BRADFORD COLLEGE Report and Financial Statements for the Year Ended 31st July 2014

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1 BRADFORD COLLEGE Report and Financial Statements for the Year Ended 31 st July 2014

2 Contents Page(s) Operating and Financial Review 1-22 Statement of Corporate Governance and Internal Control Statement of Responsibilities of the Members of the Corporation Independent Auditors Report to the Members of the Corporation Independent Auditors Report on Regularity Consolidated Income and Expenditure Account 38 Consolidated Statement of Historical Cost Surpluses and Deficits 39 Statement of Total Recognised Gains and Losses 39 Balance Sheets as at 31 st July 2013 and 31 st July Consolidated Cash Flow Statement 41 Notes to the Financial Statements 42-58

3 Consolidated BRADFORD COLLEGE Group Operating and Financial Review For the Year Ended 31 July 2014 NATURE, OBJECTIVES AND STRATEGIES 1. The members present their report and the audited financial statements for the year ended 31 July Legal status 2. The Corporation was established under the Further and Higher Education Act 1992 for the purpose of conducting the then Bradford & Ilkley Community College. The Corporation is an exempt charity for the purposes of the Charities Act On 1 September 1999, with consent from the Secretary of State, the name of the Corporation was changed to Bradford College. 4. The consolidated College Group comprises the College and its subsidiaries and associated companies; the corporate structure is described in more detail at paragraph 34 below. 5. These financial statements have been prepared in accordance with the Statement of Recommended Practice (SORP): Accounting for Further and Higher Education, as per SORP (2007). Mission 6. The College s mission, as approved by its members, is: To help students from the region, nationally and internationally, achieve their potential and make a rewarding contribution to their own communities. Public Benefit 7. Bradford College is an exempt charity under Part 3 of the Charities Act 2011 and from 1st 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 Corporation, who are trustees of the charity, are disclosed in the Statement of Corporate Governance and Internal Control section of the annual report. 8. In setting and reviewing the College s strategic objectives, the Corporation has had due regard for the Charity Commission s guidance on public benefit and particularly its supplementary guidance on the advancement of education. 1

4 9. In delivering its mission the College provides substantial public benefits through the advancement of education, including: Providing a high-quality education to its students; Contributing to the store of useful human knowledge through research and the publication of the useful results; Equipping individuals with the basic life skills such as literacy, numeracy and citizenship skills; Producing and conserving works of artistic merit and making those available for teaching purposes and mounting exhibitions which are open to the public; Contributing to the creation of a skilled workforce; and Promoting social inclusion and participation. Leadership Further information about how the Corporation has delivered its charitable purposes for the public benefit is detailed throughout the Operating and Financial Review. 10. After ten years distinguished service to the College and the College group, Michele Sutton OBE retired as the Group Chief Executive of the Bradford College Group. Michele held the post of Group Chief Executive in her last year of service and for her previous nine years she held the post of Principal and Chief Executive. Andy Welsh was appointed as the Group Chief Executive on 1 August 2014, having previously held the senior post of Group Chief Operating Officer. Gareth Osborne was appointed as the Group Chief Operating Officer on the 10 November Anthony Basham was appointed as the Group Commercial Director on 23 April 2014 to take forward the income generation, employer engagement and commercialisation agenda. Implementation of Strategic Plan 11. Over the last seven years the College has moved a long way from a staffcentred culture to a student-centred culture. It is seeking to move to the next level of engagement of staff and students so that they aspire to the same shared values. Following consultation, the College set down those core values it wishes to be recognised for and which it wishes to achieve over the current cycle of strategic planning from The following 7 E s are short hand for our culture and values we wish to develop: Employability as well as subject knowledge this is providing students with a wider range of skills required for today s workplace. Equality & Diversity is celebrated and promoted and discrimination challenged where staff and student communities reflect the demographic of the local population and where students are prepared to work in diverse labour markets. 2

5 Enterprise enhancing its good reputation for supporting entrepreneurship and producing entrepreneurs. Enrichment & Entitlement where student enrichment opportunities and entitlement to employability skills are regarded as a source of competitive advantage. Environment to educate students who can contribute to the sustainability agenda in today s workplace and society in general. Engaging Employers in the public and private sectors also the voluntary and community sectors and is the first choice provider for the areas in which it delivers curriculum. Excellence further enhance our reputation for providing excellent courses, customer service and academic outcomes. 13. The Corporation monitors performance against these priorities through an Annual Business Plan which is reviewed and updated each year. The College s continuing strategic objectives are: To achieve annual net cash inflow from operating activities to ensure investment in the future is secure; To realise the benefits from the investment of 50M into a new City Centre Campus development, the David Hockney Building, which will give the College a competitive advantage in the marketplace as well as providing a more cost effective and efficient estate; To achieve further transformation of Higher Education through the award of Taught Degree Awarding Powers (TDAP); Through Information Learning Technology, to drive the integration of information systems, teaching and learning and assessment; and To improve the learner journey through automating and simplifying processes. 14. The College Group is progressing well to achieve its strategic objectives. 15. The College s specific objectives for 2013/14 and achievement of those objectives is addressed below: The College generated 5.6M of cash from its operating activities against a target of 4M; As part of the new City centre campus development, the handover of the David Hockney Building ( 50M project budget) from its lead contractor BAM to the College was completed on-time, below budget and to design specification and this allowed for the successful opening of the College for its operations in September 2014; 3

