which includes the CEOs of the three largest engineering institutions), in July of the preceding year. The agreement to pay the Engineering Council an operational grant to run the organisation’s key activities, such as maintaining the Register of professionally qualified engineers and technicians, is laid out in the organisation’s Royal Charter. In terms of the sustainability of this revenue stream, evidence shows that registration is valued by individuals, particularly in times of economic uncertainty, when new professional registrations tend to increase rather than decrease, highlighting the value that registration brings in demonstrating individuals’ competence and commitment to either a current or prospective employer. Engineering Council is not reliant on income from sources such as donations, grants, fund raising or commercial arrangements (such as events or publications). **Impact – minimal**
**Financial Risk – International Fee Income** – As staff are not set up to print, receive post or send post out from home, during periods of national lockdown, there will be a delay in the receipt of some international
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## Annual Report and Financial Accounts 2020
fee income. However, once the organisation returns to more office based working this issue will be quickly rectified. Any delay in receipt of the internal fee income will be short term. In previous years the renewal rate of FEANI registrations has remained steady at around 80%, in 2020 the renewal rate was circa 72%. Whilst this represents a small fall in income the amount involved does not represent a risk to the organisation’s finances. **Impact – minimal**
**Financial Risk** – **Costs** – Engineering Council is not incurring additional costs due to Covid-19, to the contrary during 2020 the organisation saw a decrease in some costs particularly those associated with hosting/attendance at physical meetings (catering, travel, and subsistence costs). Additionally, as a precaution during 2020 the Management Panel reviewed its current projects and placed on hold those it felt were not currently operationally or strategically critical. This situation was kept under review throughout the year and in early 2021 it was decided that number of strategic projects could be initiated/revived. **Impact - minimal**
**Financial Risk – Reserves** – the organisation held free reserves of £2.7m at the end of 2020, in the form of cash in the bank and an investment fund with Barings Asset Management. Whilst the organisation does not draw an income from its investment fund and reinvests any gains back into the fund, it has the reassurance that there will be funds available should it need to draw on them.
Although the value of the fund fell by £317K between 31 December 2019 and 31 March 2020, the stock markets improved over the course of 2020 and the losses incurred at the beginning of the year were recouped, with the fund showing an increase in its overall value at year end. Whilst there is a risk that there may be further fluctuations in the stock market which will affect the fund value during 2021, the organisation will be monitoring the situation and will keep its planned expenditure from reserves under constant review. Additionally, the organisation’s chosen investment fund favours low risk investments designed to preserve, rather than grow capital. **Impact - minimal**
**Financial Risk** – **Pension Scheme** – at its last triennial valuation, the Scheme was in surplus on a technical provisions’ basis by £327K. Following the valuation, the Scheme Trustees implemented a revised investment strategy aimed at minimising the exposure of the Scheme’s investments to stock market volatility. Whilst the Engineering Council has agreed to pay a contribution towards the Scheme’s running costs of £108k in 2021, the organisation has no obligation to make any additional contributions to the Scheme until after the results of the next triennial valuation, due at 31 December 2021, are known. As a result, we do not anticipate any impact to the organisation from Covid-19 in relation to the Scheme in 2021. **Impact - minimal**
**Operational Risk** – **Business Plan** – all staff are continuing to work predominately from home and have done so successfully since 17 March 2020. The organisation has continued to work effectively and has delivered on its strategic and business plan objectives as expected. Despite the continue lockdown we do not expect any substantive changes to the work we plan to carry out in 2021. Board, panel, and committee meetings have all been held as scheduled, using Zoom and will continue to be held remotely during 2021. These remote meetings have proved to be as effective as face-to-face meetings. There continues to be little negative impact of remote working on delivery of the 2020 or current year’s business plan (the new strategic plan has been developed during lockdown and will be launched later in 2021) and we have continued to deliver core business process with minimum interruption. Staff and supplier payments are made promptly, and new registrations and data reconciliations continue to be processed, including a full year end reconciliation at the end of 2020. Whilst some paper-based processes stop during periods of lock down they resume once there is a return to the office-based working. **Impact - minimal**
**Operational Risk – Staff wellbeing –** ensuring staff have been able to cope as well as possible has been a key priority, particularly given the prolonged time spent in lockdown. Regular individual, team, departmental and full office meetings have been held to ensure staff are able to keep in contact not just on projects and the day-to-day matters but on the wider business operations. A successful virtual staff away day was held in November 2020. The organisation has an Employee Assistance Programme in place, to offer support and advice to staff.
A constant review of working arrangements continues and the return to office-based work will be carefully planned to take account of Government advice and staff safety and well-being. **Impact - minimal**
The organisation has not, so far not felt it necessary to take advantage of the Government support offered to businesses as a result of the pandemic. All staff have been fully deployed throughout the lockdowns and have access to the equipment and systems required to carry out their roles. The organisation believes that the robustness of its business planning and financial management has allowed activities to continue
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## Annual Report and Financial Accounts 2020
uninterrupted and extreme measures have not been required. Our IT systems have been sufficiently robust and well developed to allow all staff to work effectively from home with minimum disruption to business activities. Additionally, during the first lockdown, the organisation was able to complete a planned office move/office refurbishment to deadline and budget, further demonstrating the strength of its operations planning. The Management Panel continues to monitor both the finances and business processes monthly basis and reports regularly on them to the Trustees.
We believe that the organisation is well placed to continue to successfully deliver all business activities despite the restrictions imposed on it by lockdown and organisation wide home-based working.
## 5. Risk and compliance
## **How the Engineering Council manages risk**
The Engineering Council maintains a risk management policy which forms part of the EngC’s internal control and governance arrangements. The policy explains the EngC’s underlying approach to risk management including how the organisation views, identifies, assesses, and manages risk. It also describes the process the Board uses to manage the Engineering Council's risk management process and evaluate the effectiveness of the internal control procedures.
Engineering Council maintains a Trustee Risk Register which identifies risks that could have an impact on the organisation’s ability to deliver its strategic objectives, including all legal and financial mandates, assess the probability and impact of those risks occurring and details the measures in place to manage and mitigate them.
The Trustee Risk Register is supported by several Functional Risk Registers, each covering the main activities of the Board’s Committees and Panels, and which identify risks that could have an impact on the organisation’s ability to deliver its strategic objectives in those areas. These registers are reviewed at each of the Committee/Panel meetings with the Management Panel undertaking a holistic review every quarter.
## **Role of the Executive Team and Management Panel**
Day to day management of individual risks is the responsibility of the appropriate Executive Team member or volunteer(s) where decisions are delegated to them as recorded in the Risk Register. The Risk Register is regularly reviewed by the Executive Team and relevant volunteers and on a by-exception basis. The Management Panel reviews the Risk Register at each meeting and reports any concerns about risk and their management to the Board. The Risk Register is reviewed once a year by the Board. Should any other risk emerge during the year that is assessed to fall into one of the categories described above or which may result in the levels of tolerable risk set out in the EngC's risk appetite statement being exceeded then this should be referred to the Board for review and not wait for the annual review.
As part of the business planning process, the Executive Team scans the horizon to identify changes in the external environment that may have an impact on the Engineering Council’s operations. Both PESTLE and SWOT analysis frameworks are utilised to do this, which then instructs the ‘opportunity and risk’ identification process.
As part of the Business Planning process, all key tasks will record risks, opportunities and issues that may affect the achievement of expected outputs in either Functional Risk Registers or the Projects Risk & Opportunities Register and Issues Register _._
Based on the horizon scan and organisational SWOT analysis, the emergent opportunities are identified and captured in the Risk and Opportunities Register. The Executive Team reviews the Opportunity Register in the autumn of each year and prepares and prioritises projects that may exploit the opportunities, subject to resources being available. This will also inform any options analysis, which then drives the budgeting forecast the following year.
This process involves assessing the most significant individual risks on the basis of the likelihood of it occurring, and what the impact to the organisation would be should the risk occur and considering ways of avoiding the risk(s) or mitigating its effect. Each area of risk has been assessed by providing a score to both the impact and the probability of each risk and using these to calculate the overall severity, and therefore, Gross Risk. With the identification and definition of suitable controls and monitoring actions, a
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## Annual Report and Financial Accounts 2020
judgement is then made as to what extent the impact of the Gross Risk is reduced, thereby reflecting what the Net Risk is.
## **Role of the Board**
The Trustees assessed the major risks to which the Engineering Council was exposed in accordance with Charity Commission guidance and were satisfied that systems were in place to mitigate the Engineering Council's exposure to major risks.
The organisation’s Risk Policy & Procedure (July 2020) contains the following key principles that outline the Engineering Council's approach to risk management:
a. As the EngC’s principal body, the Board is responsible for risk management; b. The Board is responsible for maintaining a sound system of internal control that supports the achievement of policies, aims and objectives while safeguarding the public and other funds and assets for which it is responsible in accordance with its Charter and By-laws;
c. There should be an open and receptive approach to mitigating risk;
d. The Management Panel (MP) manages the EngC’s Risk and Opportunity Management Process.
e. The Finance, Audit & Remuneration Panel (FARP) advises the Board on risk assurance.
f. The Risk Register is reported to the Board via MP.
g. The CEO and Executive Team, with input from the volunteer committees and panels where relevant, are responsible for encouraging and implementing good risk management practice across the organisation, in particular the identification, evaluation and management of risk.
h. Early warning mechanisms will be put in place and monitored to alert the Board so that remedial action can be taken to manage any potential hazards.
This policy includes consideration of the organisation’s **Risk Appetite** i.e., the level of risk that EngC is prepared to accept in pursuit of its strategic objectives. This Statement informs the EngC’s strategy and business planning processes and is reviewed annually by the Board. It sets the context for managing risk and forms an integral part of this policy. The Risk Appetite Statement will also form the basis of delegated levels of authority for decisions including at subordinate panels and committees.
In terms of its willingness to accept certain types of risk, the EngC’s approach is to minimise exposure to reputational, compliance and financial risk, whilst accepting that a certain level of risk must be taken to achieve its strategic objectives. Acceptance of risk is subject to ensuring that risks and potential benefits are fully considered and understood before activities are undertaken and that sensible measures are in place to mitigate risk.
