1. College Finance North 15 December 2017
Julian Gravatt AoC deputy chief executive

2. College finances

3. Govt income & expenditure
Income tax
£175 bil
VAT
£125 bil
Pensioners
£106 bil
NHS
£117 bil
Other benefits
£115 bil
Education
£61 bil
Local taxes
£61 bil
National Insurance
£130 bil
Defence
£27 mil
All other taxes
£143 bil
Debt interest
£44 bil
Other services
£101 mil
Corp Tax
£54 bil
Local expend
£46 mil
EU contrib
£12 bil

4. DFE budget – key components.
Dedicated school grant
Schools, High Needs and Early Years Block
(£42 bil by 2020, of which £5 bil is for High Needs
DFE introducing a national fair funding formula
16-18 grants
£5.9 bil in 2017
Apprenticeships
£2.5 bil by 2020
HE (and FE) Student Loans
(£20 bil/yr by 2020)
Adult Education Budget
£1.5 bil by 2020
HE revenue
£1.4 il in 2017

5. College income & expenditure
16-18
£2.6 bil HE
£0.5 bil
Teachers
£2.6 bil
Supples and services
£1.6 bil
FE loans
£0.1 bil
Debt interest
£0.1 bil
High Needs
£0.2 bil
Other staff
£1.1 bil
ESF
£0.1 bil
Depreciation
£0.4 mil
Apprentices
£0.6 bil
Fees and other
£1.1 bil
AEB
£0.9 bil
£6.1 bil Income
83% public or is it 63%?
62% staff cost ratio
1% surplus but higher EBITDA

6. FE College funding (£ millions)

7. University and college income
Total income for English universities and colleges from annual accounts indexed to

8. Financial Health - FECs
Sources: GFE Finance records 2013/14 to 2015/16; Financial plan 2017 for 2016/17
Note: National college figures are excluded

9. Financial health - components
Colleges
Rating
Solvency
2015/16
EDITDA
Borrowing
Outstanding 92
28%
42%
39%
66%
Good
104
32%
15%
19%
26%
Satisfactory 93
18% 5%
Inadequate 40
12%
25% 2%
329
100%
Solvency
EDITDA
Borrowing
Outstanding
>1.6
>8%
<20%
Good
>1.2
>6%
<40%
Satisfactory
>0.8
>4%
<60%
Inadequate
<0.8
<4%
>60%

10. Funding in 2018 and beyond

11. Key spending decisions
The 2015 spending review
Tighter schools budget than before but rising
Fixed rate, fixed AEB, restructuring funds
Apprenticeship levy; extension of student loans
The decisions since summer 2016
National school formula by 2020 (£1.3 bil extra)
Additional technical education funds (from 2018)
Freeze on HE fee cap at £9,250

12. The EFA 16-18 funding formula
Programme Cost Weighting
Disadvantage Funding
Area
Cost Allowance
(up to 20%)
Student Numbers
National Funding Rate per student
Retention Factor
(less than 1) ( )
Band
Hours
Total 5
540+
£4,000
4 (*)
450+
£3,300 3
360+
£2,700 2
280+
£2,133 1
< 279
Programme %
Base 0%
Medium
20%
High
30%
Specialist
60%
Land-based
75%
Total Programme Funding
Disadvantage %
1 (GCSE Maths / English)
£480 per GCSE
2 (27% most deprived)
8 to 33% extra

13. ……plus extras (if applicable)
Programme Cost Weighting
Disadvantage
Funding
Student Numbers
National Funding Rate per student
Retention Factor ( )
Area Cost Allowance
Total Programme Funding
Large programme
factor
Formula Protection Funding
High Needs Students
Bursaries & Free Meals

14. 16-19 College Allocations 2017/18

15. 16-18 funding in 2018 and beyond Short term issues (2018-19)
No change to the rate despite inflation hitting 3%
English and maths condition of funding
Adjustments to retention for 2 year courses
Additional funds for work placements
Counting for the maths bonus
Long term issues (early 2020s)
The full Sainsbury package (T-levels, transition year, the place of applied general)
Funding for a rising 16+ populations
The sustainability of the system on current funding

16. High needs in 2018 and beyond
Short term issues ( )
More councils rejecting or cutting post 16 claims for element 3 (formula has 3 elements
Limit on top up of high needs by councils
Implementation of new high needs distribution formula
Long term issues (early 2020s)
More demand, higher costs, no more money
Council capacity given national school funding

17. College adult education funding
College adult education (non apprenticeship) funding in £ millions reported in annual accounts

18. Skills devolution Skills deals Greater Manchester
Liverpool City Region
West Midlands
Tees Valley
West of England
Cambridgeshire
Greater London
Sheffield City Region
North of Tyne
Policy uncertainty
Deals still stand
Delay from to
Influencing role

