city college brighton and hove

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1 city college brighton and hove Annual Report and Financial Statements For the year ended 31 July 2005

2 Annual Report and Financial Statements For the year ended 31 July 2005 Contents Executive Summary 1 to 4 Annual Report 5 to 9 Members of the Corporation 10 Professional Advisors 11 Corporate Governance and Internal Control Statement 12 to 15 Responsibilities of the Corporation 16 Auditors Report to the Members of the Corporation 17 to 18 Consolidated Income and Expenditure Account 19 Consolidated Statement of Historical Cost Surpluses and Deficits 20 Balance Sheets as at 31 July Consolidated Cash Flow Statement 22 Statement of Accounting Policies (Note 1) 23 to 25 Notes to the Financial Statements (Notes 2 to 34) 26 to 43 Regularity Audit Opinion 44

3 Report of the Members (Governors) of the Corporation of City College Brighton and Hove for the Year 1 August July 2005 Executive Summary Introduction We are proud to present our Annual Report and Accounts for 2004/05. This summary report presents key highlights from the main report. About City College Founded over 100 years ago, City College Brighton and Hove has become an international centre of excellence. Every year over 2,000 full-time and 13,000 part time students as well as many international and European students choose City College as their education provider. Offering over 650 courses from basic level to pre-university level, City College is working with its partners to develop the workforce of the future. The College offers a wide selection of vocational courses, academic and vocational A-levels, BTEC National and First Diplomas and NVQs with progression to its own Higher Education courses in conjunction with the University of Brighton. Courses ranging from Airline Cabin Crew to Music Technology to Journalism and Construction are delivered through work based learning programmes, offsite courses, apprenticeships, as well as traditional full and part time courses, day and evening. Over 2,000 companies work with City College to develop their staff - City College can deliver either off the shelf courses or develop bespoke, flexible learning programmes through our City Business Skills centre. Our Students We have over 15,000 students ranging in age from 14 to over 90. We recruit students from over 40 different countries. Our Governors We have 16 unpaid governors, who are senior managers in the local business world, council members and staff and student representatives. Together, they are responsible for the College s educational character and mission, policy and resources, strategic direction, and senior appointments. They meet several times a year, either together (The Corporation) or in committees. Details of who the governors are, which committees they are on and their terms of office can be found on page 10. Our Staff We have nearly 1,000 full time and sessional staff, who work in a wide variety of jobs, from teaching to providing in-house support to frontline staff and to students. City College is one of the ten largest employers in Brighton and Hove. 01

4 Our City Brighton and Hove is a vibrant seaside resort with lots to do and learn, and has a diverse population. It is a major educational centre, with two universities and several sixth form colleges. And we are only an hour away from London by train. Some of our Achievements At City College we have many successes to celebrate. These have been achieved by the whole College: our staff, students, and the community. We are on target towards our vision to become a Flagship College in the South East. We set some very ambitious targets and we are pleased to report that we have achieved the following: Action for Business Colleges Accreditation; Sussex Business Person of the Year awarded to Ann Smith, Principal and Chief Executive; Investors in People Re-Accreditation against new Standard; Improved our success rate by another 1% to 69% - this is now above the average for our sector; Achieved retention of 85% and achievement of 80%; Overall College Performance Overall College performance % 90% 80% 70% 60% 50% 40% 30% retention achievement Success 20% 10% 0% Achieved British Council accreditation; Centres of Vocational Excellence Status in Digital Design, Performing Arts, Hospitality and Catering, Business and Finance (Retail, Travel and Tourism and Heritage Engineering in progress); Three FE Sussex awards (Provider Collaboration, Learner Success in the Workplace, Skills for Life Strategy); Brighton and Hove Business Award for Constructing Futures project; Maintained financial stability. 02

