AQA Education A company limited by guarantee ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE 18 MONTH PERIOD ENDED 31 MARCH 2017 Registered company number 3644723 Registered charity number 1073334 www.aqa.org.uk AQA Education Corporate Governance _______________________________________________ INTRODUCTION AQA Education (AQA) is a company limited by guarantee; it does not have share capital and is a registered charity. The directors, who are AQA trustees and constitute the members of the charity, present the Directors’ Report. It incorporates the Trustees’ Annual Report, the Strategic Report, and the audited Consolidated Financial Statements for the 18 month period, which ended 31 March 2017. AQA’s financial year-end changed during this reporting period so that it now runs from 1 April through to 31 March – previously 1 October to 30 September. This better reflects its annual planning cycle and means that it is able to account for the main annual exam series (summer and re-sit series) in one financial year. To transition to the new year-end, this report covers a period of 18 months from 1 October 2015 to 31 March 2017. AQA’s annual income is concentrated in the summer exam series, therefore this change also means this report only includes income from one summer series, but shows expenditure for 18 months. STRUCTURE, GOVERNANCE AND MANAGEMENT AQA’s directors are members of the AQA Council of Trustees and during the reporting period were: Professor P J Layzell (Chair) (retired 09/05/2017) Mr M Bramwell Professor J Elwood (retired 31/03/2016) Mr S Fenton Mr M J Grant (Vice Chair) (resigned 13/02/2017) Ms F M Greeves OBE Sir Michael Griffiths Mr A Hall (retired 31/08/2017) Ms P J Hird (appointed Vice Chair from 10/05/2017) Mr G Jackson OBE Mr J Johnson (retired 31/03/2017 Ms A S Milln (retired 31/03/2017) Mrs S Moore Ms L Naqushbandi (resigned 31/08/2017) Mr P Nesbitt Mr M G Nicholson (appointed 01/04/2016) Professor J P Phillips Mrs E M Quaife (retired 31/03/2016) Dr J E Robinson Mr A Rowe Ms J E Smith Professor M E Smith Mr J Trkulja Mr J van Wijngaarden (appointed Chair from 10/05/2017) Mr N Walkey On 9 May 2017, Professor Paul Layzell retired and Mr Justin van Wijngaarden took up the role of Chair. Trustee vacancies are advertised when there is a particular skills gap within the overall membership of our Council. Education sector representation is crucial to maintaining the integrity of the Council and ensuring that the business focus is balanced with its charitable aims. AQA liaises with national education bodies actively and consistently to ensure the skills and interests of the nominees dovetail with the particular skills we seek. 2 AQA Education Corporate Governance _______________________________________________ A number of the trustees also served on governance and advisory committees and as chairs of the following committees during the reporting period. Governance committees Council Business Group Professor P J Layzell Finance Committee Dr J E Robinson (from 14/02/2017) (Mr M J Grant to 13/02/2017) Audit Committee Mr J van Wijngaarden Irregularities and Appeals Committee Mr M Bramwell Awarding Standards Committee Professor P J Layzell Nominations Committee Professor P J Layzell Remuneration Committee Professor P J Layzell Advisory committees Curriculum and Assessment Quality Committee Ms F M Greeves OBE Research Committee Professor J Baird (University of Oxford) AQA provides new trustees with an induction session to inform them about the organisation and explain their duties as charity trustees. Each year, a training workshop is arranged to update trustees on new and emerging issues and provide a forum for strategic discussions. All trustees are required to complete a Register of Interests and to declare any potential conflict of interest annually. This also applies to governance and advisory committee members who are not directors. AQA’s Articles of Association provide for a range of governance and advisory committees as well as its Council of Trustees. All the committees, except the Research Committee, are chaired by trustees and, with the exception of Council Business Group, Finance Committee and Awarding Standards Committee, include trustees and independent members within their membership. This provides a breadth of experience in teaching and assessment, as well as commercial, operational and other professional and technical skills. Governance committees • Council Business Group: meets five times a year and acts on behalf of the Council as a clearing house for time-critical decisions. It is also a preliminary review group for strategic analysis and a special study group as required. • Finance Committee: meets four times a year and is responsible for all matters relating to AQA’s financial strategy, operations and investment management. • Audit Committee: meets at least four times a year and reports to the Council on the integrity and regulatory compliance of AQA’s annual financial statements; the independence and performance of the external and internal auditors and the functioning of AQA’s internal controls, procedures and risk management. • Irregularities and Appeals Committee: meets at least twice a year and advises the Council on all matters relating to exam irregularities and appeals. It decides on appropriate action in all serious alleged cases of teacher and student malpractice relating to AQA’s exams, and oversees and contributes to operating AQA’s appeals procedures. • Awarding Standards Committee: meets only if required, prior to publishing results for each exam series, if there is an irreconcilable difference of opinion between AQA’s Responsible Officer and a Chair of Examiners about the standard being set in a particular exam. • Nominations Committee: meets at least once a year and makes recommendations to the Council on the appointment and continuation in office of trustees, ensuring that appropriate procedures are in place for their selection, training and evaluation. 