Minutes of the Finance Business Operation - 1 July 2025

M. Hartland in the Chair.

27/25. Declarations of Interest

No pecuniary interests were declared.

28/25. Minutes of Meeting Held 03 June 2025 (Appendix – Agenda Item 3)

Resolved: That the Minutes of the meeting held on 03 June 2025, be approved as a true and correct record.

29/25. Matters Arising

None.

30/25. Period 10 Management Accounts (Confidential Appendices - Agenda Item 4)

The Committee received the Period 10 Management Accounts (previously circulated). The Accounts had been circulated to all governors.

Following a presentation from the EDoF (previously circulated), the Committee noted the following -

• The college's forecast financial health score was "Outstanding," in-line with the P9 projection.
• The forecast EBITDA as a percentage of income had marginally decreased from 7.1% at P9 to 6.9%.
• The Forecast included the impact of in-year growth funding, the estimated pay award grant and the NI Grant of which some had been apportioned to 2024-25.

The Committee also received an update on the 2024-25 Budget and performance for the year to date with respect to –

16-18 Core funding, Work placement and High Needs E2

• The forecast included in-year growth funding and an estimate of the Pay grant to offset the additional cost of the 5.5% pay award from 1 April 2025. The college’s individual funding allocation for the additional pay award grant had recently been confirmed and, as it was close to estimate, did not affect the forecast outturn. The National Insurance (NI) Grant for April 2025 to March 2026, would be paid in September 2025 and the proportion relating to 2024/25 had been accrued.

High Needs Element 3 funding:

• The forecast outturn showed a shortfall against budget.

Apprenticeship income:

• The focus remained on retaining existing apprentices and achieving 60% of remaining achievements to meet the forecast. The EDoF explained that risk remained regarding timing of achievements due to the availability of end point assessments, though if End Point Assessment (EPA) achievement was delayed the funding would be claimed in 2025/26.

Adult Income now Known as Adult Skills Fund (ASF):

• Trades Union Studies (TUS) and Distance Learning were now forecast to meet or exceed budget.
• An additional £100k had been allocated to subcontracted activity to ensure that the college made effective use of the ASF allocation.

Higher Education (HE) Income:

• As had been reported all year, the forecast outturn was below budget.

Pay

• The impact of the Sixth Form Colleges Association (SFCA) pay settlement of 3.5% from 1 September 2024 and 5.5% from 1 April 2025, plus a one-off back payment of 2% from 1 September to 31 March had added to pay costs, funded through an increase in grant funding and utilisation of the additional in-year growth funding.

Non-Pay Expenditure:

• Total non-pay expenditure was forecast to slightly exceed the full year budget.
• Subcontracting Costs: These were now forecast to be higher than budgeted due to increased planned subcontracted activity, though this was partially offset by lower delivery of subcontracted "Free courses for jobs" (FCFJ) activity in the West Midlands Combined Authority (WMCA) and Greater London Authority (GLA).
• Marketing Costs: Costs are ahead of budget and the forecast now included an additional contingency to allow for this.

Capital Expenditure

• The college had been successful in its Condition Improvement Fund (CIF) bid. Although not planned for in 2024-25 the project to renew the Performing Arts block roof had commenced in May 2025 and was expected to complete in Late July/early August 2025. A significant proportion of this project will therefore fall within 2024/25. 70% of the costs of this project are now covered by the Condition Improvement Fund (CIF) grant award.

Efficient Cash Management:

• Despite the NI grant delay, cash held was strong, supported by effective treasury management generating significant investment income.

Further Education Commissioner (FEC) Financial Benchmarks update

• The FEC in a recent letter to the sector, had recommended new financial benchmarks-
• Cash days: Increased from 25 days at year end to 40 days at every month end
• EBITDA: >6%
• Staff pay as a % of income: 70%
  The FEC had stated that they “were intended for the most part to be realistic goals, rather than just a reflection of average sector performance. It is important to note that they are not triggers for intervention.” The Draft Budget 2025/26 (Min. No. 31/25) met these benchmarks for EBITDA and Cash days. However, staff pay remained higher at 74%. The EDoF explained that maintaining 40 cash days at the end of every month would restrict strategic investment in provision, equipment and estate. The Committee accepted this and agreed that this was not a helpful benchmark for the college at this point.

31/25. College Financial Forecast and Draft Budget 2025/26 (Confidential Appendices, Agenda Item 5)

The Committee reviewed the Draft Budget and revised two-year Financial Plan, prior to consideration by the Board (previously circulated).

The EDoF explained that the report to Board would be updated to incorporate the Period 10 Management Accounts.

In reviewing the Draft Budget, the Committee deliberated on the following key issues:

