Financial Recovery Board
Agenda
23 September 2014
1.
Apologies for absence
5.30
2.
Declarations of interest
5.35
3.
Terms of reference
To approve the terms of reference of the Financial
Recovery Board
Terms of reference attached
Allison Howe
5.40
4.
Finance report 2013-14
To receive the finance report which includes the draft
management accounts and cashflow statement
Report attached
Nanda Ratnavel
5.50
5.
Performance and funding report 2013-14
To receive the performance and funding outturn report for
2013-14
Report attached
Jenny Pharo
6.10
6.
Financial recovery plan
To receive a report on progress against the financial
recovery plan
Report attached
Ian Rule
6.30
7.
Enrolment report
To receive a report on enrolments to date for 2014-15
Report to be tabled
Rob Rees
7.00
8.
Estates strategy update CONFIDENTIAL ITEM
To receive a report on the Estates Strategy
Report attached
Stephen Lawes
7.15
9.
Any other business
7.30
10.
Date of next meeting
2 December 2014
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Financial Recovery Board
Minutes of the meeting held on 23 September
2014
Present:
John Curry (Chair)
Monica Duncan
Michael Knight
Ioan Morgan
Marlene Oates-Hinds
In attendance
Allison Howe, Clerk
Stephen Lawes, Vice Principal Estates Strategy
Jenny Pharo, Director of MIS
Nanda Ratnavel, Director of Finance
Ian Rule, Vice Principal Corporate Services
1.
Apologies for absence
Apologies were received from Batiste Ogier, who was going to observe the
meeting with a view to becoming a co-opted member of the committee.
Rob Rees had also sent apologies due to illness. The item on enrolments
would be led jointly by the Principal and the Vice Principal Corporate Services.
The Committee noted the resignation of Richard Livingstone from the
Corporation.
2.
Declarations of interest
None
3.
Terms of reference
The terms of reference were introduced by the Clerk. Michael Knight had
made some comments on the terms of reference, some of which had been
taken into account. Revised terms of reference were circulated.
The Committee’s terms of reference should reflect risk management of risk
that fall within the Committee’s remit.
There was a discussion as to whether the Committee should have oversight of
efficiency regarding class sizes, assessor workload etc. Class size data
would be brought to the next meeting. It was noted that some classes had
been deleted and Governors asked for a list of deleted classes at the Board
meeting.
Subject to the above changes, the Board approved the terms of reference.
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4.
Finance report 2013-14
The Director of Finance introduced the Finance Report explaining that this
was the draft financial position.
The net overall deficit was currently forecast at £17,049k. This compared with
the deficit forecast at the end of June of £18,047k that excluded FRS 17
(pension) costs but did include disposal and demolition related costs.
The annual budgeted deficit of £3,200k excluded FRS 17 (pension) costs and
disposal and demolition related costs. The Committee felt that there needed to
be a note explaining this beneath the table.
It was noted that the profit from the sale of land at Ufford Street will be
reported in next year’s accounts in a similar fashion to the accelerated
depreciation recorded this year.
Against a capital budget of £41.7m this year, the College has spent £6.8m on
redeveloping the Waterloo site and £0.7m on other projects. Significant
expenditure, primarily £4.6m that had been anticipated to be spent at
Waterloo has been delayed to 2014/15. This would have a positive impact on
cash flow during 2014/15.
Net expenditure was underspent by £228k with Pay £746k overspent due to
VTs and use of subcontractors; and Non Pay £974k underspent largely due to
low spending on teaching materials, delayed spending within Facilities on
maintenance, low recruitment costs in Human Resources and an unspent
contingency budget.
A Governor expressed concern that the expenditure analysis stated that there
were low commitments on teaching materials. The Director of Finance
explained the accounting process and explained that underspends had
occurred because anticipated purchase orders were not required. The
Governor said she was concerned about the impact on quality but it was
explained that no restrictions had been placed on necessary purchases by
budget holders. It was noted that bookshop spend was also low. It was
explained that this was due to the increase in online provision and reduced
spending on books. The Governor stated that this needed to be considered
as part of the SAR validation process. The Vice Principal Estates Strategy
stated that there were lower numbers of students during 2013/14 and that this
reflected the percentage decrease in spend.