6 Work commenced on a new 10M ATC (Advanced Technology Centre) adjacent to the David Hockney Building and this is fully grant funded by the SFA. The planned opening date is September 2015; Work continued on the 3M refurbishment of the Lister Building adjacent to the David Hockney Building and this is, also, fully granted by the SFA. The planned opening date is March 2015; The scrutiny of the College s TDAP application is work-in-progress with the QAA (Quality Assurance Agency). The likely timing of the outcome remains to be confirmed; The College invested 0.4M in improving its IT infrastructure and capital base for curriculum equipment in 2013/14; and The College commenced the re-engineering of the business processes relating to the learner journey during 2013/ The College Group s key non-financial performance indicators targets and outcomes for 2013/14 are set out in the table below. Strategic Objectives 2013/14 Target 2013/14 Actual 2012/13 Actual 2011/12 Actual People Staff Costs as a percentage of teaching income (excluding staff restructuring costs and FRS 17 staff cost charge) 64% 66% 66% 68% Support staff costs as a 19% 25% 26% 26% percentage of overall income Teaching Staff utilisation rates 100% 96% 94% 97% Cost of remitted hours for 5% 10% 2% 2% Teaching Staff Cost of lost working hours 0% 5% 5% 5% Reputation & Quality Overall FE success rates to be above benchmark 79% 87% 89% 86% HE comparison of national 78% 78% 78% 78% benchmarks Curriculum HE Student FTE 3,900 3,641 3,691 3,469 Average Class Size The College Group was unable to achieve its target level of performance for staff costs as a percentage of teaching income and support staff costs as a percentage of total income. It will continue to seek improvement opportunities to achieve target performance and realise such opportunities so as to achieve additional cost efficiencies and improved value for money from its staffing base, as part of the College s Value for Money strategy. 18. The cost of remitted hours for teaching staff as a percentage of the total contracted teaching time has increased due to the pursuit of the new HE 4

7 strategy which required HE staff to undertake research and scholarship activity to a greater extent than previously allocated, as per the new academic workload allocation model. 19. In addition, the HE student body remained below target which whilst a future threat represents an opportunity gap; this will be addressed as part of the review of the curriculum offer and marketing strategy to improve the position of the College in a very competitive environment. Financial Objectives 20. The College Group s financial objectives are: to achieve an annual underlying operating surplus (see financial results below); to hold cash days in excess of 18 days; ensure a positive current ratio within the parameters and constraints of our new accommodation strategy; to keep the pay expenditure to income ratio under 68%; and to ensure the College does not breach its loan covenants with its bank lenders Lloyds and Barclays. 21. All of the financial objectives were achieved in 2013/14 with the exception of a positive current ratio as summarised in the table below. The positive current ratio position was achieved in the week following the 31 July 2014 when the remaining 3.9M of the 25M Revolving Credit Facility with Lloyds Bank was drawn down. Objectives 2013/14 Target 2013/14 Actual 2012/13 Actual 2011/12 Actual Underlying Operating Surplus 1.0M 1.3M 2.0M 0.7M Cash Days of 18 plus Positive Current Ratio Pay to Income under 68% 1 67% 63% 64% 64% 22. All of the bank loan covenants were met for 2013/14. Performance Indicators 23. In 2013/14 the FE recruitment targets were achieved. Student numbers regulated by HEFCE were slightly down on the lower range of the student number control whereas NCTL regulated student numbers were within contract parameters. 24. The actual financial performance indicators shown in the table below, as per the SFA measurement definitions, gives a moderated financial health grading for the College Group of satisfactory for 2013/14. It is planned that this 1 Excluding staff restructuring costs and FRS 17 staff cost charge 5

