28 February 2015 Queen Alexandra College Part 1: The FE funding - - PowerPoint PPT Presentation

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28 February 2015 Queen Alexandra College Part 1: The FE funding - - PowerPoint PPT Presentation

Sep 27, 2023 144 likes •612 views

28 February 2015 Queen Alexandra College Part 1: The FE funding system: Public funding for learning and skills: how FE is funded The allocations process: how the money gets to colleges Financial planning and budgeting: how colleges

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28 February 2015 Queen Alexandra College

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Part 1: The FE funding system:

Public funding for learning and skills: how FE is funded

The allocations process: how the money gets to colleges

Financial planning and budgeting: how colleges plan and manage finance

Financial performance and health: how performance is monitored and what happens when it goes wrong

Part 2: Funding and Governance

Funding challenges: how colleges can address funding issues in the current funding climate

Asking the right questions and using the right data to take a strategic view of college finances

Case study and discussion

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Know the economic and financial context in which colleges are

  • perating

Understand how colleges receive funding and the parameters which affect this

Understand how colleges undertake financial planning and budgeting

Know how financial performance is monitored and the process for intervention in instances of financial failure

Analyse basic college financial performance data as a starting point for assessing college financial health

Know the kinds of questions to ask in order to get a strategic view of college financial performance

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Government funding for colleges broadly increased year on year during the 2000s

In 2009 the Learning and Skills Council, responsible for funding colleges since 2001, was abolished

Colleges now receive the majority of their Government-funded income from two separate departments:

  • Department for Education (DfE) via the Education Funding Agency

(EFA)

  • Department for Business, Innovation and Skills (BIS) via the Skills

Funding Agency (SFA)

The percentage of grant (public) funding has changed little over time

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84.2% 8.2% 0.7% 6.6% 0.3% Funding body grants Fee income Research grants and contracts Other income Endowment and investment income

Source: Skills Funding Agency analysis of college financial records 2012/13

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0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 07/08 08/09 09/10 10/11 11/12 12/13 % SFC GFE All

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A generally positive picture:

  • Growth up
  • Inflation down
  • Employment up

But …

  • Increased growth and employment are not generating the

anticipated level of tax receipts

  • Debt continues at high levels so interest on debt remains high
  • Borrowing is slow to fall

So …

  • Continued austerity and cuts to public funding
  • Political uncertainty
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£5,620 School Grant Plus Pupil Premium £4,645 National rate £4,000 plus weightings £3,830 £3,300 rate plus weightings £8,500 Average Full-time Covered By Fee loan

11-16 16-17 18 19-21 in HE

22% funding dip 17.5% dip

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500 1000 1500 2000 2500 3000 3500 4000 Actual Actual Actual Forecast Forecast Forecast Estimate Estimate 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 16-18 education 16-25 high needs 16-18 apprenticeships

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500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 08-09 09-10 10-11 11-12 12-13 revised 13-14 revised 14-15 revised 15-16 revised Adult Skills Budget 24+ Advanced Learning Loans Adult Safeguarded Learning/Community Learning Apprenticeships European Social Fund Employer Ownership

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86.9% 6.9% 0.7% 5.2% 0.3% Funding body grants Fee income Research grants and contracts Other income Endowment and investment income

Source: Skills Funding Agency analysis of college financial records 2012/13

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53.4% 42.0% 3.1% 1.6% EFA SFA HEFCE Other funding grants

Source: Skills Funding Agency analysis of college financial records 2012/13

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90.6% 9.2% 0.1% 0.1% EFA SFA HEFCE Other funding grants

Source: Skills Funding Agency analysis of college financial records 2012/13

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0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% General FE Colleges Sixth Form Colleges All Colleges

Dependency on Education Funding Agency income Dependency on Skills Funding Agency income Dependency on European income Dependency on Higher Education income

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Current ingredients (2014-15)

Funding paid for each full time (540 hours) student at a basic rate

  • f £4,000

Part-time students and those who are 18 paid less (% of full-time rate)

Extra weightings for costly programmes (20%, 50%, 60%)

