Minutes of the Finance & Business Operations - 7 December 2021
|Group||Minutes of Finance & Business Operations Committee|
|Location||ROOM A.41, LONDON ROAD CAMPUS, SHREWSBURY|
|Date||7th December 21|
|Minutes Membership|| In attendance in Room A.41 |
G. Mills (Chair), D. Pulford, P. Tucker and R. Wilson.
|In Attendance|| Member of the Senior Leadership Team: |
P. Partridge, Finance Director (FD)
Clerk to the Board, T. Cottee
|Apologies||J. Staniforth (Principal/CEO).|
55/21. Declarations of Interest
56/21. Minutes of Meeting Held 02 November 2021 (Appendix – Agenda Item 3)
Resolved: That the Minutes of the meeting held on 02 November 2021, be approved as a true and correct record.
57/21. Matters Arising
58/21. Financial Statements Year End 31 July 2021 (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 2021, 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 Draft Financial Statements have been revised to reflect the anticipated Ofsted outcome.
The Audit Committee had also considered the draft Financial Statements at its meeting on 24 November 2021 (Audit Min. No. 30/21 refers) and had recommended them to Board.
The Finance Director explained that the College Accounts showed a deficit before Actuarial Pension gains in the year of £1,125k. The impact of FRS102 Pension adjustments relating to the College’s LGPS defined benefit scheme and which the College had little influence over, created significant changes to the underlying position reported as part of the management accounts. After excluding the impact of FRS102 Pension charges the underlying operating result for the year was an operating surplus of £478k. 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 College had, as a result of significant growth in 16 – 18-year-old student numbers in September 2020, been allocated an additional £315k of in-year growth funding by the Education & Skills Funding Agency (ESFA) to offset immediate increased costs of delivery. The College had also been allocated £255k of Tuition Catch Up Funding to support students.
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 the financial health score granted.
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.
The Finance Director advised that the College Bank Relationship Manager had confirmed informally that Loan Covenants had now been removed, though the College was awaiting formal confirmation from the Bank, and these could be reinstated if the College drew down further loans. The College would, however, continue to submit quarterly accounts to the Bank, despite this no longer being required. The Committee supported this as good practice to maintain a positive working relationship with the Bank.
The draft year end accounts, 2021-22 financial plan and year to date operating outcomes demonstrated continuing good financial health.
The Clerk to the Board informed the Committee that the Financial Statements auditors would attend the Board meeting, as required by the 2021 Audit Code of Practice.
Resolved: That, having considered the draft Financial Statements, the report of the Finance Director and Financial Statements auditors and the reports on going concern, the Committee RECOMMENDED TO BOARD that
- the Committee considered the Shrewsbury Colleges Group to be a going concern; and
- the audit findings and draft year-end financial statements 31 July 2021 be recommended to the Board for approval.
ACTION: REPORT TO BOARD
59/21. Management Accounts – Period 03 (Appendix – Agenda Item 6)
The Committee considered a report (previously circulated) with respect to the Management Accounts to 31 October 2021, which highlighted the key results, measures, and risks. All governors had been supplied with a copy of the Report.
The main expected changes to the budget at this stage were -
- Adult Education Budget (AEB) income forecast had been reduced by £68k (c 3% of allocation) to reflect a risk of under-delivery in-year.
- HE income was estimated to be below budget by c.£35k due to slighter lower numbers of new starts than planned and to provide an allowance for some withdrawals during terms 1 and 2 of the year.
- Full cost Tuition and exams fees income had been reduced by £40k. Whilst the College had achieved 48% to date this year, given the uncertainty created by the ongoing pandemic, the full year out-turn had been reduced by £40k to reflect this risk and the potential for further disruption and legacy effects of the pandemic over the remainder of the year.
- Apprenticeship activity was significantly up on budget. As such the forecast income in this area had been increased by £425k to £2,533k. The Committee noted that the growth in activity presented an increasing pressure for additional assessor resource.