As of 31 December 2020, there were **three HIGH** Net Risks on the Trustees Risk Register as follows:
**UK secession from EU (BREXIT):** Risk that registered engineers would no longer be subject to directives on mobility: other forms of recognition and ways to enable mobility would become more important.
Mitigation: Work through ETF; should be factored into discussions about future engagement in recognition tools such as EUR-ACE, EUR ING, Engineering Card, international Accords and Agreements and Mutual Exemption Agreements; leading input into Professional Qualifications Working Group (requested by EtF/PEC), facilitated by RAEng and attended by PEIs.
**Major disaster (e.g., terrorist attack, pandemic):** Risk of a major event preventing access to Engineering Council offices for a significant period of time.
Mitigation: Routine penetration testing; Business Continuity provisions; Home working provision including provision of Callswitch (phone system), MS Teams and Zoom licences
**Maintaining licensing function during COVID-19 outbreak:** With the outbreak of COVID-19, the risk of not maintaining the various strands of the licensing function (licence reviews, Liaison Officer monitoring, volunteer seminars, workshops etc) to the current standard
Mitigation: All Licensing stakeholders have been notified of how it is anticipated the Licensing function will continue during the change to working practices; Revisions to the Licensing manual for the provision to conduct all types of licence reviews remotely; Ensuring Liaison Officers (LOs) are provided access to remote meetings held by Licensed Members for the continuation of LO reporting; Expectations of CPD activities and sampling; As part of regular Licensing team meetings, discussions will be held re the issue of training materials to key stakeholders as alternatives to conducting seminars / workshops. Additionally, research will be undertaken as to how to undertake online webinars."
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Annual Report and Financial Accounts 2020
## **Internal and external auditing**
The Quality Management System (QMS) is now embedded within the Engineering Council’s Operational Framework and a robust internal audit schedule is in place. This plan is created and revised by the internal Quality Management Team (QMT), which also manages the internal audit team. In addition, QMT monitors the internal audit process, reviews internal audit reports and follows up on both ISO9001 and internal audit non-conformances and root cause analysis. All findings are recorded in the Internal Audit Log as requested by the Executive Team. The Engineering Council was successfully certified against the ISO 9001:2015 quality management standard in June 2018.
## 6. Financial review
The areas of activity funded during 2020 are set out in section 3 - **2020 Activities and Achievements** . A detailed breakdown of expenditure for the year appears in notes 5-10 to the Financial Statements. FARP regularly scrutinises the organisation’s expenditure to ensure that the work of the Engineering Council remains cost-effective.
The inclusion of the Engineering Council Pension Scheme under FRS102 has reduced staff costs by £105,000 (2019 - £350,000), increased direct costs by £317,000 (2019 - £125,000) and resulted in an actuarial loss on the scheme of £1,107,000 (2019 – gain of £529,000). The overall effect of applying FRS102 is thus to decrease income for the year by £62,000 (2019 – increase of £225,000) and to decrease the net movement in funds by £1,169,000 (2019 – increase of £754,000).
## **Engineering Council Pension Scheme**
The Trustees of the Engineering Council Pension Scheme met three times during 2020. The Engineering Council, as the Principal Employer, made contribution towards scheme running costs of £105,000, as opposed to the scheme deficit contribution of £350,000 made in 2019. This change resulted from the triennial valuation, at 31 December 2018, showed a past service surplus of £327K compared to the deficit disclosed by the 2015 valuation of £1.2M. The principal factors affecting the change in the deficit were the deficit reduction contributions made by the Employer and the value placed on the liabilities, which was lower than in the previous year due mainly to the increase in the corporate bond yield.
The Trustees and the Employer have agreed that an annual contribution towards the Scheme running costs will be made until the next triennial valuation which is due at 31 December 2021.
## **Reserves**
In 2020 the Engineering Council held funds of £2,777,200 (£2,647,638 – 2019) as follows:
- **Unrestricted general funds** The Engineering Council’s policy is to maintain a level of unrestricted reserves, in accordance with accepted good practice, of a minimum of six months of operating budget. In 2020 six months operating budget was £1.5M (£1.55M – 2019). In calculating the level of reserves, it should hold the FARP also reviewed the key financial risks to the organisation and identified changes to funding mechanism and/or a shortfall in the annual operating grant, which could result in a lack of funds for Engineering Council operations. Consequently, a minimum reserve of six months operating budget was deemed appropriate.
Disregarding the tangible fixed assets for reserves policy purposes, the charity’s general fund was £2,530,155 (2019 - £2,616,808); a figure not materially different from ten months' expenditure.
At its October 2020 meeting FARP agreed the principle of utilising reserves in excess of six months’ operating costs to fund projects that supported the organisation’s strategic plan, but only on condition that a minimum of six months’ operating costs be retained at all times.
## **Restricted funds**
The pension reserve was £nil at the year end with the pension grant received in year again being equivalent to the current year recovery plan contributions of £105k (£350k – 2019).
The general fund, as shown in the financial statements, includes an unrecognised surplus of £1.506M (2019 surplus - £2.675M), due to an excess of assets over liabilities in the scheme this year. The figure as calculated under FRS102 is in respect of the defined benefit scheme.
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## Annual Report and Financial Accounts 2020
This amount is not recognised within the Engineering Council’s financial statements as the organisation has no rights over the Scheme’s assets. The Trustees believe that this notional funding calculation, which can vary considerably according to the assumptions made at each year-end, has no material effect on the organisation’s cash flow in the short term, and that in the long term its effects can be sustained from future income.
The majority of the reserves are held in investments, with the remainder held in cash.
## **Investment Policy and Returns**
The Trustees considered the most appropriate policy for investing funds to be a mix of equity-based trusts, gilts and cash holdings best met the Engineering Council’s requirements for both income and capital growth. The Engineering Council’s investment policy is based on securing low-risk investment with easily liquidated assets.
The Barings Targeted Return Fund invests across asset classes and through both direct holdings as well as in-house and third-party funds. The Targeted Return Fund does not invest directly in companies which manufacture tobacco products.
In January 2020, the Targeted Return Fund moved from being a Charity Commission approved Common Investment Fund to a Charity Authorised Investment Fund (CAIF) recognised by the Charity Commission and the Financial Conduct Authority (FCA). An advantage of a CAIF is that its fees are not subject to irrecoverable VAT, as a result of converting to a CAIF Barings reduced their management fees by 0.1%, so the overall effective fee moved from 0.6% to 0.4%. Additionally, the fund is now subject to financial oversight by the FCA, which was felt by Barings to be a stricter and tougher regulator than the Charity Commission. At the same time the fund performance target was reduced from CPI plus 5%, to CPI plus 3%, which was intended to make the fund more competitive without changing its structure, and lessening equity market risk. The investment manager’s fees are absorbed in the value of the fund and are therefore not separately identifiable.
FARP reviews the fund performance at each of its meetings and the fund manager attends FARP once a year to discuss fund performance. The fund manager’s report for 2020 follows.
_‘The COVID 19 pandemic had dramatic impact on investments in 2020, with the lockdowns causing a striking fall in economic activity but also significant disruption in stock markets. All assets became correlated, including unusually government bonds which all fell sharply so that the Fund saw a sharp fall in the first quarter of 2020. However, the fund manager took advantage of some of these falls and introduced Investment Grade Bonds and increased the Fund’s US equity position. Throughout the year companies and investors learned to live with Covid assisted by the unprecedented monetary and fiscal support offered by the authorities around the world. Markets ended 2020 on a positive note with an easing of international trade tensions, the outcome of the US presidential election and the prospect of three successful vaccines and on Christmas Eve the signing of Brexit. The Fund has been achieving its real yield target of CPI plus 1% with a yield of 3.4% but nonetheless saw a fall in the level of distributions with companies cutting or suspending dividends. Whilst the fund has seen a recovery in performance over recent months, the one and three years the numbers reflect the adverse impact of the pandemic.’_
The Trustees confirmed they were happy to continue with the appointment of Baring Asset Management as fund managers and that the investments held were acquired in accordance with the powers available to the Trustees.
## **Post Balance Sheet Event**
On 14 April Barings Asset Management advised that it would be closing its Targeted Return Fund with effect from 31 August 2021. Whilst the Trustees do not anticipate any significant fall in the fund’s value because of the closure, they will be seeking alternative fund managers.
## **Expenditure on charitable activities**
The following graph sets out the amounts spent on key areas of activity in 2019 and 2020.
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Annual Report and Financial Accounts 2020
**FIGURE 7: 2020 & 2019 EXPENDITURE**
## 7. Public benefit report
One of the key elements of the organisation’s core business is to ensure that the professional engineering community continues to provide public benefit through appropriate structures and professional behaviours.
This section provides a review of the significant or main activities undertaken by the Engineering Council to further its charitable purposes for the public benefit.
The Trustees confirm they have referred to the Charity Commission’s general guidance on Public Benefit when reviewing the Engineering Council’s aims and objectives and in planning future activities that will contribute to delivering the strategy OR vision and mission.
## **What is the Engineering Council there to achieve?**
The purposes of the Engineering Council are set out as follows:
## **Objective**
To advance education in, and promote the science and practice of, engineering (including relevant technology) for the public benefit and thereby to promote industry and commerce in Our United Kingdom and elsewhere.
## **Mission:**
To maintain internationally recognised standards of competence and commitment for the engineering profession and to licence competent institutions to champion the standards, for the deliverance of public benefit.
## **Vision:**
That society continues to have confidence and trust in the engineering profession.
**What has the Engineering Council done during 2019 to carry out those purposes for the public benefit?**
## _**Against the principles of public benefit**_
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## Annual Report and Financial Accounts 2020
Against each of the principles of public benefit and their key factors, as set out in the Charity Commission guidance, the Engineering Council is able to assess whether each factor has been met.