The College’s cash balance was £17.4m, £4.6m higher than previously
forecast due mainly to the lower than planned capital expenditure. The impact
on reserves is a substantial depletion, mainly due to the accelerated
depreciation on Waterloo, but these would be replenished in the next year as
the College would have a better operating position, and would have profits
from the sale of land. It was expected that by the end of next year there would
be a cash position of around £8m.
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The income figure for 2013/14 was not yet firm as further achievement
payments are forecast. Given slight uncertainty to that figure, the income
figure in the accounts may increase by about £300k.
A Governor pointed out that the management had ignored any commentary
on the cash position when producing the report. It was further stated that
capital receipts had been spent to fund the operating position which was not
explained in the income report. A Governor had asked for improved cash flow
reporting. Although there was a cash flow statement within the report, there
was no commentary.
The Vice Principal Corporate Services stated that cash had been budgeted for
2014/15, this would be reported against with commentary in future reports.
Exceptional items overall were £545k overspent. At £835k, the overspend on
reorganisation costs exceeded the net variances on other items. This was
significantly less than the £1,900k adverse variance forecast previously but
included a £500k estimate for the cost of restructuring that continues in
several departments.
The Chair stated that he was surprised not to have a budget for 2014/15
based on enrolments, however, the Vice Principal Corporate Services stated
that it was too early to finalise revisions to that budget, due to the timing of the
meeting, and the fact that enrolments would continue through to October
2014. All departments had been issued budgets based on the July 2014
agreed budget, as identified in the first year of the financial plan. This would
be worked to until the budget was revised. However the budget revision
process would take the outturn figures for 2013/14 into account. It was further
noted that the curriculum development plan would inform the budget. The
Chair stated that the curriculum and learners were the priority, but there was a
need to understand the budget going forward.
An additional cash flow statement was circulated, that separated the revenue
and capital cash flows. It was noted that there would not be a cash squeeze
as anticipated in early 2015. It was noted that the delay in building at
Waterloo in June and July 2014 meant there would be more cash available
though it was possible there would be a change in the expenditure profile, with
less spent initially and then a spike in spend in March 2015 with an advance
payment bond made to Balfour Beatty.
There was discussion that the capital element of the separated cash flows
should concentrate on strategic capital spend; and that this needed to be
separated from regular capital spend. The Vice Principal Corporate Services
and Director of Finance agreed to look into how this would be reported in
future.
The Board noted the content of the report.
5.
Performance and funding report
The report was introduced by the Director of MIS, and updated the Board in
the income and funding earned for all revenue streams at the year end
against contract and performance targets.
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It was noted that a number of income streams had fallen below target, these
included under recruitment of 16-18s, 24 + loans and apprenticeships. The
other income streams were reported at 62% of target, of which full price had
the largest variance from target. Governors expressed frustration that
Waterloo Business School had only made £29k compared to the full year
budget for £600k, despite assurances from the previous management through
the year that this would meet targets.
The impact of the apprenticeships issue had a negative effect as a number of
expected late starting apprenticeships were not started. There would be an
impact on 2014/15 target. There is some residual impact in 2014/15, but the
bulk was in 2013/14. The Board thanked the executive for the work
undertaken in respect of the apprenticeships data cleanse.
The Vice Principal Corporate Services informed the Committee that the SFA
PFA team from PWC had audited learner files and had found no further issues
either in work based learning or in classroom based learning.
The Board noted the content of the report.
5a
2014/15 Income plan
The Vice Principal Corporate Services explained that this was an early plan
based on current enrolments, which compared current enrolments to target.
This was work in progress and was likely to change once more certainty about
figures and subsequent course reviews had been undertaken.
The Board noted that the EFA September 2014 plan was overstated
compared to contract due to higher numbers of full time learners. This would
be reviewed at week six, as some curriculum areas had under recruited and
some classes would be merged. There was an additional £934k on top of the
EFA funding due to local authority funding for high needs students. Any
under-recruitment to the EFA contract would impact in 2015/16. There would
be a need to put in some subcontracting to bolster 16-18 delivery to secure
allocations for 2015/16.
There were currently 2300 16-18s against a planned 2800 enrolments (2650
funded). There were only 200 high needs learners compared to a planned 277
learners each of whom would cost the college £6000 in lost income for
2015/16.
The Board were warned that if sub-contracting took place, there would be an
impact on the budget due to sub-contracting costs. This could also have an
impact on efficient class sizes.
