Finance and General Purposes Committee Minutes 1 December 2022
Finance and General Purposes Committee Minutes 1 December 2022
Corporation and Committee Minutes- Finance and General Purposes Committee Minutes 1 December 2022
Minutes of a meeting of the board of Leicester College corporation: Finance and general purposes committee
Held on 1 December 2022 via Teams
Present: Danielle Gillett (Chair), Chan Kataria, Verity Hancock, Lee Soden
In Attendance: Louise Hazel - Director of Governance and Policy, Shabir Ismail - Deputy Principal/CEO, Harshad Taylor - Director of IT (item 4)
Declarations of interest
There were no declarations of interest.
Apologies for absence
2.1 Apologies for absence were received from Nicola Gonsalves, Jonathan Kerry
and Caroline Tote. It was noted that Ed Marsh had now resigned as a governor.
Minutes of previous meeting and matters arising
3.1 The minutes of the meeting held on 5 October 2022 were received and
agreed.
3.2 The confidential minutes of the meeting held 5 October 2022 were
received and agreed.
Digital strategy
4.1 The Director of IT presented the Digital Strategy 2022-2025. The following
points were highlighted.
4.1.1 This was the first Digital Strategy produced by the College. It had
been developed in conjunction with students and staff.
4.1.2 The current position and investment in IT over recent years was
highlighted. In 2022/23 the College had invested over £400,000 in
improving ICT resources around its sites. Investment included from
external grant sources as well as the College’s own funding.
4.1.3 The College held the Cyber Essentials Plus (CE+) accreditation and
had done for three years.
4.1.4 The strategy included 10 objectives for the next three years covering
teaching and learning environments; data enrichment and enrolment
processes; cyber security; disaster recovery and business continuity;
device replacement; interactive screens in classrooms; agile working
environments; helpdesk and end user services; safeguarding; and
server and network infrastructure.
4.2 Governors asked a number of questions including:
4.2.1 How did the College compare with other leading colleges in terms
of its digital capability? It was in a good position. Some other
colleges were struggling to achieve Cyber Essentials, let alone CE+.
There was still work to do to become outstanding but more work was
planned to increase staff confidence and digital skills, including
creating new dedicated staff training spaces. Staff were keen to get
involved. The Digital Strategy Group also had a focus on teaching and
learning with a subgroup specifically looking at this.
4.2.2 What was the biggest weakness? A lot of work had been done
around improving data and there was always demand for more
reporting. Staffing was an issue and it was important to balance staff
wellbeing with the increasing demands on the team. There were
recruitment and retention issues although work was ongoing to try to
address these.
4.2.3 Data and infrastructure were RAG rated red in the action plan;
what was needed to get them to green and how was data being
cleansed to get one version of the truth? The Matrix was the single
source of information and a lot of work had been done to train staff to
get the right data into the right system. A good start had been made
but there was more to do. Staff were being encouraged to help correct
any data that was not right; people were using the Matrix and this was
resulting in them asking for more options within reports.
4.2.4 The target to halve the number of cyber security events
suggested there were a lot; what was the extent of the problem?
The number of phishing emails was small, in single figures. There
were multiple layers of defence. An audit recommendation had been
that there was more regular staff training on cyber security and so new
short and regular training for staff was being introduced. More
information could be provided to the committee on the College’s
security measures.
4.2.5 It was good to see CE+ used as the measure; this was a well
understood benchmark. The criteria for CE+ would change next
year and so it might be harder to achieve the accreditation in future
years particularly if legacy equipment needed to be upgraded.
4.2.6 How would horizon scanning and being an early adopter of new
technology be put in practice and how would staff and students
being involved? The Director of IT attended national events including
as a speaker and was alert to what was being done in other colleges
and universities. He chaired the regional IT directors network.
Training rooms were being created for staff and students to use and
be hands on with the technology; the aim was to get feedback from
them on which tools were the most useful.
4.3 Governors approved the Digital Strategy.
Report and Financial Statements year ended 31 July 2022
5.1 The Deputy Principal presented report and financial statements for year ended
31 July 2022. The following points were highlighted.
5.1.1 The Audit Highlights and Management Report had previously been
discussed by the Audit Committee and Corporation ; there were no
changes.
5.1.2 There were no concerns, audit mis-statements, control deficiencies or
issues identified in the regularity audit.
5.1.3 The College’s delivery to adults had continued to be affected by
COVID-19 during 2021/22. The economic environment also
compounded the challenge in the College’s ability to recruit adults to
achieve its target and this had impacted on income.
5.1.4 The College’s EBITDA was a surplus of £710,000 excluding the impact
of FRS102 pension adjustments. This was achieved against a surplus
budget of £27,000 (excluding FRS102 pension adjustments). The
College outturned a deficit of £896,000, before restructuring and
pension adjustments.
5.1.5 The College met its bank covenants and had a financial health status
of ‘Requires Improvement’.
