Stow College. Financial Statements for the Year Ended 31 July Scottish Charity SC021212

Transcription

1 Stow College Financial Statements for the Scottish Charity SC021212

2 Stow College Financial Statements for the Contents Page Operating and Financial Review 3 Statement of Corporate Governance and Internal Control 9 Statement of Responsibilities of the Board of Management 13 Independent Auditor s Report to the Board of Management, the Auditor General for Scotland and the Scottish Parliament 15 Income and Expenditure Account 17 Statement of Historical Cost Surpluses and Deficits 17 Statement of Total Recognised Gains and Losses 18 Balance Sheet 19 Cash Flow Statement 20 Notes to the Financial Statements 21 1

3 Stow College Financial Statements for the Professional Advisors External auditors: Internal auditors: Bankers: Legal: Scott Moncrieff Exchange Place 3 Semple Street EDINBURGH EH3 8BL Wylie & Bisset LLP 168 Bath Street Glasgow G2 4TP Royal Bank of Scotland plc Commercial Banking 2nd Floor Kirkstane House 139 St Vincent Street Glasgow G2 5JF Brodies LLP 2 Blythswood Square Glasgow G2 4AD Creideasach Inglewood House Inglewood Alloa FK10 2HU BTO Solicitors 48 St Vincent Street Glasgow G2 5HS 2

4 Stow College Financial Statements for the Operating and Financial Review The Board present their report and the audited financial statements for the year ended. NATURE, OBJECTIVES AND STRATEGIES Stow College has been providing education and training since 26 th September 1934 and has had a long and successful association with the social and economic development of Glasgow and the West of Scotland. The college operates from two main campuses. The City Campus is situated in the Cowcaddens area of Glasgow and Stow West Campus in Maryhill. In September 2012 the Board of Management agreed to proceed with a merger process with North Glasgow College and John Wheatley College as part of the Scottish Government s regionalisation strategy for further education. The due diligence for the merger was completed in January 2013 and merger proposal documentation submitted to the Scottish Government. On the 15 th August 2013 the Cabinet Secretary for Education and Lifelong Learning gave his consent to the merger. A transfer and closure notice order will be laid before the Scottish parliament which will transfer the assets and liabilities of Stow College to North Glasgow (the host) and this will lead to the closure of Stow College as a legal entity. The Board of Management has notified the Charity regulator for consent to dissolve the charitable body as at the 1 st November 2013 which is vesting day for the merger. Legal Status The college was established under The Further and Higher Education (Scotland) Act 1992 for the purpose of conducting the business of Stow College. The College is a registered charity (Scottish Charity Number SC ) and is recognised by HM Revenue & Customs as a charity for the purposes of section 505, Income and Corporation Taxes Act 1988 and as such is exempt from corporation tax on its charitable activities. Scope of the Financial Statements The Financial Statements cover all activities of the College. Mission Statement The College's mission, as approved by the Board of Management, is: Mission statement: Vision statement: Provide user driven services to satisfy the lifelong learning needs of all our customers and communities. A centre of world class learning excellence measured against international standards providing innovative and diverse solutions. Implementation of Strategic Plan The strategic plan is reviewed annually as part of the planning cycle. The plan contains four key strategic themes that were developed from the Mission and Vision statements. Each theme has a specific aim and set of objectives attached to it. The key strategic themes and aims are as follows: Theme 1: Aim: Theme 2: Aim: Learning & Teaching To deliver excellence in learning and teaching. People and Performance To ensure the College attracts, maintains and develops a highly skilled and motivated workforce to deliver excellence in all areas of the College s operations. 3

5 Stow College Financial Statements for the Operating and Financial Review (continued) Theme 3: Aim: Theme 4: Aim: Collaboration and Partnership To develop excellence in collaborative and partnership working to contribute to local, national and international initiatives and priorities. Governance & Leadership To develop excellence in governance and leadership through transparent, responsive and accountable approaches and practices securing effective and sustainable outcomes. The College sets annually a number of operational objectives which form an operational plan linked to the objectives contained within the above themes. Education Scotland Education Scotland was created on the 1 st July 2011 and inherited the full range of functions formerly undertaken by Her Majesty's Inspectorate of Education (HMIE) A bespoke external review took place during the week commencing the 29 th April 2013 and a report was issued by HM Inspectors on behalf of the Scottish Funding Council on the 28 th June The full report can be found at The report states the following: The Scottish Funding Council (SFC) and Education Scotland have agreed a bespoke approach to a number of external reviews in year This approach takes account of the challenges and complexities of the transition period towards full regionalisation within the college sector. Education Scotland carried out a scoping exercise to identify key themes for external review, based on the identification of potential risk. These themes were discussed and agreed with SFC and the college. The judgements expressed by Education Scotland refer only to these themes: attainment rates for learners on full-time Further Education (FE) programmes; self-evaluation in learning and teaching, including individual reflection on professional practice; and the engagement of learners in enhancing their own learning The report states that Stow College has effective arrangements to maintain and enhance the quality of its provision in relation to: self-evaluation in learning and teaching, including individual reflection on professional practice; and the engagement of learners in enhancing their own learning. This judgement indicates that the college has in place effective arrangements to maintain and enhance the quality of its provision and outcomes for learners and other stakeholders in relation to these themes. The effectiveness of Stow College s arrangements to maintain and enhance the quality of its provision in relation to the attainment rates for learners on full-time FE programmes is limited. In respect of the last point on attainment levels these have improved significantly over the last four years and the target set by the Glasgow region has been exceeded however this is still below the national attainment level. The College prepared and submitted an action plan to the Scottish Funding Council with regard to the review. This action plan was agreed by SFC and is monitored on their behalf by Education Scotland. 4

