BRADFORD COLLEGE

Report and Financial Statements for the Year Ended

31st

July 2014

Contents

Page(s)

Operating and Financial Review 1-22

Statement of Corporate Governance and Internal Control 23-31

Statement of Responsibilities of the Members of the Corporation 32-33

Independent Auditors’ Report to the Members of the Corporation 34-35

Independent Auditors’ Report on Regularity 36-37

Consolidated Income and Expenditure Account 38

Consolidated Statement of Historical Cost Surpluses and Deficits 39

Statement of Total Recognised Gains and Losses 39

Balance Sheets as at 31st July 2013 and 31st July 2012 40

Consolidated Cash Flow Statement 41

Notes to the Financial Statements 42-58

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Consolidated BRADFORD COLLEGE Group

Operating and Financial Review For the Year Ended 31 July 2014

NATURE, OBJECTIVES AND STRATEGIES

1. The members present their report and the audited financial statements for the

year ended 31 July 2014. Legal status 2. The Corporation was established under the Further and Higher Education Act

1992 for the purpose of conducting the then Bradford & Ilkley Community College. The Corporation is an exempt charity for the purposes of the Charities Act 2011.

3. On 1 September 1999, with consent from the Secretary of State, the name of

the Corporation was changed to Bradford College.

4. The consolidated College Group comprises the College and its subsidiaries and associated companies; the corporate structure is described in more detail at paragraph 34 below.

5. These financial statements have been prepared in accordance with the Statement of Recommended Practice (SORP): Accounting for Further and Higher Education, as per SORP (2007).

Mission 6. The College’s mission, as approved by its members, is:

To help students from the region, nationally and internationally, achieve their potential and make a rewarding contribution to their own communities.

Public Benefit 7. Bradford College is an exempt charity under Part 3 of the Charities Act 2011

and from 1st September 2013, is regulated by the Secretary of State for Business, Innovation and Skills as Principal Regulator for all FE Corporations in England. The members of the Corporation, who are trustees of the charity, are disclosed in the “Statement of Corporate Governance and Internal Control” section of the annual report.

8. In setting and reviewing the College’s strategic objectives, the Corporation has had due regard for the Charity Commission’s guidance on public benefit and particularly its supplementary guidance on the advancement of education.

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9. In delivering its mission the College provides substantial public benefits

through the advancement of education, including:

Providing a high-quality education to its students;

Contributing to the store of useful human knowledge through research and the publication of the useful results;

Equipping individuals with the basic life skills such as literacy, numeracy and citizenship skills;

Producing and conserving works of artistic merit and making those available for teaching purposes and mounting exhibitions which are open to the public;

Contributing to the creation of a skilled workforce; and

Promoting social inclusion and participation.

Further information about how the Corporation has delivered its charitable purposes for the public benefit is detailed throughout the Operating and Financial Review.

Leadership 10. After ten years distinguished service to the College and the College group,

Michele Sutton OBE retired as the Group Chief Executive of the Bradford College Group. Michele held the post of Group Chief Executive in her last year of service and for her previous nine years she held the post of Principal and Chief Executive. Andy Welsh was appointed as the Group Chief Executive on 1 August 2014, having previously held the senior post of Group Chief Operating Officer. Gareth Osborne was appointed as the Group Chief Operating Officer on the 10 November 2014. Anthony Basham was appointed as the Group Commercial Director on 23 April 2014 to take forward the income generation, employer engagement and commercialisation agenda.

Implementation of Strategic Plan 11. Over the last seven years the College has moved a long way from a staff-

centred culture to a student-centred culture. It is seeking to move to the next level of engagement of staff and students so that they aspire to the same shared values. Following consultation, the College set down those core values it wishes to be recognised for and which it wishes to achieve over the current cycle of strategic planning from 2010- 2015.

12. The following 7 “E”s are short hand for our culture and values we wish to develop:

Employability – as well as subject knowledge this is providing students with a wider range of skills required for today’s workplace.

Equality & Diversity – is celebrated and promoted and discrimination challenged where staff and student communities reflect the demographic of the local population and where students are prepared to work in diverse labour markets.

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Enterprise – enhancing its good reputation for supporting entrepreneurship and producing entrepreneurs.

Enrichment & Entitlement – where student enrichment opportunities and entitlement to employability skills are regarded as a source of competitive advantage.

Environment – to educate students who can contribute to the sustainability agenda in today’s workplace and society in general.

Engaging Employers – in the public and private sectors also the voluntary and community sectors and is the first choice provider for the areas in which it delivers curriculum.

Excellence – further enhance our reputation for providing excellent courses, customer service and academic outcomes.

13. The Corporation monitors performance against these priorities through an

Annual Business Plan which is reviewed and updated each year. The College’s continuing strategic objectives are:

To achieve annual net cash inflow from operating activities to ensure investment in the future is secure;

To realise the benefits from the investment of £50M into a new City Centre Campus development, the David Hockney Building, which will give the College a competitive advantage in the marketplace as well as providing a more cost effective and efficient estate;

To achieve further transformation of Higher Education through the award of Taught Degree Awarding Powers (TDAP);

Through Information Learning Technology, to drive the integration of information systems, teaching and learning and assessment; and

To improve the learner journey through automating and simplifying processes.

14. The College Group is progressing well to achieve its strategic objectives. 15. The College’s specific objectives for 2013/14 and achievement of those

objectives is addressed below:

The College generated £5.6M of cash from its operating activities against a target of £4M;

As part of the new City centre campus development, the handover of the David Hockney Building (£50M project budget) from its lead contractor – BAM – to the College was completed on-time, below budget and to design specification and this allowed for the successful opening of the College for its operations in September 2014;

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Work commenced on a new £10M ATC (Advanced Technology Centre) adjacent to the David Hockney Building and this is fully grant funded by the SFA. The planned opening date is September 2015;

Work continued on the £3M refurbishment of the Lister Building adjacent to the David Hockney Building and this is, also, fully granted by the SFA. The planned opening date is March 2015;

The scrutiny of the College’s TDAP application is work-in-progress with the QAA (Quality Assurance Agency). The likely timing of the outcome remains to be confirmed;

The College invested £0.4M in improving its IT infrastructure and capital base for curriculum equipment in 2013/14; and

The College commenced the re-engineering of the business processes relating to the learner journey during 2013/14.

16. The College Group’s key non-financial performance indicators – targets and

outcomes – for 2013/14 are set out in the table below.

Strategic Objectives 2013/14 Target

2013/14 Actual

2012/13 Actual

2011/12 Actual

People

Staff Costs as a percentage of teaching income (excluding staff restructuring costs and FRS 17 staff cost charge)

64% 66% 66% 68%

Support staff costs as a percentage of overall income

19% 25% 26% 26%

Teaching Staff utilisation rates 100% 96% 94% 97%

Cost of remitted hours for Teaching Staff

5% 10% 2% 2%

Cost of lost working hours 0% 5% 5% 5%

Reputation & Quality

Overall FE success rates to be above benchmark

79% 87% 89% 86%

HE comparison of national benchmarks

78% 78% 78% 78%

Curriculum

HE Student FTE 3,900 3,641 3,691 3,469

Average Class Size 19 19 17 16

17. The College Group was unable to achieve its target level of performance for

staff costs as a percentage of teaching income and support staff costs as a percentage of total income. It will continue to seek improvement opportunities to achieve target performance and realise such opportunities so as to achieve additional cost efficiencies and improved value for money from its staffing base, as part of the College’s Value for Money strategy.

18. The cost of remitted hours for teaching staff as a percentage of the total contracted teaching time has increased due to the pursuit of the new HE

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strategy which required HE staff to undertake research and scholarship activity to a greater extent than previously allocated, as per the new academic workload allocation model.

19. In addition, the HE student body remained below target which whilst a future threat represents an opportunity gap; this will be addressed as part of the review of the curriculum offer and marketing strategy to improve the position of the College in a very competitive environment.

Financial Objectives 20. The College Group’s financial objectives are:

to achieve an annual underlying operating surplus (see financial results below);

to hold cash days in excess of 18 days;

ensure a positive current ratio within the parameters and constraints of our new accommodation strategy;

to keep the pay expenditure to income ratio under 68%; and

to ensure the College does not breach its loan covenants with its bank lenders – Lloyds and Barclays.

21. All of the financial objectives were achieved in 2013/14 with the exception of a positive current ratio as summarised in the table below. The positive current ratio position was achieved in the week following the 31 July 2014 when the remaining £3.9M of the £25M Revolving Credit Facility with Lloyds Bank was drawn down.

Objectives 2013/14 Target

2013/14 Actual

2012/13 Actual

2011/12 Actual

Underlying Operating Surplus £1.0M £1.3M £2.0M £0.7M

Cash Days of 18 plus 49 31 62 58

Positive Current Ratio 1.2 0.9 1.6 1.8

Pay to Income under 68%1 67% 63% 64% 64%

22. All of the bank loan covenants were met for 2013/14. Performance Indicators 23. In 2013/14 the FE recruitment targets were achieved. Student numbers

regulated by HEFCE were slightly down on the lower range of the student number control whereas NCTL regulated student numbers were within contract parameters.

24. The actual financial performance indicators shown in the table below, as per

the SFA measurement definitions, gives a moderated financial health grading for the College Group of ‘satisfactory’ for 2013/14. It is planned that this

1 Excluding staff restructuring costs and FRS 17 staff cost charge

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position will hold for the next five years from 2014/15 and onwards on an un-moderated basis.

Measures Target 2013/14

Actual 2013/14

Solvency (adjusted current ratio) 1.2 0.7

Sustainability (performance ratio) 3.2% 3.2%

Status (gearing ratio) 134% 114%

25. The College is committed to observing the importance of sector measures

and indicators and the use of the FE Choices website which looks at measures such as success rates. The College is required to complete the annual Finance Record for the Skills Funding Agency. The Finance Record produces a financial health grading. The current rating of ‘Satisfactory’ overall is considered an acceptable outcome.

26. For HE students, the College draws upon sector measures as contained with the NSS (National Student Survey) and the KIS (Key Information Set) for monitoring strategy execution.

FINANCIAL POSITION

Financial results

27. The College Group generated a deficit for the year retained within general

reserves of £1,169k (2012/13: surplus of £814k). The result in 2013/14 is stated after accounting for the following items:

a) Exceptional re-structuring costs of £1,220k (2012/13: £415k);

b) Exceptional accelerated depreciation of £767k (2012/13: £Nil) relating to

the write-down to their net realisable value of assets held for sale as part of the rationalisation of the College estate;

c) FRS 17 Employer service costs of £861k (2012/13: £787k); and

d) FRS 17 Pension finance income of £352k (2012/13: £3k).

28. The underlying financial position after adjusting for items a) to d) above was an underlying surplus of £1,327k (2012/13: £2,013k). This was an improvement on both the budget, as per the 2013 financial plan, and the forecast, as per the 2014 financial plan, of £364k.

29. Due to continued UK grant funding cuts for teaching and learning for FE and

HE, the College undertook a strategic review of its support services to bring their total costs in relation to total income closer to sector benchmarks. This resulted in the staff restructuring costs being incurred of £1,220k, as noted in paragraph 26a above. It is planned that a support staff reduction in 2014/15 will be achieved of £2.4M compared to 2013/14. Further phases of the strategic review are planned to be completed in 2014/15 for further support service cost reductions in 2015/16.

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30. The College Group has accumulated reserves at 31 July 2014 of £19.0M (excluding Pension Reserve) which compares with £18.5M at 31 July 2013. Cash and liquid balances were £4.9M as at 31 July 2014, a decrease from the position of £9.9M at 31 July 2013 due to the investment in the new David Hockney Building. The uncommitted amount of the £25M Revolving Credit Facility with Lloyds Bank for part funding of the David Hockney Building was £3.9M at 31 July 2014.

31. The College wishes to continue to accumulate reserves and cash balances in order to, in no particular order: a) Maintain financial solvency and improve financial sustainability;

b) Strengthen SFA financial health grading;

c) Ensure compliance with bank loan covenants; d) Strengthen risk reserves in the form of a contingency fund; and e) Strengthen capital and revenue reserves for new strategic investments.

32. Group tangible fixed asset additions during the year amounted to £33.4M, of

which £32.9M relates to the assets in the course of construction – new David Hockney Building, new Advanced Technology Centre and Lister Building refurbishment - and equipment purchased of £0.4M. All three buildings together with the Old Building and Appleton Building comprise the newly developed City Centre Campus for both FE and HE students. The David Hockney Building successfully became operational in September 2014. The new Advanced Technology Centre and the Lister Building refurbishment will become operational during 2015.

33. The College agreed a £3M finance leasing line with Lloyds Bank for the

funding of furniture and equipment for the David Hockney Building. Each tranche of finance leasing has a four year term for repayment. The first tranche of £0.8M of the sale and finance leaseback took place in 2013/14 with the remaining tranches to follow in 2014/15.

34. The College has significant reliance on the education sector funding grant

bodies for its principal funding source, largely from recurrent grants, for both FE and HE. In 2013/14 this reliance has reduced to 64% of the College Group’s total income from 70% for 2012/13, summarised in the following table. Contributory factors are the cuts in funding grants and the introduction of 24+ Learning Loans for FE student and the second year of operation of the new fee regime for HE students.