## **Table 1**
|**ble 1**|||
|---|---|---|
|**Serial**|**Principle or factor**|**Assessment**|
|**_1_**|**_There must be an identifiable benefit_**
**_or benefits_**|Engineering underpins provision and/or distribution of the
basic necessities of civilised life: buildings, energy, water and
sanitation, food, transport, healthcare, communications,
defence. The major public benefit is the professional
regulation that the Engineering Council and its Licensed
Member institutions exercise over their registrants and
members when serving the general public.|
|_1a_|_It must be clear what the benefits are_|See specific public benefits in Table 2, serials 1-11.|
|_1b_|_The benefits must be related to the aims_
_(i.e., objects)_|The object is pursued in conjunction with the Engineering
Council’s Licensed Member institutions through the core
functions of registration and accreditation to consistent
standards. The end result is that public benefits (1 above)
are generated by qualified registrants and institution
members working in private and public sector industries and
services.|
|_1c_|_Benefits must be balanced against any_
_detriment or harm_|While some engineering products or activities are potentially
harmful, the professional code of conduct and professional
education and training all emphasise safety, sustainability
and concern for the environment. Benefits vastly outweigh
detriment. Downside would be greater without professional
ethical commitment. See Table 2, serial 2.|
|**_2_**|**_Benefit must be to the public, or to a_**
**_section of the public_**|Benefits of sound engineering are to the public generally,
and, in varying degrees, to all mankind.|
|_2a_|_The beneficiaries must be appropriate to_
_the aims_|Confirmed.|
|_2b_|_Where benefit is to a section of the_
_public, the opportunity to benefit must_
_not be unreasonably restricted by:_
_Geographical or other restrictions_
_Ability to pay any fees charged_|Individual registrants, totalling more than 230,000, receive
particular benefits in addition to the general public benefits at
2 above. Discussed at 2d below.
Registration is conditional on meeting academic and other
standards of competence – an integral part of achieving the
overall public benefit. Moreover, registration is voluntary, not
a statutory ‘licence to practise’.
Annual registration fees range from £19 for Engineering
Technician to £39 for Chartered Engineer, reducible to £8.40
and £17.60 respectively for individual cases of hardship. See
also Table 2, serial 11.
In conclusion, members of the public wishing to become
registrants are not unreasonably restricted on either count.|
|_2c_|_People in poverty must not be excluded_
_from the opportunity to benefit_|Covered in 2 and 2b above.|
|_2d_|_Any private benefits must be incidental_|The private benefits of registration directly contribute towards
achieving the Engineering Council's aims and are a
necessary result of carrying out those aims. The CC’s legal
analysis underpinning its guidance quotes at para 3.84 a
case – IRC v Forrest – relating to membership of one of the
Engineering Council’s Licensed Member institutions, which
applies equally to registration.|
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Annual Report and Financial Accounts 2020
## _**As per specific activities and benefits:**_
## **Table 2**
|**able 2**|||||
|---|---|---|---|---|
|**Serial**|**Engineering Council activity**|**Institution activity**|**Effect**|**Public benefit**|
|1|Set and maintain standards of
professional competence in four
categories: Engineering
Technician, Incorporated
Engineer, Chartered Engineer,
ICT Technician|Contribute to
defining standards,
in conjunction with
industry and
academia; promote
standards|Coherent, relevant
national standards,
adopted by Quality
Assurance Agency
(QAA)|Defined learning
progression for existing and
prospective engineers,
technicians and
craftspersons; benefit to
industry and commerce and
thus to national economy|
|2|Define generic standards of
professional conduct and ethics|Tailor standards to
own field; require all
members to
observe standards
in institution code of
conduct. May
provide advice
facility to members|Members observe
standards|Positive contribution to
safety, sustainability, the
environment, industrial
effectiveness and public
confidence|
|3|Require institutions to have
complaints and disciplinary
procedures; appellate body in
defined circumstances|Produce and
operate complaints
and disciplinary
procedures in
support of (2)|Reported breaches of
standards by members
dealt with fairly and
transparently|Public confidence in
profession; a degree of
redress for complainants|
|4|License institutions to register
qualified individuals through
defined procedures|Promote registration
and institution
membership;
assess and register
qualified individuals|Evidence of the
professional
competence and
commitment of
individual engineers
and technicians|Assists employers and
clients in recruiting or
engaging individuals; public
confidence|
|5|License institutions to accredit
academic courses and approve
professional development courses
for engineers|Accredit and
approve courses
(often jointly)|Identifies courses
leading to exemplifying
qualifications for
individual registration|Raises and maintains the
quality of engineering
education; helps to inform
curriculum design and
promote innovative
methods of teaching;
assists students in
selecting courses and
career options; encourages
education in economically
important fields; attracts
foreign students to UK
universities, enhancing the
universities’ reputation and
financial position; supports
industry in developing high
quality programmes that
support professional
registration|
|6|License institutions to approve
vocational qualifications and
programmes for technicians; host
a technician working group to
develop initiatives and share good
practice|Approve Vocational
Qualifications (VQs)
and apprenticeship
programmes|Links existing VQs and
apprenticeship
programmes to
Engineering Technician
standard|Informs awarding
organisations and
apprenticeship developers
of suitability of VQs and
apprenticeship
programmes for
registration; allows
individuals with approved
VQs and apprenticeships to
register as Engineering
Technicians via a
streamlined route|
Page 18
## Annual Report and Financial Accounts 2020
|7|State requirement for individual
CPD (part of (2))|Facilitate and
monitor members’
CPD|Members maintain
competence|Contributes to (2), (4) and
(5)|
|---|---|---|---|---|
|8|Conduct periodic review of
licensed institutions|Operate internal
quality assurance
procedures|Licence requirements
and standards
maintained and applied
consistently|Underpins (2-6)|
|9|Represent UK in negotiating
international agreements for
mutual recognition of
qualifications; advise government
departments|Advise and support
members; admit
and register
qualified individuals
educated overseas;
form alliances with
overseas
institutions|Increased employment
and working mobility of
engineers and
technicians|UK firms can compete and
operate more effectively
overseas, to the benefit of
UK economy; overseas
recognition of and demand
for UK professional
recognition enhances
reputation of UK; increased
recognition of UK
engineering qualifications
provides greater
encouragement for
individuals to seek the
knowledge and
competence to achieve
them|
|10|Train institution volunteers in
registration and accreditation
procedures (e.g., interviewing,
mentoring, assessment)|Identify volunteers
from among
members; cascade
training to further
volunteers|Contributes to (4, 5, 8)|Contributes to (4, 5, 8)|
|11|Charge individual registration fees|Charge individual
membership fees|Financial viability of
bodies|All bodies charge reduced
fees for some of student
members, young members,
technician members, non-
corporate (unqualified)
members, members
temporarily not working,
retired members|
## 8. How we operate
## **How we are governed**
The Engineering Council, whose registered office is 5[th] Floor, 10 Lower Thames St, London EC3R 6EN was incorporated by Royal Charter on 27 November 1981 and is a registered charity, No. 286142, whose objects are:
_To advance education in, and to promote the science and practice of, engineering (including relevant technology) for the public benefit and thereby to promote industry and commerce in Our United Kingdom and elsewhere_ .
However, as a result of changes made to the profession under the direction of Lord Sainsbury, Minister for Science and Innovation (1998 to 2006), the scope and responsibility was narrowed down to operate the national Register.
Page 19
Annual Report and Financial Accounts 2020
## **How we are funded**
The Engineering Council’s principal source of funding is the annual registration fees of individual registered engineers and technicians. The fees are collected by the professional engineering institutions and remitted to EngineeringUK, from which a grant is made to the Engineering Council.
This operating grant is used to cover the cost of carrying out regulatory activities, which include maintenance of standards; licensing of professional engineering institutions as Licensed Members and Professional Affiliates; international representation in FEANI and the International Engineering Alliance; operation of the engineering profession’s national Register; and support for the promotion of registration by professional engineering institutions.
The annual registration fees from Engineering Technicians, Incorporated Engineers, Chartered Engineers and ICT Technicians support the work of the Engineering Council and EngineeringUK.
The Engineering Council does not raise funds from the general public.
## **The Board of Trustees**
The Engineering Council is governed by a 22-member Board of Trustees, which is appointed in accordance with the Engineering Council’s Bye-laws. Twelve of the members are appointed by the major professional engineering institutions, three by the smaller institutions and the remaining seven by EngineeringUK. The composition of the Board provides stakeholder representation through institutionnominated members, and the involvement of the wider profession through EngineeringUK nominees.
The Board chaired by Prof Chris Atkin CEng FRAeS met on three occasions in 2019.
The Board appoints the Chief Executive Officer, who is in turn responsible for staffing within parameters established by the Board.
The constitution and membership of the Board is published on the Engineering Council website (www.engc.org.uk). An extranet requiring a password (from October 2017, the Partner Portal, at https://partner.engc.org.uk) is available to stakeholders, primarily Licensed Members, Professional Affiliates, Engineering Council Trustees, and volunteer members of the Engineering Council’s Committee and Panels, as well as Engineering Council staff. The Charter and Bye-laws, Regulations and Terms of Reference of the Board’s Committees and Panels are published on the Partner Portal together with other information including agendas, minutes and papers and proceedings of the Board, Committees and Panels.
Within three months of joining the Board, Trustees are given an induction by the Executive Team, which is based on the Institute of Chartered Secretaries and Administrators Best Practice Guide to the Appointment and Induction of Charity Trustees. Further trustee training, including GDPR training, is undertaken as appropriate.
