Finance and Assets Committee Non-confidential minutes of the meeting held on Monday 26th June 2023 at 4.30pm via Microsoft Teams

1.0 Welcome and Apologies 

114 No apologies have been received

2.0 Declarations of Interest:

115 Interests Declared: 

• Janet Smith declared the following interests: 
  • CEO/Principal Nottingham College
  • Trustee and Board Members of Skills and Education Group (SEG), awarding organisation and charity
  • Ofsted Inspector
  • Member of D2N2 LEP Principals’ Group 

No other interests were declared.

3.0 Minutes of Previous Meeting 

116 The Committee resolved that the non-confidential and confidential minutes of the meeting held on 20th March 2023 (distributed as F&A.260623.002 and 003) be approved as a true record.

4.0 Actions and Matters Arising 

4.1 Action Tracker 

117 The open action tracker (distributed as F&A.260623.003) was reviewed: 
30.1.23 Action 1 – the relationship with the unions is currently very positive. The committee closed this action with an option to review it if things change. All other actions closed. 

4.2 Matters Arising 

118 There were no matters arising.

5.0 Management Accounts

5.1 P9 Management Accounts 

119 DN took governors through the headlines of the period 9 (to end April 2023) management accounts (distributed as F&A.260623.005). Key points highlighted: 

• April was a good month, especially in relation to AEB income 
• Income is still down against budget but the gap is closing 
• The HE budget is now unlikely to reach target 
• #Staff costs are higher than budget but about half of the increase reflects the cost of delivering the small group tuition support which is not included in the budget. Non-pay spend is significantly decreased this year 
• Target EBITDA and all bank covenants will be met, although there is still a shortfall at present 
• Cash better at end April than expected, due to unbudgeted capital grants. Some invested to ameliorate the effect of loan interest 

120 A governor asked about the interest on the college’s variable debt. AC responded that a small negative variance has been seen across the year but this is not material because cash is higher than expected. 

121 A governor asked about the level of pay cost and how this was influenced by agency staff. AC explained that the majority of agency appointments are teaching cover and the college is reducing the use of agency staff. Some of this cover is funded through small group tuition. 

122 A governor asked why the college still has approximately 100 more staff than at the same point last year. AC explained that this is mainly teaching staff and is reflective of the workforce needed to run the college with the increase in learner numbers this year as well as the extra 40 hours of teaching required for every 16-18 learner under the funding rules introduced by the ESFA in 2022-23. Another governor asked whether technology is being leveraged adequately. AC responded that the benefits of technology such as the new HR and payroll system will start to be realised over the next year, along with those from the new finance system which will be introduced over the Summer.

123 Governors are keen to understand the dynamics of the staff cost to income ratio, which is still higher than the FEC benchmark of 65%. AC responded that the average ratio across the sector is approximately 68% and this is likely to be higher once all colleges have submitted their 23/24 budgets. 

124 Governors sought assurance around achieving the EBITDA target given that the college is still behind budget. AC responded that much of it will come through AEB, which will reach approximately 106% this year, and the small group tuition fund. 

Action: AC to add the budgeted staff cost to income ratio line into the graph in the management accounts showing actual against the FEC benchmark (slide 6).

5.2 Applications, Progression and Enrolments Update 

125 The committee received the update report (F&A.260623.006). External applications are strong and higher than last year. Huge effort is being focussed on achieving the progression target before the Summer holidays which has shown an improvement since the report was written. 

126 A governor asked about the significant variance in target and application numbers across courses. JS explained that it is difficult to control where learners apply and it is important to adapt to the numbers as quickly as possible during enrolment to ensure all learners can be accommodated.

6.0 Financial Health

127 The committee received the ESFA Financial Health Dashboard (distributed as F&A.260623.007). Governors noted that the college’s financial health is still requires improvement, mainly due to the college’s high debt to income ratio. 

128 AC reported that the college is on course to achieve good financial health next year as long as neither the income nor EBITDA fall.

7.0 Budget and Forecast 23/24 

129 The committee received the Budget and Forecast for 23/24 (distributed as F&A.260623.008). The required level of EBITDA is determined by the recovery plan. Pay savings in this budget come from a reduction of maths and English delivery and HE delivery, and an increase in independent study, bringing the college more in line with sector norms. Non pay spend has been significantly reduced. 

130 The committee was keen to understand the challenges to achieving the 23/24 budget in order to be confident to recommend it to the board for approval. AC explained that the 14-19 funding income for 23/24 is known and the AEB target is realistic given what has been achieved this year and the 2.2% increase in the rate. Staff also understand much better what needs to be achieved due to careful and consistent communication over 22/23. The new Dean of HE and greater activity in this area also makes it much more likely that the HE budget will be achieved. 

131 Governors asked specifically about the achievement of non-pay savings. AC explained that subcontracting spend would reduce next year due to more in house delivery. All spend will be carefully monitored from the start of 23/24 and intervention will be swift where necessary. 

