British Council Annual Report 2011-2012 by British Council

ANNUAL REPORT 2011–12 www.britishcouncil.org

Contents

Contents Chair’s foreword �� 2

Governance and good practice �� 47

Chief Executive’s introduction �� 4

Governance Statement �� 47

About the British Council �� 7 How we work �� 7 Our work for the UK �� 8

The National Museum of Afghanistan

Planning through to 2015 �� 8 How did we perform in 2011–12? �� 10

The Executive Board �� 57

Headlines from the year �� 12

Executive Board remuneration report 2011–12 ��58

Working through the UK’s great cultural assets �� 15

Equal opportunity and diversity ��62

Education and Society �� 20 Working in the UK and around the world �� 23

Environmental policy ��64 Financial review and accounts ��67 Financial review ��67

Our performance in 2011–12 �� 23

The audit report of the Comptroller and Auditor General to the Trustees of the British Council �� 70

This year in the United Kingdom �� 28

Accounts �� 72

Countries where we work ��30

Notes �� 75

East Asia ��34 EU Europe ��36 Middle East and North Africa ��38 South Asia ��40 In the 1980s and 1990s Afghanistan’s once fine universities were ravaged by war and wilful destruction and are now suffering from serious skills shortages. We have launched a programme to help senior leaders in the Ministry of Higher Education and nine Afghan universities to develop their leadership and professional skills. This will support them in meeting the desperate need to rebuild the Afghan higher education system.

Our people ��63

Arts �� 18

Americas �� 32

Following the attack on our office in Kabul, we have continued to invest in the cultural and educational activities which will help to strengthen Afghanistan’s new sense of nationhood. Through grants to the newly established Afghan Institute of Arts and Architecture we are helping to revive traditional crafts and so stimulate job creation, particularly amongst women. Our support to the Afghan National Institute of Music, the first post-Taliban music school in Afghanistan, will contribute to creating a fully indigenous teaching faculty there within the next three years.

British Council Country Committees �� 55 Statement of the Trustees’ responsibilities ��56

English �� 16

The British Council remembers with gratitude all those who died, were injured or bereaved in the operation to protect our staff in Kabul, Afghanistan on 19 August 2011.

The Board of Trustees ��54

Sub-Saharan Africa �� 42 Wider Europe ��44

Our global network ��106

ANNUAL REPORT 2011 –12

Chair’s Foreword

Chair’s foreword Trust is not gained overnight. For nearly 80 years the British Council has been building trust for the UK around the world. Last year I saw how we build trust at first hand as I travelled to many of our offices in Asia, Africa, the Middle East and the Americas. And yet this was also the year when our office in Afghanistan suffered the worst attack in our history with a tragic loss of life. There is a curious paradox in the world today. It is connected as never before – by movement of goods, capital and people – but still more powerfully by the internet, media and the spread of English. At the same time, the world remains fractured and we face many risks and challenges – political, economic and environmental. Closer connection brings opportunities for greater economic and creative engagement. But, closer connection can also lead to a sense of dislocation and loss of identity and community. The resultant search for identity can manifest itself as parochialism, xenophobia or religious extremism. Building trust and understanding is vital if we are to counteract this, to overcome suspicion and break down barriers. Trust underpins the development of good relations between societies and nations. The expressions of creativity and imagination which raise our sights and our spirits are only shared where there is trust. Trust also underpins relationships which are vital, not only for political influence and security but also for trade and investment. Trust is therefore a critical foundation for growth and prosperity. So an organisation which exists to build trust, as the British Council does, is to be cherished. Through the UK’s three great cultural assets of English, education and the arts, we bring people together from all over the world and, painstakingly, on behalf of the UK, we work to earn their trust and that of their communities. How do we know that our cultural relations work really does generate trust? In 2010 we commissioned a four-country study from YouGov to test whether what the British Council does really works. In all four countries the answer was clear. There is a very strong relationship between cultural relations activity and increased trust. Last year we commissioned Ipsos MORI to extend this study by a further six countries, all of which are of strategic importance to the UK. The answer was even clearer.

Our work does build trust for the UK and the stock of trust the UK has is a major national asset for this country, as well as for the countries in which we work. People who take UK qualifications, learn English, experience the UK’s arts or share knowledge and experience with people in the UK gain great personal benefit. But the research shows us that they are also more likely to trust people from the UK, more likely to want to visit the UK, study in the UK and do business with us. Furthermore, the research demonstrates that the relationship between trust in the UK and increased openness to the UK and its people holds true everywhere, including in countries where we may not have strong historical relationships. This means that we can play an important role in building trust in countries which will be vital to the UK’s future – in high growth economies such as Brazil, China and Turkey and in places important to the UK’s security and strategic interests. The British Council’s work builds trust because it is founded on an interest in other cultures and people and it is done in a manner which is reciprocal, mutual and professional. When people learn English or take examinations with the British Council they do so in safe, corruption-free environments which embody the UK’s values, without shouting about them. When people connect with us through music, the visual arts, and the spoken and written word we demonstrate that we are an open, plural and diverse society. When we share educational opportunities and ways of organising society and institutions, we do so with humility and honesty about what we sometimes get wrong in this country, as well as the great deal we get right.

When I come away from visiting a country I am impressed by what we do but, equally, I am ambitious that we should do a lot more. We have responded to tough cuts in our core UK government grant by simplifying our structures and reducing our overheads. But, at the same time, we have ambitiously committed ourselves to growth, expanding our successful mixed economy model of core public funding together with pursuit of partnerships, contracts and paying customers. This funding approach, which we share with the UK arts and university sectors, drives innovation, efficiency and entrepreneurship. It is also winning admirers around the world, from France to Turkey to the US, as other countries look to us for a model of how to share their own cultures. The financial results in this report demonstrate that we were able to increase our earned income this year. However, the grant element in our funding remains vital. It means that we can represent the UK‘s long-term interests in countries where we cannot rely on earned income alone and helps us to gain greater acceptance everywhere we operate. Further cuts in our core grant would make it more difficult to align our priorities with the interests of the UK. Longer term, this would reduce our ability to build trust in places that are vital to the UK.

Trust is earned not bought. The British Council has been steadily and consistently earning trust for the UK for over three-quarters of a century. We have quietly created a major national asset as well as generations of great friends for the UK worldwide. I am proud to lead the British Council’s Board of Trustees in staying true to our purpose and taking forward this important mission for the UK.

Sir Vernon Ellis Chair British Council

ANNUAL REPORT 2011 –12

Chief Executive’s Introduction

Chief Executive’s introduction This year we have kept our doors open whenever and wherever we could throughout a period of continuing turbulence and uncertainty in many parts of the world. We have done this because we know that staying on the ground as countries live through times of turmoil and change builds trust in us, and trust in the UK. More than that, it shows the commitment of the UK to those countries, to their cultural institutions and to their people. In better times, that commitment is remembered as countries emerge back onto the world stage and choose the UK as a trusted ally and business partner. Commitment to staying can sometimes come at real cost, as we saw from the terrible attack on our premises in Kabul. But we did stay, restarting work less than a week later. The continuing effects of change in North Africa, the uncertainty in the eurozone, and the aftermath of natural disasters in Japan and Thailand have all affected our work. Despite all this, we have significant successes to report. In this year of change we have met, and in some cases exceeded, our activity and impact targets. We have involved over 580 million people in our work. We have increased our income, managed the reduction of our UK grant by five per cent and at the same time expanded the contribution our work makes to international development. Although we increased our turnover by seven per cent compared with the previous year we were not able to achieve all of the tough income targets we set ourselves in our Corporate Plan. Despite this we have re-committed to achieving our original growth targets by 2014 –15. We believe that current tough operating conditions give us both the duty, and in some cases the opportunity, to grow. This year earned income made up 75 per cent of our turnover – a major achievement representing real value for money for the UK taxpayer. Our income generating activities such as English teaching not only contribute directly to our core purpose, they also make surpluses which we use to deliver even more cultural relations benefit for the UK.

Corporate results tell only part of the story, however. The rest is told in the achievements highlighted in this report. Our work this year has continued to build trust for the UK. We know from our Trust Pays research that this helps lay the foundations for growth and prosperity both for the UK and for the countries in which we work. In fast growing economies which are important to the UK as business and trading partners we continued to build and strengthen ties. Our celebration of the fiftieth anniversary of Yuri Gagarin’s visit to the UK together with major arts events held in Moscow have built a closer relationship between Russia and the UK, which is supporting trade and diplomatic relations. With the spotlight on the UK as we host the Olympic and Paralympic Games we will launch major arts festivals in both China and Brazil in 2012 to increase appreciation of the UK in those countries and establish deeper links. In response to the challenge of restoring the UK as Turkey’s preferred higher education partner, we have helped to link over 70 universities in Turkey and the UK. And in January I was delighted to welcome President Santos of Colombia to our office in London, to witness the signing of agreements for the British Council and a number of UK universities to work with the Colombian Ministry of Education. Across the Middle East and North Africa, governments have sought our help to meet the demand of their people for improved English, vocational skills training and UKbacked qualifications. In November I reopened our office in Ramallah in the Palestinian Territories and our new centre in Erbil, north Iraq. This is the first time we have been open to the public in Iraq since 1990 – our mission to build trust there is a much needed one. We have reopened our office in Libya, where we worked with the Victoria and Albert Museum to stage the first international art exhibition since the revolution. We also opened in the world’s newest country, South Sudan, and helped bring the South Sudan Theatre Company’s production of Shakespeare’s Cymbeline to London as part of the Cultural Olympiad. In Burma, where we have stayed through that country’s years of isolation, our work in strengthening civil society organisations has recently been independently evaluated as ‘outstanding’.

At home in the UK we have worked through programmes in schools and universities to help internationalise our young people. We believe this is vital to their future job prospects and to the long-term health of the UK’s economy. With our partners UK Sport, UNICEF and the London Organising Committee of the Olympic and Paralympic Games, we have now linked nearly 300 schools in the UK with schools in 19 different countries as part of International Inspiration, the Olympic legacy programme. That programme has already exceeded its target of reaching 12 million young people worldwide. Last year also saw the greatest number of UK students ever participating in our Erasmus programme which supports higher education students to study or work in Europe. Our emphasis on delivering these and many more benefits for the UK while managing the reduction in our core grant has been possible only through a relentless drive for efficiency and effectiveness. We have further reduced our ‘platform costs’, now standing at 17 per cent of total costs, down from 18 per cent last year. This has been tough and involved a wide range of initiatives including reducing staff numbers in many locations. Despite this, our staff survey shows that the commitment of our staff to the work that we do on behalf of the UK has actually grown this year. In addition, we remain focused on increasing what we can achieve for the UK by working with partners and delivering contracts and paid-for services. In October we signed a strategic five-year partnership with Microsoft, adding them to the list of major companies such as HSBC, Nokia and Barclay’s Premier League with whom we already work. Our first joint project with Microsoft

will support the transformation of primary education in Sub-Saharan Africa through the use of IT. Our overall win rate for new contracts doubled compared with last year. The performance results in this report show that we are succeeding in growing our income both to increase our impact and in response to our reduced government grant. The stories show how we are continuing to make a difference to the lives of millions of people around the world and in the UK. This is at the heart of our public service ethos. We have planned for a further reduction in our grant to 16 per cent of turnover by 2014 –15 compared to 24 per cent this year. Even at that reduced level it is our core public funding which is critical in allowing us to stay in countries and make a difference through difficult times. When we stay we cannot always earn income, but we can always earn trust – the first important step towards security, growth and prosperity for the UK.

Martin Davidson cmg Chief Executive British Council

ANNUAL REPORT 2011 –12

About the British Council

About the British Council The British Council is the United Kingdom’s organisation for cultural relations and educational opportunities. Our purpose is to create international opportunities for the people of the UK and other countries and build trust between them worldwide. We do this by sharing the UK’s great cultural assets – the English language, educational opportunities, our world-class arts and creative industries and our openness and pluralism as a society. We connect people from the UK with people from around the world through shared cultural interests. This creates lasting ties between them which cut across national and cultural divides. It builds awareness and understanding of the UK which contributes to the UK’s long-term prosperity, security and standing worldwide. It benefits people in the countries where we work by offering them international opportunities and supporting development and stability. Through our work we share and learn from each other. Founded in 1934 and incorporated by Royal Charter in 1940, the British Council is a registered charity in England, Wales and Scotland. We are also a public corporation and a non-departmental public body (NDPB) sponsored by the Foreign and Commonwealth Office. Since 1934, we have been developing our understanding of what the UK has to offer together with an on-the-ground knowledge of other countries. It is this combination which gives us our unique strength as an organisation.

We are helping to enrich the lives of young people through games and sport as part of the global London 2012 legacy.

How we work We work with a wide range of UK experts and partners in English language, education, arts and civil society and link them with our network of contacts and partners overseas. We work internationally with younger people who are in education or starting their careers and with influential people within communities, typically mid-career professionals, educators, artists, scientists, community or business leaders, and policy makers. We have a strong presence across the world working in 110 countries and territories. Our national staff in these countries are some of the greatest advocates for our work and for what the UK has to offer. Our presence in, and understanding of, so many countries means we can respond effectively and quickly as needed to meet the UK’s international priorities. In emerging economies such as India, China, Turkey and Brazil we build trust and raise awareness of what the UK has to offer. This supports the development of deeper cultural and trading links and contributes to the UK’s growth and prosperity. We have a long-term track record of building relationships with the UK’s traditional trading partners and historic friends such as the United States and the countries of the Commonwealth and Europe. We stay in countries as long as we can during upheaval, as we have done this year in Libya, Syria and Tunisia. We are often one of the first organisations working in post-conflict situations, such as Iraq and Afghanistan. We support the young people of these countries, working to give them a voice and the skills they need to improve their chances of employment. This helps to counter extremism and create security. We contribute to the UK’s aid effort, with projects in some of the world’s poorest countries as well as in rapidly developing and post-conflict environments. We provide excellent value for the UK, taking an entrepreneurial approach by earning our own income as well as receiving grant funding from government. By 2015 our grant, which underpins our on-the-ground presence for the UK, is planned to be 16 per cent of our total turnover. Our income earning activities not only deliver cultural relations benefit, they also generate surpluses which we use to do even more cultural relations work.

ANNUAL REPORT 2011 –12

About the British Council

Our work for the UK

Planning through to 2015

Much of the work the British Council did in the UK this year is described in the UK performance section of this report. The scale of the work we do on behalf of the UK around the world is described throughout our report.

We produce a corporate plan each year. The four years covered by the 2011– 15 Corporate Plan reflect the four years of our spending review settlement from government. This Annual Report gives the results achieved in the first year of the 2011– 15 Corporate Plan.

Our global network includes offices in the four countries of the UK. All four UK governments have recognised the increasing importance of international activities in delivering economic benefit. We are well placed to deliver these activities for the people of the UK. We provide opportunities each year for well over two million people in Scotland, Wales, Northern Ireland and England to improve their skills and gain international experience. We work in UK schools, colleges and universities and with the education departments of each UK country to raise the global awareness and ambitions of our young people. Research we commissioned this year, some of it in partnership with the education charity Think Global, confirms that this work is crucial. Fewer than half the students polled for the research thought that an international outlook would benefit their work prospects. Three out of four business leaders, however, fear that the UK will be left behind economically unless our young people learn to think more globally. We support the UK’s education sector and creative industries to understand and take advantage of market opportunities worldwide. This year we are working with the UK government, Visit Britain and UK Trade and Investment as part of the ‘GREAT Britain’ campaign to promote UK higher education and creativity in important international markets. We bring people to the UK as paying customers as well as participants in our programmes. We promote the UK overseas as an English language learning destination, supporting UK English language providers to recruit students. We also help to attract international students to the UK contributing to the billions of pounds worth of export income that international student recruitment creates for the UK economy.

The spending review settlement resulted in a 26 per cent reduction in our government grant over four years. Whilst some painful cuts and closures are inevitable, our overall aim is to expand our impact, activity and turnover by 2015 through income growth. To 2015 we are working towards the following outcomes in our three main business areas:

Arts

English

Education and society

New ways of connecting with and understanding each other through the arts. More widespread and better quality teaching, learning and assessment of English worldwide. Enhanced UK leadership of, and shared learning from, international education. Societies whose young people, citizens and institutions contribute to a more inclusive, open and prosperous world.

Each of our individual programmes and services is expected to make a long-term difference which will contribute to the achievement of these outcomes.

Our main goals up to 2015 are: • Respond to the almost unlimited demand for UK English, qualifications, international educational opportunities and the arts, particularly through our digital platforms, content and services. • Expand our English teaching services and delivery of UK-backed qualifications to young and adult learners. • Respond to demand from governments to work with them under contract to transform English teaching throughout state school and vocational education. • Increase our face-to-face, events and exhibitions work to engage and involve millions more people in UK arts and educational opportunities. • Do more in partnership and through contracts with governments, donors, corporations and foundations, for a much greater impact than we could achieve alone. • Increase our turnover from £707 million in 2009 – 10 to £969 million by 2014 –15. This will come from paid services, partnerships and contracts. • Maintain an extensive network of expertise and presence around the world, giving priority to countries of importance to the UK and where we can achieve large scale impact, notably through English. • Continue to increase the proportion of our UK government grant-funded work which contributes to the UK’s aid effort. • Make savings and cuts of £70 million from our annual budget by 2015 with the first £26 million of this target achieved in 2011–12. • Continue to develop professional expertise and skills in the arts, English, education and society and in areas which support growth such as digital, commercial partnering and business development. • Develop global teams as a standard way of working using technology to enable us to draw on the expertise of all our people regardless of their location.

Our strength is our understanding of what the UK has to offer which we combine with an in-depth knowledge of other countries to build cultural relations for the UK.

• Uphold the British Council’s values of valuing people, integrity, mutuality, creativity and professionalism.

ANNUAL REPORT 2011 –12

About the British Council

How did we perform in 2011–12? Our work was high impact 92 per cent of people in the annual Ipsos MORI survey of 4,000 influential participants in our programmes across 50 countries said that working with us had an impact on their professional lives. 81 per cent said that it had also meant changes to the organisation they work for.... 83 per cent said that their links with the UK were strengthened as a result of taking part and 88 per cent that their view of the UK’s contribution to their sector was improved. In a survey of 1,000 influential participants in the UK, 96 per cent said that working with us had led to the strengthening of international links and collaboration.

We delivered high quality activity Customer satisfaction was high at 83 per cent against last year’s 82 per cent. Customers who would recommend the British Council (net advocacy) was down by one point from 59 per cent to 58 per cent. This compares well when benchmarked externally.

We were good value for money For every £1 of Foreign and Commonwealth Office grant we generated £3.09 of income from other sources.

14 out of 15 of externally evaluated programmes last year were judged to have delivered ‘good’ or ‘outstanding’ results.

We increased our turnover by £46 million against last year, although we missed the tough target we set ourselves in the Corporate Plan by £14 million.

We worked with more people face-to-face

Earned income as a percentage of turnover rose slightly from 72 per cent to 75 per cent.

We worked with 12.5 million people face-to-face, an increase on last year’s figure of 10.3 million. We increased the number of teaching centre students by five per cent to 308,000 and exams candidates by two per cent to 1,969,000. 9.5 million people came to exhibitions, fairs and festivals this year – a significant number, though down on last year’s high of 19.8 million.

We met our efficiency and savings targets of £26 million and made cuts which enabled us to live within our means. The costs of our worldwide ‘platform’ went down from 18 per cent of total cost in 2010 –11 to 17 per cent in 2011–12.

Progress towards our 2015 goals • We have developed our digital platforms, content and services to respond to demand for UK English, qualifications, international educational opportunities and the arts. Teachers and learners of English have made extensive use of our online learning packages, mobile apps and social networking sites but we expect a lot more expansion in this area. • We have expanded our English teaching and qualifications services with an increase of five per cent in the number of students and two per cent in the number of examinations candidates this year compared with the previous year.

• We have increased the proportion of our UK government grant-funded work which forms part of the UK’s aid contribution from 45 per cent in 2010 –11 to 51 per cent this year. By 2015 we are required to spend 64 per cent of our reducing government grant on development work. This will result in significant grant reductions elsewhere, particularly in EU countries. • We have made savings and cuts to meet the £26 million target for 2011–12 but still have much to do to reduce our annual budget by the £70 million required by 2015.

• We have worked with governments under contract, aiming to transform English teaching in the education sector in a number of locations, notably in SubSaharan Africa, India, Malaysia and Tunisia.

• We have continued to develop our professional expertise and skills and have set up new graduate recruitment and intern programmes to help ensure we have the skills needed for the future.

• We have met our 2015 target for face-to-face activity, working with 21 per cent more people this year than the previous year. Our exhibitions and fairs attendance was lower than the previous year despite several successful exhibitions. This is largely because the Shanghai Expo created exceptionally high numbers in 2010 –11. Next year we will launch two major arts festivals in China and Brazil.

• We have set up more global teams this year as our standard way of working and have used technology to draw on the expertise of staff regardless of their location.

• We still have a great deal to do to meet our very challenging targets for contracts and partnerships by 2015 despite developing some promising new partnerships in 2011–12 and improving our win rate on new contracts to one in four proposals submitted. • Our turnover has increased by seven per cent this year over the previous year, missing the nine per cent we were aiming for. This was in part because of the turbulence in the Middle East and North Africa. We will need to achieve eight per cent growth to meet our target next year – very tough, particularly if the euro continues to weaken. • So far we have maintained a wide network around the world, with a presence in 110 countries. Our operations in Cameroon and Eritrea closed this year but we opened in the new nation of South Sudan and made our operation in Rwanda into a fully independent directorate. To retain our network we have had to make radical changes to the way we operate in many places. With more funding constraints over the next two years, we will need to make more changes and some cuts to live within our means.

• We have upheld the British Council’s values of valuing people, integrity, mutuality, creativity and professionalism.

ANNUAL REPORT 2011 –12

About the British Council

Headlines from the year English TV series

April 2011

July 2011

August 2011

Learn English on your phone

Gagarin in London

Kabul

Russian cosmonaut Yuri Gagarin’s daughter Elena, director of the Kremlin Museums, sees her father’s statue unveiled at our London HQ, with huge media interest. UK and Russia go on to sign a statement on cultural cooperation in September.

After the terrible attack on our office in Kabul our first priority is to care for everyone affected by the trauma. We then get back to work in just over a week.

We launch our Learn English mobile apps which quickly become number one in the educational charts, with over one million downloads from April to August.

Supporting eco-entrepreneurs

We sign licensing contracts with TV broadcasters to bring the new British Council/BBC English language series Word on the Street to millions more English language learners, including those in hard-to-reach countries.

Partnering India

December 2011

March 2012

We reopen in Libya

Brazil launch

We restart and expand our work in Libya. ‘The Libyan people will never forget British Council officers […] and its effective role in spreading culture among the Libyan people.’ Abdul Jalil, Chairman of the Libyan Interim National Transitional Council.

The GREAT Britain campaign launches in ten countries to showcase the UK overseas as part of the 2012 Olympiad. In Brazil we begin preparations for a major UK–Brazil arts festival.

We sign an agreement to support a £25 million five-year joint investment between the UK and Indian governments to strengthen higher education ties and opportunities between our two countries.

Partnering Lloyd’s Register Quality Assurance we launch E-idea, a programme to support and mentor young eco-entrepreneurs from seven Asia-Pacific countries.

September 2011 May 2011

Go4English

Changing perceptions At the Erbil literature festival, which we held with partners, Iraqi author Inaam Kachachi says: ‘When Iraqi people think of a British person they still think of a soldier. They need to realise that a British person can be an intellectual, an artist, a writer.’

BRITISH COUNCIL LIBYA

Our Facebook page for people learning English across the Middle East and North Africa gains its 300,000th subscriber on its way to a total of half a million. GAGARIN IN LONDON

One year to go Launch of our London 2012 Festival programme together with online English language and educational materials to connect schools round the world to the unique inspirational power of the Olympic Games.

WORD ON THE STREET

November 2011

Microsoft partnership

October 2011

Chinese for UK pupils We run our annual Chinese speaking competition with HSBC, 4,300 UK pupils take part to show their Chinese language skills, with the finals being held at the British Museum.

Five-year Education Alliance Agreement signed with Microsoft. Our first project together will transform education in Africa through developing IT skills.

This partnership with the Premier League, which uses football as a tool to develop the skills of young people, launches in Sudan. Fifty coaches from Sudan and the newly independent South Sudan are trained to manage their own community-based football projects. January 2012

Supporting Burma The Foreign Secretary William Hague gives a press conference at the British Council in Burma. After their years of isolation the Burmese Ministry of Education asks us to create a training programme for 10,000 teachers per year across 20 colleges.

GREAT CAMPAIGN

Supporting UK education Our Going Global annual conference attracts over 1,000 leading professionals across the further and higher education sectors to debate their vision of international education for the 21st century.

February 2012

Erbil Literature Festival

Building trust with Russia

June 2011

Zimbabwe at Venice Biennale of art We organise the British Pavilion and encourage Zimbabwe to exhibit for the first time, helping to raise Africa’s profile at this prestigious event.

Premier Skills Sudan

INTERNATIONAL INSPIRATION

CHINESE FOR UK PUPILS

MICROSOFT PARTNERSHIP

Elena Gagarin works with us to open our Henry Moore exhibition in the Kremlin Museums which follows Antony Gormley and William Blake exhibitions in Russia, rounding off an exceptional year of UK–Russia cultural collaboration.

GOING GLOBAL

ANNUAL REPORT 2011 –12

Working through the UK’s great cultural assets

working through the UK’s great cultural assets The English language, the UK’s culture and its academic institutions are the top three factors in supporting the UK’s reputation overseas according to recent research by international policy institute Chatham House.

We organise our work into three separate business areas – English, arts, and education and society – but we also look for opportunities to bring these areas together in creative ways to achieve even more.

We work through these great cultural assets to build trust and to strengthen the UK’s reputation as an open, vibrant country with a thriving cultural scene and an excellent education sector. Our work in these areas brings together people from the UK and all over the world to learn from each other by sharing experiences and interests.

Through our schools programme we have been working with schools in the UK and overseas to involve them in arts events as part of the Cultural Olympiad. These include the Big Dance which is the world’s largest dance programme and International Voices, a music event for young people which will run throughout the Cultural Olympiad. We have also developed new English language materials linked to the Olympic Games which will reach around 20 million learners of English worldwide.

