KING GEORGE V FURTHER EDUCATION CORPORATION

MINUTES OF THE MEETING OF THE GOVERNORS

FINANCE & GENERAL PURPOSES COMMITTEE

6.00pm Monday 23 June 2014

PRESENTArlene Allan (Governor)

Chris Baker (Governor)

Elinor Dodd (Governor)

Paul Lacey (Governor)

Adele Wills (Principal/Governor)

Ian Swift (Deputy Principal) In attendance

Will Melia (Assistant Principal) In attendance

Wendy Moorcroft (Clerk)

A Quorum being present Arlene Allan in the Chair opened the meeting at 6.00pm.

14/21 Apologies

Morag Matthews (Staff Governor)

John Rostron (Governor)

Vipin Trivedi (Governor)

14/22 Minutes of the Meeting of 12 May 2014

The minutes were approved as a correct record and signed by the Chairman.

14/23Matters Arising

14/12 Loan Finance – Interest Rate Options

Governors expressed concern that the loan agreement was not yet in place which could lead to potential cash flow problems. Mr Melia reported that the process between the College and Bank solicitors was slow but he expected this to be completed within the next few weeks. The College had just received £0.5m BCIF funding and had also met with AA Projects to look at cash flow projections. These indicated that there was no cause for concern before the next meeting of F&GP.

There were no other matters arising from the minutes.

14/24 Financial Report incl 3rd Quarter Accounts, Cash Flow, Cap Ex

Will Melia, Assistant Principal,presented the 3rd Quarter Accounts for 2013/2014. The year to date surplus at Q3 was £359k, £75k below the budget target. A surplus of £137k was forecast by the year end which was £441k worse than budget. This was due to the inclusion of rationalisation costs of £381k.Income was expected to be largely in line with budget. Pay cost were £74k adverse to budget at period nine improving to £48k adverse to budget as some staff had left before the year end. Nonpay cost were £4k adverse to budget at period nine increasing to £400k adverse to budget once rationalisation costs were included. Capital expenditure to datewas £644k primarily relating to BCIF expenditure on the new creative arts block. Cash reserves at period 9 were £1,430k and forecast to be £1,093k by the year end and £1,180k by the end of 2015. Thekey financial indicators showed the ‘current ratio’ to be below target. This was due to redundancy payments and inflated accruals relating to BCIF income received in advance and was expected to improve significantly next year. In terms of staffing numbers the rationalisation process had resulted in 21 staff (17.6 full time equivalent) leaving and 13.45 of these were support staff. Governors asked if this included the impact of the curriculum review decision taken at thelast Full Board meeting. Mr Melia advised that as the final decision was still dependent on numbers in September this was difficult to model so had not been included at this stage. The next two years however would require further savings and £0.5 m efficiency savings assumed to be staffing with some related redundancy costs had been included in the budget paper on the agenda for discussion later in the meeting. Again this could change dependent on numbers. Mr Melia confirmed that the figure of £381k rationalisation costs included the related pension fund contribution of £55k.

The BCIF costings for the enlargementofthe creative arts block were projecting a small overspend, but it was hoped that non-utilised contingencies would cover this.

The Committee accepted the 3rd Quarter Accounts and Financial Report.

14/25 Budget 2014/15

Will Melia, Assistant Principal, presented the 2014/15 budget. A surplus of £137k was being forecast which represented just under 3% of turnover. It was clear from the summary Income and Expenditure account however how significant the fall in income of £1.4m was over the current year. This was primarily due to lower allocation of student numbers and changes to the funding formula. Looking at the key financial indicators ‘Borrowing as a % of income’ was marginally above the target set by Governors but this reflected the reduction in income. The income reduction was primarily due to the reduction in funded student numbers from 1,424 to 1,091. There had also been a reduction in adult learner responsive allocation due to the reduction of students aged 19+ in college. Pay costs had fallen significantlyhowever due to therationalisation programme. A pay award of 1% had been included within the budget. Non pay costs assumed an inflationary increase of 2% unless better information was available. This was significantly lower than the current year due to the inclusion of rationalisation costs in 2013/14but there had also been significant savings across many budget heads in particular planned maintenance not required due to new building project. TheBalanceSheet reflected the proposed BCIF capital expenditure of £2.7m and related loan liability of £1.64m with total cash balances at the end of 2014/15 expected to be £1,176k, an increase of £83k over the start of the year. Governors were surprised and pleased to note the estimated surplus and cash increase given the difficult funding situation and hoped that this would be achievable. Mr Melia reported that the college benefited from lagged funding and it was therefore the subsequent years that would be difficult,

The Committee approved the proposed budget for 2014/15 for recommendation to the Board for approval thanking Will Melia for his much appreciated work in preparing the figures.

14/26 Financial Plan 2014/15 to 2015/16

The financial plan included the budget for 2014/15as discussed under the previous item and also the projected position in 2015/2016. Focusing on 2015/16 and beginningwith the Key FinancialIndicators,Governors noted the ‘operating surplus a % of income’ was below target due to theinclusion of rationalisation costs of £350k. If these were excluded the positionwould be breakeven. The ‘borrowings as % of income’ indicator was around 6% higher than the target due to reduced income. ‘Cash days in hand’ was in excess of target but again this reflected static cash levels and reduced income. Governors noted the key assumptions interms of learner numbers,the related effect on funding and the cumulative changes over the period of the forecast. Pay costs assumed a payaward of 1%,some rationalisation provision and the recently announced 2.3% increase in employer’s contributions to the Teacher’s Pension Agency from September 2015.Non pay costs assumed inflation of 2% unless better information was available. The student transport subsidy had been reduced by £150k. Some subsidy would still be available however and the College would look more specifically at routes and usage and potential impact of reductionor removal. The cash flow forecast estimated cash balances to remain static at around £1.1m. Theforecast Balance Sheet reflected the significant planned capital expenditure in 2014/15 with only minimal capital expenditure in 2015/16 as a consequence. No change in FRS17 liability had been assumed at this stage. In termsof financial health,this was classified as ‘Outstanding’ for 2014/15and ‘Good ’in 2015/16. A risk and sensitivity analysis was included on schedule 5 of the plan.Audit Committee had discussed the top ten risks at its last meeting and these had centredon student numbers and funding changes.

The Committee agreed to recommend the Financial Plan to the Full Board for approval.

14/27 Any Other Business

On behalf of the Committee the Chairman thanked Mr Melia for his work over the years and wished him well for the future.

There was no other business.

14/28 Date of Next Meeting

15 September 2013at 6.00pm.

There being no other business the meeting closed at 6.40pm.

SIGNED BY THE CHAIR AS A TRUE AND ACCURATE RECORD

…………………………………………….. DATE ………………………

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