8 position will hold for the next five years from 2014/15 and onwards on an unmoderated basis. Measures Target 2013/14 Actual 2013/14 Solvency (adjusted current ratio) Sustainability (performance ratio) 3.2% 3.2% Status (gearing ratio) 134% 114% 25. The College is committed to observing the importance of sector measures and indicators and the use of the FE Choices website which looks at measures such as success rates. The College is required to complete the annual Finance Record for the Skills Funding Agency. The Finance Record produces a financial health grading. The current rating of Satisfactory overall is considered an acceptable outcome. 26. For HE students, the College draws upon sector measures as contained with the NSS (National Student Survey) and the KIS (Key Information Set) for monitoring strategy execution. FINANCIAL POSITION Financial results 27. The College Group generated a deficit for the year retained within general reserves of 1,169k (2012/13: surplus of 814k). The result in 2013/14 is stated after accounting for the following items: a) Exceptional re-structuring costs of 1,220k (2012/13: 415k); b) Exceptional accelerated depreciation of 767k (2012/13: Nil) relating to the write-down to their net realisable value of assets held for sale as part of the rationalisation of the College estate; c) FRS 17 Employer service costs of 861k (2012/13: 787k); and d) FRS 17 Pension finance income of 352k (2012/13: 3k). 28. The underlying financial position after adjusting for items a) to d) above was an underlying surplus of 1,327k (2012/13: 2,013k). This was an improvement on both the budget, as per the 2013 financial plan, and the forecast, as per the 2014 financial plan, of 364k. 29. Due to continued UK grant funding cuts for teaching and learning for FE and HE, the College undertook a strategic review of its support services to bring their total costs in relation to total income closer to sector benchmarks. This resulted in the staff restructuring costs being incurred of 1,220k, as noted in paragraph 26a above. It is planned that a support staff reduction in 2014/15 will be achieved of 2.4M compared to 2013/14. Further phases of the strategic review are planned to be completed in 2014/15 for further support service cost reductions in 2015/16. 6

9 30. The College Group has accumulated reserves at 31 July 2014 of 19.0M (excluding Pension Reserve) which compares with 18.5M at 31 July Cash and liquid balances were 4.9M as at 31 July 2014, a decrease from the position of 9.9M at 31 July 2013 due to the investment in the new David Hockney Building. The uncommitted amount of the 25M Revolving Credit Facility with Lloyds Bank for part funding of the David Hockney Building was 3.9M at 31 July The College wishes to continue to accumulate reserves and cash balances in order to, in no particular order: a) Maintain financial solvency and improve financial sustainability; b) Strengthen SFA financial health grading; c) Ensure compliance with bank loan covenants; d) Strengthen risk reserves in the form of a contingency fund; and e) Strengthen capital and revenue reserves for new strategic investments. 32. Group tangible fixed asset additions during the year amounted to 33.4M, of which 32.9M relates to the assets in the course of construction new David Hockney Building, new Advanced Technology Centre and Lister Building refurbishment - and equipment purchased of 0.4M. All three buildings together with the Old Building and Appleton Building comprise the newly developed City Centre Campus for both FE and HE students. The David Hockney Building successfully became operational in September The new Advanced Technology Centre and the Lister Building refurbishment will become operational during The College agreed a 3M finance leasing line with Lloyds Bank for the funding of furniture and equipment for the David Hockney Building. Each tranche of finance leasing has a four year term for repayment. The first tranche of 0.8M of the sale and finance leaseback took place in 2013/14 with the remaining tranches to follow in 2014/ The College has significant reliance on the education sector funding grant bodies for its principal funding source, largely from recurrent grants, for both FE and HE. In 2013/14 this reliance has reduced to 64% of the College Group s total income from 70% for 2012/13, summarised in the following table. Contributory factors are the cuts in funding grants and the introduction of 24+ Learning Loans for FE student and the second year of operation of the new fee regime for HE students. 7

10 Recurrent Funding Body Grants % Total Income 2013/ /13 FE EFA 29% 30% SFA 25% 25% Total of FE Recurrent Grants 54% 55% HE HEFCE 6% 9% NCTL 1% 2% Total of HE Recurrent Grantrs 7% 11% Other Grants 3% 4% Total of Funding Body Grants 64% 70% 35. The College Group is made up of the College and its two wholly-owned subsidiaries and two joint venture companies. The two wholly-owned subsidiary companies are: Training for Bradford Ltd trading as City Training Services (CTS) and Beacon Recruitment & Placement Services Ltd. The principal activity of CTS is apprenticeships and other forms of work-based learning. Beacon recruits and places temporary staff within the College and elsewhere and arranges placements for students as part of their course requirements. The College has a 50% share in Inprint & Design Ltd, a joint venture company with the University of Bradford, the principal activity of which is a range of print services. In addition, the College has a 50% share in the Bradford District Apprenticeship Training Agency (ATA) a joint venture company with Bradford Metropolitan District Council, which employs and seconds apprentices to small-to-medium sized enterprises. The College, as sponsor, has a controlling influence over Bradford College Education Trust, which is treated as an unconsolidated subsidiary. 36. The College s share of the results of these four companies for 2013/14 is as follows: CTS: 437k profit ( 353k in 2012/13); Beacon: 38k loss ( 7k loss in 2012/13); Inprint & Design Ltd: 46k share of profit ( 62k in 2012/13); and ATA: Nil share of profit ( Nil in 2012/13). A share of any profits generated by the subsidiaries and joint venture companies are gift aided to the College. 37. During 2013/14, CTS gift aided to the College the amount of 2.2M which related to prior year profits and treated as an equity to reserve transfer within the College Group. Treasury Policies and Objectives 38. Treasury management is the management of the College s cash flows, its banking, money market and capital market transactions; the effective control 8