• The college’s loans were no longer subject to financial covenants; however, the Committee was assured that the key historical ratios would continue to be monitored and the budget anticipated exceeding these tests.
• The Committee was assured that the proposed budget met financial objectives such as maintaining a Financial Health Grade of at least “Good,” generating a minimum EBITDA of at least 6%, and maintaining an adjusted current ratio above 1.2.
• The proposed budget met the FE Commissioner's revised target benchmarks for EBITDA (>6%) and Cash days (>40 days at month-end). However, staff pay remained higher at 74% compared to the 70% benchmark. The Committee accepted this.
• Core 16-19 funding increased for 2025-26, due to higher student numbers and an increase in the funding rate. A reduction in T-Level grant income was noted due to a decreased premium. The 2025-26 budget included an amount from the NI Grant. The Committee noted the projections for 2026-27, assumed further growth in 16-18 funded learners.
• Cash generation was not currently sufficient to enable the college to expand the estate to meet expected demand for places over the coming 5 years. Grant or alternative capital funding would be required to meet these goals.
• Element 2 High Needs income was set for 2025-26 based on Department for Education (DfE) allocations which in turn are advised by Shropshire Council. The Element 2 capita allocation from Shropshire Council had been reduced, without consultation with the college. Element 3 funding, which the college had to claim from Shropshire Council in-year has been budgeted to make up for the reduction in E2 funding.
• Adult Education Budget (AEB): AEB allocations had increased in 2024-25, due to higher FCFJ allocations. However, the national allocation from the DfE had been reduced in 2025-26, due to a national funding cut and the removal of funding devolved to the new East Midlands Combined Authority.
• Apprenticeship income was budgeted to continue growing, with a long-term goal of reaching £5 million annually. The Committee was advised that the new role of Director of Apprenticeships and Employer Partnerships would be in place from September 2025.,. They would implement a new structure to enhance quality and build capacity for future apprenticeship growth. The P/CEO explained that the new structure would support the college’s ambition to enhance quality and capacity for growth.
• Higher Education (HE) income was budgeted to remain flat. Advance learner loan fees were reduced due to displacement by FCFJ funding. Tuition and exam fees reflected planned provision and the ongoing delivery of electrical testing, including provision for Swiss Overseas students.
• Education contract income no longer included the Multiply project, which had now ended, and other short-term work.
• Lettings, Catering and Other Income were planned to increase.
• Core pay costs had increased by 10% compared to the 2024-25 budget, driven by the consolidation of the higher than budgeted 5.5% pay award in 2024-25, an estimated 4% pay award in 2025-26, the increase in Employer's NI, FTE headcount increases to support the planned increase in 16-18 numbers, and pay scale alignments. A further 4% pay increase was allowed in the 2026-27 pay plan. The Committee acknowledged the risks included centrally negotiated pay settlements exceeding the budget.
• Non-Pay Costs:
  • Subcontract costs were reduced due to lower allocated grant funding.
  • Severndale contract costs were reduced due to lower student numbers.
  • Student Travel & Welfare costs were expected to increase but were offset by bursary grants.
  • Exam costs were budgeted to increase by 6%.
  • IT and premises costs were analysed, the Committee noting increases in computer costs and reductions in phone costs.
  • Building repairs and maintenance remained a challenging target in a climate of rising costs and the management of an aging estate.
  • Rates, Electricity, Gas, and Water costs were reduced.

The Committee acknowledged that inflation was a key risk for non-pay costs.

• Bank interest rates were assumed to reduce gradually. Investment income reflected cash balances held on notice deposits. Depreciation was forecast to increase due to capital expenditure and the Committee accepted this.

The Committee, having reviewed the Draft Budget and considered the EDoF’s presentation, concluded that -

• The Draft Budget was prudent and reflected appropriate planning, including sensitivity analysis
• Through prudent management, Cashflow remain sound.

The EDoF was commended for his diligent approach to compiling the Draft Budget and the Committee supported the approach taken at this stage. It was also agreed that the EDoF present a precis of the key points to Board.

Having reviewed the Report, the Committee RESOLVED TO RECOMMEND TO BOARD the Draft Budget and two-year Financial Plan, as amended.

Action: Item to Board.

32/25. Health & Safety Report (Appendix, Agenda Item 6)

The Committee reviewed the Health & Safety Report (previously circulated).

The Health & Safety Link Governor had reviewed the report and been assured. They had also recently undertaken a site inspection of the Welsh Bridge Campus and was assured as to the robust health & safety management at that site and that of the other campuses they had visited.

• All three campuses had completed practice fire evacuations, with all occupants safely exiting buildings within approximately three minutes.
• An annual lockdown drill had been completed in October 2024, presenting no significant issues.
• Health and Safety Audits had been conducted across various areas, with findings categorized as Critical, Important, or Moderate. The Critical findings identified had been swiftly remedied following re-audits. Important findings had also been addressed and completed.
• No immediate safety concerns had been identified from the reported accidents, many of which were minor and attributed to inexperienced equipment use or lack of attention.
• No RIDDOR reportable accidents had occurred during the reporting period and no ‘near misses’ had been reported this term.
• Work continued to support First Aiders through monthly Teams calls and group messages. The EDoF confirmed that First Aiders continued to use an electronic incident reporting method, which had improved efficiency and accuracy of incident reporting.

33/25. Estates Update (Agenda Item 7)

The Committee received a further update on the further analysis and feasibility studies undertaken for the identified sites identified for possible disposal.

The London Road Campus Performing Arts roof replacement works were progressing well, due to the clement weather. The college had negotiated a lower price for the works and the EDoF would submit a request to spend the remaining grant on complimentary improvement works in the building.

34/25. Insurance Renewal Review (Agenda Item 8)

The EDoF provided verbal assurance that the college had undertaken an annual review of the college’s insurance arrangements, to ensure coverage reflected the college’s needs.

35/25. Committee Self – Assessment

At the end of the 2024 - 2025 governance cycle, the Board and each committee were invited to complete an evaluation exercise. These would inform the Board’s self-assessment return and improvement action plan 2025 – 2026.

The Clerk was requested to circulate the self-assessment form as a MS Form, for the Committee to further reflect on and respond to.

36/25. Risk (Appendix - Agenda item 10)

The Committee examined those risks within its remit and agreed that they had been identified and adequately discussed at the meeting.

The Committee agreed that the greatest long-term strategic risk remained that campuses were not sufficient to meet demand.

37/25. Date of Next Meeting – TBC.

The meeting concluded at 6.40 p.m.