3 AQA Education Corporate Governance _______________________________________________ • Remuneration Committee: meets at least once a year and advises the Council about appropriate remuneration and terms of service for the chief executive officer and other members of the senior management team. Advisory committees • Curriculum and Assessment Quality Committee: meets three times a year and advises on all educational matters relating to the curriculum and monitors performance against agreed quality assurance measures. • Research Committee: meets three times a year and advises on all matters relating to research and technical aspects of assessment so as to ensure that AQA maintains its leading place nationally in assessment research. The Research Committee is chaired by Professor Jo-Anne Baird, an independent member of the committee. The Council, comprising AQA’s trustees, is for company law purposes also the ‘board of directors’, and has ultimate responsibility for the charity’s activities. It exercises its powers through the chief executive officer (CEO) who is also a trustee. AQA’s day-to-day business is carried out by the CEO, Andrew Hall*, and a team of senior executives who make up the Executive Team: Patricia Brennan (Strategy and Delivery), Geoff Coombe (Qualifications and Markets), Lisa Pearl (People), Nick Stevens (Finance and Corporate Services), Alex Scharaschkin (Research and Compliance), David Shaw (Business Solutions) and Sadie Visick (International and Corporate Affairs). *On 31 August 2017, Mr Andrew Hall retired and Professor Toby Salt took up the role of CEO on 1 September 2017. Group structure AQA is an education charity and a leading provider of qualifications and support services for teachers and students. It also provides non-competing services through three wholly-owned subsidiary companies: Alfiesoft Limited (Alfiesoft), Doublestruck Limited (Doublestruck) and DRS Data and Research Services plc (DRS), which along with AQA make up the group and are detailed below. The financial statements of these subsidiaries are consolidated into this set of financial statements. • Alfiesoft Limited is a company incorporated in England and Wales and limited by shares (Company number: 04306664) and is wholly owned by AQA. It operates as a provider of a high quality, cloud based assessment platform for primary and secondary schools. The platform includes user-friendly, searchable databases of past test paper questions that have been adapted for on-screen delivery with auto marking and a full reporting suite. The databases include KS2-3 legacy SATs, up-to-date National Curriculum tests, KS4 GCSE-style questions and AQA GCSE past-paper questions. Teachers can compile on-screen assessments for analysis and progress testing. All products are available through the AlfieCloud. • Doublestruck Limited is a company incorporated in England and Wales and limited by shares (Company number: 02373295) and is wholly owned by AQA. It operates as a provider of online databases of past paper questions to primary and secondary schools. These user-friendly, searchable databases provide teachers with access to past test paper questions from KS2-3 legacy SATs, up-to-date National Curriculum tests and AQA GCSEs and A-levels. Teachers can create a range of assessment or educational resources, from paper-based topic tests to homework booklets or simply project questions for plenary work. The Doublestruck brands are Testbase and Exampro. All these brands support high quality, focused teaching and assessment in schools at all age levels and were acquired to support AQA’s charitable objectives. They do not conflict with delivering GCSE and A-level assessments. 4 AQA Education Corporate Governance _______________________________________________ In August 2016, AQA acquired DRS to give it more control over its e-marking activity and ensure the long-term supply of this service. • DRS Data and Research Services plc (company number 00959401) is wholly owned by AQA. It operates as a data capture bureau offering printing and scanning services. DRS also designs and manufactures imaging and Optical Mark Recognition (OMR) scanners, software solutions for exams and assessments, as well as real-time data capture technology. Commercial partnership In May 2015, AQA formed a joint venture company with Oxford University Press, Oxford International AQA Examinations Limited. The company offers a new suite of international GCSE and A-level qualifications to schools outside the UK that teach a British curriculum. The qualifications are designed and delivered by AQA and externally validated to ensure they are comparable to UK qualifications. Oxford University Press, a department of the University of Oxford, provides international research and learning materials. Charitable partnership AQA also works with the Dame Kelly Holmes Trust to deliver the AQA Unlocking Potential Programme. The programme motivates and inspires young people aged between 14 and 19 by providing them with eight months of dedicated support from high-achieving athletes. As well as receiving in-depth mentoring, the young people plan and deliver a project in their local community. PAY POLICY FOR SENIOR STAFF The Council of Trustees and the Executive Team comprise the key management of AQA in charge of directing, controlling, running and operating the organisation. Details of trustees’ expenses and related party transactions are disclosed in Note 10 to the accounts. AQA has a Remuneration Committee, established as a governance committee of Council to advise the latter on the appropriate remuneration and terms of service for the Chief Executive Officer and other members of the Executive Team. They determine annually what increase, if any, should be applied to the Chief Executive Officer’s salary, based on specific data provided to them The CEO is currently remunerated for his services in this role, and it is confirmed that no additional remuneration is payable or has been paid as a result of his appointment as a trustee. 