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Recurrent Funding Body Grants % Total Income

2013/14 2012/13

FE

EFA 29% 30%

SFA 25% 25%

Total of FE Recurrent Grants 54% 55%

HE

HEFCE 6% 9%

NCTL 1% 2%

Total of HE Recurrent Grantrs 7% 11%

Other Grants 3% 4%

Total of Funding Body Grants 64% 70% 35. The College Group is made up of the College and its two wholly-owned

subsidiaries and two joint venture companies. The two wholly-owned subsidiary companies are: Training for Bradford Ltd trading as City Training Services (CTS) and Beacon Recruitment & Placement Services Ltd. The principal activity of CTS is apprenticeships and other forms of work-based learning. Beacon recruits and places temporary staff within the College and elsewhere and arranges placements for students as part of their course requirements. The College has a 50% share in Inprint & Design Ltd, a joint venture company with the University of Bradford, the principal activity of which is a range of print services. In addition, the College has a 50% share in the Bradford District Apprenticeship Training Agency (ATA) a joint venture company with Bradford Metropolitan District Council, which employs and seconds apprentices to small-to-medium sized enterprises. The College, as sponsor, has a controlling influence over Bradford College Education Trust, which is treated as an unconsolidated subsidiary.

36. The College’s share of the results of these four companies for 2013/14 is as follows:

CTS: £437k profit (£353k in 2012/13);

Beacon: £38k loss (£7k loss in 2012/13);

Inprint & Design Ltd: £46k share of profit (£62k in 2012/13); and

ATA: £Nil share of profit (£Nil in 2012/13).

A share of any profits generated by the subsidiaries and joint venture companies are gift aided to the College.

37. During 2013/14, CTS gift aided to the College the amount of £2.2M which related to prior year profits and treated as an equity to reserve transfer within the College Group.

Treasury Policies and Objectives 38. Treasury management is the management of the College’s cash flows, its

banking, money market and capital market transactions; the effective control

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of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.

39. During the year ended 31 July 2011 the College revised its Treasury

Management Policy applicable to both the investments and borrowings of the College with a further variation during the year ended 31 July 2012. No variation has been made during the subsequent two years. The policy recognises the difficulties of striving for effective risk management and controls whilst at the same time pursuing value for money. The aim is to protect capital and provide availability of funds ahead of a financial return.

40. Surplus cash is placed on cash deposit of up to three months duration with

selected approved institutions classified with a minimum AA Credit Rating from one of the recognised rating agencies. This is fully compliant with the Skills Funding Agency financial memorandum.

41. Short term borrowing for temporary revenue purposes is authorised by the

Accounting Officer – Group Chief Executive. Such arrangements are restricted by limits in the College’s Financial Memorandum agreed with the SFA. All other borrowing requires the authorisation of the Corporation and shall comply with the requirements of the Financial Memorandum.

Cash Flows and Liquidity

42. At £5.6M (2012/13 £4.5M), the net cash inflow from operating activities

showed a 24% improvement from the previous year and remains reasonably strong and is above the target minimum of £4M for the College.

43. The funding of the capital payments of £31.7M was sourced from a combination of £19.4M from new loans, £0.8M from new finance leases relating to furniture and equipment sale and leaseback arrangements, £4.1M from SFA capital grants, in-year net cash generation of £2.4M and £5.0M from the opening cash balance.

44. The completion of all three building capital programmes currently in progress will be completed during the course of 2014/15. The new Advanced Technology Centre and the Lister Building Refurbishment are fully funded by SFA capital grants. The funding of the new David Hockney Building over its project life is summarised in the following table. This highlights that the remaining significant project risk areas for the funding of the David Hockney Building are the property disposal risk – level of remaining sale proceeds – and the strain on the College cash position by the application of internally generated funds. Overall, the College is confident that it can meet the cashflow challenge over the course of 2014/15. However, there are challenges to the month-end cash position due to different patterns for each of capital outflows and inflows and revenue outflows and inflows during 2014/15.

45. The College will seek to manage the liquidity risk in the following manner:

Partial release of revenue and capital contingency funds;

Realising income expansion and growth opportunities;

Reduction of revenue expenditure: maintaining robust control of staff costs and continuing the implementation of the procurement strategy;

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Deferral of certain lines of revenue expenditure to the last quarter of 2014/15 and 2015/16, where feasible;

Increase in the extent of finance and operating leasing of furniture and equipment;

Short-term loans from CTS (City Training Services subsidiary);

Review of VAT arrangements for new builds; and

Review of equity investment held.

David Hockney Building

Project Budget and ForecastProject Project

Budget Forecast

£M £M

Capital Expenditure 50.0 48.8

Capital Funding

Internally generated College funds 15.0 5.0

Lloyds Bank loans:

EIB Loan 10.0 10.0

RCF (Revolving Credit Facility):

Draw-downs in 2013/14 and prior years 21.1 21.1

Draw-down in 2014/15 3.9 3.9

Total of RCF 25.0 25.0

Total of Lloyds Bank Loans 35.0 35.0

Sale and leaseback of Furniture & Equipment with

Lloyds Bank:

2013/14 0.8

2014/15 2.2

Total of new finance leases 3.0

Disposal of properties:

During 2014/15 :

Cash received up to and including 30 November 2014 1.7

Remaining property sales 1.0

Total of 2014/15 property disposals 2.7

During 2017/18 0.9

Total of property disposals 3.6

Gift aid from CTS to College relating to prior 6

years received in 2013/14 2.2

Total Capital Funding 50.0 48.8 46. The closing cash at bank and in hand and liquid investments balances and

net current assets/(liabilities) at the financial year-end for the past three years of the College only are shown in the table below:

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Bradford College only

Balance as at 31 July …

2012 2013 2014

£M £M £M

Cash at bank and in hand and

liquid investments 7.4 8.8 4.1

Net current assets/(liabilities) 3.0 2.1 (1.1) 47. Until the remaining property disposals are completed, the College will be able

to fund the concluding payments for the David Hockney Building from the final draw-down of the Revolving Credit Facility of £3.9M, remaining sale and finance leaseback of furniture and equipment of £2.2M and in-year net cash generation from operations.

48. The College has fixed the interest rates with Lloyds Bank for the full term of both the £11.5M loan for the Trinity Green Development the £10M European Investment Bank loan for the David Hockney Building. Also, the interest rate for the £25M Revolving Credit Facility with Lloyds Bank for the David Hockney Building has been fixed for the full 10 year term of the facility.

49. The size of the College’s total borrowing and its approach to interest rates has

been calculated to ensure a reasonable cushion between the total cost of servicing debt and operating cash-flow.

GOING CONCERN 50. The College is aware of the liquidity risk in 2014/15 posed by the completion

of the three building capital programmes and the related monthly mismatch of capital inflows and outflows. In addition, there will be a monthly mismatch of revenue inflows and outflows. Therefore, the College will rely on the previously identified action plan to manage this risk. In summary, the College believes that it has appropriate and realistic cost reduction plans and revenue growth plan to manage its cash position. Consequently, the assessment is that the College holds sufficient cash, liquidity risk management arrangements and has sufficient long term finance in place to meet its liabilities as they fall due for the foreseeable future and is considered by the trustees to be a going concern.

51. The College is forecasting for 2014/15 that it will maintain its “satisfactory”

financial grade with the SFA and that it will meet all of its bank loan covenants.

CURRENT AND FUTURE DEVELOPMENT AND PERFORMANCE

Student Numbers (FE and HE)

52. In 2013/14 the College had 16,483 (2012/13: 15,993) EFA and SFA funded

students and 5,207 (2012/13: 3,966) non-SFA funded students representing a combined total of 21,690 (2012/13: 19,899) students.

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Student Achievements

53. Student success rates are good. The College’s 2013/14 success rate data

was scrutinised by OfSTED in a full college inspection in September 2014 and deemed to be good. Apprenticeship success rates are outstanding. The overall effectiveness of the College is good and three curriculum areas: Early Years; Health and Social Care; and ESOL were outstanding. These three areas represent substantial provision for the College. Over the last three years there has been a sustained and upward trend in success rates at all levels which are above the national averages for the sector. The College recruits throughout the year to EFA and SFA funded programmes thereby meeting the needs of the local community. Higher education students also achieve well with a steadily increasing number gaining first class honours.

Curriculum Developments

54. The College has continued to develop a coherent curriculum offer for both

further and higher education. There is seamless provision from entry level to level 3 at further education and a good range of HND, honours and masters degrees at higher education. The College is also unique in that it holds a directly funded teacher education contract from the NCTL. Over the last three years, progression from further education to higher education has been increasing. Many of the college’s higher education programmes are endorsed by professional bodies and these bodies, together with the external examiners, testify to the high standards of the awards.

55. The College’s teacher education department has responded well to partnership working maintaining its numbers in a competitive environment.

56. The College’s higher education provision is validated by Teesside University but it continues to pursue its own Taught Degree Awarding Powers (TDAP).

57. A new Film School was opened at the start of 2013/14 and recruitment has been good. The School is extremely well equipped and has a number of key strategic partners in Mumbai, Madrid and Malta as well as excellent employer links. Students and staff have benefitted from working overseas.

College Fees

58. For 2013/14, OFFA (Office for Fair Access) approved new fees for newly

recruited Home/EU undergraduate full-time students of £7,100, and this will be kept under review as the fee is intended to replace the HEFCE grant whilst providing professional services and learning support to the HE students. An increasing number of HE students, 13% up on the previous year, loaned assistive technology to aid their study. Learning support for HE students has increased by over 50% over the last three years with an increase in Disabled Students Allowance being accessed and a significant increase in the College supporting students where external funding was not available e.g. mental health support.

59. FE fees are in line with guidelines rates established by the Skills Funding

Agency. Overseas Fees are largely unchanged from the previous year.

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Payment Performance 60. The Late Payment of Commercial Debts (Interest) Act 1998, which came into

force on 1st November 1998 requires Colleges, in the absence of agreement to the contrary, to make payments to suppliers within 30 days of either the provision of goods and services or the date on which the invoice was received. The target set by the Treasury for payment to suppliers within 30 days is 95%. During the accounting period 1 August 2013 to 31 July 2014, the College paid 94% (2012/13: 96.0%) of its invoices within 30 days. The College incurred no interest charges in respect of late payment for this period.

Post-Balance Sheet Events

61. Following an OfSTED inspection in September 2014, the College was graded

as “Good” with outstanding features. 62. As part of its property disposal strategy, the College has sold two properties

for a total sum of £1.7M as at the date of the signing of the accounts. This value is in-line with the carrying value of these assets. Additionally, it is in–line with the cashflow forecast.

63. The remaining uncommitted £3.9M of the £25M RCF with Lloyds Bank was drawn down on 4 August 2014 to contribute to the funding of the David Hockney Building.

Future Developments

64. Cuts to funding body grants are expected to continue. 65. The TDAP application remains under scrutiny and consideration by the QAA. 66. The new David Hockney Building provides an exceptional teaching and

learning space and thereby the opportunity to increase student numbers, particularly EFA funded students due to the growing young people population in Bradford.

67. The new Advanced Technology Centre will provide the vehicle to increase FE

and HE student numbers by enhancing employer engagement. Competitive Environment 68. The College over the past five years has made a substantial investment into

developing market opportunities overseas and has gained Highly Trusted Sponsor Status with the UK Border Agency. However, it now finds itself subject to a series of processes not required by Universities due to its classification as a FE College and not a Higher Education Institution. The discretion awarded to the latter puts the College at a disadvantage when assisting students to obtain visas to come and study at the College. Rigorous application and continuing changes to immigration regulations by the UKBA has led to a more difficult market place in which the College operates.

69. With a proliferation of sixth form centres in Bradford many with new buildings and facilities, plus with the creation of more Academies over the last three

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years together with more likely to be created thereafter, competition will become more intense. Any notable increase in student numbers may be at the expense of other local institutions particularly for the 16-18 year old market although the demographics of Bradford mean that we have a growing young population to serve. This added to the raising of the participation age and the investment in the City Centre Campus development should increase the size of the College’s share of the 16-18 market.

70. Changes to the funding methodologies for both the EFA and SFA in 2013/14

will lead to turbulence in the demand and provision of further education. The introduction of fees and student loans for 24+ FE learners in 2013/14 has created demand uncertainty.

71. Following three years of funding cuts from the Skills Funding Agency, detailed

curriculum planning enables the College to model and plan across the year for student numbers at different start points.

Sustainability and Environmental Matters 72. Whilst the College seeks to minimise its impact on the environment, the

nature of its existing estate in terms of the older buildings has limited the extent of what it can do. Existing buildings are energy inefficient and equipment is often duplicated being on multi-sites. The relatively new development of Trinity Green has made a significant impact as an energy efficient building. In addition, the investment in the new David Hockney Building and the Advanced Technology Centre will allow for a more efficient use of energy in the coming years. Further improvements to estate energy efficiency will be realised with the completion of the property disposal strategy.

73. The College has good arrangements in place to demonstrate Corporate

Social Responsibility. Active engagement in the public life of the city is of course demonstrated at various levels but the College also makes a wider contribution to the communities it serves. A good example includes the Police Summer Camp hosted at Trinity Green which saw over 600 children from high crime areas engaged in various activities during the summer holidays. There is a Carbon Reduction plan which seeks to reduce carbon emissions by 25% by 2015/16. This will be in addition to the successful continuation of the existing schemes which cover the Green Travel Plan and the Recycling of Waste.

Bradford College Accommodation Strategy and Expected Future Targets 74. The College’s Property Strategy Review (2006) identified a number of

significant and serious issues regarding the College estate which comprises of numerous buildings, of which the majority of gross floor area, dated back from the late 19th/early 20th centuries. Additionally, the Review highlighted that 77% of floor space was in an unsatisfactory condition. With this in mind, the College adopted an accommodation strategy; a phased redevelopment of the estate over two existing main city sites. The first of the two city centre sites was Trinity Green completed in June 2008 which achieved a BREEAM Excellent rating.

