report & financial statements - stratford-upon-avon … · the members present their report and...

Report & Financial StatementsFor the Year Ending 31 July 2015

STRATFORD-UPON-AVON COLLEGE CONTENTS

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Operating and Financial Review 2 – 13 Professional Advisers 14 Statement of Corporate Governance and Internal Control 15 – 20 Governing Body’s statement on the College’s regularity, propriety and 21 compliance with Funding Body terms and conditions of funding Statement of Responsibilities of the Members of the Corporation 22 Independent Auditor’s Report to the Corporation of Stratford-upon-Avon College 23 - 24 Independent Reporting Accountant’s Report on Regularity 25 - 26 Income and Expenditure Account 27 Statement of Total Recognised Gains and Losses 28 Note of Historical Cost Surpluses and Deficits 28 Balance Sheet as at 31 July 29 - 30 Cash Flow Statement 31 Notes to the Accounts 32 - 52

STRATFORD-UPON-AVON COLLEGE OPERATING AND FINANCIAL REVIEW

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NATURE, OBJECTIVES AND STRATEGIES The members present their report and the audited financial statements for the year ended 31 July 2015. Legal status The Corporation was established under The Further and Higher Education Act 1992 for the purpose of conducting Stratford-upon-Avon College. The College is an exempt charity for the purposes of the Charities Act 1993 as amended by the Charities Act 2011. The Corporation was incorporated as Stratford-upon-Avon College. Mission The College’s mission as approved by its members is: “to work collaboratively to inspire learners to develop their full potential and generate economic success.” Public Benefit Stratford-Upon-Avon College is an exempt charity under Part 3 of the Charities Act 2011 and from 1 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 Governing Body, who are trustees of the charity, are disclosed on page 16. In setting and reviewing the College’s strategic objectives, the Governing Body has had due regard for the Charity Commission’s guidance on public benefit and particularly upon its supplementary guidance on the advancement of education. The guidance sets out the requirement that all organisations wishing to be recognised as charities must demonstrate, explicitly, that their aims are for the public benefit. In delivering its mission, the College provides the following identifiable public benefits through the advancement of education:

High-quality teaching Widening participation Excellent employment record for students Strong student support systems Links with employers, industry and commerce.

Implementation of strategic plan The Strategic Plan was updated and renamed Strategic Ambitions in June 2015 following the achievement of an overall Grade 2 in the Ofsted Inspection in March 2015 and the considerable progress made in terms of financial recovery. As these are both highly important milestones on the College’s journey, this update is significant. The Strategic and Operational Plan was developed in 2014 to specifically meet the medium term needs of the College as it addressed shortcomings in its acute financial position, some poor curriculum provision and the quality of its estate. For this reason, the plan covered the 2014-16 period in order to align perfectly with the recovery plan that projected that the College would have recovered its financial position by the end of 2016. At this time, the College will produce a new strategic plan to cover the period from 2016-2021.

STRATFORD-UPON-AVON COLLEGE OPERATING AND FINANCIAL REVIEW for the year ended 31 July 2015 (continued)

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The Strategic Ambitions consists of the following: Strategy

The overall vision and mission of the College Six strategic ambitions, which together outline the College’s broad aspiration of what it

would like to achieve by 2016 A number of objectives that support the achievement of each ambition

Operational Plan

An annually agreed set of actions to contribute to the achievement of each Strategic Ambition and objective, with the setting out of specific timescales, milestones and responsibilities

A defined set of Performance Indicators which articulate the success criteria underpinning the achievement of the Plan

The Strategic and Operational Plan is monitored regularly and updated annually to reflect progress in the achievement of the strategic ambitions and objectives and to update the position of the College in respect to the impact created by changes to Government Policies. The update will allow for new ambitions and objectives to be added reflecting any substantive changes to the Colleges’ operations. The plan links closely to the:

Self-Assessment Report The Quality Improvement Plan The Post-Inspection Action Plans following Inspection 2015 The Stratford Standard College Strategies and Policies Annual Appraisal and the College Continual Professional Development Plan

From this document, College Managers develop their own action plans to deliver team objectives and targets in curriculum and business support areas. Delivery and progress is monitored by the Executive Team and reported to Governors through the appropriate committees. Overall performance is summarised and reported to the full Governing Body three times a year. Now that the College Recovery Plan has been effectively executed and notice received from the FE Commissioner that the College is no longer under Financial Intervention and in view of the excellent most recent Ofsted Report the plan, whilst still closely aligned to the self-assessment report, is driven by the principles and forward looking ambitions underlying the original strategic plan rather than addressing the relatively short term imperatives of the Recovery Plan. The College’s strategic ambitions for 2014 to 2016 are as follows: To be recognised as a College providing high quality provision and services To develop a flexible and responsive curriculum To develop a culture of creative and progressive thinking Secure long term financial stability To respond to emerging needs. To provide all students with a safe and supportive environment in which to study. In addition to the Operational Objectives established in the Strategic Plan, a range of business, quality and operational / efficiency targets for the College during 2015-16 are set out below, establishing a comprehensive set of Key Performance Indicators (KPIs) against which College performance can be measured, broken down into Quality and Business targets.


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Key Quality Targets - recruitment and funding; learner performance retention and

success 16-18; adult skills retention and success; apprenticeship success; HE retention and success.

Key Business Targets – curriculum; staffing; teaching & learning; finance; student

satisfaction. FE Commissioner The College, having successfully implemented all of the recommendations arising from the FE Commissioner’s visit in May 2014, has now been taken out of financial intervention. This followed naturally from a very positive visit when the commissioner commented that the new management team had set about addressing the significant problems that the College faced in a methodical and professional way. The five implemented recommendations were: The Board needed to be significantly refreshed Training required for Board members Clerking arrangements needed to be improved The Principal needed additional capacity The College needed to demonstrate progress towards quality improvement and

financial recovery. This was measured at a follow-up visit in October to assess the outturns for 2013/14 and the initial enrolment figures for 2014/15 and the impact of these numbers on funding for 2014/15.

All of the above are subject to continuous improvement. Financial objectives The College’s financial objectives were: to achieve an annual operating surplus pre-exceptional items (exceptional to cover FRS

17 adjustments) to develop and implement a new, robust financial recovery plan, including agreed

milestones for repayment of SFA Advance of Funds by the end of 2015/16, thus ensuring that the Financial Notice of Concern (Health) is lifted in 2015/16 and the College's SFA Financial Health Grade for 2015/16 improves to Satisfactory

to improve relationships and confidence with key external financial stakeholders, including the SFA and Lloyds Bank, to help to secure the College's longer term financial viability

to agree new banking facilities with Lloyds, including covenants to reduce its cost base, resulting in staff costs as a proportion of income decreasing to

sector norms as a minimum to develop opportunities to diversify income away from Government funding Performance indicators FE Choices has four performance indicators: Success rates Learner destinations Student satisfaction survey Employer satisfaction survey


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The College participated in the Employer Survey during 2014/15. The financial indicators of financial health and financial management and control will continue to be graded and reported directly to the College by the Skills Funding Agency. FINANCIAL POSITION Financial results The College generated an operating surplus in the year of £367,000, before deducting £110,000 of restructuring costs and FRS 17 costs of £123,000 (2013/14: operating surplus of £344,000 before deducting £625,000 of restructuring costs and FRS 17 costs of £277,000). The College has accumulated general reserves of £953,000 excluding the FRS 17 Pension Reserve and cash balances of £212,000. Tangible fixed asset additions during the year were £3,159,000 (2013/14: £734,000). The College has significant reliance on the EFA/SFA for its principal funding source, largely from recurrent grants. In 2014/15 those organisations provided 65% (2013/14 - 68%) of the College’s total income. The College started the year with six subsidiary companies all of which were dormant during 2014/15. Four of the six, which had been dormant for several years, were struck off the Companies House Register within the year. The two subsidiary companies remaining are Stratford Catering & Retails Services Ltd, which is due to be struck from the Companies House Register in 2015/16 and the South Warwickshire Education Partnership (SWEP) Limited. Treasury policies and objectives Treasury management is the management of the College’s cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. The College has a separate treasury management policy in place. The College has in the last six years only used the money market to place short term deposits and only with institutions approved by the Corporation. Cash flows Operating cash flow was a £1.5m outflow in 2014/15 (2013/14 £3.0m inflow). The main reason for this was the capital investment comprising the investment in the SFA Enhanced Renewal Grant 3 funded buildings refurbishment along with a Further Education Condition Fund (FECF) capital grant funded flat roofs work. Operational expenditure includes £0.1m of restructuring costs relating to staff redundancies. Liquidity 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.