11 of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. 39. During the year ended 31 July 2011 the College revised its Treasury Management Policy applicable to both the investments and borrowings of the College with a further variation during the year ended 31 July No variation has been made during the subsequent two years. The policy recognises the difficulties of striving for effective risk management and controls whilst at the same time pursuing value for money. The aim is to protect capital and provide availability of funds ahead of a financial return. 40. Surplus cash is placed on cash deposit of up to three months duration with selected approved institutions classified with a minimum AA Credit Rating from one of the recognised rating agencies. This is fully compliant with the Skills Funding Agency financial memorandum. 41. Short term borrowing for temporary revenue purposes is authorised by the Accounting Officer Group Chief Executive. Such arrangements are restricted by limits in the College s Financial Memorandum agreed with the SFA. All other borrowing requires the authorisation of the Corporation and shall comply with the requirements of the Financial Memorandum. Cash Flows and Liquidity 42. At 5.6M (2012/13 4.5M), the net cash inflow from operating activities showed a 24% improvement from the previous year and remains reasonably strong and is above the target minimum of 4M for the College. 43. The funding of the capital payments of 31.7M was sourced from a combination of 19.4M from new loans, 0.8M from new finance leases relating to furniture and equipment sale and leaseback arrangements, 4.1M from SFA capital grants, in-year net cash generation of 2.4M and 5.0M from the opening cash balance. 44. The completion of all three building capital programmes currently in progress will be completed during the course of 2014/15. The new Advanced Technology Centre and the Lister Building Refurbishment are fully funded by SFA capital grants. The funding of the new David Hockney Building over its project life is summarised in the following table. This highlights that the remaining significant project risk areas for the funding of the David Hockney Building are the property disposal risk level of remaining sale proceeds and the strain on the College cash position by the application of internally generated funds. Overall, the College is confident that it can meet the cashflow challenge over the course of 2014/15. However, there are challenges to the month-end cash position due to different patterns for each of capital outflows and inflows and revenue outflows and inflows during 2014/ The College will seek to manage the liquidity risk in the following manner: Partial release of revenue and capital contingency funds; Realising income expansion and growth opportunities; Reduction of revenue expenditure: maintaining robust control of staff costs and continuing the implementation of the procurement strategy; 9

12 Deferral of certain lines of revenue expenditure to the last quarter of 2014/15 and 2015/16, where feasible; Increase in the extent of finance and operating leasing of furniture and equipment; Short-term loans from CTS (City Training Services subsidiary); Review of VAT arrangements for new builds; and Review of equity investment held. David Hockney Building Project Budget and Forecast Project Project Budget Forecast M M Capital Expenditure Capital Funding Internally generated College funds Lloyds Bank loans: EIB Loan RCF (Revolving Credit Facility): Draw-downs in 2013/14 and prior years Draw-down in 2014/ Total of RCF Total of Lloyds Bank Loans Sale and leaseback of Furniture & Equipment with Lloyds Bank: 2013/ / Total of new finance leases 3.0 Disposal of properties: During 2014/15 : Cash received up to and including 30 November Remaining property sales 1.0 Total of 2014/15 property disposals 2.7 During 2017/ Total of property disposals 3.6 Gift aid from CTS to College relating to prior 6 years received in 2013/ Total Capital Funding The closing cash at bank and in hand and liquid investments balances and net current assets/(liabilities) at the financial year-end for the past three years of the College only are shown in the table below: 10

13 Bradford College only Balance as at 31 July M M M Cash at bank and in hand and liquid investments Net current assets/(liabilities) (1.1) 47. Until the remaining property disposals are completed, the College will be able to fund the concluding payments for the David Hockney Building from the final draw-down of the Revolving Credit Facility of 3.9M, remaining sale and finance leaseback of furniture and equipment of 2.2M and in-year net cash generation from operations. 48. The College has fixed the interest rates with Lloyds Bank for the full term of both the 11.5M loan for the Trinity Green Development the 10M European Investment Bank loan for the David Hockney Building. Also, the interest rate for the 25M Revolving Credit Facility with Lloyds Bank for the David Hockney Building has been fixed for the full 10 year term of the facility. 49. 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. GOING CONCERN 50. The College is aware of the liquidity risk in 2014/15 posed by the completion of the three building capital programmes and the related monthly mismatch of capital inflows and outflows. In addition, there will be a monthly mismatch of revenue inflows and outflows. Therefore, the College will rely on the previously identified action plan to manage this risk. In summary, the College believes that it has appropriate and realistic cost reduction plans and revenue growth plan to manage its cash position. Consequently, the assessment is that the College holds sufficient cash, liquidity risk management arrangements and has sufficient long term finance in place to meet its liabilities as they fall due for the foreseeable future and is considered by the trustees to be a going concern. 51. The College is forecasting for 2014/15 that it will maintain its satisfactory financial grade with the SFA and that it will meet all of its bank loan covenants. CURRENT AND FUTURE DEVELOPMENT AND PERFORMANCE Student Numbers (FE and HE) 52. In 2013/14 the College had 16,483 (2012/13: 15,993) EFA and SFA funded students and 5,207 (2012/13: 3,966) non-sfa funded students representing a combined total of 21,690 (2012/13: 19,899) students. 11

