Minutes of the Finance & Business Operations - 1 December 2020
|Group||Minutes of Finance & Business Operations Committee|
|Location||HELD BY REMOTE ACCESS THROUGH MICROSOFT TEAMS|
|Date||1st December 20|
|Minutes Membership|| In attendance by electronic device and contributing towards the meeting quorum, in accordance with Instrument 12. (Members may count towards the quorum if they are able to be present by electronic or digital communication (including attendance by video conferencing or telephone conferencing). |
R. Heath, G. Mills (co-opted Committee member), D. Pulford (co-opted Committee member), J. Staniforth (Principal/CEO), P. Tucker and R. Wilson. 1 Vacancy
|In Attendance|| In attendance by electronic device |
Member of the Senior Leadership Team: P. Partridge, Finance Director (FD)
Clerk to the Board, T. Cottee
56/20. Declarations of Interest
R. Heath declared a standing interest as an employee of Harper Adams University.
57/20. Minutes of Meeting Held 03 November 2020 (Appendix – Agenda Item 3)
Resolved: That the Minutes of the meeting held on 03 November 2020, be approved as a true and correct record.
58/20. Matters Arising
Minute Number 49/20 – Matters Arising
The Finance Director clarified that the College had received two grants from the Greater London Authority (GLA) – £92k revenue grant for additional adult education and £30k for additional computers to support the delivery of the GMB programme within the London area.
59/20. Financial Statements Year End 31 July 2020 (Appendix – Agenda Item 5)
The Committee considered a report with respect to the draft year-end financial statements, including (previously circulated).
- Indicative year-end position;
- Cash balances;
- Net assets, including the impact of the reduced pension liability following the FRS102 actuarial re-measurement process; and
- The Financial Health Score of Good.
The Draft Financial Statements for the year ended 31 July 2020, had been audited by the Financial Statements auditors who indicated a ‘clean’ unqualified audit opinion in terms of both truth and fairness and regularity, although several minor amendments were still required, which would be made to the final version submitted to the Board for approval.
The Statements would include a Note to satisfy the funding condition required by the Office for Students (OfS) related to the College’s Higher Education Access and Participation Plan and a Note, requested by the Statement’s auditors, related to pensions. The Finance Director explained that the Shropshire Council pension scheme, in common with other pension schemes, had been unable to value its property assets during the financial period, due to the uncertainty caused by the global Covid-19 pandemic. As a result, the pension scheme would insert an Emphasis of Matter Statement highlighting this uncertainty, meaning that the College should make a similar disclosure in the Statements as a contributor to the Shropshire Council Pension Scheme.
The Finance Director explained that the College had generated a loss before other gains and losses in the year. The impact of FRS102 Pension adjustments relating to the College’s LGPS defined benefit scheme and which the College had little influence over, had caused significant variations to these results. After excluding the impact of FRS102 Pension charges the underlying operating result for the year was an operating surplus of £10k. The Committee acknowledged the impact of this pension scheme revaluation and that, having adjusted for this, the financial position of the College at the end of the financial year was broadly as projected.
The Finance Director explained that the impact of the FRS 102 Pension charges did not affect the College’s Health Score, as the ESFA used other indicators, such as EBITDA, current assets and borrowing to income ratio as the indicators which generated score granted, nor did it affect the College’s Bank Covenants.
The Audit Committee had also considered the draft Financial Statements at its meeting on 25 November 2020 (Audit Min. No. 23/20 refers) and had recommended them to Board.
The Committee Chair observed that the Draft Financial Statements were well-prepared and comprehensive.
The Finance Director advised the Committee that governors were required to assess the College’s going concern and that the auditors needed to be satisfied that the assessment was robust. The Committee accordingly considered a paper (previously circulated) with assurance regarding the status of the College as a going concern.