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75. Phase Two has seen the opening of the David Hockney Building in September 2014 which has replaced the former main College buildings of Westbrook and Kent, with the 23,000m2 new build achieving a BREEAM Very Good rating. The appropriate use of energy and natural resources has been at the forefront of design. Westbrook and Kent buildings are scheduled for demolition in the first quarter of 2015. The David Hockney Building makes use of green technologies to help significantly reduce our carbon emissions.

76. An emerging new property strategy, Phase Three, is at an advanced stage of development and agreed in principle subject to further testing of the key assumptions whereby the Old Building is envisaged as an enabler of growth in FE and HE students from the UK, the rest of the EU and from countries from outside of the EU.

Future Financial Performance

77. The financial health of the College is forecast to be maintained at

“satisfactory” for the next five financial years, as measured by the SFA. The forecast includes a combination of both growth in income streams not subject to UK Government grant funding cuts and student number restrictions and continued achievement in cost effectiveness, efficiencies and economies.

Resources

78. The College has various resources that it can deploy in pursuit of its strategic

objective, particularly the enhanced estate covering the £20M Trinity Green Building, £50M David Hockney Building, £10M Advanced Technology Centre and £3M Lister Building refurbishment. In addition, the Old Building represents a heritage building and the blend of new and old is designed to be attractive to a wide range of FE and HE students.

Financial 79. The Group has seen further improvement to its income and expenditure

reserve during the year of £0.5M and has experienced a favourable reduction of £7.0M in its pension liability under FRS 17.

80. The pension liability has experienced large up and down fluctuations over the

last few years as a result of amendments to scheme rules and changing actuarial assumptions. These fluctuations are difficult to mitigate against, without challenging the Actuary on the assumptions chosen.

People 81. Note 6 to the financial statements shows that staff FTE for staff on open-

ended contracts and fixed-term contracts, taken as a monthly average over the year, have reduced by 30 FTE against the previous year. Of these, teaching staff level has decreased by 6 FTE and support staff levels have been reduced by 24 FTE. This reflects the continuation of the restructuring programme for support services the College has undertaken to reduce costs ahead of an increasingly tighter financial environment with UK Government funding cuts but at the same time attempting to meet the requirements of a widening commitment to teaching and learning.

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Reputation 82. The College has an excellent reputation locally, nationally and internationally.

Maintaining a quality brand is essential for the College’s success at attracting students and external relationships.

Legislation 83. The College has in place anti-fraud and anti-bribery policies supplemented by

risk assessments, appropriate staff training and whistleblowing mechanisms to facilitate such potential risks being managed and dealt with.

PRINCIPAL RISKS AND UNCERTAINTIES

84. The volatility of the funding environment, together with the uncertainty of

student numbers presents a significant risk to the College Group. We continue to manage this by enhancing the teaching & learning environment and student experience to strengthen our recruitment whilst at the same time drive out costs and inefficiencies.

85. The College continues to develop and embed improved systems of internal

control, including financial, operational and risk management which is designed to protect the College’s assets and reputation. In addition, good progress is being made to standardise the risk management approach of the College’s subsidiaries in line with that of the College.

86. Based on an updated strategic plan which took effect from 2010/11, the

Executive will continue to undertake a comprehensive review of the risks to which the College is exposed. They identify systems and procedures, including specific preventable actions, which should mitigate any potential impact on the College. The internal controls are then implemented and subsequent appraisals will review their effectiveness and progress against risk mitigation actions.

87. The College’s internal auditors monitor the systems of internal control, risk management controls and governance processes in accordance with an agreed plan of input and report their findings to management and the Audit Committee and then in due course to Corporation.

88. Management is responsible for the implementation of agreed audit recommendations and internal audit undertakes periodic follow up reviews to ensure that such recommendations have been implemented.

89. A risk register is maintained at College level which is reviewed at each

meeting of the Audit Committee and more frequently where necessary by other committees. The risk register identifies the key risks, the likelihood of those risks occurring, their potential impact on the College and the actions being taken to reduce and mitigate the risks. Risks are prioritised using a consistent scoring system.

90. In conjunction with Baker Tilly (formerly RSM Tenon), the College’s Internal

Auditors, our Risk Management process has been updated and widened to

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cover a more comprehensive view of risks, this has necessitated a risk management training programme initially for the Risk Management group but also for College senior staff to raise awareness of the new system to manage risk throughout the College.

91. Outlined below is a description of the principal risk factors that may affect the

College. Not all the factors are within the College’s control. Other factors besides those listed below may also adversely affect the College.

Financing the next accommodation strategy 92. After securing the funding for the new David Hockney Building, Lister Building

refurbishment and the new Advanced Technology Centre there remains the challenge of generating and raising funds for future growth phases of the College, which includes the development of the Old Building, the original teaching accommodation of the College. A key part of the funding strategy will be continuing to meet the Leeds City Region LEP (Local Enterprise Partnership) strategic objectives and in doing secure capital grant funding.

Achieving TDAP (Taught Degree Awarding Powers) 93. The College acknowledges that if it were to be successful in its TDAP

application then it would have to manage the implications of such an award to minimise the opportunity cost. TDAP provides the authority for the College to define and deliver its provision which would be more responsive to market opportunities for higher education in the EU and non-EU countries.

Higher HE fees continuing from 2013/14 under the new fee regime, risk of reduced student numbers. 94. This is an emerging and foreseeable risk that will be monitored carefully. The

College did not fully recruit to its HEFCE student number control for 2013/14. A refreshed marketing strategy and fundamental review of the curriculum offer are planned to manage this risk.

95. In addition, in 2015/16 the student number control for the recruitment of Home/EU HE full-time undergraduate students represents both opportunity and threat to the College’s position in the HE student recruitment market.

Maintain adequate funding of pension liabilities 96. The financial statements report the share of the pension scheme deficit on the

College’s balance sheet in line with the requirements of FRS 17. 97. Other risks including those associated with employees, assets, ICT,

contingent liabilities, operational uncertainties and external relationships are dealt with through delegated responsibilities to senior post-holders, who convene working groups and facilitate action plans to ensure that each of these risks is mitigated against to a satisfactory level.

98. Since 2002, the College has had a good track record of risk mitigation and

dealing with risks, this was again evident in 2013/14 where no serious

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problems, either financial or reputational were encountered.

Maintaining liquidity during the new build phase 99. The College will maintain its robust control of cash management by utilising

both daily cashflow forecasting for rolling three month periods and monthly cashflow forecasting for a three year period.

POSITION OF INSTITUTION 100. The operating financial performance in 2013/14 has seen a continuation of the

generation of an underlying surplus and a positive net cash inflow from operating activities.

101. The condition of the College’s estate informed us that in pursuing a £50

million new build as phase 2 of the College Accommodation strategy ‘do nothing’ was not a good financial option in the longer term. This was due to known inefficiencies of the current estate and significant costs associated with maintaining an ‘old estate’ which will increase year on year. It is also recognised that older buildings have a detrimental effect on our ability to continue to grow. Our students by their choice will stay on at their schools with their new buildings and facilities, in favour of coming to the College. In part mitigation of this the College has maintained its high reputation for quality and good success rates achieving an OfSTED inspection rating of “good with outstanding features” in September 2014, also it has a key strength in being well placed to offer vocational provision in many areas of curriculum across the College.

102. Since the completion of Trinity Green at £20M with only 10% intervention from

the LSC back in 2008, the College has managed its way through to both a strong position of both solvency and liquidity to put in a position where it was able to invest in the new £50M David Hockney Building to continue to attract and retain students in a modern teaching and learning environment.

103. The College continues to operate within the covenants of its banks set by

Lloyds and Barclays. Demographic Change 104. Whilst the demographic trends across the country for young people are down,

Bradford remains an exception and is at least expected to maintain its numbers over the next few years.

Physical Environment 105. The Trinity Green development is now well established within the College

estate and the new David Hockney Building and Lister Building refurbishment are largely complete. The Advanced Technology Centre will open in September 2015 and marks the completion of the current phase of estate redevelopment. This has begun to address the issue of changing curriculum needs and the appropriateness of current curriculum delivery. Plans to refurbish and remodel the Old Building will be drawn up with the objective of

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meeting Leeds City Region skills priorities and addressing STEM and high level skills needs.

STAKEHOLDER RELATIONSHIPS 106. In line with other Colleges and Universities, Bradford College has many

stakeholders. These include:

Students;

Funding Councils;

Staff;

Local employers (with specific links);

Local Authorities;

Government Offices/ Regional Development Agencies;

The local community;

Overseas communities;

Other FE institutions;

Other HE institutions, including taught degree validating partners;

Suppliers and service providers;

Trade unions; and

Professional bodies. 107. The College recognises the importance of these relationships and engages in

regular communication with them through the College internet site and by meetings. A stakeholder perception study was undertaken and it demonstrated that the College is highly respected by the majority of shareholders.

Equal Opportunities and Employment of Disabled Persons

108. Bradford College is committed to ensuring equality of opportunity for all who

learn and work here. The College respects and values positively, differences in race, gender, sexual orientation, ability, class and age. It strives vigorously to remove conditions which place people at a disadvantage and actively combats bigotry. This policy is resourced, implemented and monitored on a planned basis. The College’s Equality and Diversity Policy, including Race Relations and Transgender Policy, is published on the College’s internet site.

109. The College considers all applications for employment from disabled persons, bearing in mind the aptitudes of the individuals concerned. Where an existing employee becomes disabled, every effort is made to facilitate the continuance of their employment with the College. The College’s policy is to provide training, career development and opportunities for promotion for employees

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with disabilities that are, as far as possible, identical to those for other employees.

Disability Statement

110. The following are examples of measures and adjustments the College has

made in compliance with is Equality Act 2010 and Disability Discrimination Act 1995, as amended by the Special Education Needs and Disability Act 2001, obligations as an employer and service provider:

i. as part of the redevelopment of the buildings it has installed lifts and

ramps so that most of its facilities allow access for people who have difficulty using stairs;

ii. there is a stock of specialist equipment, such as lighting for audio

facilities, which the College can make available for use by students who need it;

iii. both FE and HE have an admissions policy which details the procedure

for both admissions and appeals against a decision not to offer a place to any applicant;

iv. the College has made a significant investment in the appointment of

specialist lecturers to support students with learning difficulties and/or disabilities to build a learning support team of ten academics. All of the observations of the academic support team were graded as outstanding in 2013/14 compared to 42% in 2012/13;

v. there are a number of learning support assistants who provide a variety of

support for learning. There is a continuing programme of staff development to ensure the provision of a high level of appropriate support for students who have learning difficulties and/or disabilities. Three support staff gained their Master’s degree. When observed in 2013/14, the learning support assistants had 45% of their observations graded as outstanding compared to 14% in the previous year;

vi. specialist programmes are described in programme information guides,

and achievements and destinations are recorded and published in the standard College format; and

vii. counselling and welfare services are provided. Support services for

students are described on the website, during induction and via various publications in College.

Disclosure of information to auditors 111. The Corporation members who held office at the date of approval of this

report confirm that, so far as they are each aware, there is no relevant audit information of which the College’s auditors are unaware; and each member has taken all the steps that he or she ought to have taken to be aware of any relevant audit information and to establish that the College’s auditors are aware of that information.

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Professional Advisers Financial Statement and Internal Auditors: Regularity Auditors: Baker Tilly PricewaterhouseCoopers LLP 2 Wellington Place Benson House Leeds 33 Wellington Street LS1 4DW Leeds LS1 4JP

Bankers: Solicitors: Barclays Bank PLC Eversheds PO Box 224 Bridgewater Place 10 Market Street Water Lane Bradford Leeds BD1 1NR LS11 5DR Lloyds Bank Wholesale Banking & Markets North, East and West Yorkshire 2nd Floor Lisbon House 116 Wellington Street Leeds LS1 4LT

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Statement of Corporate Governance and Internal Control

The following statement is provided to equip readers of the annual report and financial statements of the College with a better understanding of its governance and legal structure.

The College is a Further Education Corporation, incorporated under the Further and Higher Education Act 1992. It endeavours to conduct its business: i) in accordance with the seven principles identified by the Nolan Committee on

Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership);

ii) in full accordance with the guidance to colleges from the Association of Colleges in The English Colleges’ Foundation Code of Governance (“the Foundation Code”); and

iii) having due regard to the UK Corporate Governance Code (“the Code”) insofar as it is applicable to the further education sector.

The College is committed to exhibiting best practice in all aspects of corporate governance and, in particular, has adopted and complies with the Foundation Code. It has not adopted the UK Corporate Governance Code but in the course of its corporate governance reporting, it draws upon best practice from it and a range of other sources.

The Corporation members are satisfied that the College complies with all provisions of the Foundation Code, and done so throughout the financial year, which ended 31 July 2014. The Corporation (which is the governing body of the College) recognises that, as a body entrusted with both public and private funds, it has a duty to observe the highest standards of corporate governance at all times. The College is an exempt charity within the meaning of Part 3 of the Charities Act 2011. The members of Corporation, being charity trustees for the purposes of that Act, are required to make certain statements as part of their annual reporting requirements, including confirming as follows: i) that in the course of their activities during the financial year, they have had due

regard for the Charity Commission’s guidance on public benefit; and ii) that the corporation is only involved in activities that will further its charitable

objects and do not put its charitable status at risk.