14 Student Achievements 53. Student success rates are good. The College s 2013/14 success rate data was scrutinised by OfSTED in a full college inspection in September 2014 and deemed to be good. Apprenticeship success rates are outstanding. The overall effectiveness of the College is good and three curriculum areas: Early Years; Health and Social Care; and ESOL were outstanding. These three areas represent substantial provision for the College. Over the last three years there has been a sustained and upward trend in success rates at all levels which are above the national averages for the sector. The College recruits throughout the year to EFA and SFA funded programmes thereby meeting the needs of the local community. Higher education students also achieve well with a steadily increasing number gaining first class honours. Curriculum Developments 54. The College has continued to develop a coherent curriculum offer for both further and higher education. There is seamless provision from entry level to level 3 at further education and a good range of HND, honours and masters degrees at higher education. The College is also unique in that it holds a directly funded teacher education contract from the NCTL. Over the last three years, progression from further education to higher education has been increasing. Many of the college s higher education programmes are endorsed by professional bodies and these bodies, together with the external examiners, testify to the high standards of the awards. 55. The College s teacher education department has responded well to partnership working maintaining its numbers in a competitive environment. 56. The College s higher education provision is validated by Teesside University but it continues to pursue its own Taught Degree Awarding Powers (TDAP). 57. A new Film School was opened at the start of 2013/14 and recruitment has been good. The School is extremely well equipped and has a number of key strategic partners in Mumbai, Madrid and Malta as well as excellent employer links. Students and staff have benefitted from working overseas. College Fees 58. For 2013/14, OFFA (Office for Fair Access) approved new fees for newly recruited Home/EU undergraduate full-time students of 7,100, and this will be kept under review as the fee is intended to replace the HEFCE grant whilst providing professional services and learning support to the HE students. An increasing number of HE students, 13% up on the previous year, loaned assistive technology to aid their study. Learning support for HE students has increased by over 50% over the last three years with an increase in Disabled Students Allowance being accessed and a significant increase in the College supporting students where external funding was not available e.g. mental health support. 59. FE fees are in line with guidelines rates established by the Skills Funding Agency. Overseas Fees are largely unchanged from the previous year. 12

15 Payment Performance 60. The Late Payment of Commercial Debts (Interest) Act 1998, which came into force on 1st 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 and 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%. During the accounting period 1 August 2013 to 31 July 2014, the College paid 94% (2012/13: 96.0%) of its invoices within 30 days. The College incurred no interest charges in respect of late payment for this period. Post-Balance Sheet Events 61. Following an OfSTED inspection in September 2014, the College was graded as Good with outstanding features. 62. As part of its property disposal strategy, the College has sold two properties for a total sum of 1.7M as at the date of the signing of the accounts. This value is in-line with the carrying value of these assets. Additionally, it is in line with the cashflow forecast. 63. The remaining uncommitted 3.9M of the 25M RCF with Lloyds Bank was drawn down on 4 August 2014 to contribute to the funding of the David Hockney Building. Future Developments 64. Cuts to funding body grants are expected to continue. 65. The TDAP application remains under scrutiny and consideration by the QAA. 66. The new David Hockney Building provides an exceptional teaching and learning space and thereby the opportunity to increase student numbers, particularly EFA funded students due to the growing young people population in Bradford. 67. The new Advanced Technology Centre will provide the vehicle to increase FE and HE student numbers by enhancing employer engagement. Competitive Environment 68. The College over the past five years has made a substantial investment into developing market opportunities overseas and has gained Highly Trusted Sponsor Status with the UK Border Agency. However, it now finds itself subject to a series of processes not required by Universities due to its classification as a FE College and not a Higher Education Institution. The discretion awarded to the latter puts the College at a disadvantage when assisting students to obtain visas to come and study at the College. Rigorous application and continuing changes to immigration regulations by the UKBA has led to a more difficult market place in which the College operates. 69. With a proliferation of sixth form centres in Bradford many with new buildings and facilities, plus with the creation of more Academies over the last three 13