5.2 Governors asked a number of questions including:
5.2.1 Should the reference to senior pay be amended to make clear that
senior postholder pay was below the median? This would be
amended.
5.2.2 Had a view been reached yet on going concern? Not yet, the
auditors had the reforecast; it was not anticipated this would present
any issues for sign off of the accounts.
5.2.3 The clean management letter was noted and staff involved were
thanked. Noted.
5.3 Governors noted the report and agreed to recommend the Report and
Financial Statements to the Corporation for approval.
Report on student union accounts for year ended 31 July 2021
6.1 The Deputy Principal presented the Student Union Accounts for Year Ended 31
July 2022. The following points were highlighted.
6.1.1 The Income and Expenditure Account showed an increase in income
of £432 from £7,850 to £8,282 and an increase in costs of £2,729 from
£3,678 to £6,407. The accounts showed a surplus for the year of
£1,875.
6.1.2 The increase in income was due to income earned from the pool table
and a football competition, which was held during the year.
6.1.3 The increased costs this year were due to more activities taking place
compared to the previous year, when COVID-19 prevented the usual
union activities from taking place.
6.2 Governors asked a number of questions including:
6.2.1 Governor attendance at a recent SU Executive meeting showed
that the students were very committed to using the funds
efficiently and for the benefit of students; there was a good range
of activities planned. Noted.
6.2.2 Were there any concerns that the cash balances being built up
would be used for the purposes intended. There were no
concerns; members of the SET team would guide students and would
flag up any concerns to the finance team.
6.3 Governors noted Student Union Accounts for Year Ended 31 July 2022.
Finance report (Period 3) and Autumn term reforecast
7.1 The Deputy Principal presented finance report (period 3) and Autumn term
reforecast. The following points were highlighted.
7.1.1 The year to date result was an operating surplus after restructuring
costs of £2,061k compared to the budgeted surplus of £2,369k.
7.1.2 16-18 student numbers were above allocation by 166 students.
Although this would not result in an increased income this year, it
would have a positive impact on next year’s allocation.
7.1.3 Predicting the AEB outturn was difficult at this point in the year but
initial indications were that the College would achieve 91%-95% of its
AEB target.
7.1.4 Apprenticeship income was currently below target with an expected
income shortfall of £410k.
7.1.5 HE recruitment was below target, expected to result in a £273k
decrease in income.
7.1.6 An autumn reforecast had been undertaken. Positive movements
included additional funding for PMLD students, release of Lennartz
assessments which were out of time, bus pass accruals and reduction
in the planned maintenance budget.
7.1.7 Overall, the expected Total Comprehensive Income after restructuring
costs had decreased by £534k, from a deficit of £514k to a deficit of
£1,048k.
7.1.8 There was still a potential £900k of income at risk at this stage; work
was underway to generate as much income as possible to reduce this
risk.
7.1.9 The College continued to meet its bank covenants and remained in the
‘requires improvement’ financial health rating following the autumn
reforecast.
7.2 Governors asked a number of questions including:
7.2.1 Whether there were likely to be further increases in energy costs.
Increases had already been factored into the budget and so this was
unlikely.
7.2.2 The forecast showed the College was in a difficult position; an
incremental approach was sensible. There were tough choices to
be made particularly around non-pay. Were other colleges in
similar position? Colleges with a similar adult offer were in a similar
position and were also taking the approach that dismantling their adult
offer entirely was not the right thing to do. Nevertheless, the College
needed to think about what it offered. Unlike Leicester College,
several colleges had not had to deal with financial pressures like this
previously and did not know how to approach it.
7.2.3 Was there an expectation that colleges would need to use their
surpluses to manage the pressures? There was a mindset that
colleges were not managing finances well. However, the fact was that
there was simply not enough funding for adult education and there was
little money to be made from apprenticeships and particularly from the
expensive technical apprenticeships which the College offered.
7.2.4 The College was very tight in maintenance areas, would it be
helpful for the Committee to have an understanding of those
courses which were loss making and those which might be loss
leaders? The contribution rates would show which courses and areas
were making least money; further detail would be brought to the next
meeting.
7.2.5 Did the College have a campaign around using energy better?
There had been some awareness raising previously but no campaign
as such; more work around this was needed.
7.2.6 The College was making a deficit and the reserves were
declining; what would the impact be on the cash position? The
cash position was healthy but if it continued to make deficits, the cash
position would erode and this could not be allowed to continue. The
College would need to think carefully about investment in any new
capital projects above what was already planned.
7.3 Governors noted the period 3 finance report and agreed to recommend
the autumn reforecast to Corporation for approval.
Autumn reforecast: Mitigation actions
8.1 The Principal presented a report which provided a summary of actions to
mitigate the financial deficit assumed in the Autumn Reforecast. The following
points were highlighted.
8.1.1 A series of mitigation actions were planned or underway to help
address the financial position. The College would try to grow income
and was working on with the NHS Partnership Trust on a new sector
based work academy through the City Skills Centre. If successful, this
might grow. The relationship with a community partner in Highfields
was also being reinvigorated with training being offered on their
premises.