5 Key features of our continued success Strategic investment - in staff and infrastructure; Excellent communication - horizontal and vertical; Business planning - core business of teaching and learning; Continuous improvement - across all services. Finances The majority of our income comes from general taxation, via the Learning and Skills Council (LSC). The LSC reports ultimately to the Secretary of State for Education. While LSC income has been increasing as a percentage of the total over the years, the rate of increase is slowing. As a result we continue to raise funds from other sources to help us continue to innovate and grow. A graphical representation of our income is shown below. City College Brighton and Hove Income Analysis 2005 LSC Grant Income Tuition Fees Education Contracts Other Income incl. Investments Staff are the greatest of our resources, and, like other similar Colleges, we spend about 66% of the budget on staffing and related costs. 03

6 What we spend the money on is summarised in the chart below: City College Brighton and Hove Expense Analysis 2005 Support Staff Salaries Full-time Teaching Salaries Non-Pay Costs Part-time Teaching Salaries Depreciation Premises Costs Franchise Payments Interest Financial Results Our accounts begin on Page 19. They show a healthy financial position for the year. The summarised figures are: Income and Expenditure for the Year: Income 18,152,000 Expenditure 18,111,000 Operating Surplus 41,000 Balance Sheet as at 31 July 2005 Fixed Assets 16,196,000 Net Current Assets 49,000 Long Term Liabilities 2,045,000 Net Assets 14,200,000 Reserves 14,200,000 04

7 Annual Report This part of the annual report gives the detailed results for the year. Much of the content is required by our funding body, the Learning and Skills Council, which is ultimately responsible to the Public Accounts Committee. Legal Status The Corporation was established under The Further and Higher Education Act 1992 for the purpose of conducting Brighton College of Technology. The College is an exempt charity for the purposes of the Charities Act Corporation Name The Corporation was incorporated as Brighton College of Technology. On the 1 st September 2001, the Secretary of State granted consent to the Corporation to change its name to City College Brighton and Hove. The Corporation believes that the new name represents the broader activities of the College. Mission The College s mission, as approved by its members, is: City College will work with partners to maximise local and wider community engagement in educational achievement and the development of skills for today s and tomorrow s workforce. Strategic Objectives The Strategic Plan for the period for 1 st August st July 2006 includes a Property Strategy and Financial Forecast. The Corporation monitors the annual performance of the College against these plans. The plans are reviewed and updated each year. The College s continuing strategic objectives in those plans include the following, which are considered to be on target to be achieved: Expand provision through partnership, collaboration and new facilities; Expand provision in partnership with the LEA and schools; Integrate provision through the Memorandum of Accord with the Sixth Form Colleges, schools and other partners; Expand Work Based Learning provision through the Colleges Work Based Learning Agency and management of the Strategic Alliance with independent training providers; Expand Workforce Development at 16 plus and 19 plus supported by the Action for Business Colleges initiative; Reshape Adult and Community Learning to raise the skills level of the community; Expand the HE provision with the University of Brighton; Increase the international student base of City College; Resource and develop the curriculum centres of Visual and Performing Art and Business and Hospitality in line with the CoVEs of Digital Design, Performing Arts, Business and Finance and Hospitality and Catering; 05

8 Improve the quality of provision in all curriculum centres specifically linked to the College s retention, achievement and success targets supported by the Teachers Pay Initiative, College Pay Initiative and Directors Pay Initiative; Embrace the Government s initiatives of Success for All, Skills for Life and Adult Skills Strategy; Maintain financial stability. The College s specific objectives for and the achievement of those objectives are addressed below: LSC student numbers - actual and (target): full time 1,186 (target 1,090); part-time 394 (target 420); 19+ full-time 827 (target 802); 19+ part-time 5,439 (target 6,980). Basic Skills provision for adults 751 (target 1,200). Retention on long qualifications: % (target 81.0%); % (target 77.0%). Retention on short qualifications: % (target 88.0%); % (target 95.0%). Improve success rates 65% forecast (on target). Recruit and retain Higher Education students: Full-time 240 (target 258); Part-time 104 (target 93). Financial Objectives The College s financial objectives are: Maintain a general reserve at a minimum of 10% of income; Maintain cash days of 25 or more at all times; Generate a cash inflow from operating activities each year; Maintain borrowing at less than 50% of general reserves; Have a current ratio of more than 1.25:1 by 31 July