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CURRENT AND FUTURE DEVELOPMENTS AND PERFORMANCE Student numbers In 2014/15 the College delivered EFA activity to 1,294 learners that produced funding of £5,625,470 (2013/14: £6,061,031) which equates to 101% (2013/14: 90.0%) of the EFA mainstream recurrent grant contract for 16-18 Classroom Based Learning. With regard to SFA contracts, the College achieved 91% (2013/14: 100%) of the Adult Skills allocation. The College derived funding of £385,000 (2013/14: £585,000) from 16-18 Apprentices compared with the initial contract value of £406,145 (2013 /14: £1,001,000). Student achievements The overall student success rate across all Classroom Based programmes has decreased from 86.8% in 2013/14 to 82% in 2014/15:-

16-18 success rate of 75% (2013/14 – 80.9%) 19+ success rate of 90% (2013/14 – 92%) Apprenticeship success rate of 73% (2013/14 – 78%)

Curriculum developments The College provides a curriculum which promotes the seven employability skills defined by the Confederation of British Industry (CBI), develops the skills of independent learning to enable progression to further and higher education and ensures that the “graduates” of the College have the skills, qualifications and aptitudes to make a significant contribution to the economic and business needs of Stratford-upon-Avon and the wider region through productive and rewarding employment. Relationships with local employers have been developed further this year, illustrated by the number of initiatives undertaken with the RSC, which include live briefs, collaborative projects and practical workshops led by RSC personnel. The College embarked on a significant restructure programme which concluded in May 2014. The purpose of which was to achieve greater financial stability and improve quality. To that end poorly performing programmes were eradicated from the curriculum offer from September 2015. This allowed for increased concentration on those curriculum areas that had stronger recruitment, success rates and better reflected local labour market intelligence. This year changes have been made to programmes of study in the creative arts area with the introduction of qualifications validated by the University of the Arts London. This awarding body has designed qualifications that allow for greater flexibility and diversity. Changes were also made to the delivery of the Catering curriculum through the introduction of City and Guilds qualifications. International delivery continues to be part of the College community. The International Foundation Programme (IFP) delivered in partnership with Warwick University attracted 200 learners last year. This relationship will conclude in 2016, however, the College has plans to develop its own IFP in association with other HEIs. A number of other initiatives are planned which include delivery ‘in country’, the development of Teacher Training programmes designed to support the Chinese market and the establishment of distance learning programmes specifically focussed on management training. There have been significant developments in the design and implementation of learners’ study programmes. English and maths have a critical part to play in the composition of these study programmes. Success in these key subjects determine learners’ ability to progress, either to higher level study or employment.


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Critically the College was inspected by Ofsted in March 2015, resulting in a Good outcome for Overall Effectiveness. The College’s Self Assessment Report was validated by the inspection team and gratifyingly all Sector Subject Areas that were scrutinised were judged to be Good. There has been increased scrutiny and monitoring of curriculum contribution and budgetary responsibility this year. Heads of Department have worked closely with the Finance Director to ensure the financial viability of all programmes of study. Improvements in terms of increased financial scrutiny have taken place at the curriculum planning stage and termly health checks take place for each curriculum department, which take a holistic view on the department including their financial position. Post Balance Sheet events Following the FE Commissioner’s most recent visit the College has been formally notified that formal intervention is at an end. The College received a letter from Nick Boles MP, Minister of State for skills, which contained the following: “…the college has fully addressed all the areas of concern that were identified in the initial visit from the FE Commissioner and in the subsequent stock take assessments. The formal FE Commissioner intervention process is therefore now at an end. The Skills Funding Agency will shortly write to you about its continuing monitoring and intervention process which will remain in place until you have fully complied with all the conditions in the Notice of Concern. I am encouraged by the actions taken by the college to implement the necessary improvements and welcome the FE Commissioner’s confidence that the board can sustain improvement. I wish you every success with the continued improvement of Stratford Upon Avon College.” Future Developments Funding The Government remains committed to deliver the Public Sector funding reductions to address its own debt position past the next General Election. If the reduction programme falls behind target, it is possible that Further Education expenditure may be cut further in order to protect Schools and Higher Education. The College’s income for 2015/16 has been confirmed at £5,699,000 (2014/15:£5,587,000) in respect of 16-18 Classroom Based Learning funding from the EFA. The improvement arises from the lagged funding model basing 2015/16 funding on the 2014/15 performance. Estates The ERG3 is now complete and provides significant improved accommodation improvements in terms of space utilisation, space functionality and general aesthetics. In addition to freehold property the College retains for the time being a modest short leasehold portfolio the use of which it will continue to optimise. However, the College is committed to the rationalisation of its estate thereby saving significant future cost. It will leave one rented property in June 2015 and another in January 2016. Following the earlier condition survey the College continues to address priorities within the confines of a necessarily limited premises budget. An accommodation strategy is being developed to satisfy the long term curriculum aims amongst others, and which may play a part in the forthcoming area review. Funding mix To date the College strategy has been to expand further its non SFA/EFA areas of income. 35% of its income in 2014/15 (2013/14: 32%) came from non-SFA/EFA funded areas. In particular it has sought to grow the International and HE figures in both monetary and student number terms.


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3million Apprenticeships – Government manifesto target

The College is looking to develop a much greater market share towards achieving this ambitious government target. The fact that apprenticeships will be afforded the same legal treatment as degrees and that public sector bodies will be set targets to help reach 3 million could prove very powerful enablers. Schools, hospitals, prisons and police forces will all be creating opportunities for young people to get on.

Post 16 Area Review

The government’s policy statement Reviewing Post-16 Education and Training Institutions sets out their approach to facilitating a restructuring of the further education sector, which is being done through a series of area based reviews of provision. Each review involves assessing the economic and educational needs of the area, and the implications for post-16 education and training provision, including school sixth forms, sixth form colleges, further education colleges and independent providers. The reviews will be led by steering groups consisting of chairs of governors, Local Enterprise Partnerships (LEPs) and local authorities, FE and Sixth Form College Commissioners and Regional Schools Commissioners. The College’s review will commence November 2016.

24+Loans

With more funding becoming available the College plans to develop more effective strategies, including communication strategies, to help students commit to further education and take advantage of this facility.

Resources

Property

The College has various site resources that it can utilise in pursuit of its strategic objectives. These include the main campus, leasehold premises at Masons Road and the Crown Buildings site, all in Stratford-upon-Avon, together with the delivery of Hospitality and Catering at the Rugby premises of Warwickshire College. The Crown buildings lease terminates in summer 2016. The College has the option of exercising a two year break clause at the Rugby site in 2017. Mason’s Road has a three year lease remaining and subject to the outcome of the broader accommodation strategy review remains part of the College’s long term planning. Additionally, the College have a partnership with Stratford-on-Avon District Council in the VIC (Visitor Information Centre) in the centre of Stratford, where the College is presently looking to extend the remaining arrangement beyond 2017. An ageing campus and limited funds continues to present challenges.

Financial The College has £3.6 million of net assets, including £6.0 million pension liability (2013/14:£2.1m including £5.2m pension liability). People The College employs 209 people (expressed as Full Time Equivalents), (2013/14: 245) of whom 104 were teaching staff (2013/14: 125). Investors in People has been maintained.


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IT infrastructure and Digital technology developments

Although the current infrastructure is sound and with little evidence of negative feedback from students, investment levels will probably have to increase if the College to continue to deliver to the reasonable student and commercial customer expectations. The College is shortly to embark on a full review to assess the level of investments required and sensible achievable timescales.

Reputation The College has a well-respected reputation locally, nationally and internationally. Maintaining a quality brand and association with the town is essential for the College’s continued success in attracting students and external relationships. A number of key College staff are involved in local, national and international committees. The College has strong relationships with businesses – as highlighted by a comprehensive range of professional courses and apprenticeships. Provision ranges from Child Care to Engineering, Bricklaying to Business Administration, and Management to Catering. These are run in collaboration with local employers, improving their performance and profitability whilst providing the future of the local business community with opportunities to gain essential skills. PRINCIPAL RISKS AND UNCERTAINTIES The College continues to develop and embed the system of internal control, including financial, operational and risk management which is designed to protect the College’s assets and reputation. The College regards the FE Commissioner’s decision to take the College out of Financial Intervention as a comment on the efficacy of the underlying infrastructure as much as on the welcome and positive financial results themselves. A risk register is maintained at the College which is reviewed at least termly by the Audit Committee and by the Corporation. The risk register reviewed by both the Executive and Senior Management Teams identifies the key risks, the likelihood of those risks occurring, their potential impact on the College and the actions necessary to reduce and mitigate the risks. Risks are prioritised using a consistent scoring system. The College is developing a risk management strategy aimed at involving all staff at all levels in the risk identification, assessment and management process. 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. 1. In-house International programmes The College places considerable reliance on international students. The College is aware of the risks associated with overseas students and the impact on recruitment of matters beyond the College’s control. These risks are mitigated in a number of ways:-

Monitoring arrangements Due diligence when selecting partners Credit control practices Legal agreements Good relationships with agents Good practice in relation to visas and immigration


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2. Government funding The College has considerable reliance on Government funding, through the EFA in particular for the 16-18 sector which accounts for approximately 46% (2013/14 - 48%) of the College’s income. The College is aware of two issues which may impact on future funding from the EFA and SFA:-

The impact of colleges across the country providing a very high percentage of programmes in excess of 540 hours.