We also support the UK’s education, English language teaching, examinations, cultural and creative sectors to develop the international links which lead to trade and export opportunities.

Our project to celebrate the Charles Dickens bicentenary this year involved a mix of activities with schools and arts organisations as well as the development of new resources for English language teaching. Our contribution to the London 2012 Olympic Games has also involved working across our business areas. Through projects which involve a combination of English language, arts and education activities we are helping to deliver London 2012’s vision of connecting young people around the world.

We connect UK practitioners in English language, education, arts and civil society with our extensive network of contacts and partners overseas. We work through these great cultural assets to build trust and to strengthen the UK’s reputation as an open, vibrant country with a thriving cultural scene and an excellent education sector.

ANNUAL REPORT 2011 –12

Working through the UK’s great cultural assets

English We expanded self-accessed learning to reach many more people particularly through our LearnEnglish website. In addition, 31 million teachers and learners listened to our radio programmes, 17 million people watched our English magazine television programme Word on the Street, and 53 million people used our publications. Our teaching centres and examination services continued to grow to meet increasing demand. We opened new teaching centres in Spain, Thailand and Iraq. Our work in examinations has also continued to grow, promoting the UK as a provider of high quality assessment. In partnership with the University of London we will administer nearly 120,000 local examinations annually in 75 different countries. The examinations service we provide enables UK universities to access many more markets than would otherwise be possible.

Our aim: more widespread and better quality teaching, learning and assessment of English worldwide. Sharing a language is the first step towards shared understanding. This is why the teaching and learning of English has always been central to our work. A shared language helps to create new international communities and enables people from diverse backgrounds to communicate with each other. English connects people with the world and builds trust for the UK. Learning English can transform lives. English opens doors and creates opportunities for mobility and education. It is a means of sharing culture and values and has the potential to make a profound impact on the lives and prospects of individuals and societies. English is the first language of international business. Learning English supports economic growth through international trade and exchange. There are currently 1.6 billion learners of English worldwide. The importance of English for the development of economies globally is likely to increase dramatically over the next five years. Today, demand for English is greater than ever before. The prosperity of emerging powers and developing economies depends on people having the language skills needed to access global markets. Our business is growing in response to this demand. We have a reputation as a world-leading provider of high quality English language learning opportunities worldwide, raising the global profile of UK expertise

in English language teaching. We run English classes for young learners and adults through more than 70 teaching centres and partner organisations in over 45 countries. We also accredit more than 500 English language providers in the UK and promote the UK as a leading destination for English language learners. We administer examinations across our global network, in particular working with Cambridge ESOL and IDP Education to run the International English Language Testing System (IELTS) test. In 2011–12 we also administered over one million school and professional examinations on behalf of UK boards. Both our teaching and examinations operations are funded exclusively from self-generated income, but at the same time are central to our charitable purpose of developing a wider knowledge of the English language. We provide training and professional development for teachers of English through a range of programmes. We also reach increasing numbers of teachers and learners through online English courses, podcasts and apps, broadcasts and provision of teaching materials. We work with education ministries around the world to support policy development and improve the quality of English language teaching in public education systems. In 2011–12 we made steady progress towards our aim as our English and assessment work with learners, teachers and policy makers continued to grow significantly. This year we taught over 300,000 learners in our teaching centres, an increase of five per cent on the previous year. We supported four million English teachers and 41 million learners with online teaching and learning content, an increase of over ten per cent. We delivered 2.7 million UK examinations, up from 2.5 million last year, generating £60 million for UK examination boards.

Our work with education ministries is helping to transform English teaching in schools in a wide range of countries, with, for example, half a million teachers trained in India and 54,000 teachers being trained every year in Rwanda. Our programmes aim to improve both the availability and the quality of English language teaching in schools. In Tunisia we have worked with the Ministry of Education to reform and enhance the learning and teaching of English throughout the school system – reaching 4.8 million young learners and teachers. Through our teacher development project in Malaysia we are working through mentors in 600 primary schools. Through 18 research partnerships with British universities we have been supporting improvements in English language teaching and learning worldwide and published over 20 publications on critical issues in this specialist area. This year we have continued to develop new services, working with partners in the English Language Teaching (ELT) sector. These include new, more flexible teaching models and a range of new ELT products for both young learners and adult groups. Working in partnership with others is helping to transform both our self-access and face-to-face learning services. We are also partnering on individual projects. In 12 countries across the Middle East and North Africa, for example, we have been working with HSBC to improve resources in schools and develop English language training skills for thousands of school teachers.

We worked with: 916,000

Policy makers and government ministers, teachers and learners

2.2 million

Teachers and learners in online communities

308,000

Learners in teaching centre classes

1.97 million

Exams candidates

46.9 million

Website users

103 million

Viewers, listeners and readers

In the Ipsos Mori poll of participants in our programmes last year, 94 per cent of those involved in English reported that taking part had already made an impact on their professional lives and development.

ANNUAL REPORT 2011 –12

Working through the UK’s great cultural assets

Arts The Russia and China programmes demonstrate how we are working in the arts to create influence, value and opportunity for the UK with the world’s great emerging powers. This year we have been designing an exciting four-year programme in Brazil called Transform, which begins in 2012 –13. In response to developments in the Middle East and North Africa, we have initiated new approaches to working with artists and arts organisations, with arts for development firmly on the agenda to build skills, confidence and capacity. For example, in Erbil in Northern Iraq a literature festival with Iraqi writers in Kurdish and Arabic and their British counterparts, created a safe space for the exploration of difficult issues.

Our aim: new ways of connecting with and understanding each other through the arts. The arts help us see ourselves and the world differently. Few things are as eloquent or effective as the arts in promoting cultural exchange and breaking down barriers. Our work in the arts raises the profile of the UK’s worldleading creative industries. Established artists and arts organisations are able to extend their audiences while lesser-known artists and companies can be launched internationally. The arts form a crucial part of national identity. Celebration of culture and support for emerging creative industries can play a crucial role in development and nation building. The arts uniquely enable the exploration of difficult and challenging ideas. In some of the world’s isolated states our arts work provides a forum for these ideas. The UK’s arts are admired across the world and the UK can attract people to engage more widely with all that the UK has to offer through the arts. We work with the best of British and international artistic and creative talent to develop innovative, high quality events and collaborations. We link artists, organisations and audiences around the world. We stage shows and exhibitions, work on joint projects with partners and help build creative leadership, professional networks and educational programmes. Working with international artists and creative institutions helps us understand their context and consider our own values.

This year, three themes have preoccupied us and focused our work. These are: innovation and renewal; building trust and understanding; and deploying the arts to create new connections and enable people to understand one another better. All of this work is underpinned by an unequivocal commitment to artistic excellence. We have developed a new, balanced and inclusive arts programme through our strengthened international network, with expert arts staff in every region and across the UK. A great highlight of the year has been the role that the arts have played in improving relations with Russia. The Gagarin statue, unveiled outside our London office in summer, the Russia focus at the London Book Fair in 2011, and recent exhibitions of work by Antony Gormley in St Petersburg, and William Blake and Henry Moore in Moscow, have all been extraordinary arts events in themselves and had a wider impact in building relationships and understanding. We have set up UK Now in China: a series of more than 100 events in 17 cities with major contributions from national institutions including the British Film Institute, Victoria and Albert Museum, several top orchestras and theatre companies, as well as wide-ranging input from the arts in Scotland, Wales and Northern Ireland. Our China residencies for innovative UK musicians, in partnership with Performing Rights Society for Music Foundation, has enabled Matthew Bourne, Imogen Heap, Jamie Woon and others to explore new musical territory, reach new audiences and write new material in the context of a changing international market.

We welcomed a company of actors from Juba in the new nation of South Sudan to the World Shakespeare Festival to perform Cymbeline at the Globe. These actors are from different tribes, working together in a common belief that culture brings people together and helps to build a cohesive national identity and confidence. We used ideas from theatre programmes and producers from across the world to help UK artists and companies present challenging work at the Edinburgh Showcase. Across our arts programme we help countries to develop more robust, professional and open creative and cultural sectors. We share the UK’s mixed economy model of public and private funding and offer support in developing a strong intellectual property framework, digital and financial infrastructure. We do this with partners such as CCSkills and Nesta. Arts work on a global scale has included the recent Dickens anniversary, through which we enabled classic work to be re-imagined for a new global audience, with a major digital presence, new partners and extraordinary profile.

We worked with: 703,000

Artists, art lovers, cultural leaders and ministers

147,000

Artists and participants in online communities

7.4 million

Exhibition, festival, event and performance attendees

5.4 million

Website users

146 million

Viewers, listeners and readers

Our work is founded on the concept of mutuality – we seek to build more understanding of other people’s culture within the UK, as well as increasing knowledge of the UK overseas. The Artists’ International Development Fund, in partnership with Arts Council England and others, provides opportunities for artists to gain international exposure, to exchange new and challenging ideas with their international peers, and to realise their own creative potential through exchange.

In the Ipsos Mori poll of participants in our programmes last year, 90 per cent of those involved in arts activity reported that taking part had increased their awareness of the UK’s contribution to the arts and 85 per cent that their links with the UK were now stronger.

ANNUAL REPORT 2011 –12

Working through the UK’s great cultural assets

Education and Society teachers have benefited from English language learning materials and 400,000 young people have been involved through the power of football. We contribute to the promotion of the UK as a leader in, and trusted provider of, quality higher education. The Going Global conference in March was a highlight this year, with 1,400 academics and sector leaders and representatives of government and industry from 80 countries gathering in London to debate their vision of international education for the 21st century. We have worked closely this year with the major emerging economies of strategic importance to the UK. For example, in India we are working with the Department for Business, Innovation and Skills and the Indian government across schools, higher education and vocational education institutions to support educational aspirations and in so doing build long lasting links with the UK.

Our aim: enhanced UK leadership of, and shared learning from, international education and societies whose young people, citizens and institutions contribute to a more inclusive open and prosperous world. Education transforms lives. All over the world, people want greater educational opportunities to enhance their lives and employment prospects. An international outlook for the UK’s young people is essential to their prospects and to the UK economy. Higher education is a UK strength and it is vital that we make connections to encourage international students to choose UK education and create strong links for UK institutions which help maintain their position as world leaders. Stability and prosperity are dependent on societies which are open and engaged with the outside world and have access to justice and economic development. We aim to bring an international dimension to education worldwide, for young learners through to life-long learners. Our work enables young people in the UK and overseas to take part internationally and includes programmes run under contract for students and

academics to study internationally. We work extensively in market intelligence which higher education institutions use to position themselves and the UK internationally. Our exhibitions and the Education UK website encourage overseas students to choose UK education. We create international links and collaborations with educational institutions, communities, businesses and governments. In countries with the challenge of large youth populations, we work to engage youth and increase their entrepreneurship and skills. We run programmes as part of the UK’s aid effort to assist countries in improving education standards and strengthening civil society. We promote debate to improve social and educational policy. We connect the UK’s school sector to others around the world to enrich education and build trust. Early in this Olympic year, our programme to enrich and transform lives through sport, has fulfilled its promise. International Inspiration, run with London 2012 partners, has resulted in 13 million children and young people in 20 countries around the world experiencing the lasting benefits of high quality and inclusive physical education and sport. Working with policy makers, International Inspiration has inspired 36 new policy changes creating long-term benefits for young people around the world well beyond the Games in 2012. Bringing together the global appeal of the most watched football league in the world with our worldwide network, Premier Skills uses football to develop life skills for young people. Continuing the outstanding partnership with the Premier League, the programme was expanded this year to work with some of the world’s most marginalised young people and give more support for English language learning. Over 1,500 grassroots coaches and referees have been trained this year, 150,000 learners and

We also continue to work in countries facing some of the greatest challenges. In Burma, we are working with over 60 local non-governmental organisations on the Pyoe Pin (Young Shoots) programme to strengthen civil society by supporting networks and coalitions throughout the country. The UK is now well placed to play an important role in the exciting developments in Burma. In Afghanistan we have successfully set up a large Department for International Development-led multi-donor programme to support civil society’s development across the country while recognising the major security challenges involved. We manage over 50 per cent of the European Union’s education, training and youth programmes which continued to grow in popularity and impact this year. Nearly 13,000 international student placements were funded under the Erasmus Programme, the largest number since the programme began in 1987. The feedback from employers is that Erasmus gives their graduates the skills they need. Growth in international awareness and ambition was further demonstrated by the EU-funded Youth in Action programme which had the highest-ever number of applications. This programme supports young people’s inclusion and employability and 80 per cent of young people from the UK who took part say that their employment chances have increased as a result. Our schools work is being transformed though new partnerships agreed this year with the Department for International Development and Microsoft. These partnerships mean that despite our reducing government grant, we will be able to enhance the educational outcomes and global competitiveness of 16 million young people worldwide. On individual projects, we worked in smaller partnerships such as The Big Science Challenge, sponsored by Rolls Royce. Schoolchildren from the UK and Gulf States explored solutions for water shortage – a vital issue in itself but also a good example of our work providing inspiration and common ground for students from very different backgrounds and cultures.

We worked with: 8.6 million

Ministers, teachers, academics, education and youth sector leaders and young people

1.9 million

Education and citizenship exhibition and fair attendees

2.1 million

Teachers, academics, college and higher education leaders in online communities

13.5 million

Website users

236 million

Viewers, listeners and readers

In the Ipsos Mori poll of participants last year, 89 per cent of those involved in education and society programmes reported that taking part had an impact on their organisation or community.

ANNUAL REPORT 2011 –12

Working in the UK and around the world

working in the uk and around the world

Our performance in 2011–12 In the UK and around the world this year our staff have worked hard in the face of considerable challenges and have achieved real and measurable impact. We have worked with over 580 million people worldwide, including 12.5 million people face-to-face. Our research on trust has shown that involvement in cultural relations is associated with higher levels of trust. We have had a significant impact on many people who have taken part in our programmes. UK participants have reported particularly high levels of impact. We achieved four ratings of ‘outstanding’ and ten of ‘good’ in external evaluations of the 15 programmes we deliver for the European Union and the Department for International Development. ‘Outstanding’ evaluations are rarely achieved. The quality of our work has stayed high, with customer satisfaction remaining in the range considered by the National Audit Office to be ‘good to excellent’. In our Annual Impact Survey Ipsos MORI reported that there were ’overwhelmingly high levels of satisfaction with British Council activity’.

We work with teachers and learners in the UK and around the world to help young people develop crucial skills.

We are on track to meet most of our 2015 Corporate Plan performance targets and in some cases we have already met or exceeded those targets. We were not able to achieve all of the tough income targets we set ourselves in our Corporate Plan but we have re-committed to achieving our original growth targets by 2014 –15.

What we measure Each year we assess: • The impact of our work – does what we do really make a difference? • The scale of our work – how many people have been involved in activities with us? • The quality of our work – are we maintaining quality year on year? We also set performance targets in our Corporate Plan for sustainability and diversity together with financial targets. We report on performance against those targets in the Governance and Good Practice and Financial Review and Accounts sections of this report.

The impact of our work We evaluate our impact in four ways: • Strategic level research. • Annual Impact Survey (AIS). • Programme evaluations. • Heads of Mission survey.

ANNUAL REPORT 2011 –12

Working in the UK and around the world

Strategic Level research – Trust Pays

The main findings were:

Annual Impact Survey (AIS)

Impact on UK participants in our programmes This year we included UK participants in the survey for the first time. The proportion of participants who reported impact from their involvement in our programmes was even higher than for overseas participants.

We work to build trust between the people of the UK and other countries. This year we repeated research first carried out in 2010 to look at:

• A higher level of trust in people from the UK is associated with an increased interest in doing business and trade with the UK.

We constantly try to improve how we measure whether our work really does make a difference to individuals, to their communities and to their relationship with the UK.

• The power of trust to give positive benefits for both the UK and other countries.

• The UK compares well with other countries in generating trust between people.

• The effectiveness of our work in English, arts, and education and society in building trust and strengthening cultural relations.

• Involvement in cultural relations with the UK is associated with a higher level of trust in people in the UK in all ten countries surveyed.

Each year we commission a survey of influential people such as teachers, community leaders and policy makers who have taken part in activities with us. This year we have worked with Ipsos MORI to improve the survey. Most significantly we have:

YouGov conducted the 2010 research in Poland, China, India and Saudi Arabia. Ipsos MORI followed up with the 2011 research in Brazil, Turkey, Thailand, Spain, Russia and Pakistan. We therefore covered a range of countries which are strategically important to the UK.

The results below show the clear positive association in all ten countries surveyed between involvement in some form of cultural relations activity with the UK and level of trust in people in the UK. Saudi Arabia had the lowest trust environment of the ten countries measured. Even there, however, Saudi participants are tipped from ‘net negative’ to ‘net positive’ trust in the UK through their involvement in cultural relations activities.

Percentage net trust in people from UK among people from … % pt increase

Brazil

54 56

Spain

Thailand

58 62 41 59

India

40 47 37 59

Pakistan

33 31

Turkey

-20%

• Increased the sample size to three times larger than in previous years and the number of countries covered from 20 to 50. • Conducted detailed interviews with a sample of participants to give us more in-depth qualitative information.

Impact on …

+26

my awareness of the UK’s contribution in my field

52 45

my links with the UK +14

-12 20%

40%

60%

80%

my organisation’s development

100

Who have NOT been involved in cultural relations activities with the UK

Source: Online panel surveys of respondents aged 16/18–34 with minimum secondary education (Note: Pakistan research undertaken F2F and with minimum tertiary education) Base: YouGov, 2010: Saudi Arabia (279 CR, 241 non-CR); China (993 CR, 212 non-CR); Poland (982 CR, 223 non-CR); India (994 CR, 209 non-CR) Ipsos MORI, 2011: Turkey, Pakistan, Russia, Thailand, Spain, Brazil (750 CR, 250 non-CR)

0 Who have been involved in cultural relations activities with the UK

Percentage Report impact

my organisation’s development

96 100

Report impact

Impact on overseas participants in our programmes

my international links and collaboration

Percentage

These and other improvements mean that we cannot make a direct comparison of our results this year with results from previous years (collected through our former Evaluation of Long Term Outcomes survey). However, we can report that this year our work has achieved significant impact with influential people, through whom we can potentially reach many others.

my professional development

+10

+22

2 0%

my professional development

+19

+21

The strongest result was impact on international links and collaboration – an especially encouraging result in terms of strengthening the UK’s economic position by increasing the international outlook of our people. Impact on …

We asked overseas participants about the impact of their involvement with us in four areas. The results are shown below. People who have worked with us for longer and through more than one kind of experience reported deeper impact.

+15

Russia

Saudi Arabia

+16

China

+10 +7

Poland

• Included UK participants for the first time – some of the most positive results this year have come from the UK.

• Refined the numerical scale used to give us more insight into the level of impact we are having.

Involvement in cultural relations with the UK is associated with an increase in trust in people in the UK in all ten countries

Report significant impact

Programme evaluations The impact of our larger programmes, and of the programmes we deliver on behalf of others, is evaluated externally. Two of our larger programmes, Skills for Employability and Active Citizens were evaluated this year. Skills for Employability supports development of the skills needed for employment in countries with large young populations – a critical basis for long-term economic and political stability. The evaluation showed that partnerships between UK colleges and their overseas counterparts in ten different countries were having a lasting positive impact on the institutions involved. Active Citizens runs social leadership and action projects across Africa, Asia and Europe to support community cohesion and global citizenship. Participants reported a strong impact on their understanding of the value of global citizenship. UK participants in particular saw the programme as transformative. There were external evaluations this year of 15 programmes managed by the British Council under contract on behalf of the Department for International Development and the European Union. Ten were assessed as ‘good’, one as ‘satisfactory’ and four as ‘outstanding’. Achieving a ‘good’ rating is highly regarded by both the evaluators and the donors themselves. ‘Outstanding’ evaluations are rarely achieved.

ANNUAL REPORT 2011 –12

Working in the UK and around the world

Heads of Mission Survey

The scale of our work

Each year we ask for structured feedback from the heads of UK diplomatic missions in the countries where we operate. This year 78 embassies and posts took part in the survey, ten more than last year. Heads of mission rate us for our effectiveness in making an impact through English, arts, education and society, and the extent to which they feel we have delivered good value for money. These two ratings are averaged out on a scale where zero indicates strongly negative views and 100 strongly positive views.

Each year we track the number of people we work with. This helps to give us a picture of the scale of our activity and to see if we are reaching a critical mass of people in particular markets or locations.

Heads of Mission rating

2011–12 result

2011–12 target

2010 –11 result

+76

The 2011–12 result is slightly below last year’s result but in line with the Corporate Plan target. Analysis of the qualitative information from the survey indicates that the shift from last year is probably not statistically significant and this year’s score still falls into the range of ‘good to excellent’.

We work with three main groups of people – those who are influential in their field such as educators and community leaders, younger people in education or starting out on their careers, and a smaller number of people who are leaders in their area.

Results for 2011–12 We work with people in four main ways, as shown below. This year we involved 12.5 million people through face-to-face activity and just over 558 million through publications, television and radio broadcasts and digital channels. In most cases we exceeded not only our Corporate Plan targets for 2011–12 but also those for 2014 –15.

Participants in our activities in 2011–12 2011–12 result

2011–12 target

2010–11 result

12.5 million

6.1 million

10.3 million

9.5 million

6.1 million

19.8 million

Digital users People participating through digital channels: social networks, online learning communities, websites, and mobile devices and applications.

73.3 million

N/A (see opposite)

Broadcast and publications People participating by watching, listening to, or reading British Council produced or co-produced content.

485 million

Face-to-face People participating in activity where they come into physical face-to-face contact with others. Includes leaders, teachers, exam candidates and teaching centre students. Exhibitions, festivals and fairs and performances People attending exhibitions, live arts performances, and arts and education fairs, and festivals.

400 million

483 million

With planned cuts in grant-funded programme activity we had expected significantly reduced numbers of participants in face-to-face activity. However, we not only exceeded our Corporate Plan face-to-face target, we also topped last year’s figure. This is because our large programmes did even better than expected in scaling up their activity this year. Connecting Classrooms, for example, had over 1.5 million children, teachers and head teachers involved in face-toface school linking activity. The number of people involved in exhibitions, fairs and festivals will, by the nature of the activity, go up and down year on year. The high in 2010 –11 reflected the Shanghai Expo and Darwin Now exhibitions. The 2011–12 result far exceeded our target for the year, reflecting the success of our New Works, New Audiences arts programme which involved nearly five million people through exhibitions and festivals. We have two broad categories of digital users – those who interact through social networks and online learning communities and those who use websites or download mobile apps. The number of people using social networks and online learning went up by 60 per cent this year, from 2.5 million to four million people. For website visitors, we centralised measurement this year by adopting an industry standard tracking tool called Webtrends. This makes data easier to collect and more consistent but means that we cannot directly compare results on digital users with results from previous years. We are, however, planning continued growth in this area and have now set a revised target of reaching 100 million unique users by 2015, compared with this year’s figure of nearly 74 million.

The quality of our work Quality has stayed high this year. We measure how people view the quality of our work in two main ways: • Scores from a customer satisfaction survey distributed both at face-to-face events and online. • A net recommendation score which is a measure of the willingness of our participants to recommend others to work with us or to use services provided by the British Council. The net percentage is calculated from advocates minus detractors, according to international benchmarks. This year we collected feedback from 250,000 people taking part in a wide range of our programmes. These are the results: 2011–12 result

2011–12 target

2010–11 result

Customer satisfaction

Net recommendation

58 per cent

57 per cent

59 per cent

Customer satisfaction has remained at last year’s high level. Customer satisfaction scores in the range above 80 are considered by the National Audit Office to be ‘good to excellent’. On net recommendation we are slightly above our target though a point below last year’s result. The Net Promoter methodology is widely used and allows us to benchmark our scores externally. Our score of 58 per cent compares well with that of other high performing organisations or industries such as highly rated online shopping brands and supermarkets which score 49 per cent or above*. *Source: Satmetrics 2011 net promoter

ANNUAL REPORT 2011 –12

Working in the UK and around the world

This year in the United Kingdom Creating international opportunities for our young people, for our vibrant education and culture sectors, and for the UK as the home of the English language has remained at the heart of our work for all four UK countries in 2011–12.

Supporting UK Higher Education

In the five years to 2011–12 we helped set up nearly 2,000 international partnerships for UK higher education institutions.

−− two-thirds had seen a significant impact on their professional lives, especially in strengthening international links

Preparing for a unique year for the UK

Our two flagship UK conferences this year, the Education World Forum and Going Global, brought together government ministers and senior policy makers from over 80 countries to share experiences and learning.

−− more than half said that there had been a significant impact on the development of their organisation.

The lead up to the Diamond Jubilee, the Olympics and Paralympics and the Cultural Olympiad has given us a unique opportunity this year to promote the best of the UK’s culture around the world. Throughout the year we have worked with the London 2012 Culture and Education teams to put together a programme of activities for London 2012. In July we launched our London 2012 Festival programme as well as Olympics-related materials for schools, teachers and learners of English. We have also been supporting a number of international artistic collaborations in preparation for the Cultural Olympiad. One example out of many is the group of Welsh and Australian Indigenous musicians who will perform at the River of Music festival following support from us to explore their shared interest in preserving language and culture through music. We have also used London 2012 to create new international opportunities for the UK’s young people.

Internationalising our young people Research we commissioned this year showed how vital it is to broaden the international outlook of our young people. The research found that fewer than half the students polled thought that an international outlook would benefit their work prospects. However, three quarters of business leaders feared that the UK would be left behind economically unless our young people learn to think more globally. We work with the education departments of each of the four UK countries to raise young people’s global awareness, skills and ambition. Our latest global survey shows that this year we worked with approximately: • 30 per cent of the UK’s schools • 50 per cent of the UK’s colleges • 90 per cent of the UK’s universities.

