Minutes Of Fgp - 7 10 09 - Confirmed

CONFIRMED

Minutes of the Meeting of the

FINANCE AND GENERAL PURPOSES COMMITTEE held in the Boardroom, Edison Building, Willesden Centre, at 9am on Tuesday 6 October 2009 MEMBERS

Name

Category

Present [5]

[5/5 : 100%]

Gerry Davis [Chair] Margaret House [Vice-Chair] Vicki Fagg Pam Jordan Jan Knight

Independent Independent Principal Independent Independent

Apologies

None

IN ATTENDANCE

Name

Office

Gill Winward Malcolm Rapier Ashok Patel Anna Openshaw

Clerk to the Corporation Assistant Principal Finance Director Director of Human Resources (left after Item 7)

It was agreed to take the HR-related agenda items first in order to facilitate the attendance of the HR Director. Declarations of Interest – None declared [Action] 1

MINUTES OF THE PREVIOUS MEETING The minutes of the meeting held on 23 June 2009 were APPROVED as a true and accurate record and, as such, were signed by the Chair.

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MATTERS ARISING [i]

Item 2 [i] – Health & Safety – Swine ‘Flu: The Assistant Principal reported that there had been minimal incidence with 3 confirmed and 5 suspected cases (both staff and students) though more were expected in the autumn. He confirmed all processes were in place and being managed successfully.

[ii] Item 3 [i] – Management Accounts – Train to Gain: The Principal referred to the paper that had been circulated, which attempted to explain why the contract with the LSC had changed and why the figures were as they now stood, and reminded Members that this was a very complex area. The Finance Director elaborated that £1m had been transferred between Adult (Train to Gain) funding and Employer Responsive budgets and then a further transfer had taken place mid-year based on the activity levels predicted by the LSC rather than the actual levels planned by the College. There had also been a reduced availability of central funding.

Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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[Action] Responding to a question, the Finance Director said that financial plans going forward assumed that Train to Gain funding may cease altogether in April and this could have staffing implications. Members also noted the disappointment caused to many employers when provision had to be scaled back and there were concerns regarding reputational damage for the College. [iii] Item 4 – LSC Funding Allocation 09/10: The Principal reminded Members that funding now known as ‘Adult Responsive’ had once been the College’s core business but was no longer. Funding was also currently based on achievement of a funding allocation rather than learner numbers. This year’s outcome was uncertain but there was a belief the target would be achieved. The Government’s focus was now on Full Level 2 skills achievement and 16-18 yr olds. The former was considered to be a challenging target this year and the latter was likely to be on-target (rather than overachieved, where the LSC would fund up to 10% over delivery.) Overall, it appeared that the settlement for College was more favourable than other colleges had managed to achieve. [iv] Item 8 – Staff Contract Negotiations: The Director of HR updated Members that since the last meeting the UCU had approached management with 2 offers but neither had been acceptable as they did not include contractual changes. In the summer the union had sent a 10 page letter to members and then conducted a strike on the first 2 days of enrolment. Further strike action had been threatened but not implemented. There had been discussion with the national official but subsequently the topic of harmonisation had been overtaken with the prospect of redundancies locally. The position had therefore stalled and a more complex situation now existed. A discussion ensued and it was noted that efficiencies from changed staff contracts were important in helping the College to improve its financial position and without these the opposite was likely. Members also expressed surprise at staff attempts to disrupt the enrolment process when core college funding came from such enrolments and any reduction in this income could jeopardise job security. The current situation was NOTED. Items 5 - 8 were taken next 5

PROPOSED REDUNDANCIES CONSULTATION The Director of HR reported it was now clear from the College’s financial position that compulsory redundancies would be needed in order to make the required level of financial savings. There was a legal obligation to have a 30 day consultation on these proposals and this would begin from the following Monday. A letter had gone to staff informing them of this regrettable but unavoidable situation. In response to a question, the Principal stated that both teaching and support posts would be affected by the cutbacks and that management positions would also feature. Natural wastage savings were also factored in. The actions and position was NOTED.