Page 20
Annual Report and Financial Accounts 2020
The following table presents changes to Board members during 2020.
||Nominated by|Board Member|Term of
Office
ended|Term of
Office
started|
|---|---|---|---|---|
|1|BCS, The Chartered Institute for IT|Prof Kevin Jones CEng CITP CSci
FIET FBCS|||
|2|Chartered Institution of Building
Services Engineers|Mr George Adams CEng FCIBSE|||
|3|Institution of Chemical Engineers|Dr Rob Best CEng FIChemE|||
|4|Institution of Civil Engineers|EUR ING Bill Hewlett CEng FICE
FIET|||
|5|Institution
of
Engineering
&
Technology|Mr James Baker CEng FIET|||
|6|Institution
of
Engineering
&
Technology|Ms Michelle Richmond CEng FIET|||
|7|Institute of Marine Engineering,
Science & Technology|John Chudley CEng FIMarEST|||
|8|Institute of Materials, Minerals and
Mining|EUR ING Dr Graham Woodrow CEng
FIMMM|||
|9|Institution of Mechanical
Engineers|Mr Mike McLoughlin CEng FIMechE|||
|10|Royal Aeronautical Society|Prof Chris Atkin CEng FRAeS|||
|11|Society of Operations Engineers|Mr
Stephen
Catte
CEnv
IEng
HonFSOE|||
|12|Institution of Structural Engineers|Mr Phil Nelson CEng FIStructE|||
|13|Group B Institutions|Terry Fuller CEng MICE MCIWEM|||
|14|Group B Institutions|Mr Neil Phelps IEng MIED|||
|15|Group C Institutions|Mr Tony Gibson CEng MNucI MIET
MAPM MINCOSE|||
|16|EngineeringUK|Mr Doug Alexander*|||
|||Mr David Short CEng FRAeS MIET|||
|17|EngineeringUK|Ms Ann Watson|||
|18|EngineeringUK|Matt Gantley||Jun 2020|
|||Carolyn Griffiths CEng FIMechE
FREng|Jun 2020||
|19|EngineeringUK|Ms Estelle Clark CQP FCQI FRSA|||
|20|EngineeringUK|Mrs Josephine Parker MBE CEng
FCIWEM FICE F!Water||Jun 2020|
|||Col Martin Court CEngFIMechE|Jun 2020||
|21|EngineeringUK|Capt Mike Rose RN CEng
MIMarEST|||
|22|EngineeringUK|Ms Ann Francke|||
*As Chair of FARP Doug Alexander remains on the Board of Trustees as a non-voting member.
Page 21
Annual Report and Financial Accounts 2020
## **Committees and Panels**
The Board operates through the two principal committees and four panels listed below. All committee and panel Chairs are members of the Board. Other committee and panel members are nominated by the professional engineering institutions.
**----- Start of picture text -----**
Board
Registration Standards Committee(RSC) Quality Assurance Committee(QAC) International Advisory Panel(IAP) Management Panel(MP) Remuneration PanelFinance, Audit and (FARP) Privy Council and Governance (PCGP)Panel Group B and C Panel
**----- End of picture text -----**
The **Registration Standards Committee (RSC)** has oversight of matters to do with the education, training and professional development of professional engineers and technicians. It is responsible for maintaining the standards of competence and commitment and maintaining the underpinning knowledge and understanding requirements for professional registration. This includes publishing, and keeping under review, the Registration Code of Practice that aligns with the requirements set out in the UK Standard for Professional Engineering Competence (UK-SPEC), the ICT Technician Standard, and the standards for the accreditation of HE programmes and approved apprenticeships. RSC comprises nominees from professional engineering institutions, including from academia and industry, which ensures that the Engineering Council is kept abreast of developments in education and professional development that relate to professional engineers and technicians. The committee met three times in 2020.
The **Quality Assurance Committee (QAC)** is responsible for licensing professional engineering institutions that are considered competent to assess candidates for professional registration, accredit academic programmes, and approve professional development schemes. This involves a periodic review of the institutions’ registration process, reviewing and making appropriate changes to licensing policies and processes, and encouraging information exchange between institutions, while maintaining an overview of licence related issues. It also approves suitable bodies as Professional Affiliates. QAC comprises members nominated by the licensed institutions who are registrants and of suitable standing and experience. The committee met four times in 2020.
The **International Advisory Panel (IAP)** is responsible for advising on matters that have an impact on the global recognition of Engineering Council standards and the international mobility of engineering professionals. This involves advising on the international promotion of the national Register, updating the Board on relevant international developments, guiding the Engineering Council’s international activity and identifying suitable representatives of the UK engineering profession to join international committees. IAP acts as the National Monitoring Committee for FEANI registration purposes and as the responsible Committee for the UK section of International Registers. IAP also promotes the flow of communications between the Engineering Council and the institutions on international matters. IAP comprises nominees from professional engineering institutions, including from academia and industry, with international experience and expert knowledge of mobility issues affecting professional engineers and technicians. The panel met three times in 2020.
The **Finance, Audit and Remuneration Panel (FARP)** has responsibility for keeping the financial management of the Engineering Council under review. Through the delegated authority of the Board, it approves variations to expenditure and investment policy within established limits. The Panel advises the Board and CEO on financial services; monthly management accounts; remuneration; staff pensions; subscription and fees policies; the annual budget, report and accounts; risk assessment policy; audit reports; delegated financial authorities; marketing and promotions activity; and the business continuity plan. In addition to the Chair, FARP comprises three current trustees and one other member with relevant knowledge and experience. The panel met three times in 2020.
The **Privy Council and Governance Panel (PCGP)** is responsible for the periodic review of the Charter, Bye-laws and Regulations of the Engineering Council, and making proposals for change to the Board. The Panel also advises the Board on its response to requests for advice from the Privy Council Office and other government departments on matters concerning the constitution of relevant institutions. PCGP provides advice to professional engineering institutions on constitution, governance and disciplinary procedures. This involves publishing and reviewing guidance on disciplinary procedures and consulting with Licensed Members on significant proposed changes to policies or procedures. PCGP also considers representations from professional engineering institutions, registrants or members of the public concerning the conduct of institutions or registrants and determines whether, and if so how, appeal proceedings should take place.
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## Annual Report and Financial Accounts 2020
PCGP comprises suitable nominees from the Board, together with advisors to assist in this work of the Panel. The PCGP met four times in 2020.
The **Management Panel (MP)** is responsible for day-to-day operational decision making and management of the organisation. The Panel is chaired by the CEO and comprises of the CEO, the Deputy CEO/Operations Director, Head of Professional Standards and the Head of Administration & Support and meets approximately every four to six weeks. Its standing agenda includes IT and Management Information Systems, project management/project reporting, risk management, business planning, HR, finance, quality management and business continuity.
The **Group B and C Panel** provides a forum for the exchange of information and good practice with respect to membership and registration matters concerning small (Group C) and medium-sized (Group B) institutions. It also discusses pan-engineering issues of joint concern and, where appropriate, provides focus for campaigns or lobbying and the dissemination of a collective view. The Panel provides a platform for organisations and individuals to present topics of common interest, including identifying and implementing opportunities for co-operation between institutions for mutual benefit and the public good.
## **Volunteer Effort**
Volunteer effort, through its Board, committees, panels and working groups, continues to be crucial to the work of the Engineering Council. A conservative estimate gives the total days given freely to the Engineering Council throughout the year as approximately 1,200. Given the standing of those involved the financial equivalent would be in the order of £620,000 per annum. These figures have not significantly changed in the last year.
A remote Volunteers Seminars was held in November in 2020, which was well attended.
## **Remuneration Policy**
The Engineering Council is committed to ensuring that it pays staff fairly and at an appropriate level in order to attract and retain people with the right skills and experience to ensure that the organisation delivers its charitable objectives and strategic plan.
FARP has delegated authority from the Board of Trustees to determine all matters relating to staff pay and reward. In determining staff remuneration, FARP considers factors such as the increase in cost of living and the general rate of salary increases in the market during the preceding 12 months. Bonus payments are awarded on a discretionary basis to provide staff with appropriate incentives to encourage enhanced performance and to reward them in a fair and responsible manner for their individual contributions to the success of the organisation.
## **KEY MANAGEMENT PERSONNEL**
**Chief Executive Officer**
Alasdair Coates BEng(Hons) MSc CEng FICE MCIHT CMIOSH
**Operations Director & Deputy Chief Executive Officer** Paul Bailey BSc (Hons)
**Head of Administration & Support** Gillian Paterson MA FCIPD
**Head of Professional Standards** Katy Turff CMgr MCMI
Page 23
Annual Report and Financial Accounts 2020
## **Professional Advisors**
|**Service**|**Organisation**|**Address**|
|---|---|---|
|Actuaries & Pension
Administrators|Cartwright Benefit Consultants
Ltd.|175 Kings Road, Reading, RG1 4EY|
|Auditors|Haysmacintyre LLP|10 Queen Street Place, London
EC4R 1AG|
|Bankers|HSBC Bank plc|165 Fleet Street, London, EC4A 2DY|
|Financial Accountants|Kreston Reeves LLP|37 St Margaret’s Street, Canterbury, CT1
2TU|
|Investment Managers|Barings Asset Management
Ltd|155 Bishopsgate, London, EC2M 3XY|
|Lawyers|Veale Wasbrough Vizards LLP|Narrow Quay House, Narrow Quay,
Bristol BS1 4QA|
## 9. Statement of Trustees' responsibilities
The Trustees are responsible for preparing the Trustees' report and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
The law applicable to charities in England and Wales requires the Trustees to prepare financial statements for each financial year, which provides a true and fair view of the state of affairs and the incoming resources and application of resources, of the charity for that period. In preparing these financial statements, the Trustees are required to:
- select suitable accounting policies and then apply them consistently.
- observe the methods and principles in the Charities Statements of Recommended Practice (SORP)
- make judgments and estimates that are reasonable and prudent.
- state whether applicable accounting standards have been followed, insofar as these are appropriate to the Council, its Royal Charter and Bye-laws, subject to any material departures disclosed and explained in the financial statements.
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the charity will continue in operation.
The Trustees are responsible for keeping proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the charity and enable them to ensure that the financial statements comply with the Charities Act 2011, the applicable Charity (Accounts and Reports) Regulations and the provisions of the Trust Deed. They are also responsible for safeguarding the assets of the charity and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Trustees are responsible for the maintenance and integrity of the charity and financial information included on the charity’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The above Trustees’ Report on pages 1-25 was approved by the Trustees on 10 June 2021 and signed on their behalf by the Chairman of the Board:
Prof Chris Atkin CEng FRAeS
Page 24
## Independent auditor’s report to the Trustees of The Engineering Council
## **Opinion**
We have audited the financial statements of The Engineering Council for the year ended 31 December 2020 which comprise the Statement of Financial Activities, the Balance Sheet and the Cash Flow Statement and notes to the financial statements, 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).