Government spending cuts to the education budget. The Comprehensive Spending Review was published on 25th November. The reduction in funding does not appear to be as drastic as previously thought. The exact details and their impact has not yet been communicated to the College by the EFA and SFA. However, the key announcements from the Comprehensive Spending Review were:

o The base funding rate for 16 to 18-year-old full-time students will remain at the same level for the rest of this Parliament. However, there will be ‘targeted savings’ from ‘funding outside the national base rate per student’

o The Adult Skills Budget will be protected in cash terms o Loans will be available for Level 3 and 4 students aged 19 to 23

These risks are mitigated in a number of ways:-

Regular review of the curriculum plan to ensure guided learning hours targets are met but not significantly exceeded

Ensuring that the College is rigorous in delivering high quality teaching to increase success and retention rates

Use of labour market intelligence to deliver a flexible curriculum that meets demand and the local market need

Refreshed, dynamic marketing, with much better use of social media and the implementation of a new website

Considerable focus and investment in maintaining existing and developing new key relationships with the various funding bodies

Regular dialogue with the EFA/SFA 3. Financial support from funding bodies and Lloyds Bank The College’s underlying cash position, whilst considerably helped by the improved operating position, still requires good day to day management. A weekly cash flow forecast is produced to enable this. £200,000 of the BIS Loan was repaid during the year; £550,000 remains outstanding. Following recent advice regarding the Warwick University IFP contract and taking into account assumed cuts in EFA and SFA funding rates, the College has produced a revised forecast for 2015/16, which though remaining in surplus, and therefore evidence of continuing financial progress, represents a significant reduction in the earlier forecast. This will inevitably impact on liquidity to such an extent that repayment of the BIS Loan will prove problematic in the context of bank covenants. Confidence from Lloyds Bank in the progress made by the College management with its finances has continued to rise since February 2014. The agreed new facilities for the College during 2014/15, following the Bank's decision to put negotiations on hold until they were clearer that it was addressing its financial problems, representing a further vote of confidence.

The risk is mitigated in a number of ways:-

Issue of monthly accounts to the SFA, Lloyds Bank and the Corporation Monthly review meetings with Lloyds and quarterly meetings with the SFA and EFA


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Stronger governance and monitoring from new Board members who possess greater business experience

Comprehensive set of Key Performance Indicators (KPIs) against which College performance can be measured

Improvements in the quality of data and reporting using both existing and new systems 4 Adequate funding of pension liabilities The College has fully complied with the FRS 17 accounting standard. The College is aware, however, of the significant deficit calculated under the FRS 17 methodology. A significant increase in the level of employer contributions was announced in February 2014, taking effect from April 2014. The College has allowed for these cost increases in its Financial Recovery Plan to July 2016. However, there is a risk that at some stage in the future further increases in the level of employer contributions may be required. The College recognises this risk but considers that there are no actions that can be taken to mitigate any such risks. At present the employer contribution rate set by the administering body is calculated to repay the deficit within 20 years. The current Government policy is to reduce the increased deficit by a combination of reduced member benefits and increased employee contributions. From 1st September 2015, the TPS employer contributions will increase from 14.1% to 16.48%, followed in April 2016 by a rise in employer NI contributions from 10.4% to 13.8%, adding 5% to the cost of employing a teacher in 2015/16. The Association of Colleges (AoC) is lobbying Government on this issue. It is seeking either a phased increase in NI contributions, or an extension of the TPS deficit recovery period beyond 15 years, or measures that would make the post-2015 scheme less generous in terms or accrual rates or indexation. 5 Other identified risks include

Failure to increase Work Based Learning revenues due to increased competition, or due to inability to develop effective relationships with employers and CWLEP.

Failure to adapt the curriculum offer to attract adults for Level 3 and above courses

STAKEHOLDER RELATIONSHIPS In line with other colleges and universities, Stratford-upon-Avon College has many stakeholders. These include:-

- Students - Staff - Funding Agencies - Local employers - Local Authorities - Bank - Coventry & Warwickshire Local Enterprise Partnership (CWLEP) - Government departments - Local communities - Trade unions - Fellow colleges and training providers - Universities -

The College recognises the importance of these relationships and engages in regular communication with them through a variety of means. The College recognises the need to convert those relationships into business opportunities (and additional funding) and is developing a strategy to exploit the full potential of those relationships. COMMUNITY ENGAGEMENT The College provides the local community with the best possible leisure learning experience delivered where and when it is most appropriate to their needs. The College develops


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programmes and employs pedagogies that promote learning in the community as well as on campus. Such preparation for and interaction with the community is the core of the College’s leisure learning programme, but the College will also continue to develop opportunities which may better fit the needs of those in work. Leisure learning in the community is not just about learning and improving skills but also the impact that Stratford-upon-Avon College has within the local community through projects such as the Visitor Information Centre, a collaborative partnership with the Stratford-on-Avon District Council in the centre of town. Two apprentices work at the Visitor Information Centre. Students across the College engage in various activities over the course of the year to raise money for charity. These involve entrepreneurial activity, for example students on the BTEC Level 3 Business programme have recently raised over £1,000. The College is currently raising money to support the local guide dog charity which will enable to students to name a puppy before it begins its training as a guide dog. Students often volunteer to support community and sporting events. Students on the International Foundation Programme support primary school pupils in developing their badminton skills at the local Leisure Centre. These students also form an important part of the local Christian community and regularly help out at the local Methodist church. Every year the College takes part in the numerous events that make up Shakespeare’s annual Birthday celebrations. This includes being part of the parade through the town centre to Holy Trinity Church to lay flowers on Shakespeare’s grave. Uniformed Public Services students take part in the annual remembrance parade and lay a wreath on the war memorial in commemoration of fallen soldiers including two former students. The local Business forum frequently uses the College as a venue for the very popular business breakfasts at which the local MP, Nadhim Zahawi, is a regular guest. EQUAL OPPORTUNITIES AND EMPLOYMENT OF DISABLED PERSONS Stratford-upon-Avon College is committed to promoting equality of opportunity for all who learn and work at the College. The Equality Act 2010 (The Act) replaces existing anti-discrimination laws with a new single Act. In complying with the new public duty, the College will work towards eliminating all discrimination and harassment against students and employees regardless of the ‘protected characteristics’ of Age, Disability, Gender reassignment, Marriage and civil partnership, Pregnancy and maternity, Race, Religion or belief, Sex or Sexual orientation. The College has established Equality and Diversity Impact Measures (EDIMs) which are monitored with performance against target. At all times the College will promote positive attitudes to and from all students and employees and take steps to meet their needs. The College considers all applications for employment from people with disabilities, bearing in mind the aptitudes of the individuals concerned. The College’s policy is to provide training, career development and opportunities for promotion that are, as far as possible, identical to those for other employees. An equalities statement is published each year and monitored by staff and Governors. DISABILITY STATEMENT The Equality Act places a statutory General Duty on all businesses to promote disability equality. Disabilities could include physical impairment, sensory impairment, social, emotional or mental health conditions, learning difficulties or disabilities or long standing illness. The legislation calls for organisations to be proactive agents of change and will encourage a holistic approach by mainstreaming disability equality into all decisions and activities.

In addition to this, the following illustrates the College’s commitment to equality, diversity and inclusivity:

a) The College has made a significant investment in supporting students’ individual needs. Student support assistants provide a variety of support for learners. There is a


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continuing programme of staff development, to ensure the provision of high level appropriate support for students who have learning difficulties and/or disabilities

b) The admissions policy for all students is available on the College Intranet. Appeals against a decision not to offer a place are referred to the Head of Student Services

c) Specialist programmes are described in the prospectus and course information leaflets

d) Achievements and destinations are recorded and published in the College’s standard format

e) Support services are described in the College Charter

f) The College keeps a list of specialist equipment which can be made available to students

PAYMENT POLICY The Late Payment of Commercial Debts (Interest) Act 1998, which came into force on 1 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 or 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 per cent. The College incurred no interest charges in respect of late payment for this period. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS The members who held office on the date of approval of these financial statements have confirmed, as far as they are aware, that 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. Approved by order of the members of the Corporation on 15 December 2015 and signed on its behalf by:

Paul Lankester Chair

STRATFORD-UPON-AVON COLLEGE

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PROFESSIONAL ADVISERS External auditors: RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) St Philips Point Temple Row Birmingham B2 5AF Internal auditors: Mazars 45 Church Street Birmingham B3 2RT Bankers: Lloyds Bank Plc 22 Bridge Street Stratford-Upon-Avon Warwickshire CV37 6AG Solicitors: Shakespeare Martineau No 1 Colmore Square Birmingham B4 6AA & Eversheds LLP 115 Colmore Row Birmingham B3 3AL

STRATFORD-UPON-AVON COLLEGE STATEMENT OF COPORATE GOVERNANCE AND INTERNAL CONTROL

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The following statement is provided to enable readers of the annual report and accounts of the College to obtain a better understanding of its governance and legal structure. The College endeavours to conduct its business:

i. in accordance with the seven principles identified by the 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 the Corporation has adopted and complied with the Foundation Code. The College does not comply with the UK Corporate Governance Code. However, the College has reported on our Corporate Governance arrangements by drawing upon best practice available, including those aspects of the UK Corporate Governance Code considered to be relevant to the further education sector and best practice. In the opinion of the Governors, the College complies with all the provisions of the Foundation Code, and it has complied throughout the year ended 31 July 2015. The Governing Body recognises that, as a body entrusted with both public and private funds, it has a particular duty to observe the highest standards of corporate governance at all times. In carrying out its responsibilities, it takes full account of The English Colleges’ Foundation Code of Governance issued by the Association of Colleges in December 2011, which it formally adopted on 02 July 2012, and the Audit and Accountability Annex to the Foundation Code that was issued in March 2013 and adopted by the College on 09 July 2013. The College is an exempt charity within the meaning of Part 3 of the Charities Act 2011. The Governors, who are also the Trustees for the purposes of the Charities Act 2011, confirm that they have had due regard for the Charity Commission’s guidance on public benefit and that the required statements appear elsewhere in these financial statements.