9 Performance Indicators Performance indicators relating to key areas of the College s activity are set out in the LSC s publication Summary Statistics for Further Education Institutions: England 2001/2002. This document compares the performance of different Colleges in the following areas: Achievement and funding target; Percentage change in student numbers; In-year retention rates and achievement rates; Contribution to national targets. Student Numbers The College is funded according to the level of activity that it generates each year. In 2004/05, the College achieved 3,408 FTE learners against a target of 3,400. This represents a reduction of 208 students (5.7%) over 2003/04. This was a planned reduction following LSC funding restrictions. Additional capacity has been taken up by growth relating to full cost courses. Student Achievements Students achieved an estimated 79% of their qualification aims (in %). Curriculum Developments Methods of teaching and learning are under continuous review and development in order to ensure that the curriculum meets the needs of the local community. The College s Increased Flexibility programme for Year 10 and 11 school students continues to be an effective programme for an increasing number of students, and has recently been highlighted nationally as a model of good practice. The College has been accredited as an Action for Business College in The accreditation flags up to potential sponsors and local employers that we are fit to offer responsive provision to meet employers needs. The Higher Education programme franchised from the University of Brighton continues to expand, and now includes the new Foundation Degrees. Transparency Arrangements The Corporation conducts its business through a number of committees. Each committee has terms of reference, which have been approved by the full Corporation. Full minutes of all meetings are available from the Clerk to the Corporation at: City College Brighton and Hove, Pelham Street, Brighton, East Sussex BN1 4FA The Clerk to the Corporation maintains a register of financial and personal interests of the governors. The register is available for inspection at the above address. Finances The College generated an operating surplus in the year of 41,000 (2003/04 surplus of 130,000). The College has an unsecured loan facility to finance the Campus 21 project, and cash balances of 446,000. Accumulated group reserves stood at 5,463,000 at 31st July

10 Post-Balance Sheet Events There were no significant Post-Balance Sheet events not reflected in this report. Staff and Student Involvement The College considers good communication with its staff to be very important, and to this end it publishes a monthly newsletter, which is available to all staff. The College encourages staff and student involvement through membership of formal committees. Taxation The majority of the College s activities do not fall to be charged to Corporation Tax. Subsidiary Company The College has a subsidiary company, BCT Developments Limited. Accounts are shown for the Group and for the College. Employment of Disabled Persons 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 ensure that employment with the College continues. The College s policy is to provide training, career development and opportunities for promotion that are, as far as possible, identical to those for other employees. A member of the Learner Support Unit is identified as the Disability Support Coordinator to ensure the promotion of opportunities for the Disabled. Disability Statement The College is committed to the principles of Equality of Opportunity. We seek to ensure that we are meeting the spirit, not just the letter, of the Disability Discrimination Act (1995) as amended by the Special Educational Needs and Disability Act (2001). The College s commitment is reflected in the Learner Charter, Equal Opportunities Policy and Quality Assurance Policy. The following facilities and support are available: The College has undertaken a rebuilding programme and many parts of the campus have been re-designed to be more accessible. In the medium term, some old buildings will still be used which do not yet have lifts, and access will be variable. One of the College s mini-buses is accessible for use on College business. Specialist Learning Support services include literacy and numeracy support, support for learners with dyslexia and support for learners with disabilities. These are delivered by the College s own wellqualified and experienced specialist staff. Additional specialist expertise is brought in from external agencies where necessary. We provide specialist courses for students with learning difficulties. Specialist software and equipment is available on loan and for use in the Learning Resource Centre and Flexible Learning Centre. 08

