Minutes of the Finance & Business Operations - 16 April 2024

G. Mills in the Chair.

The Chair welcomed F. Chalk to the meeting and the Committee members present introduced themselves.

08/24. Declarations of Interest

No pecuniary interests were declared.

09/24. Minutes of Meeting Held 30 January 2024 (Appendix – Agenda Item 3)

Resolved: That the Minutes of the meeting held on 30 January 2024, be approved as a true and correct record.

10/24. Matters Arising

None.

11/24. Period 7 Management Accounts and Budget 2023 – 2024 Mid-Year Update (Confidential Appendices - Agenda Items 5 & 6)

The Committee received the Period 7 Management Accounts and finance update (previously circulated). The Accounts had been circulated to all governors. The college continued to forecast a Good Financial Health score.

The key issues and differences between the Budget and Forecast out-turn were:

Regarding income:

• 16-18 Income reflected the changes to the funding rate since the initial funding allocation from the Education & Skills Funding Agency (ESFA) which had allowed for the national pay award of 6.5% to be paid.
• New start apprenticeship funding had been reduced to reflect the college’s withdrawal from Trades Union apprenticeships and lower than planned enrolments to date. This therefore reduced the forecast Apprenticeship income.
• As reported previously, reduced HE and Learner loan income reflected lower enrolments and contracts for High Needs student top-up funding had been agreed with all main providers.
• Full cost income activity had been downgraded further and was therefore expected to be below budget. Year to date full cost activity behind budget included a number of new activities that were struggling to gain traction. The Forecast outturn had therefore been downgraded to reflect the year-to-date position and to discount these elements of new course income.
• Within Other income “Multiply” and Local Skills Improvement Fund (LSIF) Income had been included in the forecast in addition the SALIX Grant funding provided to allow detailed design work to be completed to assess the work needed and costs for decarbonisation of campus heating systems. The project income had been partially offset within costs.

Regarding pay:

• Increased Pay costs included the 6.5% pay settlement as opposed to the 4% budgeted and the new posts/hours required to support increased groups and numbers of students.
• Pay costs now included additional funds in respect of the expected impact of the 5% increase in Teacher Pension contributions which took effect from 1 April 2024. This was offset by an increase in the Teachers’ Pension Scheme Grant which was confirmed in March 2024.
• Pay costs also included additional funds in respect of additional LGPS pension top up contribution costs not budgeted for as unknown. The top up cost arose due to the LGPS treatment of the college not being covered by the central government guarantee on pension liabilities. This remained an outstanding issue since ONS reclassification in November 2022.
• General Payroll remained higher than expected due to agency and invigilation costs.

Regarding non-pay:

• Exam costs continued to run ahead of plan for the Year to Date but were broadly in line with budget for January 2024.

In response to questions:

• The EDoF confirmed that the potential upsides from LSIF and Higher Technical Education Skills Injection Fund revenue grant income had not yet been recognised as much of this was likely to impact in 2024-25.
• The EDoF and P/CEO explained the implications of the Teacher Pension Scheme Contribution increase from 23.7% to 28.7% for the forecast outturn and that this was equivalent to a 21% increase in cash contributions, equating to c.£40k per month from April to July, based on current payroll and despite additional grant funding announced to offset this there was an anticipated adverse impact of c.£24k for the year.
• In addition, LGPS Top up payments and a higher contribution rate was being charged by LGPS for the year ending 31 March 2025, due to the continued absence of the public sector guarantee on pension liabilities for colleges. The EDoF explained that, although colleges were now designated as public sector, they were not included in the government’s guarantee scheme, nor could colleges take out an Indemnity Bond, due to the prohibition to borrow commercially. The new funding rate was now 22.1% rather than 19.2% due to the lack of the government guarantee. The EDoF was pursuing the implications of this technical anomaly with the ESFA. The Committee shared the frustration at the real financial impact on the college of the repercussions of the decision.
• The P/CEO confirmed that the college was on track to remain within the Financial Health Score of ‘Good’ in 2023/24.

The Committee also received an update (previously circulated) on the progress of short-term grants activity and one-off and short-term grants activity –

• Local Skills Improvement Fund (Engineering and Construction equipment) – project substantially complete.
• Local Enterprise Partnership (LEP) (Refurbishment and renewal of Electrical & Plumbing workshops, classrooms and purchase of related equipment) – work largely completed during Easter of 2024.
• Higher Skills Injection Fund (Revenue and capital funding for enhancement of HE courses facilities and equipment) – detailed planning for the capital spend underway.
• Modular Accelerator Programme Grant (Funding to support HND/HNC courses) - grant to be used by September 2025.
• T Level capacity estates project (Refurbishment at the London Road Campus to provide capacity and improve the quality of space for T levels in Health & Social Care, Childcare and to refresh and enhance the quality of space for Media, High Needs and Preparation Routes students) - The lowest tendered costs for the project were c£500k higher than the original project estimates due, in part, to the additional space (and value) created as part of the detailed project designs developed. The Committee sought assurance regarding the increased costs, whilst recognising the urgent need for additional space. In response, the EDoF confirmed that he was working with the preferred supplier in undertaking a value engineering exercise to reduce these costs where appropriate without compromising the benefits for students and teaching delivery. To date, this exercise had reduced the additional unfunded cost to c£300k. In respect of project costs, further value engineering work was ongoing; however and nonetheless, forecast capital expenditure was based on pre value engineered costs. The Committee had already received information that the project remained affordable and was within the college’s overall approved capital budget for 2023/24. The Committee supported the approach as it was assured that the project remained affordable and within the college’s overall approved capital budget for 2023/24. The Committee were assured and agreed that, despite the higher costs, given the urgent need for this space and the additional benefits obtained over and above the original project brief, the project should continue and requested that revised value engineered costings be reported to the Committee as the project progressed.
• Post-16 capacity estates project (Refurbishment of the ground floor of the Quarry Building and the relocation of the Learning Resources Centre at the Welsh Bridge Campus). The tendered costs were c£30k higher than the project funding. As this additional cost remained affordable and given the urgent need for this space, the Committee remained supportive of the project.