6 Stow College Financial Statements for the Operating and Financial Review (continued) Financial Objectives In order to achieve the College s mission and strategic aims the financial objectives are: - to achieve an annual operating surplus; - to maintain an adequate ratio of net current assets to liabilities; - to maintain sufficient cash reserves to meet the working capital needs of the college; - to generate funds for capital investment; - to continue to develop new sources of funding that contribute to the overall finances of the college and are consistent with the strategic aims of the college; - to manage risk in the deployment of college resources; and - to ensure value for money is achieved. FINANCIAL POSITION Financial Results The College had a deficit of 429,076 and after adjusting for the effect of depreciation on revalued fixed assets, the historical cost deficit was 270,499. The deficit includes 168,694 of non budgeted restructuring cost and 90,055 of non budgeted College contribution to student support funds. The College also funded a pay award during the year to be consistent with merger partners. Included within the unfunded restructuring costs was an amount of 101,977 which the College and the merging partners were of the opinion that SFC would fund these costs from the transformation funding. SFC has now determined that they will only fund up to a certain amount on an individual level and this has required all three Colleges to amend their severance claims from the transformation funds and make appropriate adjustments within their financial statements. The accounts include 1,288,664 of restructuring costs (see note 7) achieved through a voluntary severance process. Fixed Assets The College received 427,001 of capital grant funding for 2012/13. The Income & Expenditure includes a charge of 408,699 for estates related maintenance costs funded by capital estates grant. The remaining grant of 18, was used for capitalised equipment. Balance Sheet Cash reserves at were 856,883. This includes 23,322 of HE Discretionary funds which will be repaid to Student Awards Agency Scotland (SAAS). The College maintains sufficient cash reserves to meet its working capital requirements and to meet its obligations for the repayment of past funding. Treasury Management Working capital funds are held in high interest bearing accounts and any excess funds not required in the short term are placed on fixed term deposit. These generally do not exceed a period of 1 month. The Finance Committee and General Purposes Committee has approved a Treasury Management Policy that requires funds to be deposited with a UK clearing bank to avoid any exposure where funds might be at risk in international markets. Creditor Payment Policy The College complies with the CBI Prompt Payment Code and has a policy of paying its suppliers within 30 days of receipt of invoice unless the invoice is contested. Payments in this year s accounts have been made on average within 30 days. All disputes and complaints are handled as quickly as possible. 5

