Minutes of the Finance & Business Operations - 27 September 2022

38/22. Declarations of Interest

None.

39/22. Election of Chair

Resolved: That Graham Mills be appointed Chair of the Committee.

Graham Mills in the Chair.

40/22. Minutes of Meeting Held 29 June 2022 (Appendix – Agenda Item 3)

Resolved: That the Minutes of the meeting held on 29 June 2022, be approved as a true and correct record.

41/22. Matters Arising

Minute Number 30/22. - College Financial Forecast and Draft Budget 2022/23

The EDF confirmed that the college’s bank would provide a seasonal overdraft facility if required going forward.

Minute Number 33/22 .- Office for National Statistics (ONS) Review of Classification of Colleges

The P/CEO explained that the outcome ONS’s review had been delayed.

 42/22. Human Resources & Development Annual Report (Confidential Appendix – Agenda Item 6)

Further to F&BO Min. No. 28/22, the Committee reviewed the report (previously circulated) outlining the key strategic progress made with People Management over the 2022 – 2023 academic year, which included the relevant headline outcomes of the latest Staff Survey.

The report set out strategic information on –

• • • Workforce
    • Recruitment
    • Wellbeing
    • Communication
    • Leadership Development and changes to the college’s management structure
    • Staff Professional Development
    • Recognition and Reward
    • Industrial relations.

The key priorities for 2022 – 2023 would continue to support the college’s strategic objective and be informed by the outcome of the most recent staff survey.

In response to questions, the VP – HR&D further reported –

• • • the percentage of teaching staff relative to non-teaching staff was in line with sector benchmarks.
    • the college staff absence rate was below sector benchmarks, though it has risen as a result of the pandemic
    • One of the key priorities for 2022 – 2023, was the continued development of its employee engagement arrangements, with a particular focus on communications. The new staff forum had provided a greater opportunity for consultation with staff and, during 2022 - 2023, the college would increase the number of staff listening groups and visit other colleges for examples of best practice in staff communications.

The Committee acknowledged the many positive outcomes from the latest staff survey, including the strong rankings against the benchmarking group. It thanked the VP and the HR Team for their hard work during the year.

The GVP – HR&D left the meeting at this point.

43/22. Period 12 Management Accounts (Appendix – Agenda Item 7)

The Committee considered a report (previously circulated to all governors) on the Management Accounts to 31 July 2022, which highlighted the key results, measures, and risks.

The Period 12 Forecast had been further reduced. The main changes related to:

• • • a reduction in forecast Adult Education Budget (AEB) income due to the belated decision by the Education & Skills Funding Agency (ESFA) that it would claw-back all under-delivery where a provider delivered less than 97% of its allocation rather than clawing back only to the 97% threshold (as previously forecast).
    • Subcontractors’ under-delivering their forecast delivery allocation due to delays to planned courses.
    • Whilst apprenticeship income remained significantly positive compared to budget, overall achievement rates for the whole year were anticipated to be near 50% overall. The ED,F highlighted the remaining risk in the R12 forecast position relating to Apprenticeship achievement. The Committee sought an explanation for lower achievement rates. The P/CEO explained that achievement rates for 2022 - 23, had been depressed by both long-term apprentices scheduled to complete in 2022 - 23 losing their placements during Covid, and due to delays in End Point Assessment. Additionally, achievements not realised in 2021-22, were anticipated to occur and generate funding during the first six months of 2022-23.

The Committee congratulated the EDF and his Team for successfully navigating one of the most volatile and challenging years for financial management.

44/22. Budget 2022 – 2023 – Risk Analysis and Pressures

The EDF gave a detailed presentation on the following –

1. 1. 1. Actual and Budgeted Financial Performance 2020 – 21 to 2023 – 24 with respect to:
         • Funded 16 – 18 learners
         • Income
         • Pay costs
         • Subcontract and pass-through costs
         • Non-pay expenditure
         • EBITDA (education specific)
         • Total interest and accounting costs
         • Operating surplus/deficit.
      2. Regarding funded 16 – 19 Learners, the college had grown strongly through the last three years; 2022 – 2023 16- 19 income was secure (as paid based on 2021 – 2022 student numbers enrolled). The college had, for 2022 - 2023, anticipated a slight reduction in enrolments. However, enrolment had not met expected targets, which would affect 2023 – 2024 income.
      3. At present, apprenticeship enrolment was broadly on plan, as was Higher Education (HE) and Advance Learner Loans.
      4. The 2023 – 24 Plan income had already incorporated assumptions regarding
         • Fewer students
         • Lower retention factor
         • No CDF Grant
         • No tuition funding
           