STRATFORD-UPON-AVON COLLEGE STATEMENT OF CORPORATE GOVERNANCE AND INTERNAL CONTROL

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THE CORPORATION The Governors who served on the Corporation during the year 2014/15 and up to the date of signature of this report are listed below:

Name Date of Appointment

Term of office

Date of resignation

Status of appointment

Committees served

Corporation meeting attendance 14/15

Lisa Dean 31/07/14

31/07/18 29/01/15 Independent member

100% (4 of 4)

Ysabel Delux 01/09/14 31/07/16 01/07/15 Student member

- 75% (6 of 8)

Sophie Hunt 10/04/14 30/04/16 31/07/15 Student member

- 67% (6 of 9)

Ian Lumley 13/12/12 31/10/16 29/08/14 Staff Governor A 100% (1 of 1)

Asaf Razaq 13/12/12 31/10/16 25/06/15 Staff governor A 75% (6 of 8)

Ian Robinson

30/04/14


A 100% (4 of 4)

Alex Blewer 06/07/15 31/07/17 Staff member A 100% (1 of 1)

Ian Dunn 28/08/14 31/07/18 Independent member

A, R 100% (8 of 8)

Jamie Grant 01/09/15 31/07/16 Student member

- NA

Stephanie Gray 31/07/14 31/07/18 Independent member

A,R 89% (8 of 9)

Paul Huggins 02/02/15 31/07/18 Independent member

A 100% (5 of 5)

Judith Humphry 02/02/15 31/07/18 Independent member

GS 60% (3 of 5)

Paul Lankester Chair 2/2/15


100% (8 of 8)

Ian Lumley 28/08/14 31/07/18 Independent member

GS 100% (8 of 8)

Nicola Mannock 21/11/13 Ex Officio Principal & CEO

GS 100% (9 of 9)

Steven Parissien

03/10/14 31/07/17 30/11/14 Independent member

0 (0 of 2)

Judith Payne 01/09/14 31/07/16 Staff member GS 75% (6 of 8)

Rebecca Ryan 08/09/15 31/07/19 Independent member

A NA

Deb Reynolds 08/09/15 31/07/19 Independent member

- NA

Hannah Strick 06/07/15 31/07/16 Student member

- 100% (1 of 1)

Lord Digby Jones


N/A


17

Key: A - Audit Committee R - Remuneration Committee GS - Governance & Search Committee 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 capital expenditure, quality matters and personnel-related matters such as health and safety and environmental issues. The Corporation meets each term. During 2014/15 the Corporation conducted its business through a number of committees. Each committee had terms of reference which had been approved by the Corporation. These committees were remuneration, governance and search and audit. From the beginning of 2014/15 the Corporation changed the way it conducts its business. It has implemented the Carver model of governance. Corporation meetings are held on a monthly basis, and the number of committees has been reduced to three - search and governance, audit, and remuneration. This is intended to give all Governors a greater breadth of knowledge of all the areas of the College operations. Full minutes of all meetings, except those deemed to be confidential by the Corporation, are available from the Clerk to the Corporation at: Stratford-upon-Avon College The Willows North Alcester Road Stratford upon Avon CV37 9QR The Clerk to the Corporation maintains a register of financial and personal interests of the Governors. The register is available for inspection at the above address. All Governors are able to take independent professional advice in furtherance of their duties at the College’s expense and have access to the Clerk to the Corporation, who is responsible to the Corporation for ensuring that all applicable procedures and regulations are complied with. The appointment, evaluation and removal of the Clerk are matters for the Corporation as a whole. Formal agendas, papers and reports are supplied to Governors in a timely manner, prior to Corporation 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 Chairman and Accounting Officer are separate.


18

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, consisting of four members of the Corporation, 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 2015 the College’s Remuneration Committee comprised two members of the Corporation. The Committee’s responsibilities are to make recommendations to the Corporation on the remuneration and benefits of the Accounting Officer and other senior post-holders. Details of remuneration for the year ended 31 July 2015 are set out in note 6 to the financial statements. Audit Committee The Audit Committee previously comprised three members of the Corporation (excluding the Accounting Officer and Chair). From 2014/15 the Committee increased its membership to five members (excluding the Accounting Officer and Chair). The Committee operates in accordance with written terms of reference approved by the Corporation. The Audit Committee meets on an at least 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 main FE funding bodies 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 such recommendations have been implemented. The Audit Committee also advises the Corporation on the appointment of internal and external auditors and their remuneration for both audit and non-audit work, as well as reporting annually to the Corporation. During 2014/15 the Corporation had in place the following additional Committees the details of which can be found on the College’s website www.stratford.ac.uk Governance and Search 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 and not absolute assurance against material misstatement or loss.


19

The Corporation has delegated the day-to-day responsibility to the Principal, 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 she is personally responsible, in accordance with the responsibilities assigned to her in the Financial Memorandum between Stratford-upon-Avon College and the funding bodies. She 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 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 Stratford-upon-Avon College for the year ended 31 July 2015 and up to the date of approval of the annual report and accounts. 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 2015 and up to the date of approval of the annual report and accounts. This process is regularly reviewed by the Corporation. The risk and control framework The system of internal 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 Governing Body

regular reviews by the Governing Body 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

the adoption of formal project management disciplines, where appropriate.

Stratford-upon-Avon College has an internal audit service, which operates in accordance with the requirements of the EFA’s 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 minimum annually, the Head of Internal Audit (HIA) provides the Governing Body with a report on internal audit activity in the College. The report includes the HIA’s independent opinion on the adequacy and effectiveness of the College’s system of risk management, controls and governance processes.


20

Review of effectiveness As Accounting Officer, the Principal has responsibility for reviewing the effectiveness of the system of internal control. Her review of the effectiveness of the system of internal control is informed by:

the work of the internal auditors ;

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

comments made by the College’s financial statements auditors, the regularity reporting accountants, the appointed funding auditors (for colleges subject to funding audit) in their management letters and other reports.

The Accounting Officer has been advised on the implications of the result of her 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. The Accounting Officer and senior management team receive reports setting out key performance and risk indicators and considers possible control issues brought to their attention by early warning mechanisms, which are embedded within the departments and reinforced by risk awareness training. The Accounting Officer, 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 December 2015 meeting, the Corporation carried out the annual assessment for the year ended 31 July 2015 by considering documentation from the senior management team and internal audit, and taking account of events since 31 July 2015. Based on the advice of the Audit Committee and the Accounting Officer, the Corporation is of the opinion that the College has an adequate and effective framework for governance, risk management and control, and has fulfilled its statutory responsibility for “the effective and efficient use of resources, the solvency of the institution and the body and the safeguarding of their assets”. Going concern After making appropriate enquiries, the Corporation considers that the College has adequate resources to continue in operational existence for the foreseeable future. For this reason, it continues to adopt the going concern basis in preparing the financial statements. Approved by order of the members of the Corporation on 15 December 2015 and signed on its behalf by:

Paul Lankester Nicola Mannock Chair Accounting Officer & Chief Executive

STRATFORD-UPON-AVON COLLEGE GOVERNING BODY’S STATEMENT ON THE COLLEGE’S REGULARITY, PROPRIETY AND COMPLIANCE WITH FUNDING BODY TERMS AND CONDITIONS OF FUNDING

21

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 our consideration we have had due regard to the requirements of the financial memorandum. We confirm, on behalf of the Corporation, that after due enquiry, and to the best of our knowledge, we are 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 confirm that no instances of material irregularity, impropriety or funding non-compliance have been discovered to date. If any instances are identified after the date of this statement, these will be notified to the Skills Funding Agency.

Paul Lankester Nicola Mannock Chair Accounting Officer & Chief Executive


22

STATEMENT OF RESPONSIBILITIES OF THE MEMBERS OF THE CORPORATION

The members of the Corporation (who act as trustees for the charitable activities of the College) are required to present audited financial statements for each financial year.

The law applicable to charities in England and the terms and conditions of the Financial Memorandum between the Skills Funding Agency and the Corporation of the College, requires the Corporation of the College to prepare financial statements and the Operating and Financial Review for each financial year in accordance with the 2007 Statement of Recommended Practice – Accounting for Further and Higher Education Institutions and with the Annual Accounts Direction for 2014 to 2015 financial statements issued jointly by the Skills Funding Agency and the Education Funding Agency, and applicable United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and which give a true and fair view of the state of affairs of the College and of the College’s surplus of income over expenditure for that period.

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

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 prepare 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 Charities Act 2011 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 and Education Funding Agency are used only in accordance with the Financial Memorandum with the Skills Funding Agency and any other conditions that may be prescribed from time to time. Members of the Corporation must ensure that there are appropriate financial and management controls in place in order to safeguard public and other funds and to ensure they are used properly. In addition, members of the Corporation are responsible for securing economical, efficient and effective management of the College’s resources and expenditure, so that the benefits that should be derived from the application of public funds from the Skills Funding Agency and Education Funding Agency aren’t put at risk.

Approved by order of the members of the Corporation on 15 December 2015 and signed on its behalf by:

Paul Lankester Chair


23

INDEPENDENT AUDITOR’S REPORT TO THE CORPORATION OF STRATFORD-UPON-AVON COLLEGE We have audited the College financial statements (“the Financial Statements”) set out on pages 27 to 52. The financial reporting framework that has been applied in their preparation is United Kingdom accounting standards (United Kingdom Generally Accepted Accounting Practice) as set out in our engagement letter dated 17 November 2015.