7 Stow College Financial Statements for the Operating and Financial Review (continued) Taxation Status The College has been entered into the Scottish Charity Register and is entitled, in accordance with section 13(1) of the Charities and Trustee Investment (Scotland) Act 2005, to refer to itself as a Charity registered in Scotland. The College is recognised by HM Revenue & Customs as a charity for the purposes of section 505, Income and Corporation Taxes Act 1988 and is exempt from corporation tax on its charitable activities. The College receives no similar exemption in respect of Value Added Tax. CURRENT AND FUTURE DEVELOPMENTS AND PERFORMANCE Following the Scottish Government s consultation on Post 16 Education the Post 16 Education (Scotland) bill was introduced in the Scottish Parliament on the 27 November Following a series of amendments the bill was passed in June 2013 and received royal assent on the 7 th August The bill includes provision for the regionalisation of Colleges. In 2012/13 in preparation for regionalisation the Colleges within each region prepared a Regional Outcome Agreement (ROA) and funding for 2012/13 was allocated on a regional basis. The seven colleges within the Glasgow region (Anniesland College, Cardonald College, City of Glasgow College, John Wheatley College, Langside College, North Glasgow College and Stow College) under the auspices of the Glasgow College Strategic Partnership (GCSP) received 76,664,835 of core funding from the Scottish Funding Council for the academic year 2012/13 to plan and deliver Further and Higher Education in the Glasgow region. Funding was provided on the condition that the GCSP commits to deliver the outcomes detailed within this agreement document. Delivery of these outcomes by the GCSP will seek to support the achievement of the following four Glasgow region priority impacts: 1. An efficient, regional college structure that meets the needs of Glasgow and Scotland. 2. Fewer young people in Glasgow and Scotland not in employment, education or training. 3. More learners develop the appropriate skills needed to get a job, keep a job or get a better job. 4. More learners achieve qualifications and progress to further study. In providing an efficient regional college structure Anniesland, Cardonald and Langside Colleges merged on the 1 st August 2013 to create Glasgow Clyde College and Stow, John Wheatley and North Glasgow will merge on the 1 st November to create Glasgow Kelvin College. The College along with its GCSP partners have contributed to the actions and objectives set out in the Regional Outcome Agreement. The Scottish Funding Council provides the main funding for the College s student activity. This funding is based on the College achieving a level of funded activity determined by weighted student units of measure (WSUMs). Each College within the region has a WSUM allocation and the allocation for Stow College was 40,135 and the College has an additional allocation of 766 WSUMs as part of the ESF priority 1 project, Investing in skills for economic recovery managed by SFC. This provides a combined target of 40,901 WSUMs. The College has delivered 42,617 which represent % of the combined target. The table below shows the number of funded WSUMs delivered against each programme group: Programme Group WSUMs 2012/13 WSUMs 2011/12 +/(-) Business Management 4,379 4,996 (617) Computing 2,356 3,297 (941) Construction 4,352 4,926 (574) Art & Design 7,960 8,567 (607) Engineering 6,816 6, Health Minerals & Materials 2, , (708) 11 Personal Development (275) Science & Maths 6,108 4,782 1,326 6

8 Stow College Financial Statements for the Operating and Financial Review (continued) Social Studies 2,064 1, Social Work 1,120 1, Special Programmes (152) Extended Learning Support(ELS) 4,964 5,318 (354) Total 42,617 45,190 (2,573) The number of WSUMs delivered has fallen due to reductions in funded activity from SFC. The College carries out an annual review of courses and adjusts the portfolio based on the level of funding, demand for individual courses and overall performance of each programme. The number of students enrolled on programmes is: Student Enrolments 2012/ /12 +/(-) Full Time 2,012 2,177 (165) Part Time Student Numbers 2,562 3,151 (589) Total Student Numbers 4,574 5,328 (754) The reduction in the overall number of enrolments is consistent with the reduction in funded activity levels. The College maintains a range of key performance indicators, these are organised into four key groupings. Financial There is a significant variance on the surplus/deficit comparison due the impact of restructuring costs Non SFC income as a % of total income fell by 4.12% this included the reduction in International fee income of 595K. Human Resources The main impact on indicators is the uncertainty caused by merger and changes taking place within the sector. Buildings & Infrastructure Energy consumption increased marginally by 7.6%, this is due higher gas consumption during the winter period. Learning & Teaching There continues to be improvement in both the early retention and retention indicators. The overall student outcome has increased significantly (4.8%) with improvements in both HE and FE programmes. This reflects the positive impact that a number of initiatives have had. These numbers are taken from the data returns submitted to SFC and final performance indicators are published annually by SFC. Individual programmes are monitored closely to ensure the College meets its targets in each of these three areas. 7

9 Stow College Financial Statements for the Operating and Financial Review (continued) KPI 2012/ /12 +/(-) Financial Operating Surplus ( K) WSUMs delivered as a % of target Non SFC Income as a % of total income International fee income Staff Cost as % of total expenditure Days cash to total expenditure (excluding depreciation) (429) (529) 2.17 (4.12) (595) 3.10 (43) Current ratio: current assets to current liabilities (0.19) Human Resources Staff turnover % (on permanent contracts) Working days lost through Absence per FTE % of staff holding TQFE qualification (0.04) WSUMs per staff FTE (5.19) Buildings & Infrastructure Electricity and Gas consumption (kwh) 4,673,563 4,343, ,891 Learning & Teaching Early student retention % Student retention % Student outcome successful % Client satisfaction % PRINCIPAL RISKS AND UNCERTAINTIES With merger vesting day taking place on November 1 st each of the 3 Colleges has an individual WSUMs and funding allocation for 2013/14. The three Colleges have prepared individual budgets for 2013/14 and a robust business case for Glasgow Kelvin College has been prepared. A budget for the combined activity of the 3 Colleges has been approved by the Shadow Board and was submitted to the Scottish Funding Council at the end of August Students have enrolled on programmes at each individual College for 2013/14 and it is anticipated that students will be largely unaffected by the merger with their courses continuing to operate as planned for this academic session. The key risks and uncertainties for the future relate to the challenge of successfully integrating the 3 Colleges and achieving the reductions in expenditure required to offset the funding reductions in 2013/14. The changes to the classification of Colleges under the Office of National Statistics (ONS) will impact on Glasgow Kelvin College from 1 st April 2014 and preparations to deal with the implications of this change are underway. EQUALITY, DIVERSITY AND INCLUSIVENESS The college pursues practices designed to promote equality and eliminate discrimination of any kind whilst offering equality of opportunity and access to all. DISCLOSURE OF INFORMATION TO AUDITORS The Board members who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which the College s auditors are unaware; and each Board 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 Board on 31 October 2013 and signed on its behalf by: K A J McKellar Chairman 8 R McGrory Chief Executive & Principal