In schools we offered Olympics-themed programmes such as International Inspiration – the official sports legacy programme of London 2012 – and BBC World Class which enabled schools to find international partners and share work inspired by the Olympics. These programmes helped teachers and young people from over 2,500 UK schools to connect with their peers around the world this year. As part of our Connecting Classrooms programme we worked with schools in the UK and overseas to involve them in dance and music events for the Cultural Olympiad. In March, as part of the same programme, teachers from Northern Ireland made a pioneering visit to Iraq to work with teachers there on planning shared lessons, In February we signed a new three-year agreement with the Welsh government to expand international education in schools. In Scotland, the government has taken action in response to our campaign to highlight the serious drop in foreign language assistants in Scottish schools. We also create international opportunities for students of all ages and from all four UK countries through our EU-funded programmes, Youth in Action, Erasmus and Comenius. Each year these programmes involve more than 200,000 UK young people in international experiences through community and social projects as well as formal education. Erasmus supports students to study overseas and politicians and academics increasingly talk about ’the Erasmus generation‘ as shorthand for the next generation of European and global leaders. Comenius develops the skills of young people and education professionals. A significant achievement for the UK this year was the selection of a project from Northern Ireland as a case study for the 33 countries taking part in the 2012 Comenius Conference. The project, led by Belfast Boys’ Model School with partners in Europe, highlighted issues for young people connected with employment. In our Annual Impact Survey this year more than three quarters of UK project coordinators involved in our EU-funded Lifelong Learning programmes said that their involvement with these programmes had made a significant impact on their professional lives.

• The UK was included in our impact survey for the first time this year. Of the UK participants surveyed who took part in our programmes:

We support international student recruitment, contributing to bringing more than 400,000 students to the UK each year. This creates an estimated export income of £14 billion for the UK economy.

−− seven out of every eight were completely satisfied with their involvement

• We increased the number of people we reached through digital channels. Our active digital community in the UK now engages nearly 300,000 people and our UK website audience has grown to 10.9 million.

Going Global took place in London in March and was the largest ever gathering of the world’s higher education leaders, supported by our extensive network of education contacts around the world.

Customer satisfaction1

Promoting the UK as an English language learning destination As well as teaching English overseas we also promote the UK as an English language learning destination. This supports UK-based English language providers to enrol hundreds of thousands of English language students each year. Our provision of UK examinations and qualifications is worth around £60 million in export earnings for UK examinations boards.

Bringing top UK contemporary art to new international audiences Arts is a priority area for our top stakeholders in all four countries. Our programme this year included our biggest ever presence at the Edinburgh Festivals. More than 50 countries were represented among the 300 policy makers, programmers, curators and artists who exchanged ideas and looked for outstanding UK work to tour internationally. As a result of relationships and networks created three years earlier in Edinburgh, the National Dance Company of Wales and the Plymouth theatre company ATC both performed in India this year.

Score from 0–100 83 0

2011–12 100

Participation Total face-to-face (millions) 2011–12 2010–11 2009–10

2.3 2.6 1.4 0

3.0

Digital (millions)2 11.2 0

2011–12

Exhibitions, fairs and festivals (millions) 2011–12 2010–11 2009–10

0.1 0.4 0.6 0

0.7

Publication and broadcast (millions)

• In total we offered face-to-face opportunities for 2.3 million people in the UK to gain international skills and experience in 2011–12. This nearly matched our total for 2010 –11, despite funding reductions. • Our latest global survey shows that we reached over 9,200 UK organisations with initiatives involving a total of 167 different countries.

2011–12 2010–11 2009–10

Performance headlines this year

6 5 0 Data not collected for previous years

2011–12 digital figure is a new baseline for this year

ANNUAL REPORT 2011 –12

Countries where we work

Countries where the British Council WORKS

The British Council has a presence in 110 countries and territories.

Working in the UK and around the world

ANNUAL REPORT 2011 –12

Working in the UK and around the world

Americas A major feature of 2011–12 in this region was continued strong growth across Latin America. Countries such as Brazil, Mexico and Colombia will be of crucial importance to the UK’s economic future.

As part of the London 2012 Cultural Olympiad we have supported collaborations this year between theatre companies in the UK, Colombia, Mexico and the US. Next year we will launch a major UK-Brazil arts festival, raising the profile of the UK there as part of our handover of the Olympic Games.

The UK’s relationship with North America also remains significant. This year our US team played a major role in establishing a five-year partnership with Microsoft for joint projects in education, skills and English. Following the first project in Africa we aim to expand to other regions, including Latin America.

Customer satisfaction

English is our top priority in Latin America. This year we worked on language reform with policy makers in Venezuela, Chile, Cuba, Mexico and Brazil. We also worked with government authorities and private organisations on language improvement initiatives worth over £1 million and benefiting 7,400 teachers in Colombia alone.

Our English examinations business grew by 17 per cent, reflecting the rising demand for UK English qualifications. We reached more learners through digital platforms than ever before – 3.2 million. In our Annual Impact Survey 79 per cent of people who engaged with us through our English work reported a significant impact on their professional development. In Brazil we are investing £500,000 to help students achieve the required level of English to study in UK universities. This supports the UK’s aim of attracting 10,000 of the 100,000 Brazilian students who will be funded to study overseas through their government’s new scholarship programme. In Mexico we launched a five-year project funded by HSBC, Fundación Televisa and the state government to improve English language teaching. We will involve 17,000 teachers and 800,000 students by September 2012. We also launched our Premier Skills football programme which will develop the English language and leadership skills of over 15,000 young Mexicans. In education we also work with governments at policy level. In November, President Santos of Colombia visited our London headquarters to witness the signing of six memoranda of understanding to expand the way universities in Colombia and the UK work together. Our arts work strengthens cultural connections through regional and UK-based events. In Edinburgh last year we introduced nearly 30 US arts professionals to the best of new British performance. Two-thirds of US presenters who worked with UK performers reported more positive impressions of UK creativity among their audiences.

Score from 0–100 2011–12 2010–11 2009–10

85 83 84 100

Participation Total face-to-face (millions) 2011–12 2010–11 2009–10

0.2 0.6 0.3 0

0.7

Digital (millions)

4.2 0

2011–12 5

Exhibitions, fairs and festivals (millions) 0.7 2.7 2.5 0

2011–12 2010–11 2009–10

3.0

Publication and broadcast (millions) 2011–12 2010–11 2009–10

23 23 35 0

Funding data Other turnover

Total

1.97

6.57

8.54

4.61

1.17

5.78

Mexico

1.66

2.26

3.92

Venezuela

0.77

2.14

2.91

USA

2.14

0.25

2.39

Americas Region

1.27

0.00

1.27

Argentina

0.73

0.04

0.77

Canada

0.59

0.02

0.61

Chile

0.32

0.09

0.41

Trinidad

0.07

0.31

0.38

Cuba

0.21

0.03

0.24

Jamaica

0.08

0.14

0.22

Country

GIA

Colombia Brazil

(£ millions)

Grant-in-aid (GIA) +

Other turnover = Total

2011–12 digital figure is a new baseline for this year

2010–11 turnover £24.6m

£11.8m GIA

INCREASING PER CENT GOVERNMENT GRANT

£12.8m Total other turnover

2011–12 turnover £27.4m

£14.4m GIA

£13m Total other turnover

ANNUAL REPORT 2011 –12

Working in the UK and around the world

East Asia We matched East Asia’s appearances in the world’s headlines this year with initiatives to strengthen the UK’s links with this region of critical importance to our future prosperity. Despite the devastating floods in Thailand we opened a new partner teaching branch and launched a three-year science curriculum project with Sheffield Hallam University, sponsored by energy company BG Group. This will support science learning in 2,250 schools and involve 22,500 teachers and over two million students in year one. In Burma the programme we run for DFID to strengthen civil society was evaluated as ‘outstanding’. A strong civil society is essential to successful reform in Burma and following our outstanding rating we have won a £12.8 million contract to deliver the second phase of this project. Elsewhere, we supported the development needs of significant partners for the UK, working on a national plan to train 26,000 English teachers in China, the development of a new university based on UK models in Vietnam and the training of over 11,000 English teachers in Indonesia. We used innovative approaches to meet the huge demand for English. In China we partnered with Nokia Life to provide nearly half a million lower income families with English language learning materials by mobile phone. In Korea we won awards for language learning apps. In conflict-affected regions of Southern Thailand we reached over 200 rural primary school teachers both digitally and face-to-face. Across rural East Malaysia our 120 teacher-mentors supported 2,000 teachers of English in over 600 schools. We administered 781,000 examinations – 120,000 more than last year – and opened three new teaching branches in Bangkok, Hanoi and Ho Chi Minh City. We brought together 12 leading UK and Japanese universities in a new partnership to encourage collaboration between higher education and industry. In China a similar model led to creative industries partnerships between 57 Chinese and 52 UK universities, part of a wider collaboration with China on the role of higher education in development. We secured a £1.3 million contract for vocational teacher training in Korea and continued to support state school teachers with a significant reform of English teaching. In the arts, we advised the Japanese government on arts and cultural leadership and signed a three-year agreement with the Indonesian Ministry of Tourism and Creative Economy to develop their fashion industry.

We scaled up our arts activities through sponsorship and partnership, attracting sponsorship from Nokia to develop Indonesia’s creative entrepreneurs as well as £400,000 of partnership money over the next three years for our Australian Indigenous artists leadership programme. We also invested an extra £1 million to bring 348 UK artists to the region and laid plans to launch a major arts festival – UK Now – in China on 1 April 2012.

Customer satisfaction Score from 0–100 2011–12 2010–11 2009–10

82 81 81 0

100

Participation Total face-to-face (millions) 2.3 1.8 1.5 0

2011–12 2010–11 2009–10

2.5

Digital (millions)1 25.2 0

2011–12

Exhibitions, fairs and festivals (millions) 3.8 10.9 1.3 0

2011–12 2010–11 2009–10

12.0

Publication and broadcast (millions) 147 87 170 0

2011–12 2010–11 2009–10

Funding data Country

GIA

(£ millions)

Other turnover

Total

China

9.31

62.23

71.54

Hong Kong

1.69

13.86

15.55

Malaysia

1.41

13.49

14.90

Singapore

0.67

13.80

14.47

Korea

1.28

7.06

8.34

Vietnam

1.80

5.93

7.73

Japan

2.67

5.06

7.73

Thailand

1.51

6.07

7.58

Burma

0.74

3.63

4.37

Indonesia

1.96

1.22

3.18

Taiwan

0.61

2.12

2.73

East Asia Region

2.16

0.04

2.20

Philippines

0.31

1.87

2.18

Australia

0.77

0.16

0.93

New Zealand

0.33

0.14

0.47

Brunei

0.04

0.07

0.11

Grant-in-aid (GIA) +

Other turnover = Total

180

2011–12 digital figure is a new baseline for this year

2010–11 turnover £138.2m

£24.9m GIA

REDUCING PER CENT GOVERNMENT GRANT

£113.3m Total other turnover

2011–12 turnover £164m

£27.3m GIA

£136.7m Total other turnover

ANNUAL REPORT 2011 –12

Working in the UK and around the world

EU Europe Countries in this region continued to face severe challenges created by the continuing eurozone crisis this year. The UK’s political relationship with the institutions of the EU has also been under pressure but remains of critical importance, not least because the region accounts for nearly half of UK trade and exports. This has made it a challenging year for us, given that most of our impact and income comes from our paid English and examinations services and that we work with the European Commission and European Parliament to win and deliver contracts throughout our global network. Despite the challenges, our results for teaching, examinations and our Madrid school were strong. We grew our English and examinations business, delivering a four per cent increase in class hours and a seven per cent increase in examinations income. We opened new branches in Madrid and Barcelona and a new light teaching model in Hungary and are on target to open in Lyon and Marseille in September. We also improved our strategic approach to securing European Commission co-funded regional projects. This year saw the end of our EC co-funded project to explore the position of immigrants in Europe and the beginning of another to support multi-lingualism. Together these projects brought us €1 million in EC funding to help address issues critical to Europe’s future prosperity and stability. Also this year we secured a large EC contract for a funded English language training programme. In our Annual Impact Survey, 90 per cent of participants involved in arts activity with us reported an impact on their professional development. We reached 42 million people through publications and the media and directly engaged with nearly four million people through events such as the Venice Biennale and a Dickens 2012 seminar in Berlin. In education, ten countries in Europe agreed to join a new global initiative offering a number of services for UK education institutions. Our schools work continued to build connections between schools in 19 countries in Europe and nine local authorities in the UK. In total we worked with 250 schools, 4,500 teachers and 45,000 students to develop the international outlook of young people in the region.

Overall this year we made a £3.2 million reduction in our grant at the same time as increasing our total turnover by £3.6 million. We involved nearly two million people in faceto-face activities – a 38 per cent increase on last year – and over 120 million in total, exceeding our target while at the same time maintaining levels of customer satisfaction.

Customer satisfaction Score from 0–100 2011–12 2010–11 2009–10

79 79 80 0

100

Participation Total face-to-face (millions) 1.8 1.3 0.9 0

2011–12 2010–11 2009–10

2.0

Digital (millions)

10.9 0

2011–12

Exhibitions, fairs and festivals (millions) 2.5 2.8 2.1 0

2011–12 2010–11 2009–10

Funding data Other turnover

Total

1.43

57.49

58.92

0.96

13.09

14.05

Portugal

0.48

8.30

8.78

France

1.21

6.57

7.78

Greece

0.57

7.00

7.57

Romania

0.69

4.18

4.87

Poland

1.02

3.78

4.80

Cyprus

0.50

3.55

4.05

Germany

1.92

1.69

3.61

Czech Republic

0.55

2.15

2.70

Netherlands

0.29

1.90

2.19

Bulgaria

0.59

1.52

2.11

EU Region

1.91

0.00

1.91

Belgium

0.93

0.58

1.51

Slovakia

0.41

Austria

Country

GIA

Spain Italy

(£ millions)

Grant-in-aid (GIA) +

Other turnover = Total

0.74

1.15

0.27

0.66

0.93

Switzerland

0.31

0.60

0.91

Hungary

0.49

0.38

0.87

Lithuania

0.20

0.47

0.67

Slovenia

0.35

0.13

0.48

Sweden

0.38

0.02

0.40

Ireland

0.39

0.00

0.39

Finland

0.29

0.05

0.34

Norway

0.32

0.01

0.33

Denmark

0.31

0.00

0.31

Estonia

0.21

0.03

0.24

Latvia

0.20

0.01

0.21

Malta

0.08

0.00

0.08

3.0

Publication and broadcast (millions) 78 65 143 0 2011–12 digital figure is a new baseline for this year

160

2011–12 2010–11 2009–10 2010–11 turnover £128.5m

£20.5m GIA

REDUCING PER CENT GOVERNMENT GRANT

£108m Total other turnover

2011–12 turnover £132.2m

£17.3m GIA

£114.9m Total other turnover

ANNUAL REPORT 2011 –12

Working in the UK and around the world

Middle East and North Africa It has been another extraordinary year of conflict and change across this region. Governments are looking to work with the UK on social, educational and economic reform and individuals have rising expectations and demands. We are helping the UK to respond by working to meet these needs at all levels. Despite a challenging operating environment we have worked face-to-face with more people this year. In December we reopened our office in Libya, organising the first international arts exhibition following the revolution. In Ramallah we reopened to the public in November to begin English teaching. We also opened to the public in Iraq for the first time since 1990, delivering 1,500 examinations as well as English courses for over 200 students. Demand for English as a key skill for employment is vast. We support the development of national policies for English learning, for example working with the Tunisian Ministry of Education on improving the teaching and learning of English throughout the school system. This year we also worked with 4.8 million young learners and teachers – double the number from last year. Around 35,000 learners accessed our online material daily. Our Go4English Facebook page has over 500,000 subscribers with over 100,000 from Egypt alone. Education is also crucial in supporting employability. This year we launched a programme sponsored by HSBC to encourage 25,000 children in 13 countries to improve their English and literacy through reading. Our programme with Rolls Royce to inspire young people to develop scientific and technical skills ran across eight countries. In vocational education our Skills for Employability programme has built institutional links with UK colleges and helped nearly 1.1 million people so far gain marketable skills. Young people have been at the heart of calls for change in the region and are vital to its future. Through our Young Arab Voices programme, funded by the Arab Partnership Initiative, we have helped over 25,000 young Egyptians, Tunisians and Jordanians to develop the debating skills needed to help drive social change and build new institutions.

The great respect and support for the arts in the region helps us to build connections with the UK through our arts programme. Significantly this year we worked with a range of Iraqi partners, including the Salahaddin University, to organise the Erbil Literature Festival. This brought together some of the best contemporary writers from the UK and Arabic and Kurdish writers from Iraq. It also contributed to a much needed rebuilding of trust between the UK and Iraq, adding to the legacy of trust that the British Council has been building for the UK in the region for decades.

Customer satisfaction Score from 0–100 2011–12 2010–11 2009–10

81 80 80 0

100

Participation

Funding data

Total face-to-face (millions) 2011–12 2010–11 2009–10

0.6 0.5 0.4 0

0.7

Digital (millions)

4.9

2011–12

Exhibitions, fairs and festivals (millions) 2011–12 2010–11 2009–10

0.20 0.17 0.16 0

0.25

Publication and broadcast (millions) 5 5 23 0

2011–12 2010–11 2009–10

Other turnover

Total

1.69

13.88

15.57

2.81

11.24

14.05

United Arab Emirates

1.73

10.08

11.81

Qatar

0.65

5.33

5.98

Jordan

1.43

3.96

5.39

Kuwait

0.67

4.14

4.81

Morocco

1.49

2.21

3.70

Bahrain

0.45

2.33

2.78

Oman

0.55

2.04

2.59

ME and NA Region

2.23

0.14

2.37

Tunisia

0.92

1.31

2.23

Palestinian Territories

1.83

0.38

2.21

Iraq

1.33

0.88

2.21

Lebanon

1.04

1.03

2.07

Syria

1.38

0.31

1.69

Libya

1.44

0.04

1.48

Algeria

0.80

0.16

0.96

Yemen

0.55

0.10

0.65

Country

GIA

Saudi Arabia Egypt

(£ millions)

Grant-in-aid (GIA) +

Other turnover = Total

2011–12 digital figure is a new baseline for this year

2010–11 turnover £78m

£19.6m GIA

INCREASING PER CENT GOVERNMENT GRANT

£58.4m Total other turnover

2011–12 turnover £82.5m

£23m GIA

£59.5m Total other turnover

ANNUAL REPORT 2011 –12

Working in the UK and around the world

South Asia South Asia is central to the UK’s economic and security agendas. Pakistan and Afghanistan continue to pose significant security challenges. India and Sri Lanka are among fast growing economies in South Asia with whom the UK needs to create fresh links. Huge demand for English, education and arts in the region puts us in a strong position to help create these links and to build trust for the UK. Our work also supports the UK’s development agenda, particularly in Bangladesh, Nepal, Afghanistan and Pakistan. Following the attack on our office in Kabul this year we have been investing significantly in cultural capacity building to support Afghanistan’s new sense of nationhood. We deliver English on a large scale in South Asia by working with policy makers and through digital channels. Our English curriculum reform programme has now reached 15 million pupils across West Bengal. This year we began work with six state governments in India to train around 2,000 teacher trainers. Tens of thousands of people in India and Sri Lanka downloaded our new mobile apps which support English learning and English as a skill for employability. Our eight per cent increase in overall turnover in 2011–12 came mainly from our examinations business. In Pakistan, we delivered over 410,000 English language examinations on behalf of the UK sector, supporting the future prospects of 180,000 Pakistanis and earning £6.8 million in export earnings for the UK. Higher education is expanding rapidly in the region. We signed phase two of the UK India Education Research Initiative in August, a major bilateral agreement which will support academic partnerships between 140 institutions from the UK and India up to 2016. In Pakistan we have now provided leadership training to approximately 90 per cent of the country’s vice-chancellors. We also help young people find a voice in their societies. In Bangladesh we celebrated the 10,000th participant in our programme to help young people address challenges in their communities. Alongside partners, and working with the Bangladesh Parliament we piloted the first ever Bangladesh Youth Parliament. The inaugural session was watched on television by 60 million people. In our Annual Impact Survey 76 per cent of participants who engaged with us through our education and society work reported a significant impact on their professional development.

In the arts we have collaborated with great UK cultural institutions this year. We continued working with the Victoria and Albert Museum and the British Museum to build expertise and leadership in the Indian museums sector, and supported Hay festivals in Bangladesh and India. In Sri Lanka over 40,000 people visited a travelling exhibition to showcase images of Sri Lanka from the British Library collection. The Karachi literature festival attracted over 10,000 visitors in two days, as well as leading literary names from the UK.

Customer satisfaction Score from 0–100 2011–12 2010–11 2009–10

86 85 84 0

100

Participation Total face-to-face (millions) 1.4 1.7 1.4 0

2011–12 2010–11 2009–10

1.8

Digital (millions)1 4.4 0

2011–12

Exhibitions, fairs and festivals (millions) 0.6 0.5 0.4 0

Funding data Other turnover

Country

GIA

India

7.31

19.39

26.70

Pakistan

4.15

19.09

23.24

Bangladesh

2.85

7.31

10.16

Sri Lanka

0.74

7.96

8.70

Afghanistan

2.53

0.49

3.02

Nepal

0.28

2.22

2.50

South Asia Region

0.80

0.07

0.87

Iran

0.35

0.03

0.38

2011–12 2010–11 2009–10

(£ millions)

Grant-in-aid (GIA) +

Other turnover = Total

0.6

Publication and broadcast (millions) 112 171 92 0 2011–12 digital figure is a new baseline for this year

2011–12 2010–11 2009–10

2010–11 turnover £70.1m

MAINTAINING PER CENT GOVERNMENT GRANT

2011–12 turnover £75.6m

180 £17.5m GIA

£52.6m Total other turnover

£19m GIA

£56.6m Total other turnover

Total

ANNUAL REPORT 2011 –12

Working in the UK and around the world

Sub-Saharan Africa Economic growth and abundant resources are attracting huge investment in Sub-Saharan Africa, yet the potential of the region is threatened by governance issues and skills shortages. Our work helps to address these issues and to build cultural and commercial ties between the new Africa and the UK in the face of intensifying competition from countries such as China and India. A big achievement this year was the start of a US $2 milion joint project with Microsoft to transform education in Sub-Saharan Africa by improving ICT skills. Our close relationships with ministries of education across the region have played an important part in this project. So far over 60 digital hubs have been created, each serving up to nine schools. We also launched a significant partnership with Tullow Oil to support up to 110 postgraduates from Ghana and other parts of Africa to study in the UK. In growing economies such as Nigeria we connected young people to the UK and helped them develop muchneeded skills. Our ‘Study in the UK’ Facebook page had a daily reach of over 10,000 last year and saw enquiries about UK education increase by 300 per cent. Over 1,400 people and over 60 UK institutions attended our Education UK exhibition in Lagos. Our DFID Global School Partnerships programme exceeded its target for creating school partnerships despite fluid security situations in many of the countries involved. The overall programme was externally evaluated as ‘outstanding’ this year. In countries with ethnic tensions we work to help bridge divisions. This year we were awarded €430,516 by the European Union to extend our Active Citizens programme in Sudan. This will reach over 100,000 people in 20 communities, supporting local leaders to run social cohesion projects. English is a key skill for development in the region. It is a priority in our newest directorates – Rwanda where our teaching centre achieved double the expected registrations, and South Sudan which chose English as its official language. This year we carried out research into English teaching and learning in Francophone West Africa and are now working with policy makers to address the issues identified. In our Annual Impact Survey this year 79 per cent of people who engaged with us through our English work reported a significant impact on their professional development.

Through our arts work we share UK expertise and help creative entrepreneurs to gain commercial skills. In December we brought together people working in the creative industries in Nigeria and the UK to share ideas and experiences at our Creative Expo Nigeria event. We also supported Zimbabwe to take part in the Venice Biennale for the first time.

Customer satisfaction Score from 0–100 90 85 86 0

2011–12 2010–11 2009–10

100

Participation Total face-to-face (millions) 2011–12 2010–11 2009–10

1.9 1.4 0.8 0

2.5

Digital (millions)1 0.8

2011–12

Funding data Other turnover

Total

2.34

9.65

11.99

3.62

0.04

3.66

Kenya

0.81

2.67

3.48

Sudan

0.94

2.41

3.35

Sierra Leone

0.22

2.93

3.15

South Africa

1.69

1.16

2.85

Ghana

0.74

1.74

2.48

Ethiopia

0.70

0.97

1.67

Zimbabwe

0.95

0.72

1.67

Tanzania

0.57

0.99

1.56

Uganda

0.53

0.82

1.35

Zambia

0.21

1.08

1.29

Mozambique

0.32

0.87

1.19

Senegal

0.60

0.50

1.10

Eritrea

0.07

0.82

0.89

Malawi

0.19

0.69

0.88

Mauritius

0.23

0.59

0.82

Botswana

0.20

0.43

0.63

Cameroon

0.18

0.42

0.60

Rwanda

0.23

0.32

0.55

Dem. Rep. of Congo

0.16

0.22

0.38

Namibia

0.20

0.05

0.25

South Sudan

0.22

0.03

0.25

Country

GIA

Nigeria Africa Region

(£ millions)

Grant-in-aid (GIA) +

Other turnover = Total

Exhibitions, fairs and festivals (millions) 0.21 0.23 0.33 0

2011–12 2010–11 2009–10

0.35

2010–11 turnover £44.6m

Publication and broadcast (millions) 70 73 76 0 2011–12 digital figure is a new baseline for this year

2011–12 2010–11 2009–10

£17.8m GIA

REDUCING PER CENT GOVERNMENT GRANT

£26.8m Total other turnover

2011–12 turnover £46m

£15.9m GIA

£30.1m Total other turnover

ANNUAL REPORT 2011 –12

Working in the UK and around the world

Wider Europe Countries across this region are in transition and are redefining their connections with the rest of the world. High growth economies such as Turkey and Russia are important to the UK’s prosperity and it is in the UK’s interests to support stability and democracy in the region. Trust is an important foundation for this. Our team in Russia worked hard this year to help rebuild trust between the UK and Russia through our arts programme. President Medvedev described our involvement in the Russia Market Focus programme at the London Book Fair and the unveiling of the Yuri Gagarin statue outside our London HQ as ‘a symbol of our good cultural ties’. A total of 682,000 visitors saw exhibitions by William Blake and Henry Moore in Moscow and Antony Gormley in St Petersburg, further strengthening the UK–Russia relationship. A top regional priority is English. We made good progress this year on reaching increasing numbers of learners digitally with 2.2 million learners overall visiting our websites. We launched the British Council’s new English language television programme Word on the Street in Bosnia and Herzegovina, Georgia and Turkey to positive feedback. In the three weeks following the launch, visits to our LearnEnglish website jumped by 55 per cent in Georgia and 41 per cent in Turkey and 120,000 people downloaded our English mobile content. In Ukraine our new in-service training course involved 37,000 teachers. In Uzbekistan, in partnership with the Ministry of Education, we are on course to train every secondary school teacher of English in the country by 2015. Kazakhstan was the first country in the world to use Aptis, the British Council’s new English language test, which contributed to a 19 per cent increase in income from examinations in the region. Turkey achieved a 46 per cent increase in volume for IELTS, the global benchmark assessment test of English language competence. In our Annual Impact Survey, 98 per cent of participants engaging with us through English reported an impact on their professional development with 69 per cent reporting significant impact. Promoting higher education links with the UK is also a priority. This year we worked to help re-establish the UK as Turkey’s preferred higher education partner, engaging over 70 universities in both countries through a higher education/industry research links programme.

