Further to Minute Number 09/20, R. Heath in the Chair
11/20 Declarations of Interest
R. Heath declared a standing interest as an employee of Harper Adams University.
12/20 Minutes of Meeting Held 25 February 2020 (Appendix – Agenda Item 3)
Resolved: That the Minutes of the meeting held on 25 February 2020, be approved as a true and correct record.
13/20 Matters Arising
Minute Number 04/20. - Management Accounts - 1 August to 31 January 2020
There was no update on the ROATP application of the College’s apprenticeship subcontract partner. However, the College was working to encourage the partner to retain its apprentices during the current Covid-19 crisis.
14/20 Management Accounts - 1 August to 29 February 2020 (Appendix – Agenda Item 5)
The Committee considered a report (previously circulated) with respect to the management accounts for the period to 29 February 2020, which highlighted the key results, measures and risks.
The Committee reviewed the Accounts and noted that the outturn EBITDA year to date was forecast to be slightly behind budget.
The forecast presented reflected the expected outturn to the end of February 2020 and therefore excluded the impact of the Coronavirus lockdown and the extended College closure. The Committee acknowledged that Apprenticeship income could be significantly impacted by Coronavirus.
The three key threats currently facing the College remained reputational damage caused by the Ofsted inspection, past and ongoing strike action over national pay by the NEU and the Coronavirus pandemic. Additional costs had been forecast to reflect expected additional expenditure resulting from the Ofsted inspection (F&BO Min. No. 04/20 refers).
The Committee reviewed the key changes to the forecast outturn –
- The full year outturn reflected the final notified value of the Teachers’ Pension Scheme (TPS) Grant to compensate for increased teachers‘ pension costs. The amount confirmed in September 2020, was higher than budgeted; however, this had since been recalculated by the ESFA and confirmed in the latest funding contract and was now only slightly higher than originally budgeted.
The Committee also considered key changes to planned capital expenditure (not relevant to outturn)-
- The College had committed £529k of the capital budget of £700k. Remaining Capital expenditure was to be deferred, where possible, until after August 2020. The Committee noted that most of this was now likely to be deferred until 2020/21, unless the present Coronavirus disruption was shorter than expected.
- The College had applied for two Condition Improvement Fund (CIF) grants which would require significant matched funding, if successful, with capital contributions in 2020-21. However, due to the financial impact of Covid-19 on the College, the Committee acknowledged that, even if the bids were successful, the College may not provide the matched-funding required, to protect its financial position.
The Committee finally considered cash-flow -
- The College’s Bank had provided a short term overdraft facility to the end of April 2021. The Cash-flow forecast, not considering the impact of Covid-19, anticipated no requirement for this, however, taking into account the changing circumstances, the Committee agreed that it was prudent to ensure that the College had sufficient facilities in place to ensure that there was no issue during this period. The Bank had also offered a six-month loan repayment holiday as part of its initial response to the Coronavirus disruption. The Committee agreed that, although the impact was to preserve only a small amount of cash, given the high level of uncertainty, it felt prudent to take the six-month loan repayment holiday at this stage. The FD would continue to assess the College’s cash forecast.
Resolved: That, having considered the report, the Committee received the Management Accounts to 29 February 2020.
15/20 Coronavirus Income Risks: Potential Financial Impact on Income Streams for 2019-20 (Confidential Appendix – Agenda Item 6)
The Committee received a confidential report (previously circulated) setting out the income currently included in the February 2020 Management accounts (P7) Forecast outturn (Min. No. 14/20) which was at risk as a result of the Coronavirus Pandemic and associated College closure.
The Committee considered each income line in turn, assessing the possible income at risk and the current estimated likelihood of impacts arising as a RAG rating.
- 16-19 funding was paid based on last year’s actual student numbers and so not at risk this year;
- ESFA and devolved authorities had indicated that they would continue to pay on profile as long as the College demonstrated best endeavours to continue delivery and to start new learning. However, there were limited assurances to date that they would not claw back under delivery in January 2021;
- The College was continuing to support apprentices remotely with the theoretical aspects of their off the job training but with Apprentices currently mostly unable to attend their workplaces and also unable to attend College the ability to continue to earn apprenticeship funding was at risk.
- High needs student funding Element 2 (E2) was allocated and paid by the ESFA in the same way as 16-19 funding and not at risk. Element 3 top ups allocated and paid by councils were likely to be honoured in the present circumstances.
The FD provided verbal updates as follows
- Due to the short-term nature of the majority of AEB courses (in particular trade union studies courses) it was unlikely that the College would be able to complete current courses or to deliver planned courses for the remainder of the academic year. The College was investigating moving to on-line delivery of the courses.
- Should the College’s current Non Levy Apprenticeship prime-contracting partner fail, that proportion of ESFA funding the College received would cease. The FD would contact the partner to establish their situation.