- Energy costs had increased significantly following the recent price spike in electricity and gas – the forecast anticipated an additional cost of £315k over budget.
- While Pay costs were running slightly below budget year to date, this potential upside had not yet been reflected in the forecast, again reflecting the uncertainties of the remainder of the year.
- The College had been awarded an additional £219k as part of the 16-19 Tuition fund. This had not been included in the forecast outturn for the year as the College needed to deliver additional activity to justify this funding, as well as £157k brought forwards from 2020-21.
The Committee acknowledged the significant increase in energy costs and sought assurance on what mitigating actions the College was taking to reduce the impact of the price increase on the College. The Finance Director reported that the College had conducted a lighting energy efficiency review in 2018 and where possible, had installed motion-sensitive lighting in many classrooms More recently, the College worked to reinforce the adoption of energy saving habits throughout the College and had instigated other energy saving initiatives, such as turning off the Training Kitchen fridges and ventilation system overnight.
In response to a question, the Finance Director confirmed that the Covid precautions introduced had added c.15% to the College’s energy bill, as it tried to ensure adequate ventilation in classrooms whilst keeping students and staff warm and comfortable.
The Clerk to the Board reported that, at the Quality, Standards & Curriculum Committee meeting, the Group Vice Principal, Curriculum Support and Business Development had reported that it was likely that the College’s Bursary allocation for the year was expected to be fully spent, due to increased demands from students. The Finance Director confirmed he was aware of this and was working with the GVP to make the best use of the funds available.
The Committee Chair thanked the Finance Director for the inclusion of a progress update on the College’s grant bids and ongoing projects that had been requested at the previous meeting. The Finance Director reported that the College had an opportunity to bid for Condition Improvement Funding and it was his intention to submit a bid to support the cost of replacing windows at the London Road Campus, as this was a priority project.
Resolved: That, having considered the report, the Committee receive the Management Accounts to 31 October 2021.
60/21. Insurance Policy Schedule (Appendix – Agenda item 7)
The Committee received the report (previously circulated), providing assurance that the College had in place adequate insurance arrangements. The Committee noted that the College had insurance against protecting against cyber-crime, as this was an increasing risk to the sector. The Finance Director confirmed that he would review this level of cover with the Group Vice Principal, Information & Strategic Development to ensure it remained adequate to meet the College’s needs.
61/21. Estates Strategy Verbal Update
The Finance Director provided a verbal update on the development of the College’s Estates Strategy.
- The consultant’s report would be considered by the Senior Leadership Team on 10 December 2021.
- The membership of the Estates Working Group would be confirmed at the next Board meeting and it was expected that meetings would be held from mid-January 2022.
- The Committee acknowledged the challenge in delivering a Strategy that would achieve a balance between developing ‘shovel ready’ projects to meet the expected growth in student numbers and the longer-term aspirations of the College.
- Regarding capital projects for 2022, works would be undertaken at the London Road Campus to accommodate the E-sports provision and refurbishments of the ground floor at the English Bridge Campus were being developed.
- A Condition Improvement Fund bid would be submitted in December for funding to assist with replacement of windows in the main block at London Road and that the College would contribute 30% of the costs of replacement.
62/21. 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 had either been identified or adequately discussed at the meeting. The Committee agreed that it had been advised of and had considered risks with respect to rising energy costs and the impact on the College.
It was noted that the 2021 – 22 Strategic Risk Register had been considered by the Audit Committee and the updated risks had been included on the agenda. This update included a new risk – ‘exclusion from RoATP in 2022, if reapplication process was not successful, as the College had been invited to apply for RoATP registration in December 2021, to retain its ability to provide apprenticeships; the outcome would be known in February 2022.
63/21. Date of Next Meeting – 08 February 2022 at 5.30 p.m. Venue - tbc.
The meeting concluded at 7.05 p.m.