16 years together with more likely to be created thereafter, competition will become more intense. Any notable increase in student numbers may be at the expense of other local institutions particularly for the year old market although the demographics of Bradford mean that we have a growing young population to serve. This added to the raising of the participation age and the investment in the City Centre Campus development should increase the size of the College s share of the market. 70. Changes to the funding methodologies for both the EFA and SFA in 2013/14 will lead to turbulence in the demand and provision of further education. The introduction of fees and student loans for 24+ FE learners in 2013/14 has created demand uncertainty. 71. Following three years of funding cuts from the Skills Funding Agency, detailed curriculum planning enables the College to model and plan across the year for student numbers at different start points. Sustainability and Environmental Matters 72. Whilst the College seeks to minimise its impact on the environment, the nature of its existing estate in terms of the older buildings has limited the extent of what it can do. Existing buildings are energy inefficient and equipment is often duplicated being on multi-sites. The relatively new development of Trinity Green has made a significant impact as an energy efficient building. In addition, the investment in the new David Hockney Building and the Advanced Technology Centre will allow for a more efficient use of energy in the coming years. Further improvements to estate energy efficiency will be realised with the completion of the property disposal strategy. 73. The College has good arrangements in place to demonstrate Corporate Social Responsibility. Active engagement in the public life of the city is of course demonstrated at various levels but the College also makes a wider contribution to the communities it serves. A good example includes the Police Summer Camp hosted at Trinity Green which saw over 600 children from high crime areas engaged in various activities during the summer holidays. There is a Carbon Reduction plan which seeks to reduce carbon emissions by 25% by 2015/16. This will be in addition to the successful continuation of the existing schemes which cover the Green Travel Plan and the Recycling of Waste. Bradford College Accommodation Strategy and Expected Future Targets 74. The College s Property Strategy Review (2006) identified a number of significant and serious issues regarding the College estate which comprises of numerous buildings, of which the majority of gross floor area, dated back from the late 19th/early 20th centuries. Additionally, the Review highlighted that 77% of floor space was in an unsatisfactory condition. With this in mind, the College adopted an accommodation strategy; a phased redevelopment of the estate over two existing main city sites. The first of the two city centre sites was Trinity Green completed in June 2008 which achieved a BREEAM Excellent rating. 14

17 75. Phase Two has seen the opening of the David Hockney Building in September 2014 which has replaced the former main College buildings of Westbrook and Kent, with the 23,000m 2 new build achieving a BREEAM Very Good rating. The appropriate use of energy and natural resources has been at the forefront of design. Westbrook and Kent buildings are scheduled for demolition in the first quarter of The David Hockney Building makes use of green technologies to help significantly reduce our carbon emissions. 76. An emerging new property strategy, Phase Three, is at an advanced stage of development and agreed in principle subject to further testing of the key assumptions whereby the Old Building is envisaged as an enabler of growth in FE and HE students from the UK, the rest of the EU and from countries from outside of the EU. Future Financial Performance 77. The financial health of the College is forecast to be maintained at satisfactory for the next five financial years, as measured by the SFA. The forecast includes a combination of both growth in income streams not subject to UK Government grant funding cuts and student number restrictions and continued achievement in cost effectiveness, efficiencies and economies. Resources 78. The College has various resources that it can deploy in pursuit of its strategic objective, particularly the enhanced estate covering the 20M Trinity Green Building, 50M David Hockney Building, 10M Advanced Technology Centre and 3M Lister Building refurbishment. In addition, the Old Building represents a heritage building and the blend of new and old is designed to be attractive to a wide range of FE and HE students. Financial 79. The Group has seen further improvement to its income and expenditure reserve during the year of 0.5M and has experienced a favourable reduction of 7.0M in its pension liability under FRS The pension liability has experienced large up and down fluctuations over the last few years as a result of amendments to scheme rules and changing actuarial assumptions. These fluctuations are difficult to mitigate against, without challenging the Actuary on the assumptions chosen. People 81. Note 6 to the financial statements shows that staff FTE for staff on openended contracts and fixed-term contracts, taken as a monthly average over the year, have reduced by 30 FTE against the previous year. Of these, teaching staff level has decreased by 6 FTE and support staff levels have been reduced by 24 FTE. This reflects the continuation of the restructuring programme for support services the College has undertaken to reduce costs ahead of an increasingly tighter financial environment with UK Government funding cuts but at the same time attempting to meet the requirements of a widening commitment to teaching and learning. 15