In our opinion, the financial statements:
- give a true and fair view of the state of the charity’s affairs as at 31 December 2020 and of the charity’s net movement in funds for the year then ended;
- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
- have been prepared in accordance with the requirements of the Charities Act 2011.
## **Basis for opinion**
We have been appointed as auditor under section 144 of the Charities Act 2011 and report in accordance with the Act and relevant regulations made or having effect thereunder. 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 are independent of the charity in accordance with the ethical requirements that are 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
## **Conclusions relating 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 charity's ability to continue as a going concern for a period of at least twelve 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.
## **Other information**
The trustees are responsible for the other information. The other information comprises the information included in the Trustees’ Annual Report. 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.
In connection with our audit of the financial statements, 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 or a material misstatement of the other information. 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 require us to report to you if, in our opinion:
- adequate accounting records have not been kept by the charity; or
- sufficient accounting records have not been kept; or
- the charity financial statements are not in agreement with the accounting records and returns; or
- we have not received all the information and explanations we require for our audit.
## **Responsibilities of trustees for the financial statements**
As explained more fully in the trustees’ responsibilities statements set out on page 24, 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 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 charity or to cease operations, or have no realistic alternative but to do so.
## **Auditor’s responsibilities for the audit of the financial statements**
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.
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.
Based on our understanding of the Engineering Council, we identified that the principal risks of noncompliance with laws and regulations relates to the Charities Act 2011 and its Royal Charter, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Charities Act 2011 and the application of FRS 102, income tax and payroll tax.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to application of controls around authorisation of expenditure and payments. Audit procedures performed by the engagement team included:
- Enquiries of management regarding correspondence with regulators and tax authorities;
- - Discussions with management including consideration of known or suspected instances of noncompliance with laws and regulation and fraud;
- Evaluating management’s controls designed to prevent and detect irregularities;
- Identifying and testing journals, in particular, journal entries posted with unusual account combinations, postings by unusual users or with unusual descriptions; and
- Challenging assumptions and judgements made by management in their critical accounting estimates;
- Reviewing the assumptions and judgements used by the professional actuary in relation to the Council’s pension asset.
Page 26
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: 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 section 144 of the Charities Act 2011 and regulations made under section 154 of that Act. 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’s trustees as a body for our audit work, for this report, or for the opinions we have formed.
Haysmacintyre LLP 10 Queen Street Place Statutory Auditors London [date] EC4R 1AG
Haysmacintyre LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
Page 27
**The Engineering Council**
## **Statement of financial activities for the year ended 31 December 2020**
|**Note**
**Income from:**
Charitable activities
Other trading activities
Investments
**Total income**
**Expenditure on:**
Raising funds
Charitable activities
**Total expenditure**
Net (losses)/gains on investments
**Net movement in funds before other**
**recognised gains/(losses)**
**Other recognised gains/(losses):**
Actuarial (losses)/gains on defined
benefit pension schemes
Derecognition of pension surplus
**Net movement in funds**
**Reconciliation of funds:**
Total funds brought forward
Net movement in funds
**Total funds carried forward**|**Restricted**
**funds**
**2020**
**£**
**105,000**
**-**
**-**
**105,000**
**-**
**105,000**
**105,000**
**-**
**-**
**-**
**-**
**-**
**-**
**-**
**-**|**Unrestricted**
**funds**
**2020**
**£**
**2,813,226**
**7,754**
**54,082**
**2,875,062**
**2,582**
**2,762,855**
**2,765,437**
**(42,063)**
**67,562**
**(1,107,000)**
**1,169,000**
**129,562**
**2,647,638**
**129,562**
**2,777,200**|**Total**
**funds**
**2020**
**£**
**2,918,226**
**7,754**
**54,082**
**2,980,062**
**2,582**
**2,867,855**
**2,870,437**
**(42,063)**
**67,562**
**(1,107,000)**
**1,169,000**
**129,562**
**2,647,638**
**129,562**
**2,777,200**|_Total_
_funds_
_2019_
_£_
_3,082,018_
_26,358_
_78,450_
_3,186,826_
_2,159_
_3,084,006_
_3,086,165_
_166,574_
_267,235_
_529,000_
_(754,000)_
_42,235_
_2,605,403_
_42,235_
_2,647,638_|
|---|---|---|---|---|
The Statement of financial activities includes all gains and losses recognised in the year.
The notes on pages 31 to 53 form part of these financial statements.
Page 28
**The Engineering Council**
## **Balance sheet as at 31 December 2020**
|**Note**
**Fixed assets**
Tangible assets
14
Investments
15
**Current assets**
Debtors
16
Cash at bank and in hand
Creditors: amounts falling due within one
year
17
**Net current assets**
**Net assets including pension scheme**
**liabilities**
**Charity funds**
Restricted funds
18
Unrestricted funds
18
**Total funds**|**171,120**
**688,715**
**859,835**
**(345,753)**|**2020**
**£**
**247,045**
**2,016,073**
**2,263,118**
**514,082**
**2,777,200**
**-**
**2,777,200**
**2,777,200**|_293,905_
_671,177_
_965,082_
_(353,190)_|_2019_
_£_
_30,830_
_2,004,916_|
|---|---|---|---|---|
|||||_2,035,746_
_611,892_|
|||||_2,647,638_|
|||||_-_
_2,647,638_|
|||||_2,647,638_|
The financial statements were approved and authorised for issue by the Trustees on and signed on their behalf by:
## **Mr James Baker**
Chairman of the Finance, Audit and Remuneration Panel
**Professor Chris Atkin, CEng FRAes** Chairman of the Board
The notes on pages 31 to 53 form part of these financial statements.
Page 29
## **The Engineering Council**
|**Statement of cash flows**
**for the year ended 31 December 2020**
**Cash flows from operating activities**
Net cash provided by/(used in) operating activities
**Cash flows from investing activities**
Dividends, interests and rents from investments
Purchase of tangible fixed assets
Purchase of investments
**Net cash used in investing activities**
**Change in cash and cash equivalents in the year**
Cash and cash equivalents at the beginning of the year
**Cash and cash equivalents at the end of the year**|**2020**
**£**
**360,103**
**862**
**(273,427)**
**(70,000)**
**(342,565)**
**17,538**
**671,177**
**688,715**|_2019_
_£_
_31,699_
_1,032_
_-_
_(74,418)_
**(73,386)**
**(41,687)**
_712,864_
_671,177_|
|---|---|---|
The notes on pages 31 to 53 form part of these financial statements
Page 30
**The Engineering Council**
**Notes to the financial statements for the year ended 31 December 2020**
## **1. General information**
The Engineering Council is an unincorporated charity registered with the Charity Commission. The registered office is 10 Lower Thanes Street, London, EC3R 6EN.
## **2. Accounting policies**
## **2.1 Basis of preparation of financial statements**
The financial statements have been prepared in accordance with the Charities SORP (FRS 102) - 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 (FRS 102) (effective 1 January 2019), the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the Charities Act 2011.
The financial statements have been prepared to give a 'true and fair' view and have departed from the Charities (Accounts and Reports) Regulations 2008 only to the extent required to provide a 'true and fair' view. This departure has involved following the Charities SORP (FRS 102) published on 16 July 2014 rather than the Accounting and Reporting by Charities: Statement of Recommended Practice effective from 1 April 2005 which has since been withdrawn.
The Engineering Council meets the definition of a public benefit entity under FRS 102. Assets and liabilities are initially recognised at historical cost or transaction value unless otherwise stated in the relevant accounting policy.
## **2.2 Going concern**
The Trustees consider that there are no material uncertainties about the charity's ability to continue as a going concern.
Whilst the impact of the COVID-19 pandemic has been assessed by the Trustees, so far as is reasonably possible, due to its unprecedented impact on the worldwide economy it is difficult to evaluate with any certainty the potential outcomes on the Charity's future activities. However, taking into consideration the Charity's level of reserves, the Trustees believe that the Charity will be able to continue in operational existence for the foreseeable future.
## **2.3 Income**
All income is recognised once the charity has entitlement to the income, it is probable that the income will be received and the amount of income receivable can be measured reliably.
Income tax recoverable in relation to investment income is recognised at the time the investment income is receivable.
## **2.4 Expenditure**
Expenditure 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.
Charitable activities are costs incurred on the charity's operations, including support costs and costs relating to the governance of the charity, all incurred in achieving the charity's objectives.
All expenditure is inclusive of irrecoverable VAT.
Page 31
**The Engineering Council**
**Notes to the financial statements for the year ended 31 December 2020**
## **2. Accounting policies (continued)**
## **2.5 Tangible fixed assets and depreciation**
Tangible fixed assets costing £1,000 or more are capitalised and recognised when future economic benefits are probable and the cost or value of the asset can be measured reliably.
Tangible fixed assets are initially recognised at cost. After recognition, under the cost model, tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses. All costs incurred to bring a tangible fixed asset into its intended working condition should be included in the measurement of cost.
Depreciation is charged so as to allocate the cost of tangible fixed assets less their residual value over their estimated useful lives, .
Depreciation is provided on the following bases:
|Fixtures and fittings|- 20% straight line|
|---|---|
|Office equipment|- 25% straight line|
|Computer equipment|- 33% straight line|
Assets of nil book value are removed from the asset register after 10 years, irrespective of whether they exist or not. These are in included in "Disposals during the year" as appropriate.
## **2.6 Investments**
Fixed asset investments are a form of financial instrument and are initially recognised at their transaction cost and subsequently measured at fair value at the Balance sheet date, unless the value cannot be measured reliably in which case it is measured at cost less impairment. Investment gains and losses, whether realised or unrealised, are combined and presented as ‘Gains/(Losses) on investments’ in the Statement of financial activities.
## **2.7 Interest receivable**
Interest on funds held on deposit is included when receivable and the amount can be measured reliably by the charity; this is normally upon notification of the interest paid or payable by the institution with whom the funds are deposited.
## **2.8 Operating leases**
Rentals paid under operating leases are charged to the Statement of financial activities on a straight line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the period until the date the rent is expected to be adjusted to the prevailing market rate.
## **2.9 Debtors**
Trade and other debtors are recognised at the settlement amount after any trade discount offered. Prepayments are valued at the amount prepaid net of any trade discounts due.