6

PAY AWARD FOR 2009/10 The Director of HR reminded Members that it was usual at this time of year to consider an annual pay award and the national recommendations on this. The proposition at present, however, was that in light of the College’s financial position,

Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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[Action] as already mentioned, that no action be taken until the question of redundancies had been dealt with and the ensuing situation re-evaluated and steady. A paper had been circulated which showed the national recommendation this year (for a 1.5% increase) and details on other public sector pay deals. Many groups, such as school teachers, were in the 3rd year of 3-year pay deals which now seemed very generous in the present climate of pay freezes in many places. The proposal was APPROVED. 7

INDIVIDUAL EMPLOYEE RELATIONS MATTERS The Director of HR reported that, since the last meeting, there had been 1 dismissal (MY), which was the suspension case reported at that time. With regard to Tribunals, one case was listed for January (moved from June) and one other outstanding, which had been ‘stayed’ pending the Heyday outcome, where application would be now be made for the case to be struck off as this test case had now been ruled on. The report was NOTED

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LOCAL GOVERNMENT PENSION SCHEME (LGPS) [i]

Pension Discretionary Policy The Director of HR explained that there had always been a facility for each scheme participating employer to have some discretions over provisions. Following a rule change in 2007, the relevant policy required amendment and a review of the situation (analysis contained in the circulated paper) showed that the College could not afford any of the possible discretions as all were very expensive. It was noted that Brent Council, our partner in the LGPS, had continued the practice of abatement, which was in place prior to 2007. The Principal informed the Committee that next year the age at which pension enhancements on redundancy can be made rises from 50 to 55. Members AGREED not to alter the present policy and practice of no discretions and NOTED that the financial position was not likely to improve from that necessitating such a stance.

Ms A Openshaw left the meeting [ii]

FR17 Disclosure The Finance Director reminded Members that each year, under accounting requirements, a valuation figure on the pensions liabilities had to be included in the accounts (the FRS 17 disclosure requirement). Last year the relevant figure was £11m and this year would be £20m. Poor investment returns had not helped this situation. A full Scheme valuation was due next March and this would inform of any revised contribution rates necessary or re-alignment of funding. The College’s current Employer Contribution rate was just over 19% but Brent Council were paying over 23% so it was expected that there would be an increase in the pipeline for the College.

Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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[Action] Members NOTED the situation The agenda order was then restored 3

FINANCIAL REPORTS [i]

Management Accounts – Financial Outturn (draft) for 2008/09

The Finance Director presented his report and reminded Members that the year end Management Accounts would form the basis of the statutory accounts. A summary view was that:

• • • • • •

An operating deficit of £900k was likely, which was more than £200k over than previously reported. This was mainly due to failing to hit tuition fee targets and also some unexpected overtime claims. The aborted capital project also added costs to the accounts and these were very significant in terms of the balance sheet Overall, the balance sheet was very weak and hence the need for actions indicated earlier in the meeting Contracts had all been successfully delivered but with significantly reduced adult ‘core’ funding Monies expected form the LSC towards the property projects (£0.6m) had largely been received Ratios on Solvency and Cash days were weak and needed attention. A report on these would come to the next meeting for recommendation to the Corporation

AP

In response to a question on financial health, the Finance Director judged the College currently to be in Category B: however, if the planned savings could not be realised there was a possibility that this could reduce to Category C. Given that any savings made would just take effect for the second half of the year, this was a potential risk. Members NOTED: a) the projected outturn b) the associated issues [ii] Working Budget for 2009/10 (including cash flow) The Finance Director commented that this proposed detailed budget was very similar to the first year of the 3 year Financial Plan, recently approved. In essence, the aim was to adjust the College’s financial position, which had not been done for some while. Some key influences were:

• •

• •

• •

•

LSC ‘core’ income falling in real terms in the last 4 years, by up to 16% therefore, existing costs could not continue to be carried pay costs represented 75% of the total income and this needed to reduce to match reduced income 75% was also high when compared to sector norms and the target was 71% going forward Any pay savings achieved would only be half-year ones and would be partly offset by redundancy costs Other cost lines were also being examined: the staff development budget was to be cut by 50% and other non-pay lines would be reviewed as well The LSC capital funding debacle had caused the College to lose

Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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[Action] • • •