           However, the financial impact of the reduced 2022 – 2023 enrolment and the cost of escalating energy bills were additional to these assumptions.The college was monitoring enrolment activity and withdrawals up to census point and taking ongoing action to rebalance and optimise staffing resources, to mitigate the impact of potential under-recruitment. The Committee sought further explanation regarding lower enrolment activity. The P/CEO summarised feedback received from schools which, while anecdotal and incomplete, indicated that there were larger numbers of year 11s locally who had not engaged in applying to college and/or had taken up employment without training.
      5. Assumptions had been made regarding pay cost inflation for 2022 – 2023 and 2023 – 2024; 2022-23 assumptions were slightly lower than the pay offer tabled by the Sixth Form Colleges Association (SFCA) as part of collective bargaining. However 2023-24 pay increase assumptions were now looking increasingly challenging given the current inflation forecasts and economic outlook. Unions’ demands for cost of living pay increases above inflation (currently 11.7%) meant that there was also an increased risk of potential industrial action on pay in 2022-23. The college was reviewing its 2023 – 24 staffing needs in the context of final 16 – 19 recruitment and the non-pay challenges ahead, particularly the impact of energy cost increases on college finances.
      6. Although the Budget and 2023 – 2024 Plan had included assumptions around increases in energy prices from April 2023, energy process now secured by the college for the period April 2023 – March 2024, were more than 100% higher than planned. Existing fixed-price gas and electricity contracts ending on 31 March 2023, had been replaced with 12-month fixed-price contracts ending on March 2024. The government support package did not include detail and the long-term impact was uncertain. The college was taking steps to reduce its exposure to increasing prices by reducing energy consumption including through voltage optimisation which would reduce electrical power use by c9%.
      7. Regarding capital expenditure -
         • The college had increased expenditure in 2022 – 2023, to enable substantial condition and space improvements. This expenditure for 2022-23 had already been committed as part of the work completed during the summer of 2022, to improve the condition and capacity of the London Road Campus main building and to improve student learning and other facilities at the English Bridge Campus. Planned expenditure had been reduced significantly in 2023 – 2024, reflecting the lower cash available due to lower planned EBITDA. The impact of the additional financial challenges highlighted previously was likely to further curtail the ability of the college to invest in capital expenditure in 2023-24.
         • Whilst cashflow for 2022 - 2023 remained sound, arrangements were being made to ensure that seasonal overdraft facilities were in place for February to April 2023 and February to April 2024.

The Committee acknowledged that the 2023/24 financial position would be very challenging with significant risks around pay and non-pay cost inflation reductions in 16-19 funding and other uncertainties, such as the impact of possible further education sector reclassification. The impact was likely to further reduce the college’s Financial Health score. Due to the rise in inflation and borrowing costs, the overall financial viability of further capital investment in the estate would also require careful consideration.

45/22. Estates Strategy – Site Visit Report and Working Party Arrangements for 2022/23

The EDF provided verbal feedback on the comments received after the governor site visit to land at London Road Campus and the Wakeman Field held in late August 2022. He thanked those members of the Committee who had provided interesting suggestions to explore and that consideration of options for these sites was ongoing. 

The EDF gave a detailed presentation on –

1. 1. 1. The capital projects undertaken over the summer of 2022, including window refurbishment, Main Block, London Road Campus and the Learning Resources Centre, student café and social space and Reception refurbishment and Drama relocation at English Bridge Campus. It was confirmed that the first meeting of the Board would take place at English Bridge and that, prior to the meeting, the Board had been invited to tour the refurbishment. The EDF reported the positive reaction of staff and students to the completed elements at English Bridge and assured the Committee that the works to the student café and lift would be completed in early October.
      2. Further to Board Min. No. 21/22 (P/CEO’s Report), progress on the capital projects feasibility studies commissioned.
      3. Capital projects, suitable as candidates for Post-16 Capacity Fund bids. The P/CEO reported that eligibility to apply for Bid funding had been widened to include schools with 16 – 19 provision, which increased competition; any bids, therefore, had to be strong and ready to implement. The Committee recognised that a decision on which projects to develop as bids was required ready for the November 2022 submission deadline.
      4. A capital project for a creation of a Renewable Energy Centre (REC), suitable for a new grant funding opportunity made available in late July 2022, by the Marches LEP.