19. Adult ed budget, 2018 and beyond
Short term issues ( )
The role of MCAs in influencing allocations
The underspends and the restrictions that cause it
Long term issues (2019 and beyond)
Implementing skills devolution in 7 to 9 areas (grant or contract? data requirements? cross border issues?)
The European Social Fund replacement (Shared Prosperity Fund) and relationship to AEB
Revitalising adult education policy

20. Apprenticeship levy and spending
“Apprenticeship spending will double over the decade”
2015 spending review
… via a new hypothecated tax

21. Employer driven levy funding
Large employer
HMRC
Levy (0.5% of payroll)
Employer
directs recipient and price
Apprentice
Digital Apprenticeship Service
Registered Training Organisation
Skills Funding Agency
Payment on confirmation of training (ILR) and employer authorisation

22. The apprenticeship formila
Programme funding
15 funding bands (£1,500 to £27,000)
Maximum government investment of 90%
year olds
£1,000 to employer
£1,000 to provider
plus 20% for frameworks
English & Maths
£471 to provider for each qualification (L1,L2)
Additional learning support
Up to £150 per month
Disadvantage uplift
10%, 20% uplifts
Small employers (<50)
No co-financing for 16-18s
Or 19-24s with EHCP

23. Apprenticeships, 2018 and beyond
Short term issues ( )
Issues associated with the non-levy procurement
Likely underspend because levy payers are cautious while co-funding discourages some employers
Changes associated with new standards
Long term issues (2019 and beyond)
The plan to bring all employers into DAS
Creating a more sustainable and high quality apprenticeship system focused on Level 3 and above

24. Higher education, 2018 and beyond
Short term issues ( )
OFS registration (probably in early summer)
Long term issues (2019 and beyond)
OFS registration conditions
Paying for OFS (subscriptions) and other costs
The likely freeze on the fee cap (at £9,250)
Review of HE fees/loans (in time for next election?)

25. Anticipating change 2015-16 Spending set by Coalition (several cuts)
Spending review (stabilisation on core budgets, promise of future reform)
Apprenticeship levy started
Working through of reforms
Some big changes (Brexit, OFS, Skills
devolution, College insolvency)

26. Pensions

27. Colleges and pensions Support staff Teachers College 91 LGPS funds TPS
LGPS Employer
Range 10-28%
Average c17%
Deficit contributions
TPS Employer
16.48%
Could rise in 2019
We’ll know by April 2018
Support staff
Income-related
Contributions %
Income-related
Contributions
7.4 – 11.7%

28. Pension regulations and colleges
Eligibility Teachers employed in a college eligible for TPS All other college staff eligible for LGPS Subsidiary companies Staff not eligible for TPS (unless seconded in) Staff eligible for LGPS if company is admitted
Support staff
Teachers

29. Oversight of colleges

30. Multiple regulators Special Office for Students FE EFSFA Ofsted
Administrator
(2018) FE
Commissioner
EFSFA
Office for Students
(2018)
College
Ofsted
LGPS Fund
External auditor
The College’s bank

31. College accountability
Colleges accountable to various organisations
The bank (who insist on loan covenants)
ESFA (finances are satisfactory or inadequate)
Ofsted (which has a risk-based inspection cycle)
FE Commissioner (referral from ESFA or Ofsted)
plus students, employers and communities
College data visible to regulators
Finance data (2 key returns a year)
Individual Learner Record (14 returns: R01 to R14)

32. Financial reporting Accounting FRS102 (introduced in 2015-16)
FE HE SORP (interprets standards, update every 4 years)
ESFA accounts direction (annual update, last one Dec 16)
Accounts Direction Handbook (“Casterbridge college”)
ESFA finance oversight
Financial plan each July: this year, next year, year after
Finance record each December: last year

33. College finance challenges
Rising staff costs
College credit crunch
Competition for students
Flat cash funding
Poorly controlled pension system
Funding reform and uncertainty

34. Set some benchmarks Needs to be decided by the college. Some hints
A-level class sizes in sixth form colleges average 17
Teaching contact hours often above 800/ year
Average student hours: 16 hours/week
Estate costs (from area reviews) average £56/m2
Space utilisation (area reviews) 33%
Etc
“Average colour of a rainbow is white” (Nick Allen)

35. Running a successful college.
Class size
Income and
cashflow
Student taught hours
Positive completion
Staff costs per teaching hour
Staff and student engagement
Student satisfaction
Costs of running the college

36. Julian Gravatt AoC deputy chief executive
Any questions?
Julian Gravatt AoC deputy chief executive