18 Reputation 82. The College has an excellent reputation locally, nationally and internationally. Maintaining a quality brand is essential for the College s success at attracting students and external relationships. Legislation 83. The College has in place anti-fraud and anti-bribery policies supplemented by risk assessments, appropriate staff training and whistleblowing mechanisms to facilitate such potential risks being managed and dealt with. PRINCIPAL RISKS AND UNCERTAINTIES 84. The volatility of the funding environment, together with the uncertainty of student numbers presents a significant risk to the College Group. We continue to manage this by enhancing the teaching & learning environment and student experience to strengthen our recruitment whilst at the same time drive out costs and inefficiencies. 85. The College continues to develop and embed improved systems of internal control, including financial, operational and risk management which is designed to protect the College s assets and reputation. In addition, good progress is being made to standardise the risk management approach of the College s subsidiaries in line with that of the College. 86. Based on an updated strategic plan which took effect from 2010/11, the Executive will continue to undertake a comprehensive review of the risks to which the College is exposed. They identify systems and procedures, including specific preventable actions, which should mitigate any potential impact on the College. The internal controls are then implemented and subsequent appraisals will review their effectiveness and progress against risk mitigation actions. 87. 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 and then in due course to Corporation. 88. Management is responsible for the implementation of agreed audit recommendations and internal audit undertakes periodic follow up reviews to ensure that such recommendations have been implemented. 89. A risk register is maintained at College level which is reviewed at each meeting of the Audit Committee and more frequently where necessary by other committees. The risk register identifies the key risks, the likelihood of those risks occurring, their potential impact on the College and the actions being taken to reduce and mitigate the risks. Risks are prioritised using a consistent scoring system. 90. In conjunction with Baker Tilly (formerly RSM Tenon), the College s Internal Auditors, our Risk Management process has been updated and widened to 16

19 cover a more comprehensive view of risks, this has necessitated a risk management training programme initially for the Risk Management group but also for College senior staff to raise awareness of the new system to manage risk throughout the College. 91. 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. Financing the next accommodation strategy 92. After securing the funding for the new David Hockney Building, Lister Building refurbishment and the new Advanced Technology Centre there remains the challenge of generating and raising funds for future growth phases of the College, which includes the development of the Old Building, the original teaching accommodation of the College. A key part of the funding strategy will be continuing to meet the Leeds City Region LEP (Local Enterprise Partnership) strategic objectives and in doing secure capital grant funding. Achieving TDAP (Taught Degree Awarding Powers) 93. The College acknowledges that if it were to be successful in its TDAP application then it would have to manage the implications of such an award to minimise the opportunity cost. TDAP provides the authority for the College to define and deliver its provision which would be more responsive to market opportunities for higher education in the EU and non-eu countries. Higher HE fees continuing from 2013/14 under the new fee regime, risk of reduced student numbers. 94. This is an emerging and foreseeable risk that will be monitored carefully. The College did not fully recruit to its HEFCE student number control for 2013/14. A refreshed marketing strategy and fundamental review of the curriculum offer are planned to manage this risk. 95. In addition, in 2015/16 the student number control for the recruitment of Home/EU HE full-time undergraduate students represents both opportunity and threat to the College s position in the HE student recruitment market. Maintain adequate funding of pension liabilities 96. The financial statements report the share of the pension scheme deficit on the College s balance sheet in line with the requirements of FRS Other risks including those associated with employees, assets, ICT, contingent liabilities, operational uncertainties and external relationships are dealt with through delegated responsibilities to senior post-holders, who convene working groups and facilitate action plans to ensure that each of these risks is mitigated against to a satisfactory level. 98. Since 2002, the College has had a good track record of risk mitigation and dealing with risks, this was again evident in 2013/14 where no serious 17

20 problems, either financial or reputational were encountered. Maintaining liquidity during the new build phase 99. The College will maintain its robust control of cash management by utilising both daily cashflow forecasting for rolling three month periods and monthly cashflow forecasting for a three year period. POSITION OF INSTITUTION 100. The operating financial performance in 2013/14 has seen a continuation of the generation of an underlying surplus and a positive net cash inflow from operating activities The condition of the College s estate informed us that in pursuing a 50 million new build as phase 2 of the College Accommodation strategy do nothing was not a good financial option in the longer term. This was due to known inefficiencies of the current estate and significant costs associated with maintaining an old estate which will increase year on year. It is also recognised that older buildings have a detrimental effect on our ability to continue to grow. Our students by their choice will stay on at their schools with their new buildings and facilities, in favour of coming to the College. In part mitigation of this the College has maintained its high reputation for quality and good success rates achieving an OfSTED inspection rating of good with outstanding features in September 2014, also it has a key strength in being well placed to offer vocational provision in many areas of curriculum across the College Since the completion of Trinity Green at 20M with only 10% intervention from the LSC back in 2008, the College has managed its way through to both a strong position of both solvency and liquidity to put in a position where it was able to invest in the new 50M David Hockney Building to continue to attract and retain students in a modern teaching and learning environment The College continues to operate within the covenants of its banks set by Lloyds and Barclays. Demographic Change 104. Whilst the demographic trends across the country for young people are down, Bradford remains an exception and is at least expected to maintain its numbers over the next few years. Physical Environment 105. The Trinity Green development is now well established within the College estate and the new David Hockney Building and Lister Building refurbishment are largely complete. The Advanced Technology Centre will open in September 2015 and marks the completion of the current phase of estate redevelopment. This has begun to address the issue of changing curriculum needs and the appropriateness of current curriculum delivery. Plans to refurbish and remodel the Old Building will be drawn up with the objective of 18

