College Governance Summit

Benchmarking (and some other issues)

Julian Gravatt, AoC Assistant Chief Executive

4 March 2015

Slides available at:

https://www.aoc.co.uk/funding-and-corporate-services/funding-and-finance/reports-and-presentations

College income

Colleges

SFA

FE College income2014-15 (£ millions)233 Colleges

EFA 2,823 (44%)SFA 1,734 (28%)Other 1,756 (28%)Total 6,396Surplus 34

Sixth form colleges2014-15 (£ millions)93 Colleges

EFA 822 (95%)Other 42 (5%)Total 864 Surplus 20

EFA

Funding update – where are we right now?

EFA (16-18 education)2015-16 allocations issued to collegesVery few changes to the formula or rulesAverage funding down by c2% (because student numbers down)

ApprenticeshipsBudget ring-fenced but major reform programme underway

SFA (19+ further education)24% cut in “other Adult Skills Budget” (allocations 16 March 2015)New SFA CEO interested in simplifying the funding approach

Loan supported education24+ advanced learning loans - money available to growNo student number controls in higher education

Sources: GFE Finance records 2008/09 to 2013/14 (adjusted); Financial plans 2014/15 to 2015/16

College Forecast

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

6,200,000

6,300,000

6,400,000

6,500,000

6,600,000

6,700,000

6,800,000

6,900,000

Total Income

College Forecasts

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

0

20,000

40,000

60,000

80,000

100,000

120,000

Staff Restructuring Costs

£'00

0

Financial health assessment

College financial health (EFA/ SFA assessment)Cash based profitabilityNet current assetsLevels of borrowing

Latest scores (based on 2013-14 accounts)45-50 FE colleges 10 sixth form colleges “inadequate financial health”

Colleges with no debt can’t necessarily borrowc80 FE colleges have weak finances judged on surpluses & cash150 FE colleges in a stronger position but facing a difficult present

How colleges will improve their finances

Some or all of the following:

1. Better government policy (funding properly matching the task)

2. Cost reduction (to bring budgets back into balance)

3. Property sales to release cash (only open to some colleges)

4. Relentless focus on student/employer demand and need

5. Outsmarting the competition (eg schools, universities)

Some other things to think about

Politics

The general electionNew policies

The 2015 spending review

Education

New A-levels, GCSEs, Tech levelsOfsted’s 2015 framework

Rising student expectations

Society & Economy

Changing demographicsEconomic recovery

Mental health

Technology

Social mediaEducation technology

New industrial revolution

Benchmarking – what’s available?

Reputation

People College FinanceThe College

Finance Spreadsheet

ILR

StudentsConsultancies

(eg Tribal)

Ofsted Data DashboardDFE/ BIS League Tables

Surveys

MiDES

Benchmarking – what’s available

MIDES servicehttps://mides.rcu.co.uk/Provided as part of AoC membershipAdditional MIDES services (LMI £1,188; Vector £5,580)

Consultancies (cost more, deliver more)www.tribalgroup.com

Financial benchmarkingLarge publicly available spreadsheet from college accountswww.aoc.co.uk/funding-and-corporate-services/funding-and-finance/accounting

gov.uk

MIDES (www.mides.rcu.uk)

RCU, Unit 3 Tustin Court, Port Way, Ashton on Ribble, Preston, PR2 2YQ

Tel 01772 734855 | Fax 01772 721621 |

16-18 Classroom Learning In-Year Retention Report (2014/15 R04)

In October 14/15 the College (96.97%) was higher than the GFE average (96.83%).

The College’s retention rate (96.01%) was lower than the GFE average (96.45%) in 13/14 in October.

Why is the cost of teaching different?

Is it as simple as; because there are more FTEs teaching?

The college finance spreadsheet

www.aoc.co.uk/funding-and-corporate-services/funding-and-finance/accounting

The numbers aren’t everything…

“Some of the world’s leading business brains have gone out of their way to highlight the role of more intuitive, subjective, creative thinking in driving corporate performance, and to warn that an excessive boardroom focus on number-crunching and cost management is coming at the expense of experimentation, innovation and top-line growth.”

“It’s hard to imagine the future when your head is buried in a spreadsheet”

Martin Sorrell, founder & CEO, WPP article in City AM, 26 Feb 2015

What governing bodies need to do

Understand your position, your environment and your risksWhat do national trends mean for the college?Opportunities for income growth: 16-18, apprenticeships, loansRisks around every cornerStakeholders keep shifting (SFA, EFA, Ofsted, LEPs, Councils, MPs)

Focus on your roleGoverning bodies - solvency, viability & future of the collegeTrustee relationship – it’s your principals, SMT and staff who deliverTake a cold, hard look at the present and the future

(PS) Slides available at:

https://www.aoc.co.uk/funding-and-corporate-services/funding-and-finance/reports-and-presentations