5 AQA Education Strategic Report _______________________________________________ INTRODUCTION The trustees present their Strategic Report for the 18 month period, which ended 31 March 2017. PUBLIC BENEFIT The Council has due regard of the Charities Act 2011 and the Charity Commission guidance on public benefit, in particular the requirement that public benefit can no longer be presumed but must be demonstrated. We are confident in our role as a charity delivering services to the public and meeting the Charity Commission’s public benefit requirements now and into the future, with specific attention to ensuring that our services benefit society. We have complied with the duty in section 4 of the Charities Act 2011 to have due regard to public benefit guidance published by the Charity Commission. ENVIRONMENTAL POLICY We accept our environmental responsibilities and recognise our obligations to contribute to the resolution of global and local environmental issues by reducing our impacts on the environment and by taking a leading role in promoting environmental best practice. During the year, ’Environmental Champions’ at all sites continued to initiate ideas for improvements and to promote the environmental message throughout the organisation. We also recycled used equipment and furniture following the closure of our Harrogate office by donating items to a local school and charity. PURPOSE AND AIMS AQA is an independent education charity and the UK’s largest provider of academic qualifications for schools and colleges. We set and mark the papers for nearly half of all GCSEs and A-levels taken every year. Our purpose is to advance education by enabling students and teachers to realise their potential. This means that educational values and supporting good teaching and learning are at the heart of what we do. Any money made through providing qualifications is re-invested into education. AQA’s work • We offer a broad range of qualifications designed for students of all abilities that includes: GCSEs; AS levels; A-levels; International qualifications; Tech-levels; the Extended Project Qualification; the AQA Baccalaureate and the Unit Award Scheme. • Our qualifications enable students to progress to the next stage in their lives and are highly valued by employers and universities. They are recognised internationally and taught in around 30 countries around the world. • We work in collaboration with employers and professional bodies to develop Tech-levels. These are new, industry-specific qualifications that give learners the knowledge and skills for higher apprenticeships, university or employment. • We work closely with teachers and collaborate with them to create support and resources that are designed around their teaching needs. • Our Centre for Education Research and Practice (CERP) aims to put cutting-edge assessment research at the heart of education policy and practice and raise the bar in assessment practice across the world. • Each year, we invest in new and revised products, processes and service developments which play a key part in establishing and maintaining educational standards within the UK. • We help young people to aim high and achieve by providing them with eight months of dedicated support through the AQA Unlocking Potential programme, run in partnership with the Dame Kelly Holmes Trust. 6 AQA Education Strategic Report _______________________________________________ Ensuring AQA’s work delivers its aims Informed by the advice contained in the Charity Commission’s general guidance on public benefit, we keep our educational aims, objectives and activities under continuous review, consider our achievements and the outcomes of our work, and evaluate the successes and benefits. In addition, we consider how future activities will contribute to the agreed aims and objectives and help to equip learners with the knowledge and skills they require for the future. FINANCIAL REVIEW These financial statements cover an 18-month period from 1 October 2015 until 31 March 2017. The impact of changing the year end is as follows; • AQA’s income is primarily earned during the summer exam series, therefore this period includes the income and direct costs from just one summer series. However, it also includes on-going operational expenditure for the full 18 months, so we expected to show a significant deficit for the period. The actual deficit of £30,986,000 is in line with our expectations. The Trustees strategically built up the reserves to cover this. • The invoices for our main exam series are raised prior to the year-end are not recognised as income until the exams are sat, and are therefore recorded as deferred income. • The high level of debtors at the period-end represents monies owed by schools and colleges for the 2017 summer exam series. • Due to the timing of the exam series, we have a large stock of question papers and answer booklets relating to the summer exam series. • As a result of the transition to FRS 102, we have included an accrual for holiday pay for holidays earned which have not been taken. Our income from educational services of £160,921,000 was earned through AQA, Alfiesoft Limited and Doublestruck Limited. This income compares to £148,814,000 earned in the prior year. Our income from DRS Data and Research Services plc is shown as Digital Services. We earned £7,417,000 in Digital Services during the period from third party income. Our expenditure has been well managed during the period. Our support costs have been reduced, when considered on an annual basis. We made a number of significant changes during the year to enhance our efficiency. The financial results include a reorganisation charge of £7,783,000 (2015 £1,352,000). The