11 Other support and expertise is available through our links with external services. As part of our admissions and induction procedures, we will assess requirements for additional support, specialist equipment or other adjustments and will make every effort to supply it directly or to refer learners to alternatives. Arrangements for taking examinations and assessments will be made within the awarding bodies guidelines about the level and type of support that can be given in particular circumstances and appropriate arrangements made for students who have been assessed as needing consideration. Equality of access and treatment is a guiding principle behind the Complaints and Appeals Procedure. Learners rights and the standards we apply to all our activities are detailed in the Student Charter and summarised in the Student Handbook. The formal complaints process contains clear instructions on how to appeal against any decision. Arrangements for additional support are regularly reviewed as part of the College s self-assessment process and support activities are monitored and described in an annual report. Payment Performance The Late Payment of Commercial Debts (Interest) Act 1998, which came into force on 1 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 or 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 2004 to 31 July 2005, the College paid 98.46% of its invoices within 30 days. The College incurred no interest charges in respect of late payment for this period. Planned Maintenance The cost of the College s planned maintenance programme over a period of five years is estimated to be 728,850, resulting in an average annual charge of 145,770. The programme was developed following a survey of the College s estate, which was carried out during 2003/04. The programme is reviewed each year. Chair of Governors 13th December

12 Corporation Members The Members who served the Corporation during the year were as follows: Name Date of Date of Term of Office Date of Resignation Status of Appointment Committees Served Appointment Re-appointment Ms J Alsford 28-Nov Nov years - Staff (Teaching) Employment, Standards. Mr R Baker MBE 09-Feb Nov years - Business Audit, Strategy w.e.f Mr P Bevan 09-Feb Nov years - Co-opted Audit, Strategy; Chair of Governance and Search; Chair of Strategy w.e.f Ms M Deacon 26-Nov years - Business Employment, Chair of Finance. Mr D Elliston 08-Oct Jan-2005 Student Standards w.e.f 30 Nov Ms P Hawkes 27-Jan years - Local Authority Audit. Mr P Hofman 28-Nov Nov years - Business Vice Chairman of Corporation, Finance, Strategy; Chair of Standards. Mr D House 06-Mar Nov years - Business Standards, Chair of Audit. Mr A Mernagh 26-Nov years - Business Finance, Standards. Mr M Perry 12-Mar years - Business Chairman of Corporation Finance, Governance and Search, Strategy; Chair of Employment / Remuneration. Mr A Richardson 22-Jun years - Staff (Support) Finance w.e.f 30 Nov Mrs A Smith 31-Aug Tenure of Post - - Employment, Finance, Governance and Search, Standards, Strategy. Mr M Sohna 29-Aug years - Community Governance and Search, Employment and Remuneration. Mr P Stocker 21-Jul years - Community Governance and Search wef Audit w.e.f Miss A Taitt 24-Feb Term as - Student - Student Ms L Tarrant 24-Sep years - Co-opted Audit, Employment, Standards. Ms R Turner 24-Jul Nov years 20-May-2005 Co-opted Governance and Search, Standards, Chairperson of Strategy. Mr P White was Clerk to the Corporation. 10

13 Professional Advisors External Auditors Baker Tilly International House Queens Road BRIGHTON BN1 3XE Internal Auditors Grant Thornton LLP The Explorer Building Fleming Way Manor Royal CRAWLEY West Sussex RH10 9GT Bankers Barclays Bank plc P O Box 358 BRIGHTON BN1 1SF Solicitors Thomas Eggar Belmont House Station Way CRAWLEY West Sussex RH10 1JA AIB Group (UK) plc 20 Marlborough Place BRIGHTON BN1 1UB Nat West Bank plc London Road BRIGHTON BN1 4LW 11