The Corporation

The members who served on the Corporation board during the financial year 2013/14 and up to the date of signature of this report are as listed overleaf:

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Members serving on the Corporation 2013/14

Corporation member

Date of appointment/re-appointment

Term of office

Date of resignation

Status of appointment

Committees served

Attendance

Mr Richard Wightman, Corporation Chair

25 May 2013 Re-appointed Chair of Corporation Feb 2013 for 2 years.

4 years Member Member of Collaboration Committee Development Committee, Chair Hon Fellows Approvals Committee, Vice-Chair Policy & Resources, Vice-Chair Remuneration Committee Search Committee Standards Committee Appleton Academy Governing Body IFT Studio School Governing Body Training for Bradford Ltd Board, ATA, Bradford College Education Trust BCET Board

66/6/

6/6

Mr Paul Ashton

14 Dec 2011 4 years Member Member of: Policy and Resources Cttee, Chair Search Committee, Vice-Chair, BCET Audit Committee

3/6

Mr Richard Brown

01 October 2014

4 years Staff Member Member of: Audit Committee Collaboration Committee

4/6

Mr David Cawthray

31 Aug 2012 4 years Member Member of Policy and Resources Committee Collaboration Committee

3/6

Mr Andrew Chang

20 Oct 2012 4 years Member Member of: Audit Committee, Chair

4/6

Ms Eve Gregory

17 Feb 2011 4 years Member Member of: Development Committee Remuneration Committee BCET Board Samuel Lister Governing Body

4/6

Dr Kath Hodgson

19 Aug 2013 4 years Member Member of Development Committee Hon Fellows Approvals Committee Standards Committee, Vice

4/6

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Chair

Cllr Naveeda Ikram

31 Aug 2012 4 years Local Authority Member

1/6

Mr Alan Jerome, Corporation Vice-Chair

20 October 2011 4 years Member Member of Audit Committee, Collaboration Committee, Chair Development Committee, Vice Chair Hon Fellows Approval Committee, Chair Remuneration Committee Search Committee, Chair Appleton Academy Governing Body BCET Board Textile Archive Board, Chair

5/6

Ms Nasreen Karim

19 August 2013 4 years Member 1/6

Ms Ruth Kelly 7 Oct 2012 4 years Staff Member 5/6

Mr Ian McAleese

19 Aug 2013 4 years Member 2/6

Mr Karl Oxford 10 Oct 2012 4 years Member Member of Collaboration Committee Remuneration Committee

3/6

Mr Umar Rafique

1 July 2014 2 years Student Member

1/1

Cllr David Robinson

08 July 2013 4 years Local Authority Member

Member of Collaboration Committee Development Committee Policy and Resources Committee Standards Committee Appleton Academy Governing Body

4/6

Mr Malik Siddique

31 Aug 2012 4 years Member 1/6

Dr Ramindar Singh

17 Mar 2012 4 years Member

Member of Policy & Resources Committee Remuneration Committee Standards Committee, Chair Inprint & Design Board

6/6

Cllr Dale Smith

07 Oct 2012 4 years Local Authority Member

Member of Audit Committee Collaboration Committee, Vice-Chair Remuneration

5/6

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Committee

Ms Fatima Sohail

1 July 2014 2 years Student Member

1/1

Ms Michele Sutton OBE

Appointed as Principal 1st August 2004 Appointed as Group Chief Executive August 2013 Retired 31st July 2014

10 years Member of Collaboration Committee Development Committee Hon Fellows Approvals Committee Policy and Resources Committee Search Committee Standards Committee Training for Bradford Ltd Board Samuel Lister Governing Body Beacon Recruitment and Placement Services: Board Bradford College Education Trust BCET Board

5/6

Mr Andy Welsh

Appointed as Group Chief Executive, 1

st

August 2014

Member of Collaboration Committee Development Committee Hon Fellows Approvals Committee Policy and Resources Committee Search Committee Standards Committee Training for Bradford Ltd Board Samuel Lister Governing Body Beacon Recruitment and Placement Services: Board Bradford College Education Trust BCET Board

N/A

John Buckley appointed as Clerk to the Corporation on 12th October 2006 – retired 16

th September 2014

Joanna Green appointed as Clerk to the Corporation from 3rd

November 2014

It is the Corporation’s responsibility to bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct. The Corporation is provided with regular and timely information on the overall financial performance of the College together with other information such as performance against funding targets, proposed major capital expenditure, quality matters and personnel related matters such as health and safety and environmental issues. The Corporation meets twice each term. The Corporation has delegated certain of its powers and functions to committees. Each committee has terms of reference, which are decided by the Corporation. The College’s standing committees are Remuneration, Audit, Collaboration, Development, Policy and Resources, Search, Honorary Fellows Approval and Standards. Special Committees are

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occasionally established to fulfil special purposes, for example to appoint to senior posts. Full minutes of all Corporation meetings, except those items which Corporation determines should be dealt with on a confidential basis and where the public interest in disclosure does not outweigh the reasons for such determination, are available from the Clerk to the Corporation at: Bradford College, Great Horton Road, Bradford BD7 1AY. The Clerk to the Corporation maintains a register of financial and personal interests of the Corporation members. The register is available for inspection at the above address. All Corporation Members are able to take professional advice in furtherance of their duties at the College’s expense and have access to the Clerk to the Corporation, who is responsible for advising the Corporation with regard to the operation of its powers, procedural matters, the conduct of its business and matters of governance practice. The appointment, evaluation and removal of the Clerk are matters for the Corporation as a whole. Formal agendas, papers and reports are supplied to Corporation Members in a timely manner, prior to Corporation and Committee meetings. Briefings are also provided on an ad-hoc basis. The Corporation has a strong and independent non-executive element and no individual or group dominates its decision-making process. The Corporation considers that each of its non-executive members is independent of management and free from any business or other relationship, which could materially interfere with the exercise of their independent judgement. There is a clear division of responsibility in that the roles of the Chair of the Corporation and Group Chief Executive are separate.

Appointments to the Corporation

Any new appointments to the Corporation are a matter for the consideration of the Corporation as a whole. The Corporation has a Search Committee, which is responsible for the selection and nomination of any new member for the Corporation’s consideration. The Corporation is responsible for ensuring that appropriate training is provided as required. Members of the Corporation are appointed for a term of office not exceeding four years.

Remuneration Committee

Throughout the year ending 31 July 2014, the College’s Remuneration Committee was comprised of seven members of the Corporation. The Committee’s responsibilities are to make recommendations to Corporation on the remuneration and benefits of the Group Chief Executive and other senior post holders. Details of remuneration for the year ended 31 July 2014 are set out in note 7 to the financial statements.

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Audit Committee

The Audit Committee comprises four members (excluding the Group Chief Executive and Chair) and a co-opted member. The Committee operates in accordance with written terms of reference approved by the Corporation. Its purpose is to advise the Corporation on the adequacy and effectiveness of the College’s systems of internal control and its arrangements for risk management, control and governance process. The Audit Committee meets on a termly basis and provides a forum for reporting by the College’s internal and financial statements auditors, who have access to the Committee for independent discussion, without the presence of College management. The Committee also receives and considers reports from the Skills Funding Agency and Quality Assurance Agency as they affect the College’s business. The College’s internal auditors monitor the systems of internal control, risk management controls and governance processes in accordance with an agreed plan of input and report their findings to management and the Audit Committee. Management is responsible for the implementation of agreed audit recommendations and internal audit undertakes periodic follow up reviews to ensure that such recommendations have been implemented. The Audit Committee also advises the Corporation on the appointment of internal, regularity and financial statements auditors and their remuneration for both audit and non-audit work.

Internal Control

Scope of responsibility The Corporation is ultimately responsible for the College’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable, not absolute assurance, against material misstatement or loss. The Corporation has delegated the day-to-day responsibility to the Group Chief Executive, as Accounting Officer, for maintaining a sound system of internal control that supports the achievement of the College’s policies, aims and objectives, whilst safeguarding the public funds and assets for which he is personally responsible, in accordance with the responsibilities assigned to him in the Financial Memorandum between the College and the Skills Funding Agency (SFA). He is also responsible for reporting to the Corporation any material weaknesses or breakdowns in internal control. The purpose of the system of internal control The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal

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control is based on an ongoing process designed to identify and prioritise the risks to the achievement of College policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised and to manage them efficiently, effectively and economically. The system of internal control has been in place in Bradford College for the year ended 31 July 2014 and up to the date of approval of the annual report and financial statements. Capacity to handle risk The Corporation has reviewed the key risks to which the College is exposed, together with the operating, financial and compliance controls that have been implemented to mitigate those risks. The Corporation is of the view that there is a formal ongoing process for identifying, evaluating and managing the College’s significant risks that has been in place for the period ending 31 July 2014 and up to the date of approval of the annual report and financial statements. The process of risk management is regularly reviewed by the Corporation. The risk and control framework The system of internal financial control is based on a framework of regular management information, administrative procedures including the segregation of duties, and a system of delegation and accountability. In particular, it includes:

comprehensive budgeting systems with an annual budget, which is reviewed and agreed by the Corporation;

regular reviews by the Corporation of periodic and annual financial reports which indicate financial performance against forecasts;

setting targets to measure financial and other performance;

clearly defined capital investment control guidelines; and

the adoption of formal project management disciplines, where appropriate.

The College is provided with an internal audit service by an external organisation, which operates in accordance with the requirements of the EFA and SFA’s Joint Audit Code of Practice. The work of the internal audit service is informed by an analysis of the risks to which the College is exposed, and annual internal audit plans are based on this analysis. The analysis of risks and the internal audit plans are endorsed by the Corporation on the recommendation of the Audit Committee. At least annually, the internal audit service provider presents the Corporation with a report on internal audit activity in the College. The report includes the external internal audit service provider’s independent opinion on the adequacy and effectiveness of the College’s system of risk management, controls and governance processes. Review of effectiveness As Accounting Officer, the Group Chief Executive has responsibility for reviewing the effectiveness of the system of internal financial control. His review of the effectiveness of the system of internal control is informed by:

the work of the internal auditors;

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the work of other relevant parties (e.g. Skills Funding Agency, Education Funding Agency, Higher Education Funding Council for England, National College for Teaching and Learning)

the work of the executive managers within the College who have responsibility for the development and maintenance of the internal control framework; and

comments made by the College’s financial statements auditors. The Group Chief Executive has been advised by the Audit Committee on the implications of the result of his review of the effectiveness of the system of internal control by the Audit Committee, which oversees the work of the internal auditor, and a plan to address weaknesses and ensure continuous improvement of the system is in place. Normal practice is for the senior management team to receive reports setting out key performance and risk indicators and consider possible control issues brought to their attention by early warning mechanisms, which are embedded within the departments and reinforced by risk awareness training. The process has now been cascaded into the departments and is routinely reported on at termly performance management and planning meetings. The senior management team and the Audit Committee also receive regular reports from internal audit, which include recommendations for improvement. The Audit Committee’s role in this area is confined to a high-level review of the arrangements for internal control. The Corporation’s agenda includes a regular item for consideration of risk and control and receives reports thereon from the senior management team and the Audit Committee. The emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception. At its October 2014 meeting, the Corporation carried out the annual assessment for the year ended 31 July 2014 by considering documentation from the senior management team and internal audit and taking accounts of events since 31 July 2014. Based on the advice of the Audit Committee and the Group Chief Executive, the Corporation is of the opinion that the College has an adequate and effective framework for governance, risk management and control, and that it has fulfilled its statutory responsibility for “the effectiveness and efficient use of resource, the solvency of the institution and the body and the safeguarding of its assets.” Governing Body’s Statement on the College’s regularity, propriety and compliance with Funding body terms and conditions of funding. The Corporation has considered its responsibility to notify the Skills Funding Agency of material irregularity, impropriety and non-compliance with Skills Funding Agency terms and conditions of funding, under the financial memorandum in place between the College and the Skills Funding Agency. As part of its consideration the Corporation has had due regard to the requirements of the Financial Memorandum. We confirm, on behalf of the Corporation, that to the best of its knowledge, the Corporation is able to identify any material irregular or improper use of funds by the College, or material non-compliance with the Skills Funding Agency’s terms and conditions of funding under the College’s Financial Memorandum. We further confirm that any instances of material irregularity, impropriety or funding non-compliance discovered to date have been notified to the Skills Funding Agency.

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Statement of Responsibilities of the Members of the Corporation The members of the Corporation are required to present audited financial statements for each financial year. Within the terms and conditions of the Financial Memorandum agreed between the Skills Funding Agency (SFA) and the Corporation of the College, the Corporation, through its Group Chief Executive, is required to prepare financial statements for each financial year in accordance with the 2007 Statement of Recommended Practice – Accounting for Further and Higher Education and which give a true and fair view of the state of affairs of the College and the result for that year. In preparing the financial statements, the Corporation is required to:

select suitable accounting policies and apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

prepare financial statements on the going concern basis, unless it is inappropriate to assume that the College will continue in operation.

The Corporation is also required to produce an Operating and Financial Review which describes what it is trying to do and how it is going about it, including the legal and administrative status of the College. The Corporation is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the College, and which enable it to ensure that the financial statements are prepared in accordance with the relevant legislation of incorporation and other relevant accounting standards. It is responsible for taking steps that are reasonably open to it in order to safeguard the assets of the College and to prevent and detect fraud and other irregularities. The maintenance and integrity of the College website is the responsibility of the Corporation of the College; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Members of the Corporation are responsible for ensuring that expenditure and income are applied for the purposes intended by Parliament and that the financial transactions conform to the authorities that govern them. In addition they are responsible for ensuring that funds from the Skills Funding Agency are used only in accordance with the Financial Memorandum with the Skill Funding Agency and any other conditions that the SFA may prescribe from

34

Independent auditors’ report to the Corporation ofBradford College (the “institution”)

Report on the financial statements

Our opinion

In our opinion, the financial statements, defined below:

give a true and fair view of the state of the group’s and of the parent institution’s affairs as at 31 July 2014 and of

the group’s income and expenditure , recognised gains and losses, historical cost surpluses/deficits, and cash flows

for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been properly prepared in accordance with the Statement of Recommended Practice – Accounting for Further

and Higher Education.