This report is made solely to the Governing Body, as a body, in accordance with the Financial Memorandum published by the Skills Funding Agency and our engagement letter dated 17 November 2015. Our audit work has been undertaken so that we might state to the Governing Body, as a body, those matters we are required under our engagement letter dated 17 November 2015 to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Governing Body, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective Responsibilities of the Governing Body of Stratford-upon-Avon College and Auditor

As explained more fully in the Statement of the Governing Body’s Responsibilities set out on page 22, the Governing Body is responsible for the preparation of financial statements which give a true and fair view.

Our responsibility is to audit, and express an opinion on, the Financial Statements in accordance with the terms of our engagement letter dated 17 November 2015, Joint Audit Code of Practice issued by the Skills Funding Agency and Education Funding Agency and International Standards on Auditing (UK and Ireland). The International Standards on Auditing (UK and Ireland) require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.uk/auditscopeukprivate

Opinion on financial statements In our opinion the Financial Statements: give a true and fair view of the state of the College’s affairs as at 31 July 2015 and of the

College’s surplus of income over expenditure for the year then ended; and

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

Emphasis of matter going concern In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in the accounting policies to the financial statements concerning the College’s ability to continue as a going concern. The College’s cash flow forecasts indicate that it will not be able to support agreed repayments of Skills Funding Agency/BIS advance funds of £550,000 during a period covering twelve months from the date of approval of these financial statements. The College has submitted a business case to the Skills Funding Agency/BIS requesting a deferral of these repayments. This request for deferment is currently being considered by the Skills Funding Agency/BIS. This condition, along with the other matters explained in the accounting policies to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the College’s ability to continue as a going concern. The financial statements do not include any adjustments that would result if the College was unable to continue as a going concern.


24

INDEPENDENT AUDITOR’S REPORT TO THE CORPORATION OF STRATFORD-UPON-AVON COLLEGE (continued)

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Joint Audit Code of Practice issued jointly by the Skills Funding Agency and the Education Funding Agency requires us to report to you if, in our opinion: adequate accounting records have not been kept; the financial statements are not in agreement with the accounting records; or we have not received all the information and explanations required for our audit.

RSM UK AUDIT LLP (formerly Baker Tilly UK Audit LLP) Chartered Accountants St Philips Point Temple Row Birmingham B2 5AF

2015


INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON REGULARITY TO THE CORPORATION OF STRATFORD-UPON-AVON COLLEGE AND THE SECRETARY OF STATE FOR BUSINESS, INNOVATION AND SKILLS ACTING THROUGH THE SKILLS FUNDING AGENCY

25

In accordance with the terms of our engagement letter dated 17 November 2015 and further to the requirements of the financial memorandum with Skills Funding Agency we have carried out an engagement to obtain limited assurance about whether the expenditure disbursed and income received by Stratford-upon-Avon College during the period 1 August 2014 to 31 July 2015 have been applied to the purposes identified by Parliament and the financial transactions conform to the authorities which govern them. The framework that has been applied is set out in the Joint Audit Code of Practice issued jointly by Skills Funding Agency and Education Funding Agency. In line with this framework, our work has specifically not considered income received from the main funding grants generated through the Individualised Learner Record (ILR) returns, for which Skills Funding Agency has other assurance arrangements in place. This report is made solely to the Corporation of Stratford-upon-Avon College and the Secretary of State for Business, Innovation and Skills acting through the Skills Funding Agency in accordance with the terms of our engagement letter. Our work has been undertaken so that we might state to the Corporation of Stratford-upon-Avon College and the Secretary of State for Business, Innovation and Skills acting through the Skills Funding Agency those matters we are required to state in a report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the corporation of Stratford-upon-Avon College and the Secretary of State for Business, Innovation and Skills acting through the Skills Funding Agency for our work, for this report, or for the conclusion we have formed. Respective responsibilities of Stratford-upon-Avon College and the reporting accountant The Corporation of Stratford-upon-Avon College is responsible, under the SFA financial memorandum and the requirements of the Further & Higher Education Act 1992, subsequent legislation and related regulations and guidance, for ensuring that expenditure disbursed and income received is applied for the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. Our responsibilities for this engagement are established in the United Kingdom by our profession’s ethical guidance and are to obtain limited assurance and report in accordance with our engagement letter and the requirements of the Joint Audit Code of Practice. We report to you whether anything has come to our attention in carrying out our work which suggests that in all material respects, expenditure disbursed and income received during the period 1 August 2014 to 31 July 2015 have not been applied to purposes intended by Parliament or that the financial transactions do not conform to the authorities which govern them. Approach We conducted our engagement in accordance with the Joint Audit Code of Practice issued jointly by Skills Funding Agency and Education Funding Agency. We performed a limited assurance engagement as defined in that framework and our engagement letter The objective of a limited assurance engagement is to perform such procedures as to obtain information and explanations in order to provide us with sufficient appropriate evidence to express a negative conclusion on regularity. A limited assurance engagement is more limited in scope than a reasonable assurance engagement and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express a positive opinion.

STRATFORD-UPON-AVON COLLEGE INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON REGULARITY TO THE CORPORATION OF STRATFORD-UPON-AVON COLLEGE AND THE SECRETARY OF STATE FOR BUSINESS, INNOVATION AND SKILLS ACTING THROUGH THE SKILLS FUNDING AGENCY

26

Our engagement includes examination, on a test basis, of evidence relevant to the regularity of the college’s income and expenditure. Our work included identification and assessment of the design and operational effectiveness of the controls, policies and procedures that have been implemented to ensure compliance with the framework of authorities including high level financial control areas where we identified areas where a material irregularity is likely to arise. We undertook detailed testing, based on our identification of the areas where a material irregularity is likely to arise where such areas are in respect of controls, policies and procedures that apply to classes of transactions. This work was integrated with our audit on the financial statements to the extent evidence from the conduct of that audit supports the regularity conclusion. Conclusion In the course of our work, nothing has come to our attention which suggests that in all material respects the expenditure disbursed and income received during the period 1 August 2014 to 31 July 2015 has not been applied to purposes intended by Parliament and the financial transactions do not conform to the authorities which govern them.

RSM UK AUDIT LLP (formerly Baker Tilly UK Audit LLP) Chartered Accountants St Philips Point Temple Row Birmingham B2 5AF

2015

STRATFORD-UPON-AVON COLLEGE INCOME AND EXPENDITURE ACCOUNT for the year ended 31 July 2015

27

Notes

2015 £’000

2014 £’000

INCOME Funding body grants 2 7,932 9,438 Tuition fees and education contracts 3 2,789

2,935

Other income 1,504 1,420 Investment income 4 5 3 TOTAL INCOME 12,230 13,796 EXPENDITURE Staff costs 5 6,998 8,333 Exceptional restructuring costs 5 110 625 Other operating expenses 7 3,970 4,333 Depreciation 10 858 797 Interest and other finance costs 8 162 266 TOTAL EXPENDITURE 12,098

14,354

Surplus/(Deficit) after depreciation of tangible fixed assets at valuation and before disposal of assets and tax

134

(558)

Loss on disposal of assets - - Surplus/(Deficit) after depreciation of assets at valuation, and disposal of assets but before tax

134

(558)

Taxation 9 - - SURPLUS/(DEFICIT) AFTER DEPRECIATION OF ASSETS AT VALUATION, DISPOSAL OF ASSETS, DISPOSAL OF FIXED ASSETS AND TAX BEING THE SURPLUS/(DEFICIT) FOR THE YEAR RETAINED WITHIN GENERAL RESERVES

134

(558) The income and expenditure account is in respect of continuing activities.

STRATFORD-UPON-AVON COLLEGE STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 July 2015

28

Notes 2015 2014 £’000 £’000 Surplus/(Deficit) on continuing operations after depreciation and disposal of tangible fixed assets at valuation and tax

134

(558)

Actuarial (loss) in respect of pension schemes 24 (723) (1,005) Total recognised losses relating to the year

(589)

(1,563)

Reconciliation Opening reserves (1,727) (164) Total recognised losses for the year (589) (1,563) Closing reserves (2,316) (1,727) NOTE OF HISTORICAL COST SURPLUSES AND DEFICITS for the year ended 31 July 2015

Notes

2015 £’000

2014£’000

Surplus/(Deficit) on continuing operations before taxation 134 (558) Difference between historical cost depreciation and the actual charge for the period calculated on the revalued amount 18 70 71 HISTORICAL COST SURPLUS/ (DEFICIT) FOR THE YEAR BEFORE TAXATION

204

(487)

HISTORICAL COST SURPLUS/ (DEFICIT) FOR THE YEAR AFTER TAXATION

204

(487)

STRATFORD-UPON-AVON COLLEGE BALANCE SHEET as at 31 July 2015

29

Notes 2015 £’000

2014£’000

FIXED ASSETS Tangible assets 10 15,453 13,152Investments 11 - - TOTAL FIXED ASSETS 15,453 13,215 CURRENT ASSETS Debtors 12 300 460Cash at bank and in hand 212 2,959 512 3,419

LESS: CREDITORS - amounts falling due within one year

13

(2,613) (4,791)

NET CURRENT LIABILITIES (2,101) (1,372) TOTAL ASSETS LESS CURRENT LIABILITIES

13,352 11,780

LESS: CREDITORS - amounts falling due after more than one year

14

(3,757) (4,492)

Net assets excluding pension liability 9,595 7,288 Net pension liability 24 (6,000) (5,162) NET ASSETS INCLUDING PENSION LIABILITY

3,595

2,126

STRATFORD-UPON-AVON COLLEGE BALANCE SHEET as at 31 July 2015

30

Notes 2015 £’000

2014 £’000

DEFERRED CAPITAL GRANTS 16 5,911 3,853 RESERVES Revaluation reserve 17 2,731 2,801 General reserve Income and expenditure account excluding pension reserve

