Minutes of a meeting of the board of Leicester College corporation: Finance and general purposes committee

Held on 27 June 2024

Present: Danielle Gillett (Chair), Chan Kataria, Lesley Giles, Verity Hancock, Lee Soden*, Robert Radford

In Attendance: Louise Hazel - Director of Governance and Policy, Shabir Ismail - Deputy Principal/CEO, Della Sewell - Director of HR, Shaun Curtis - Director of Estates and Campus Services (item 4)

* Joined via Teams

1. Declarations of interest

   • 1.1 Verity Hancock, Louise Hazel, Shabir Ismail and Della Sewell declared an

     interest in item 8.2.

2. Apologies for absence

   • 2.1 There were no apologies for absence.

3. Minutes of previous meeting and matters arising

   • 3.1 The minutes of the meeting held on 9 May 2024 were received and agreed.

   • 3.2 The confidential minutes of the meeting held on 9 May 2024 were received

     and agreed.

   • 3.3 As a matter arising, the Principal gave an update on the SMB College Group

     SPA.

   • 3.4 As a further matter arising, the Principal gave an update on discussions with

     the City Council over High Needs funding. The Council now said it did not

     understand how the College’s costs had been calculated and it expected them

     to be lower than those of a special school. It had asked more questions. The

     tone of the latest email was not consistent with indications given in previous

     meetings which had involved the ESFA and the Council was still failing to

     confirm that it would look properly at funding for 2024/25.

   • 3.5 Governors asked a number of questions including:

     • 3.5.1 At what point did this need to be escalated? A further meeting

       would take place on 1 July. If that was not helpful, the Principal would

       need to write to the Director of Education and SEND.

     • 3.5.2 Was it possible to get leverage through another route? There was

       no obvious route to do this.

     • 3.5.3 The potential adverse impact on the Council as well as on

       students needed to be spelled out. Agreed, the Council was trying

       to get away with paying as little as possible. The College understood

       its financial difficulties but it had a legal responsibility to these students

       and a local agreement needed to be negotiated.

     • 3.5.4 The tone of the Council’s response indicated it was in a

       vulnerable position and buying time.

     • 3.5.5 The Council needed to understand the consequences of failing to

       fund the College properly, for students and for the College. Its

       position had not changed and a decision would still need to be

       taken about the future of the provision if there was insufficient

       funding.

     • 3.5.6 This was a national issue and there might be scope to raise this

       at national levels.

4. Capital projects update - Aeronautical

   • 4.1 The Director of Estates and Campus Services presented an update on the

     aeronautical project. The following points were highlighted.

     • 4.1.1 The Office for Students (OfS) funded aeronautical project (£5.58

       million) was in progress. The deadline for tender responses had been

       extended by a week.

     • 4.1.2 Current cost estimates were indicating a potential overspend but it was

       hard to predict where tenders would come in. Some other colleges’

       projects had received tenders much higher than the planned budgets.

     • 4.1.3 If the tenders were higher than planned, the College would need to

       look at requesting additional funding from the OfS and/or value

       engineering.

   • 4.2 Governors asked a number of questions including:

     • 4.2.1 Whether the College knew who might tender? There were

       potentially four good contractors.

     • 4.2.2 What the red lines were. This would depend on the OfS’ willingness

       to agree additional funding. If it would not provide additional funding,

       the College would need to decide what other work it might need to

       hold back.

   • 4.3 Members noted the update on the aeronautical project

5. Chages to staff contracts - CONFIDENTIAL

6. Finance report (Period 10) and Summer reforecast

   • 6.1 The Deputy Principal presented the finance report (period 10) and summer

     reforecast. The following points were highlighted.

     • 6.1.1 The year to date result was an EBITDA deficit after restructuring costs

       of £101k compared to the forecast EBITDA deficit of £46k.

     • 6.1.2 16-18 learner responsive learner numbers were well above allocation

       by 212 students (including T Levels) and the College had received

       additional in-year funding for this

     • 6.1.3 Latest indications were that the AEB allocation would be exceeded

       and an additional £165k had been factored into the summer

       reforecast. The data return showed an increase of 10% compared to

       the same point last year.

     • 6.1.4 Apprenticeship income was currently in line with the revised target and

       20% above the same point last year.

     • 6.1.5 HE income overall was expected to fall slightly short of the spring

       reforecast by £37k as a result of withdrawals.

     • 6.1.6 A summer reforecast had been undertaken. There was an overall

       positive variance of £100k; variances were highlighted and included

       release of additional 16-18 income retained for potential clawback.

       Numbers had held although there would still be a small clawback.

       Additional AEB funding had been assumed although remained

       unpredictable. The end of year uplift was expected to be around £400k

       but could be more. No AEB clawback was expected.

     • 6.1.7 Overall, the expected EBITDA after restructuring costs would improve

       by £69k, from a Surplus of £714k to £783k. This excluded any

       potential funding relating to an increase in high needs students

     • 6.1.8 The summer reforecast would meet the bank covenants, noting the

       agreement of a waiver for one of the covenants for this year, and the

       College’s financial health remained in the planned ‘requires

       improvement’ rating.