8.1.2 Other actions included a freeze on recruitment for three months, a
review of part-time lecturing and agency costs, release of Lennartz
assessment values and unclaimed bus passes included in the
reforecast.
8.1.3 There would also be a reduction to the planned maintenance
budget. The reactive maintenance budget would be retained as
planned for any issues that arose in year. There was a lot of work for
the estates team to manage the previously approved capital projects.
8.1.4 There might be other options which would be less palatable but these
would be kept under review.
8.2 Governors noted the report.
Any other business
9.1 The Principal took the opportunity to report on the recent decision by the Office
for National Statistics (ONS) on the reclassification of FE colleges into the
public sector. The following points were raised.
9.1.1 Ministers had accepted the reclassification for now and were making
some changes to the controls applied to colleges which came into
effect immediately.
9.1.2 There were no planned changes to the law. Colleges continued to be
self-governing corporations with charitable status and with
responsibility for their educational character, courses, contracts, and
relationships with staff and students.
9.1.3 The new controls from the Department for Education (DfE) involved 16
areas where colleges would need to get prior approval ahead. These
controls applied immediately.
9.1.4 There were changes relating to borrowing which had implications for
colleges’ relationships with banks. There were no changes to existing
loans but a clear DfE objective to replace borrowing from banks in the
future with grants or borrowing from government. DfE would be
distributing £150 million in spring 2023 in formula-based capital grants
to colleges and would bring forward £300 million in revenue payments
from summer 2023 to March 2023 to ‘reduce the need for borrowing’.
9.1.5 Most of the controls were similar to those applied to academies but
colleges would not need to get prior approval for capital transactions
and normal commercial activity. Colleges would retain their reserves,
any surpluses they made, control over capital spending and asset
sales, and their ability to use leases.
9.1.6 There would be a new College Finance Handbook in 2024. Colleges’
accounting years might change.
Chan Kataria left the meeting
9.2 Governors asked whether any of the information papers were likely to be
affected by the decision. They would not; the level of write-offs was lower than
the new thresholds requiring approval
9.3 Governors noted the information.
Bank loan
10.1 The Deputy Principal presented a paper which set out options for one of the
College’s bank loans. The following points were highlighted:
10.1.1 In October 2017, the College had transferred its loan of £6.9 million
from Barclays Bank to Santander. A 10 year fixed rate was agreed for
£5 million, with the remaining £1.9 million being paid at a variable rate.
The variable rate loan matured on 13 October 2022 and it was agreed
to extend this arrangement for a further three months while alternative
options were considered. This would expire on 13 January 2023.
10.1.2 Three options were being considered: convert to a fixed rate
arrangement; repay the loan or continue with a variable rate
arrangement. A five-year arrangement would be preferable as this
aligned to the term of the fixed rate element of the loan.
10.1.3 However, the ONS decision earlier in the week now meant that the
College would need to seek permission from the DfE for any changes
to existing arrangement as well as any new arrangements.
10.1.4 It was therefore proposed to seek a further extension from the bank
while permission was sought from the DfE. If this approval was not
forthcoming, it might be necessary to repay the loan, in which case, an
additional F&GP meeting would be called.
10.2 Governors agreed to recommend the option of extending the variable rate
to Corporation and agreed to request a further extension of the existing
loan arrangement for three months while approval was sought from the
DfE.
Bad debt write-off
11.1 The Deputy Principal presented a paper requesting authority to write-off debts
that were considered uncollectable. The following points were highlighted:
11.1.1 It was proposed that two debts totalling £7,839.50 were written off.
11.1.2 The debts had been chased as far as possible and were now
considered to be uncollectable.
11.1.3 During the academic year to date, from 1 August 2022, there had been
no previous write offs. With this recommendation, the cumulative total
for the year will be £20,493.98.
11.2 Governors considered the paper and agreed to approve the write-off of
uncollectable debts totalling £7,839.50.
Capital update
12.1 The Deputy Principal gave an update on the capital programme. The following
points were highlighted.
12.1.1 Most of the capital expenditure over the next three years was grant
funded. Up to 2023/24, the College was planning to invest around £12
million in capital projects, £4.4 million of which (36%) was funded by
the College with the rest from grants.
12.1.2 It was not expected that the College would have access to this level of
investment in future years and so it was felt sensible to take up the
opportunities and proceed with the projects.
12.2 Governors commented that this was the right approach and noted the
update.
ESFA dashboard
13.1 Governors received and noted the ESFA Dashboard.
Staff wellbeing
14.1 Governors received and noted the report on staff wellbeing.
Marketing update
15.1 Governors received and noted the Marketing update.
Waivers of financial regulations
16.1 Governors received and noted the report on waivers of financial
regulations.
Dates of next meetings
1 March 2023
3 May 2023
22 June 2023