ORPORATION OF SIR GEORGE MONOUX COLLEGE
Minutes of Ordinary Business at the Meeting of the Resources Committee held on 28June 2016
Present / Jonathan Bush (Chair), Stephen Jones, Stewart Maclean, Rhys Moore.Clerking Services / Jonathan Bush.
Observer / David Ball (Acting Principal).
1 / Apologies for Absence and Quoracy
All members were present.
2 / Declarations of Interest
None.
3 / Minutes of the Previous Meeting (Ordinary Business): 15 March 2016
It was noted that the draft minutes had received approval by the Chair of the Committee for circulation.
The minutes were approved as a correct record of the business transacted and prima facie evidence of the proceedings to which they relate, except that the £75,000 referred to as cost savings in Minute 7 are separate from the additional £75,000 authorised to support curriculum improvement.
4 / Matters Arising from the Minutes (Ordinary Business): 15 March 2016
None.
5 / Management Accounts 2015-16 to Period 10 (31 May 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: 2.24 (1.99)
. / Underlying operating position as a % of income: 3.1% (5.0%)
. / Borrowing as a % of Reserves and Debt: 8.5% (9.1%)
. / Financial Health Score (points): 230 (240)
. / Financial Health Score (grade): Good (Outstanding)
. / Cash days in hand: 52 (60)
. / Pay as a % of income: 71.9% (70%)
. / Outturn: £94,000 deficit (£96,000 surplus)
. / Cash at Bank: £1,598,546 (£1,815.000)
The following matters were also noted, namely that:
. / the impact on the new financial health scoring system of changes to accounting treatments under the new Statement of Recommended Practice (SORP) have, in practice, relatively limited effects on the College’s financial results;
. / the items shown below are not budgeted, are a cause of the predicted deficit, and have reduced possible spending in other areas:
£000
. / Budget overspend on Principal / 20
. / Additional pension settlement to former principal / 26
. / 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 / 22
Total / 206
. / the projected deficit includes £75,000 allocated to improving the College’s performance;
. / overspends are projected as £309,000 (pay) and £65,000 (non-pay), offset by £196,000 of income not budgeted;
. / pay costs are currently 70.6% against a budget of 69.8% due to the above factors and are predicted to be 71.9% at the end of the year (including the holiday pay provision);
. / 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;
. / additional transitional funding to offset the sharp depreciation in deprivation funding has been secured for 2016/17;
. / whilst the prediction is for “good” health this year the underlying position is “outstanding” (on the current basis for allocation to categories) if the exceptional expenditure is stripped out;
Members further noted that:
. / of the £94,000 deficit, £90,000results from the holiday pay accrual provided under the new SORP – otherwise the actual deficit would be only £4,000;
. / the new SORP guidance system is now applicable to the College’s accounts – even though introduced very recently; and
. / student recruitment numbers are significantly behind where they should be as at the present date.
6 / 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 noted that a £75,000 allocation had been approved at the previous meeting of the Committee, and that the following calls had been made on these extra resources:
. / conversion, at an approximate cost of £67,000, of Room 133 into a large computer suite accommodating 40 computers, to be used as a classroom, a drop in space for students to work quietly, and a facility to practice and take online examinations - this is linked to Stream 1 “Teaching and Learning”, particularly in relation to examination preparation and addressing areas of known weakness; and
. / minor equipment purchaseslinked to Stream 1 “Teaching and Learning”.
Members further noted that:
. / the correct total should be £68,300;
. / converting Room 133 into a computer room will significant benefit underperformance in Maths and English qualifications; and
. / the above calls were both requested and agreed by the Senior Leadership Team.
7 / First Draft Financial Estimates 2016-17
First draft estimates prepared by the Interim Principal were received and considered.