We also developed the BIRAX Regenerative Medicine Initiative, to increase collaboration between worldleading Israeli and UK academics. A conference in Israel in November to launch the initiative was attended by 270 experts including 60 scientists from 20 UK universities. We aim to raise £10 million of partnership income to fund 15 joint projects. As well as supporting the UK’s higher education sector this will also help millions of people globally suffering from degenerative diseases.

Customer satisfaction Score from 0–100 2011–12 2010–11 2009–10

87 87 84 0

100

Participation Total face-to-face (millions) 2011–12 2010–11 2009–10

0.4 0.4 0.2 0

0.5

Digital (millions)1 4.0

2011–12

Exhibitions, fairs and festivals (millions) 2011–12 2010–11 2009–10

1.5 2.1 0.6 0

2.5

Publication and broadcast (millions) 36 54 31 0

2011–12 2010–11 2009–10

Funding data Other turnover

Total

3.64

2.88

6.52

0.96

2.51

3.47

Serbia and Montenegro

0.79

2.40

3.19

Russia

2.37

0.12

2.49

Country

GIA

Turkey Ukraine

(£ millions)

Israel

1.16

0.70

1.86

Kazakhstan

0.99

0.64

1.63

Kosovo

0.25

1.24

1.49

Wider Europe Region

1.20

0.01

1.21

Azerbaijan

0.62

Croatia

Grant-in-aid (GIA) +

Other turnover = Total

0.53

1.15

0.59

0.38

0.97

Uzbekistan

0.58

0.38

0.96

Georgia

0.42

0.31

0.73

Bosnia

0.46

0.16

0.62

Armenia

0.30

0.24

0.54

Macedonia

0.26

0.23

0.49

Albania

0.25

0.20

0.45

2011–12 digital figure is a new baseline for this year

2010–11 turnover £25.7m

£15.4m GIA

REDUCING PER CENT GOVERNMENT GRANT

£10.3m Total other turnover

2011–12 turnover £27.7m

£14.8m GIA

£12.9m Total other turnover

ANNUAL REPORT 2011 –12

Governance and good practice

GOVERNANCE AND good practice

Governance Statement This Governance Statement sets out the British Council’s governance, risk and compliance framework and our management of the major risks to the achievement of our strategic objectives from 1 April 2011 to 31 March 2012. We ensure that we have robust governance arrangements in place to promote high performance and safeguard propriety and regularity. We comply with all parts of the Corporate Governance Code as applicable to our status as a charity.

Governance Framework Purpose The purpose of the British Council is to create international opportunities for the people of the UK and other countries and build trust between them worldwide. Principal Address 10 Spring Gardens London SW1A 2BN, UK T +44 (0)20 7930 8466 Legal Status The British Council is registered as a charity under registration numbers 209131 (England and Wales) and SC037733 (Scotland). The British Council was established in 1934 and incorporated by Royal Charter in 1940. A Supplemental Charter of Incorporation was granted in 1993. Patron Her Majesty The Queen Vice-Patron His Royal Highness The Prince of Wales

We contribute to creating stable and secure societies through governance reform and access to skills for employment and enterprise.

Charitable Objects The objects (as defined in its Royal Charter) for which the British Council is established and incorporated are to advance any purpose that is exclusively charitable and that shall: • promote cultural relationships and the understanding of different cultures between people and peoples of the United Kingdom and other countries • promote a wider knowledge of the United Kingdom • develop a wider knowledge of the English language • encourage cultural, scientific, technological and other educational co-operation between the United Kingdom and other countries • otherwise promote the advancement of education. The Privy Council approved the addition of the first of these objects to the Royal Charter on 8 June 2011, together with other changes made to the overall document to reflect the nature, breadth and mutuality of our work today. The Royal Charter can be viewed in full on the British Council’s website. The Trustees have given careful consideration to the Charity Commission’s and Scottish Charities regulator’s general guidance to ensure that there is clear evidence of how the aims of the British Council are carried out through the activities undertaken for public benefit.

ANNUAL REPORT 2011 –12

Relationship with the Foreign and Commonwealth Office The British Council is a public corporation and an executive non-departmental public body. We are sponsored by the Foreign and Commonwealth Office (FCO), from which we have operational independence. The relationship is set out in the Management Statement and the Financial Memorandum.

Organisation The British Council has a group structure including wholly and jointly owned subsidiary undertakings. There is a detailed description of these entities in note 12 to the accounts.

Connected Charities and Organisations The British Council co-operates with many organisations in the pursuit of its charitable objects. Other than related parties, we have no direct relationship with any organisation other than by way of normal contract. We are the sole corporate trustee of a number of small trusts of which the three largest are the United Kingdom 9/11 Scholarships Fund, the Lefèvre Trust and the Sir Shiu Kin Tang Educational Trust.

Board of Trustees The Royal Charter vests all the powers of the British Council in a Board of Trustees. The Board of Trustees are the guardians of the British Council’s purpose and are accountable for the organisation. Sir Vernon Ellis is Chair of the Board. In accordance with the Royal Charter the Board elects trustees following an open recruitment process. Up to two non-British citizens may sit on the Board. Under the terms of the Royal Charter the Foreign Secretary has the right to nominate one trustee to the Board, currently the Permanent Under-Secretary at the Foreign and Commonwealth Office. One trustee place is filled by the Chair of the Wales, Scotland or Northern Ireland Committee, co-opted on a rotating basis for a two-year period. The term of appointment to the Board is three years, with the possibility of re-election for a further three years. The Foreign Secretary approves appointments to the offices of Chair and Deputy Chair. The Chair, Deputy Chair and members of the Board are not remunerated but we reimburse out-of-pocket expenses incurred on British Council business. We may also pay fees if a Board member undertakes work in a professional capacity at the request of the British Council. The Board Code of Practice requires members to declare any interest that may conflict with their responsibilities as Board members. This information is available for inspection.

Governance and good practice

The Royal Charter, which can be viewed on the British Council’s website, gives further detail on membership of the Board. Members of the Board of Trustees and the British Council Country Committees who have served in 2011–12 are on pages 54–55. Country Committees provide advice to the Chief Executive and the country teams. The British Council Board meets six times per year. The Royal Charter establishes a quorum of seven for Board meetings. There is a summary of attendance at this year’s Board and Board subcommittee meetings on page 54. A Board member reviews the effectiveness of the Board annually. Alan Buckle, the Deputy Chair of the Board (with the equivalent status of senior independent director) was responsible for this year’s review. The results were presented to the Board in June 2012. On all measures of Board effectiveness the scores were positive. Areas for further consideration include succession and development plans and the mix of skills and diversity on the Board. We will conduct an external review for 2012–13. This year the Board has worked with the Executive to develop a 2012–15 refresh of last year’s 2011–15 Corporate Plan. The Board and the Executive have committed the organisation to maintaining its original stretching targets for 2015. They have also identified and begun work on five key areas of focus to help achieve those targets. These are, increasing the profile and recognition of our work in the UK, creating new models of presence around the world, building our talent and capability, strengthening our business performance and embedding digital in all we do. There are further details of the Board’s work this year in the Board minutes which are available on the British Council website.

Board delegation and sub-committees The Board of Trustees delegates certain authorities to the Chair and to the Chief Executive, who in turn can delegate them either wholly or partially.

This year, the committee also monitored the management of selected strategic risks, the development of a new travel and expenses policy, the management of trapped and restricted cash, responses to the Bribery Act 2010 and the first year of operation of the Shared Services Centre. Following a self-evaluation completed in February 2012, we will further strengthen training and ways of updating committee members.

Remuneration Committee The Deputy Chair of the British Council chairs the Remuneration Committee. The committee sets annual performance measures and policy for total remuneration and benefits for the Chief Executive and agrees his annual performance evaluation. It also sets policy for remuneration of members of the Executive Board and reviews and agrees their performance evaluation reports, ratings and eligibility for bonuses. The committee considers the impact of its work on remuneration policy for the organisation as a whole and addresses any other matters referred to it by the Board. The full Executive Board remuneration report is on pages 58–61.

Nominations Committee The Chair of the British Council chairs the Nominations Committee. The committee monitors the composition of the Board of Trustees and makes sure that the Trustees provide the expertise and experience needed for the governance of the British Council, as determined by the Board and the Royal Charter. The committee also leads recruitment of the Chair, Deputy Chair and Chief Executive. This year the committee has prepared for the recruitment of a new Deputy Chair and a number of new trustees who will be elected in July 2012.

Executive Board

The Board has three sub-committees: Audit, Remuneration, and Nominations. It delegates certain responsibilities to these sub-committees and receives reports from them.

The British Council’s Executive Board is made up of the Chief Executive and eight Executive Directors and is responsible for the overall strategy, management and performance of the organisation. We fill executive roles through open recruitment and give appointees induction briefings which include our governance arrangements.

Audit Committee

There is a list of Executive Board members who have served in 2011–12 on page 57.

Claire Ighodaro currently chairs the Audit Committee. On behalf of the Board, the committee maintains an overview of risk, control and governance in the British Council, ensuring that the system of internal controls is adequate to deliver regulatory compliance, financial probity and value for money. The committee reviews and monitors the British Council’s risk management processes and its arrangements for ensuring compliance with regulatory and financial reporting requirements. It also agrees a programme for internal audit and considers any other financial or accounting matters that the Board might specify.

Reporting and Accounting arrangements The Trustees are responsible for the preparation of financial statements for each financial year and for keeping proper accounting records in accordance with applicable law and regulations. The Chief Executive is the designated Accounting Officer for the British Council. A full account of the responsibilities of the Trustees and of the Accounting Officer for reporting and accounting is given in the Statement of the Trustees Responsibilities and the Statement of the Accounting Officer’s Responsibilities.

Audit arrangements The British Council’s accounts are audited by the Comptroller and Auditor General by agreement with HM Treasury and are, with the Annual Report, laid in the Library of the House of Commons. The audit fee for 2011–12 was £142,500. Through his staff, the Chief Executive has taken all necessary steps to make himself aware of any relevant audit information and to establish that the auditors are aware of that information. So far as the Chief Executive is aware, there is no relevant audit information of which the auditors are unaware. Auditors Comptroller and Auditor General National Audit Office 157–197 Buckingham Palace Road Victoria, London SW1W 9SP Bankers HSBC 129 New Bond Street London W1A 2JA

Risk assessment Management of Risk The Executive Board is responsible for the management of the risks facing the British Council and for ensuring that we have effective risk management processes in place. The Board of Trustees has ultimate accountability, including responsibility for determining our risk appetite. An Enterprise Risk Management team of specialists in security, business continuity, health and safety, fire safety and risk management is responsible for strengthening our capacity to manage risk. Specialist teams provide support for the management of other areas of risk, including information management and child protection. We provide a range of risk management training and guidance to staff to ensure that they are equipped to manage risks appropriate to their duties and level of authority. The Board of Trustees undertakes an annual review of strategic risks facing the British Council to satisfy itself that these risks have been adequately mitigated. Through the Audit Committee, it also reviews the effectiveness of the risk and control processes in the organisation.

ANNUAL REPORT 2011 –12

Risk and control framework The risk and control framework comprises two elements: • Financial Control Compliance Framework (FCCF) • Enterprise Risk Management Framework (ERMF) Financial Control Compliance Framework The FCCF is the primary tool for monitoring financial control and managing financial risk. It is a global monthly process of assessment of control effectiveness based on validated self-certification against minimum control standards to address key financial risks in the organisation. The consolidation of self-certification returns and the resulting reports ensure that risks and non-compliance issues are identified, tracked and resolved on a timely basis. The framework gives the evidence for the Executive Board, Group Financial Controller, and management at regional and country levels to certify compliance with standards of financial control. Enterprise Risk Management Framework The Enterprise Risk Management Framework comprises a ‘bottom-up’ process for identifying, assessing, controlling and reporting on operational risks by countries and business units and a ‘top-down’ process for managing strategic risks. All countries and business units maintain a risk register. Registers are reviewed and updated at least every quarter and refreshed at the start of each year. Country and business registers are also reviewed at directorate level. The Executive Board revises the Strategic Risk Register annually. A member of the Executive Board is accountable for ensuring that there is effective mitigation for each risk. The Executive Board sets risk tolerances for each strategic risk based on the Statement of Risk Appetite approved by the Board of Trustees. The Enterprise Risk Management team provides a commentary on the risk data from all countries and business units to the Risk Board, which meets quarterly to monitor changes to the British Council’s risk profile, review the mitigation of strategic and operational risks and recommend action to improve mitigation where necessary. The Board also considers reports from the Security, Health and Safety and Information Assurance committees. Embedding risk management The Financial Control and Compliance Framework and the Enterprise Risk Management Framework have been in place since 2009. We will complete an extensive revision of the Financial Control Compliance Framework by June 2012. This will revise financial controls and minimum standards to focus on areas of greatest risk and improve risk and compliance reporting to regional directors and the Executive Board.

Governance and good practice

We have taken a number of steps to embed risk management more fully in our activities during the past year, including risk workshops in overseas directorates and in the UK.

Risk Profile The priorities for risk management in the British Council during the past year included: Eurozone crisis Regional Director European Union led meetings to review the steps being taken to reduce the British Council’s exposure to financial instability in the eurozone and assess the impact of the ongoing crisis on our teaching and examinations businesses, especially in Greece, Italy, Spain and Portugal. The Treasury and Banking team continuously monitor eurozone developments and adjust the British Council’s holdings as necessary to maintain access to euro funds, while managing the security of euro cash held with financial institutions. Our euro currency positions and investments, and the credit ratings of its banks, are reviewed monthly. The British Council’s euro holdings are effectively naturally hedged, with overseas directorates holding sufficient euros generated from teaching and exams receipts to meet short-term expenditure needs. We repatriate any surplus holdings to the UK to support cash requirements in other European Union countries. To date, the impact of the eurozone crisis on the British Council’s teaching and exams business has not been significant. Demand remained reasonably buoyant throughout 2011–12, though there is some concern that the impact of reduced spending power on student registrations may lag behind other indicators. Security and business continuity Political instability, conflicts and natural disasters continue to pose a threat in many parts of the world. During the past year, we maintained operations in Afghanistan and Iraq, but with restrictions on the movement of staff and visitors. Increased terrorist activity in northern Nigeria led to the temporary closure of offices in Kano and Abuja. We withdrew UK staff from Syria in February 2012. Continuing unrest in Bahrain, Egypt, Libya and Tunisia led to some adjustment to activities including occasional short-term closures. On 19 August 2011 a terrorist attack was mounted against the British Council compound in Kabul. The security of the compound provided protection for the staff on site, but the attack cost the lives of 11 Afghan security forces members and a member of the New Zealand Special Forces. We quickly re-established ourselves in the British Embassy compound and are currently developing a secure, permanent base for our operations in Kabul.

We prioritise the safety of our customers, staff and partners through a combination of risk assessments, briefing, training, and the use of appropriate protective measures. Security is an intrinsic element of all premises projects. There is a service level agreement with FCO Estates and Security Division for a rolling programme of inspections of all properties globally. The Security Committee monitors the effectiveness of security arrangements. All countries and business units in the UK must have upto-date business continuity plans in place. Internal Audit validates business continuity arrangements as part of the audit process and sample audits of plans are carried out. In 2011–12, 84 per cent of plans were tested and updated. Following a review of emergency procedures in the light of the political changes in North Africa, we piloted an incident plan template in a number of high risk locations. This provides countries with a simplified, flexible response structure to address the immediate impact of any disruption and focuses on ensuring the safety and security of staff. We will roll out the template globally in 2012–13. Status and tax We continued work last year on the regularisation of the British Council’s status overseas. The status and tax programme aims to establish a robust platform for the growth of income-generating activities and address the reputational and financial risks associated with our status in some countries. We have reviewed status options and agreed preferred solutions for all but one directorate. However, in a number of countries we have had to revisit status solutions because of changes to local legislation or the nature of our business. The status and tax programme is approximately half-way through its five-year implementation phase, with regularisation projects in 30 countries still to be undertaken. In some cases, regularisation may result in demands for back tax payments and we have made provision for this where necessary. A specialist team continues to provide advice on international tax issues and to support the development and implementation of governance arrangements for new entities. Work on regularising the employment related tax status of UK staff working overseas is taking place within the European Union and will be extended to the rest of the global network from 2012–13. We have made further progress on the development of our group structure and the financial and legal framework needed to support it. In 2011–12, new subsidiaries were incorporated in Thailand and Singapore, bringing the total number of subsidiaries in the group to 12, of which two (BC Holdings (UK) Ltd and BC Trading Ltd) are based in the UK. A transfer pricing mechanism which provides a transparent means of charging between different entities is in place. In view of the increased complexity of the group structure and the risks associated with it, we give priority to ensuring that our governance, risk management and control framework is aligned with the new arrangements and remains fit for purpose.

Fraud, bribery and money-laundering The British Council is more exposed to the likelihood of fraud in some parts of the world than in others, particularly in cash economies, and as a consequence may suffer financial loss. We regularly introduce enhancements to processes and controls to prevent and detect fraud, and take our responsibility to minimise any consequential loss very seriously. Despite these measures, the risk of fraud cannot be entirely eliminated. We have introduced an anti-fraud and corruption e-learning programme this year and will complete its global roll-out by May 2012. We have briefed managers on the provisions of the UK Bribery Act 2010 and given them guidance on ensuring compliance. We will launch a bribery and anti-money laundering awareness e-learning programme throughout the organisation by July 2012. Information management The British Council is committed to protecting and using its information securely and effectively, in compliance with our legal obligations and the standards and requirements set out by the Cabinet Office. The Senior Information Risk Owner is a member of the Executive Board and chairs the Information Assurance Committee, which is responsible for monitoring compliance with relevant legislation and the implementation of the Addressing Information Risk programme. Our work in information management focuses on three main areas. Firstly, we are working to ensure the organisation is able to evidence compliance with data protection regulations. Secondly, we are giving priority to minimising the extent of the organisation’s data holdings to reduce redundant information, improve retrievability and deliver efficiency gains. Finally, we have introduced initiatives to ensure greater exploitation of our information assets. In September 2011, an overseas directorate identified evidence of a number of attempts to gain unauthorised access to a British Council system hosting a large quantity of data. One of these attempts was successful and a major incident investigation was immediately triggered. The investigation found no harm was likely to be caused by the breach but recommended that this should be subject to ongoing review. We have since taken additional steps to strengthen the organisation’s IT security arrangements and secure its information assets. In November 2011, a foreign government asked an overseas directorate to provide the names and contact details of recipients of scholarship awards. The details of a small number of award recipients were shared in contravention of corporate policies. The information was subsequently destroyed and an apology given to all affected individuals.

ANNUAL REPORT 2011 –12

We continue to measure progress in improving information management against the standards set out in the government’s Information Assurance Maturity Model (IAMM). As a result of initiatives undertaken through the Addressing Information Risk programme, a number of UK and overseas directorates achieved compliance at Levels 1 and 2 of the IAMM in 2011–12. We continued to pay particular attention to mitigating the information management risks associated with the Shared Services Centre in Noida. During the year, the Centre consolidated its achievement of Level 3 of the IAMM and, in November 2011, obtained independent certification against the international information security standard, ISO 27001. Child protection The British Council works annually with up to nine million children and we are committed to taking all reasonable measures to protect children from abuse. We have a zero tolerance of risk in this area. We benchmark policy and practice against the minimum international child protection standards identified by the Keeping Children Safe Coalition. Key measures taken this year include the appointment of regional leads and in-country child protection focal points; the conclusion of the Child Safe pilot; internal and external mapping of risk to support a phased, risk-based approach to the roll-out of a global Child Safe programme; regional face-to-face training delivered to the child protection network; and the launch of an e-learning course for all staff. All countries have either produced Child Safe action plans or are on target to produce them by June 2012. Health and safety We are committed to providing a safe working environment for our staff, customers and partners. We deliver our duty of care to those who take part in our activities through compliance with health and safety legislation in the countries in which we operate and aim, where practicable, to follow UK standards, guidance and codes of good practice. The Health and Safety Committee reviews health and safety policies and monitors compliance with health and safety standards throughout the organisation. Plans to engage with more people and implement new operating models may increase the British Council’s exposure to health and safety risk. We are addressing this through the development of guidance and training to embed effective health and safety management at all levels in the organisation. We brief all staff on their health and safety responsibilities to a consistent standard through mandatory online training, developed in 2011–12. Regional face-to-face training focuses on staff with health and safety management roles. An annual programme of health and safety and fire audits provides assurance and the global Incident Reporting System enables the organisation to record and review health, safety and fire incidents.

Governance and good practice

In February 2012, there was an electrical fire in the Colombo teaching centre. This caused significant damage to several classrooms. However, there were no injuries to staff or students and the teaching centre was operational the next day. Following the incident, a detailed review of fire safety was carried out, improved fire management arrangements were put in place and additional training was provided for all staff.

We have taken significant steps to address the problems identified during the investigation into contract balances and to ensure similar issues do not recur. Stronger management, a focus on managing projects throughout their entire lifecycle, the closer integration of the finance team in Programmes and Projects with the corporate finance function and continuing improvements in financial systems will mitigate this risk in future.

Shared Services Centre The British Council’s Shared Services Centre (SSC) in Noida, India provides finance transaction processing, IT support and specialised technical services to our global operations. During 2011–12, following a period of service stabilisation after the migration of services from other locations, the SSC enacted a number of service improvement initiatives to address issues relating to bank reconciliations and IT admin rights.

Review of Effectiveness

The SSC operates as a wholly-owned subsidiary of BC Holdings (United Kingdom) Ltd, incorporated under Indian law as BC Management Services Pvt Ltd (BCMS). Services provided by BCMS to the British Council are regulated through a management services sub-contract, licensing and affiliation agreements, and underpinned by agreed service standards and operating level agreements. BCMS has maintained an effective compliance framework to ensure statutory regulatory and legal requirements and corporate standards relating to security, health and safety and risk management are met. The BCMS Board has discharged its responsibilities in line with agreed corporate governance and Indian company law. Recognising its obligations to put in place adequate arrangements for the safe processing of British Council data, the SSC has enhanced its information and data security environment to achieve ISO 27001 certification. Business continuity arrangements are subject to regular testing and review to ensure the continued delivery of critical services. Contract balances In 2010 –11, a detailed investigation of balances relating to contracts managed by the British Council from 2004 to 2007 resulted in a charge of £1.8 million to the Statement of Financial Activities. This year, external specialists carried out further checks on the systems used to manage certain contracts in the period 2000 – 07 and on the financial reporting of these contracts. As a result of these checks, an additional charge of £0.6 million has been recognised in the Statement of Financial Activities for 2011–12 and agreement has been reached over the arrangements for the closure of the contracts concerned.

As Accounting Officer, the Chief Executive has responsibility for reviewing the effectiveness of the system of internal control in the British Council. His review is informed by the work of Internal Audit and members of the Executive Board who have responsibility for the development and maintenance of the internal control framework, and comments and recommendations made by the external auditors in their annual management letter and other reports.

• The Audit Committee, which provides oversight and guidance on the work of Finance and Internal Audit, providing an interface between the organisation and the National Audit Office. • The work of the National Audit Office, as external auditor, supported by PricewaterhouseCoopers as auditor of subsidiaries in the British Council’s group structure, in forming an opinion on the financial statements and in reporting the results of any value for money examination which may be conducted. Based on the above, we are satisfied that this Governance Statement provides an accurate account of the British Council’s governance, risk and compliance framework, and its management of the major risks to the achievement of its strategic objectives during the period 1 April 2011 to 31 March 2012.

The effectiveness of the system of internal control was maintained and reviewed this year through: • Comprehensive operational and financial planning and reporting processes within the organisation. • Policies and procedures, to support the flow of timely, relevant and reliable information across the organisation.

Sir Vernon Ellis Chair of the Board of Trustees 9 July 2012

• Formalised authorisation processes, with the maintenance of delegated authorities covering financial transactions and contracts. • Monthly and year end self-certification by all country and UK directors giving assurance that the organisation’s accounting procedures have been understood and followed. • The work of Internal Audit, which provides an independent and objective opinion on the adequacy of processes on risk, control, governance and finance systems.

