Minutes of the Finance Business Operation - 3 December 2024

M. Hartland in the Chair.

The Committee Chair welcomed P. Adams and Prof. J Barratt to the meeting.  It was confirmed that they would be appointed to the Committee at Board on 09 December 2024.

61/24.  Declarations of Interest

No pecuniary interests were declared.

62/24.  Minutes of Meeting Held 05 November 2024 (Appendix – Agenda Item 4)

Resolved:  That the Minutes of the meeting held on 05 November 2024, be approved as a true and correct record.

It was noted that the appointment of a Committee Vice Chair was deferred until the next meeting.

63/24.  Matters Arising

            None.

64/24.  Financial Statement Auditors (FSA) Report – Draft Financial Statements for Year Ended 31 July 2024 (Appendices Agenda Items 4)

The EDoF presented the following reports –

Financial Statements for the Year Ended 31 July 2024

The Draft Financial Statements for the Year Ended 31 July 2024 (previously circulated) which, having been audited, indicated a ‘clean’ unqualified audit opinion in terms of both truth, and fairness and regularity.  Minor amendments identified would be incorporated into the final version to be submitted to the Board. The anticipated regularity assurance opinion was unmodified. 

The Audit Committee had also considered the draft Financial Statements at its meeting on 27 November 2024 (Audit Min. No. 35/24 refers) and had recommended them to Board. 

The Financial Statements auditors would attend the Board meeting and the Letter of Representation and final version of the Financial Statements would be signed at the Board meeting in December 2024.

Going Concern Assessment

The EDoF also presented a report (previously circulated) providing the Committee with assurance regarding the status of the college as a going concern from December 2024 to December 2025.  The draft year end accounts, 2024 - 2025 financial plan, year to date operating outcomes, and weekly cashflow forecast for the year all demonstrated continuing good financial health.  The EDoF advised 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 auditors had considered that the Board’s Going Concern assessment was reasonable and therefore the accounts had been appropriately prepared on the going concern basis.

Resolved: That, having considered the draft Financial Statements, the report of the Executive Director of Finance and Financial Statements auditors and the reports on going concern, the Committee RECOMMENDED TO BOARD that

1. the Committee considered the Shrewsbury Colleges Group to be a going concern; and
2. the audit findings and draft year-end financial statements 31 July 2024, as amended, be approved.

                                                            ACTION:  REPORT TO BOARD 09/12/2024

65/24.  Period 3 Management Accounts (Confidential Appendices - Agenda Item 6)

The Committee received the Period 3 Management Accounts (previously circulated).  The Accounts had been circulated to all governors.  The Forecast had not been changed materially since Period 2.  However, the Committee noted the following -

• The Forecast EBITDA outturn had been reduced by £6k while the operating surplus forecast had reduced by £2k.
• High Needs Element 3 Income was expected to be substantially lower than planned.
• HE Income remains lower than planned.
• Pay costs were slightly below budget. The Committee acknowledged that the Forecast remained based on 3% pay increase.
• Non-Pay costs were running ahead of budgeted for this time of year – Exams and Materials remained the key risk areas.
• Cash was expected to remain above £4m at the end of the financial year.
• Treasury activities continue to be managed such that the college forecast to have a minimum of £500k of cash available at any point with a further £500k coming off deposit and hence available within 30 days.

The Committee also received an update on the 2024-25 Budget and performance to date with respect to –