The Committee noted that, whilst overall capital expenditure was higher than budget due to the additional LSI and LEP projects and expanded TCLF project, grant and other funded additions had substantially delayed expenditure from the college’s own resources.

Whilst the Committee appreciated the quality of the financial information presented, it requested that updates going forward show more clearly in which financial year capital expenditure was forecast to fall.

12/24. Estates Update (Confidential Appendix, Agenda Item 8)

In addition to the update on the various estate projects underway during 2024 provided by the EDoF at Minute 11/24, the Committee further reviewed the termly estates report (previously circulated) which summarised key estates developments completed since the last Report, other campus improvements are currently planned over the summer period and progress against the college’s energy saving activities.

The Committee also acknowledged, as in the previous meeting (FBO Min No 04/24 refers), the college’s success in securing bids and, whilst the projects improved the capacity of the estate and students’ experience, this increased the risk of capacity strain to the EDoF and college staff supporting the delivery of the projects. The Committee agreed that it had been assured that the college had considered carefully the impact of the additional pressure on staffing, management and delivery of these projects on top of the “day job” as part of the bids’ process.

In response to questions, the EDoF confirmed that further engagement with LocatEd had been completed, including provision of a detailed space planning report for further consideration and discussion. Further activities were in progress. The Committee acknowledged that strategic projects remained under consideration as part of this and the college’s response to longer term demographic challenges remained.

13/24. Health & Safety Termly Report (Appendix, Agenda Item 7)

The Committee reviewed the Termly Health & Safety Report (previously circulated), seeking assurance that college continued to meet its statutory obligations regarding health & safety legislation to ensure the continuing safety of the college community.

The Committee noted that –

• No significant issues had arisen or health and safety concerns of significance had been identified from Accident and Near miss reports during the period.
• During the reporting period there had been no changes required to SCG Health and Safety Policy.
• The Health & Safety Link Governor had reviewed the termly Report and had no further comments; they continued to meet with the Health & Safety Manager to monitor health & safety indicators.
• The Health & Safety audit programme adequately reflected the college’s health & safety priority areas.

In response to questions, the EDoF confirmed that –

• The college was taking mitigating actions to support the increasing number of students with pre-existing conditions, including increasing staff numbers on a temporary basis initially to help directly support students with specific support needs.
• College first aiders were using the First Aid App to report incidents. The Staff Governor, who was also a first aider, confirmed it was easy to use.

14/24. Department for Education College Governing Body Finance Dashboard Reports (Appendices, Agenda item 9)

The Committee reviewed the following reports (previously circulated)–

1. Finance Dashboard
2. Curriculum Efficiency Benchmarking Tool
3. P/CEO Report on SCG Financial Benchmarking.

The P/CEO explained that –

• Further education financial stability remained the primary concern for the ESFA and the FE Commissioner (FEC).
• The suite of finance dashboard reports had therefore been developed as part of the FEC’s work to improve financial stability through curriculum efficiency.
• The data had been taken from college finance records to provide the report benchmarks, with an individual version released to each college.
• The college had contributed to the development process of the reports and the ‘Beta’ version was currently being trialled.

Having reviewed the information, the college had drawn a number of conclusions –

• The college had
  • more 16–18-year-olds students than the mean for the benchmark population but received less funding per student.
  • more apprentices than the mean and received more funding per apprentice.
  • fewer adult students than the mean and received less funding per student.
  • fewer HE students than the mean and received less funding per student.
  • almost exactly the mean number of students with EHCPs but received less funding per student.
• The mean cost per staff FTE was significantly higher but the college’s mean number of students per staff FTE was also significantly higher, and staff utilisation percentage was significantly higher than the mean and staff remission was significantly lower than the mean, as senior and middle managers contributed to remission, indicating the importance of teaching in the college.
• Average group sizes were greater than the mean for L3, L2 and L1, but smaller than the mean for HE.
• The college delivered fewer hours per student per year for L3 and L2, and the same number of hours for L1.
• The college’s attrition rate was significantly lower than the mean.
• Overheads as a percentage of income were marginally higher than the mean for all colleges and marginally lower than the mean for colleges with multiple sites.

The Committee concluded that the information articulated why the college was financially sound, rather than providing insight or indicating actions the college should be taking to improve its financial stability and, therefore, its usefulness was currently limited. However, it could become more useful as more data was collected.

15/24. Risk (Appendix - Agenda item 8)

The Committee examined those risks within its remit (previously circulated).

With respect to Risk FBO 25 (Refurbishment or building projects disrupt teaching and learning or materially exceed budgets), the EDoF confirmed that the impact of this risk was being managed through careful project scheduling and particular attention would be taken on supporting the IT department to manage both service the installation of IT into the new classrooms around the campuses whilst also preparing for the enrolment period.

The P/CEO indicated that Risk FBO 27 (Extended disruption to student transport arrangements) could be retired, as the railway line between Telford and Shrewsbury had been repaired.

This led to a discussion on the process by which committees could report risks within their remit that could be removed, retired or regraded. It was agreed that the Audit Committee be requested to consider this at its next meeting, together with how, going forward, risks within the remits of committees should be presented, so that they could more effectively monitor these risks.

16/24. Date of Next Meeting – Tuesday, 04 June 2024 from 5.30 p.m.

The Committee Chair thanked F. Chalk for attending the meeting.

The meeting concluded at 7.23 p.m.