10 Stow College Financial Statements for the Statement of Corporate Governance and Internal Control Introduction The College is committed to exhibiting best practice in all aspects of corporate governance. This summary describes the manner in which the College has applied the principles set out in Section 1 of the UK Corporate Governance Code Its purpose is to help the reader of the financial statements understand how the principles have been applied. Statement of full UK Corporate Governance Code 2010 compliance In the opinion of the College s Board of Management, the College complies with all the provisions of the UK Corporate Governance Code 2010, in so far as they apply to the further education sector, and it has complied throughout the year ended. Board of Management The College s Board of Management met five times during the year. The Board of Management has five committees. All of these Committees are formally constituted with terms of reference which were reviewed and updated during the year and their membership comprises mainly of lay members of the Board of Management. The Board of Management also has representation on the Performance Monitoring Committee and Learning and Teaching Council. These are College operational committees. The Human Resource Management Committee ensures that the College follows best practice on employment and employee development issues. The Finance and General Purposes Committee, inter alia, recommends to the Board of Management the College s annual revenue and capital budgets and monitors performance in relation to the approved budgets. The Governance and Audit Committee is scheduled to meet at least four times a year with the College s external and internal auditors in attendance. The Governance and Audit Committee advises the College on the appointment of the internal auditors and the auditors remuneration. The above committees met four times per year. The Search Committee considers nominations for vacancies in the Board of Management under the terms of the Further and Higher Education (Scotland) Act The Remuneration Committee determines the remuneration of the Chief Executive & Principal and members of the senior management team. 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 Governance and Audit Committee. Management is responsible for the implementation of agreed audit recommendations and internal auditors undertake periodic follow-up reviews to ensure that such recommendations have been implemented. The Committee considers detailed reports together with recommendations for the improvement of the College s systems of internal control and management s responses and implementation plans. It also receives and considers reports from the Scottish Funding Council as they affect the College s business and monitors adherence to the regulatory requirements. Whilst senior managers attend meetings of the Governance and Audit Committee, they are not members of the Committee and the Committee meets the external auditors on their own for independent discussions as and when required. 9

11 Stow College Financial Statements for the Statement of Corporate Governance and Internal Control (continued) Board members The members of the Board of Management of the College at, all of whom have been members for the whole of the year ended on that date unless otherwise stated, were: Board Member Committees Served Status / Organisation Date of Appointment Mr I Baxter Finance and General Purpose; Self employed 23 March 2005 Remuneration; Search and Nomination Dr R McGrory Finance and General Purpose; Chief Executive and 7 June 2000 Human Resource Management Principal Mr G Hunt Governance and Audit University of the 16 September 2009 West of Scotland Ms A Peters Human Resource Management Halo Hotels Ltd 16 September 2009 Mr R Rose Governance and Audit ; NHS Greater Human Resource Management Glasgow & Clyde Mr P Lord Mr K Ramsay Finance and General Purpose; Remuneration; Search and Nomination Remuneration; Search and Nomination Mr H Robertson Human Resource Management Support Staff Date of Retiral 16 September 2009 Resigned 14 th December 2012 Rolls Royce PLC 25 November 2009 Self employed 25 November 2009 Resigned 13 th November July 2010 Representative Retired 16 March 2011 Mr J Barbour 1 Finance and General Purpose, Search and Nomination Mr S Pirie Governance and Audit; NVT Group 16 March 2011 Search and Nomination Mr I Hume Governance and Audit; Retired 16 March 2011 Remuneration Mr K McKellar Search and Nomination, Hannah Research 3 October 2011 Chair 2 Remuneration Institute Mr D Martin Finance and General Purpose, Skills Development 3 October 2011 Human Resource Management Scotland Ms C O Connor Finance and General Purpose Concept Property 3 October 2011 Development Ms F Curran Finance and General Purpose Teaching Staff 12 September 2012 Representative Mr M Cairns Student 20 th December Representative Appointed Vice Chair on 7th December Appointed Chair on 13th November