performance of our long-term investments in 2015/17 was pleasing given world market performance and is reflected in the Consolidated Statement of Financial Activities as an overall net gain on investments (i.e. the aggregate of the £3,359,000 unrealised gains and the £3,575,000 net increase in the realised gains reserve) of £6,934,000 for the period (2015 £375,000). AQA continues to participate in two defined benefit pension schemes, the AQA Pension Scheme and the Greater Manchester Pension Fund (“GMPF”). AQA also has some unfunded pension obligations. The net balance sheet liability at 31 March 2017 for the aggregated scheme is detailed as follows: 31 March 2017 30 September 2015 £000 £000 Fair value of scheme assets 249,713 193,597 Present value of defined benefit obligation (261,681) (208,565) Net pension liability (11,968) (14,968) The net pension liability is made up of net liability positions of £20,043,000 on the GMPF scheme and £4,241,000 in relation to the unfunded liabilities, offset partly by the a net surplus position of £12,316,000 on the AQA scheme. 7 AQA Education Strategic Report _______________________________________________ FINANCIAL REVIEW (continued) After taking all of these into account, AQA’s Charity Funds decreased by £30,986,000 (2015 £2,516,000 after FRS 102 transition adjustments) to £36,243,000 (2015 £67,229,000 after FRS 102 transition adjustments). The Group has healthy liquidity with £60,012,000 (2015 £30,702,000) in cash fund investments and £18,260,000 (2015 £2,145,000) in cash at bank and in hand. When placing cash, our first priority is security, followed by liquidity and finally the investment return. This high level of short term cash and investments was received from schools and colleges as payment for the upcoming summer 2017 exam series. These funds will be used to fund the delivery of the summer 2017 exams. Our income for the summer 2017 exam series is forecast to be in line with the summer of 2016. This reflects two main changes. Firstly, there has been a reduction in the overall market for AS Levels as a result of Government reform. The number of student entries for AS Levels, in 2017 in England has reduced by over 40 per cent compared to 2016. Our market share in AS Levels has remained broadly constant. Secondly, our market share in GCSEs has increased significantly, fully compensating for the reduction in AS Level income. The total number of GCSE entries in 2017 for AQA exams has increased by 17 per cent. ACTIVITIES, ACHIEVEMENTS AND PERFORMANCE Delivering against its purpose As an independent charity, AQA’s purpose is to advance education by enabling students and teachers to realise their potential. Any money we make through providing qualifications is re-invested into education, for example, we: • both provide and fund research that helps inform education policy and improve assessment practice in the UK and internationally through our Centre for Education Research and Practice (CERP). Sharing this work more widely enables better public understanding of how assessment works • invest in developing and delivering qualifications which ensure that students can achieve the results they deserve and move on to the next stage of their lives • help young people who are facing challenges to develop their skills and knowledge, increase their self-belief and raise their aspirations through our Unlocking Potential mentoring programme. We supported 40 of the 72 students through the Unlocking Potential programme in 2015/16. As part of the programme, these students set up their own community projects, impacting a further 6,035 people. In November 2016, another 72 students were selected to participate in the programme. Delivering against its objectives At the end of 2015, we reviewed our longer-term strategy and objectives, and set out our revised objectives in January 2016. These objectives and what we did to achieve them is set out below. 1) Delivering quality products with reliable, valid and accurate outcomes The Government recently introduced a number of changes to increase the rigour of A-level and GCSE qualifications and the focus on assessment by exam. The main changes are: • assessment at the end of the course, covering the content from the full two years • coursework is only used when it is the only valid way to assess essential elements of the subject • AS qualifications are stand-alone and designed to be co-teachable with the A-level • a new 9–1grading system for GCSEs, with 9 being the highest, grade 4 a “pass” and grade 5 a “strong pass”. Along with other awarding bodies, we continued developing new GCSE and A-level qualifications as per the phased timeline. The first set of qualifications – AS level only – were assessed for the first time in 2016 and the final set of qualifications will be assessed for the first time in 2020. These new qualifications include a range of subjects that need to be cross-subsidised, such as community languages not offered by other awarding bodies: A-level Bengali, A-level Biblical Hebrew, A-level Modern Hebrew, A-level Panjabi and A-level Polish. 