HKUST Annual Report 2019-2020

CONSOLIDATED BALANCE SHEET As at 30 June 2020 2020 ($million) 2019 ($million) Non-Current Assets Property, Plant and Equipment 5,900 5,338 Intangible Assets 17 13 Right-of-use Assets 13 0 Financial Assets at Amortised Cost 78 105 Financial Assets at Fair Value through Other Comprehensive Income 484 477 Financial Assets at Fair Value through Income and Expenditure 7,536 6,593 Interest in an Associate 84 83 Bank Deposits with Original Maturity over Three Months 2 385 14,114 12,994 Current Assets Financial Assets at Amortised Cost 64 1 Inventories 1 1 Accounts Receivable and Prepayments 614 411 Bank Deposits with Original Maturity over Three Months 1,269 1,776 Cash and Cash Equivalents 2,350 656 4,298 2,845 Current Liabilities Accounts Payable and Accruals 1,014 1,153 Lease Liabilities 9 0 Provision for Staff Benefits 229 185 Deferred Income 1,633 868 Tax Payable 2 2 2,887 2,208 Net Current Assets 1,411 637 Total Assets Less Current Liabilities 15,525 13,631 Non-Current Liabilities Lease Liabilities 4 0 Provision for Staff Benefits 37 36 Deferred Income 908 768 Deferred Capital Funds 4,427 4,086 5,376 4,890 NET ASSETS 10,149 8,741 UGC Funds 3,127 2,591 Restricted Funds 1,721 1,248 Other Funds 5,301 4,902 TOTAL FUNDS 10,149 8,741 Approved by the Council on 14 October 2020 APPENDIX V INTERNAL CONTROL AND RISK MANAGEMENT SUMMARY OF INTERNAL CONTROL AND MEASURES The University continues to adopt a system of internal control based on a framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO). The five components of COSOFramework, namely Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring, are adopted by the University in ensuring the effectiveness of University governance. In order to provide assurance about the effectiveness of internal controls to the Council and Senior Management of the University, the following arrangements are in place: a. Whistleblowing Policy is in place and operating to provide a safe and protective means by which staff, students and other stakeholders of the University are enabled to raise concerns with the appropriate University authorities against any malpractice within the University. b. The Internal Audit Office is responsible for preparing the annual risk-based audit plans and performing independent reviews to assess adequacy of the design and operating effectiveness of the internal controls as well as providing recommendations to streamline processes for efficiency enhancement. A co-sourced external service provider is engaged on an as-needed basis to supplement other audit areas relating to the University’s IT environment and cybersecurity. c. In addition to the statutory annual audit of the University’s financial statements, the external auditors also carry out an independent assurance engagement on the University’s compliance with the guidelines, terms and conditions imposed by the Government’s University Grants Committee. d. The Audit Committee of the University Council approves the annual audit plan, supervises the scope of work performed by the Internal Audit Office and reviews internal audit reports or concerns on internal controls raised by the internal and/or external auditors. Furthermore, the Audit Committee has an oversight role on the appointment and performance of both internal and external audit teams to ensure independence of the reporting line for the auditors and objectivity of the work performed by the auditors. HKUST RISK MANAGEMENT The University’s risk management process (the “Process”) is managed in accordance with the Strategic Risk Management Policy approved by the University Council in June 2019. The Process complies with the recommendation on identification and management of major institutional risk included in the UGC report on Governance in UGC-funded Higher Education Institutions in Hong Kong, published on 30 March 2016. Results and reports of strategic risk management exercise and the strategic risk register will be presented to the Council in October 2020. The following is the summary of the risk assessment results extracted from the reports. Overall Conclusion The University faces a number of strategic risks that are classified under reputational, operational and financial risks that are addressed by appropriate risk mitigation actions with responsible risk owners assigned and sources of assurances identified that the risk mitigating activities are effective. Looking back, the University faces a risk landscape amplified by social unrest and the prevailing COVID-19 pandemic in the past year. Nonetheless, management has seen the University community unified in a coordinated and collaborative manner to cope with the unprecedented COVID-19 pandemic through online teaching and learning and virtual meetings and conferences for faculty, staff and students. Management believes that upholding the University’s core values of inclusiveness, diversity and respect in differences, and its timeliness in providing necessary support to all University members, will help the University emerge strongly from current challenges. Going forward, management with the support of the Internal Audit Office (IAO), will continue to monitor the risk profile facing the University and review the Strategic Risk Register to identify and assess existing and emerging risks that could affect the University’s ability to achieve its objectives. Management will follow up on the status of the risk mitigating activities at least annually. Reputational Risk Management reaffirms the University’s core values of inclusiveness, diversity and respect in mitigating the external risks arising from the COVID-19 pandemic and social unrest including the enactment of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (HKSAR), also known as the National Security Law. Management will continue to uphold and promote a University-wide culture that embraces diversity in views, background, culture, race, religion, and personal interests among others and will use open and direct communication to cultivate a collaborative, safe and sustainable environment in which all University members thrive. The new Guangzhou campus will be fully synergistic and complementary to the Clear Water Bay campus that this Unified System nurtures both curiosity-driven and mission-motivated pursuits with enlarged resources and new physical infrastructures and promotes collaboration and integration between campuses. This enhances our overall competitiveness and reputation in academic excellence, innovation, knowledge transfer and entrepreneurship. In addition, in line with the University’s vision to be a world- class university in all targeted fields of pursuit, there is a robust governance framework to govern the academic, research and administrative related processes. The framework is essential to ensure full compliance with the regulatory requirements and upholds the standards expected of a publicly funded institution. The University undergoes periodic internal and external quality assurances exercises such as Research Assessment Exercise (RAE) and Quality Assurance Council (QAC) audits by the UGC, and the internal multi-level quality assurance framework at HKUST to ascertain and uphold the standard of academic and research excellence. HKUST ANNUAL REPORT 2019-2020 63 62 APPENDICES

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