It was noted that:
. / the estimates had been prepared under the new accounting framework;
. / mainstream income rises from £10,632m to £10,821m, an increase of £189,000, owing to a funding formula which, for the most part, operates a year in arrears;
. / proposed key indicators for 2016-17 (with 2015-16 projections shown in parentheses) are:
. / Adjusted Current Ratio: 1.99 (2.24)
. / Underlying operating position as a % of income: 5.0% (3.1%)
. / Borrowing as a % of Reserves and Debt: 9.1% (8.5%)
. / Financial Health Score (points): 240 (230)
. / Financial Health Score (grade): Outstanding (Good)
. / Cash days in hand: 59 (52)
. / Pay as a % of income: 69.8% (71.9%)
. / Outturn: £96,000 surplus (£94,000 deficit)
Cash at Bank: £1,815,000 (£1,598.546)
. / under the new framework the 2015/16 budget would have been rated “good” rather than “outstanding”, in which context the return to “outstanding” is borderline, 240 being the minimum score for “outstanding” – an annual surplus increase of approximately £110,000 will now be needed for each additional ten points gained;
. / pay costs are estimated to be 69.7% of income (66% if out-sourced services are excluded) and, having been projected on a post-by-post basis, afford no scope for contingency (although reasonable allowances have been made for cost such as overtime and maternity cover);
. / non-pay costs include both cost-cutting measures and efficiency gains; and
. / the most significant risks to the College are seem to be:
. / failure to improve the quality of the College’s student outcomes leading to a further grade 3 Ofsted, or worse;
. / failure to balance income and expenditure in order to retain the College’s financial viability;
. / a change in Government funding policy, in particular a requirement for further funding cuts - the current savings needed are dealt with by freezing funding levels and cutting bursary funds;
. / changes to national insurance and pension contributions for staff causing significant inflationary pressure on pay settlements - if schools are able to increase salaries due to funding protection, it will further weaken the College's ability to recruit high calibre staff;and
. / increasing poverty amongst the student body having a significant impact on the ability of young people to attend the College and succeed.
Members commented that despite the altered balance sheet treatment of government grants, moving them from reserves to liabilities, the balance sheet remains strong. It was also reported that the London living allowance now applies to cleaners and catering staff – the total additional cost impact being £30,000 with nil impact re catering as this was managed during a recent tender process where the contract had to be at zero cost to the College including the agreed pay rate to staff.
Members recommended the 2016/17 budget to the Corporation for approval, subject to the assumptions section being rewritten by the Acting Principal to confirm that the assumptions are simply suggestions, and not a fixed or actual plan to implement.
8 / Two Year Financial Forecast2016-18
A forecast in the prescribed form was received and considered.
It was noted that the first year of the forecast (2016/17) is the budget submitted for Agendum 7 re-cast in the format required, and that figures for 2017/18 had been based on a complete budget for that year, using a range of assumptions, in particular that:
. / the College recruits 100 less students in 2016/17, leading to a drop in income of over half a million pounds;
. / the College loses the disadvantage funding protection it will receive in 2016/17;
. / application levels are lower than in previous years - the College’s external consultants take the view that this will not translate into substantially lower numbers, and that progression will mean that numbers will be sustained at a level as good, or better, than at the census date in 2015 (this is an estimate in respect of which opinions amongst the senior staff and the external consultants show a wide degree of variation - the estimate of a 100 student drop is a split between the most pessimistic view of the staff and the view of the external consultants, and is a key element addressed in the related sensitivity analysis);
. / a 1% cost-of-living pay rise and all possible incremental increases are paid;
. / there are no further changes to national insurance and pension contribution costs;
. / non-pay costs produce savings of nearly £100,000;
. / depreciation falls by £30,000 as significant capital spending 10 years ago is now fully depreciated; and
. / capital expenditure is forecast at £100,000 for the year.
Members recommended the 2016/18 financial forecast to the Corporation for approval, subject to the following amendments:
9 / Education Funding Authority (EFA) Dashboard Data
The data was received for information.
Members commented that these were useful, and that it would be helpful to see information presented in this format across non-financial aspects of the College’s performance.
10 / Indemnity Cover for Members of the Corporation
The increase in the level of cover, and the additional cost incurred, was noted.
11 / Dates and Times of Meetings 2016-17
The following schedule of dates and times was approved:
Tuesday 22 November 2016 (6.30pm)
Tuesday 14 March 2017 (6.30pm)
Tuesday 20 June 2017 (6.30pm)
12 / Any Other Competent Business
None.