## **2.10 Cash at bank and in hand**
Cash at bank and in hand includes cash and short-term highly liquid investments with a short maturity of three months or less from the date of acquisition or opening of the deposit or similar account.
Page 32
**The Engineering Council**
**Notes to the financial statements for the year ended 31 December 2020**
## **2. Accounting policies (continued)**
## **2.11 Liabilities and provisions**
Liabilities are recognised when there is an obligation at the Balance sheet date as a result of a past event, it is probable that a transfer of economic benefit will be required in settlement, and the amount of the settlement can be estimated reliably.
Liabilities are recognised at the amount that the charity anticipates it will pay to settle the debt or the amount it has received as advanced payments for the goods or services it must provide.
Provisions are measured at the best estimate of the amounts required to settle the obligation. Where the effect of the time value of money is material, the provision is based on the present value of those amounts, discounted at the pre-tax discount rate that reflects the risks specific to the liability. The unwinding of the discount is recognised in the Statement of financial activities as a finance cost.
## **2.12 Financial instruments**
The charity only has financial assets and financial liabilities of a kind that qualify as basic financial instruments. Basic financial instruments are initially recognised at transaction value and subsequently measured at their settlement value with the exception of bank loans which are subsequently measured at amortised cost using the effective interest method.
## **2.13 Foreign currencies**
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the reporting date.
Transactions in foreign currencies are translated into sterling at the rate ruling on the date of the transaction.
Exchange gains and losses are recognised in the Statement of financial activities.
## **2.14 Fund accounting**
General funds are unrestricted funds which are available for use at the discretion of the Trustees in furtherance of the general objectives of the charity and which have not been designated for other purposes.
Restricted funds are funds which are to be used in accordance with specific restrictions imposed by donors or which have been raised by the charity for particular purposes. The costs of raising and administering such funds are charged against the specific fund. The aim and use of each restricted fund is set out in the notes to the financial statements.
Page 33
**The Engineering Council**
**Notes to the financial statements for the year ended 31 December 2020**
## **2. Accounting policies (continued)**
## **2.15 Pensions**
The Engineering Council contributes to a contracted-out defined benefit pension scheme, the Engineering Council Pension Scheme. This scheme was closed to new entrants on 3 July 2002. The Scheme closed to future accrual with effect from 30 April 2012.
The Engineering Council fully adopts Financial Reporting Standard 102 (FRS102) and the impact of this standard has been reflected throughout the financial statements.
In accordance with FRS102, the Statement of Financial Activities includes: the cost of benefits accruing during the year in respect of current service costs (charged against staff costs within charitable activities); the interest cost and the expected return on assets (shown as direct costs); and actuarial gains and losses (disclosed within other recognised gains and losses).
In accordance with FRS102, the balance sheet includes the surplus or deficit in the scheme. This has been estimated for the purposes of FRS102 based on the results of the funding Actuarial Valuation, adjusted for the different assumptions and taking into consideration subsequent cash flows.
Further details regarding the scheme are disclosed in note 24.
The Engineering Council also contributes to a defined contribution stakeholder pension scheme operated by Scottish Widows. Contributions are charged to the Statement of Financial Activities as they fall due.
## **2.16 Taxation**
The charity 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 company for UK corporation tax purposes. Accordingly, the charity is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 of the Corporation Tax Act 2010 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.
## **2.17 Value Added Tax**
Due to the nature of the Engineering Council's income sources, almost all VAT incurred on purchases is irrecoverable. Irrecoverable VAT input charges have therefore been included in the expenditure areas to which they relate.
Page 34
**The Engineering Council**
**Notes to the financial statements for the year ended 31 December 2020**
## **3. Critical accounting estimates and areas of judgment**
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions:
The charity makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
## _Defined benefit pension scheme_
In the application of the accounting policies, Trustees are required to make judgement, estimates, and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and underlying 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 affected current and future periods.
The charity also contributes to the Engineering Council Pension Scheme. The scheme is a defined benefit scheme in accordance with section 28 of FRS 102. Service costs, curtailments, settlement gains and losses, net financial returns and remeasurement gains and losses are included in the Statement of Financial Activities in the year to which they relate.
Changes in the assets and liabilities of the scheme in the year are disclosed and allocated as follows: • Changes relating to current or past service costs and gains and losses on settlements and curtailments and pension finance costs arising from changes in the net of the interest costs and expected return on assets, are allocated to the relevant activity heading based on staff costs of employees within the scheme.
• Pension finance charges arising from similar changes are recognised as expenditure.
• Remeasurement gains and losses are recognised as other recognised gains and losses.
The assets, liabilities and movements in the surplus or deficit of the scheme are calculated by qualified independent actuaries as an update to the latest full actuarial valuation.
Details of the scheme assets and liabilities and major assumptions are shown in note 25.
## _Tangible fixed assets_
The useful economic lives of tangible fixed assets are based on management's judgement and experience. When management identifies that accrual useful economic lives differ materially from the estimates used to calculate depreciation, that charge is adjusted retrospectively. Although tangible fixed assists are significant, variances between actual and estimated useful economic lives will not have a material impact on the operating results. Historically, no changes have been required.
In the view of the trustees, no assumptions concerning the future or estimation uncertainty affecting assets or liabilities at the balance sheet date are likely to result in a material adjustment to their carrying amounts in the next financial year.
Page 35
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **4. Income from charitable activities**
|Grants
FEANI income
Miscellaneous income
Admin fee from EngineeringUK
Professional services
MCP license fees
Prior year - 2019
Grants
FEANI income
Admin fee from EngineeringUK
Professional services
MCP license fees|**Restricted**
**funds**
**2020**
**Unrestricted**
**funds**
**2020**
**£**
**£**
105,000
2,611,523
-
98,404
-
35
-
44,664
-
24,600
-
34,000
105,000
2,813,226
_Restricted_
_funds_
_2019_
_Unrestricted_
_funds_
_2019_
_£_
_£_
_350,000_
_2,535,459_
_-_
_91,128_
_-_
_44,664_
_-_
_24,850_
_-_
_35,917_
_350,000_
_2,732,018_|**Total**
**funds**
**2020**
**£**
**2,716,523**
**98,404**
**35**
**44,664**
**24,600**
**34,000**
**2,918,226**|
|---|---|---|
|||_Total_
_funds_
_2019_
_£_
_2,885,459_
_91,128_
_44,664_
_24,850_
_35,917_
_3,082,018_|
Page 36
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **5. Other trading activities**
|**Unrestricted**
**funds**
**2020**
**£**
Trading income
7,754
Stamp purchases
(2,159)
5,595
Prior year - 2019
_Unrestricted_
_funds_
_2019_
_£_
Trading income
_26,358_
Stamp purchases
_(2,159)_
_24,199_|**Total**
**funds**
**2020**
**£**
**7,754**
**(2,159)**
**5,595**
_Total_
_funds_
_2019_
_£_
_26,358_
_(2,159)_
_24,199_|
|---|---|
Trading income comprises professional stamps and replacement registration certificates.
## **6. Investment income**
|**Unrestricted**
**funds**
**2020**
**£**
Interest from fixed asset investments
53,220
Bank interest receivable
862
Pension income (note 25)
(150,000)
(95,918)|**Total**
**funds**
**2020**
**£**
**53,220**
**862**
**(150,000)**
**(95,918)**|
|---|---|
Page 37
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
Prior year - 2019
|Interest from fixed asset investments
Bank interest receivable
Pension income (note 25)|_Unrestricted_
_funds_
_2019_
_£_
_74,418_
_1,032_
_3,000_
_78,450_|_Total_
_funds_
_2019_
_£_
_74,418_
_1,032_
_3,000_
_78,450_|
|---|---|---|
## **7. Analysis of expenditure by activities**
|Charitable activities
Prior year - 2019
Charitable activities|**Activities**
**undertaken**
**directly**
**2020**
**£**
2,424,855
_Activities_
_undertaken_
_directly_
_2019_
_£_
_2,755,606_|**Support**
**costs**
**2020**
**£**
293,000
_Support_
_costs_
_2019_
_£_
_328,400_|**Total**
**funds**
**2020**
**£**
**2,717,855**|
|---|---|---|---|
||||_Total_
_funds_
_2019_
_£_
_3,084,006_|
Page 38
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **8. Direct costs**
|Pension expense (note 12)
Project spend
Recruitment and temporary staff
Training
Computer and information systems costs
Marketing
Travel and subsistence
Subscriptions and meetings
Accomodation costs
Wages and salaries (note 11)
Prior year - 2019
Pension expense (note 12)
Project spend
Recruitment and temporary staff
Training
Computer and information systems costs
Marketing
Travel and subsistence
Subscriptions and meetings
Accomodation costs
Wages and salaries (note 11)|**Restricted**
**funds**
**2020**
**Unrestricted**
**funds**
**2020**
**£**
**£**
-
167,000
-
1,739
-
6,553
-
3,449
-
217,083
-
4,780
-
18,508
-
88,530
-
285,893
105,000
1,526,320
105,000
2,319,855
_Restricted_
_funds_
_2019_
_Unrestricted_
_funds_
_2019_
_£_
_£_
_-_
_128,000_
_-_
_5,650_
_-_
_43,857_
_-_
_20,531_
_-_
_389,106_
_-_
_29,999_
_-_
_115,294_
_-_
_111,202_
_-_
_250,993_
_350,000_
_1,310,974_
_350,000_
_2,405,606_|**Total**
**funds**
**2020**
**£**
**167,000**
**1,739**
**6,553**
**3,449**
**217,083**
**4,780**
**18,508**
**88,530**
**285,893**
**1,631,320**
**2,424,855**|
|---|---|---|
|||_Total_
_funds_
_2019_
_£_
_128,000_
_5,650_
_43,857_
_20,531_
_389,106_
_29,999_
_115,294_
_111,202_
_250,993_
_1,660,974_
_2,755,606_|
Page 39
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **9. Support costs**
|**Unrestricted**
**funds**
**2020**
**£**
**General support**
Telephone
10,922
Printing, stationery and office supplies
60,219
Maintenance of equipment
15,120
Sundries
2,607
Rental of office equipment
8,323
Bank charges
3,913
Accountancy
4,750
Legal and professional
18,036
Insurance
47,401
Application fees
14,802
Office move costs
14,228
Depreciation
56,969
**Governance**
**257,290**
Accountancy
21,170
Auditors' remuneration
14,540
293,000|**Total**
**funds**
**2020**
**£**
**10,922**
**60,219**
**15,120**
**2,607**
**8,323**
**3,913**
**4,750**
**18,036**
**47,401**
**14,802**
**14,228**
**56,969**|
|---|---|
||**257,290**
**21,170**
**14,540**
**293,000**|
Page 40
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
Prior year - 2019
|Telephone
Printing, stationery and office supplies
Maintenance of equipment
Sundries
Rental of office equipment
Bank charges
Accountancy
Legal and professional fees
Insurance
Application fees
Office move costs
Depreciation
Bad debts
Accountancy
Auditors' remuneration
**10.**
**Auditor's remuneration**
Fees payable to the charity's auditor for the audit of the charity's annual
accounts - excluding VAT|_Unrestricted_
_funds_
_2019_
_£_
_8,953_
_51,574_
_15,601_
_3,168_
_3,057_
_4,546_
_4,500_
_29,435_
_48,084_
_5,530_
_40,675_
_71,786_
_2,052_
_288,961_
_21,349_
_16,239_
_326,549_
**2020**
**£**
**11,950**|_Total_
_funds_
_2019_
_£_
_8,953_
_51,574_
_15,601_
_3,168_
_3,057_
_4,546_
_4,500_
_29,435_
_48,084_
_5,530_
_40,675_
_71,786_
_2,052_|
|---|---|---|
|||**288,961**
_21,349_
_16,239_
_326,549_|
|||_2019_
_£_
_11,950_|
Page 41
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **11. Staff costs**
|Wages and salaries
Social security costs
Contribution to defined contribution pension schemes|**2020**
**£**
**1,407,744**
**154,651**
**235,925**
**1,798,320**|_2019_
_£_
_1,298,688_
_140,326_
_349,960_|
|---|---|---|
|||_1,788,974_|
Included within wages and salaries is an ex-gratia termination payment of £15,000 (2019: £Nil), which was paid in full during the year.