12 Stow College Financial Statements for the Statement of Corporate Governance and Internal Control (continued) Mrs Lisa Clark was appointed as Clerk to the Board on 1 st June The members of the committees of the Board of Management of the College during the year ended 31 July 2013, all of whom have been members for the whole of the year unless otherwise stated, were: Governance and Audit Committee: Mrs K Henry** Job Centre Plus Mr G Hunt (Chair) Board of Management Mr I Hume Board of Management Mr K McKellar Board of Management (resigned 13 th November 2012) Mr S Pirie Board of Management Mr R Rose Board of Management (resigned 13 th November 2012) Dr M Green** Board of Management Advisor (appointed 28 th May 2013) ** Co-opted member Finance and General Purpose Committee: Mr J Barbour Board of Management Mr I Baxter (Chair) Board of Management Mr P Lord Board of Management Dr R McGrory Chief Executive & Principal Ms C O Connor Board of Management Mr D Martin Board of Management (appointed 21 st August 2012) Ms F Curran Board of Management Teaching Representative (appointed 13 th November 2012) Human Resource Management Committee: Mrs K Henry** Job Centre Plus Ms A Miller Assistant Principal Mr D Martin Board of Management Dr R McGrory Chief Executive & Principal Ms A Peters Board of Management Mr H Robertson Board of Management Mr R Rose Board of Management (resigned 13 th November 2012) Dr M Green** Board of Management Advisor (appointed 21 st May 2013) **co-opted member Remuneration Committee: Mr Ian Baxter Board of Management Mr I Hume Board of Management Mr P Lord (Chair) Board of Management Mr K Ramsay Board of Management (resigned 13 rd November 2012) Mr K McKellar Board of Management (appointed 4 th December 2012) Search Committee: Mr Ian Baxter Board of Management Mr P Lord Board of Management Mr K McKellar (Chair) Board of Management Mr S Pirie Board of Management Mr K Ramsay Board of Management (resigned 13 rd November 2012) 11

13 Stow College Financial Statements for the Statement of Corporate Governance and Internal Control (continued) Corporate strategy In respect of its strategic and development responsibilities, the Board of Management receives recommendations and advice from all Board of Management Committees in accordance with their terms of reference. The membership of these committees includes lay members appointed by the Board of Management from amongst its members. Board s statement on internal control The College s Board of Management is responsible for the College s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The senior management team receives 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 operational units and reinforced by risk awareness training. The senior management team and the Governance and Audit Committee also receive regular reports from the internal audit and health, safety and environmental monitoring functions which include recommendations for improvement. The Governance and Audit Committee s role in this area is confined to a high level review of the arrangements for internal financial control. The Board of Management s agenda includes a regular item for consideration of risk and control and receives reports thereon from the senior management team and the Governance and Audit Committee. The emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception. The risk register is reviewed by the Governance and Audit Committee and the Board of Management each quarter by considering documentation from the senior management team and internal audit, and taking account of events since the last review. The Board of Management is of the view that there is an ongoing process for identifying, evaluating and managing the College s significant risks that has been in place for the year ended and up to the date of approval of the annual report and financial statements. This process is regularly reviewed by the Board of Management and it accords with the internal control guidance published by the Turnbull Committee. Going concern The Board of Management considers that the College has adequate resources to continue in operational existence for the foreseeable future. The Board of Management have approved the merger with North Glasgow and John Wheatley Colleges and that Stow College will cease to exist on 1 November However, as the merger business case indicates, the new College expects to be financially sustainable in the long term and all Stow College assets, liabilities, rights, obligations and staff will transfer to the new merged institution by a Scottish Statutory Instrument. Keith A J McKellar Chair of the Board of Management 31 October