132 Governors asked about the risk in the pay progression plans set out in the budget. AC explained that pay costs include only the incremental progression previously committed to for September 2023. There is an ambition to achieve a pay award in 23/24 and any funds for this will need to come from in year savings as a result of the transformation programme which is just getting underway. A separate paper detailing the transformation programme will be presented to the committee in early 23/24. 

133 A governor sought reassurance around the potential risk of industrial action in the current climate. AC and JS explained that they have both met with union representatives to make them aware of the situation and the ambition around a pay award and that this relationship and that with all staff are being carefully managed.

134 The forecast for 24/25 is based on a conservative enrolment figure for 23/24. The anticipated EBITDA target is also reduced to approximately 7% of income because the refinancing arrangement that the college needs to enter into before August 2024 will no longer be on commercial borrowing terms. Governors asked to see a detailed breakdown of what the target EBITDA for 24/25 should be ahead of the college entering into refinancing negotiations with the DfE. 

Action: AC to present detailed breakdown of target EBITDA and the influences on this figure ahead of entering into negotiations with the DfE on the college’s loan arrangements. 

The Committee resolved to recommend to the board for approval: 

1. The 3-year plan for the 2022-23 outturn, 2023-24 budget and 2024-25 forecast. 
2. The 2023-24 budget, including the incremental pay award in September 2023 to all eligible staff. 
3. The College Financial Forecast Return (CFFR) for submission to the ESFA by 31 July 2023 based on the plan to be approved at point 1 above. 

In addition, the committee resolved to recommend that the board approve the following, in order to maintain the subcontracting arrangements with Expressions for 23/24: 

1. The award of a subcontracting contract to Expressions Academy of Performing Arts in 2023-24 up to the value of £150,000 for 14-19 provision. 
2. The award of a subcontracting contract to Expressions Academy of Performing Arts in 2023-24 up to the value of £186,000 for HE provision.

8.0 Subcontracting

This item was minuted as confidential.

9.0 MIS 

136 The Committee received the MIS delivery plan update (distributed as F&A.260623.010). The committee commended the progress with the plan, especially around the smooth introduction of the new HR and payroll system.

10.0 IT 

137 The Committee received the IT strategy delivery update (distributed as F&A.260623.011). 

138 RW updated the committee on the multi-functional device (MFD) tender process. 5 bids have been received. Once scoring is complete, board approval to award the contract will be complete by written resolution due to the timing of this process relative to board and committee meetings. 

139 One governor asked about artificial intelligence (AI) and how its risks and benefits are being considered by the college and sector as a whole. JS responded that the college’s approach to AI would form part of her Principal’s report to the board on 3rd July. 

CT left the meeting

11.0 Health and Safety 

140 The committee noted the Q1 Health and Safety report (distributed as F&A.160623.012).

12.0 Estates

This item was minuted as confidential.

13.0 Policy Review 

13.1 and 13.2 Financial regulations and Treasury management policy 

151 The committee noted the updated financial regulations (distributed as F&A.260623.017 and 018). Changes were required due to the college returning to the public sector and being required to adhere to managing public money regulations. The procedure for amending bank details has also been updated to make this more secure. The committee resolved to recommend the financial regulations and treasury management policy to board for approval. 

13.3 Supply fees and charges policy 

152 The committee resolved to recommend the supply fees and charges policy (distributed as F&A.260623.019) to board for approval.

14.0 Committee Terms of Reference, Business Schedule and Self Assessment

153 The committee received the committee terms of reference and business schedule for 23/24 and the self-assessment questionnaire for 22/23 (distributed as F&A.260623.020). Due to the maturation of both committees, it is proposed that the finance and assets committee takes on the business of the workforce and development committee from 23/24, adding one extra annual meeting. 

The committee resolved to recommend the terms of reference and business schedule for 23/24 to board for approval. 

154 The committee approved the wording of the 22/23 committee self-assessment questionnaire to be distributed after the meeting.

15.0 Review of Risks

155 The committee received and noted the finance and resources section of the risk register (distributed as F&A.260623.021) and confirmed that the agenda and reports reflected those risks. Governors noted the updates to the risks identified. 

156 The committee discussed the risk of IT service area failure (FIN 6). A governor suggested that the risk score could be reduced if the network is adequately segregated as this would lessen the impact score of the risk. The committee acknowledged that hacking attempts for all organisations are frequent and it is essential to be vigilant in this area.

16.0 AOB 

157 There were no items of AOB.

17.0 Date of the Next Meeting 

158 The date of the next meeting was confirmed as Monday 2nd October 2023 at 4.30pm. Chair thanked the committee and college staff for the quality of debate and efficiency of presentation, as well as the work that went into papers that come to the committee. 

The Chair closed the meeting at 6.41pm.