CFDG draft minutes 31 Jan 2019 draft

COLLEGE FINANCE DIRECTORS’ GROUP Minutes of the meeting held on 31 January 2019 at AoC’S Offices - 2-5 Stedham Place, London Those Present: North West Lynn French Macclesfield College vi

COLLEGE FINANCE DIRECTORS’ GROUP Minutes of the meeting held

on 31 January 2019 at AoC’S Offices - 2-5 Stedham Place, London Those Present:

North West Lynn French (Macclesfield College) (vice chair)

Graeme Lavery (Reaseheath College) North East Carolyn Kipling (Middlesborough College)

Brian Fitzgerald (East Durham College) Yorkshire Peter Doherty (DN Group)

East Midlands Shabir Ismail (Leicester College)

West Midlands Mark Payne (Coventry College)

Eastern Scott Cryer (Peterborough Regional College)

Stephen Jones (West Suffolk College) South East Biram Desai (Sussex Coast Hastings)

David Moir (Basingstoke College of Technology) South West Lawrence Frewin (South Devon College)

Adrian Ford (Wiltshire College & University Centre)

In attendance Julian Gravatt (AoC)

Mike Hunter (ESFA) Item 10 Richard Boland (ESFA), Item 11

1 Introduction

There were the following apologies for absence and absentees:

David Pullein (Leeds College of Building)

Steve Rankine (Northampton College)

Nikki Williams (Heart of Worcestershire College)

David Holmes (Havering College of FHE)

2 Minutes and matters arising

The discussion at the 27 September 2018 meeting was noted All issues and actions from that meeting had been closed or were on the agenda for this meeting so there were no matters arising

3 Membership update

Brian Fitzgerald is now the North East rep in place of Helen Beaton

Adrian Ford is now the South West rep in place of Becky Edwards

There need to be re-elections in the West Midlands, East and South East The terms of Chair and Vice chair are up for re-election

4 AoC and CFDG

The group noted that AoC has supported CFDG for the last 19 years but that there is no explanation of the relationship or written terms of reference The group agreed to discuss this at the next meeting

5 Current funding issues

The group discussed a number of current issues:

 The government’s Autumn budget in October 2018 had reaffirmed existing government policy towards post-16 education and resulted in no

meaningful changes to the 2019-20 budgets Despite the

#loveourcollege’s campaigns and work with other 16-to-19 organisations

to raise the rate, colleges would be stuck with the same old funding issues

in 2019-20 Work was now underway to persuade Treasury and DfE to make changes in 2020-21

 16-to-18 funding: There were no big new issues in this area apart from DfE’s failure to increase the funding rates for the 7th year in a row, despite inflation in the period There was a discussion about Capacity and Delivery Fund and whether there was a clawback risk in 2018-19 ESFA staff had made it very clear at various points that CDF is a grant to support new development and not linked specifically to activity

 Apprenticeships: ESFA had just announced new rules for the 15-month non-levy contract which would allow contract-holders to move funds

between the three contract blocks Some of the group said this would be helpful but at least one FD still faces the problem of unfunded

over-delivery ESFA’s message that there will be no funding for over-delivery in the next 12 months will require some re-appraisal of plans

 Adult education budget: There was a discussion about the way that ESFA’s use of actual 2017-18 activity to set indicative 2019-20 allocations This would result in significantly lower budgets for some colleges Several members of the group reported difficulties associated with the

commissioning approach being taken by combined authorities

 High needs High needs funding continued to be sreported as a problem despite the extra funding added by DfE to the budget for the 2019-20 academic year

 Higher education Some of those present had received OfS approval for their 2019-20 registration applications Competition for students in

autumn 2018 had proved to be a significant problem The group discussed the Post-18 review, which might say positive things about the role on colleges in delivering higher technical education but which was unlikely to lead to change until 2021 at the earliest because of Parliamentary and recruitment lead-times

6 College insolvency and intervention regimes

The group discussed the college insolvency law which comes into force on 31 January 2019 and DfE’s plan to change the intervention regime for colleges Points from the discussion:

 DfE officials are working on documents to update the intervention rules to take account of the insolvency law and the plan to end the exceptional financial support policy These new rules are due to come into effect in April 2019

 Early intervention and diagnostic assessments As a result of

underfunding, there were now large numbers of colleges in early

intervention – apparently as many as 70 The experience of diagnostic assessments was mixed FE commissioner and ESFA judgements were sometimes informed by a confidential red/amber/green rating The visits themselves could be searching in some areas but not in others DFE is no

longer making restructuring funding available so it is less clear that

mergers will be a good idea for financially weak colleges

 Financial health scores provide some of the triggers for early intervention but are not necessarily a firm basis for action Some colleges are reporting good financial health simply because they have a lot of cash Others are reporting inadequate financial health because a covenant breach has resulted in the auditors reclassifying bank debt but without that debt yet being at risk

 The insolvency law itself had resulted in some governors and auditors seeking a change to the letter of representation

The group agreed to monitor the situation and, if asked, to respond to any DFE consultation on the new intervention rules

8 Pensions

Julian Gravatt updated the group on several current pension issues:

 DfE had confirmed that the employer contribution rate for the Teacher Pension Scheme valuation from September 2019 was likely to be 23.68% DfE has published a consultation on plans to pay a one-year grant n

2019-20 to assist schools and colleges with the costs The consultation deadline

is 12 February 2019

 The valuation itself is being delayed because of HM Treasury concerns that the government might not win its appeal on a court case involving judge’s and firefighter’s pensions The court of appeal ruled in December

2018 that the 2015 pension reforms constitute discrimination on grounds

of age As a result the plans for cost-cap rectification had been suspended

in case they are not needed because of court-mandated compensation to current pension members Despite this delay, HM Treasury is going ahead with the employer contribution increase to avoid deficits building up The Treasury statement was only made on 30 January and there is a DFE briefing on 8 February on the TPS issues

 There is no firm news on how or whether LGPS will deal with cost-cap rectification

10 2019 finance director's conference

The 2019 Finance director’s conference which will be at the same Nottingham venue as the successful 2018 event and on the 15th and 16th May 2018

11 Discussion with ESFA on College finance issues

ESFA's Mike Hunter and Richard Boland joined the meeting and discussed the spring 2019 Provider Risk and Assurance presentation Key points:

 Most 2017-18 financial statements from colleges are in but there are some delays resulting from restructuring facility applications

 The updated financial health assessment based on the 2017-18 accounts still reports a substantial number of colleges with inadequate and

satisfactory (ie less than good) financial health

 ESFA staff are hoping to circulate the accounts direction and post 16 audit code of practice in February 2019, the 2017-18 benchmarking data at the end of March 2019 and the financial planning information in April 2019 The group discussed the new reporting requirements on fraud and offered the view that they are more extensive than needed

 Work has already started to align ESFA and OfS accounting requirements (which come into effect for 2019-20)

 The current ESFA plan is to reduce some of the data required in the

summer 2019 financial plan but to supplement it with a new return by 31 October 2019 which would capture updated information on the 2018-19 outturn, 2019-20 budgets and future cashflow that took account of

September recruitment The group offered the strong view that the timing

of this new return was wrong because it was too early in the academic year to capture the remedial action that is generally taken in response to variations in September recruitment but not aligned at all to the college governance cycle

Dates of next meetings

TBC in May or June 2019