14 Stow College Financial Statements for the Statement of Responsibilities of the Board of Management The Board of Management are required to present audited financial statements for each financial year. In accordance with the Further and Higher Education (Scotland) Act 1992, the Board of Management is responsible for the administration and management of the College s affairs, including ensuring an effective system of internal control, and is required to present audited financial statements for each financial year. The Board of Management is responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the College and enable it to ensure that the financial statements are prepared in accordance with the Further and Higher Education (Scotland) Act 1992, the 2007 Statement of Recommended Practice - Accounting for Further and Higher Education and other relevant accounting standards. In addition, within the terms and conditions of a Financial Memorandum agreed between the Scottish Funding Council and the College s Board of Management, the Board of Management, through its designated office holder, is required to prepare financial statements for each financial year which give a true and fair view of the College s state of affairs and of the surplus or deficit and cash flows for that year. The financial statements are prepared in accordance with the Accounts Direction issued by the Scottish Funding Council, which brings together the provisions of the Financial Memorandum with other formal disclosures that the Scottish Funding Council require the Board of Management to make in the financial statements and related notes. In preparing the financial statements, the Board of Management is required to: Select suitable accounting policies and apply them consistently; Make judgements and estimates that are reasonable and prudent; State whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and Prepare financial statements on the going concern basis, unless it is inappropriate to presume that the College will continue in operation. The Board of Management is satisfied that it has adequate resources to continue in operation for the foreseeable future and for this reason the going concern basis continues to be adopted in the preparation of the financial statements. Financial statements of the College may be published on the College s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the College s website is the responsibility of the Board. The Board s responsibility also extends to the ongoing integrity of the financial statements contained therein. The Board of Management has taken reasonable steps to: Ensure that funds from the Scottish Funding Council are used only for the purposes for which they have been given and in accordance with the Financial Memorandum with the Funding Council and any other conditions which the Funding Council may from time to time prescribe; Ensure that there are appropriate financial and management controls in place to safeguard public funds and funds from other sources; Safeguard the assets of the College and prevent and detect fraud; and Secure the economical, efficient and effective management of the College s resources and expenditure. The key elements of the College s system of internal financial control, which is designed to discharge the responsibilities set out above, include the following: Clear definitions of the responsibilities of, and the authority delegated to, heads of academic and administrative departments; A comprehensive medium and short-term planning process, supplemented by detailed annual income, expenditure, capital and cash flow budgets. 13

15 Stow College Financial Statements for the Statement of Responsibilities of the Board of Management (continued) Regular reviews of key performance indicators and business risks and quarterly reviews of financial results involving variance reporting and updates of forecast outturns; Clearly defined and formalised requirements for approval and control of expenditure, with investment decisions involving capital or revenue expenditure being subject to formal detailed appraisal and review according to approval levels set by the Board of Management; Comprehensive Financial Regulations, detailing financial controls and procedures, approved by the Governance and Audit Committee and the Finance and General Purposes Committee; and Professional internal audit team whose annual programme is approved by the Governance and Audit Committee and endorsed by the Board of Management and whose head provides the Board of Management with a report on internal audit activity within the College and an opinion on the adequacy and effectiveness of the College s system of internal control, including internal financial control. Any system of internal financial control can, however, only provide reasonable, but not absolute, assurance against material misstatement or loss. Approved by order of the members of the Board on 31 October 2013 and signed on its behalf by: Keith A J McKellar Chair of the Board of Management 14

16 Stow College Financial Statements for the Independent auditor s report to the members of the Board of Management of Stow College the Auditor General for Scotland and the Scottish Parliament We have audited the financial statements of Stow College for the year ended under the Further and Higher Education (Scotland) Act 1992 and section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act The financial statements comprise the Income and Expenditure Account and Statement of Total Recognised Gains and Losses, the Balance Sheet, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the parties to whom it is addressed in accordance with the Public Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 125 of the Code of Audit Practice approved by the Auditor General for Scotland, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Respective responsibilities of the Board of Management and auditor As explained more fully in the Statement of Responsibilities of the Board of Management, the Board of Management is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and is also responsible for ensuring the regularity of expenditure and income. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) as required by the Code of Audit Practice approved by the Auditor General for Scotland. Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. We are also responsible for giving an opinion on the regularity of expenditure and income in accordance with the Public Finance and Accountability (Scotland) Act Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the body s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board of Management; and the overall presentation of the financial statements. It also involves obtaining evidence about the regularity of expenditure and income. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements, irregularities, or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view in accordance with the Further and Higher Education (Scotland) Act 1992 and directions made thereunder by the Scottish Funding Council of the state of the College s affairs as at and of its deficit for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Further and Higher Education (Scotland) Act 1992 and directions made thereunder by the Scottish Funding Council, the Charities and Trustee Investment (Scotland) Act 2005, and regulation 14 of The Charities Accounts (Scotland) Regulations Opinion on regularity In our opinion in all material respects the expenditure and income in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers. 15

17 Stow College Financial Statements for the Independent auditor s report to the members of the Board of Management of Stow College the Auditor General for Scotland and the Scottish Parliament (continued) Opinion on other prescribed matters In our opinion the information given in the Operating and Financial Review for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We are required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records; or we have not received all the information and explanations we require for our audit; or the Statement of Corporate Governance and Internal Control does not comply with Scottish Funding Council requirements. We have nothing to report in respect of these matters. Scott-Moncrieff, senior statutory auditor Chartered Accountants Registered Auditor Exchange Place 3 Edinburgh EH3 8BL Eligible to act as an auditor in terms of section 1212 of the Companies Act October

