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

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 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 

Know the economic and financial context in which colleges are  operating 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

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

0.3% 6.6% 0.7% 8.2% Funding body grants Fee income Research grants and contracts Other income Endowment and investment income 84.2% Source: Skills Funding Agency analysis of college financial records 2012/13

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

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 

22% £8,500 funding dip Average 17.5% dip Full-time £5,620 £4,645 Covered School Grant £3,830 By Fee loan National rate Plus £4,000 Pupil Premium £3,300 plus rate plus weightings weightings 11-16 16-17 18 19-21 in HE

4000 3500 3000 2500 16-18 education 2000 16-25 high needs 16-18 1500 apprenticeships 1000 500 0 Actual Actual Actual Forecast Forecast Forecast Estimate Estimate 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 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

0.7% 5.2% 0.3% 6.9% Funding body grants Fee income Research grants and contracts Other income Endowment and investment income 86.9% Source: Skills Funding Agency analysis of college financial records 2012/13

1.6% 3.1% EFA SFA 42.0% 53.4% HEFCE Other funding grants Source: Skills Funding Agency analysis of college financial records 2012/13

0.1% 0.1% 9.2% EFA SFA HEFCE Other funding grants 90.6% Source: Skills Funding Agency analysis of college financial records 2012/13

100.0% 90.0% 80.0% 70.0% 60.0% Dependency on Education Funding Agency income 50.0% Dependency on Skills Funding Agency income Dependency on European 40.0% income Dependency on Higher 30.0% Education income 20.0% 10.0% 0.0% General FE Colleges Sixth Form Colleges All Colleges

Current ingredients (2014-15) Funding paid for each full time (540 hours) student at a basic rate  of £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

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 

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

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  Mar Mar Apr Aug (yr1) Jul (Yr2) ???? ???? Indicative No indicative figures this year 

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 

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 

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

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 ▪

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

Financial Planning and Budgeting: How colleges plan and manage finance Peter Merry – Director of Finance, Walsall College

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 of our students: skille lled, p , profession onal l an and d enterpr prisin ising.

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

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?

Finance: Measuring performance • Management accounts – Timely? – Comprehensive? – Commentary? – KPIs?

Finance: Beyond just historical data • Understanding the business drivers – EFA income – SFA funding and achievements – Pay and headcount • Forecasting • Financial outlook for 15/16….

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?

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