This opinion is to be read in the context of what we say in the remainder of this report.

Emphasis of matter: Going Concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of disclosuresmade in note 1 of the financial statements concerning the group’s and parent institution’s (the ‘College group’) ability tocontinue as a going concern.

The College group has prepared cash flow forecasts that are underpinned by an ongoing cost reduction programme thatoperates in conjunction with a business growth strategy. The cash flow forecasts include the realisation of excess capitalassets and show that the College group has sufficient cash to meet its liabilities as they fall due. In addition to this, theCollege group is also exploring additional financing options to increase its cash headroom, although none of these additionalfacilities has yet been agreed.

However, there is no certainty over the effectiveness of the cost reduction programme nor the achievement of studentrecruitment and this indicates the existence of a material uncertainty that may cast significant doubt about the Collegegroup’s ability to continue as a going concern. The financial statements do not include the adjustments that would result ifthe College group was unable to continue as a going concern.

What we have audited

The group financial statements and parent institution financial statements (the “financial statements”), which are preparedby Bradford College, comprise:

the consolidated Income and Expenditure Account for the year ended 31 July 2014;

the consolidated Statement of Historical Cost Surpluses and Deficits for the year then ended;

the consolidated Statement of Total Recognised Gains and Losses for the year then ended;

the group and parent institution Balance Sheets as at 31 July 2014;

the consolidated Cash Flow Statement for the year then ended; and

the notes to the financial statements, which include a summary of significant accounting policies and otherexplanatory information.

The financial reporting framework that has been applied in their preparation is the Statement of Recommended Practice forFurther and Higher Education, incorporating United Kingdom Generally Accepted Accounting Practice.

In applying the financial reporting framework, the Corporation has made a number of subjective judgements, for example inrespect of significant accounting estimates. In making such estimates, it has made assumptions and considered futureevents.

What an audit of financial statements involves

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give

35

reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.This includes an assessment of:

whether the accounting policies are appropriate to the group and parent institution’s circumstances and have beenconsistently applied and adequately disclosed;

the reasonableness of significant accounting estimates made by the Corporation; and

the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the “Report and Financial Statements” to identifymaterial inconsistencies with the audited financial statements and to identify any information that is apparently materiallyincorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. Ifwe become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinions on other matters prescribed in the Joint Audit Code ofPractice issued by the Education Funding Agency and the ChiefExecutive of Skills Funding

In our opinion, in all material respects:

proper accounting records have been kept, and

the financial statements are in agreement with the accounting records and returns.

Responsibilities for the financial statements and the audit

Respective responsibilities of the Corporation and auditors

As explained more fully in the Statement of Responsibilities of the Members of the Corporation set out on pages 32 and 33,the Corporation is responsible for the preparation of the financial statements and for being satisfied that they give a true andfair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable lawand ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards forAuditors.

This report, including the opinions, has been prepared for and only for the Corporation as a body in accordance with Article22 of the institution’s Articles of Governmentand for no other purpose. We do not, in giving these opinions, accept orassume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLeeds

23 December 2014

(a) The maintenance and integrity of the Bradford College website is the responsibility of the Corporation; the workcarried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the financial statements since they were initiallypresented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of the financial statements maydiffer from legislation in other jurisdictions.

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Addressees:

The Corporation of the College

The Chief Executive of Skills Funding

Independent Auditor’s Report on Regularity to the Corporation of Bradford

College and the Chief Executive of the Skills Funding Agency

This report is produced in accordance with the terms of our engagement letter dated 10

October 2014 for the purpose of reporting on the College’s Statement of Regularity,

Propriety and Compliance in respect of whether the transactions underlying the College’s

financial statements for the year ended 31 July 2014 are regular as defined by and in

accordance with the Financial Memorandum with the Chief Executive of Skills Funding, in

accordance with the authorities that govern them.

The regularity assurance framework that has been applied is set out in the Joint Audit Code

of Practice and the Regularity Framework published by the Skills Funding Agency and the

Education Funding Agency.

Our review has been undertaken so that we might state to the Corporation of Bradford

College and the Chief Executive of Skills Funding those matters we are required to state to

them in a report and for no other purpose. This report is made solely to the Corporation of

Bradford College and the Chief Executive of Skills Funding in accordance with the terms of

our engagement letter. To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the corporation of Bradford College and the Chief

Executive of Skills Funding, for our review work, for this report, or for the opinion we have

formed.

Responsibilities of the Corporation of Bradford College

The Corporation of Bradford College is responsible under the requirements of the Further &

Higher Education Act 1992, subsequent legislation and related regulations and guidance, for

ensuring that financial transactions are in accordance with the framework of authorities

which govern them and that transactions underlying the financial statements for the year

ended 31 July 2014 are regular.

The Corporation of Bradford College is also responsible, under the requirements of the

Accounts Direction 2013/14 published by the Skills Funding Agency and the Education

Funding Agency for the preparation of the Statement on Regularity, Propriety and

Compliance. The Statement confirms that, to the best of its knowledge, the Corporation

believes it is able to identify any material, irregular or improper use of funds by the College,

or material non-compliance with the Skills Funding Agency’s terms and conditions of

funding under the College’s financial memorandum. It further confirms that any instances

of material irregularity, impropriety or funding non-compliance discovered in the year to 31

July 2014 have been notified to the Skills Funding Agency.

37

Auditor’s responsibilities

Our responsibility is to express a reasonable assurance opinion that the College's Statement

of Regularity, Propriety and Compliance is fairly stated in respect of whether the

transactions underlying the College’s financial statements for the year ended 31 July 2014

are in all material respects regular, based on the procedures that we have performed and the

evidence we have obtained. Our reasonable assurance engagement was undertaken in

accordance with the Joint Audit Code of Practice, the Regularity Framework and our

engagement letter dated 10 October 2014. The International Standards on Auditing (UK and

Ireland) and Joint Audit Code of Practice require that we plan and perform this engagement

to obtain reasonable assurance in respect of the Assertion that the transactions underlying

the financial statements are in all material respects regular.

Basis of opinion

We have performed procedures on a sample basis so as to obtain information and

explanations which we consider necessary in order to provide us with sufficient appropriate

evidence to express reasonable assurance that the College’s Statement of Regularity,

Propriety and Compliance is fairly stated in respect of whether the transactions underlying

the College’s financial statements are in all material respects regular for the year ended 31

July 2014.

Opinion

In our opinion the College’s Statement of Regularity, Propriety and Compliance is fairly

stated in respect of whether the transactions underlying the College’s financial statements

are in all material respects regular for the year ended 31 July 2014.

23 December 2014

PricewaterhouseCoopers LLP

Chartered Accountants

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Consolidated Income and Expenditure Account

Notes 2014 2013

£'000 £'000 £'000 £'000

INCOME

Funding body grants 2 36,836 41,266

Tuition fees and education grants 3 18,024 15,095

Research grants and contracts 4 675 701

Other income Other 2,066 2,311

Endowment and investment income 5 453 74

Total income 58,054 59,447

Less: Share of joint venture company (769) (860)

Group income 57,285 58,587

EXPENDITURE

Staff costs 6 37,117 38,063

Exceptional restructuring costs 6e 1,220 415

Other operating expenses 8 16,527 16,321

Depreciation 12s 2,069 2,237

Accelerated depreciation 767 0

Interest and other finance costs 9 798 799

Total expenditure 58,498 57,835

(1,213) 752

Share of operating profit of joint venture company 46 62

Loss on disposal of assets 12 (2) 0

(1,169) 814

Taxation 10 0 0

Deficit/(surplus) for the year retained within general reserves (1,169) 814

Surplus on continuing operations after depreciation of tangible

fixed assets at valuation and before tax

Surplus on continuing operations after depreciation of assets at

valuation, but before tax

38

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Consolidated Statement of Historical Cost Surpluses and Deficits

2014 2013

£'000 £'000

(Deficit)/surplus on continuing operations before taxation (1,169) 814

Impairment provision against property revaluation gains 767 0

363 259

Historical cost (deficit)/surplus for the year before taxation (39) 1,073

Historical cost (deficit)/surplus for the year after taxation (39) 1,073

Consolidated Statement of Total Recognised Gains and Losses

2014 2013

£'000 £'000

(1,169) 814

Actuarial gain/(loss) in respect of pension scheme 7,548 5,986

Actuarial gain/(loss) in respect of enhanced pensions 1 (5)

Gift aid received from subsidiary 0 0

Total recognised gains since last report 6,380 6,795

Reconciliation

Opening reserves 3,973 (2,822)

Movement in restricted reserves (7) 0

Total recognised gains/(losses) for the year 6,380 6,795

Closing reserves and endowments 10,346 3,973

(Deficit)/surplus on continuing operations after depreciation of assets

at valuation and disposals of assets and tax

Difference between historical cost depreciation and the actual charge for the

year calculated on the revalued amount

39

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Consolidated Cash Flow Statement Notes 2014 2013

£'000 £'000

Net cash inflow from operating activities 24 5,583 4,545

Returns on investments and servicing of finance

Gift aid received from joint venture company 62 115

Interest received 101 74

Interest element of finance lease rental payment -6 0

Interest paid -791 -802

Net cash outflow from returns on investment and servicing of finance 25 -634 -613

Taxation 0 0

Capital expenditure and financial investment

Purchase of tangible fixed assets -33,373 -14,306

Sales of tangible fixed assets 0 0

Deferred capital grants received 4,053 0

Net cash outflow from capital expenditure and financial investment 26 -29,320 -14,306

Management of liquid resources

Withdrawals from deposits 0 0

Movement in endowment assets 0 0

Placing of deposits 0 0

Net cash outflow from management of liquid resources 27 0 0

Financing

Repayment of amounts borrowed -862 -581

Cash inflow from new finance leases 774 0

Cash inflow from new loans 19,439 11,607

Net cash inflow from financing 28 19,351 11,026

(Decrease)/increase in cash in the year -5,020 652

Reconciliation of net cash flow to movement in net debt

(Decrease)/increase in cash in the year -5,020 652

Cash inflow from financing -19,351 -11,026

Cash (inflow)/outflow from liquid resources 0 0

Movement in net debt in the year -24,371 -10,374

Net debt at 1 August -12,475 -2,101

Net debt at 31 July -36,846 -12,475

41

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

All financial statements are made up to 31 July 2014.

Statement of accounting policies

Notes to the Financial Statements

1. Accounting policies

Basis of preparation

Basis of accounting and going concern

Basis of consolidation

The following accounting policies have been applied consistently in dealing with items which are considered material in

relation to the financial statements.

These financial statements have been prepared in accordance with the Statement of Recommended Practice:

Accounting in Further and Higher Education 2007 (the SORP) and in accordance with applicable Accounting

Standards in the United Kingdom. They conform to the guidance published jointly by the Skills Funding Agency and the

EFA in the 2013/14 Accounts Direction Handbook.

The consolidated financial statements also include the College's share of the results of a joint venture company co-

owned with the University of Bradford, Inprint & Design Limited. Its results have been dealt with under the equity

method of accounting in accordance with FRS9.

The recurrent grant from the funding bodies is that receivable as determined by the results of the funding audit

undertaken. The recurrent grants from HEFCE and the TDA represent the funding allocations attributable to the

current financial year and are credited direct to the income and expenditure account.

The financial statements are prepared in accordance with the historical cost convention modified by the revaluation of

certain fixed assets and in accordance with applicable United Kingdom Accounting Standards and have been

prepared on a going concern basis. As a consequence of the significant investment the College has made in its

estate, the College has taken out facilities from the bank and has also utilised grant funding and cash reserves to 'self

fund' the balance. The College group is also subject to the uncertainty associated with student recruitment and due to

changes in grant funding and the ability to meet forecast levels of student recruitment. As a consequence, there is

material uncertainty that may cast significant doubt about the College group's ability to continue as a going concern, to

mitigate this the College group has implemented a cost reduction programme and is exploring additional financing

options, so to ensure it has sufficient cash to meet its liabilities as they fall due, and that as such the College is a going

concern, and has prepared its accounts under the going concern basis. There are also some medium term challenges

in financing the College's activities and capital programmes, but we have plans and actions in place to address these

challenges before they develop.

The consolidated financial statements include the College and its subsidiaries, Training for Bradford Limited and

Beacon Recruitment and Placement Services Limited. Uniform accounting policies have been adopted across the

group. The results of subsidiaries acquired or disposed of during the period are included in the consolidated income

and expenditure account from the date of acquisition or up to the date of disposal. Intra-group sales and profits are

eliminated fully on consolidation. In accordance with Financial Reporting Standard (FRS) 2, the activities of the student

union have not been consolidated because the College does not control those activities.

Recognition of income

Funding body recurrent grants are recognised in line with best estimates for the period of what is receivable and

depend on the particular income stream involved. Any under or over achievement for the adult learner responsive

funding elements is adjusted for and reflected in the level of recurrent grant recognised in the income and expenditure

account. The final grant income is normally determined with the conclusion of the year end reconciliation process with

the funding body at the end of November following the year end. Employer responsive grant income is recognised

based on a year end reconciliation of income claimed and actual delivery. 16-18 learner-responsive funding is not

normally subject to a reconciliation and is therefore not subject to contract adjustments.

42

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Income from tuition fees is recognised in the period for which it is received and includes all fees payable by students or

their sponsors.