Disadvantage = postcode + low GCSE Maths, English, Care (£480)

This year’s actual numbers determine next year’s funded numbers (lagged funding)

Colleges get provisional data by January, rate published in February, funding allocations known by March

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Funding system

Same formula, same process, later data (after R06)

Basic rate for a full-time student aged 16 or 17 due to be £4,000

Basic rate for a full-time student aged 18 due to be £3,300

Cutting funding for 18 year olds saves DFE just under 2% Some important rules

English/Maths compulsory for those who lack GCSE grade C

Work experience must be partly external

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Based on the notional costs of delivering a full study programme

Declining cohort 16-18 year olds but compulsory participation age rises to 18 in September 2015

Lagged funding

Competition from schools, academies and other post-16 providers

GCSE maths and English become conditions of funding

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Government works on a financial year (Apr – Mar)

Colleges budget for and are funded on an academic year (Aug – Jul)

Potentially four months of uncertainty

No indicative figures this year

Apr Aug Mar (yr1) Jul Mar (Yr2) ???? ???? Indicative

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The funding rate for the qualification studied

Multiplied where relevant by

  • Disadvantage uplift based on postcode
  • Area costs uplift (London and the South East)

But funding has to be ‘earned’

Rules and combinations apply – an earnings cap of £4,400

Not all qualifications or learners are fully funded

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Apprenticeship funding reform involves major system overhaul

Employers expected to own and drive apprenticeships – and pay

Decisions on HE budget determine money available for FE

Possibility FE loans will be extended

Contest for Adult Skills Budget continues

Councils and LEPs both keen to have a larger role

If pockets of high unemployment remain, money may be targeted

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Squeeze on adult skills funding – 35% reduction over four years

24% reduction in non-apprenticeship funding in 2015/16

Shift to direct funding to employers, local enterprise partnerships and combined authorities

Extension of loans to 19+

ESOL demand and the impact of continued immigration

Government focus on apprenticeships, traineeships and English and maths

Higher apprenticeships and higher vocational skills will be a priority area

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System redesigned from 2013/14

A young person aged from 16 to 24 with additional support needs costing over £6000 or a Learning Disability Statement

A central role for local authorities

Comprises

  • ‘Place’ funding

▪ Elements 1 and 2

  • Top-up funding

▪ Element 3

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Element 1

  • Core funding allocated on the basis of the 16-18 funding

formula

Element 2

  • Provides first £6000 to meet additional support costs
  • Allocated on the basis of local authority forecasts
  • Moving to allocation on a lagged basis from 2015/16

Element 3

  • Additional funding to enable a high needs student to participate

fully

  • Funding allocated to local authorities
  • Funding rate and payment agreed between college and local

authority on an individual needs basis

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Financial Planning and Budgeting: How colleges plan and manage finance

Peter Merry – Director of Finance, Walsall College

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The College’s mission statement is:

Walsall College is uniquely and proudly vocational. Our greatest passion is unleashing the potential of individuals, communities and businesses; our greatest legacy is the talent

  • f our students: skille

lled, p , profession

  • nal

l an and d enterpr prisin ising.

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Walsall College

  • First GFE College to be graded outstanding under the

current Ofsted Inspection Framework

  • Outstanding financial health in 2012/13 and

2013/14

  • Two years of £1m+ surpluses (£1.3m and £1.7m)
  • £11m capital project – Walsall Business and Sports

Hub due to open September 2015

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Finance: Understanding the Objectives

  • What are your objectives and

who is driving them?

– Bottom line profitability? – Skills funding agency and financial health? – Ofsted? – The bank and their covenants? – Cash?

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Finance: Measuring performance

  • Management accounts

– Timely? – Comprehensive? – Commentary? – KPIs?

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Finance: Beyond just historical data

  • Understanding the business drivers

– EFA income – SFA funding and achievements – Pay and headcount

  • Forecasting
  • Financial outlook for 15/16….
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Financial outlook: planning Is there a seamless process?

  • Curriculum plan?
  • New project appraisal?
  • Understanding pay and headcount?

Can it be measured against actuals? Are managers held to account?