18 Stow College Financial Statements for the Income and Expenditure Account for the Note Restated Income SFC grants 2 10,287 9,702 Tuition fees and education contracts 3 2,695 3,088 Other grant income Other operating income Endowment and investment income TOTAL INCOME 13,216 13,160 Expenditure Staff costs 7 9,239 8,424 Other operating expenses 9 3,648 3,782 Depreciation Interest payable TOTAL EXPENDITURE 13,645 13,060 Surplus on continuing operations after depreciation of assets at valuation, disposal of assets and before tax (429) 100 Taxation Surplus on continuing operations after depreciation of assets at valuation and after tax (429) 100 Statement of Historical Cost Surpluses and Deficits for the Note Restated Surplus on continuing operations for the year (429) 100 Difference between historical cost depreciation and the actual charge for the year calculated on the revalued amount Historical cost surplus for the year (270) 259 The notes on pages 21 to 39 form part of these financial statements. 17

19 Stow College Financial Statements for the Statement of Total Recognised Gains and Losses for the Note Restated Surplus on continuing operations for the year after depreciation of assets and valuation and tax (429) 100 Unrealised surplus on revaluation of tangible fixed assets 0 Actuarial gain/(loss) in respect of pension scheme 19 & (462) Total gain /(loss) recognised since last annual Report 567 (362) RECONCILIATION Opening reserves 3,556 3,918 Total recognised gains for the year 567 (362) Closing reserves 4,123 3,556 The notes on pages 21 to 39 form part of these financial statements. 18

20 Stow College Financial Statements for the Balance Sheet as at Note Restated Fixed assets Tangible fixed assets 12 7,217 7,919 Current assets Stocks - - Debtors 13 1, Cash at bank and in hand 857 2,237 2,099 2,702 Creditors: amounts falling due within one year 14 (2,177) (2,334) Net current assets (78) 368 Total assets less current liabilities 7,139 8,287 Creditors due after one year 15 (463) (774) Provision for liabilities 16 (931) (941) Net Assets excluding pension (liability) ,572 Pension (liability) 24 (602) (1,578) NET ASSETS INCLUDING PENSION (LIABILITY) 5,143 4,994 Deferred capital grants 17 1,020 1,438 Reserves Income and expenditure reserve excluding pension reserve 19 (574) (324) Pension reserve 19 &24 (602) (1,578) Income and expenditure account including pension reserve (1,176) (1,902) Revaluation reserve 18 5,299 5,458 Total Reserves 4,123 3,556 TOTAL 5,143 4,994 The financial statements on pages 17 to 39 were approved by the Board of Management and authorised for issue on 31 October 2013 and signed on its behalf by: K A J McKellar Chairman R McGrory Chief Executive & Principal 19

21 Stow College Financial Statements for the Cash Flow Statement for the CASH FLOW STATEMENT Note Restated Net cash inflow/(outflow) from operating activities 20 (1,385) (545) Returns on investments and servicing of finance Capital expenditure 21 - (130) Financing Increase /(Decrease) in cash in the period (1,380) (665) Increase/(Decrease) in cash in the period (1,380) (665) Cash outflow from decrease in debt and lease financing - - Movement in net funds in the period (1,380) (665) Net funds at 1 August ,237 2,902 Net funds at ,237 The notes on pages 21 to 39 form part of these financial statements. 20

22 Stow College Financial Statements for the Notes to the financial statements 1. Principal accounting policies Basis of preparation The financial statements are prepared in accordance with the Further and Higher Education (Scotland) Act 1992 and the Accounts Direction issued thereunder by the Scottish Funding Council which requires compliance with the Statement of Recommended Practice: Accounting for Further and Higher Education (2007). Basis of accounting The accounts have been prepared under the historical cost convention, modified by the revaluation of certain fixed assets. Recognition of income Income from tuition fees is recognised in the year in which it is receivable and includes all fees chargeable to students or their sponsors. Income from grants, contracts and other services rendered is included to the extent of completion of the contract or services concerned. Income from short term deposits is credited to the income and expenditure account in the period in which it is earned. Fixed assets Fixed assets are shown in the balance sheet at cost or valuation less amounts written off by way of depreciation. Land and buildings are stated in the balance sheet at their current value at the balance sheet date. Because of their specialised nature, the properties are valued on the depreciated replacement cost basis. The SORP Accounting for Further and Higher Education follows the guidance in FRS 15 Tangible Fixed Assets that a full external revaluation should be carried out every five years with an interim valuation in the third accounting period. A full valuation was carried out on 31 st July Expenditure incurred on the provision of fixtures and fittings, the purchase of computers, furniture and equipment and the purchase of motor vehicles which results in the provision of a new or substantially enhanced facility with a cost of more than 10,000 is capitalised. All other expenditure on the provision of fixtures and fittings, the purchase of computers, furniture and equipment and the purchase of motor vehicles is written off to the income and expenditure account in the period in which it is incurred. Grants relating to specific capital expenditure on depreciable assets are treated as a deferred grant. A proportion of the grant is transferred to the income and expenditure account annually over the estimated useful life of the asset to which it relates. 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. Depreciation Depreciation is provided on all tangible fixed assets, other than separately distinguishable freehold land, at rates calculated to write off the cost or valuation of each asset evenly over its expected useful life, as follows: 21