- The College could face delays in achievement payments if apprentices could not complete in a timely manner. Additionally, the College could face congestion in practical areas on campus, as current students needing to complete practical work could be in College when 2020/21 students were starting courses. The College was focussing on maintaining delivery and ensuring continued engagement of apprentices during this period to minimise the impact on their training which would mitigate these possible impacts.
- There were likely direct costs savings associated with reduced income in Catering, Transport and reduced subcontractor costs.
- The College enjoyed a positive relationship with its Bank. Whilst Bank Covenants were potentially at risk as a result of lost income arising from current the Coronavirus emergency, at present, it was considered likely that the Bank would agree to amend or adjust existing covenants in light of the current situation.
- Going forward, the FD would -
- Reforecast where other savings would occur;
- Undertake a more detailed analysis of other potential Pay and Non Pay cost savings and await clarification of the College’s ability to participate in the Coronavirus Job Retention Scheme;
- Continue dialogue with the ESFA, particularly on its approach to supporting the College;
- Continue to RAG-rate all income streams and investigate cost mitigation measures, where possible;
- Continue to produce a weekly cash flow forecast.
The Board had recently approved (Board Min No 18/20 refers) additional capital commitment for the Deal 3 Advanced Manufacturing, Engineering and Automotive Training Centre Project at the London Road Campus. Due to the high level of uncertainty around key financial risks facing the College driven by the disruption caused by Covid-19, the Committee discussed the continuation of this project. It was intended to develop this new facility as quickly as possible, meaning a significant element of this expenditure would be required in 2019-20. The Committee agreed that whilst capital expenditure on this project might place cash covenants at risk, this risk was considered to be low due to the good relationship with the College’s Bank and its past willingness to address short-term covenant concerns constructively by temporary adjustments to covenants if required. Additionally, the College remained confident that the additional capacity the project would provide would be required in future and would provide a high-quality teaching facility and improved student experience. Therefore, at this stage, the Committee expressed its continued support for the project. The Committee asked the FD to provide a business case for the Deal 3 Advanced Manufacturing, Engineering and Automotive Training Centre Project to fully consider the investment decision and evaluate likely funding options. The Committee also requested the FD to provide a high-level balanced and worst case scenario over the next two weeks to further consider the impact of COVID-19, whilst a more detailed exercise was completed for inclusion in the March 2020 management accounts. The Committee recognised, further information was required from the ESFA, in order to model all possible financial options, to enable an evaluation of the appropriate course of action.
Resolved: That the report be noted and that the Finance Director be requested to submit a Business Case for the Deal 3 Advanced Manufacturing, Engineering and Automotive Training Centre Project.
16/20 Finance ‘Red Flags’ (Presentation to AoC WMCN by Andrew Tyley, Deputy FE Commissioner) (Appendix – Agenda Item 7)
The Committee reviewed a presentation made by the Deputy FE Commissioner to a recent meeting of the Association of Colleges West Midlands Clerks’ Network (previously circulated). Included in the presentation, were —
- Early warning signs of financial and organisational failure in FE;
- Common causes of failure of colleges; and
- FEC benchmarks.
The Committee considered whether the College’s arrangements reflected best practice recommendations referenced in the presentation. The Committee concluded that the College performed well against the FEC benchmarks referenced and that it had confidence it was monitoring the appropriate financial information and indicators.
The Committee requested that the presentation slides be circulated to all governors.
17/20 Marketing Update – Verbal Report
The Principal/CEO reported that the Director of Admissions and Marketing was settling into the role and dealing well with the considerable challenges facing the College at present. The Principal/CEO suggested that Director attend the next scheduled meeting of the Committee, to provide an overview of marketing activities and projects planned. This recommendation was accepted by the Committee.
18/20 Risk (Appendix – Agenda item 9)
As part of the discussions on the College’s Risk Register (previously circulated) agreed by Board (Board Min No. 19/20 refers), the Committee examined those risks within its remit to ensure that they have either been identified or adequately discussed at the meeting. The Board had added an additional risk to this Committee’s remit – the risk of flooding of the town centre campuses. The FD invited the Committee to appraise the risk appetite for each risk. The Committee agreed that the risk score for the Risk ‘Disruption to College from the loss of key staff due to medium/long term sickness absence (rise in staff turnover)’ be increased to 25%, in response to the current Covid-19 pandemic.
The Committee took the opportunity at this point to thank the FD for providing daily updates to College staff on the College’s management of Covid-19.
19/20 Date of Next Meeting – 02 June 2020 @ 5.30 p.m. Venue – Priory House, Welsh Bridge Campus. However, it was acknowledged that the Committee may need to meet before this date, if required, to monitor the developing financial impact of Covid-19 on the College.
Concluded at 7.53 p.m.