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Please contact: Peter Merry Walsall College Wisemore Campus Littleton Street Walsall West Midlands WS2 8ES 01922 657000

Thank you

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Assessed by the funding agencies for performance monitoring and risk management purposes

Based on three indicators derived from the college’s financial plan and statement

Each indicator is given a score with scores aggregated to give a financial health grade:

  • Outstanding

240 - 300 points

  • Good

180 - 230

  • Satisfactory

120 - 170

  • Inadequate

110 or below

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Solvency

  • Assets v Liabilities
  • Adjusted current ratio (Sector average in 12/13 = 1.47; GFE = 1.37)

Performance

  • Income v Expenditure
  • Cash based operating surplus (Sector in 11/12 = 6.66%; GFE = 6.17%)

Gearing

  • Borrowing v Income
  • Borrowing as % of net assets (Sector in 11/12 = 17.85%; GFE = 18.81%)

Staff costs

  • Staff costs as a % of income (Sector in 12/13 = 65.0%; GFE = 63.9%)

Income dependency

  • Funding Agency income as a % of all income (Sector in 12/13 = 84.2%;

GFE = 83.9%)

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0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

Financial Health Grades

Outstanding Good Satisfactory Inadequate

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Financial Health Grades

Sources: GFE Finance records 2010/11 to 2012/13; Financial plans 2013/14 to 2015/16

Finance Record Financial Plan 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 (final) (final) (auto) Outstanding 102 100 77 56 51 64 Good 80 81 68 75 96 107 Satisfactory 58 57 79 92 81 66 Inadequate 12 12 21 20 14 6 Total 252 250 245 243 242 243 Outstanding 40% 40% 31% 23% 21% 26% Good 32% 32% 28% 31% 40% 44% Satisfactory 23% 23% 32% 38% 33% 27% Inadequate 5% 5% 9% 8% 6% 2%

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Triggers

  • notification to the college or training organisation of failure to meet Minimum

Standards

  • notification to the college or training organisation of failure to meet the Agency’s

criteria for financial health or control

  • notification to the college or training organisation from Ofsted of an inadequate grade

at inspection 

The FE and Sixth Form College Commissioners

  • SFA and EFA can refer to the respective Commissioner where intervention is triggered

Options

  • the organisation is allowed to attempt recovery by developing and implementing its
  • wn recovery plan, or
  • the organisation is placed into ‘Administered College / Administered Institution’ status

and that a Structure and Prospects Appraisal should be carried out by the Commissioner and his Advisers

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Higher education (full-time and part-time)

International activity (here and overseas)

Pre-16 education (14-16, school partnerships/sponsorships)

High need pupils (16-25 or even younger age groups)

Back-to-work programmes (eg Work Programme)

Offender learning (prisons and probation)

Full-cost courses

Non-education revenue

On-line learning

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The process through which colleges identify, evaluate and control risks

An essential management tool to support the implementation

  • f the college strategic / business plan

Should not result in risk aversion but appetite for risk will vary

Internal and external risks

  • Strategic
  • Operational
  • Project-based

Impact and probability

Mitigation and control

  • Treat, tolerate, transfer, terminate, take
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Risk Management Guide: College Finance Directors’ Group / PKF, 2011

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Funding is only partly the issue… ...it’s what your College does with the money it has

Aligning the curriculum to LEP growth priorities and developing sound relationships with employers

More intense competition, new competitors (eg new sixth forms), and competition form work-based learning providers

Maximising income through growth and diversification

Managing costs particularly staff costs

Pensions and national insurance

Capital and borrowing

Restructuring – mergers, federations, shared services

Less support for Colleges but higher standards required

Changing curriculum / new technology

Teaching maths and English

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General FE College on two main sites in county town

Income Profile

Within 20 mile radius – three other FE colleges, one sixth form college, three 11-16 schools including a new free school, three 11-18 schools (academies)

Some significant national employers based locally with a new logistics centre planned for a location 10 miles away

Currently Ofsted Grade 3 (requires improvement) with an inspection due in next 3 months

Principal has been in post for c.7 years and could retire at any point in the next two