18

953

634 Pension reserve 18 (6,000) (5,162) Income and expenditure account including pension reserve

(5,047)

(4,528)

TOTAL RESERVES (2,316) (1,727) TOTAL FUNDS 3,595 2,126 The financial statements on pages 27 to 52 were approved and authorised for issue by the Governing Body on 15 December 2015 and were signed on its behalf by:-

- Chair

- Accounting Officer & Chief Executive

STRATFORD-UPON-AVON COLLEGE CASH FLOW STATEMENT for the year ended 31 July 2015

31

Note

2015 £’000

2014 £’000

CASH FLOW FROM OPERATING ACTIVITIES 19 (1,509) 3,028 Returns on investments and servicing of finance 20 (130) (177) Capital expenditure and financial investment 21 (800) (161) Cash (outflow)/ inflow before financing (2,430) 2,690 Financing 22 (308) (329) (DECREASE)/INCREASE IN CASH IN THE YEAR 23 (2,747) 2,361 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (Decrease)/Increase in cash in the year 23 (2,747) 2,361 Cash outflow from decrease in debt and lease financing 23 308 329

Movement in net debt in the year (2,430) 2,690 Net debt at 1 August (898) (3,588) Net debt at 31 July (3,337) (898)

STRATFORD-UPON-AVON COLLEGE NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 July 2015

32

ACCOUNTING POLICIES 1. STATEMENT OF ACCOUNTING POLICIES

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.

BASIS OF PREPARATION

These financial statements have been prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education 2007 (the SORP) and applicable Accounting Standards. They also conform to guidance published jointly by the Skills Funding Agency and the EFA in the 2014/15 Accounts Direction Handbook. GOING CONCERN During the year to 31 July 2015 the College generated a surplus of £0.1m and at the end of the year had net current liabilities of £2.1m. The College’s bank loans of £3.5m are secured by a fixed legal charge on all the College-owned land and buildings. The terms of the existing agreements are for up to 13 years and the College’s bankers have indicated that these repayment terms will continue. The College’s forecasts and financial projections, indicate that it will be able to operate within its existing facilities over the next twelve months on the condition that BIS agree to repayments of Skills Funding Agency/BIS advance funds of £550,000 being re-profiled over the next three financial years, rather than all in 2015/16 as currently agreed. The College has submitted a business case to the Skills Funding Agency/BIS requesting a deferral of these repayments. This request for deferment is currently being considered by the Skills Funding Agency. The Governors having considered the factors above, the College’s relationship with the Skills Funding Agency, its response to the Notice of Concern, evidenced by the successful execution of its recovery plan and the resultant financial turnaround reflected in these statements, and its relationship with its bankers believe that the College has a reasonable expectation that it has adequate resources to continue in operational existence for the foreseeable future, and for this reason continues to adopt the going concern basis in the preparation of its Financial Statements. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.

BASIS OF ACCOUNTING 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. BASIS OF CONSOLIDATION The financial statements exclude the College’s subsidiary undertakings on the basis that the companies’ transactions and their net assets are immaterial to the financial statements. In accordance with FRS2, the activities of the student union have not been consolidated because the College does not control those activities, and the transactions are not material to the results of the College.


33

1. STATEMENT OF ACCOUNTING POLICIES (continued) RECOGNITION OF INCOME Income from Tuition Fees is recognised in the period for which it is earned 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. The recurrent grants from HEFCE represents the funding allocations attributable to the current financial year and are credited direct to the income and expenditure account. 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 achievement of the Adult Skills Budget 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, and results of any funding audits. This process may involve negotiations in respect of over achievement or adjustment to claw back in respect of under achievement, however, where negotiations are subsequent to the year end, they are not reflected in the income recognised. Employer responsive grant element of the single budget allocation is recognised on a year-end reconciliation of income claimed and actual delivery with the funding body. 16-18 learner responsive funding is not normally subject to reconciliation and is therefore not subject to contract adjustments. The income recognised is the allocation for the year. Non-recurrent grants from the funding body 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.

POST RETIREMENT BENEFITS

Retirement benefits to employees of the College are provided by the Teachers’ Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS). These are defined benefit schemes, which are externally funded and contracted out of the State Earnings-Related Pension Scheme (SERPS), and the assets are held separately from those of the College.

The TPS is an unfunded scheme and contributions to the TPS are calculated so as to spread the cost of pensions over employees’ working lives with the College in such a way that the pension cost is a substantially level percentage of current and future pensionable payroll. The contributions are determined by the Government Actuary on the basis of quinquennial valuations using a prospective benefit method. As stated in Note 24, 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.


34

1. STATEMENT OF ACCOUNTING POLICIES (continued)

LGPS

The LGPS is a funded scheme and the assets are held separately from those of the College in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent term and currency to the liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The amounts charged to operating surplus are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the income and expenditure account if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period until vesting occurs. The expected return on assets and the interest cost are shown as a net finance amount of other finance costs or credits adjacent to interest. Actuarial gains and losses are recognised immediately in the statement of total recognised gains and losses.

ENHANCED PENSIONS

The actual cost of any enhanced ongoing pension to a former member of staff is paid by a 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 Land and buildings

Land and buildings inherited from Warwickshire County Council 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 on an annual basis. Land and buildings acquired since 1992 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 50 years. The College has a policy of depreciating major adaptations to buildings over the period of their useful economic life, normally 10 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.

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 any fixed asset may not be recoverable. Shortfalls between the carrying value of fixed assets and their recoverable amounts are recognised as impairment. Impairment losses are recognised in the income and expenditure account.


35


TANGIBLE FIXED ASSETS (continued) On adoption of FRS 15, the College followed the transitional provision to retain the book value of land and buildings, which were revalued in 1992, 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.

Subsequent expenditure on existing fixed assets Where significant expenditure is incurred on existing 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:

Asset capacity increases; Substantial impairment in the quality of output or reduction in operating costs; Significant extension of the asset’s life beyond that conferred by repairs maintenance.

Equipment

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.

All assets are depreciated over their useful economic life as follows:

Freehold buildings 50 years Refurbishments 10 years Plant and equipment 15 years Motor vehicles 5 years Computer equipment 4 years Fixtures and fittings 10 years

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. ASSETS UNDER THE COURSE OF CONSTRUCTION

Assets under construction are accounted for at cost, based upon the value of architects’ certificates or a value calculated by the College and other direct costs incurred to 31 July. They are not depreciated until they are brought into use.

INVESTMENTS Fixed asset investments are stated at the lower of their cost and net realisable value. TAXATION

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 exclusively to charitable purposes.


36


The College is partially exempt in respect of Value Added Tax, 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.

PROVISIONS 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.

2. FUNDING BODY GRANTS

2015 £’000

2014£’000

Recurrent grant – main funding bodies 6,948 8,316 Recurrent grant – HEFCE 17 25 Non recurrent grants – main funding bodies 666 868 Release of deferred capital grants (note 16) 301 229 7,932 9,438

3. TUITION FEES AND EDUCATION CONTRACTS

2015 £’000

2014£’000

Tuition fees 1,185 1,295 Education contracts 1,604 1,640 2,789 2,935

4. INVESTMENT INCOME

2015 £’000

2014£’000

Other interest receivable 5 3


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5. STAFF COSTS

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

2015

Number 2014

Number Teaching staff 104 125 Non-teaching staff 105 120 209 245 2015

£’000 2014 £’000

Staff costs for the above persons: Wages and salaries 5,819 6,640 Social security costs 415 513 Other pension costs (note 24) including FRS 17 adjustments of £107,000 (2014: £202,000)

764

1,180

6,998

8,333 Exceptional restructuring costs 110 625 7,108 8,958

The number of staff, including senior post-holders and other staff, who received emoluments excluding pension contributions but including benefits in kind, in the following ranges was: 2015 2014 Number

senior post-

holders

Number

Other Staff

Number senior

post-holders

Number

Other Staff

£10,001 to £20,000 £20,001 to £30,000 £30,001 to £40,000

- - -

- - -

1 1 1

- - -

£40,001 to £50,000 £70,001 to £80,000

1 - 1 - 2 - - -

£80,001 to £90,000 - - 1 - £110,001 to £120,000 1 - - - 4 - 5 -


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During the year one senior post holder received a severance payment of £25,000. The College had 3 senior post-holders as at 31 July 2015.

6. SENIOR POST-HOLDERS’ EMOLUMENTS

Senior post-holders are defined as the Accounting Officer 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.

2015 Number

2014 Number

The number of senior post-holders including the Accounting Officer was:

4 5

Senior post-holders' emoluments are made up as follows: 2015 2014 £ £ Salaries 298,763 224,531

Benefit in kind - 1,321 Pension contributions 39,267 30,107

Total emoluments 338,030 255,959

The above total senior post-holders’ emoluments include amounts payable to the Accounting Officer (who is also the highest paid senior post-holder) of:

2015 £

2014 £

Salary 111,539 88,415 Benefit in kind - - Total emoluments 111,539 88,415 Pension contributions 14,100 12,586

The pension contributions in respect of the Accounting Officer and senior post-holders are in respect of employer’s contributions to the Teachers’ Pension Scheme or Local Government Superannuation Scheme and are paid at the same rate as for other employees.