The average number of persons employed by the charity during the year was as follows:
|**2020**|_2019_|
|---|---|
|**No.**|_No._|
|**32**|_32_|
The number of employees whose employee benefits (excluding employer pension costs) exceeded £60,000 was:
||**2020**|_2019_|
|---|---|---|
||**No.**|_No._|
|In the band £60,001 - £70,000|**1**|_1_|
|In the band £70,001 - £80,000|**-**|_1_|
|In the band £80,001 - £90,000|**1**|_-_|
|In the band £100,001 - £110,000|**1**|_1_|
|In the band £140,001 - £150,000|||
||**1**|_1_|
Employers pension contributions totalling £38,619 (2019: £37,228) were paid to higher paid employees.
The total employment benefits of the key management personnel were £495,325, including employer's national insurance contributions of £47,365 (2019 - £475,386, including employer's national insurance contributions of £42,853).
## **12. Pension expense**
|Interest on pension scheme liabilities
Interest on scheme assets
Administrative expenses|**2020**
**£**
**255,000**
**(105,000)**
**167,000**
**317,000**|_2019_
_£_
_347,000_
_(350,000)_
_128,000_
_125,000_|
|---|---|---|
Page 42
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **13. Trustees' remuneration and expenses**
During the year, no Trustees received any remuneration or other benefits _(2019 - £NIL)_ .
During the year ended 31 December 2020, expenses totalling _£_ 2,019 were reimbursed or paid directly to 4 Trustees _(2019 - £9,587 to 18 Trustees)_ for travel expenses incurred.
## **14. Tangible fixed assets**
|**Cost or valuation**
At 1 January 2020
Additions
At 31 December 2020
**Depreciation**
At 1 January 2020
Charge for the year
At 31 December 2020
**Net book value**
At 31 December 2020
_At 31 December 2019_|**Fixtures and**
**fittings**
**£**
**196,280**
**248,119**
**444,399**
**168,569**
**49,761**
**218,330**
**226,069**
_27,711_|**Office**
**equipment**
**£**
**29,171**
**4,170**
**33,341**
**27,905**
**1,310**
**29,215**
**4,126**
_1,266_|**Computer**
**equipment**
**£**
**279,618**
**21,138**
**300,756**
**277,765**
**6,141**
**283,906**
**16,850**
_1,853_|**Total**
**£**
**505,069**
**273,427**
**778,496**|
|---|---|---|---|---|
|||||**474,239**
**57,212**
**531,451**|
|||||**247,045**|
|||||_30,830_|
Page 43
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **15. Fixed asset investments**
|**Cost or valuation**
At 1 January 2020
Additions
Revaluations
**At 31 December 2020**
**Net book value**
**At 31 December 2020**
_At 31 December 2019_|**Listed**
**investments**
**£**
**2,004,916**
**53,220**
**(42,063)**|
|---|---|
||**2,016,073**|
||**2,016,073**|
||_2,004,916_|
Historical cost of investments held would be £1,749,070. All investments are held in the UK.
## **16. Debtors**
|**Due within one year**
Trade debtors
Amounts owed by group undertakings
Other debtors
Prepayments and accrued income
**Creditors: Amounts falling due within one year**
Trade creditors
Amounts owed to group undertakings
Other taxation and social security
Other creditors
Accruals and deferred income|**2020**
**£**
**50,027**
**-**
**46,820**
**74,273**
**171,120**
**2020**
**£**
**33,751**
**29,610**
**75,189**
**5,383**
**201,820**
**345,753**|_2019_
_£_
_31,381_
_58,715_
_119,088_
_84,721_|
|---|---|---|
|||_293,905_|
|||_2019_
_£_
_139,530_
_-_
_72,361_
_10,678_
_130,621_|
|||_353,190_|
**17. Creditors: Amounts falling due within one year**
Page 44
**The Engineering Council**
**Notes to the financial statements for the year ended 31 December 2020**
## **18. Statement of funds**
**Statement of funds - current year**
|**Unrestricted**
**funds**
General Funds
Pension reserve
**Restricted**
**funds**
Pension fund
grant
**Total of funds**|**Balance at 1**
**January**
**2020**
**£**
**2,647,638**
**-**
**2,647,638**
**-**
**2,647,638**|**Income**
**£**
**2,875,062**
**-**
**2,875,062**
**105,000**
**2,980,062**|**Expenditure**
**£**
**(2,765,437)**
**-**
**(2,765,437)**
**(105,000)**
**(2,870,437)**|**Transfers**
**in/out**
**£**
**62,000**
**(62,000)**
**-**
**-**
**-**|**Gains/**
**(Losses)**
**£**
**(42,063)**
**62,000**
**19,937**
**-**
**19,937**|**Balance at**
**31**
**December**
**2020**
**£**
**2,777,200**
**-**
**2,777,200**|
|---|---|---|---|---|---|---|
|||||||**-**|
|||||||**2,777,200**|
## **Pension reserve**
This represents the movement on the defined benefit pension scheme. At the end of the year the scheme was in surplus, this was de-recognised since it is deemed non-recoverable.
## **Pension fund grant**
This represents the grant from EngineeringUK which was paid into the defined benefit pension scheme as a lump-sum contribution following consultation with the actuaries.
Page 45
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **18. Statement of funds (continued)**
## **Statement of funds - prior year**
|**Unrestricted**
**funds**
General Funds
Pension reserve
**Restricted**
**funds**
Engineering
Gateway
project
Pension fund
grant
**Total of funds**|_Balance at_
_1 January_
_2019_
_£_
_2,586,631_
_-_
2,586,631
_18,772_
_-_
18,772
_2,605,403_|_Income_
_£_
_2,836,826_
_-_
2,836,826
_-_
_350,000_
350,000
_3,186,826_|_Expenditure_
_£_
_(2,717,393)_
_-_
(2,717,393)
_(18,772)_
_(350,000)_
(368,772)
_(3,086,165)_|_Transfers_
_in/out_
_£_
_(225,000)_
_225,000_
_-_
_-_
_-_
_-_
_-_|_Gains/_
_(Losses)_
_£_
_166,574_
_(225,000)_
_(58,426)_
_-_
_-_
_-_
_(58,426)_|_Balance at_
_31_
_December_
_2019_
_£_
_2,647,638_
_-_
_2,647,638_|
|---|---|---|---|---|---|---|
|||||||_-_
_-_
_-_|
|||||||_2,647,638_|
## **19. Summary of funds**
**Summary of funds - current year**
|General funds
Restricted funds|**Balance at 1**
**January**
**2020**
**£**
**2,647,638**
**-**
**2,647,638**|**Income**
**£**
**2,875,062**
**105,000**
**2,980,062**|**Expenditure**
**£**
**(2,765,437)**
**(105,000)**
**(2,870,437)**|**Transfers**
**in/out**
**£**
**-**
**-**
**-**|**Gains/**
**(Losses)**
**£**
**19,937**
**-**
**19,937**|**Balance at**
**31**
**December**
**2020**
**£**
**2,777,200**
**-**
**2,777,200**|
|---|---|---|---|---|---|---|
Page 46
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **19. Summary of funds (continued)**
## **Summary of funds - prior year**
|General funds
Restricted funds|_Balance at_
_1 January_
_2019_
_£_
_2,586,631_
_18,772_
_2,605,403_|_Income_
_£_
_2,836,826_
_350,000_
_3,186,826_|_Expenditure_
_£_
_(2,717,393)_
_(368,772)_
_(3,086,165)_|_Transfers_
_in/out_
_£_
_-_
_-_
_-_|_Gains/_
_(Losses)_
_£_
_(58,426)_
_-_
_(58,426)_|_Balance at_
_31_
_December_
_2019_
_£_
_2,647,638_
_-_
_2,647,638_|
|---|---|---|---|---|---|---|
## **20. Analysis of net assets between funds**
## **Analysis of net assets between funds - current period**
|**Unrestricted**
**funds**
**2020**
**£**
Tangible fixed assets
247,045
Fixed asset investments
2,016,073
Current assets
822,697
Creditors due within one year
(308,615)
**Total**
2,777,200|**Total**
**funds**
**2020**
**£**
**247,045**
**2,016,073**
**822,697**
**(308,615)**
**2,777,200**|
|---|---|
## **Analysis of net assets between funds - prior period**
|Tangible fixed assets
Fixed asset investments
Current assets
Creditors due within one year
**Total**|_Unrestricted_
_funds_
_2019_
_£_
30,830
2,004,916
965,082
(353,190)
2,647,638|_Total_
_funds_
_2019_
_£_
_30,830_
_2,004,916_
_965,082_
_(353,190)_
_2,647,638_|
|---|---|---|
Page 47
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **21. Reconciliation of net movement in funds to net cash flow from operating activities**
|Net income for the period (as per Statement of Financial Activities)
**Adjustments for:**
Depreciation charges
Gains/(losses) on investments
Dividends, interests and rents from investments
Decrease in debtors
Increase in creditors
Pension adjustments
Write off of investments
**Net cash provided by operating activities**
**22.**
**Analysis of cash and cash equivalents**
Cash in hand
**Total cash and cash equivalents**
**23.**
**Analysis of changes in net debt**
**At 1**
**January**
**2020**
**£**
Cash at bank and in hand
**671,177**
**671,177**|**2020**
**£**
**67,562**
**57,212**
**58,843**
**(862)**
**90,810**
**24,538**
**62,000**
**-**
**360,103**
**2020**
**£**
**688,715**
**688,715**
**Cash flows**
**£**
**17,538**
**17,538**|_2019_
_£_
_267,235_
_71,786_
_(166,574)_
_(1,032)_
_39,518_
_45,391_
_(225,000)_
_375_
_31,699_
_2019_
_£_
_671,177_
_671,177_
**At 31**
**December**
**2020**
**£**
**688,715**
**688,715**|
|---|---|---|
Page 48
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **24. Pension commitments**
The charity operates a defined benefit pension scheme.