Martin Davidson cmg Chief Executive 9 July 2012

ANNUAL REPORT 2011 –12

Governance and good practice

The Board of Trustees

British Council Country Committees

At 31 March 2012 Chair Sir Vernon Ellis ‡ †† Deputy Chair Alan Buckle ‡ †† Global Head of Advisory, kpmg Members Nihal Arthanayake Musician, broadcaster and DJ Martin Bean Vice Chancellor, The Open University (member of Board of Trustees from 12 July 2011)

Simon Fraser cmg Permanent Under-Secretary of State, Foreign and Commonwealth Office (member of Board of Trustees from 6 June 2011) Professor Pamela Gillies ‡ †† Principal and Vice-Chancellor, Glasgow Caledonian University Lord Hall of Birkenhead cbe Chief Executive, Royal Opera House Sue Hoyle obe † Director, Clore Leadership Programme Claire Ighodaro cbe † Independent Director

James Boyle Chair, Scotland Committee

Attendance at Board of Trustees meetings 2011–12

Howell James cbe Corporate Affairs Director, Barclays

At 31 March 2012

Professor Steve Jones Professor of Genetics, University College London

NORTHERN IRELAND COMMITTEE Chair Rosemary Kelly obe ‡

Patrick McKenna † Chief Executive, Ingenious Media plc

Members The Hon. Mr Justice Deeny Rosalie Flanagan Isabel Jennings ‡ ‡ Jim Kitchen Dr Aideen McGinley obe Seamus McKee Professor Anne Moran † Jonna Monaghan Duncan Morrow Trevor Ringland Professor Gillian Robinson Alan Shannon Paul Sweeney

Raoul Shah Founder and Chief Executive, Exposure Secretary Andy Mackay obe

Attendance at Board of Trustees sub-committee meetings 2011–12

Secretary David Alderdice † †

Board Member

Attendances

Apologies

Audit

Attendance

Apologies

Sir Vernon Ellis

25 May

Alan Buckle

22 June

Nihal Arthanayake

10 October

Martin Bean*

20 February

Helen Osborn left the Northern Ireland Committee in March 2012

James Boyle

Remuneration

Simon Fraser cmg*

23 May

Professor Alastair Adair left the Northern Ireland Committee in August 2011

Professor Pamela Gillies

13 December

Lord Hall of Birkenhead cbe

Joan Reilly left the Northern Ireland Committee in September 2011

Sue Hoyle obe

Claire Ighodaro cbe

Howell James cbe

Shona McCarthy finished as Secretary to the Northern Ireland Committee in April 2011

Professor Steve Jones

Patrick McKenna

Raoul Shah

Nominations 13 December

Brian Hanna cbe (Chair) left the Northern Ireland Committee in March 2012

* Joined the Board after the first meeting of the year when Board membership increased from 12 to 14 members

‡

from March 2012

‡ ‡ from September 2011 †

from August 2011

‡ Member of the Nominations Committee

† † from April 2011

†† Member of the Remuneration Committee

† † † from October 2011

† Member of the Audit Committee Board

‡ † from July 2011

SCOTLAND COMMITTEE Chair James Boyle

WALES COMMITTEE Chair Aled Eirug ‡

Members Sir David Edward Professor Dame Joan Stringer cbe frsa Ken Greer Mukami McCrum Dr Dave Reay Professor Petra Wend James Tough Tom Thomson Dawn Ellis Ken Thomson

Members Gary Davies Richard Davies John Howells Euryn Ogwen Williams Berwyn Rowlands Nicholas Bourne ‡ † Laura McAllister ‡ † Ashok Ahir ‡ †

Secretary Dr Lloyd Anderson † † † Sheena MacDonald left the Scotland Committee in April 2011 Professor Alan Walker left the Scotland Committee in September 2011 Paul Docherty finished as Secretary to the Scotland Committee in April 2011 Julia Amour acted as Secretary to the Scotland Committee from April 2011 to October 2011

Secretary Rebecca Matthews Professor Elan Closs Stephens cbe (Chair) left the Wales Committee in March 2012

ANNUAL REPORT 2011 –12

Governance and good practice

Statement of the Trustees’ responsibilities Under the Charities Act 2011 and Charities and Trustee Investment (Scotland) Act 2005, the Trustees are responsible for the preparation of financial statements for each financial year in the form and on the basis prescribed by regulations made by the Secretary of State for the Home Department. The accounts are prepared on an accruals basis and give a true and fair view of the British Council’s income and expenditure, the changes in the charity’s funds and its cash flows for the financial year 2011–12. In preparing those financial statements the Trustees are required to: • observe the accounts direction issued by the Secretary of State for Foreign and Commonwealth Affairs, including the relevant accounting and disclosure requirements • select suitable accounting policies and then apply them consistently

The Trustees are also responsible for safeguarding the British Council’s assets and hence for taking reasonable steps for the prevention and detection of fraud and breaches of law and regulations. Details of any related party transactions undertaken by the Trustees are detailed in note 20 to the accounts.

• prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the British Council will continue in operation. The Trustees’ responsibilities include keeping proper accounting records. These disclose with reasonable accuracy at any time the financial position of the British Council and enable it to ensure that the financial statements comply with Accounting and Reporting by Charities: Statement of Recommended Practice (revised 2005) (SORP) and United Kingdom Generally Accepted Accounting Practice (UK GAAP).

At 31 March 2012 Martin Davidson cmg Chief Executive Jo Beall Director Education and Society (from 1 July 2011) Pippa Greenslade Director Global Human Resources

Statement of the Accounting Officer’s responsibilities

Adrian Greer cmg Director Global Network

The Accounting Officer for the Foreign and Commonwealth Office has designated the Chief Executive as the Accounting Officer for the British Council. The Chief Executive’s relevant responsibilities as Accounting Officer, including his responsibility for the propriety and regularity of the public finances and for the keeping of proper records, are carried out according to Chapter 3 (Accounting Officers) of Managing Public Money.

Mark Robson Director English

• make judgements and estimates that are reasonable and prudent • state whether applicable accounting standards as set in the Government Financial Reporting Manual 2011–12 and statements of recommended practice have been followed, subject to any departures disclosed and explained in the financial statements

The Executive Board

Bidesh Sarkar Chief Financial Officer Graham Sheffield Director Arts (from 9 May 2011) Rebecca Walton Director Partnerships and Business Development (from 1 April 2011)

Sir Vernon Ellis Chair British Council 9 July 2012

John Worne Director Corporate Headquarters Anne Wozencraft Acting Director Education and Society (to 3 July 2011)

ANNUAL REPORT 2011 –12

Governance and good practice

Executive Board remuneration report 2011–12 Executive Board members’ annual salary increases are determined by their performance rating. There are five performance ratings, one being the highest and five the lowest. Performance pay would normally only apply to those rated three or above. Performance is assessed on how far objectives and targets have been met or exceeded in the individual’s performance agreement and how far duties have been completed to standards agreed in the job description. One of the five ratings is then given, which will determine the level of pay award given each year. In 2011–12 Executive Board members did not receive an increase to salary in accordance with the freeze on senior Civil Service pay. In addition, a member of the Executive Board could be eligible for a non-consolidated performance-related payment, as part of their total remuneration, if he or she is successful in meeting a number of targets and objectives. Any bonuses issued to the Executive Board are solely related to performance. This is up to a maximum of 15 per cent of base salary. Bonuses are based on performance levels attained and are made as part of the appraisal process. The bonuses reported in 2011–12 relate to performance in 2010–11. No member of the Executive Board receives any noncash benefits. Executive Board members are initially appointed on a fixed-term contract of three years. The notice period for termination, for either side, is three months. Early termination, other than for misconduct, may result in the individual receiving compensation as set out in the Civil Service Compensation Scheme. Emoluments (salaries, including allowances subject to UK taxation) paid to members of the Executive Board and their pension entitlements are set out on page 60–61. All those individuals are members of the Principal Civil Service Pension Scheme. An overview of retirement benefits can be found below.

Pension benefits are provided through the Civil Service pension arrangements. From 30 July 2007, civil servants may be in one of four defined benefit schemes; either a ‘final salary’ scheme (classic, premium or classic plus); or a whole career scheme (nuvos). These statutory arrangements are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, classic plus and nuvos are increased annually in line with Pensions Increase legislation. Members joining from October 2002 may opt for either the appropriate defined benefit arrangement or a ‘money purchase’ stakeholder pension with an employer contribution (partnership pension account).

(ii) Partnership pension account

(i) Classic, premium, classic plus and nuvos schemes

The accrued pension quoted is the pension the member is entitled to receive when they reach pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over pension age. Pension age is 60 for members of classic, premium and classic plus and 65 for members of nuvos.

Employee contributions are set at the rate of 1.5 per cent of pensionable earnings for classic and 3.5 per cent for premium, classic plus and nuvos. Increases to employee contributions will apply from 1 April 2012. Benefits in classic accrue at the rate of 1/80th of final pensionable earnings for each year of service. In addition, a lump sum equivalent to three years’ initial pension is payable on retirement. For premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike classic, there is no automatic lump sum. Classic plus is essentially a hybrid with benefits for service before 1 October 2002 calculated broadly as per classic and benefits for service from October 2002 worked out as in premium. In nuvos a member builds up a pension based on his or her pensionable earnings during their period of scheme membership. At the end of the scheme year (31 March) the member’s earned pension account is credited with 2.3 per cent of their pensionable earnings in that scheme year and the accrued pension is up-rated in line with Pensions Increase legislation. In all cases members may opt to give up (commute) pension for lump sum up to the limits set by the Finance Act 2004.

The partnership pension account is a stakeholder pension arrangement. The employer makes a basic contribution of between three per cent and 12.5 per cent (depending on the age of the member) into a stakeholder pension product chosen by the employee from a panel of three providers. The employee does not have to contribute but where they do make contributions, the employer will match these up to a limit of three per cent of pensionable salary (in addition to the employer’s basic contribution). Employers also contribute a further 0.8 per cent of pensionable salary to cover the cost of centrally-provided risk benefit cover (death in service and ill-health retirement).

Further details about the Civil Service pension arrangements can be found at www.civilservice.gov.uk/pensions

Cash Equivalent Transfer Values A Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.

The figures include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost. CETVs are worked out in accordance with the Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.

Real increase in CETV This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

ANNUAL REPORT 2011 –12

Governance and good practice

Executive remuneration (continued)

Executive remuneration Salary 2011– 12 (in bands of £5,000)

Salary 2010 – 11 (in bands of £5,000)

Bonus Payments (in bands of £5,000) 2011– 12

Bonus Payments (in bands of £5,000) 2010 – 11

Accrued Pension At Pension Age as at 31 March 2012 (In Bands of £5,000)

Accrued Lump Sum At Pension Age as at 31 March 2012 (In Bands of £5,000)

Real Increase (Decrease) In Pension At Pension Age (In Bands £2,500)

Real Increase (Decrease) In Lump Sum At Pension Age (In Bands £2,500)

CETV at 31 March 2012 (To Nearest £1,000)

CETV at 31 March 2011 (To Nearest £1,000)

Real increase (Decrease) in CETV Funded By Employer (To Nearest £1,000)

Davidson, MS Chief Executive

165 –170

15 –20

60 – 65

180 –185

(0 – 2.5)

(2.5 – 5)

1,237

1,159

(21)

Robson, MW Director, English

140 –145

10 –15

20 – 25

N/A

2.5 – 5

N/A

200

145

Sarkar, B Chief Financial Officer

115 –120

10 –15

15 – 20

N/A

2.5 – 5

N/A

108

85 – 90 (full year equivalent 115 –120)

N/A

0 – 5

N/A

2.5 – 5

N/A

120 –125

10 –15

30 – 35

N/A

0 – 2.5

N/A

399

360

105 –110 (full year equivalent 115 –120)

N/A

0 – 5

N/A

2.5 – 5

N/A

Greenslade, PJ Director, Global Human Resources

110 –115

60 – 65 (full year equivalent 110 –115)

5 –10

N/A

5 –10

N/A

2.5 – 5

N/A

Walton, RH Director, Partnerships and Business

105 –110

40 – 45 (full year equivalent 100 –105)

10 –15

N/A

35 – 40

115 –120

5 –7.5

17.5 – 20

724

566

109

25 –30 (full year equivalent 100 –105)

30 – 35 (full year equivalent 100 –105)

N/A

35 – 40

60 – 65

0 – 2.5

611

586

Greer, A Director, Global Network

105 –110

35 – 40 (full year equivalent 110 –115)

0 –5

N/A

40 – 45

130 –135

2.5 – 5

12.5 –15

864

723

Highest paid Director's total remuneration (in bands of £5,000)

185 –190

Median total

£34,225

£32,650

5.5:1

5.7:1

NAME AND POSITION

Beall, J1 Director Education and Society Worne, JP Director, Corporate Headquarters Sheffield, G2 Director Arts

Wozencraft, AO3 Acting Director, Education and Society

Remuneration Ratio

The above table has been subject to audit. The actuarial factors used to calculate CETVs were changed in 2011–12. The CETVs at 31 March 2011 and 31 March 2012 have both been calculated using the new factors for consistency. The CETV at 31 March 2011 therefore differs from the corresponding figure in last year’s report which was calculated using the previous factors. 1

Appointed 1 July 2011

Appointed 9 May 2011

EB board member until 3 July 2011

Reporting bodies are required to disclose the relationship between the remuneration of the highest-paid director in their organisation and the median remuneration of the organisation’s workforce. The banded remuneration of the highest-paid director in the British Council in the financial year 2011–12 was £185,000 – £190,000 (2010 –11, £185,000 – £190,000). This was five times the median remuneration of the workforce, which was £34,225 (2011–12). The calculations have been made based on the total salary of UK appointed staff. It does not include employer pension contributions or the cash equivalent transfer value of pensions, or the salaries of staff appointed overseas. The membership of the Remuneration Committee is included in the full membership list of the Board of Trustees.

Martin Davidson cmg Chief Executive Accounting Officer 9 July 2012

ANNUAL REPORT 2011 –12

Governance and good practice

Equal opportuntity and diversity Equality and diversity are integral to the British Council’s work in cultural relations. This year we continued to invest in making equality and diversity part of everything that we do. In 2011–12 we revised our diversity strategy. This now has three main objectives – to develop capability and leadership, to foster inclusion and to measure our performance, impact and compliance with legal requirements.

Our people

Equality monitoring We set equality targets for our most senior management group. Performance over the last three years is as follows:

Category Minority ethnic* Women Disabled

As at 31 March 2010

As at 31 March 2011

As at 31 March 2012

2013 Target

5.6%

7.7%

7.4%*

12%

20.4%

27.8%

28.6%

44%

Diversity Assessment Framework

* known ethnicity (in 2011–12, two staff withheld ethnicity data at this pay band)

We also simplified and improved our Diversity Assessment Framework (DAF) which measures how well we embed equality and diversity into our work. The DAF now concentrates on measuring the things that we have learned are the most significant indicators of good performance.

The mix of UK-contracted staff at all grades as at 31 March 2012 is as follows:

We also changed the DAF from a five level scale to a ten indicator system. For 2011–12 we achieved level 7 overall, falling just short of our organisational target of level 8. There were, however, some very strong regional performances, notably from Wider Europe and South Asia who exceeded the target and from East Asia who met it. There were also good performances from individual countries experiencing very significant challenges in their operating environments such as Afghanistan and Syria. The DAF also identified some excellent diversity-themed British Council programme work such as the Australia Accelerate Leadership Programme for Indigenous leaders. This programme addresses the under representation of Indigenous Australians in positions of influence within the creative sector and mainstream media.

Impact of our work externally We also received external acknowledgement of our work this year. A project run by the Directorate of Immigrants in the Ministry of Labour in Spain selected the British Council’s office there as a success case in equality and diversity. This led to our inclusion in the ‘Guide for the Management of Diversity in Professional Environments’ which will support organisations to introduce and implement equality and diversity in their work. In Mauritius the British Council was the only nonMauritian organisation to win an HR Excellence Award, with our Diversity Assessment Framework receiving particular recognition.

Category

Total number

% of workforce

2.9%

Minority ethnic

150

14.4%

Women

538

51.5%

Disabled

Note: These figures are based on all 1,045 staff, of whom 12 staff have not provided ethnicity data and five staff have not provided data regarding whether they are disabled or not.

Disabled employees We are committed to attracting disabled people to work with us and to ensuring disabled employees are able to progress and develop their careers. We display the ‘Positive about Disabled People’ double tick symbol on our recruitment advertisements and our web pages. This aims to encourage disabled people to apply to work with us and reflects our commitment to existing employees. We guarantee an interview to all disabled people who meet the required criteria and make reasonable adjustments to help support the full participation of disabled people. Our internal Disability Working Group and external Disability Advisory Panel are a valuable resource in promoting understanding and awareness, supported by training and development materials and initiatives.

In 2011–12 we have concentrated on building the staff talent, capability and flexibility that we need to achieve our 2015 Corporate Plan. We are: • building skills and capability in critical areas, such as English and education • increasing our capability in newer disciplines such as commercial, partnership and digital working • continuing to develop our leadership and management skills. We are doing this through a development programme and targeted training and mentoring of staff. To support our future growth we are also investing in an intern and graduate programme. With the continuing contraction of some roles and changes in the skills we need as an organisation, we are running two managed exit programmes at senior and middle management level.

Staff survey Our 2011–12 staff survey was completed by 5,216 colleagues, up from 5,088 in 2010 –11. The overall response rate is up from 67 per cent to 69 per cent. This continues to be a significantly higher return rate than in most public and private sector organisations. Our staff engagement index is up from 62 per cent in 2010 –11 to 66 per cent. This increase was spread across all overseas regions and UK departments. In comparison with the previous year we saw an increase in optimism and confidence about the organisation from our staff. Particularly strong scores in comparison with both public and private norms were:

Areas where we need to improve are: • management of change • understanding what happens as a result of the survey • fairness of pay in comparison to other organisations. The Executive Board will continue to address the concerns of staff in 2012–13. Next year, following widespread consultation, we have agreed to focus the survey on specific action areas only. We will repeat the full staff survey in 2014.

Consultation with staff We recognise the value of staff involvement in trade unions and staff associations. In countries where we operate we consult with staff according to local practice and legislation. In EU countries we discuss transnational European issues through the European Works Council. Managers are responsible for consulting with trades unions, staff associations and individual staff on proposals for change which have significant implications for staff. We send a monthly briefing to all managers, a weekly bulletin to all staff and encourage debate and discussion of issues face-to-face and online.

Absence monitoring The British Council monitors sickness absence in the UK, through Absence Line. Data is analysed monthly to assess trends and inform management. For 2011–12, 1.2 per cent of staff days were lost due to sickness absence. This is an improvement on the 2.07 per cent of staff days lost in 2010 –11.

• understanding of personal and organisational objectives • recognising the need for change • taking responsibility for training and development.

This year we saw an increase in optimism and confidence from our staff.

ANNUAL REPORT 2011 –12

Governance and good practice

Environmental policy As an organisation with a significant physical presence around the world we are committed to reducing the impact we make on the environment. Although climate change affects us all, it creates particularly serious challenges for people in many of the countries where we work. Showing that we understand this helps us to build trust with those countries. By working to reduce our own carbon footprint we demonstrate that we are serious about tackling climate change and its consequences. We are also committed to providing excellent value for the UK. Operating more sustainably cuts costs and makes good business sense. We have a Sustainable Action Plan based on a balance of financial, social and environmental considerations (the ‘triple bottom line’ of sustainability). We will make sustainability a central part of how we manage our premises, our programmes and our people.

Minimising our impact on the environment in the UK

Minimising our impact on the environment overseas

In 2008 we introduced an Environmental Management System (EMS) to improve our environmental performance in the UK. Through the EMS, our six offices in the UK achieved the International Standard for Environmental Management (ISO 14001) in 2010–11.

Overseas, we use our Environmental Framework Tool (EFT) to manage and mitigate the environmental impact of our activities. We assess our progress on a five-level scale starting at level one ‘making a commitment’ through to level five ‘global sustainability leader’.

In 2011–12 we maintained ISO 14001 and reduced UK carbon emissions (including reported emissions from travel) by over 30 per cent compared with 2009–10.

In 2011–12 we set a challenging target that all offices should reach level three ‘making a difference’ by the end of the year. We fell short of that target with 39 per cent of our offices reaching this level, but we have still made good progress in many countries. We reduced our carbon footprint significantly in countries across all regions, for example in Cuba, Ethiopia, Japan, Lebanon, Portugal, South Africa, Ukraine and Germany.

Our report on sustainability performance is in line with the UK government’s ‘Greening government commitments’. This covers our UK estate but does not include travel. As a public corporation we are not required to publish our performance results, but as an organisation committed to reducing our impact on the environment we are choosing to report on key areas this year as below.

Summary of key areas of UK sustainability performance 2011–12 2009 –10 performance

2010–11 performance

2011–12 performance

Target for 2014 –15

Carbon dioxide emissions from energy (electricity and gas) in offices

2,254 tonnes of CO2e*

2,041 tonnes of CO2e

1,843 tonnes of CO2e

Reduce CO2e by 25 per cent to 1,690 tonnes compared with 2009 –10 baseline.

Water consumption**

9,170 cubic metres*

8,770 cubic metres

9,515 cubic metres

Reduce water consumption by 15 per cent compared with 2009 –10 baseline.

Waste arising

124 tonnes*

140 tonnes

130 tonnes

Reduce overall waste arising (general and recycled) by 25 per cent to 93 tonnes compared with 2009 –10 baseline.

Recycling

36 per cent of waste arising

45 per cent of waste arising

36 per cent of waste arising

Divert waste from landfill by increasing recycling by 20 per cent to 56 per cent compared with 2009 –10 baseline.

Impact

Note: CO2e represents equivalent carbon dioxide. * The ‘Greening government commitments’ require us to use a 2009–10 baseline, however, the first year we could obtain data from all six of our UK offices was 2010 –11. ** Data for Belfast, Cardiff and Edinburgh (no sub-meters), is based on extrapolated data.

Sustainability in our global estate Sustainability is a part of both our premises management and our building projects. For example, in a refurbishment of premises in Thailand this year we introduced flexible smart working zones and rooms which could be operated independently. This saved on lighting and air conditioning and contributed to an estimated 30 per cent drop in energy consumption. In Chittagong, Bangladesh we relocated to a new building, reducing the area we had previously occupied from 1,254m2 to a more efficient usage of 335m2, but giving us a much higher quality premises.

Our programmes – Low Carbon for Cultural Relations Our Low Carbon for Cultural Relations (LCCR) initiative helps us to manage our carbon impact and also to address environmental issues in the countries where we work. For example, our Americas region reduced their carbon footprint and gave that footprint a monetary value. They then set up an LCCR fund with the equivalent sum to support environmental projects in their region this year. We are aiming to incorporate sustainability into all of our operations, delivering greener programmes that benefit our business as well as the environment.

As an organisation with a significant physical presence around the world we are committed to reducing the impact we make on the environment.

ANNUAL REPORT 2011 –12

Finance review and accounts

FINANCIAL REVIEW AND ACCOUNTS

Financial review Summary of results • For every £1 of government grant we generated an additional £3.09 from other sources, up from £2.65 the previous year. • We increased our overall turnover by £46 million compared with last year despite the cut in our government grant. • Though earned income went up by nearly 12 per cent we fell short of the tough income target we set ourselves in the Corporate Plan by £14 million. • We met our efficiency and savings targets of £26 million and made cuts which enabled us to live within our means.

Turnover for our contracts business rose slightly compared with last year though it was below our target. The loss of the FCO Chevening contract was disappointing but overall, our ‘win rate’ for new contracts, compared with proposals submitted, doubled in 2011–12 compared with 2010 –11. We also had a higher value of contract wins last year – £45 million – the best result in at least seven years. The economic environment overall remains extremely challenging. Partnerships income in particular did not meet its target though we entered into several significant new partnerships in 2011–12.

Percentage split on total income of £739 million

Income received 2011–12 The Foreign and Commonwealth Office (FCO) government grant went down by five per cent from £190.1 million in 2010–11 to £180.5 million in 2011–12. This fall was in line with the Spending Review Settlement of October 2010. Total income, however, went up by seven per cent (£46 million) compared with the previous financial year. This increase came from fees and income from paid services, in particular our examinations business which performed strongly. Examinations income grew by 18 per cent compared with the previous year and exceeded the Corporate Plan target by £12 million. Our teaching business grew by six per cent despite the challenges of operating in countries affected by the political changes in North Africa, though it fell short of the Corporate Plan target.

We share the UK’s world-class arts and creative industries with countries around the world and we learn from each other.

59% | £432 million Fees and income from services 25% | £184 million Voluntary income (grants receivable) 15% | £111 million Contract activity 1%

| £12 million Other income

ANNUAL REPORT 2011 –12

Finance review and accounts

Resources expended 2011–12

Efficiency savings and cuts

Reserves policy

Grant-making policy

Total expenditure for the year went up by eight per cent (£55 million) to £720 million compared with last year reflecting the growth in income and the release of additional funds for programmes towards the end of the year.

We achieved our savings target of £26 million on grant costs in 2011–12. This was mainly achieved through:

The Trustees approved an updated reserves policy in June 2012. It provides greater transparency and aligns the presentation of the British Council’s unrestricted funds in the consolidated accounts with the intended use of those funds.

Part of our charitable activity is undertaken by making grants to individuals and organisations to facilitate their participation in events, schemes or programmes set up to achieve our objectives. The grants are made to successful applicants, both from overseas and the United Kingdom, who fulfil the published criteria for each scheme and who are best suited to deliver the objectives of the activity.

As part of the UK’s commitment to Overseas Development Assistance (ODA) we were required to spend £90.8 million of our FCO grant on development activity in ODA eligible countries as defined by the OECD. We exceeded this target by £1 million, spending £91.8 million of our grant on development projects.

Split of expenditure by our charitable objects

• Our programme to create a more efficient and responsive network overseas with new lighter models of operation particularly in lower priority countries; this programme aims to minimise any closures but some office or even country closures are inevitable, with Cameroon and Eritrea closing this year • Continuing headcount reductions in the UK • Making more use of the Global Shared Services Centre in Delhi, which continues to take on more support functions for the worldwide network • Continuing efficiency improvements through, for example, the renegotiation of corporate contracts and the ‘better buying’ initiative in overseas regions • Planned reductions in some operational programmes. During the year we also looked for opportunities to achieve efficiency by sharing costs or doing joint procurements with other bodies. We re-tendered the contract for global IT connectivity in 2011–12 with FCO and other government departments.

59% | £420 million Developing a wider knowledge of the English language 22% | £160 million Encouraging educational co-operation and promoting the advancement of education 13% | £95 million Building capacity for social change 5%

| £38 million Encouraging cultural scientific and technological co-operation

| £7 million Governance and tax

One way in which we track efficiency is by looking at the percentage of our total costs which we spend on our operating platform each year. This was 17 per cent last year, down from 18 per cent in 2010–11 and 19 per cent the year before that. We aim to be down to 15 per cent by 2014–15.

Fair trading We have a fair trading policy to ensure that our trading activities are at all times conducted fairly and in accordance with relevant legal requirements. We maintain a robust accounting firewall to ensure that our use of grant funds does not result in any distortion of competitive markets. This accounting process is supported by a global transfer pricing policy that reflects the principle that transactions between the different legal entities within the group should be conducted on an arm’s length basis.