In July 2020, the College had provided a 24-month cashflow forecast to the Education & Skills Funding Agency (ESFA), based on the 2020-21 Budget and 2021-22 Plan’s expected cashflow profiles (“The July Return”). At the end of November 2020, the College was required to submit an updated cashflow forecast covering at least the next 12 months to the end of October 2021 (“The November return”).
The report provided a financial commentary on the COVID-19 November financial return provided to the ESFA, which provided:
- a bridge between the July and November returns;
- a Summary assessment of cashflow cover;
- an Exception report on key variables and sensitivities; and
- an assessment of the College’s status as a going concern to provide governors with the assurance required to approve the 2019-20 Financial statements.
The Committee accordingly reviewed a list of considerations and the responding management comments in order to make their assessment, including the key changes in Cash between the July return and the November return to the ESFA, the key drivers behind these changes, and a summary assessment of cash flow cover. The Committee agreed that the paper indicated that the College had sufficient resources to meet the going concern requirement.
The Finance Director reminded the Committee that he had been granted delegated authority to seek an overdraft facility, should it be required, to cover the period from the end of February to the end of April. Whilst the Cash-flow forecast anticipated no immediate requirement for this, it was prudent to ensure that the College had sufficient facilities in place to ensure that there is no issue during this period and that NatWest had agreed in principle to put in place such an overdraft.
Resolved: That, having considered the draft Financial Statements and the report of the Finance Director on going concern, the Committee RECOMMENDED TO BOARD that:
- The Committee considered the Shrewsbury Colleges Group to be a going concern; and
- The draft year-end financial statements 31 July 2020, as amended at the request of the Committee, be recommended to the Board for approval subject to the minor amendments, clarifications and adjustments reported being made.
ACTION: REPORT TO BOARD
60/20. Management Accounts - 1 August to 31 October 2020 (Appendix – Agenda Item 6)
The Committee considered a report (previously circulated) with respect to the management accounts for the two months to 31 October 2020, which highlighted the key results, measures and risks. All governors had been supplied with a copy of the Report.
Although the forecast outturn had not changed, it had been significantly affected by the COVID pandemic and changes since the budget was finalised. The Committee reviewed the key changes to the forecast outturn –
- ESFA 16-18 income for 2020-21, was based on 2019-2020 census student numbers of 3,412. While higher recruitment this year, put some pressure on the 2020-21 year pay budget due to additional unplanned groups being run, this would result in higher than planned income in 2021-22.
- The ESFA had allocated all colleges additional 16-19 catch up funding in response to the COVID disruption last year. This had increased the College’s 16-19 allocation by £255k over and above budget. In addition, the College continued to be awarded £176k of Capacity and Delivery Funding to support work placements which had not been budgeted for due to the Ofsted grading.
- As a result of COVID, the ESFA had allocated additional adult grant funding for Sector based work academies. This additional funding had not been included in the forecast due to the uncertainty over the College’s ability to fully deliver in this area, due to the impact of Covid.
- Some income streams had been impacted by Covid and were currently below the amounts delivered at the same point last year and, with ongoing COVID restrictions and safety measures, delivery of the Adult Education Budget remained a significant challenge. The key change to AEB risks was uncertainty regarding the extent to which the ESFA will claw-back funding for under-delivery in 2020-21.
- Apprenticeship enrolments and hence income was running below the levels planned for at the start of the year. As a result, the full year outturn had been reduced to reflect existing enrolments and the remaining known apprenticeships yet to start. There remained an opportunity to improve this position, however the key areas where demand remained were those already constrained by limitations to workshop space, increased Level 1 and level 2 full time enrolments, and changes to delivery dictated by COVID.
Further to F&BO Min. No. 49/20, the Finance Director provided a verbal update on the additional costs incurred by the College with respect to Covid-19 -
- The College has incurred a total spent of £95k to the end of October 2020, included higher IT & premises costs which reflected increased COVID cleaning consumables costs and the set-up costs required to ensure campuses were COVID secure by the start of Term 1 in September, and additional agency and staffing costs. This was a significant additional on-going financial burden on the College and did not include the additional bursary disbursements over summer holidays with respect to free school meals and the additional costs over Christmas.