Income from grants, contracts and other services rendered is included to the extent the conditions of the funding have

been met or the extent of the completion of the contract or service concerned.

All income from short term deposits is credited to the income and expenditure account in the period in which it is

earned. Income from restricted purpose endowment funds not expended in accordance with the restrictions of the

endowment in the period is transferred from the income and expenditure account to accumulated income within

endowment funds.

Retirement benefits to employees of the College are provided by the Teachers' Pension Scheme (TPS) and the West

Yorkshire Superannuation Fund (WYSF). These are defined benefit schemes which are externally funded and

contracted out of the State Earnings Related Pension Scheme (SERPS). Training for Bradford Limited also operates a

defined contribution scheme for employees through Scottish Widows and Scottish Life.

Non-recurrent grants from the funding bodies or other bodies received in respect of the acquisition of fixed assets are

treated as deferred capital grants and amortised in line with depreciation over the life of the assets.

Notes to the Financial Statements (continued)

1. Accounting policies (continued)

Recognition of income (continued)

Post retirement benefits

Contributions to the TPS are calculated so as to spread the cost of pensions over employees' working lives with the

group in such a way that the pension cost is a substantially level percentage of current and future pensionable payroll.

The contributions are determined by qualified actuaries on the basis of quinquennial valuations, using a prospective

benefit method. As stated in note 31, the TPS is a multi employer scheme and the College is unable to identify its

share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. The TPS is therefore

treated as a defined contribution scheme and the contributions recognised as they are paid each year.

The assets of the WYSF are measured using closing market values. WYSF liabilities are measured using the

projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term

and currency to the liability. The increase in the present value of the liabilities of the scheme expected to arise from

employee service in the period is charged to the operating surplus. The expected return of the scheme's assets and

the increase during the period in the present value of the scheme's liabilities, arising from the passage of time, are

included in pension finance costs. Actuarial gains and losses are recognised in the statement of total recognised gains

and losses.

The actual cost of any enhanced ongoing pension to a former member of staff is paid by the college annually. An

estimate of the expected future cost of any enhancement to the ongoing pension of a former member of staff is

charged in full to the college's income and expenditure account in the year that the member of staff retires. In

subsequent years a charge is made to provisions in the balance sheet using the enhanced pension spreadsheet

provided by the funding bodies.

Tangible fixed assets are stated at historic purchase cost less accumulated depreciation. Cost includes the original

purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Enhanced pensions

Tangible fixed assets and depreciation

43

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Market value of the fixed asset has subsequently improved

Asset capacity increases

Substantial improvement in the quality of output or reduction in operating costs

Significant extension of the asset’s life beyond that conferred by repairs and maintenance

Land and buildings

Subsequent expenditure on existing fixed assets

Assets in the course of construction

Assets held for resale

Finance costs which are directly attributable to the construction of land and buildings are not capitalised as part of the

cost of those assets.

A review for impairment of a fixed asset is carried out if events or changes in circumstances indicate that the carrying

amount of the fixed asset may not be recoverable.

On adoption of FRS 15, the College followed the transitional provision to retain the book value of land and buildings,

which were revalued in 1993, but not to adopt a policy of revaluations of these properties in the future. These values

are retained subject to the requirement to test assets for impairment in accordance with FRS 11.

Where significant expenditure is incurred on tangible fixed assets it is charged to the income and expenditure account

in the period it is incurred, unless it meets one of the following criteria, in which case it is capitalised and depreciated

on the relevant basis:

Land and buildings inherited from the local education authority are stated in the balance sheet at valuation on the

basis of depreciated replacement cost as the open market value for existing use is not readily obtainable. The

associated credit is included in the revaluation reserve. The difference between depreciation charged on the historic

cost of assets and the actual charge for the year calculated on the revalued amount is released to the income and

expenditure account reserve on an annual basis. Building improvements made since incorporation are included in the

balance sheet at cost. Freehold land is not depreciated. Freehold buildings are depreciated over their expected useful

economic life to the College of between 25 and 50 years. The College has the policy of depreciating major adaptations

to buildings over the period of their useful economic life, normally 25 years.

Where land and buildings are acquired with the aid of specific grants they are capitalised and depreciated as above.

The related grants are credited to a deferred capital grant account and are released to the income and expenditure

account over the expected useful economic life of the related asset on a basis consistent with the depreciation policy.

Notes to the Financial Statements (continued)

1. Accounting policies (continued)

Assets in the course of construction are accounted for at cost, based on the value of architects' certificates and other

direct costs, incurred at 31 July 2014. They are not depreciated until they are brought into use.

Assets held for sale at 31 July 2014 comprises of six buildings (Grove Building, Farnham Road, Junction Mills, Merton

Road, Green Lane, and McMillan Building which had become surplus to College requirements and are expected to be

sold during 2014 - 2015.

44

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Fixtures and fittings 10% per year on a straight line basis

Furniture and equipment 20% per year on a straight line basis

Motor vehicles 25% per year on a straight line basis

Computer equipment 25% per year on a straight line basis

Notes to the Financial Statements (continued)

1. Accounting policies (continued)

Equipment costing less than £1,000 per individual item is written off to the income and expenditure account in the

period of acquisition. All other equipment is capitalised at cost. Equipment inherited from the local education authority

is included in the balance sheet at valuation.

Inherited equipment has been depreciated on a straight line basis over its remaining useful economic life to the

College of between four and ten years from incorporation and is now fully depreciated. All other equipment is

depreciated over its useful economic life as follows:

Where equipment is acquired with the aid of specific grants it is capitalised and depreciated in accordance with the

above policy, with the related grant being credited to a deferred capital grant account and released to the income and

expenditure account over the expected useful economic life of the related equipment.

Costs in respect of operating leases are charged to the income and expenditure account on a straight line basis over

the lease term.

Equipment

Leased assets

Listed investments held as fixed assets or endowment assets are stated at market value. Current asset investments,

which may include listed investments, are stated at the lower of their cost and net realisable value.

In view of the size and nature of stockholdings, all purchases of such items have been charged to the income and

expenditure account on acquisition.

Transactions denominated in foreign currencies are recorded using the rate of exchange ruling at the dates of the

transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange

ruling at the end of the financial period with all resulting exchange differences being taken to the income and

expenditure account in the period in which they arise.

The finance charges are allocated over the period of the lease in proportion to the capital element outstanding. Where

finance lease payments are funded in full from funding council capital equipment grants, the associated assets are

designated as grant funded assets.

Leasing agreements that transfer to the College substantially all the benefits and risks of ownership of an asset are

treated as if the asset had been purchased outright and are capitalised at their fair value at the inception of the lease

and are depreciated over the shorter of the lease term or the useful economic lives of equivalent owned assets. The

capital element outstanding is shown as obligations under finance leases.

Investments and endowment assets

Stocks

Foreign currency translation

45

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

The College acts as an agent in the collection and payment of discretionary support funds, trainee teacher salaries

and other bursaries payable to students by some of the funding councils. Related payments received from the funding

bodies and subsequent disbursements to students are excluded from the Income and Expenditure account and are

shown separately in Note 37, except for the percentage of grant received which is available to the College to cover

administration costs relating to the grant.

The College is considered to pass the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it

meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the College is potentially

exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11

Corporation Tax Act 2010 or section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income

or gains are applied to exclusively charitable purposes.

The College is partially exempt in respect of Value Added Tax (VAT), so that it can only recover a minor element of

VAT charged on its inputs. Irrecoverable VAT on inputs is included in the costs of such inputs and added to the cost of

tangible fixed assets as appropriate, where the inputs themselves are tangible fixed assets by nature.

Taxation

Liquid resources

Provisions

Agency arrangements

Training for Bradford Limited, Beacon Recruitment and Placement Services Limited and Inprint & Design Limited are

subject to both corporation tax and to VAT in the same way as any commercial organisation.

1. Accounting policies (continued)

Liquid resources include sums on short term deposits with recognised banks and building societies and government

securities.

Provisions are recognised when the College has a present legal or constructive obligation as a result of a past event, it

is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be

made of the amount of the obligation.

Notes to the Financial Statements (continued)

46

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

2 Funding body grants

2014 2013

£'000 £'000

EFA recurrent grant 16,295 17,241

SFA recurrent grant 14,569 14,898

HEFCE - Recurrent grant 3,571 5,340

NCTL (formerly TDA) - Recurrent grant 854 1,375

SFA non-recurrent grant 1,159 1,318

Train to Gain 0 629

Release of deferred capital grants (note 20) 388 465

Total 36,836 41,266

The College delivery of its Train to Gain contract ended on 30th September 2014.

3 Tuition fees and education contracts

2014 2013

£'000 £'000

Tuition fees:

UK higher education students 10,799 7,739

Trainee teachers 4,018 3,349

UK and EU further education students 1,899 1,734

Non-European Union students 921 2,273

Education contracts 387 0

Total 18,024 15,095

Tuition fees funded by bursaries

There were no tuition fees funded by bursaries in the year (2013: £nil)

4 Research grants and contracts

2014 2013

£'000 £'000

European Commission 51 60

UK-based charities 183 183

Research Council 83 87

Other grants and contracts 358 371

Total 675 701

5 Endowment and investment income

2014 2013

£'000 £'000

Other investment income 101 74

Pension finance income (note 31) 352 0

Total 453 74

47

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

6 Staff costs

Restated

2014 2013

No. No.

Teaching staff 393 399

Non-teaching staff 607 631

Total 1,000 1,030

Staff costs for the above persons

2014 2013

£'000 £'000

Wages and salaries 30,240 31,442

Social security costs 2,274 2,205

4,603 4,416

Payroll sub-total 37,117 38,063

Exceptional restructuring costs 1,220 415

Total Staff costs 38,337 38,478

2014 2013 2014 2013

No. No. No. No.

£50,001 to £60,000 0 0 2 0

£60,001 to £70,000 0 0 4 5

£70,001 to £80,000 0 0 0 2

£90,001 to £100,000 0 0 0 0

£100,001 to £110,000 2 1 0 0

£110,001 to £120,000 1 2 0 0

£130,001 to £160,000 1 1 0 0

4 4 6 7

7 Senior post holders' emoluments

2014 2013

No. No.

The number of senior post holders including the Group Chief Executive was: 4 4

Senior post holders' emoluments are made up as follows:

2014 2013

£'000 £'000

Salaries 459 449

Benefits in kind 0 3

Performance related payments 45 0

Pension contributions 45 39

Total emoluments 549 491

2014 2013

£'000 £'000

Salary 152 153

Performance related payment 15 0

167 153

Pension contributions 0 13

The exceptional restructuring costs relate to the strategic review of support services staff resource, with the view to bring the College closer to sector averages.

Senior post holders are defined as the Group Chief Executive, and holders of the other senior posts whom the Governing Body has selected for the purposes of

the articles of government of the College relating to the appointment and promotion of staff who are appointed by the Governing Body.

The average number of persons (including senior post holders) employed by the College during the year, described as full time equivalents, was:

Other pension costs (including FRS17 adjustments of

£861,000, prior year £787,000)

The number of senior post holders and other staff who received annual emoluments, excluding pension contributions but including benefits in kind, in the following

ranges was:

Senior post holders Other staff

The above emoluments include amounts payable to the Group Chief Executive (who was also the highest paid senior post holder) of:

48

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

7 Senior post holders' emoluments (continued)

2014 2013

£'000 £'000

Salary 111 100

Benefits in kind 0 0

111 100

Pension contributions 0 0

8 Other operating expenses

2014 2013

£'000 £'000

Teaching costs 3,941 4,215

Non-teaching costs 8,817 8,375

Premises costs 3,301 3,255

HE Bursaries paid 468 476

Total 16,527 16,321

Other operating expenses include:

Auditors' remuneration:

Financial statements audit * 59 59

Internal audit ** 22 40

Other services provided by the external auditors *** 59 0

Other services provided by the internal auditors 0 0

Losses on disposal of tangible fixed assets 0 0

Hire of plant and machinery - operating leases 2 2

Hire of other assets - operating leases 127 131

* - includes £33,200 in respect of the College (2012/13: £44,900)

** - includes £21,804 in respect of the College (2012/13: £40,000)

*** - includes £58,640 in respect of the College (2012/13: £nil)

9 Interest and other finance costs

2014 2013

£'000 £'000

On bank loans, overdrafts and other loans:

Repayable within five years not by instalments 0 0

Repayable within five years by instalments 0 0

Repayable wholly or partly in more than five years 792 802

792 802

Pension finance costs 0 (3)

On finance leases 6 0

Total 798 799

10 Taxation

11 (Deficit)/Surplus on continuing operations for the year

The (deficit)/surplus for the year is made up as follows:

2014 2013

£'000 £'000

College's (deficit)/surplus for the year (1,614) 399

437 8

46 62

(1,131) 469

Retained by subsidiary undertakings (38) 345

Total (1,169) 814

The pension contributions in respect of the senior post holders are in respect of employer's contributions to the Teachers Pension Scheme and the West

Yorkshire Superannuation Fund and are paid at the same rate as for other employees.

The members of the corporation other than the Group Chief Executive and the staff members did not receive any payment from the College other than the

reimbursement of travel and subsistence expenses (2014: £761) incurred in the course of their duties.

The above emoluments include amounts payable to the Principal of:

The estimated value of other benefits has been calculated in accordance with Financial Reporting Standard 17. The performance related payment was approved

by the College's Remuneration Committee.

Surpluses generated by subsidiary undertakings and transferred to the College under gift aid

The members do not believe the group was liable for any corporation tax arising out of its activities during the year.