The policy establishes a minimum level of funds (£49 million with effect from 31 March 2012) to be maintained in the Risk Reserve to protect the British Council from the potential financial impact of business risks and of status and tax risks. The policy also designates funds for use in specific planned investment projects during 2012–13. These funds will be applied to: • First to a Risk Reserve: representing a minimum level of funds required to protect the British Council from the potential financial impact of business risks and status and tax risks. • Then to an Investment Fund: representing funds earmarked for use on planned investment projects. The investment fund will be applied to: −− growth and impact projects to increase future impact, revenues or surpluses −− efficiency and capability projects that reduce cost or increase our ability to meet our objectives. Under the updated reserves policy, if a balance remains within the General Account after the designation to the Risk Reserve and the Investment Fund, it remains deployable at the discretion of management in line with the British Council’s corporate targets. The Management Board will review the current and projected level of unrestricted funds and investment plans each quarter to ensure that the British Council retains sufficient unrestricted reserves to provide cover against financial risks that may materialise. The target levels of designated funds within the scope of the reserves policy will be recalculated at least annually to take account of our targets, the latest assessment of risks and opportunities, the financial out-turn and projections for the following year. The British Council must manage its affairs to ensure that the level of reserves and associated cash balances related to activity substantially funded by the government grant are kept at an acceptable level in accordance with its responsibilities under Managing Public Money.

Information on payment policy The British Council’s payment policy in respect of thirdparty creditors is to settle on the contractual payment date or within 30 days from the date of the invoice receipts, provided that the relevant goods and/or services have been supplied. During the financial year 2011–12, 98 per cent (2010–11: 95 per cent) of valid invoices were paid within this target period. This figure includes payments of grants and stipends. The total number of payment transactions processed in 2011–12 was 117,142 (2010–11: 114,973). These figures relate only to UK activity. Trade creditor days for the British Council for the year ended 31 March 2012 were 27 days (2010 –11: 26 days) based on the ratio of trade creditors at the end of the year to the amounts invoiced during the year by the trade creditors.

Estates management Our global estate supports our work worldwide. We manage our property assets with the aim of improving the cost-efficiency, effectiveness and sustainability of the estate over time, and of measuring its performance against external property and commercial benchmarks. We make decisions on property acquisitions, lease renewals, refurbishments or disposals to support the priorities agreed in the Corporate Plan or to address specific health and safety, security or maintenance issues. The British Council’s overseas estate comprises 260 commercial properties in 109 countries plus a small number of residences. The majority of the overseas properties are leased rather than owned to keep fixed costs low and to give greater flexibility. In the UK, we have large premises in London and Manchester, together with smaller regional offices in Cardiff, Edinburgh and Belfast. All the UK properties are leased.

ANNUAL REPORT 2011 –12

Finance review and accounts

The audit report of the Comptroller and Auditor General to the Trustees of the British Council I have audited the financial statements of the British Council for the year ended 31 March 2012. The financial statements comprise: the Consolidated Statement of Financial Activities, the Consolidated and British Council Balance Sheets, the Consolidated Cash Flow Statement and the related notes. These financial statements have been prepared under the accounting policies set out within them. I have also audited the information in the Remuneration Report that is described in that report as having been audited.

Respective responsibilities of the Board of Trustees, Chief Executive and auditor As explained more fully in the Statement of the Trustees’ Responsibilities and the Statement of Accounting Officer’s Responsibilities, the Board of Trustees and the Chief Executive as Accounting Officer are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. I audit under section 43 of the Charities Act 1993 and section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act 2005 and report in accordance with those Acts. My responsibility is to audit and express an opinion on the financial statements in accordance with relevant legal and regulatory requirements. I conducted my audit in accordance with International Standards on Auditing (UK and Ireland). Those standards require me and my staff to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the British Council’s and the group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Trustees; and the overall presentation of the financial statements. In addition, I read all the financial and non-financial information in the Annual Report to identify material

inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies I consider the implications for my report. I am required to obtain evidence sufficient to give reasonable assurance that the expenditure and income funded by grant-in-aid have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Opinion on regularity In my opinion, in all material respects the expenditure and income funded by grant-in-aid have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Opinion on financial statements In my opinion: • the financial statements give a true and fair view of the state of the group’s and of British Council’s affairs as at 31 March 2012 and of its incoming resources and application of resources for the year then ended • the financial statements have been properly prepared in accordance with the Charities Act 1993; the Charities and Trustee Investment (Scotland) Act 2005 and regulation 8 of the Charities Accounts (Scotland) Regulations 2006 (as amended) and Secretary of State directions issued thereunder.

Opinion on other matters In my opinion: • the part of the Remuneration Report to be audited has been properly prepared in accordance with the Charities Act 1993 and Secretary of State directions; and • the information given in ‘Our Performance in 2011–12’; ‘Governance Statement’; and ‘Financial Review’ included within the Annual Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which I report by exception I have nothing to report in respect of the following matters which I report to you if, in my opinion: • proper and adequate accounting records have not been kept or returns adequate for my audit have not been received from branches not visited by my staff; or • the financial statements and the part of the Remuneration Report to be audited are not in agreement with the accounting records and returns; or • I have not received all of the information and explanations I require for my audit; or • the Governance Statement does not reflect compliance with HM Treasury’s guidance. Amyas CE Morse Comptroller and Auditor General National Audit Office 157–197 Buckingham Palace Road Victoria, London SW1W 9SP 11 July 2012

ANNUAL REPORT 2011 –12

Finance review and accounts

Accounts

Charity and Consolidated Balance Sheets as at 31 March 2012 GROUP

Consolidated Statement of Financial Activities for the year ended 31 March 2012

NOTES

UNRESTRICTED

RESTRICTED

2011–12 TOTAL

£’000

NOTES

2010 –11 TOTAL RESTATED £’000

Incoming resources Incoming resources from generated funds 180,500

3,584

184,084

196,161

Investment income

2,777

107

2,884

2,369

Trading income

2,124

1,811

Voluntary income

Funding for contract activity Other incoming resources

428,967 -

Total incoming resources

3,168 111,407

432,135 111,407

386,207 105,054

5,841

5,868

1,361

620,209

118,293

738,502

692,963

2011

2012

2011 RESTATED

£’000

Intangible fixed assets

5,691

5,949

5,660

5,886

Tangible fixed assets

162,243

168,408

161,333

167,796

Heritage assets

84,511

78,381

84,511

78,381

Investments

3,019

3,169

3,049

3,193

255,464

255,907

254,553

255,256

Total fixed assets Current assets Stock

396

346

389

333

12(c)

3,336

3,375

Debtors

67,581

60,512

69,006

61,174

Derivative financial assets

Cash at bank and in hand

252,872

232,915

248,230

228,303

Total current assets

320,849

293,800

320,961

293,212

(189,297)

(189,785)

(186,886)

(188,150)

16(a)

(11,000)

(8,278)

(10,984)

(8,202)

Creditors

Costs of generating funds: Trading expenses

205

297

Cost of activities and grants made in furtherance of the objects: 395,402

24,609

420,011

301,090

Encouraging educational co-operation and promoting the advancement of education

67,377

92,458

159,835

224,483

Encouraging cultural, scientific and technological co-operation

37,876

262

38,138

41,594

Building capacity for social change

94,428

754

95,182

91,907

Developing a wider knowledge of the English language

Short-term provisions for liabilities and charges Net current assets

120,552

95,737

123,091

96,860

Total assets less current liabilities

376,016

351,644

377,644

352,116

(20,527)

(20,211)

(20,479)

(20,133)

355,489

331,433

357,165

331,983

1,789

1,344

1,789

1,344

357,278

332,777

358,954

333,327

74,144

2,660

75,369

Liabilities: amounts falling due after more than one year

Governance costs

6,673

5,950

601,756

118,083

719,839

665,024

Long-term provisions for liabilities and charges

16(b)

Net assets excluding retirement benefits scheme asset Retirement benefits scheme asset/(deficit)

7(i)

Net assets 5

Taxation Total resources expended Net incoming/outgoing resources

369

602,330

118,083

720,413

665,321

17,879

210

18,089

27,642

Transfers Transfer of heritage assets to Restricted funds

2012

Liabilities: amounts falling due within one year

Resources expended

Total resources expended to promote cultural relationships and the understanding of different cultures

BRITISH COUNCIL

Fixed assets

Loan to subsidiaries

Incoming resources from charitable activities Fees and gross income from services and other sources

(47,234)

47,234

Recognition of special trust assets

4,149

Gain / (loss) on revaluation of fixed assets for charity's own use

(938)

(862)

Other recognised gains and losses

Funds and reserves Unrestricted funds General account

Risk reserve

49,000

Investment fund

49,341

Retirement benefits scheme reserve

1,789

1,344

1,789

1,344

Capital account

90,784

97,746

89,802

97,071

Revaluation account

77,149

76,642

77,148

76,642

Heritage assets reserve – unrestricted

Total unrestricted funds

Profit on revaluation of intangible fixed assets for charity's own use

897

1,586

Gain on revaluation of fixed assets for charity's own use – heritage assets

6,028

7,274

Employer pension contributions

118

Actuarial gain / (loss) recognised in the retirement benefits scheme

(859)

Foreign exchange differences arising on consolidation of subsidiaries

239

Net movement in funds

(22,944)

47,444

24,500

38,930

Funds brought forward at start of year

328,257

4,520

332,777

293,847

Funds carried forward at end of year

305,313

51,964

357,277

332,777

37,250

78,381

37,250

78,381

305,313

328,257

306,990

328,807

118

4,520

Restricted funds Other restricted funds

Endowment funds

4,585

4,520

4,585

Heritage assets reserve – restricted

47,261

51,964

4,520

51,964

4,520

357,277

332,777

358,954

333,327

Total restricted funds Total charity funds Minority interest Total capital employed

357,278

332,777

358,954

333,327

Approved by the Board of Trustees and signed on its behalf on 9 July 2012. The British Council’s non-consolidated total incoming resources for 2011–12 were £734.6 million (2010 –11: £691.4 million); total resources expended were £715.2 million (2010–11: £662.6 million); and total net incoming resources were £19.4 million (2010 –11: £28.8 million). Restricted activity includes £57 million (2010–11: £49 million) of income and expenditure relating to projects carried out on behalf of the European Commission. Unrestricted fees and gross income from services and other sources includes £6.7 million (2010 –11: £4.9 million) received in relation to European Commission projects. There are no other recognised gains and losses other than those passing through the Statement of Financial Activities. All activities are continuing. The notes on pages 75 to 104 form part of these accounts. 2010 –11 figures have been restated to reflect the business restructure which more closely maps business areas to charitable objects. Please see note 26 for more details.

Sir Vernon Ellis, Chair Trustee

Martin Davidson cmg, Chief Executive Accounting Officer

The notes on pages 75 to 104 form part of these accounts.

ANNUAL REPORT 2011 –12

Finance review and accounts

Notes Consolidated cash flow statement for the year ended 31 March 2012

£’000 Net incoming resources for the year Less: Contribution made to scheme

£’000

18,089 (118)

1 Basis of preparation and consolidation

2010 –11 RESTATED

2011 –12

(118)

£’000 27,642

(130)

17,971

(130) 27,512

Add / (deduct): Interest receivable

(2,884)

(2,369)

Depreciation charge including impairments

10,899

9,228

(Gain)/loss on sale of tangible fixed assets

2,533

(452)

Loss on revaluation of fixed asset investment Donated heritage assets

(27)

Unrealised (gain)/loss on exchange

239

122

636

(50)

(43)

Unrealised gain on revaluation of financial assets (Increase)/decrease in stocks (Increase)/decrease in debtors

(7,069)

27,459

Increase/(decrease) in creditors

(488)

(1,354)

Movement in provisions including short-term element

3,038

(16,798)

(1,367)

Adjustments made to recognise special trust balances

Net cash inflow from operating activities

The Group financial statements consolidate the financial statements of the Charity and its subsidiary undertakings drawn up to 31 March each year. All subsidiaries in the British Council Group have been consolidated under the acquisition method (see note 12). The British Council controls a number of special trusts which are included within the Financial Statements of the British Council (see note 17).

6,218

15,070

24,189

42,582

Returns on investments and servicing of finance Interest receivable Net movement in endowment investments

2,884

2,369 -

(42) 2,842

2,369

Capital expenditure and investments activities Receipts from sales of investments Payments to acquire investments Net movement in endowment investments Payments to acquire intangible fixed assets Payments to acquire tangible fixed assets Payments to acquire heritage assets Receipts from sales of tangible fixed assets

551

(593)

(62)

(8,151)

(9,049)

(75)

(106)

1,152

1,343 (7,074)

Increase/(decrease) in cash

The financial statements for the year ended 31 March 2012 have been prepared on a going concern basis: both the Board of Trustees and management believe that this is an appropriate basis of preparation. (7,874)

19,957

37,077

232,915

195,838

Cash at end of year

252,872

232,915

The notes on pages 75 to 104 form part of these accounts.

No separate statement of financial activities has been presented for the British Council as the British Council has taken advantage of the exemptions afforded by paragraph 397 of the Charities SORP. A summary of all subsidiaries’ results and balance sheets is provided in note 12(b). Intra group transactions are eliminated on consolidation and all income and expenditure figures in the Statement of Financial Activities relate to external transactions only. The results of a joint venture, IELTS Inc., in which the British Council has a long-term interest and over which it exercises joint control, have not been consolidated as they are not material.

Cash at start of year

These financial statements were authorised by the Chair of the Trustees and the Chief Executive for issue on the date that the Comptroller and Auditor General signed the Audit Certificate.

The accounts have been prepared under the historical cost convention modified by the inclusion of certain fixed assets at their current cost. They comply with Accounting and Reporting by Charities: Statement of Recommended Practice (Revised 2005) (the SORP) and other applicable accounting standards; the Charities Act 2011; the accounts direction issued by the Secretary of State for Foreign and Commonwealth Affairs; and with the 2011–12 Government Financial Reporting Manual (the FReM) where this exceeds but does not conflict with the SORP.

2 Accounting policies (a) Contractual income Contractual income earned through the provision of goods and services is recognised on an accruals basis. Incoming resources relating to the future provision of services under contracts are deferred until the services are provided and entitlement to the income is earned. (b) Grants and donations receivable Grant in Aid received from the Foreign and Commonwealth Office is recognised as unrestricted income in the year in which it is received. Income received under other grants and donations is recognised in the Statement of Financial Activities when all of the SORP’s criteria of entitlement, certainty, and measurability have been met by the Balance Sheet date.

(c) Resources expended Liabilities are recognised as resources expended as soon as there is a legal or constructive obligation committing the British Council to the expenditure. All expenditure is accounted for on an accruals basis and has been classified under headings that aggregate all costs related to the category. Grants payable are made to third parties in the furtherance of the charitable objects of the British Council. Grants payable are accounted for when either: • the recipient has a reasonable expectation that they will receive a grant and the trustees have agreed to pay the grant without condition, or • the recipient has a reasonable expectation that they will receive a grant and any condition attaching to the grant is outside the control of the British Council. The cost of developing new products and services is included within resources expended in the year in which it is incurred. All development of new products and services are for primary purpose trading. (d) Classification of expenditure Expenditure in the Statement of Financial Activities is classified under the SORP’s three principal categories: cost of generating funds, charitable activities and governance. Cost of generating funds comprises expenditure associated with generating trading income. Charitable expenditure comprises all expenditure directly relating to the charitable activities of the British Council, resources expended on managing and administering the charity and the support infrastructure in the UK and overseas which enables these activities to take place, but excludes governance costs. Charitable expenditure is analysed between four of the British Council’s charitable objects: • promote a wider knowledge of the United Kingdom • develop a wider knowledge of the English language • encourage cultural, scientific, technological and other educational co-operation between the United Kingdom and other countries • otherwise promote the advancement of education. The British Council also has an overarching charitable object; to promote cultural relationships and the understanding of different cultures between people and peoples of the United Kingdom and other countries, which encompasses the other four objects of the organisation. There is no activity solely attributable to this charitable object in 2011–12. In addition, the notes to the financial statements provide an analysis of expenditure by type.

ANNUAL REPORT 2011 –12

Support costs included within charitable activities are allocated against the charitable objects based on appropriate drivers using a pro rata basis. Drivers (such as financial transaction volumes, staff costs, gross expenditure) have been applied to ‘developing a wider knowledge of the English language’. The balance has then been apportioned between the remaining three categories of charitable activity on a pro rata basis based on total expenditure. The SORP requires separate disclosure of governance costs. These relate to the cost of the public accountability of the British Council and of its compliance with regulation and good practice. Governance costs include relevant directly attributable staff costs as well as legal and statutory audit costs. (e) Taxation For the United Kingdom only, irrecoverable and partially recoverable Value Added Tax (VAT) is charged to the relevant expenditure category or included in the capitalised purchase cost of fixed assets. Where output tax is charged or input tax is recoverable the underlying transactions are brought to account net of VAT. The British Council as a registered charity is exempt from corporation tax on its income and gains falling within Section 505 of the Taxes Act 1988 or Section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that they are applied to its charitable objects. Accordingly, no UK corporation tax has been incurred during 2011–12. Subject to the availability of similar charitable exemption overseas, provision has been made for overseas taxation on the profits of overseas subsidiaries and branches. The British Council’s policy is to comply with all relevant tax legislation and regulations in each country in which it operates, and to co-operate fully with relevant Tax Authorities. The British Council’s tax status, and its liability to tax, varies from country to country according to the activities the Council undertakes. (f) Intangible fixed assets Purchased computer software licences are capitalised as intangible fixed assets where expenditure of £3,000 or more is incurred. Software licences are included at their value to the business by reference to current costs and are amortised at rates calculated to write off the assets on a straight-line basis over ten years or the period of the licence, whichever is shorter. These revaluations take place annually in line with market value. (g) Tangible fixed assets Expenditure on tangible fixed assets is capitalised if: • the cost of the asset, or a group of related assets purchased in bulk, is £3,000 or more • if the costs meet the criteria for capitalisation set out in Financial Reporting Standard 15 – Tangible Fixed Assets.

Finance review and accounts

Fixed asset purchases that cost less than £3,000 are expensed within resources expended in the Statement of Financial Activities in the year of acquisition. Tangible fixed assets, other than freehold land, assets under construction and heritage assets, are depreciated using the straight-line method over their estimated useful lives as follows: Freehold and long-leasehold buildings

30 –50 years

Long leasehold land

term of lease

Building improvements

5 –25 years

Furniture and equipment

4 years

Plant and machinery

7 years

Motor vehicles

4 –7 years

Major IT projects

4 –5 years

Major IT projects include system developments. The useful life for each has been set to end on the expected date of replacement. Assets under construction are not depreciated until brought into operational use. (i) Land and buildings Land and buildings are recognised at a valuation arrived at by DTZ Real Estate Advisors, an external valuer, in accordance with the guidelines issued by the Royal Institution of Chartered Surveyors. These valuations take place every five years. It is not practicable to revalue land and buildings on a yearly basis but land and buildings are reviewed on an annual basis for material impairment. During the year ended 31 March 2009, all freehold and long leasehold land and buildings were revalued by DTZ Real Estate Advisors on the basis of the open market value at 31 March 2009. Subsequent land and building additions have been included at cost. All upward revaluation adjustments for existing properties are held in the revaluation account. When a property is disposed of, the revaluation account is adjusted and any previous revaluation is released to the capital account. (ii) Other tangible fixed assets All other tangible fixed assets are included at their value to the business by reference to current costs and are reviewed on an annual basis for material impairment. The adjustments for current cost accounting revaluation and backlog depreciation include the effect of both upward and downward indices. Upwards revaluations are added to the revaluation account as are downwards revaluations to the extent of previous upwards revaluations. Any excess downwards revaluations are taken to the income and expenditure account before being moved to the capital account.

(h) Heritage assets The British Council’s permanent collection of purchased and donated works of art comprises over 8,400 heritage assets. Where there is a readily ascertainable market value, the British Council’s works of art are recorded on the balance sheet at current valuation. Where no readily ascertainable market value is available, either the initial purchase price or original valuation by the Curator of the collection at the date of donation is used. The Curator carries out valuations of the collection each year as at 31 March. The Curator is a member of the British Council’s staff and a suitably qualified person as permitted under Financial Reporting Standard 30 – Heritage assets. Any gains or losses on the revaluation of heritage assets are recognised through the heritage asset revaluation reserve. As permitted by Financial Reporting Standard 30 – Heritage assets, the British Council’s heritage assets are not depreciated as they have an indefinite life. Any impairment of heritage assets is dealt with in accordance with Financial Reporting Standard 11 – Impairment of fixed assets and goodwill. The policy for acquisition, preservation and management of the art collection can be found on the following website, http://collection.britishcouncil.org/ (i) Fixed asset investments Investments held in subsidiaries and joint ventures are included in the Balance Sheet at the amount invested by the British Council less any impairments (in the case of equity or loans) and any amounts repaid (in the case of loans). Where impairments are identified, they are recognised as an expense within resources expended. Other investments held for continuing use by the special trusts are included at the market value as at the Balance Sheet date. (j) Financial assets and liabilities Financial instruments are any contractual agreements that will give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. All material business arrangements are reviewed to determine the nature of the financial instruments they contain. Financial instruments are recognised on the balance sheet when the organisation becomes a party to the contractual provisions of the instrument. The British Council may hold derivative financial instruments in the form of forward foreign exchange contracts. These are held to hedge the organisation’s exposure to currency fluctuations. Derivative financial instruments are classified as financial assets and liabilities at fair value through profit or loss.

Creditors are recognised at carrying value. Provisions for liabilities and charges are accounted for at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date, discounted to present values where the effect of discounting is considered to be material. Debtors are recognised at carrying value, reduced by appropriate allowances for estimated irrecoverable amounts. (k) Stocks Stocks of items for resale are valued at the lower of historical cost and net realisable value. Replacement cost is not materially different from historical cost. Purchases of consumable items are taken to expenditure as incurred. (l) Gifts in kind Companies, organisations and individuals have provided the use of facilities, equipment and premises mainly supplied at no cost to the donor to facilitate specific activities organised by the British Council. The value of these gifts, which is not considered material, is not included in the accounts. (m) Leases Costs relating to operating leases are charged to the Statement of Financial Activities over the period of the lease. (n) Exchange differences Transactions in foreign currencies are translated into Sterling on a monthly basis at the opening rate of exchange for the period. Current assets and liabilities in foreign currencies are translated into Sterling at the rates of exchange ruling on the Balance Sheet date. Fixed assets are recorded at historical cost or current cost. All exchange differences incurred in the year are taken to the Statement of Financial Activities. (o) Retirement benefits Past and present employees are covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS). This is an unfunded defined benefit scheme. The British Council recognises the expected cost of providing pensions on a systematic and rational basis over the period during which it benefits from employees’ services by payment to the PCSPS of amounts calculated on an accruing basis. Liability to pay future benefits is a charge on the PCSPS rather than the British Council. Certain UK appointed employees, formerly employed by the Central Bureau for Educational Visits and Exchanges, are members of a separate, funded and contributory defined benefit scheme. The expected cost of providing pensions as calculated periodically by independent actuaries is charged so as to spread the cost over the expected average remaining service lives of current employees.

ANNUAL REPORT 2011 –12

For overseas defined contribution schemes, the British Council recognises the contributions payable for the year in accordance with Financial Reporting Standard 17 – Retirement benefits. (p) Provisions and contingent liabilities Provisions are recognised when the British Council has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are discounted to present value where the effect is material. Provision is made for future liabilities on the basis of costs estimated at the balance sheet date in respect of payments to employees in the UK who have retired, or are expected to retire early as part of structured retirement schemes. The British Council is required to meet the additional costs of benefits before normal retirement age in respect of employees who retire under early severance and early retirement schemes. The British Council pays the required amounts annually to the Principal Civil Service Pension Scheme over the period between early departure and normal retirement date. In many overseas offices the British Council operates terminal gratuity schemes for its locally engaged employees. The value of the final payment is based on final salary and length of employment. Full provision is made in the accounts for the British Council’s liability on the basis of service accrued as at the balance sheet date. Where the British Council has significant possible obligations which do not meet the provisions criteria set out in Financial Reporting Standard 12 – Provisions, contingent liabilities and contingent assets, these are disclosed as contingent liabilities unless such disclosure would prejudice seriously the position of the British Council. (q) Revenue and expenditure under contracts or agreements Where the British Council receives funding or income for a specified purpose and can exercise discretion over the use of the funds, the British Council is considered to be acting as principal. In these circumstances, expenditure on activities under contracts or agreements is brought to account when incurred. Revenue is recognised as an incoming resource on the Statement of Financial Activities as an amount equivalent to the expenditure on the activity. The difference between receipts and expenditure is carried forward in the Balance Sheet as debtor or creditor balances depending on the status of the balance for each individual contract or overall client agreement.

Finance review and accounts

Where funds are received by the British Council acting as an ‘agent’ rather than as principal, and the Council transmits those funds to a third party but does not have responsibility for their ultimate application, the resources are not recognised in the British Council’s Statement of Financial Activities or Balance Sheet, in accordance with the SORP. The terms of the contract may require the British Council to collect receipts and pass them on to a third party, or monies may be disbursed by the British Council and subsequently reimbursed by the client. (r) Fund accounting Funds are classified as either unrestricted or restricted. (i) Unrestricted funds Unrestricted funds comprise those funds which the Trustees are free to use for any purpose in furtherance of the British Council’s charitable objects. They are managed in accordance with the British Council’s reserves policy. Unrestricted funds include designated funds where the Trustees, at their discretion, have created a fund for a specific purpose, or where funds are effectively constrained by their application in operational fixed assets. The purpose and any application of designated funds are set out in the notes to the financial statements. (ii) Restricted funds These are funds which are to be used in accordance with specific restrictions imposed by the donor, grant giver or trust deed. Restricted funds include Trust funds that are controlled by the British Council but that have objects narrower than those of the British Council. These funds are separately maintained and disbursed in accordance with the terms of each Trust and terms specified by the funding providers. (iii) Transfers between funds Transfers between funds are primarily not discretionary and are made for statutory accounting purposes. The only discretionary transfers relate to the designation of unrestricted funds previously disclosed within the General Account to the Risk Reserve and the Investment Fund in line with the reserves policy approved by the Board of Trustees.