Compensation for loss of office paid to former senior post- holders

2015 £

2014 £

Compensation paid to one (three in 2014) former senior post- holder

25,000

85,000


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6. SENIOR POST-HOLDERS’ EMOLUMENTS (Continued)

The members of the Corporation other than the Accounting Officer did not receive any payment from the institution other than the reimbursement of £1,239 in relation to 1 member (2013/14 - £504) travel and subsistence expenses incurred in the course of their duties.

7. OTHER OPERATING EXPENSES

2015 £’000

2014 £’000

Teaching costs 939

1,963

Non-teaching costs 2,197 1,566 Premises costs 834 804 Total 3,970 4,333 Other operating expenses include: Auditors' remuneration: Financial statements current year audit 22 16

Financial statements prior year audit 16 16 Internal audit 18 16 Hire of land and buildings – operating leases 295 329

8. INTEREST AND OTHER FINANCE COSTS

2015 £’000

2014 £’000

On bank loans: Repayable wholly or partly in more than 5 years 135 180 Enhanced pension finance cost 11 11 Pension finance costs (note 24) in respect of FRS 17 16 75 Total 162 266

9. TAXATION The members do not believe the College was liable for any corporation tax arising out of its

activities during this year.


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10. TANGIBLE FIXED ASSETS

Freeholdland and

buildings£’000

Equipment£’000

Total £’000

Cost or Valuation At 1 August 2014 17,275 4,536 21,811 Additions 2,898 261 3,159 At 31 July 2015 20,173 4,797 24,970 Depreciation At 1 August 2014 5,221 3,438 8,659 Charge for year 565 293 858 At 31 July 2015 5,786 3,731 9,517 Net book value At 31 July 2015 14,387 1,066 15,453 Net book value At 31 July 2014 12,054 1,098 13,152

The transitional rules set out in FRS 15 Tangible Fixed Assets have been applied on

implementing FRS15. Accordingly, the book values at implementation have been retained. Land and buildings were valued in 1992 at depreciated replacement cost by a firm of

independent chartered surveyors. Other tangible fixed assets inherited from the LEA at incorporation have been valued by the College on a depreciated replacement cost basis with the assistance of independent professional advice.

Land and buildings, together with refurbishments to Buildings with a net book value of

£3,630,387 (2013/14: £2,727,747) have been 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 the Financial Memorandum with the Skills Funding Agency, to surrender the proceeds.


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10. TANGIBLE FIXED ASSETS (Continued) If fixed assets had not been valued they would have been included at the following amounts:

Freehold land and buildings

Equipment

Total

£’000 £’000 £’000

Cost - - - Aggregate depreciation based on cost - - - Net book value based on cost - - -

11. INVESTMENTS

2015 2014

£’000 £’000

Investments in subsidiary companies - -

Total - -

The College owns 100 per cent of the issued ordinary £1 shares of Stratford Catering Services Limited (formerly Stratford-upon-Avon College Services Limited); a company incorporated in England and Wales. The College also owns 100% of the allotted share capital of South Warwickshire Education Partnership (SWEP) Limited (formerly Stratford Business Services Limited); a company incorporated in England and Wales. This company did not trade during the year. Investments are held at historic cost. Stratford Catering Services Limited has not been consolidated on the basis that the company’s transactions and net assets are immaterial to the financial statements.


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12. DEBTORS

2015 £’000

2014 £’000

Trade debtors 59 85 Prepayments and accrued income 241 322 Amounts owed by the Skills Funding Agency - 53

Total 300 460

Included within prepayments is £110,662 (2013/14: £110,662) relating to direct costs incurred in arranging the lease referred to in note 14. These costs are being amortised over the period of the lease. The value due to be released after more than one year at 31 July 2015 was £106,662 (2013/14: £106,662).

13. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2015 £’000

2014 £’000

Bank & other loans 259 312 Payments received in advance 244 2,732 Trade creditors 589 263 Other taxation and social security 255 201 Accruals 525 917 Lease premium 16 16 Amounts owed to the Skills Funding Agency 725 350 Total 2,613 4,791

14. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

2015 £’000

2014 £’000

Bank & other loans 3,290 3,545 Lease premium 382 416 Other creditors - Lennartz 85 131 Amounts owed to Skills Funding Agency

- 400

Total 3,757 4,492

During the financial year 2004/05 the College granted a lease for the provision of a new student accommodation block. The lease is for a period of 125 years with an option for the College to obtain the freehold after 35 years. On the basis that the option will be exercised the lease premium is being released over a period of 35 years. During 2007/08 and 2008/09 the College was successful in a claim with HM Revenue & Customs under the Lennartz principle. The College received £522,349 which has to be repaid over approximately ten years; £52,320 has been treated as a current liability.


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15. BORROWINGS 2015

£’000 2014 £’000

a) Bank loans Bank loans are repayable as follows: In one year or less 252 304 Between one and two years 301 312 Between two and five years 991 993 In five years or more 1,998 2,240 Total 3,542

3,849

The College has not breached its covenants in 2014/15 and therefore the loans are disclosed

in line with the ageing of when the payments are due. The loans from the Lloyds TSB Bank plc are secured over a proportion of the freehold land and

buildings of the College, and are repayable in quarterly instalments over 15 to 25 years. £3,900,000 was fixed for various periods at 5.25%, whilst the balance bears interest at 1.55% above bank base rate. The fixed interest rate loans are due to mature in 2022 and 2028.

2015

£’000 2014 £’000

b) Other loans Other loans are repayable as follows: In one year or less 7 8 Between one and two years - - Total 7 8 2015

£’000 2014 £’000

c) Ageing of Lennartz In one year or less 52 52 Between one to two years 52 52 Between two and five years 33 79 Total 137 183


44

16. DEFERRED CAPITAL GRANTS

Funding Body

Grants £’000

Other grants £’000

Total £’000

At 1 August 2014 2,997 856 3,853 Cash received 2,349 10 2,359 Released to income and expenditure (172) (129) (301)

At 31 July 2015 5,174 737 5,911

17. REVALUATION RESERVE

2015 £’000

2014 £’000

At 1 August 2,801 2,872 Transfer from revaluation reserve to general reserve in respect of:

Depreciation on revalued assets (70) (71)

At 31 July 2,731 2,801

18. MOVEMENT ON GENERAL RESERVES

2015 £’000

2014 £’000

Income and Expenditure Account Reserve

At 1 August (4,528) (3,036) Surplus/(Deficit) for the year 134 (558) Transfer from revaluation reserve 70 71 Actuarial (loss) in respect of pension scheme

(723) (1,005)

At 31 July (5,047) (4,528) Balance represented by: Income and expenditure account reserve excluding pension reserve

953 634

Pension reserve (6,000) (5,162) At 31 July (5,047) (4,528)


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19. RECONCILIATION OF OPERATING SURPLUS/(DEFICIT) TO NET CASH (OUTFLOW)/

INFLOW FROM OPERATING ACTIVITIES

2015 £’000

2014 £’000

Surplus/(Deficit) on continuing operations after depreciation of assets at valuation and disposal of assets 134 (558)Depreciation (note 10) 858 797 Deferred capital grants released to income (note16) (301) (229)Interest payable (note 8) 135 180 FRS 17 Pension cost less contributions payable (note24) 107 202 FRS 17 pension finance cost (note 24) 27 86 Decrease in debtors 160 125 (Decrease)/Increase in creditors (2,605) 2,446 Interest receivable (note 4) (5) (3)Enhancement pension cost less benefits paid (19) (18)

Net cash (outflow)/inflow from operating activities (1,509) i3,028

20. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

2015 £’000

2014 £’000

Other interest received 5 3 Interest paid (135) (180) Net cash outflow from returns on investments and servicing of finance (130) (177)

21. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT

2015 £’000

2014 £’000

Purchase of tangible fixed assets (3,159) (734) Deferred capital grants received 2,359 573

Net cash (outflow)/inflow from capital expenditure and financial investment

(800)

(161)


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22. FINANCING

2015 £’000

2014 £’000

Repayment of amounts borrowed (308) (329)

Net cash outflow from financing

(308)

(329)

23. ANALYSIS OF CHANGE IN NET DEBT

At 1 August

2014 £’000

Cashflows £’000

Non cash

movements £’000

At

31 July 2015 £’000

Cash in hand, and at bank 2,959 (2,747) - 212 Debt due within 1 year (312) 308 (255) (259) Debt due after 1 year (3,545) - 255 (3,290) Total (898) (2,439) - (3,337)


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24. PENSIONS AND SIMILAR OBLIGATIONS

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 Local Government Pension Scheme (LGPS) for non-teaching staff, which is managed by Hymans Robertson LLP Both are defined-benefit schemes. Total pension cost for the year 2015 2014

£000 £000

Teachers’ Pension Scheme: contributions paid 392 475

Local Government Pension Scheme:

Contributions paid 363 301

FRS 17 charge 107 202

Charge to the Income and Expenditure Account (staff costs)

470 503

Enhanced pension charge to Income and Expenditure Account (staff costs)

19 75

Accrued contributions (79) -

Total Pension Cost for Year 802 1,053

Enhanced Pension Provision £’000 At 1 August 2014 267 Interest cost 11 Actuarial loss 29 Charge to income and expenditure (19) At 31 July 2015 288

The enhanced pension provision relates to the cost of staff who have already left the College’s employ and commitments for reorganisation costs from which the College cannot reasonably withdraw at the balance sheet date. This provision has been calculated in accordance with guidance issued by the funding bodies. The principal assumptions for this calculation are: 2015 2014 Price inflation 3.74% 3.74% Discount rate 2.5% 2.5%


48

24. PENSIONS AND SIMILAR OBLIGATIONS (Continued)

Analysis of pension liability 2015 £’000

2014 £’000

Deficit in respect of local government scheme 5,712 4,895 Enhanced pension provision 288 267 6,000 5,162 Amounts (charged) to the Statement of Total Recognised Gains and Losses Actuarial loss in respect of LGPS (694) (984) Actuarial loss on enhanced pension provision (29) (21) (723) (1,005)

The pension costs are assessed in accordance with the advice of independent qualified actuaries. The latest actuarial valuation of the TPS was 31 March 2012 and of the LGPS 31 March 2013.