Share of surplus generated by joint venture company and transferred to the College under gift aid

49

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

12 Tangible assets (Group)

Freehold Assets under Equipment Total

construction

£'000 £'000 £'000 £'000

Cost or valuation

At 1 August 2013 59,161 14,942 3,201 77,304

Additions 0 32,926 447 33,373

Transfer: Assets held for sale (6,379) 0 0 (6,379)

Disposals 0 0 (7) (7)

At 31 July 2014 52,782 47,868 3,641 104,291

Accumulated Depreciation

At 1 August 2013 24,383 0 2,059 26,442

Charge for year 1,771 0 298 2,069

Transfer: assets held for sale (2,951) 0 0 (2,951)

Eliminated in respect of disposals 0 0 (5) (5)

At 31 July 2014 23,203 0 2,352 25,555

Net book value at 31 July 2014 29,579 47,868 1,289 78,736

Net book value at 31 July 2013 34,778 14,942 1,142 50,862

Freehold Assets in Equipment Total

course of

construction

£'000 £'000 £'000 £'000

Cost or valuation

At 1 August 2013 57,498 14,942 2,951 75,391

Additions 0 32,926 411 33,337

Transfer: assets held for sale (6,379) 0 0 (6,379)

Disposals 0 0 (7) (7)

At 31 July 2014 51,119 47,868 3,355 102,342

Accumulated Depreciation

At 1 August 2013 23,584 0 1,882 25,466

Charge for year 1,650 0 275 1,925

Transfer: assets held for sale (2,951) 0 0 (2,951)

Eliminated in respect of disposals 0 0 (5) (5)

At 31 July 2014 22,283 0 2,152 24,435

Net book value at 31 July 2014 28,836 47,868 1,203 77,907

Net book value at 31 July 2013 33,914 14,942 1,069 49,925

£'000

Cost Nil

Aggregate depreciation based on cost Nil

Net book value based on cost Nil

Equipment with a total cost of £708,000 (2013: £nil) at 31st July 2014 are held on finance leases, the accumulated depreciation of these assets was £nil.

Land and buildings

Land and buildings

The transitional rules set out in FRS 15 Tangible Fixed Assets have been applied on implementing FRS 15. Accordingly, the book values at implementation have

been retained.

Land and buildings with a net book value of £10,045,163 (2013: £10,273,732) have been partly financed by exchequer funds, through for example the receipt of

capital grants. Should these assets be sold, the College may be liable, under the terms of its Financial Memorandum, to surrender the proceeds.

If fixed assets had not been valued they would have been included at the following historical cost amounts:

50

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

13 Investments

2014 2013

£'000 £'000

Investment in subsidiary companies 0 0

Investment in joint venture company 0 0

Investment in Virtual College 1 1

Trust Fund investments 142 149

Total 143 150

14 Debtors

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

Amounts falling due within one year:

Trade debtors 1,477 1,371 2,085 2,075

Amounts owed by group undertakings:

Subsidiary undertakings 0 68 0 21

Joint venture undertakings 55 55 129 129

Prepayments and accrued income 343 343 501 378

Total 1,875 1,837 2,715 2,603

15 Assets held for sale

16 Creditors: amounts falling due within one year

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

Bank loans and overdrafts 913 913 812 812

Obligations under finance leases 176 176 0 0

Payments received in advance 186 151 193 193

Trade creditors 3,372 3,136 3,436 3,234

Amounts owed to group undertakings:

Subsidiary undertakings 0 391 0 1,607

Corporation tax 0 0 122 122

Other taxation and social security 2,263 2,229 838 805

Accruals 3,071 2,509 2,255 2,131

Amounts owed to funding bodies 306 306 369 369

Total 10,287 9,811 8,025 9,273

The College is the sole owner of Training for Bradford Limited, a company registered in England & Wales and limited by guarantee, whose principal business is to

administer and supervise the training of persons within Bradford and Calderdale. During the year to 31 July 2010 the college acquired 100% of the share capital of

Beacon Recruitment and Placement Services Limited, a company also registered in England & Wales, whose principal business is the recruitment and placement

of temporary and permanent staff.

On 28 February 2013 the College acquired 50% of the issued ordinary shares of Bradford District Apprentice Training Agency (BDATA), a joint venture with the

City of Bradford Metropolitan District Council. The company's principal business is the placement of apprentices in local businesses.

On 1 August 2002 the College acquired 50% of the issued ordinary shares of Inprint & Design Limited, a joint venture with the University of Bradford. The

company's principal business is the production of printed materials.

Assets held for sale at 31 July 2014 comprises of six buildings (Grove Building, Farnham Road, Junction Mills, Merton Road, Green Lane, and McMillan Building

which had become surplus to College requirements and are expected to be sold during 2014/15, and are held at the lower of cost and net realisable value, in line

with IAS 2, of £2,661,000

The Virtual College, whose principal business is the production of computer based training programmes, which is also incorporated in England & Wales, was set

up in 1997 by the College in partnership with several other organisations. Although the College holds in excess of 29% of the company's share capital, it is not

actively involved in nor is influential in the direction of that company. For this reason the Virtual College has not been treated as an associate company in these

consolidated financial statements.

In 2011/12 the College acquired the power to exercise a dominant influence over the Bradford College Educational Trust (BCET), a body sponsoring two

academies and a studio school in the Bradford area. The basis of that influence is that a majority of the board members of BCET are College corporation

members or senior post holders. However, in line with the accounts direction 2013/14, the results of BCET have not been consolidated into these financial

statements on the basis that effective control does not rest with the College, in particular with reference to the condition in BCET's constitution that on a winding up

its assets would not be distributed to the College and has no rights to a share of the income or assets of BCET whilst it is a going concern.

The Corporation believe that the carrying value of the investments is supported by their underlying net assets.

51

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

17 Creditors: amounts falling due after more than one year

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

Bank loans 40,081 40,081 21,605 21,605

Obligations under finance leases 598 598 0 0

Total 40,679 40,679 21,605 21,605

18 Borrowings

(a) Bank loans and overdrafts

The bank loans are repayable as follows:

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

In one year or less 913 913 812 812

Between one and two years 959 959 906 906

Between two and five years 4,751 4,751 4,039 4,039

In five years or more 34,371 34,371 16,660 16,660

Total 40,994 40,994 22,417 22,417

(b) Finance leases

The net finance lease obligations to which the institution is committed are:

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

In one year or less 176 176 0 0

Between one and five years 598 598 0 0

In five years or more 0 0 0 0

Total 774 774 0 0

Finance lease obligations are secured on the assets to which they relate.

19 Provisions for liabilities

Restructuring Enhanced Other Total

pension

£'000 £'000 £'000 £'000

At 1 August 2013 0 289 0 289

Expenditure in the year 341 (19) 0 322

Transferred from income and expenditure account 0 12 0 12

Actuarial gain 0 (1) 0 (1)

At 31 July 2014 341 282 0 622

The enhanced pensions above are administered through the West Yorkshire Superannuation Fund. Principal assumptions are listed under note 31.

The first bank loan, at 9.46%, is repayable by instalments falling due between 6 March 1997 and 6 December 2016. The initial loan totalled £955,000 and is

unsecured. Outstanding balance of the loan is £221,821.

The second loan in its initial term had a revolving facility of up to £11,500,000. As at 31 July 2010 the full amount had been drawn down. The loan is repayable by

instalments falling due between 6 December 2010 and 6 September 2032 at a rate of 5.52%, amended to 7.02% in June 2012. Until 7 September 2010, the facility

bore interest on amounts drawn down at bank base rate plus 0.35%. The loan is unsecured. Outstanding balance of the loan is £10,327,142.

In 2011/12 the College negotiated loans totalling £35,000,000 with a view to funding the construction of the new building. The first of these loans was for

£10,000,000, at 4.06% and was to be drawn down before 31 December 2012. It is repayable by instalments between 28 March 2013 and 31 December 2028. The

second was for £25,000,000, and was to be drawn down in the period 28 June 2013 to 29 March 2017, at 3.93% until that date, and is repayable by instalments

between then and 30 June 2039. The loan was fully drawn down on 1 August 2014. Both loans are unsecured. The outstanding balances of these loans are

£9,342,504 and £21,102,533 respectively.

Group and College

The restructuring provision comprises of £341,000 (2013: £nil) in respect of redundancy payments due to be made in the forthcoming months after 31 July 2014.

The enhanced pension provision comprises an amount of £280,915 (2013 - £289,471) in respect of enhanced pensions payable to former senior post holders. The

provision has been calculated in accordance with guidance provided by the funding bodies.

In 2013/14, the College negotiated a finance lease with the view to funding asset purchases for operation throughout the College estate. The first tranche of lease

finance was received in June 2014, and is repayable by instalments between June 2014 and June 2018.

52

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

20 Deferred capital grants

Funding Other Total

body grants

£'000 £'000 £'000

At 1 August 2013 2,898 1,928 4,826

Cash receivable 4,053 0 4,053

Released to income and expenditure account (388) 0 (388)

At 31 July 2014 6,563 1,928 8,491

21 Restricted reserve

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

At 1 August 149 149 149 149

Movement in the year (7) (7) 0 0

At 31 July 142 142 149 149

22 Revaluation reserve

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

At 1 August 10,264 10,264 10,523 10,523

Transfer from revaluation reserve to general reserve in respect of: 0 0 0 0

Impairment of assets held for sale (767) (767) 0 0

Depreciation on revalued assets (363) (363) (259) (259)

At 31 July 9,134 9,134 10,264 10,264

23 Movement on general reserves

Group College Group College

2014 2014 2013 2013

£'000 £'000 £'000 £'000

Income and expenditure account reserve

At 1 August (6,440) (9,346) (13,494) (16,062)

(Deficit)/Surplus retained for the year (1,169) (1,131) 814 476

Impairment of assets held for sale 767 767 0 0

Transfer from revaluation reserve 363 363 259 259

Gift aid payment from subsidiary 0 2,200 0 0

Actuarial gain in respect of pension scheme and enhanced pensions 7,549 7,549 5,981 5,981

At 31 July 1,070 402 (6,440) (9,346)

Balance represented by:

Pension reserve (17,924) (17,924) (24,963) (24,963)

Income and expenditure account reserve excluding pension reserve 18,994 18,326 18,523 15,617

At 31 July 1,070 402 (6,440) (9,346)

24

2014 2013

£'000 £'000

(Deficit)/Surplus after depreciation of assets at valuation (1,169) 814

Share of operating profits in joint venture company (46) (62)

Depreciation (notes 1 and 12) 2,074 2,237

Impairment provision against property revaluation gains 767 0

Deferred capital grants released to income (note 20) (388) (471)

Interest payable (note 9) 792 799

Interest receivable (note 5) (101) (74)

FRS17 pension cost less contributions payable (notes 6 and 31) 861 787

FRS17 pension finance income (note 5) (352) 0

Increase/(decrease) in debtors 840 (433)

Increase in creditors 1,972 948

Increase in provisions 333 0

Net cash inflow from operating activities 5,583 4,545

The restricted reserve represents the Bradford College Trust Fund, which provides prizes, scholarships, grants and loans to College students.

Group

Reconciliation of consolidated operating (deficit)/surplus to net cash inflow from operating activities

53

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

25 Returns on investments and servicing of finance

2014 2013

£'000 £'000

Other interest received 101 74

Gift aid received from joint venture company 62 115

Interest paid (791) (802)

Interest element of finance lease rental payment (6) 0

Net cash inflow from returns on investment and servicing of finance (634) (613)

26 Capital expenditure and financial investment

2014 2013

£'000 £'000

Purchase of tangible fixed assets (33,373) (14,306)

Payments to acquire endowment assets 0 0

Sales of tangible fixed assets (see note 30) 0 0

Receipt from sale of endowment assets 0 0

Deferred capital grants received 4,053 0

Endowments received 0 0

Net cash outflow from capital expenditure and financial investment (29,320) (14,306)

27 Management of liquid resources

2014 2013

£'000 £'000

Withdrawals from deposits 0 0

Purchase of investments 0 0

Placing of deposits 0 0

Movement in endowment assets 0 0

Net cash inflow from management of liquid resources 0 0

28 Financing

2014 2013

£'000 £'000

New unsecured loans repayable by 2026 19,439 11,607

New finance leases 774 0

Repayment of amounts borrowed (862) (581)

Net cash inflow/(outflow) from financing 19,351 11,026

29 Analysis of changes in net funds

At 1 August Cash Other At 31 July

2013 flows changes 2014

£'000 £'000 £'000 £'000

Cash in hand, and at bank 1,941 (5,020) 8,001 4,922

Debt due within one year (812) (101) 0 (913)

Debt due after one year (21,605) (18,476) 0 (40,081)

Finance leases 0 (774) 0 (774)

Current asset investments 8,001 0 (8,001) 0

Total (12,475) (24,371) 0 (36,846)

30 Cash flow relating to exceptional items

2014 2013

£'000 £'000

Provision as at 1 August 0 0

Income and expenditure account charge 1,220 0

Operating cash outflow (879) 0

Provision as at 31 July 341 0

The operating cash outflows do not include an outflow of £1,220,000 for exceptional restructuring costs as the amount provided was not paid until the following

financial year (see note 6)

54

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

31 Pension and similar obligations

Total pension cost for the year

2014 2013

£'000 £'000

Teachers' Pension Scheme: contributions paid 2,124 2,159

West Yorkshire Superannuation Fund:

Contributions paid 1,584 1,409

FRS17 charge 861 787

less: included within restructuring costs 0 0

Charged to the income and expenditure account (staff costs) 2,445 2,196

Enhanced pension charge to income and expenditure account (staff costs) 11 11

23 57

Total pension cost for the year 4,603 4,423

Teachers' Pension Scheme

Latest actuarial valuation (under the new provisions) 31 March 2012

Actuarial method Projected Units Methodology

Investment returns per annum 5.06% per annum

Salary scale increases per annum 4.75% per annum

Notional value of assets at date of last valuation £176,600 million

Proportion of members accrued benefits covered by the notional value of the assets 92.22%

The West Yorkshire Superannuation Fund

The College's employees belong to two principal pension schemes: the Teachers' Pension Scheme England and Wales (TPS) for academic and related staff; and

the West Yorkshire Superannuation Fund (WYSF) for non-teaching staff, which is managed by the City of Bradford Metropolitan District Council. Both are defined

benefit schemes.