3 Voluntary income Unrestricted

Restricted

2011–12 Total

£’000

2010 –11 Total £’000

£’000

Foreign and Commonwealth Office Revenue grant-in-aid Capital grant-in-aid

179,370

184,682

1,130

5,400

Total

180,500

190,082

Education grants Grants receivable from: International Inspirations Foundation

1,901

4,550

Department for Education

794

UK Department for Business, Innovation and Skills (BIS)

700

Department of Education, Northern Ireland

336

372

Scottish Government Schools Directorate

325

259

Welsh Government – Education and Skills

228

198

Total grants receivable

3,584

6,079

184,084

196,161

4 Fees and gross income from services and other sources Contract management fee income

Teaching and exams income

Partnership income

other INCOME

2011–12 total

2010 –11 total Restated

£’000

Fees, sponsorship and other income received from activities in furtherance of the objects: 871

367,439

5,519

15,318

389,147

345,303

11,736

18,661

867

31,276

33,079

Encouraging cultural, scientific and technological co-operation

2,481

2,540

1,541

Building capacity for social change

6,148

2,985

9,172

6,284

18,770

367,453

29,646

16,266

432,135

386,207

Developing a wider knowledge of the English language Encouraging educational co-operation and promoting the advancement of education

Total income received to promote cultural relationships and the understanding of different cultures

Included in the above fees and income are restricted resources of £3,168,106. 2010 –11 figures have been restated to (i) move foreign exchange gains of £908,616 to note 6, and (ii) reflect the business restructure which more closely maps business areas to charitable objects (see note 26 for more details).

ANNUAL REPORT 2011 –12

Finance review and accounts

5 Analysis of total resources expended

7 Staff emoluments and related costs (a) Total staff costs: Grants payable £’000

Staff costs £’000

Other direct costs £’000

Support costs £’000

2011–12 TOTAL

2010 –11 TOTAL restated

£’000

Developing a wider knowledge of the English language

537 64,485

Encouraging cultural, scientific and technological co-operation

4,526

Building capacity for social change

Total costs to promote cultural relationships and the understanding of different cultures

54,051

420,011

301,090

11,778

71,854

17,334

14,846

6,988

159,835

£’000 207,573

44,457

38,800

Social security costs

8,911

8,881

Other pension costs

13,008

12,709

1,848

4,261

276,160

272,224

38,138

224,483 41,594

14,285

95,182

91,907

4,391

144

2,138

6,673

5,950

85,655

276,160

263,228

94,796

719,839

665,024

2010 –11 figures have been restated to reflect the business restructure which more closely maps business areas to charitable objects. Please see note 26 for more details. Included in governance costs are fees of £152,500 (2010–11: £155,000) payable to the Charity’s auditors for the audit of the Charity’s Annual Report. Included in the audit fee is £10,000 relating to the audit of the charity for the year ended 31 March 2011. There were no fees paid to the Charity’s auditors in respect of non-audit work.

Included in non-permanent wages and salaries is £26,357,398 (2010 –11: £22,098,000) relating to English language oral examiners, examination markers and invigilators who are paid on an hourly/daily rate. The remaining costs for non-permanent wages and salaries relate to contracted staff who are filling vacant roles.

In addition to the above, also included in other direct costs are amounts in respect of:

Payments for travel and subsistence

2011–12

2010 –11

£’000

Exit package cost band – UK appointed staff

2010 –11 restated

£’000

266

452

5,575

909

5,868

1,361

2010 –11 Number of staff

710

827

Management and administrative (senior managers 238 (2010–11: 250))

4,336

4,370

Teachers

1,790

1,831

6,836

7,028

United Kingdom Management and administrative (senior managers 162 (2010–11: 135)) Overseas

It is not practicable to calculate full-time equivalents as casual staff are employed by the British Council at various times during the year. Casual staff are excluded from the above figures.

Number of compulsory redundancies

Number of other departures agreed

Total number of exit packages by cost band

13,527

12,134

Property rental costs relating to operating leases

24,215

24,522

<£10,000

Depreciation and amortisation charged

10,899

9,228

£10,000 – £25,000

9,167

10,851

£25,000 – £50,000

£50,000 – £100,000

£100,000 – £150,000

Provisions charged to expenditure in year

The property rental costs relating to operating leases are significantly higher than the annual commitments disclosed in note 18 of the accounts as a result of leases under cancellable contracts.

2011–12

2010 –11

2011–12

2010–11

2011–12

2010 –11

£150,000 – £200,000

£200,000 – £250,000

£250,000 – £300,000

£300,000 – £350,000

28,633

563,014

154,462

4,958,913

183,095

5,521,928

Total resource cost (£)

2011–12

2011–12 Number of staff

Total number of exit packages

6 Other incoming resources

Included in the above other incoming resources is restricted income of £26,760.

6,162

22,913

The SORP requires grantmaking charities to identify the amount of support costs associated with grantmaking activity. Due to the dual role played by programme support functions, it is not possible for the British Council to split support costs between activities undertaken directly and grant-making activities.

Total other incoming resources

153,471

41,877

Included in the above resources expended are restricted costs of £118,082,990.

Donated heritage assets

211,952

16,107

Governance costs

Profit on disposal of fixed assets

£’000

Early retirement costs

Encouraging educational co-operation and promoting the advancement of education

(b) The average monthly number of employees during the year was 6,836 (2010–11: 7,028) analysed as follows:

2010 –11

207,936

Wages and salaries – permanent Wages and salaries – non-permanent

Cost of activities in furtherance of the objects:

Foreign exchange gains

2011–12

ANNUAL REPORT 2011 –12

Finance review and accounts

Redundancy and other departure costs for UK appointed staff have been paid in accordance with the provisions of the Civil Service Compensation Scheme (CSCS), a statutory scheme made under the Superannuation Act 1972. Where the British Council has agreed early retirements, the additional costs are met by the British Council and not by the Civil Service pension scheme. Ill-health retirement costs are met by the pension scheme and are not included in the table. Exit package cost band – overseas appointed staff

Number of compulsory redundancies

Number of other departures agreed

Total number of exit packages by cost band

2011–12

159

<£10,000 £10,000 – £25,000

£25,000 – £50,000

£50,000 – £100,000

£100,000 – £150,000

£150,000 – £200,000

£200,000 – £250,000

£250,000 – £300,000

£300,000 – £350,000

108

122

230

1,995,752

1,232,900

3,228,652

Total number of exit packages Total resource cost (£)

Redundancy and other departure costs for staff appointed overseas have been paid in accordance with local terms and conditions of service. Comparative figures for 2010 –11 are not disclosed for overseas exit packages as data was only collated for the first time this year. (d) The Chief Executive’s total actual emoluments plus pension was £228,043 (2010–11: £230,318) comprising salary of £186,883 (2010–11: £189,158), which includes a bonus of £17,500 (2010–11: £19,775), and pension contributions of £41,160 (2010–11: £41,160). The Chief Executive is a member of the Principal Civil Service Pension Scheme. (e) T he following number of employees received annual remuneration falling within the following ranges: 2011–12

2010 –11

Number of staff

£60,000 – £70,000

£70,001– £80,000

£80,001– £90,000

£90,001– £100,000

£100,001– £110,000

£110,001– £120,000

£120,001– £130,000

£130,000 – £140,000

£150,000 – £160,000

£180,000 – £190,000

Of staff with remuneration over £60,000, none (2010–11: one) are a member of a defined contribution pension scheme and 78 (2010–11: 62) are members of a defined benefit pension scheme. Contributions of staff in this range to defined contribution pension schemes during the year were £nil (2010–11: £7,002). (f) Travel expenses reimbursed to four (2010–11: 14) members of the Board of Trustees amounted to £27,311 (2010–11: £34,927). No Trustees or any persons connected with them received any remuneration for their services during the year ended 31 March 2012. (g) The Principal Civil Service Pension Scheme (PCSPS) is an unfunded multi-employer defined benefit scheme but the British Council is unable to identify its share of the underlying assets and liabilities. The scheme actuary valued the scheme as at 31 March 2007. Details can be found in the resource accounts of the Cabinet Office: Civil Superannuation (www.civilservice. gov.uk/pensions). For 2011–12, employer’s contributions of £7,454,914 (2010–11: £7,945,565), were payable to the PCSPS at one of four rates in the range of 16.7 per cent to 24.3 per cent of pensionable pay, based on salary bands. The Scheme Actuary reviews employer contributions usually every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2011–12 to be paid when the member retires, and not the benefits paid during this period to existing pensioners.

Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. Employers’ contributions of £68,913 (2010–11: £63,280) were paid to one or more of a panel of three appointed stakeholder pension providers. Employer contributions are age-related and range from three per cent to 12.5 per cent of pensionable pay. The Employer also matches employee contributions up to three per cent of pensionable pay. In addition, employer contributions of £4,453 (2010–11: £4,726) which is 0.8 per cent of pensionable pay, were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service and ill-health retirement of these employees. Contributions due to the partnership pension providers at the Balance Sheet date were £4,564 (2011: £5,470). Contributions prepaid at that date were £nil (2010–11: £nil). (h) T he British Council operates a number of insured pension schemes for overseas appointed staff. None of these schemes is of a significant size due to the small numbers of staff involved.

Reconciliation of opening and closing balances of the present value of the scheme liabilities

Scheme liabilities at start of period Current service cost Interest cost Contributions by scheme participants Actuarial (gains) / losses Benefits paid and death in service insurance premiums Scheme liabilities at end of period

2012

2011

£’000

11,515

14,014

204

623

632

1,232

(2,636)

(486)

(716)

12,996

11,515

Reconciliation of opening and closing balances of the fair value of the scheme assets

(i) The British Council operates a defined benefit scheme for UK appointed employees formerly employed by the Central Bureau for Educational Visits and Exchanges (CBEVE). Financial Reporting Standard 17 – Retirement Benefits has been adopted. The scheme is closed to new entrants. As a consequence the current service cost calculated under the projected unit method can be expected to increase over time, as the average age of the membership increases. A preliminary actuarial valuation was carried out at 1 April 2011 and updated to 31 March 2012 by a qualified actuary, independent of the scheme’s sponsoring employer. The major assumptions used by the actuary are shown below.

Fair value of scheme assets at start of period Expected return on scheme assets Actuarial gains / (losses) Contributions by the British Council Contributions by scheme participants Benefits paid and death in service insurance premiums Fair value of scheme assets at end of period

2012

2011

£’000

17,225

16,217

980

890

(675)

687

118

130

(486)

(716)

17,177

17,225

The actual return on the scheme assets over the period ending 31 March 2012 was £305,000 (2011: £1,577,000).

The British Council currently pays contributions at the rate of 35.4 per cent of pensionable pay. Member contributions are payable in addition at the rate of five per cent of pensionable pay.

Total expense recognised in the Statement of Financial Activities:

Present values of scheme liabilities, fair value of assets and surplus 2012

2011

2010

£’000

Interest cost

Fair value of scheme assets

17,177

17,225

16,217

Present value of scheme liabilities

12,996

11,515

14,014

4,181

5,710

2,203

Surplus / (deficit) in scheme

Unrecognised surplus

2,392

4,366

995

Asset / (liability) to be recognised

1,789

1,344

1,208

Current service cost

2012

2011

£’000

204

623

632

Expected return on scheme assets

(980)

(890)

Total (income)/expense recognised in the Statement of Financial Activities:

(260)

(54)

ANNUAL REPORT 2011 –12

Finance review and accounts

Statement of total recognised gains and losses

Assumptions

2012

2011

2012

2011

2010

2012

2011

2010

2009

2008

£’000

% per annum

£’000

Inflation

3.30%

3.60%

2.75%

Fair value of scheme assets

17,177

17,225

16,217

16,032

18,109

Salary increases

3.30%

3.60%

4.75%

Present value of scheme liabilities

12,996

11,515

14,014

11,213

13,747

Rate of discount

4.70%

5.50%

4.60%

Surplus / (deficit) in scheme

4,181

5,710

2,203

4,819

4,362

Experience adjustment on scheme assets

(675)

687

278

(3,326)

1,036

(11)

425

116

1,764

515

Difference between expected and actual return on scheme assets: (675)

687

Experience gains and losses arising on the scheme liabilities: (11)

425

Effects of changes in the demographic and financial assumptions underlying the present value of the scheme liabilities:

Allowance for commutation of pension for cash at retirement (1,221)

(1,907)

3,323

Effect of limit on amount of surplus recognised due to some of the surplus not being recognisable 1,974

(4,366)

Total amount recognised in statement of total recognised gains and losses:

None

The mortality assumptions adopted at 31 March 2011 imply the following life expectancies: Male retiring at age 60 in 2012

24.4

Female retiring at age 60 in 2012

26.2

Male retiring at age 60 in 2032

27.6

Female retiring at age 60 in 2032

29.4

Assets 2012

2011

2010

£’000

Equity

7,798

8,285

6,130

Bonds

5,497

5,357

6,892

Property

3,143

3,204

2,903

739

379

292

17,177

17,225

16,217

Total assets

(j) Capita ATL Pension Trustees Limited, independent Trustee to the Scheme, was paid fees amounting to £18,460 (2010–11: £36,290) excluding VAT during the year. Two other Trustees of the Scheme were paid fees amounting to £5,850 (2010–11: £nil) excluding VAT and £1,300 (2010–11: £nil) respectively during the year. Travel expenses totalling £43 (2010–11: £nil) were reimbursed to one Trustee of the Scheme during the year.

(1,043)

Expected long-term rates of return

Cash

The best estimate of contributions to be paid by the British Council to the scheme for the period beginning after 31 March 2012 is £121,894 (2011: £148,703).

None of the fair values of the assets shown above include any of the British Council’s own financial instruments or any property occupied by, or other assets used by, the British Council.

The long-term expected rate of return on cash is determined by reference to bank base rates at the Balance Sheet date. The long-term expected return on bonds is determined by reference to UK long dated government and corporate bond yields at the Balance Sheet date. The long-term expected rate of return on equities is based on the rate of return on bonds with an allowance for out-performance.

8 Grants payable The British Council gives financial support to particular programmes and activities in furtherance of its charitable objects in the form of grants to institutions and individuals. Analysis of the grant recipients by object and category:

£’000

Universities

101

41,901

366

375

42,743

36,726

Other bodies

274

4,483

2,722

5,063

12,542

11,158 11,670

The expected long-term rates of return applicable for each period are as follows: 2012

2011

% per annum

Equity

7.87%

7.79%

Bonds

5.00%

Property

6.50%

7.79%

Cash

3.50%

0.50%

Overall for scheme

6.63%

6.46%

Type of institution

Total 2010 –11

Amount: gain / (loss)

2.75%

Total 2011–12

Amount: gain / (loss)

3.60%

2,211

Total actuarial gains and losses (before restriction due to some of the surplus not being recognisable) Amount: gain / (loss)

3.30%

Building capacity for social change

Amount: gain / (loss)

Experience adjustment on scheme liabilities

Encouraging cultural, scientific and technological co-operation

Amount: gain / (loss)

Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less

Encouraging educational co-operation and promoting the advancement of education

Amount: gain / (loss)

Amounts for the current and previous four years

Developing a wider knowledge of the English language

Charities, NGOs and social enterprises

1,266

9,344

10,610

Schools

10,149

210

10,380

9,323

Colleges

3,471

3,546

4,023

Local government bodies

1,367

317

437

2,121

1,612

Arts and culture bodies

154

440

594

383

Environmental groups

123

385

Religious bodies

139

National and international government bodies

506

Total grants to institutions

377

62,791

3,865

15,706

82,739

75,925

Grants to individuals

160

1,694

661

401

2,916

1,956

Total grants payable to promote cultural relationships and the understanding of different cultures

537

64,485

4,526

16,107

85,655

77,881

ANNUAL REPORT 2011 –12

Finance review and accounts

6,486

Additions / transfers

Disposals

At 31 March 2012

6,486

Amortisation At 1 April 2011 Charge for year

(537) (1,123)

Disposals / transfers

(32)

Revaluations / backlog amortisation

897

At 31 March 2012

Vehicles and plant

Total

£’000

96,168

4,400

79,025

6,720

9,285

12,247

11,085

218,930

Modified cost or valuation At 1 April 2011 (restated) Additions/transfers

Modified cost or valuation At 1 April 2011

Information technology

£’000

Furniture and equipment

SOFTWARE LICENCES

Long leasehold land and property – residential

9 Intangible fixed assets

Long leasehold land and property – non-residential

10 Tangible fixed assets Freehold land and property – residential

The format of the grants payable note has been changed from 2010 –11. The note now shows aggregate amounts by type of institution, rather than by individual body, which gives the reader a more complete picture of the types of organisations that are supported through grant funding from the British Council.

(795)

Net book value

5,370

2,533

277

469

828

1,525

11,055

Transfers of completed assets to additions

(2,344)

(43)

(211)

(306)

(2,904)

Disposals

(1,421)

(368)

(5,863)

(20)

(1,141)

(3,451)

(1,303)

(13,567)

Revaluations (CCA)

(1,398)

1,603

(1,372)

(1,167)

Revaluations

97,773

4,085

75,695

6,977

7,172

11,016

9,629

212,347

At 1 April 2011 (restated)

(3,425)

(142)

(23,134)

(448)

(6,931)

(8,446)

(7,996)

(50,522)

Charge for the year

(1,799)

(82)

(4,748)

(241)

(542)

(1,678)

(686)

(9,776)

Disposals/transfers

102

4,220

1,100

3,409

1,113

9,965

Backlog depreciation (CCA)

481

(665)

413

229

Revaluations

(5,122)

(217)

(23,662)

(675)

(5,892)

(7,380)

(7,156)

(50,104)

At 31 March 2012

92,651

3,868

52,033

6,302

1,280

3,636

2,473

162,243

At 1 April 2011 (restated)

92,743

4,258

55,891

6,272

2,354

3,801

3,089

168,408

At 31 March 2012 Depreciation

At 31 March 2012

5,691

At 1 April 2011

5,949

Purchased computer software licences are capitalised as intangible fixed assets where expenditure of £3,000 or more is incurred. Software licences are included at their value to the business by reference to current costs and are amortised at rates calculated to write off the assets on a straight-line basis over ten years or the period of the licence, whichever is shorter. These revaluations take place annually in line with market value.

Freehold land and property – non-residential

Net book value

Included in the above:

Assets under construction (AUC)

AUC at 1 April 2011

Land and property

Furniture and EQUIPMENT

Information technology

Vehicles and plant

TOTAL

£’000

4,800

444

472

5,765

(2,344)

(43)

(211)

(306)

(2,904)

2011–12 AUC items to be capitalised

2,067

109

315

458

2,949

Total AUC at 31 March 2012

4,523

115

548

624

5,810

AUC items capitalised in 2011–12

Balances on freehold land and property and leasehold land and property at 1 April 2011 have been restated to reflect a transfer of building improvements from the freehold to leasehold category. Included in tangible fixed assets are assets to the value of £19.2 million (2011: £20.4 million) which have been fully depreciated. These assets are still in use and provide value to the business. The British Council considers that the useful lives of its tangible fixed assets remain appropriate. All tangible fixed assets acquired are used to support the British Council’s charitable activities. Freehold and long-leasehold land and buildings are revalued every five years. Freehold and long-leasehold

land and buildings were valued on the basis of open market value for existing use at 31 March 2009 by DTZ Real Estate Advisers, in accordance with the guidelines issued by the Royal Institution of Chartered Surveyors. The British Council has concluded that there was no significant movement in the value of its properties during the year. The Valuation Office carried out an indicative movement review of the land and buildings portfolio as at 31 March 2012. This review was based on a combination of indices, previous assessments and/or a review of the countries economic performance. The outcome of this review indicated that there has not been a material change in the value of land and buildings since the valuation which was carried out at 31 March 2009.

ANNUAL REPORT 2011 –12

The adjustments for current cost accounting revaluation and backlog depreciation include the effect of both upward and downward indices. Upwards revaluations are added to the revaluation account as are downwards revaluations to the extent of previous upwards revaluations. Any excess downwards revaluations are taken to the income and expenditure account before being moved to the capital account. Within the freehold land and properties category, there is one building allocated a useful life of 60 years in 2009 that will expire in 2069. The current book value is £2.0 million (2011: £2.0 million). This is the only property where treatment deviates from the accounting policy.

Finance review and accounts

Fixed asset disposals for 2011–12 include the disposal of British Council property, vehicles, furniture and equipment in Kabul, Afghanistan which were severely damaged or destroyed in a terrorist attack in August 2011. All assets on the premises (with a cost of £1.3 million and net book value of £592,425) have been impaired, fully written off and included in the disposals line in the table above. The British Council currently has assets with a cost of £584,230 and a net book value of £232,991 in Damascus, Syria. The office in Damascus was closed in February 2012 and at the date of the financial statements remains so, without a reopening date confirmed.

The British Council valued its fixed assets in 1994 when changing from cash to resource accounting principles. It is not practical to identify the original cost and accumulated depreciation of those assets included at valuation at that date.

The British Council maintains a permanent collection of works of art which started in 1938 and at present has over 8,400 works. The purpose of the collection is to increase the understanding and appreciation of British art overseas in furtherance of the British Council’s objectives for cultural co-operation. It is not held for investment or resale. Many works have been acquired from emerging artists and on beneficial terms because of the collection’s purpose. The art collection is not depreciated since the assets are considered to have an indefinite life and the residual values of the assets are considered to be either in line with or above costs.

2012

2011 RESTATED

2010 RESTATED

£’000

Modified cost or valuation 1,192

1,034

At 1 April 2011– valuation

77,189

69,915

49,978

Total value at 1 April 2011

78,381

70,949

51,012

Collection additions – purchased

106

Collection additions – donated

6,028

7,274

19,916

At 31 March 2012

84,511

78,381

70,949

Unrestricted

37,250

78,381

70,949

Restricted

47,261

Total

84,511

78,381

70,949

Increase in valuation

Artworks that are purchased by the British Council are held as ‘unrestricted’ on the Balance Sheet as the British Council is free to sell these assets subject to Charity Commission approval. Prior year figures have been restated to remove balances of £2,518,100 relating to works of art that were on a long loan to the British Council.

(a) Subsidiary undertakings

11 Heritage assets

At 1 April 2011 – cost

Artworks donated to the British Council are held as ‘restricted’ on the Balance Sheet as these assets are deemed to be inalienable (i.e. cannot be sold).

12 Investments

Organisation Name

Country of incorporation

Principal activity

Class shares held/% (Charity)

Class shares held/% (Group)

Accounting year end date

BC Holdings Limited

England and Wales

Holding company

Ordinary/100%

31 March

BC English Services Trans-National Limited

Hong Kong

Holding company

Ordinary/100%

31 March

British Council AC

Mexico

Carrying out charitable objectives of the British Council

Ordinary/100%

31 December

BC Trading International Ltd

England and Wales

Raising funds through trading activities

Ordinary/100%

31 March

BCT Events and Promotions India Private Limited

India

Raising funds through trading activities

Ordinary/0.01%

Ordinary/99.99%

31 March

BC Management Services Private Limited

India

Provision of accounting and IT support to the British Council

Ordinary/0.003%

Ordinary/99.997%

31 March

British Council Asociados AC

Mexico

Raising funds through trading activities

Ordinary/100%

31 December

Friends of British Council USA

USA

Fundraising and carrying out charitable objectives of the British Council

31 March

BC Holdings (Thailand) Limited

Thailand

Holding company

Ordinary/100%

31 March

BC Operations (Thailand) Limited

Thailand

Carrying out charitable objectives of the British Council

Ordinary/100%

31 March

BC Language Teaching (Thailand) Limited

Thailand

Carrying out charitable objectives of the British Council

Ordinary/100%

31 March

British Council (Singapore) Limited

Singapore

Carrying out charitable objectives of the British Council

31 March

Friends of British Council (USA) is consolidated as a subsidiary undertaking because the group has the power to exercise dominant influence over the undertaking by virtue of provisions contained in the undertaking’s articles.

• BC Language Teaching (Thailand) incorporated on 11 July 2011.

BC Holdings (United Kingdom) Limited

BC English Services Trans-National Limited

British Council AC

BC Trading International Ltd

BCT Events and Promotions India Private Limited

BC Management Services Private Limited

Investment at 1 April 2011

30,371

100

5,750

961,826

Additions

30,371

100

5,750

961,826

2011–12

£’000

2,962

644

3,128

2,303

Liabilities

(3,029)

(344)

(1,642)

(3,117)

(796)

Reserves

(67)

(277)

(998)

1,507

Assets

Incoming resources / turnover

1,980

2,123

4,083

Resources expended / expenditure

(81)

(153)

(2,944)

(812)

(1)

(3,669)

Net incoming / (outgoing) resources / Profit/(loss)

(50)

(153)

(964)

1,311

(1)

414

(1,311)

Gift aid of profits

The investment at 1 April 2011 in BC Management Services Private Limited has been restated as the balance of £937,000 in the 2010 –11 accounts was incorrect.

Additions

5,000

1,002

1,836,756

1,014,392

Investment at 31 March 2012

5,000

1,002

1,836,756

1,014,392

2011–12

£’000

169

933

2,571

Liabilities

(10)

(101)

(964)

(1,627)

(7)

Reserves

(31)

944

(5)

(b) Financial results of subsidiaries

Investment at 31 March 2012

£ Investment at 1 April 2011

British Council AC and British Council Asociados AC have a year end reporting date of 31 December due to local statutory reporting requirements in Mexico.

• British Council (Singapore) Limited incorporated on 1 February 2012, but remained dormant until 1 April 2012.

British Council (Singapore) Limited

• BC Operations (Thailand) Limited incorporated on 6 July 2011.

BC Language Teaching (Thailand) Ltd

• BC Holdings (Thailand) Limited incorporated on 14 June 2011.

BC Operations (Thailand) Ltd

BC Holdings (Thailand) Limited and British Council (Singapore) Limited are consolidated as subsidiary undertakings because the group exercises dominant influence over these investments, directing their financial and operating policies.

During 2011–12, four new wholly owned subsidiaries were incorporated in Thailand and Singapore.