   • 6.2 In response to a question as to whether there was anything in the next two

     months that might affect the forecast position, it was confirmed this was

     unlikely.

   • 6.3 Members noted the period 10 finance report and agreed to recommend

     the summer reforecast to Corporation for approval.

7. Budget for 2024/25 and financial plan 2025/26

   • 7.1 The Deputy Principal presented the Budget for 2024/25 and financial plan for

     2025/26. The following points were highlighted.

     • 7.1.1 Overall, the proposed budget for 2024/25 showed an operating surplus

       of £511k moving to £1.1m in 2025/26 with an EBITDA of £2.3m

       moving to £2.9m in 2025/26.

     • 7.1.2 Total income for 2024/25 was forecast to increase by £2.9m to £51.5m

       compared to 2023/24. This was mainly due to increases in 16-19

       income. Apprenticeship income was also budgeted to increase

       marginally. The Adult Skills Fund (ASF) which replaced the AEB now

       included tailored learning which was previously non-regulated

       provision/community learning; this provided more flexibility. Other

       income streams including Higher Education and fees in general were

       held at 2023/24 levels.

     • 7.1.3 Total forecast pay expenditure in 2024/25 would increase by £1.5m

       before restructuring costs; this reflected the increased delivery. A 1.1%

       pay increase had been assumed.

     • 7.1.4 Total non-pay expenditure of £14.6 million was included in the 2024/25

       budget.

     • 7.1.5 Under the current economic climate, the financial health would be

       ‘good’ with a health score of 190 points for 2024/25. Other financial

       objectives would be met.

     • 7.1.6 The capital programme was £8.8m of which the College would

       contribute £500k

     • 7.1.7 The assumptions, risks and sensitivities were highlighted. Risks

       included pay expectations which were not yet known and would be

       influenced by schools teachers’ pay which might be between 2-3%.

       Additional High Needs funding for 100 students receiving element 2

       had also been factored in.

   • 7.2 Governors asked a number of questions including:

     • 7.2.1 What would an increased pay award cost? Each 1% was around

       £350k.

     • 7.2.2 Was the College currently funded for 45 High Needs students?

       Correct.

     • 7.2.3 Were high needs and pay costs the main hotspots for 2024/25?

       They would be, assuming enrolment was as planned.

     • 7.2.4 When the outline position had been reviewed earlier in the year, a

       breakeven budget had been anticipated but this was slightly

       better; was that because of the high needs assumptions? It was.

     • 7.2.5 Had any of the potential SMB related finances been factored in?

       No, a separate budget had been prepared for the proposal.

     • 7.2.6 Was a three-year budget normally prepared? The College was only

       required to produce a two-year budget since funding was allocated

       annually.

     • 7.2.7 There was the potential for some big decisions needed on capital

       investment noting the OfS project potential overspend and the

       need to upgrade IT equipment and servers. Agreed. A decision

       might be needed on the OfS project. Funding for the server

       replacement had been included in the budget which would reduce the

       risk exposure. £250k had also been included for the IT equipment

       replacement; this would be targeted at the higher risk areas in 2024/25

       with further funding needed in 2025/26.

     • 7.2.8 Was it assumed that the TPS increase would continue to be

       funded? It was; that was the assumption of the sector

     • 7.2.9 What was the tolerance level between the Requires Improvement

       and Good ratings? The top RI score was 170 and the top Good score

       was 230. There would need to be a deficit of £4m to fall into

       inadequate.

     • 7.2.10 Had SMB fallen to inadequate? It had.

   • 7.3 Members agreed to recommend to Corporation that it:

     • 7.3.1 Approve financial plan for submission to ESFA.

     • 7.3.2 Approve of the 2024/25 budgeted Income and Expenditure. Account, Balance Sheet and Cash Flow contained within the plan.

     • 7.3.3 Approve the Capital Expenditure Budget for 2024/25.

     • 7.3.4 Note the 2025/26 financial plan and its assumptions.

8. Pay award - CONFIDENTIAL

9. Bad debt write off

   • 9.1 The Deputy Principal presented a paper requesting authority to write-off debts

     that were considered uncollectable. The following points were highlighted:

     • 9.1.1 It was proposed that one debt of £1,541 was written off.

     • 9.1.2 The debt had been chased as far as possible and was now considered to be uncollectable.

     • 9.1.3 During the academic year to date, from 1 August 2023, there had been

       write offs of £15,540. With this recommendation, the cumulative total

       for the year would be £17,081.

   • 9.2 Members approved the write-off of uncolllectable debt of £1,541.

10. Committee workplan

    • 10.1 The Director of Governance and Policy presented the workplan for 2024/25.

      The following points were highlighted.

      • 10.1.1 This followed a similar format to the current year, additional meetings

        could be held if required.

    • 10.2 In response to a question clarifying the timing of the pay award, it was

      confirmed that this would be in December.

    • 10.3 Members approve of the committee workplan for 2024/25.

11. Waivers of financial regulations

    • Members received and noted the report on waivers of financial regulations.

12. Dates of next meetings

    • 3 October 2024

    • 4 December 2024 (4.30pm - followed by Corporation Christmas Dinner)

    • 13 March 2025

    • 7 May 2025

    • 26 June 2025