Corporation of Sir George Monoux College

CORPORATION OF SIR GEORGE MONOUX COLLEGE

Minutes of Ordinary Business at the Meeting of the Resources Committee held on 15 March 2016

Present / Jonathan Bush (Chair), Stewart Maclean, Rhys Moore.
Clerking Services / Robert Smith (Clerk to the Corporation).
Observers / David Ball (Acting Principal), Hussa Ali (Finance Manager)
1 / Apologies for Absence and Quoracy
All members were present.
2 / Declarations of Interest
None.
3 / Minutes of the Previous Meeting (Ordinary Business): 24 November 2015
The minutes were approved as a correct record of the business transacted and prima facie evidence of the proceedings to which they relate.
4 / Matters Arising from the Minutes (Ordinary Business): 24 November 2015
None.
5 / Risk Management Report: Update on Status of At-Risk Items
A report setting out the College risks relevant to the Committee’s remit, as approved by the Audit Committee, was received.
It was noted that the document circulated to members in advance if the meeting originally due to have been held on 8 March 2016 relates to the Risk Register formulated in the Autumn Term and approved by the Audit Committee at its meeting held in November 2015, and that a number ofmatters shown thereon are already receiving substantial attention. It was also noted that the Risk Register had been significantly amended in the light of the report into the College’s performance commissioned from Messrs. Borland and Hughes, two former sixth form college principals, which had been received, considered and approved at a Corporation meeting held on 23 January 2016.
It was further noted that, in addition to financial and finance-related risks, the inclusion of several risks concerning health & safety and security reflects the full remit of the Committee.
It was emphasised that there is a need to report incidents mapped against risksset out in the Register, and that this should be a regular feature for this agendum at future meetings.
Risks to the achievement of strategic objectives, including those to College solvency and reputation, are of particular importance and should be prioritised in reports.
For future meetings it was agreed that a summary report be provided setting out changes to those risks falling within the Committee’s remit since the previous meeting.
6 / Management Accounts 2015-16 to Period 6 (31 January 2016)
A report prepared by the Interim Principal was received and considered.
Present performance against budget was noted, and projections for key performance indicators at 31 July 2016 observed as follows (budgeted values in parentheses):
. / Adjusted Current Ratio: 1.90 (1.99)
. / Underlying operating position as a % of income: 3.8% (5.0%)
. / Borrowing as a % of Reserves and Debt: 9.3% (9.1%)
. / Financial Health Score (points): 220 (240)
. / Financial Health Score (grade): Good (Outstanding)
. / Cash days in hand: 57 (60)
. / Pay as a % of income: 71% (70%)
. / Outturn: £31,000 deficit (£96,000 surplus)
. / Cash at Bank: £1,721,108 (£1,815.000)
The following matters were also noted, namely that:
. / the items shown below are unbudgeted and have caused the predicted deficit and reduced possible spending in other areas:
£000
. / Budget overspend on Principal / 20
. / Additional pension settlement to former principal / 24
. / Cost of Messrs. Borland and Hughes (advising on College improvement) / 70
. / Cost of Dr Karl Mackie (industrial relations consultant) and Governor legal advice / 50
. / Cost of review by AoC/ RCU / 18
. / Cost of Drapers Hall event / 20
Total / 202
. / the projected deficit does not include any additional spending on improving College performance;
. / overspends are £80k on pay and £40k on non-pay;
. / pay costs are currently 70.5% against a budget of 69.8% due to the above factors, and are predicted to be 71% at the end of the year;
. / student numbers are confirmed at 2,091 for 2016/17. - higher than the allocated funding (2,070), but lower than the growth target (2,120)needed to continue current spending plans without further savings;
. / whilst the prediction is for a “good” financial healthscore this year, the present underlying position is “outstanding” - a £100,000 reduction in expenditurewould be needed to return to “outstanding” in the current year;
. / the change in the projected outturn has no implications for loan covenants; and
. / at the previous meeting funds were requested to be vired from non-pay to pay for improvements to outcomes - these potential funds have already been used on the items set out above.
Whilst agreeing that each incident of unbudgeted expenditure must receive appropriate scrutiny in terms of value for money, members commented that addressing issues of under-performance in the College is a proper use of reserves, and an important priority at this time.
No matters of concern were raised in connection with passing the management accounts to the Corporation for further consideration at the meeting to be held on 22 March 2016.
7 / Application of Resources to Curriculum-Based Activities in Support of College Improvements
A report prepared by the Interim Principal was received and considered.
Projected performance, as reviewed under Agendum 6, was noted.
It was also noted that the £75,000 difference between the surplus reduction (£127,000) reported under Agendum 5 and the total additional unbudgeted costs in the year (£202,000) is due to a reduction of other budgets to bridge the gap.
Mindful of the opinion it had expressed concerning the use of College reserves in present circumstances (see Minute 6), the Committee recommended that the budget (£75,000) be reinstated in its entirety, subject to due scrutiny being carried out to ensure that each request for funds is necessary to enableactivities specified in the College’s performance improvement plan to be carried through (in which regard a report at the next meeting will be required). The effect of the decision increases the current year projected deficit to £106,000. This will not adversely affect the College’s financial health rating.
8 / First Draft Financial Estimates 2016-17
First draft estimates prepared by the Interim Principal were received and considered.
It was noted that:
. / the 2016-17 allocation provides for an increase of about £110,000 (to £10.7m), the £195,000 loss of disadvantage funding being offset by the move of more of the College’s students into band 5 funding (the maximum);
. / the estimates provide for a slight growth in student numbers of 16;
. / staffing costs will need to be recalculated based on the College’s current position, with any problems being dealt with in the budgeting process;
. / the impact of the cut in bursary funds is likely to be a 12% reduction in funds for students (i.e. c.£60,000), which will definitely impact on the College cohort; and
. / the reduction in deprivation funding has had minimal effect at all colleges apart from Waltham Forest, NewVic, Newham College and Sir George Monoux, anddiscussions are being held with the Education Funding Agency overwhether extra funding can be allocated to compensate forwhat will otherwise be a shortfall.
The intention was noted that a budget surplus be provided for in the 2016-17 estimates, with payroll as a proportion of College income returning to a level below 70%.
It was additionally noted that a budget for 2016-17, forming the first year of a two-year financial forecast, will be submitted for detailed consideration at the next meeting of the Committee.
9 / College Loan Finance and Options for Repayment
A report prepared by the Interim Principal was received and considered.
The following matters were agreed:
. / since the College has bank balances consistently over £1.5 million which receive minimal interest, the floating loan of £111,362 should be repaid; and
. / because fixed loan costs are the same irrespective of when the loan is repaid (the cost of the break clause being roughly equal to that of future interest payments), no action in relation to repayment of the loan should be taken at this time though, if the College chooses to become an academy, the matterwill have to be reconsidered.
10 / Any Other Competent Business
None.
11 / Date of Next Meeting
Friday 24 June 2016 (6.30pm).