• 16-18 Core funding, Work placement and High Needs E2. In response to a question, the EDoF confirmed that no adjustment for T level claw-back had been made in the forecast outturn at this stage. The 2024/25 budget included lower T level income than had been allocated for 2024/25 by DfE and the two adjustments were expected to have a broadly net zero impact.  The EDoF also highlighted that no allowance had been made in the forecast for possible growth funding at this stage.
• High Needs Element 3 funding. While overall student recruitment was up, the number of high needs students was lower.
• Apprenticeship income
  • Apprenticeship recruitment was on target:
  • The Committee acknowledged that, given the potential additional income arising from new starts, there may be some potential upside in this area.
• Adults (AEB)
  • The college’s main subcontracting partner had a significant financial setback in mid-2024. The EDoF confirmed that the college carried out extensive due diligence before awarding a small contract for 2024-25 and continued to monitor closely their financial performance.
• Higher Education
  • September enrolment was below forecast budget.
  • HSIF Grant funding enrolment targets had now been relaxed by DFE: the college now needed to meet enrolment targets in any one academic year for each of the pathways. The Committee acknowledged the risk of clawback has declined significantly.
• Pay
  • The FTE headcount as at the end of October was at budgeted levels. October pay costs were also as budgeted.
  • The decision to award schools a funded 5.5% cost of living increase would place additional pressure on colleges (for whom there was no additional funding). The Committee acknowledged that a 5.5% award would cost the college in the region of c£625k above budget. The P/CEO provided a brief verbal update on the impact on the college of the strike action being taken by the NEU.  The college had in place strong mitigating actions to reduce the impact on learning. 
  • The college also now had to manage the impact of the increase in the employer National Insurance contributions announced in the recent Budget. There remained a risk that additional funding to cover increased NI costs were insufficient, but this was not expected to be significant.
• Non-Pay
  • Final exams costs for 2023-24, had ended lower than expected, hence it was likely that there was contingency within the existing exams budget for 2024-25. However, the pressure on exams fees for 2024/25, from higher student enrolment and increased exam fees would continue. The forecast outturn has not been increased at this stage.
  • Premises costs now included security related expenditure originally budgeted for as pay costs.
  • Materials costs were likely to increase based on the higher than planned numbers of students.

The Committee acknowledged that, whilst the revised 16-19 funding settlement was likely to be more positive, as was the high-value apprenticeships activity, there was still a risk in delivery of the approved Budget due to the possibility of continuing inflationary costs, unfunded pay pressures, increased exam fees and lower than planned recruitment to HE.

66/24.  Estates Update (Agenda Item 7)

The college was eligible to submit applications under the Condition Improvement Fund to support capital works.  Applications required an element of match funding.

The existing Performing Arts building at London Road Campus had already been identified as a priority area for condition improvement and refurbishment and now required urgent attention as it was in a poor and failing condition.  The project would be eligible for an application to safeguard the college’s ability to continue to deliver its curriculum and meet student demand in light of existing space limitations.

As the deadline for applications was 10 December 2024 and the college required time in which to prepare the bid documentation, the Committee agreed that a Chair’s Action, in accordance with Standing Order No. 19, be taken to approve the provision of 30% match-funding to support a Condition Improvement Fund bid.

The Committee also received a further update on possibilities for development of parcels of land within the college’s ownership.

67/24.  Governor Body Finance Dashboard – Letter and Dashboard (Appendices, Agenda item 8)

The Committee reviewed the letter from the ESFA (previously circulated) confirming the assessment of the college’s financial health as –

• Good for 2023/24 (the latest outturn forecast year); and
• Outstanding for 2024/25 (the current budget year).

The Committee also reviewed extracts from the Financial Dashboard (previously circulated), which incorporated various key performance indicators and measures.  In response to a request from the Principal/CEO the Committee confirmed that the current reporting was sufficient and that the DfE report that was particularly valued was the benchmarking report which had been considered by the Committee in the last academic year.  The Principal/CEO confirmed that this information would be reported to the Committee when it was received in the current academic year.

68/24.  Risk (Appendix - Agenda item 09)

The Committee examined those risks within its remit and agreed that they had been identified and adequately discussed at the meeting.  The EDoF explained that SLT had reviewed the Risk Register and the revised 2024– 2025 Strategic Risk Register would be presented to the Board for approval at its December meeting.

69/24.  Date of Next Meeting – Tuesday, 04 February 2025 from 5.30 p.m.

The meeting concluded at 6.51 p.m.