Finance and Property Committee

Preston College – Finance and Property Committee 8 March 2012

Minutes

FINANCE AND PROPERTY COMMITTEE

MINUTES of a meeting held on 8 March 2012.

Present: Mr E Bassa Chair

Mr R Bamford

Mr D S Connolly

Miss S Johnson

Mr P Kennedy

Dr E H Smith Principal and Chief Executive

(Left the meeting after item 12/04)

Also in attendance: Mr C Smith Interim Finance Director

Mr M Airey Acting Head of Finance

Mrs J E Hewitt Head of Facilities

Mr F Lee Clerk

Mrs S Wignall Deputy Clerk

Unable to attend: Mr M Mallam

12/01 DECLARATIONS OF INTEREST

Mr E Bassa declared an interest in Agenda item 12 – Park Campus Disposal.

12/02 MINUTES

The Minutes of the meeting held on 24 November 2011 were accepted as a true record and signed by the Chairman.

12/03 MATTERS ARISING

In response to questions asked the Principal and Chief Executive confirmed that a progress report would be submitted to the next Board meeting on the review of the Marketing Strategy and on how the College might use the £60k which was available following the decision not to make a pay award to staff in the current academic year. The Interim Finance Director reported that the SFA had not commented on the financial reports which the College submits monthly and that he would provide members with a commentary on FRS17 and its impact on College finances.

12/04 BUDGET/FINANCIAL PLANNING – 2012/2013

A paper set out the programme of work that would take place to prepare the budget for the July meeting of the Committee and for subsequent submission to, and approval by, the Board. It outlined the updated, but still very early projection, of the financial outlook for the 2012/13 budget informed by the indicative funding agency allocations. The possible extent of the financial challenge for the College was reported which was now much greater than previously reported last November. Reduced funding by the SFA was a material factor and the Principal and Chief Executive reported that a business case would be submitted to the SFA in an attempt to influence the final allocations. These were sector-wide cuts that were impacting greatly on learners.

In addition the paper set out the prognosis for 2013/14 noting the uncertainties attached to the new funding methodology impact, the effect on recruitment of FE loans, the possibility of continued review of the eligibility rules and the potential continuation of austerity measures.

The Committee recognised the seriousness of the issues facing the College both for the coming financial year and for 2013/14. The timetable submitted to the Committee would be amended to include a meeting for all Chairs mid way through the programme to update as issues materialised. The Committee felt that the College needed to do more in respect of marketing creativity and engaging with the market place, particularly using the V&PA development. The Principal outlined the work being done in that regard which she would communicate to all governors. The business planning process needed to take account of the government’s expectation of Colleges looking to become more dynamic and through greater strategic governance developing a wide range of evolving models, including joint models across the post-14 education sector in considering the needs of their local areas and that the College should explore more dynamic models to deliver some of its strategic objectives.

The College faced a difficult timescale in which to achieve a balanced budget that provided the required surplus of 1% as a minimum and the Committee was aware that it would take time to increase income from non-traditional areas. As a consequence the College would need to substantially reduce its costs as a worsening situation was developing.

DECISION

a)  that the proposed budget timetable for 2012/13 be noted and that the Interim Finance Director present an updated programme to the Board at its meeting on 29 March 2012;

b)  that the changes to funding within 2012/13 and the challenges facing the College to deliver the required 1% budgeted surplus be noted;

c)  that the financial pressures that could arise in 2013/14 be noted.

12/05 FINANCIAL REPORT 2011-12 PERIOD 6

The Acting Head of Finance reported the College Income and Expenditure position as at the end of January 2012 setting out the main influences which comprised an under achievement of income targets mainly in Adult Learner Responsive, and overspends on non-pay costs which were partially being mitigated by savings on pay costs. A College forecast, based on period 5 results, had been undertaken and the operating surplus was still expected to be reasonably in line with the Autumn Budget.

Detailed Management Accounts pack containing the scorecard, KPI projections, income and expenditure schedules, balance sheet and cashflow had been submitted to the meeting. The report also contained the latest analysis of aged debtors, credit notes and refunds.

The Committee was informed that a letter of variation had been received from the bank to confirm an adjustment to the loan facilities but as the communication from the bank was private and confidential the Committee agreed that this matter be taken as a Part 2 item.

The Committee noted the report and requested that the Interim Finance Director provide, by email to members, details of the commercial/retail operations undertaken by the College.

DECISION that the year to date position be noted.

12/06 CAPITAL BUDGET UPDATE (INCLUDING SFA PROJECTS)

A report provided the Committee with an update on capital spend for 2011/12 and also provided an update on the projects undertaken as part of the SFA grant funding allocation in 2010/11 and in 2011/12. The details for 2011/12 were:

The Committee felt that, in the light of the College’s finances in general, the programme should be the subject of a review.

DECISION

a)  that the forecast expenditure outturn for 2011/12 and the expectation that the budget would be met be noted;

b)  that the current progress on the SFA capital grant supported projects be noted;

c)  that the programme for 2011/12 be reviewed.

12/07 FINANCE SYSTEM UPDATE

The Committee received an update on the current position relating to the replacement of the Finance system. The tender process took place last year and a decision had been made to award the contract to Advanced Business Systems with their accounting package of ‘Open Accounts’. Costs were reported as being in line with the original budget.

The project would officially be launched on 6 March 2012 with a deadline for go-live for the 2012/13 financial year.