21 meeting Leeds City Region skills priorities and addressing STEM and high level skills needs. STAKEHOLDER RELATIONSHIPS 106. In line with other Colleges and Universities, Bradford College has many stakeholders. These include: Students; Funding Councils; Staff; Local employers (with specific links); Local Authorities; Government Offices/ Regional Development Agencies; The local community; Overseas communities; Other FE institutions; Other HE institutions, including taught degree validating partners; Suppliers and service providers; Trade unions; and Professional bodies The College recognises the importance of these relationships and engages in regular communication with them through the College internet site and by meetings. A stakeholder perception study was undertaken and it demonstrated that the College is highly respected by the majority of shareholders. Equal Opportunities and Employment of Disabled Persons 108. Bradford College is committed to ensuring equality of opportunity for all who learn and work here. The College respects and values positively, differences in race, gender, sexual orientation, ability, class and age. It strives vigorously to remove conditions which place people at a disadvantage and actively combats bigotry. This policy is resourced, implemented and monitored on a planned basis. The College s Equality and Diversity Policy, including Race Relations and Transgender Policy, is published on the College s internet site The College considers all applications for employment from disabled persons, bearing in mind the aptitudes of the individuals concerned. Where an existing employee becomes disabled, every effort is made to facilitate the continuance of their employment with the College. The College s policy is to provide training, career development and opportunities for promotion for employees 19

22 with disabilities that are, as far as possible, identical to those for other employees. Disability Statement 110. The following are examples of measures and adjustments the College has made in compliance with is Equality Act 2010 and Disability Discrimination Act 1995, as amended by the Special Education Needs and Disability Act 2001, obligations as an employer and service provider: i. as part of the redevelopment of the buildings it has installed lifts and ramps so that most of its facilities allow access for people who have difficulty using stairs; ii. iii. iv. there is a stock of specialist equipment, such as lighting for audio facilities, which the College can make available for use by students who need it; both FE and HE have an admissions policy which details the procedure for both admissions and appeals against a decision not to offer a place to any applicant; the College has made a significant investment in the appointment of specialist lecturers to support students with learning difficulties and/or disabilities to build a learning support team of ten academics. All of the observations of the academic support team were graded as outstanding in 2013/14 compared to 42% in 2012/13; v. there are a number of learning support assistants who provide a variety of support for learning. There is a continuing programme of staff development to ensure the provision of a high level of appropriate support for students who have learning difficulties and/or disabilities. Three support staff gained their Master s degree. When observed in 2013/14, the learning support assistants had 45% of their observations graded as outstanding compared to 14% in the previous year; vi. specialist programmes are described in programme information guides, and achievements and destinations are recorded and published in the standard College format; and vii. counselling and welfare services are provided. Support services for students are described on the website, during induction and via various publications in College. Disclosure of information to auditors 111. The Corporation 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 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. 20

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24 Professional Advisers Financial Statement and Internal Auditors: Regularity Auditors: Baker Tilly PricewaterhouseCoopers LLP 2 Wellington Place Benson House Leeds 33 Wellington Street LS1 4DW Leeds LS1 4JP Bankers: Solicitors: Barclays Bank PLC Eversheds PO Box 224 Bridgewater Place 10 Market Street Water Lane Bradford Leeds BD1 1NR LS11 5DR Lloyds Bank Wholesale Banking & Markets North, East and West Yorkshire 2nd Floor Lisbon House 116 Wellington Street Leeds LS1 4LT 22

25 Statement of Corporate Governance and Internal Control The following statement is provided to equip readers of the annual report and financial statements of the College with a better understanding of its governance and legal structure. The College is a Further Education Corporation, incorporated under the Further and Higher Education Act It endeavours to conduct its business: i) in accordance with the seven principles identified by the Nolan 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, has adopted and complies with the Foundation Code. It has not adopted the UK Corporate Governance Code but in the course of its corporate governance reporting, it draws upon best practice from it and a range of other sources. The Corporation members are satisfied that the College complies with all provisions of the Foundation Code, and done so throughout the financial year, which ended 31 July The Corporation (which is the governing body of the College) recognises that, as a body entrusted with both public and private funds, it has a duty to observe the highest standards of corporate governance at all times. The College is an exempt charity within the meaning of Part 3 of the Charities Act The members of Corporation, being charity trustees for the purposes of that Act, are required to make certain statements as part of their annual reporting requirements, including confirming as follows: i) that in the course of their activities during the financial year, they have had due regard for the Charity Commission s guidance on public benefit; and ii) that the corporation is only involved in activities that will further its charitable objects and do not put its charitable status at risk. The Corporation The members who served on the Corporation board during the financial year 2013/14 and up to the date of signature of this report are as listed overleaf: 23