The P/CEO also reported that the college had received £500k from the Strategic Development Fund to develop training programmes in renewable energy.

A number of potential capital projects had been identified as part of the Estates Strategy ‘Road Map’ –

1. The redevelopment of the Austin Building at Welsh Bridge Campus;
2. Improvements to the Quarry Building and Learning Resources Centre (LRC) at the Welsh Bridge Campus; and
3. The co-location of selected provision from the London Road Campus to the English Bridge Campus.
4. Expansion of construction space at the London Road Campus and addressing of the poor condition of the existing “D Floor” of the main building.

The Committee was also briefed on the nature, scale and location for a Renewable Energy Centre (REC) at the London Road Campus, which was a suitable candidate for a new capital grant funding opportunity made available in late July 2022, by the Marches LEP. The grant required match funding of £400K and funds must be spent by March 2024. Due to the timescales, the project had been developed over the summer, to ‘shovel ready’ stage and a planning application submitted to the Planning Authority. The Committee strongly supported the development of the project as it would offer an enhanced learning experience for students, support the growth of skills and potentially unlock other aspects of the Estates Strategy.

These projects all required an element of match funding from the college (20%). Due to the current sensitivity and uncertainty on energy costs and the increased cost of borrowing, materials and labour, there was an inherent risk to the college’s financial health going forward, which required a re-assessment before decisions on which bids to develop, could be taken –

• • • The redevelopment of the Austin Building was anticipated to cost in the region of c£8m. As the Post-16 Bid maximum was £4m, the college would be required to fund the remainder. This option was considered unaffordable at this stage.
    • The Quarry Building/LRC element of the Welsh Bridge Campus projects at a cost of c£400k would require college match-funding of £70 – 80k. This contribution was affordable and the project would offer significant benefits for students by creating additional teaching capacity and an improved student experience. This option was considered suitable to develop for a Post-16 Capacity Fund bid.
    • The project to co-locate certain provision from London Road to English Bridge required further work and was not ready to develop into a bid for 2022 – 2023.
    • The creation of the REC could also be submitted as a Post-16 Capacity Fund bid, should it not gain Marches LEP funding. However, the college would be required to match fund at a cost of £400k (i.e. the same level of match funding is required).

It was also recognised that, whilst government support to the sector in coping with the impact of rising energy costs was only currently in place until 31 March 2023 and there was no guarantee at this stage that this support would continue and if no such support was forthcoming the college would need to constrain other routine capital expenditure to afford the match funding required. Any significant further capital investment (including match funding) was increasingly likely to require long term borrowing – even where grant funded through Post 16 Capacity or LEP grants.

Having carefully considered the EDF’s presentation and discussed the benefits to the college and risks to financial health, the Committee AGREED to –

1. 1. 1. Recommend to Board: that -
         • The Renewable Energy Centre capital project be pursued and that the college commits to match funding of 20% of the bid cost; and
         • The capital project for improvements to the Quarry Building and Learning Resources Centre at the Welsh Bridge Campus be put forward as a Post-16 Capacity Fund bid and the college commits to match funding of 20% of the bid cost.
         • The EDF continue to develop plans for redevelopment of the Austin Building at Welsh Bridge Campus so that this project would be ready and in a stronger position should appropriate and sufficient grant funding be made available in the future.
      2. The EDF would produce a Briefing Paper to Board to support the Committee’s recommendations.
         Action: Recommendation and Report to Board

46/22. Draft Committee Work Plan 2022 – 2023 (Appendix – Agenda Item 10)

The Committee reviewed the Draft Workplan for 2022 – 2023 (previously circulated). The P/CEO requested that the HR Annual Report 2022 – 2023, be included on the agenda for the June 2023 meeting.

Resolved: That the Draft Workplan, as amended, be agreed. 

47/22. Terms of Reference of Committee – Review (Appendix – Agenda Item 11)

The Committee reviewed the current Terms of the Committee (previously circulated) and agreed that they remained pertinent to the Committee’s role.

48/22. Risk (Appendix - Agenda item 12)

As part of the discussions on the College’s Risk Register (previously circulated), the Committee examined those risks within its remit and agreed that they had either been identified and adequately discussed at the meeting. It had been thoroughly briefed of and had considered the risks with respect to rising energy and building costs and the risks of below-target enrolment and their impact on the College

49/22. Date of Next Meeting – 01 November 2022 at 5.30 p.m. Venue - TBC.

The meeting concluded at 7.50 p.m.