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considerable sums (£3.8m) in net cash & reserves off the balance sheet The stalled capital project also now left College with building maintenance and unsatisfactory working/learning environment issues (eg 2 lifts to now be replaced at Wembley at a cost of £0.5m) Employer Responsive work was continuing but being scaled down to reflect funding changes Less confidence over fee income – students less able to pay in the present economic climate Seeking all sources of income – including space rentals and the siting of phone masts

Overall, a £1.2m gap had to be made up and therefore reducing pay costs was an essential activity and redundancies were inevitable. The recommendation was that an underlying (taking account of actual redundancy costs) break-even budget should be achieved. The Finance Director then went through the draft budget, modelled with this aim, in some detail. Key points included:

• • •

•

•

A good LSC allocation for the current year HEFCE funding was expected to show a good settlement There was a halving of the agency staff costs budget Capital Project costs – it was hoped these could be written off in the 08/09 accounts in one ‘hit’ but accounting rules may not permit this. Arena House was still an operational building and this portion may need to be carried forward as a depreciation item for a further two years The franchise contract was expensive provision but was critical for helping to meet 16-18 yr old learner number targets

In conclusion, it was submitted that it would be difficult to deliver the proposed breakeven position in the first year of such an adjusted approach, given the scope for only a half year of savings and the potential redundancy costs. A very lengthy discussion then followed. This embraced the following points:

• •

•

•

•

The Principal explained the background and history of various factors that had led to the present situation and had had a particular effect on this College. The Principal also highlighted that it was clear that Government priorities were on the 16-18 yrs arena and therefore, going forward, funding to CNWL was likely to continue to decrease, with speculation of up to a 20% reduction on adult funding. Members debated at length the need for forward financial planning along the lines of these expectations and to therefore assess the implications for the future and judge the depth of cuts necessary at any one time. It was also suggested that it may be more desirable to make larger than immediately required savings this year, to prevent the need for constant re-adjustments in succeeding years. The Principal stressed the difficulty in forward planning when funding regimes varied so frequently, eg to assume 20% future reductions and so make reductions now. At present, the need to deliver the LSC contract was paramount and as this was based on volume delivery there was no scope for further reductions beyond those currently calculated. Funding formulas were very constraining and with no flexibilities. The position could be re-assessed once future funding sums were more certain. The current year’s savings were based on efficiency gains – ie delivering the same outputs but with less resource - but it was possible that any future year cuts could be based on volume reduction and hence provision cuts. Efficiency savings were essential now owing to the inefficiencies of the last 4

Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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[Action]

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years where reserves had been used to support operations. The development of new income sources would be important, such as the international market which provided a lifeline for London based colleges. Developing the local market was also important, especially full-cost work if Train to Gain was reducing, though employers were also currently cutting back on this area of activity because of the recession. Any further unplanned events or hits (eg poor recruitment or unproductive staffing costs) would worsen the situation.

Implications for the future were then debated. These included:

• • •

An overall feeling of having to operate in a ‘lower division’ or tier – eg IT renewal now planned for 4 yearly intervals vs 2 yrs at some colleges Need to consider overall size of College operations across 3 centres May need to consider the possibility of finding a suitable merger partner

Members NOTED the reports and the current situation and AGREED that the working budget presented was appropriate to deliver the previously approved objective of a break even position and the three year forecast. [iii] Purchase Savings Report The Finance Director was pleased to present such a positive report, showing approximately £319k of savings. This had been through a totally centralised approach to purchases which, in addition to facilitating more advantageous prices, also helped to save management time and assisted limited funds to go further. Members NOTED these excellent results with satisfaction and REQUESTED:

Clerk Clerk/AP

a) that the Clerk send a note of congratulation to the section responsible on their behalf b) to have a presentation from the team on their work at a convenient date in the future [iv] LSC Funding Audit 08/09 The Finance Director informed members that the accounts were subject usually to 2 types of external audit: one on the statutory accounts and one on Regularity issues. However, an additional one was now pending and this was to take place by the LSC related to funding under that contract. This was a re-introduction of their detailed funding audits after a ‘light touch’ regime in recent years. Not all colleges were involved at this stage but CNWL had been selected to be part of the first wave of 79 and would receive a 2 week visit utilising a large sample of data. A second audit would take place in February to examine Success Rates data.