In response to a question from the Committee Chair, the Finance Director confirmed that the construction of the Automotive Workshop at the London Road Campus had been delayed by planning and COVID supply chain issues during the summer. This had resulted in significant delay to planned capital expenditure which would reverse by the end of January 2021, as the construction of the new workshop was completed. The Committee sought assurance that students’ learning and College experience had not been detrimentally affected by the delay. The Finance Director explained that the Contingency Plan to address any delay in the project had been actioned to ensure there was no disruption in the delivery of provision.
The Committee acknowledged that the key financial risks facing the College continued to be driven by the disruption of Coronavirus, and the current high level of uncertainty inherent at this stage. Some of these risks had reduced by ongoing funding support from the ESFA but a high level of uncertainty remained regarding timing and ability of the College to resume “normal” operations.
The Staff Governor echoed the concern expressed in the report regarding the impact of the increasing numbers of high need students on the College and its facilities, in particular, the impact on space due to the need for social distancing within existing classrooms. She sought assurance that the College could accommodate the break-out spaces these students required. The Finance Director explained that finding suitable space had been particularly challenging at the London Road Campus; however, the College had timetabled break-out rooms which were monitored on an on-going basis by the Room Booking Team.
In response to a question about the sources of capital improvement funding available to general further education colleges referenced in the FE Commissioner’s Annual Report (previously circulated to all governors), the Principal/CEO took the opportunity to explain that the College, as a designated sixth form, could bid, along with maintained schools, academies and other sixth forms, for Condition Improvement Funding. The College also received recurrent revenue funding for estates costs of c.£75k annually, as well as a one-of payment of more than £200k in 2018-19, neither of which were paid to GFE Colleges
Resolved: That, having considered the report, the Committee received the Management Accounts to 31 October 2020.
61/20. Health & Safety Policy Statement (Appendix – Agenda Item 7)
The Committee had reviewed at its last meeting, the Annual Report on Health and Safety across the College for August 2019 to July 2020 (F&BO Min. No. 51/20 refers). The Committee now reviewed the Annual Health & Safety Policy Statement and Policy (previously circulated).
The H&S Link Governor had reviewed these documents and had submitted several suggestions for minor amendments, which were accepted, including that -
- The Policy Statement include the importance of regularly updating Risk Assessments.
- The Policy reflect the importance of the health & safety induction to all staff and students; and
- The inclusion of a statement that the Board was regularly updated on health & safety.
The Finance Director also advised that the Policy would clarify that union health & safety representatives attended health & safety meetings.
The Annual Health & Safety Policy Statement would be signed by the Board Chair and Principal/CEO at the next Board meeting.
Resolved: That, having considered the report, the Committee RECOMMENDED TO BOARD that the Health & Safety Policy and Policy Statement, as amended, be approved.
62/20. Financial Regulations – Review (Appendix – Agenda Item 8)
The Committee reviewed the College’s Financial Regulations (previously circulated) to ensure they remained compliant and appropriate to the College’s requirements.
The Regulations would be revised to reflect compliance with the 2013 CIPFA requirements.
Resolved: That, having considered the report, the Committee RECOMMENDED TO BOARD that the College’s Financial Regulations, as amended, be approved.
63/20. Risk (Appendix – Agenda item 11)
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.
64/20. Further Business
The Principal/CEO provided a verbal report to the Committee, the details of which are set out in a Confidential Minute.
OFSTED Monitoring Visit
The Principal/CEO advised that OFSTEDs letter to the College following the recent remote visit to the College, would be published on 11 December 2020.
64/20. Date of Next Meeting – 09 February 2021 from 5.30 p.m. Meeting arrangements tbc.
Concluded at 7.07 p.m.