The Committee noted the current position and the proposed implementation plan to ensure a go-live for the 2012/13 financial year recognising that there was a major resource implication in bringing the new system into operation. A part-time systems consultant had been recruited to provide additional support to the project.

12/08 FINANCIAL FORECASTING REVIEW UPDATE

The Committee received an update on the progress made to-date on the range of actions identified to improve or rectify the existing financial forecasting processes and implementation of other recommendations contained within the Deloitte report. A total of 52 specific actions were identified and of those 47 had already been completed. Key aspects still to be completed for each section of the plan were reported. The Interim Finance Director reported that the Internal Auditors had conducted an assessment of the implementation of the findings of the Deloitte report and had concluded that there were no issues to draw to the Committee’s attention as the action plan was being addressed satisfactorily.

The Committee noted the current progress and the steps required to fully complete the remaining actions.

12/09 STAFF UTILISATION AND ADDITIONAL DUTIES POLICY

A report provided an update on the implementation of the Staff Utilisation and Additional Duties Policy and associated monitoring systems. The policy and associated monitoring system had been implemented across all academic areas in September 2011 and was subject to continual review through monthly monitoring meetings. The report proposed key changes to the monitoring mechanisms that would be implemented at the start of the next academic year. It was proposed to align the policy and monitoring systems to the establishment structure rather than measuring delivery by curriculum academy, which would remove some of the flaws that currently existed and minimise manual adjustment of the data.

The results reported in respect of Creative Arts required elaboration and the Interim Finance Director was asked to inform members by email in that regard. The Committee was of the view that whilst the details provided were of benefit there needed to be included measures of productivity and profitability whilst also reporting by curriculum area.

DECISION

a)  that the implementation of the Staff Utilisation Policy and monitoring systems as agreed in March 2011, be noted;

b)  that the staff utilisation recording mechanisms, in addition to its current measures, be also aligned to the establishment structure to measure utilisation against allocated budget;

c)  that any revisions necessary to the policy and recording mechanisms due to the outcomes of the contract review be reported to the committee for consideration and recommendation to the Board.

12/10 FEES AND CHARGES POLICY – 2012/13

The proposed fees and charges policy for 2012/13 was considered by the Committee.

RECOMMENDATION TO THE BOARD

a) that the Fees and Charges Policy, as set out in Appendix 1 to these Minutes, be approved;

b)  that authority be delegated to the Principal and Chief Executive to amend the schedules of Higher Education, Adult Community Learning, 14-16 Provision and Replacement ID cards when that information became available.

PART 2

12/11 BANK LOAN

The Interim Finance Director reported private and confidential letters received from the bank relating to the facility agreements in respect of loans to the College. He reported the details of the communication and that the proposed amendments were advantageous to the College.

RECOMMENDATION TO THE BOARD

That the letters of variation in respect of the bank loan be approved and signed by the Chairman of the Board and the Principal and Chief Executive.

12/12 PARK CAMPUS – DISPOSAL

Mr E Bassa had declared an interest in this item and left the room taking no part in the discussion or decision.

The Head of Facilities Management and Capital Projects provided an update on the disposal of Park Campus. Exchange of contracts had taken place on 23 February 2012 with an agreed completion date of 31 May 2012 or earlier by arrangement.

The Committee noted the progress made on this matter.

12/13 CAPITAL INVESTMENT OPTIONS

The Interim Finance Director submitted a report which provided data for initial consideration of the options available to the College in respect of the proceeds arising from the disposal of Park Campus. A number of options were available to the Board and the report set out various scenarios for using the funds. The Creative Solutions project had been part funded by the SFA with costing based on the estimated proceeds for the sale of Park Campus. He confirmed that there would be no clawback in respect of the grant funding based on the original estimate and the Committee welcomed that news. He also reported that the SFA had indicated that there might be further capital releases later in the year which the College might wish to bear in mind in respect of the use of the proceeds from the sale.

The Committee asked what progress had been made towards the completion of the Property Strategy and the Head of Facilities Management reported that at this stage there were uncertainties relating to the College going forward which impacted on the finalisation of the strategy. The Committee stressed the need for the College to develop its Strategic Plan which would enable the property strategy to be concluded. The Committee also asked the Interim Finance Director to report further to the Board on this matter and to include in his report the possibility of using the proceeds from the sale for capital investment in the College estate during 2012/2013 as opposed to an allocation being made from the revenue budget.

DECISION that a report be submitted to the next Board meeting on this matter together with an updated financial plan.

(Meeting finished at 8.20 pm)

DATE OF NEXT MEETING 12 JULY 2012

APPENDIX 1

FEES POLICY 2012/13

FEES POLICY 2012/13

1.  The College’s views on fees

The College sets fees in respect of all its course provision. Some fees are determined outside the College’s control (for example Lancashire County Council, the University of Central Lancashire and Edge Hill University). Fees are reviewed on an annual basis.

In those areas where the College has discretion to determine fee levels, the Corporation Board has a duty to set these with due regard to financial viability and market forces. The College does seek through the operation of its fees policy to encourage access to its courses amongst all sections of the population with ability to benefit. Since 2004 there has been a significant Government shift in both further and higher education policy which requires learners and employers to make an increased contribution towards the cost of course provision. This was further strengthened in the Comprehensive Spending Review from October 2010, and the Coalition Government’s plans for reform of the further education system. The College is taking forward the Department for Business, Innovation and Skills’ principles set out in Skills for Sustainable Growth and taking account of the most recent document New Challenges, New Chances:, Skills Investment Statement 2011-2014: Investing in a World Class Skills System.