Financial Planning and Budgeting: How colleges plan and manage finance. Peter Merry Director of Finance, Walsall College

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1 Financial Planning and Budgeting: How colleges plan and manage finance Peter Merry Director of Finance, Walsall College

2 The College s mission statement is: Walsall College is uniquely and proudly vocational. Our greatest passion is unleashing the potential of individuals, communities and businesses; our greatest legacy is the talent of our students: skilled, professional and enterprising.

3 Walsall College Graded outstanding by Ofsted in 2013 Outstanding financial health in 2012/14 and 2013/14, Good Financial Health in 2014/15 and expected for 2015/16 Historically has delivered surpluses and generated cash 11m capital project Walsall Business and Sports Hub opened September 2015: funded without borrowing

4 What are your objectives and who is driving them?

5 What are your objectives and who is driving them?

6 What are your objectives and who is driving them?

7 What are your objectives and who is driving them? Chief Executive EFA (April 2012)

8 What are your objectives and who is driving them? Chief Executive EFA (April 2012) Chief Executive SFA (Nov 2014)

9 What are your objectives and who is driving them? Chief Executive EFA (April 2012) Chief Executive SFA (Nov 2014) Shadow Chief Executive, Institute For Apprenticeships (Sep 2016) 2 days per week until 2017

10 What are your objectives and who is driving them?

11 What are your objectives and who is driving them?

12 What are your objectives and who is driving them?

13 Indicator Definition Target range Operating Surplus/deficit (as a % of income) Surplus/(deficit) on continuing operations after depreciation and before exceptional items, tax, pension finance income and FRS 17 adjustments, divided by Adjusted income The aim would be to deliver colleges in strong financial health e.g. to have the potential to make an annual surplus of 3%- 5% which enables reinvestment in delivery but not limited to including capital From colleges' 2015/16 financial year the SFA and EFA will move to use of a measure of Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) for the purposes of monitoring financial health. As this change progresses the use of this surplus measure for this process will be reviewed. Borrowings (as a % of income) Adjusted current ratio Staff costs (as a % of income) Total borrowing, i.e. overdrafts, loans (including exceptional financial support loans and the capital element of finance leases) <40% Current assets (excluding restricted cash from disposal of fixed assets held for future reinvestment and assets held for resale) divided by current liabilities (excluding deferred capital grants and holiday pay accruals) >1 Total Staff costs (teaching and support, including contract tuition services but excluding restructuring) as a percentage of Adjusted income (excluding franchised provision income) <65%

14 What are your objectives and who is driving them?

15 What are your objectives and who is driving them?

16 What are your objectives and who is driving them?

17 What are your objectives and who is driving them?

18 What are your objectives and who is driving them?

19 What are your objectives and who is driving them? Bottom line profitability? Skills funding agency and financial health? Performance / EBITDA Gearing / Borrowing as a % of income Adjusted current ratio Ofsted? The bank and their covenants? Cash?

20 Finance: Measuring performance Management accounts Timely? Comprehensive? Commentary? KPIs?

21 Finance: Measuring performance Management accounts Timely? Comprehensive? Commentary? KPIs?

22 Finance: Beyond just historical data Understanding the business drivers EFA income SFA funding and achievements Pay and headcount Forecasting Financial outlook for 17/18.

23 Financial outlook: planning Is there a seamless process? Curriculum plan? New project appraisal? Understanding pay and headcount? Can it be measured against actuals? Are managers held to account?

24 The FE Commissioner: financial challenges June 2014 Critical of: The level of challenge and financial skills of governing bodies Reliance of governing bodies on information from Principals The level of reporting to governing bodies including financial and non-financial data Lethargy in dealing with funding shortfalls, reliance on undeliverable growth, cuts not deep enough Small group sizes, excess of support staff, high pay as a % of income Lack of expertise in executive teams and new Principals Poor recovery plans not underpinned by detailed curriculum plans Failure to appraise the cost-benefit of new initiatives and expensive vanity projects Under-utilised estates

25 The FE Commissioner: financial challenges June 2014 Template balanced scorecard:

26 Thank you Please contact: Peter Merry Walsall College Wisemore Campus Littleton Street Walsall West Midlands WS2 8ES