There were outstanding contributions at 31 July 2015 of £84,768 (2014: £nil).

Teachers’ Pension Scheme The Teachers' Pension Scheme (TPS) is a statutory, contributory, defined benefit scheme, governed by the Teachers' Pensions Regulations 2010, and, from 1 April 2014, by the Teachers’ Pension Scheme Regulations 2014. These regulations apply to teachers in schools and other educational establishments, including academies, in England and Wales that are maintained by local authorities. In addition, teachers in many independent and voluntary-aided schools and teachers and lecturers in some establishments of further and higher education may be eligible for membership. Membership is automatic for full-time teachers and lecturers and, from 1 January 2007, automatic too for teachers and lecturers in part-time employment following appointment or a change of contract. Teachers and lecturers are able to opt out of the TPS.

The Teachers’ Pension Budgeting and Valuation Account Although members may be employed by various bodies, their retirement and other pension benefits are set out in regulations made under the Superannuation Act 1972 and are paid by public funds provided by Parliament. The TPS is an unfunded scheme and members contribute on a ’pay as you go‘ basis – these contributions, along with those made by employers, are credited to the Exchequer under arrangements governed by the above Act.

The Teachers' Pensions Regulations 2010 require an annual account, the Teachers' Pension Budgeting and Valuation Account, to be kept of receipts and expenditure (including the cost of pension increases). From 1 April 2001, the Account has been credited with a real rate of return, which is equivalent to assuming that the balance in the Account is invested in notional investments that produce that real rate of return.

Valuation of the Teachers’ Pension Scheme The latest actuarial review of the TPS was carried out as at 31 March 2012 and in accordance with The Public Service Pensions (Valuations and Employer Cost Cap) Directions 2014. The valuation report was published by the Department for Education (the Department) on 9 June 2014. The key results of the valuation are:


49

24. PENSIONS AND SIMILAR OBLIGATIONS (Continued) employer contribution rates were set at 16.4% of pensionable pay; total scheme liabilities for service to the effective date of £191.5 billion, and notional assets of

£176.6 billion, giving a notional past service deficit of £14.9 billion; an employer cost cap of 10.9% of pensionable pay.

The new employer contribution rate for the TPS will be implemented in September 2015.

A full copy of the valuation report and supporting documentation can be found on the Teachers’ Pension Scheme website at the following location:

https://www.teacherspensions.co.uk/news/employers/2014/06/publication-of-the-valuation-report.aspx

Scheme Changes Following the Hutton report in March 2011 and the subsequent consultations with trade unions and other representative bodies on reform of the TPS, the Department published a Proposed Final Agreement, setting out the design for a reformed TPS to be implemented from 1 April 2015.

The key provisions of the reformed scheme include: a pension based on career average earnings; an accrual rate of 1/57th; and a Normal Pension Age equal to State Pension Age, but with options to enable members to retire earlier or later than their Normal Pension Age. Importantly, pension benefits built up before 1 April 2015 will be fully protected.

In addition, the Proposed Final Agreement includes a Government commitment that those within 10 years of Normal Pension Age on 1 April 2012 will see no change to the age at which they can retire, and no decrease in the amount of pension they receive when they retire. There will also be further transitional protection, tapered over a three and a half year period, for people who would fall up to three and a half years outside of the 10 year protection.

Regulations giving effect to a reformed Teachers’ Pension Scheme came into force on 1 April 2014 and the reformed scheme will commence on 1 April 2015.

The pension costs paid to TPS in the year amounted to £989,000 (2014: £1,490,000)

FRS 17 Under the definitions set out in Financial Reporting Standard (FRS 17) 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.

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.

Local Government Pension Scheme The LGPS 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 2015 was £485,000 (2014: £432,000) of which employers’ contributions totalled £363,000 (2014: £301,000) and employees’ contributions totalled £122,000 (2014: £131,000). The agreed employer contribution rate from 1 April 2011 was 12.8% for employers with various employee rates. The contribution rate increased to 13.2% in April 2012 and there was a further increase to 15.0% from 1 April 2014. The Actuary has indicated that the current service cost will be approximately £495,000 in the financial year 2015/16 (2014/15: £466,000).

The expected contribution payable for the year ended 31 July 2016 is £426,000 (2015: £363,000).


50

24. PENSIONS AND SIMILAR OBLIGATIONS (Continued)

FRS 17

The following information is based upon a full actuarial valuation of the fund at 31 March 2013 updated to 31 July 2015 by a qualified independent actuary.

2015 2014 Rate of CPI Inflation 2.6% 2.7% Rate of increase in salaries 4.5% 4.5% Rate of increase for pensions 2.6% 2.7% Discount rate for scheme liabilities 3.6% 4.0%

An allowance is included for future retirements to elect to take 50% of the maximum additional tax-free cash up to HMRC limits for pre-April 2008 service and 75% of the maximum tax-free cash for post-April 2008 service.

The expected returns on scheme assets were determined by considering the expected returns available on the assets underlying the current investment portfolio. Expected yields on bonds are based on gross redemption yields at balance sheet date whilst the expected returns on the equity and property investments reflect the long term, real rates of return experienced in the respective markets.

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

At 31 July 2015 At 31 July 2014

years years

Retiring today

Males 22.4 22.4

Females 24.4 24.4

Retiring in 20 years

Males 24.3 24.3Females 26.6 26.6

The College’s share of the assets and liabilities in the scheme and the expected rates of return were:

Long-term rate of return

expected at 31 July 2015

Value at 31 July 2015

£’000

Long-term rate of return

expected at 31 July 2014

Value at 31 July

2014£’000

Equities N/A 6,994 6.6% 6,652Bonds N/A 2,367 3.8% 1,928Property N/A 1,183 4.7% 964Other N/A 215 4.5% 96 Total market value of assets 10,759

9,640

Present value of scheme liabilities

- Funded (16,471) (14,535)

(Deficit) in the scheme (5,712) (4,895)


51

Changes in the present value of the defined obligation are as follows:

2015 2014

£’000 £’000

Opening defined benefit obligation 14,535 12,418

Service cost 588 629

Interest cost 587 578

Actuarial losses 1,044 1,232

Losses on Curtailments 4 6

Benefits paid (287) (328)

Closing defined benefit obligation

16,471

14,535

Changes in the fair value of scheme assets are as follows:

Opening scheme assets 9,640 8,785

Expected return 571 503

Actuarial gains 350 248

Contributions by employer 363 301

Contributions by employees 122 131

Benefits paid (287) (328)

Closing scheme assets

10,759

9,640

The actual return on scheme assets was £921k (2014: £593k).

Analysis of the amount charged to income and expenditure account

2015 2014

£’000 £’000

Employer service cost (net of employee contributions) 466 498

Past service cost - -

Total operating charge

466

498

Analysis of pension finance income / (costs)

Expected return on pension scheme assets 571 503

Interest on pension liabilities (587) (578)

Pension finance income / (costs)

(16)

(75)

Total amounts recognised in income and expenditure (482) 573

Actuarial gains/(losses) on pension scheme assets (current year)

(694) (984)

Actuarial loss recognised in STRGL (694) (984)


52

Amounts for the current and previous four periods are as follows: Defined benefit pension schemes:

2015£’000

2014£’000

2013 £’000

2012 £’000

2011£’000

Defined benefit obligation (16,471) (14,535) (12,418) (11,320) (9,596)Scheme assets 10,759 9,640 8,785 7,101 6,750 Deficit (5,712) (4,895) (3,633) (4,219) (2,846)Experience (gains)/losses on pension scheme assets (350) (248) (1,169) 237 54Experience gains/(losses) on Liabilities 107 (97)

- (124) 520

25. CAPITAL COMMITMENTS

2015 £’000

2014£’000

Commitments contracted for at 31 July - 2,907

26. FINANCIAL COMMITMENTS

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

2015

£’000 2014£’000

Land & Buildings Expiring within one year Expiring between one to two years inclusive

70 165

72 66

Expiring between two to five years inclusive Expiring after five years

27 0

30 133

262 301

27. RELATED PARTY TRANSACTIONS

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 organisations in which a member of the Corporation may have an interest are conducted at arm’s length and in accordance with the College’s financial regulations and normal procurement procedures. Stratford-on-Avon District Council – Paul Lankester, Chief Executive The College has a partnership with Stratford-on-Avon District Council in the VIC (Visitor Information Centre) in the centre of Stratford-upon-Avon. The College leases and operates the VIC and is presently looking to extend the remaining arrangement beyond 2017. Transactions totalling £30,000 (2014 - £30,000), relating to the lease of the VIC took place. There were no amounts outstanding (2014 - £nil).

Transactions with the funding bodies and HEFCE are detailed in notes 2, 12, 13, 14 and 16.

report & financial statements - stratford-upon-avon … · the members present their report and...

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