As at 31 July 2014 contributions amounting to £177,732.63 (2013: £167,522) were payable to the WYSF and are included in creditors.

Under the definitions set out in Financial Reporting Standard 17 (FRS17) Retirement Benefits, the TPS is a multi-employer pension scheme. The College is

unable to identify its share of the underlying assets and liabilities of the scheme.

Pension contributions paid into subsidiary's scheme

Training for Bradford Limited incurred pension costs of £56,968 (2013: £56,602) mainly through a defined contribution pension scheme. The company also has a

small number of employees who are members of the WYSF and are included below.

Accordingly, the College has taken advantage of the exemption in FRS17 and has accounted for its contributions to the scheme as if it were a defined contribution

scheme. The College has set out above the information available on the scheme and the implications for the College in terms of the anticipated contribution rates.

The WYSF is a funded defined benefit scheme, with the assets held in separate trustee administered funds. The total contribution made for the year ended 31 July

2014 was £2,246,060 of which employer's contributions totalled £1,584,019 and employees' contributions totalled £671,041.

The agreed contribution rates for future years for the College are 13.4% plus £103,119 per annum for the employer and varying between 5.5% and 12.5% for

employees depending on salary.

The pension costs are assessed in accordance with the advice of independent qualified actuaries. The latest actuarial valuations of the TPS was 31 March 2012

and the WYPF 31 March 2013

The Teachers' pension scheme is an unfunded defined benefit scheme. Contributions on a pay as you go basis are credited to the exchequer under arrangements

governed by the Superannuation Act 1972. A notional asset value is ascribed to the Scheme for the purposes of determining contribution rates.

Following the implementation of Teachers' Pensions (Employers' Supplementary Contributions) Regulations 2000 the government actuary carried out a further

review on the level of employer contributions. For the year from 1 August 2013 to 31 July 2014 the employer contribution rate was 14.1%. The employee rate was

between 7.0% and 12.4% for the period with rates depending on the member's salary from 1st April 2013.

55

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

31 Pension and similar obligations (continued)

Principal Actuarial Assumptions

At 31 July At 31 July At 31 July

2014 2013 2012

Rate of increase in salaries 3.7% 4.6% 4.6%

Rate of increase for pensions in payment/inflation 2.2% 2.7% 2.1%

Discount rate for scheme liabilities 4.1% 4.5% 4.1%

Inflation assumptions (CPI) 2.2% 2.7% 2.1%

Commutation of pensions to lump sums pre 1 April 2010 50.0% 50.0% 50.0%

Commutation of pensions to lump sums post 31 Mar 2010 75.0% 75.0% 75.0%

At 31 July At 31 July At 31 July

2014 2013 2012

Retiring today

Males 23 22 22

Females 25 24 24

Retiring in 20 years

Males 25 24 24

Females 28 26 26

Long-term Long-term Long-term

rate of return Value at 31 rate of return Value at 31 rate of return Value at 31

expected at July 2014 expected at July 2013 expected at July 2012

31-Jul-14 £'000 31-Jul-13 £'000 31-Jul-12 £'000

Equities 7.5% 52,065 7.8% 48,558 7.5% 39,328

Government bonds 3.2% 7,141 3.3% 7,583 2.5% 7,483

Other bonds 3.7% 3,605 4.0% 3,792 3.2% 3,207

Property 6.8% 2,288 7.3% 1,996 7.0% 2,025

Cash 1.1% 2,704 0.9% 2,528 1.4% 1,575

Other 7.5% 1,525 7.8% 2,061 7.5% 2,645

Total market value of assets 6.6% 69,327 6.8% 66,518 6.4% 56,263

Present value of scheme liabilities (funded) (87,120) (91,350) (86,300)

Present value of scheme liabilities (unfunded) (131) (131) (128)

Deficit in the scheme (17,924) (24,963) (30,165)

Analysis of the amount charged to income and expenditure account

2014 2013

£'000 £'000

Employer service cost (net of employee contributions) 2,330 2,140

Past service cost 115 56

Total operating charge 2,445 2,196

Analysis of pension finance costs 2014 2013

£'000 £'000

Expected return on pension scheme assets 4,485 3,567

Interest on pension liabilities (4,133) (3,564)

Pension finance costs 352 3

Amount recognised in the statement of total recognised gains and losses (STRGL)

2014 2013

£'000 £'000

Actuarial (losses)/gains on pension scheme assets (1,586) 6,483

Actuarial (losses)/gains on scheme liabilities 9,134 (497)

Actuarial (loss)/gain recognised in STRGL 7,548 5,986

Movement in deficit during year 2014 2013

£'000 £'000

Deficit in scheme at 1 August (24,963) (30,165)

Movement in year:

Employer service cost (net of employee contributions) (2,330) (2,140)

Employer contributions 1,584 1,409

Past service cost (115) (56)

Net interest/return on assets 352 3

Actuarial (loss)/gain 7,548 5,986

Deficit in scheme At 31 July (17,924) (24,963)

The following information is based upon a full actuarial valuation of the fund at 31 March 2013 updated to 31 July 2014 by a qualified independent actuary.

The estimated group's share of the assets and liabilities in the scheme and the expected rates of return were:

The current mortality assumptions include sufficient allowance for future improvements in mortality rates. The assumed life expectations on retirement age 65 are:

56

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

31 Pension and similar obligations (continued)

Asset and liability reconciliation

2014 2013

Reconciliation of liabilities £'000 £'000

Liabilities at start of year 91,481 86,428

Service cost 2,330 2,140

Interest cost 4,133 3,564

Employee contributions 671 682

Actuarial loss/(gain) (9,134) 497

Benefits paid (2,345) (1,886)

Past service cost 115 56

Liabilities at the end of the year 87,251 91,481

2014 2013

Reconciliation of assets £'000 £'000

Assets at start of year 66,518 56,263

Expected return on assets 4,485 3,567

Actuarial (loss)/gain (1,586) 6,483

Employer contributions 1,584 1,409

Employee contributions 671 682

Benefits paid (2,345) (1,886)

Assets at end of year 69,327 66,518

The estimated value of employer contributions for the year ended 31 July 2015 is £0.010M.

History of experience gains and losses

2014 2013 2012 2011 2010

£'000 £'000 £'000 £'000 £'000

Difference between the expected and actual return on assets (1,586) 6,483 (3,089) 1,629 3,496

Experience gains and losses on scheme liabilities 9,134 (497) (8,140) 3,988 (3,710)

Total amount recognised in STRGL 7,548 5,986 (11,229) 5,617 (214)

32 Post-balance sheet events

There have been no significant post balance sheet events.

33 Capital commitments

2014 2013

£'000 £'000

Commitments contracted for at 31 July 14,320 35,190

Authorised but not contracted at 31 July 0 35,190

34 Financial commitments

At 31 July, the College had annual commitments under non-cancellable operating leases as follows;

2014 2013

£'000 £'000

Land and buildings

Expiring within one year 0 76

Expiring within one to two years 43 0

Expiring within two and five years inclusive 116 86

Expiring in over five years 75 75

234 237

35 Contingent liability

There are no contingent liabilities to disclose.

57

BRADFORD COLLEGE GROUP Financial Statements for the year ended 31 July 2014

Notes to the Financial Statements (continued)

36 Related party transactions

City of Bradford Metropolitan District Council

University Of Leeds

Bradford College Educational Trust (BCET)

Bradford and District Apprenticeship Training Agency Limited

Inprint & Design Limited

Beacon Recruitment & Placement Services Limited

Training for Bradford Limited

37 Amounts disbursed as agent

Learner Trainee

Support Teacher NCTL

Funds Salaries B-NETT GSCC

2014 2014 2014 2014

£'000 £'000 £'000 £'000

Balances brought forward 423 88 102 107

Grants received 1,792 1,066 (45) 0

Interest earned 0 0 0 0

2,215 1,154 57 107

Disbursed to students (2,098) (1,028) 0 (107)

117 126 57 0

The Bradford College Educational Trust, a multi-academy trust, was formed on the 16 March 2012, as a company limited by guarantee, to operate Appleton

Academy and Samuel Lister Academy. The Bradford Studio School (formerly The International Food & Travel Studio School) was opened in September 2012. The

College Group Chief Executive Officer, Michele Sutton, was the CEO of Bradford College Educational Trust. The senior post-holders of the College: Kath Oldale,

Principal; Andy Welsh, Chief Operating Officer and David Hambleton, Group Financial Director are Directors of BCET. The following senior managers of the

College are Directors of BCET: Dr Clive Opie, Dean of Teaching, Health and Care and Michael Walsh, Vice-Principal: Curriculum and Quality. In addition, the

following members of Corporation are Directors of BCET: Richard Wightman, Chair of Corporation; Alan Jerome, Vice-Chair of Corporation and Eve Gregory.

Purchase transactions with the Trust, including the individual academies and schools during the year amounted to £23,100 (2012/13: £5,459) with a balance of

£3,619 outstanding at the year-end (2012/13: £nil). Sales transactions with Bradford College Education Trust including the individual academies and schools

amounted to £122,996 (2012/13: £311,920) with a balance of £65,367 (2012/13: 30,635) outstanding at the year end.

For the first two years of operation of Bradford Studio School, part of the Bradford College education Trust, Bradford College as the sponsor agreed to underwrite

any deficit that arose as per the EFA funding contract by way of donation. As at 31 July 2014, the total amount payable to in this respect was £86,208 relating to a

deficit in 2012/13 of £50,435 and a deficit in 2013/14 of £35,773.

Owing to the nature of the College’s operations and the composition of the board of governors being drawn from local public and private sector organisations, it is

inevitable that transactions will take place with organisations in which a member of the board of governors may have an interest. All transactions involving such

organisations are conducted at arm’s length and in accordance with the College’s financial regulations and normal procurement procedures.

Mr David Cawthray, Assistant Director and Councillors David Robinson and Dale Smith, are members of the Corporation. Purchase transactions with City of

Bradford Metropolitan District Council in the year (excluding business rates payments) amounted to £225,378 (2012/13: £255,482) with balances outstanding at

the year end of £7,858 (2012/13: £7,707). Sales transactions with City of Bradford Metropolitan District Council in the year amounted to £1,196,742 (2012/13:

£263,346) with a balance outstanding at the year end of £nil (2012/13: £nil).

Dr Kath Hodgson, is a member of the Corporation and is employed by The University of Leeds. Purchase transactions with the University of Leeds in the year

amounted to £11,930 (2012/13: £90,913) with nil balances outstanding at the year-end (2012/13: £nil). Sales transactions with The University of Leeds in the year

amounted to £38,235 (2012/13: £61,309) with a balance of £nil outstanding at the year end (2012/13: £nil).

Bradford and District Apprenticeship Training Agency Limited is a company limited by guarantee as a joint venture with Bradford Council. The College Group Chief

Executive Officer, Michele Sutton, and Richard Wightman, Chair of Corporation became Directors of the Company on 28 February 2013. There were no purchase

transactions with the Company in the year (2012/13: £nil) with £nil balances outstanding at the yearend (2012/13: £nil). Sales transactions with the company

amounted to £7,269 during the year (2012/13: £2,172). Amounts outstanding at the year end were £9,441.33 (2012/13: £2,172) .

Inprint & Design Limited is a private limited company in which the college holds 50% of the issued share capital, the remaining 50% being held by the University of

Bradford. Raminder Singh, a member of Corporation, and David Hambleton were Directors of Inprint & Design during the financial year. Purchase transactions

with Inprint & Design Ltd in the year amounted to £410,715 (2012/13: £567,240) with £79,991 outstanding at the yearend (2012/13: £55,288). Sales transactions

with Inprint & Design Limited in the year amounted to £379,523 (2012/13: £360,830) with a balance of £64,648 outstanding at the year end (2012/13: £127,740).

Beacon Recruitment & Placement Services Limited is a private limited company in the college holds 100% of the issued share capital. The College Group Chief

Executive Officer, Michele Sutton, was a Director of the company during the financial year. Purchase transactions during the year were £532,496(2012/13:

£420,153) with amounts outstanding at the year end were £ 43,265 (2012/13: £21,078). The Intercompany account balance was £67,855 (2012/13: £20,954).

Training for Bradford Limited is a wholly owned subsidiary of Bradford College. The College Group Chief Executive Officer, Michele Sutton, and the Group

Finance Director, David Hambleton, were board members during the financial year. Purchase transactions during the year were £4,345,274 (2012/13 £3,911,027).

Sales transactions were £1,052,489 (2012/13 £800,027). The balance on the intercompany account, including share of input VAT reclaimable, was

£390,421(2012/13 £1,606,955).

Balance unspent as at 31 July, included in creditors

Funding body grants are available solely for students. In the majority of instances, the College only acts as a paying agent. In these circumstances, the grants and

related disbursements are therefore excluded from the income and expenditure account. The income and expenditure consolidated in the College's financial

statements relates to the purchase of some equipment from the access fund and the payment of accommodation by the College on the student's behalf.

58