23 Stow College Financial Statements for the Notes to the financial statements (continued) Freehold buildings - 20 years Modular buildings - 10 years or over the period of lease Fixtures and fittings - 10 years Computers, furniture and equipment - 4 years Motor vehicles - 5 years An amount equal to the excess of the annual depreciation charge on revalued assets over the notional historical cost depreciation charge on those assets is transferred annually from the revaluation reserve to the income and expenditure reserve. Revaluation reserve Surpluses arising on the revaluation of the college s properties are transferred to the revaluation reserve. Additional depreciation charged on the revalued amounts of these assets is transferred from revaluation reserve to income and expenditure account together with any surplus or deficit on disposal. Maintenance of Premises The costs of maintenance are charged to the income and expenditure account in the period in which they are incurred. Stocks Stocks are stated at the lower of cost and net realisable value. Taxation The College has been entered into the Scottish Charity Register and is entitled, in accordance with section 13(1) of the Charities and Trustee Investment (Scotland) Act 2005, to refer to itself as a Charity registered in Scotland. The College is recognised by HM Revenue & Customs as a charity for the purposes of section 505, Income and Corporation Taxes Act 1988 and is exempt from corporation tax on its charitable activities. The College receives no similar exemption in respect of Value Added Tax. Retirement benefits All new members of staff have the option of joining a pension scheme. The schemes currently open to new members of staff are the Strathclyde Pension Fund (SPF) Scheme and the Scottish Teachers Superannuation Scheme (STSS). Existing employees are entitled to maintain their membership of these schemes. Full provision has been made for those pension costs which do not arise from externally funded defined benefit schemes. Strathclyde Pension Fund The Strathclyde Pension Fund is a pension scheme providing benefits based on final pensionable pay. The assets and liabilities of the scheme are held separately from those of the College. Pension scheme assets are measured using market values. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Contributions to the Scheme are determined by an actuary on the basis of triennial valuations using the age attained method. Variations from regular cost are spread over the expected average remaining working lifetime of members of the schemes, after making allowances for future withdrawals. The amount charged to the income and expenditure account represents the service cost expected to arise from employee service in the current year. 22

24 Stow College Financial Statements for the Notes to the financial statements (continued) Scottish Teachers Superannuation Scheme The College participates in the Scottish Teachers' Superannuation Scheme pension scheme providing benefits based on final pensionable pay. The assets of the scheme are held separately from those of the College. The College is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by FRS17 Retirement Benefits, accounts for the scheme as if it were a defined contribution scheme. As a result, the amount charged to the income and expenditure account represents the contributions payable to the scheme in respect of the year. Restatement of Prior Year Figures The College has an historical unfunded pension liability within the Strathclyde Pension Scheme which was recognised in the financial statements originally as a provision. When the College implemented FRS 17, based on guidance provided at the time, the provision was included as part of the overall pension liability for FRS 17. The current guidance is that this element of the pension liability should now be separated as a provision and accounted for in accordance with FRS 12: Provisions. The main impact of this change is a restatement of reserves. A separate provision for 941,000 has been recognised in the prior year balance sheet with a corresponding reduction in the pension fund liability. A 941,000 transfer between the Income and Expenditure Account reserve and the Pension reserve to reflect the fact that the provision should have been created through the Income and Expenditure Account rather than through the Pension reserve. The prior year figures have been changed to reflect the amended accounting treatment. 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. Agency Arrangements The College acts as an agent in the collection and payment of certain Student Support Funds. These funds are excluded from the College Income and Expenditure Account, and movements have been disclosed in the notes to the accounts. Where the College has more discretion in the manner in which specific funds are disbursed, and those funds do not meet the definition of agency funds, the income and expenditure relating to those funds are shown in the College Income and Expenditure Account. 2. SFC Grants FE Recurrent grant (including fee waiver) 6,700 7,483 FE & HE childcare funds Release of deferred capital grants Other SFC grants 2,784 1,333 10,287 9,702 23