The Engineering Council contributes to a contracted-out defined benefit pension scheme, The Engineering Council Pension Scheme. This scheme was closed to new entrants on 3 July 2002.
The full actuarial valuation as at 31 December 2018 was updated to the Scheme's accounting date by an independent qualified actuary in accordance with FRS102. As required by FRS102, the actuarial method adopted to calculate the present value of member's expected benefits is the projected unit method.
Following consultation with the actuaries, The Engineering Council made a lump-sum contribution of £105,000 in March 2019.
The present value of the liability to meet future pension obligations of members is arrived at by applying a discount rate equivalent to the return expected to be derived from a class AA corporate bond. At 31 December 2020 this was 1.30% (2019 - 2.00%).
The assets of the scheme are valued at their market value at the balance sheet date. This value will therefore fluctuate materially from year to year in response to market conditions.
The Engineering Council is the principal employer and Engineering UK is a participating employer under this scheme. The proportion of the total scheme fund attributable to Engineering Council staff and exEngineering Council staff is 100% (2019 - 100%). On withdrawal from the Scheme by Engineering Council or closure, assets would be segregated in a similar proportion.
The Scheme closed to future accrual with effect from 30 April 2012.
Principal actuarial assumptions at the Balance sheet date (expressed as weighted averages):
|Discount rate
Retail price inflation
Future salary increases
The assets in the scheme and the expected rates of return were:
Equities
Bonds
Cash|**2020**
**201**9
1.30%
2.00%
3.10%
3.10%
3.00%
3.00%
**2020**
_2019_
**£**
_£_
**3,228,000**
_3,142,200_
**12,589,200**
_12,411,690_
**322,800**
_157,110_
**16,140,000**
_15,711,000_|
|---|---|
The actual return on scheme assets was £1,064,000 _(2019 - £1,464,000)._
Page 49
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
The amounts recognised in the Balance sheet are as follows:
|Present value of funded obligations
Unrecognised past service cost
Surplus in scheme
Adjustment for non-recoverable surplus
**Net assets**|**2020**
**£**
**(14,634,000)**
**16,140,000**
**1,506,000**
**(1,506,000)**
**-**|_2019_
_£_
_(13,036,000)_
_15,711,000_
_2,675,000_
_(2,675,000)_
_-_|
|---|---|---|
The charity has an unrecognised surplus of £1,506,000 _(2019 - £2,675,000)_ in respect of its defined benefit pension scheme as it does not expect to recover the plan surplus either through reduced contributions in the future or through refunds from the plan.
The amounts recognised in the Statement of financial activities are as follows:
|Interest on obligation
Expected return on scheme assets
Administrative expenses
**Total amount recognised in the Statement of financial activities**|**2020**
**£**
**(255,000)**
**105,000**
**(167,000)**
**(317,000)**|_2019_
_£_
_(347,000)_
_350,000_
_(128,000)_
_(125,000)_|
|---|---|---|
The actuarial loss on the scheme at year end was £1,107,000 _(2019 - Gain - £529,000)_ .
Movements in the present value of the defined benefit obligation were as follows:
|Opening defined benefit obligation
Interest cost
Actuarial losses/(gains)
Benefits paid
**Closing defined benefit obligation**|**2020**
**£**
**13,036,000**
**255,000**
**1,916,000**
**(573,000)**
**14,634,000**|_2019_
_£_
_12,687,000_
_347,000_
_585,000_
_(583,000)_
_13,036,000_|
|---|---|---|
Page 50
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
Changes in the fair value of scheme assets were as follows:
|Opening fair value of scheme assets
Expected return on assets
Actuarial gains/(losses)
Contributions by employer
Benefits paid
Administrative expenses|**2020**
**£**
**15,711,000**
**105,000**
**809,000**
**255,000**
**(573,000)**
**(167,000)**
**16,140,000**|_2019_
_£_
_14,608,000_
_350,000_
_1,114,000_
_350,000_
_(583,000)_
_(128,000)_
_15,711,000_|
|---|---|---|
The charity expects to contribute £105,000 to its Defined benefit pension scheme in 2020 increasing annually on 1 January at 3.4% per annum
The major categories of scheme assets as a percentage of total scheme assets are as follows:
||**2020**|**201**9|
|---|---|---|
|Equities and property|20%|20%|
|Bonds|78%|79%|
|Cash|2%|1%|
## **Stakeholder and other pension schemes**
The board at a meeting on 3 July 2002 decided to no longer offer entry to The Engineering Council Pension Scheme to new staff and nominated a stakeholder pension scheme instead. This is a defined contribution scheme operated by Scottish Widows and is not contracted out for the earnings related part of the State Pension Scheme. The employer contributes 10% of pensionable salary and the employee 5%.
The Engineering Council employer contributions during 2020 were £218,925 _(2019 - £221,_ 960).
## **25. Capital commitments**
||**2020**|_2019_|
|---|---|---|
||**£**|_£_|
|Contracted for but not provided in these financial statements|**7,000**|_-_|
Page 51
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
## **26. Operating lease commitments**
At 31 December 2020 the charity had commitments to make future minimum lease payments under noncancellable operating leases as follows:
|Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years|**2020**
**£**
**145,741**
**449,605**
**-**
**595,346**|_2019_
_£_
_191,272_
_544,231_
_691,627_|
|---|---|---|
|||_1,427,130_|
## **27. Related party transactions**
EngineeringUK is a related party to the Engineering Council. Under the Engineering Council supplemental charter which came into effect on 22 March 2002, EngineeringUK may nominate 7 of its 22 Board members. By its Regulations, the Engineering Council has assigned all income from its registration fees to EngineeringUK. Changes to this regulation cannot be made without EngineeringUK's approval. The level of fee is determined by EngineeringUK.
During the year ended 31 December 2020, the following transactions took place between the parties arising from the above:
EngineeringUK provided a grant to the Engineering Council of £2,611,523 (2019 - £2,535,459) to fund its operation plus £105,000 (2019 - £350,000) for the pension scheme.
To cover administration costs, The Engineering Council charged EngineeringUK £44,664 (2019 - £44,664) in the year.
On 31 December 2020, Engineering Council owed EngineeringUK the sum of £29,610 (2019 Debtor - £58,715). This amount is disclosed within creditors falling due within one year.
There were no other related party transactions in the current or the prior year.
## **28. Comparative statement of financial activities**
||_Restricted_
_funds_|_Unrestricted_
_funds_
_Total_
_funds_|
|---|---|---|
||_2019_|_2019_
_2019_|
||_£_|_£_
_£_|
|**Income from:**|||
|Charitable activities|_350,000_|_2,732,018_
_3,082,018_|
|Other trading activities|_-_|_26,358_
_26,358_|
|Investments|_-_|_78,450_
_78,450_|
|**Total income**|_350,000_|_2,836,826_
_3,186,826_|
|**Expenditure on:**|||
|Raising funds|_-_|_2,159_
_2,159_|
|Charitable activities|_368,772_|_2,715,234_
_3,084,006_|
Page 52
**The Engineering Council**
## **Notes to the financial statements for the year ended 31 December 2020**
|**Total expenditure**|_368,772_|_2,717,393_
_3,086,165_|
|---|---|---|
|**Net income before investment gains/(losses)**|_(18,772)_|_119,433_
_100,661_|
|Net gains/(losses) on investments|_-_|_166,574_
_166,574_|
|**Net income before other recognised gains and losses**|_(18,772)_|_286,007_
_267,235_|
|Derecognition of pension surplus|_-_|_(754,000)_
_(754,000)_|
|Actuarial gains on defined benefit pension scheme|_-_|_529,000_
_529,000_|
|**Net movement in funds**|_(18,772)_|_61,007_
_42,235_|
|**Reconciliation of funds:**|||
|Total funds brought forward|_18,772_|_2,586,631_
_2,605,403_|
||||
|**Total funds carried forward**|_-_|_2,647,638_
_2,647,638_|
On 14 April 2021 Barings Asset Management advised that it would be closing the Targeted Return Fund with effect from 31 August 2021. Whilst this is a non-adjusting post balance sheet event, the Trustees do not foresee any significant change in the value of the fund at the time of closure. The Trustees are in the process of appointing new managers for the fund.
Page 53