BC Holdings (Thailand) Ltd

Finance review and accounts

Friends of British Council USA

ANNUAL REPORT 2011 –12

British Council Asociados AC

Assets

246

1,102

1,017

Resources expended / expenditure

Incoming resources / turnover

(1)

(178)

(33)

(1,984)

(7)

Net incoming / (outgoing) resources / Profit/(loss)

(1)

(33)

(882)

1,010

Gift aid of profits

(c) Loans to subsidiaries During the year ended 31 March 2012, BC English Services Trans-National Limited repaid £2,086,000 of the £2,359,822 loan outstanding to the British Council at 31 March 2011. Interest of £47,677 (2010–11: £59,509) was charged on the loan during the year. At 31 March 2012, the balance on the loan was £321,499. During the financial year the British Council made a registered capital investment in the form of an additional loan of £1,941,250 to BC Holdings (United Kingdom) Limited. Interest of £57,720 (2010–11: £13,521) was charged on the loan during the year. At 31 March 2012 the balance of the loan was £3,014,491 (2011: £1,015,521). During the financial year BC Holdings Limited made a registered capital investment in the form of a loan of £10,000 to British Council Asociados AC. Interest of £223 (2010–11: £nil) was charged on the loan during the year. At 31 March 2012 the balance of the loan was £10,223 (2011: £nil).

During the financial year BC Holdings Limited made a registered capital investment in the form of an additional loan of £75,000 to Friends of British Council USA. Interest of £1,150 (2010–11: £nil) was charged on the loan during the year. At 31 March 2012 the balance of the loan was £101,150 (2011: £25,000). During the financial year BC Holdings Limited made a registered capital investment in the form of a Thai Baht-denominated loan of £942,505 to BC Holdings (Thailand) Limited. BC Holdings suffered an exchange loss of £11,642 (2010–11: £nil) on the loan during the year. Interest of £30,057 (2010–11: £nil) was charged on the loan during the year. At 31 March 2012 the balance of the loan was £960,920 (2011: £nil). Interest is charged on all of the above loans at arm’s length rates. Of the loans outlined above, loans to subsidiaries held on the Charity’s balance sheet include only those loans to BC Holdings and BC English Services Trans-National Limited with a total value of £3,335,990.

ANNUAL REPORT 2011 –12

Finance review and accounts

(d) IELTS

(f) Total investments

The British Council has a long term interest in a joint venture, IELTS Inc., over which it exercises joint control. IELTS Inc. is a not-for-profit organisation formed for the charitable and educational purposes of supporting and improving the teaching of English.

GROUP

IELTS Organisation IELTS Inc.

Country of registration

Nature of business Developing, administering and marketing the IELTS examinations

Delaware, USA

Quoted investments

Interest held 33%

Investment in IELTS

At 1 April 2011

217

Programme-related investment

Interest receivable

Loss on revaluation

At 31 March 2012

222

(e) Quoted investments

2010 –11 Restated

2011–12

2010 –11 Restated

£’000

222

217

222

217 2,946

2,797

2,946

2,797

Investment in subsidiaries

3,019

3,169

3,049

3,193

2010 –11 balances have been restated to reflect investments held by the special trusts controlled by the British Council that have been included for the first time in 2011–12.

13 Debtors (amounts falling due within one year) (a) Analysis by type:

2012

2011 Restated

£’000

2011–12

2010 –11 Restated

2011–12

2010 –11 Restated

£’000

29,377

26,845

30,266

27,915

323

1,987

303

2,002

5,829

6,989

5,477

6,729

Balances resulting from activity under contracts and agreements

14,723

14,609

14,723

14,609

17,329

9,963

17,018

9,800 119

2,946

3,458

Purchases during the year

593

972

Disposals during the year

(736)

(1,606)

Net realised / unrealised gain / (loss)

2011–12

2012 £’000

Exchange differences

BRITISH COUNCIL

BCT Events and Promotions

Total

Market value as at 1 April

GROUP

Trade debtors VAT debtor Other debtors

BRITISH COUNCIL

(6)

122

Market value at 31 March

2,797

2,946

Prepayments and accrued income

Historical value at 31 March

2,431

Taxation and Social Security

119

Amounts due from subsidiary undertakings

1,219

67,581

60,512

69,006

61,174

Total investments at 31 March

Held in the United Kingdom

Held outside the United Kingdom

All quoted investments are held by the special trusts within restricted funds, are listed on a recognised stock exchange and are valued at market value at the year end.

Total

2010 –11 balances have been restated to reflect debtor balances in the special trusts controlled by the British Council that have been included for the first time in 2011–12. (b) Intra-government debtors: Group 2011–12

2010 –11 Restated

£’000

5,709

9,558

5,757

9,575

Balances with bodies external to UK government

61,824

50,937

Total debtors

67,581

60,512

Balances with UK central government bodies Balances with UK local authorities Balances with UK public corporations and trading funds Total intra-government debtors

ANNUAL REPORT 2011 –12

Finance review and accounts

14 Derivative Financial Assets

2010 –11 balances have been restated to reflect creditor balances in the special trusts controlled by the British Council that have been included for the first time in 2011–12.

The British Council uses forward foreign exchange contracts to reduce exposure to movements in exchange rates. At 31 March 2012 the Council held no open forward foreign exchange contracts (2011: 12 open contracts worth US$12,600,000 in exchange for £7,824,385). 2011–12

2010 –11

£'000

Forward foreign exchange contracts – fair value

Movements in deferred income during the year were as follows: At start of year Income recognised during the year Income deferred during the year At end of year

15 Creditors (amounts falling due within one year)

Group 2011–12

Group 2010 –11

British Council 2011–12

British Council 2010 –11

£’000

77,993

78,020

77,348

78,020

(543,864)

(1,197,424)

(543,219)

(1,198,069)

548,300

1,197,397

546,450

1,197,397

82,429

77,993

80,579

77,348

(b) Intra-government creditors: Group

(a) Analysis by type: Group 2011–12 £’000

British Council 2010 –11 Restated £’000

2011–12 £’000

2010 –11 Restated £’000

Balances with NHS trusts

21,367

18,801

21,590

18,307

Balances resulting from activity under contracts and agreements

36,357

49,635

36,357

49,635

3,313

5,805

2,786

5,735

Taxation and social security Accruals Deferred income Amounts due to subsidiary undertakings Total

Balances with UK central government bodies Balances with UK local authorities

Trade creditors

Other creditors

3,051

2,817

2,714

2,720

42,780

34,734

42,224

34,016

82,429

77,993

80,579

77,348

636

389

189,297

189,785

186,886

188,150

Balances with UK public corporations and trading funds Total intra-government creditors

2011–12

2010 –11 Restated

£’000

4,822

7,311

4,849

7,318

Balances with bodies external to UK government

184,448

182,467

Total creditors

189,297

189,785

ANNUAL REPORT 2011 –12

Finance review and accounts

16a Provisions for liabilities and charges (amounts falling due within one year)

17 Movements on funds and reserves Movement in unrestricted funds

£’000

1,263

671

6,306

8,278

Net amounts paid or utilised in year

(1,817)

(15)

(1,575)

(3,407)

Charged to expenditure

556

4,252

4,884

Movement between short and long term

1,245

At 31 March 2012

1,247

732

8,983

11,000

Net amounts paid or utilised in year Charged to expenditure Movement between short and long term At 31 March 2012

£’000

74,144

1,344

97,746

76,642

78,381

328,257

Net incoming resources for the year

17,879

6,414

(6,341)

(73)

118

(260)

260

Actuarial gain recognised in the retirement benefits scheme

Foreign exchange differences arising in the revaluation reserve – to capital account

340

(340)

239

(961)

961

(75)

Valuation account movement: on general fixed assets

(938)

Valuation account movement: on intangible fixed assets

897

Valuation account movement: heritage assets

6,028

6,028 (47,234)

Nominal transfer to capital and valuation account

16b Provisions for liabilities and charges (amounts falling due after more than one year)

Unrealised loss on exchange

£’000 Balance as at 1 April 2011 (Restated)

Employer pension contributions Total pension expense

Terminal gratuities

Early retirement

Other staff

Legal cases

Other

Total costs

£’000

15,811

4,400

20,211

574

(3,296)

3,343

940

4,283

(1,245)

16,432

4,095

20,527

Terminal gratuities are payments made to a member of local staff at the end of his/her contractual relationship with the British Council. The payments are calculated according to local labour regulations and the Terms and Conditions of service agreed for each country. The British Council makes terminal gratuity payments to its staff in four different circumstances; resignation, retirement, redundancy and early retirement. A provision is raised to meet this liability which accrues over time. The provision has not been discounted as it is a provision at a fixed point in time and timing of future payments are not fixed and cannot be reliably determined. We believe that the majority of this provision will be payable in greater than one year and since the amount payable within one year cannot be reliably determined, this is not disclosed separately.

The provision for early retirement relates to costs to service the number of early retirement schemes offered by the Principal Civil Service Pension Scheme. This provision has been discounted at a rate of 2.8 per cent as per PES 2011 (17). Other provisions include amounts for contract activity losses and taxes. These are not disclosed separately in detail as to do so could impact the probability of the liability materialising.

Foreign exchange differences arising on consolidation of subsidiaries IT CCA revaluation in reval reserve – to capital account Transfer of purchased heritage assets

Transfer to restricted funds: heritage assets Transfer to designated funds Balance as at 31 March 2012

Total

£’000

Heritage asset reserve

Other

£’000

Revaluation account

Other staff

Funds designated from the General Account

Capital account

£’000

Total costs

Retirement benefits scheme reserve

£’000

Legal cases

Investment fund

Early retirement

Risk reserve

Terminal gratuities

At 1 April 2011

General account

(47,234)

(98,341)

49,000

49,341

49,000

49,341

1,789

90,784

77,149

37,250

305,313

The General Account as at 1 April 2011 has been restated to reflect balances totalling £371,260 already included in the British Council charity’s accounts relating to special trusts. They are now included in the restricted endowment reserves below. The Heritage Asset Reserve as at 1 April 2011 has been restated to remove balances of £2,518,100 relating to works of art that were on a long loan to the British Council.

ANNUAL REPORT 2011 –12

Finance review and accounts

Reserves Policy

(i) growth and impact projects that will result in increased future impact, or revenues and/or surpluses

The closing balance of the General Account, and the designation of the Investment Fund, reflect the updated reserves policy approved by the Trustees in June 2012.

(ii) efficiency and capability projects that reduce cost structure and/or increase capability to deliver the British Council’s objectives.

This established a minimum level of funds (£49 million with effect from 31 March 2012) to be maintained in the Risk Reserve to protect the British Council from the potential financial impact of business risks and of status and tax risks.

• Retirement benefits reserve – actuarially assessed net asset/(liability) relating to the British Council’s share of the Central Bureau for Educational Visits and Exchange pension scheme.

The policy also designated funds for use in specific planned investment projects during 2012 –13.

• Capital account – funds applied towards the purchase of tangible and intangible fixed assets other than heritage assets, less accumulated depreciation relating to historic cost.

Designated funds Designated funds and the purpose for which their income may be applied are:

• Heritage asset reserve – funds applied towards the purchase of heritage assets, and the effect of revaluation of those assets. This excludes donated heritage assets which are shown within restricted reserve.

• Investment fund – a designated reserve created from funds transferred from the General Fund representing funds earmarked for use on planned investment in:

Transfer from unrestricted funds

The British Council must permanently maintain the whole of the fund. This is represented by: • Sir Steven Runciman Prize Trust – Annual book prize awarded to a student of the University of Peshawar.

Expendable endowment reserve The British Council has the power to spend the capital related to these trusts for the purpose of the trust. • Lefevre Trust – To promote understanding between UK and France, and the mutual learning of each other’s customs and language through an exchange programme for French and British boys and girls between the ages of 11 and 19.

Movement in restricted funds

Balance as at 1 April 2011 (Restated)

Permanent endowment reserve

The Sir Steven Runciman Prize Trust is not disclosed in a separate Permanent Endowment Reserve as its total reserve balance is £353 which would not appear in the accounts when rounded to the nearest thousand.

• Revaluation reserve – arising from the five-yearly revaluation and the indexation of historical asset values to arrive at a modified historical cost.

• Risk reserve – a designated reserve created from funds transferred from the General Fund that represents a minimum level of funds required to protect the British Council from the potential financial impact of business risks and status and tax risks.

The Permanent and Expendable Endowment Reserves as at 1 April 2011 have been restated to recognise balances in the special trusts controlled by the British Council. An amount of £371,260 was already recognised in the General Account in 2010 –11 and therefore an additional amount of £4,148,830 has been recognised to reflect the opening reserve position.

Income (restricted grants)

Expendable endowment reserve

Heritage asset reserve

Total

£’000

4,520

• Hammond Trust – Provides small grants of up to £500 to students of Asian origin in the UK who are suffering hardship, to help them complete their course of study and return to their country of origin. • De Souza Trust for Goanese Students – Assist education of men and women living in Goa, or born of Goan parents, by the award of scholarships or grants for study in the UK. • The Sir Shiu Kin Tang Educational Trust – To advance the education of postgraduate students from Hong Kong in the UK. The Trust funds one to two scholarships a year. • UK 9/11 Scholarship Fund – Provides scholarships to any child or other dependant of any person who has been killed or permanently injured as a result of the terrorist attack on the World Trade Centre in New York and similar tragedies, for higher education study in the UK. • Dame Nancy Parkinson Bequest – To assist Commonwealth students to purchase books, attend conferences or consult specialist advisers in Britain when this cost could not be met from public funds. • Charles De Gaulle Bursary Scheme – To provide an opportunity for British and French students aged 17–19 to undertake a specific study project relating to the language or culture of the other country.

Unrestricted funds Analysis of group net assets between funds

47,234

Net incoming resources for the year

118

210

Fixed assets

Balance as at 31 March 2012

118

4,585

47,261

51,964

Investments Current assets Current liabilities

Restricted funds

Total funds

£’000

205,184

47,261

252,445

222

2,797

3,019

282,575

38,274

320,849

(163,930)

(36,368)

(200,298)

Amounts falling due after more than one year

(18,738)

Total net assets (excluding minority interests)

305,313

51,964

357,277

100

ANNUAL REPORT 2011 –12

Finance review and accounts

18 Commitments

20 Related party transactions

(a) Capital commitments:

The Council is a non-departmental public body sponsored by the Foreign and Commonwealth Office (FCO).

Contracted expenditure

2012

2011

£’000

1,834

845

The FCO is regarded as a related party. During the year the British Council has had various material transactions with the FCO, most notably the receipt of grant-in-aid as disclosed in note 2(b) and note 3.

Contracted expenditure includes £163,153 (2011: nil) relating to subsidiary capital commitments.

The Council has had a number of material transactions with other government departments and other central government bodies. The most significant have been with:

(b) Specific charitable projects (grants):

To be undertaken in the following year

2012

2011

£’000

• Department for International Development

101

In addition, the British Council has a number of transactions with the British Council Benevolent Fund which provides financial assistance to staff in need in the UK and overseas via charitable donations from current and ex-employees. The British Council has no control over the fund; however the Trustees of the British Council Benevolent Fund are appointed by the British Council Board of Trustees. None of the Trustees, Board members, key managerial staff or other related parties has undertaken any material transactions with the British Council during the year other than as disclosed below.

• Department for Business, Innovation and Skills • Department for Education

Grants to be undertaken in the following year includes £88,872 (2011: nil) relating to subsidiary charitable commitments. (c) Annual commitments under non-cancellable operating leases:

Grants provided and funds disbursed under contracts for the year ended 31 March 2012

Organisation

Trustee / Board Member

Relationship

University College London

Professor Steve Jones Phd

Emeritus Professor

King's College London

Sue Hoyle obe

Visiting Research Associate

671

£’000

Land and buildings £'000

1,943

Other

2012 Total

Land and buildings

Other

2011 Total

Glasgow Caledonian University

Professor Pamela Gillies

Principal and Vice Chancellor

364

£'000

BBC World Service

Nihal Arthanayake

DJ BBC1 and BBC World Service

260

5,150

5,207

4,454

4,467

Open University

6,217

308

6,525

5,030

146

5,176

Vice Chancellor Chair Audit Committee

Between one and five years

Martin Bean Claire Ighodaro cbe

In five years or more

3,129

4,460

Leonard Cheshire Disability

Martin Davidson

Trustee

14,496

365

14,861

13,944

159

14,103

Open University Worldwide Limited

Martin Bean Claire Ighodaro cbe

Vice Chancellor Chair Audit Committee

Tipping Point

Sue Hoyle obe

Husband is Board Member

Southbank Centre

Nihal Arthanayake

Board Member

Brunel University

Lord Hall of Birkenhead cbe

Council Member

Clore Leadership Programme

Sue Hoyle obe

Director and Trustee

The Metropolitan Arts Centre

Colm McGivern

Board Member

In one year or less

Commitments under operating leases to pay rentals during future years are analysed according to the period in which each lease expires.

19 Losses and special payments The following losses have been confirmed during the year: 330 cases, totalling £1,469,870, of losses as defined in Managing Public Money. A charge of £1.8 million was made to the Statement of Financial Activities in the 2010 –11 accounts in relation to historic contract balances, as disclosed in the 2010 –11 Statement on Internal Control. Since the publication of the 2010 –11 accounts, £1,145,261 (176 cases) of this amount has been formally approved as a loss and is included with the loss total above. The balance of £0.6 million remains on the Balance Sheet as a provision. An additional provision of £0.6 million has been made in the 2011–12 accounts in respect of closing contract balances from 2000 onwards. The additional provision will bring the total loss on contract balances to £2.4 million.

There have been 11 cases of commercial losses totalling £64,047. In addition, the British Council made seven special payments, totalling £44,586, to families bereaved as a result of the 2011 terrorist attack on the British Council’s office in Kabul. These payments were approved by both the FCO (on 28 October 2011) and the Charity Commission (on 21 October 2011).

102

ANNUAL REPORT 2011 –12

Some of the Trustees and Board Members of the Council may be related to companies with which British Council has entered into partnerships. There are no undisclosed transactions between the British Council and these partners, however, there may be other indirect benefits or similar.

21 Contingent liability Potential liabilities may arise as a result of the regularisation of the British Council’s status overseas. Related contingent liabilities are not disclosed on the grounds that to do so could seriously prejudice the position of the organisation and impact the probability of the liability materialising. The British Council is estimated to have contingent liabilities of £1.7 million (2010 –11: £1.6 million) in relation to ongoing legal action.

22 Financial Instruments The Governance Statement sets out the British Council’s approach to managing its main financial risks. In addition, the British Council is required to make the following disclosures under the UK Financial Reporting Standard 29. The categories of financial instruments held within the British Council are: • Loans and receivables: the British Council values receivables initially at fair value and subsequently at amortised cost. The British Council does not intend to trade receivables and currently holds no loans other than intercompany loans as outlined in note 12. • Assets available for sale: the only assets that the British Council holds under this category are cash and short-term investments as described below. These are stated in the accounts at fair value. • Financial liabilities: the British Council’s policy is that short-term creditors are recorded at carrying value and long-term creditors are reflected at amortised cost where reasonable timescales exist over which to discount and where this is materially different from carrying value. • Financial assets and liabilities at fair value through profit or loss: the British Council uses forward foreign exchange contracts to reduce exposure to movements in exchange rates. These contracts are carried at fair value, and any gains or losses in fair value are recognised in the statement of financial activities.

Finance review and accounts

Credit risk The British Council is exposed to credit risk on trade debtors over 120 days of £2.3 million (2010 –11: £2.7 million). This risk is not considered significant as a number of these debts relate to European Union projects on which the British Council is protected from financial risk provided criteria are met. In addition, experience in many overseas regions demonstrates that aged debts in this timeframe remain valid and collectable. Bad and doubtful debts are provided for on an individual basis. Write-offs in the year for bad debts amounted to £170,959 (2010 –11: £108,000). Counterparty credit limits, which take published credit rating and other factors into account, are set to cover the total aggregate exposure to a single financial institution. Exposures and limits applicable to each financial institution are reviewed on a regular basis. The British Council has not suffered any loss in relation to cash held by its banks. The counterparty for all forward foreign exchange contracts is the Bank of England.

Liquidity risk Grants from government departments, principally the Foreign and Commonwealth Office, comprise 25 per cent (2010 –11: 27 per cent) of total income of the British Council. The remainder is funded through fees and income from services and competitively tendered contracts. Any liquidity risk is minimal, as overseas current account balances are generally maintained at five weeks’ working capital requirement to ensure sufficient cash for operational activities. Surplus cash is repatriated to the UK where local foreign exchange controls permit, and invested in the UK. Otherwise, surplus funds are invested overseas. All investments are in accordance with the British Council’s investment policy. Non-restricted cash is held on shortterm deposit accounts or money market deposits with a maturity of not more than 12 months at market rates. The British Council is therefore securing interest returns on cash holdings largely held in the UK on a short-term basis. Surplus funds which cannot be repatriated to the UK (due to local foreign exchange controls) are currently invested for periods up to six months. The British Council, as at 31 March 2012, held cash and cash equivalents amounting to £253 million (2011: £233 million), of which £107 million (2011: £94 million) was held in sterling, £69 million (2011: £55 million) was held in euros and £9 million (2011: £16 million) was held in US dollars. Other currency holdings amounted to £68 million (2011: £68 million).

Of the total cash balances of £253 million (2011: £233 million), £81 million or 32 per cent (2011: £74 million, or 32 per cent) was held in overseas bank accounts of which £70 million (2011: £70 million) was held with banks incorporated in the UK and regulated by the Financial Services Authority, £10 million (2011: £4 million), was held with overseas banks outside the UK bank portfolio. Counterparty risks relating to our banks holding balances overseas are reviewed regularly and 98 per cent of all funds are held with banks with an Standard and Poors short term deposit rating of A1 or greater. At 31 March 2012, total interest income amounted to £2.9 million (2010 –11: £2.4 million), of which £0.8 million (2010 –11: £0.4 million) was earned in the UK and the balance of £2.1 million (2010 –11: £2.0 million) attributable to cash invested overseas.

Currency risk The British Council operates in over 100 countries and carries out transactions in sterling, US dollars, euros and a variety of local currencies. The British Council manages its exposure to foreign currency risk on cash balances by maintaining operational funding balances in local currency bank accounts where possible to no more than working capital requirements. Where countries have deregulated foreign exchange controls any excess funds over and above working capital requirements are repatriated to the UK, invested and/or held in convertible hard currency accounts. The British Council operates a foreign exchange forward hedging programme to cover up to 80 per cent of euro and US dollar exposures, the objective being to assist in achieving budget certainty. The British Council’s current US dollar and euro exposures are limited by significant natural hedges. As at 31 March 2012 the notional value of open US dollar forward contracts amounted to £ nil (2011: £7.8 million), The British Council held no open euro forward contracts as at 31 March 2012. Cash held overseas considered to be trapped due to foreign exchange controls amounted to a sterling equivalent of £9 million (2011: £12 million) at 31 March 2012. The British Council is actively seeking ways to manage and limit the effect of foreign exchange gains and losses on cash balances held in those currencies.

103

23 Contract activity as an agent During the year the British Council executed activities under two contracts where the British Council acted as an agent. Resources held and transferred as an agent are excluded from the British Council’s Balance Sheet and Statement of Financial Activities. The resources from these contracts is analysed as follows; 2011–12

2010 –11

£'000

Contract income

14,373

15,291

Contract expenditure

Commonwealth Scholarships

14,373

14,147

Current assets

925

732

Current liabilities

925

732

Matt II Contract income

1,576

1,577

Contract expenditure

1,576

1,577

There were no current assets or liabilities relating to the Matt II contract at the year end.

24 Post Balance Sheet events On 1 April 2012, the British Council’s Singapore and East Asia regional operations were transferred to British Council (Singapore) Ltd, a company limited by guarantee, and registered charity in the Republic of Singapore, in order to comply with local law. British Council (Singapore) Ltd is controlled by the British Council and its results will be consolidated into the British Council’s group financial statements in future periods. If reflected in the financial statements for the year ended 31 March 2012, the impact would have been to reduce the net asset figure in the charity-only balance sheet by £1.

104

ANNUAL REPORT 2011 –12

25 Impact of new charitable object on 2011–12 accounts Following discussion with the National Audit Office, the British Council agreed with the Charity Commission for England and Wales and the Office of the Scottish Charity Regulator that it would be appropriate to add an additional charitable purpose to our Royal Charter. This was approved by the Privy Council in session on 11 June 2011, with the following wording: ‘to promote cultural relationships and the understanding of different cultures between people and peoples of the United Kingdom and other countries’. The additional object encompasses the breadth of the Council’s work in cultural relations and all of its existing portfolio of work and so all income and expenditure is reported against this object. It is designed to allow for future cultural relations programme work which does not fall within the previous four objects. If that occurs in future, the new programme will be reported separately against that object.

26 Restructure of business areas and reporting of income and expenditure against charitable objects The Corporate Plan 2011–15 (‘the Plan’) outlines the British Council’s strategy for the coming years. The Plan outlines a new focus on three outcomes – arts, English, and education and society. These were agreed by the Board of Trustees as the best way of planning, organising and reporting on the Council’s activity from 2011–12 onwards. The new structure aligns the Council’s charitable objects to its future strategy and the organisation’s expertise, and meets internal and external requests for greater clarity and simplicity. The re-organisation impacts the accounts as the Statement of Financial Activities and notes 4 and 5 have been restated to reflect the reallocation of the examinations business area (which represented £127 million of expenditure in 2010 –11) from education to the English outcome, which maps to the developing a wider knowledge of the English language charitable object, along with other movements due to this business restructuring.

PHOTOGRAPH CREDITS Inside front cover © The National Museum of Afghanistan Page 3 © Umar Farooq Page 5 © Anthony Makinson, Prudence Cuming, British Council Page 6 © II Foundation/2012/M, Iqbal Ibnu S Page 12 Erbil Literature Festival in 2011 © Rigel Klingman; Gagarin in London © Tim Sowula; International Inspiration © Mateus Sa for UNICEF Brazil 2009; Chinese for UK pupils © Dave Vickers, British Council; Word on the Street © BBC 2011; Microsoft Partnership © Mat Wright; British Council Libya © British Council; Going Global © Frank Noon / British Council All other images © Mat Wright

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