8 AQA Education Strategic Report _______________________________________________ We also worked in collaboration with employers and professional bodies to develop technical awards. The aim of our Tech-levels is to provide industry-specific qualifications that give learners the knowledge and skills for higher apprenticeships, university or employment. During this reporting period, we worked with approximately 28,500 teachers and subject experts to design our new qualifications and to set and mark all our exams. We awarded nearly 4 million qualifications to more than 1.8 million students, which included: • 2,400,000 GCSEs to 848,450 students • 931,000 A-levels to 482,970 students. While our UK qualifications are taught in more than 30 countries around the world, we have developed a range that is specifically designed to meet the needs of the international market for our joint venture with Oxford University Press, Oxford International AQA Examinations. These new international GCSEs and A-levels were first launched in the Middle East in 2015 and South East Asia in October 2016. The shared aim of the joint venture is to improve education internationally through excellence in teaching, learning and assessment. Operational performance To deliver these new qualifications, we revised our internal operations and cost base structure to ensure that we continue serving our customers in a secure, efficient and affordable way. For example, we introduced more specialist teams to design and produce question papers and run events for teachers. The Office of Qualifications and Examinations Regulation (Ofqual) is the regulator of qualifications, exams and assessments in England. It ensures that we exercise our responsibilities appropriately against the General Conditions of Recognition. Since 2012, we have maintained our compliance and submitted our annual declaration of compliance. We also have internal systems to monitor and maintain our compliance, and our quality and customer standards. We have achieved and maintained the quality standard ISO9001 for: • our main exam processes • support for our schools and colleges, teachers and students • change management, including project planning and delivery • procurement of resources and third party services. We also hold ISO27001 on our information and security management systems and BS OHSAS 18001 for our occupational health and safety management system. 2) Being trusted and reliable in assessment design and delivery Customer support We provide tools and resources, directly and through Doublestruck, for teachers using our products. We work collaboratively with teachers to ensure these are designed around their teaching needs. This wide range of tools and resources for teachers includes the following. • Prepare to Teach: we offer free events covering teaching new qualifications and publish the training materials on our website to share them more widely. • Continuing Professional Development (CPD): we offer a wide portfolio of training events, ranging from subject teaching to leadership development courses. • Formative Assessment: through our Doublestruck brands, we provide searchable databases of past papers for use in primary and secondary assessment and progress testing. • Resources: Teachit produces high quality teaching and learning resources to support teachers across the primary and secondary curriculum. 9 AQA Education Strategic Report _______________________________________________ Customer services During this reporting period, we changed our customer services operations, creating teams dedicated to taking calls from teachers, exams officers and students. A team is also responsible for training exams officers, and delivered 16 face-to-face events and 28 webinars. We continued to offer dedicated face-to-face service to teachers through our Relationship Management team, and ensured customers were kept up-to-date with any information they needed through appropriate channels. 3) Providing timely, valued insight and evidence that inform policy Our assessment expertise provides the foundation for everything we do at AQA, and ensures that we are able to continuously improve the quality and reliability of our assessments to the benefit to students and teachers. We share our research with other assessment experts and policymakers to ensure that they have a sound evidence base for considering what would be in the best interests of students. We also publish and present papers and participate in national and international education conferences. AQA’s Centre for Education Research and Practice (CERP) Our international reputation and expertise is an accessible source of high quality, credible research for policy-makers, practitioners and the research and education communities. In addition to conducting research, we help support and shape education by: • ensuring standards are maintained • making our research on education and assessment freely available through a searchable online library at www.cerp.org.uk • engaging with the education research community through national and international education conferences and publishing blogs on the key issues arising from our research. Engaging Stakeholders During the period, we continued to engage the education policy community to promote awareness of our research findings and inform policymakers about our work as an exam board. For example, we briefed education policy stakeholders about our research into the interaction of students’ social background and their responses to exam questions, and promoted understanding of how online social media is shaping student participation in exams and public perceptions of GCSEs and A-levels. 4) Ensuring sound financial management and a robust asset base We aim to achieve this by accurately recording and monitoring expenditure, planning how we will meet new challenges and ensuring we receive good value for money. We also want to maintain resources at a level that ensures we are able to meet our financial commitments and obligations as they fall due, fund unexpected expenditure and safeguard the income of the charity. We hold regular audit and finance committee meetings to ensure we meet our responsibilities to deliver our financial objectives and maximise our resources. Details of our financial activities and performance are detailed in the report above. 5) Delivering demonstrably secure, reliable, agile and cost-effective systems During the reporting period, we started work to update our core operational systems. The development of our new platform is on target. In August 2016, we acquired DRS, one of our e-marking suppliers, to give us more control over our e-marking services and ensure the long-term supply of this capability. 10