The SFA had funded the college to £18.3m if the contract was met. The
amount ring fenced for apprentices were £3m under budget which could result
in clawback. The £4.2m ring-fenced for apprenticeships was based on returns
in February 2014, and the plans of the previous Vice Principal Business
Development. There was the possibility of going back to the SFA to reverse
the ratio of apprentices/non-apprentices. The current SFA figures showed an
income of £15,300. This meant the College was currently approximately £1m
down on the previous year.
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16-18 apprenticeships were likely to be closer to the contract figure than the
plan. 24+ loans showed an income of £914k compared to a budgeted £1.3m.
The plan showed an income of £37m as opposed to a budget of £40m. It was
hoped that a discussion with the SFA about renegotiating the amount ringfenced for apprenticeships would enable the College to meet its budgeted
income.
It was noted that the curriculum sales teams were being motivated to increase
income streams. There was a discussion about the groups which would be
closed and what happened to students affected. It was noted that many
courses run with more than one group, which in the end of low numbers would
be merged. A report on the number of groups cut with details of students and
what had happened to them would be submitted to the Quality Committee.
Recruitment was ongoing until October 2014, some low groups would be
filled. Adjustments were being made as early as possible, particularly where
learners had to change groups and courses. Staff hours were managed to
contract, any changes to courses would impact on the use of VTs. The
revised budget would be circulated to committee members prior to the next
meeting.
The Committee noted the content of the report.
6.
Financial recovery plan
The plan was introduced by the Vice Principal Corporate Services and
reported progress against the plan. The report noted that Items 1 to 3 were
achieved and with Item 5 not being due focussed on Item 4 (initiate a
programme of targeted cost savings with detailed, costed plans created to
reduce costs to agreed timescales for 2014/15, utilising benchmarking and
contextual data, including 3 year income projections).
The Chair pointed out that the June budget had demonstrated (after
depreciation) a net deficit of 482k. If there was a reduction in income of £3m
as indicated in the previous report, there would be a deficit of £3,482k. It had
been intended to plan for £6m to be taken out of costs. There was a real
need to identify those £6m of costs. There was also a need to identify another
£4m of cost savings in 2015/16.
The Vice Principal Corporate Services explained that in July 2014, managers
had met with the FE commissioner and discussed the identified £3m of cuts,
this position had not changed, although work had been going on in that time.
The review of apprenticeships would help identify cost savings in work place
delivery and assessors, for example, but there was not yet certainty of cost
savings. It was important that the College could show that £6m of cost
savings had been identified. The Principal stated that one of the weaknesses
was the time it took HR and line managers to remove the posts. Some groups
of staff had been under threat since May 2013. An external review of the HR
function had been commissioned.
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Some elements of the cost savings plan were high risk. Some had been put
on hold until after the expected Ofsted monitoring visit. E learning was a high
risk area, as it was not known whether there would be a direct impact on
costs.
The Principal was confident that £6m could be saved. 95 FTE posts would be
shed by Christmas. There would then be a focus on business processes and
administration. The Tribal report identified business processes as an area
where savings could be made. There were two big inefficiencies identified
within the College. These were large overheads and small class sizes.
It had been proposed that there would be decreased expenditure on subcontracted delivery, however to increase recruitment, there would need to be
sub-contracting. The biggest savings will be in admin support and
management while there was a need to consider curriculum efficiencies.
The Chair asked that this should be updated to provide a document that was
realistic and not so high risk. This would be informed by the revised budget.
The Board noted the content of the report.
7.
Enrolment report
In the absence of the Vice Principal Curriculum, Quality and Learner
Experience, The Principal and Vice Principal Corporate Services provided the
Board with a verbal update.
The Principal reported that he was relieved by enrolment. The adult target
was ahead of target and 16-18s were not as low as anticipated and these
could be picked up across the year. There was still enrolment ongoing. The
college was approximately 200 16-18s down on this time last year.
There was a need to rebuild apprenticeships. Camberwell was doing well and
was important to the College and the Borough.
The Board noted the content of the report.
8.
Estates Strategy Update – confidential item
9.
Any other business
The changes to the governing body were discussed. The Board believed that
it was a risk that three members of the Board would be leaving in December
2014.
The Principal urged the Board to consider the need for a pay policy. The
unions had asked for one, the use of increments were issues. The Board
requested that a draft pay policy be brought to the meeting on 27 January
2014.
10.
Date of next meeting
2 December 2014.
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