AP

Responding to a question, The Finance Director added that it was not clear why the College had been identified for this attention, which was supposedly based on a riskassessed listing, but he was making further enquiries of the LSC. Overall, there was speculation nationally as to the motivation for the new approach, which was suspected to be aimed at achieving clawbacks in funding from colleges. The present exercise, which was understood to be costing £2m, would certainly need to pay for itself. There had also been concerns expressed at the huge increase in Success Rates reported by many colleges and these were now going to be examined in more detail. Members NOTED the situation and that the Audit Committee would receive the full reports in due course Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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[Action]

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PROPERTY STRATEGY/ESTATES [i]

Willesden Masterplan and the National Construction College The Assistant Principal updated the Committee on the current situation. There had been a shift in emphasis and it was possible that this may develop into inviting Training Providers to deliver on their site. However, the NCC still had a desire to operate from a second centre and Willesden was their preference. The situation was NOTED.

[ii] Wembley Park

a) Financial update – The Finance Director took Members through the paper, which gave a summary of the financial analysis of both the delivered and aborted developments, and various attachments showing the detail of this. It was now known that the AiP scheme costs and other LSC monies would be claimable and this reduced the overall losses. Members expressed pleasure at this news and at the support and advice received from the consultants to facilitate this outcome. The likely financial exposure and effect on the statutory accounts of the aborted project was £3.386m. £2.2m of this would be written-off against reserves. Members NOTED this position and also the list of capital maintenance issues remaining now at Arena House.

b) Legal opinion regarding Capital Programme – The Principal explained that the delays in awaiting the LSC’s final decisions on project applications had taken colleges outside of time limits for raising a legal challenge. Further, feedback on the scores awarded to CNWL’s application were not encouraging enough to motivate a challenge and therefore the management view was that there was little point in pursuing this route, particularly when it would incur further costs. The preferred action was to continue to lobby the LSC for a financial settlement and a letter had now been sent to the LSC. The Chair informed Members that he had spoken to the Chair of the National Governors Council, as promised, and expressed disappointment that the Council had not seemed interested in the national and political angle that this episode had entailed for colleges and Governors. The updating information was NOTED c) Preliminary options paper – The Assistant Principal explained the background. After the Summer Conference he had met with the Finance Director to consider options and both had taken advice from the consultants. The outcome was a range of 9 options for consideration (7 main ones, with 2 variants) and the Assistant Principal took Members through these in turn. A discussion then took place, during which the following topics were examined: • Demographics of provision and students at Wembley

Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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[Action] •

Future funding cuts that could affect not only the decision about the way forward but also require a re-visiting of past decisions • The implications for the College Mission • The need to re-examine approaches for sponsorship and other external investment It was acknowledged that difficult decisions needed to be taken but which were considered to be made worse by: • being in the midst of huge uncertainty about the size and direction of public spending in the next few years • the recession and lower training spend from employers • lower property prices and demand . Taking all these considerations into account it was AGREED that the only sensible and practicable action was a ‘Status Quo’ avenue, in line with Option 5 in the paper, ie: a) to remove the asbestos from Crescent House b) to conduct minor works to ensure that Arena House was useable and comfortable for the next couple of years c) to keep options open in the short term by retaining Crescent House

MKR

and that this should be RECOMMENDED to the Corporation It was NOTED that any further decisions were difficult without knowing the shape of the college post-September 2010 as it could not be assumed that FE provision as presently constituted would continue. Big changes would affect the decisions on the required and preferred accommodation.

MKR

Meanwhile it was AGREED sensible to continue with research into:

a) the widest possible range of utilisation for Crescent House b) the planning and change of use possibilities c) demographic information on likely future students and the courses that would be in demand. 9

DATE & TIME OF NEXT MEETING This was scheduled for Tuesday 24 November 2009 at 9am but it was noted that it could be necessary to call a special meeting before then.

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ANY OTHER BUSINESS There was no further business. The meeting closed at 12.15pm

Signed……………………………………..,,,,,,,, (Chair of the Committee)

Date……………………..

Minutes of the Meeting of the Finance and General Purposes Committee held on 6 October 2009

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