14 Statement of Corporate Governance and Internal Control 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 Combined Code on Corporate Governance issued by the London Stock Exchange in June Its purpose is to help the reader of the accounts understand how the principles have been applied. In the opinion of the governors, the College complies with all the provisions of the Combined Code in so far as they apply to the Further Education Sector, and it has complied throughout the year ended 31 July The Corporation The composition of the Corporation is set out on page 10. It is the Corporation s responsibility to bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct. The Corporation is provided with regular and timely information on the overall financial performance of the College together with other information such as performance against funding targets, proposed capital expenditure, quality matters and personnel-related matters such as health and safety and environmental issues. The Corporation meets twice each term. The Corporation conducts its business through a number of committees. Each committee has terms of reference, which have been approved by the Corporation. These committees are Audit, Employment (and Remuneration sub-committee), Finance, Governance and Search, Standards, and Strategy. All governors are able to take independent professional advice in furtherance of their duties at the College s expense and have access to the Clerk to the Corporation, who is responsible to the Corporation for ensuring compliance with all applicable procedures and regulations. The appointment, evaluation and removal of the Clerk are matters for the Corporation as a whole. Formal agendas, papers and reports are supplied to governors in a timely manner, prior to Corporation meetings. Briefings are also provided on an ad-hoc basis. The Corporation has a strong and independent non-executive element and no individual or group dominates its decision making process. The Corporation considers that each of its non-executive members is independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. There is a clear division of responsibility in that the roles of the Chair of the Corporation and Principal of the College are separate. Appointment to the Corporation Any new appointments to the Corporation are a matter for the consideration of the Corporation as a whole. The Corporation has a Search Committee comprised of six members, which is responsible for the selection and nomination of any new member for the Corporation s consideration. The Corporation is responsible for ensuring that appropriate training is provided as required. Members of the Corporation are appointed for a term of office not exceeding four years. 12

15 Remuneration Committee Throughout the year ending 31 July 2005, the College s Remuneration Committee comprised four members who were not staff or students of the College. The committee s responsibilities are to make recommendations to the Corporation on the remuneration and benefits of the Principal and other senior postholders. Details of remuneration for the year ended 31 July 2005 are set out in notes 6 and 7 to the financial statements. Audit Committee The Audit Committee comprises of five members of the Corporation (excluding the Principal and Chair). The committee operates in accordance with written terms of reference approved by the Corporation. Its minimum membership is three. Its purpose is to advise the Corporation on the adequacy and effectiveness of the College s systems of internal control and its arrangements for risk management, control and governance processes. The Audit Committee meets on a termly basis and provides a forum for reporting by the College s internal and financial statements auditors, who have access to the Committee for independent discussion, without the presence of College management. The Audit Committee monitors all aspects of the College s Risk Management strategy. The committee also receives and considers reports from the LSC, as they affect the College s business. The College s internal auditors monitor the systems of internal control, risk management controls and governance processes in accordance with an agreed plan based on audit risk, and report their findings to management and the Audit Committee. Management is responsible for the implementation of agreed recommendations and internal audit undertakes periodic follow up reviews to ensure that such recommendations have been implemented. The Audit Committee also advises the Corporation on the appointment of internal and financial statements auditors and their remuneration for both audit and non-audit work. Internal Control Scope of Responsibility The Corporation is ultimately responsible for the College s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable, not absolute assurance, against material misstatement or loss. The Corporation has delegated to the Principal, as Accounting Officer, the day-to-day responsibility for maintaining a sound system of internal control that supports the achievement of the College s policies, aims and objectives, whilst safeguarding the public funds and assets for which she is personally responsible, in accordance with the responsibilities assigned to her in the Financial Memorandum between the College and the LSC. She is also responsible for reporting to the Corporation any material weaknesses or breakdowns in internal control. 13

16 The Purpose of the System of Internal Control The purpose of the system of internal control is to manage risk to a reasonable level. The system is based on an ongoing process designed to identify and prioritise the risks to the achievement of College policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The system of internal control has been in place in City College Brighton and Hove for the year ended 31 July 2005 and up to the date of approval of the annual accounts. Capacity to Handle Risk The Corporation has reviewed the key risks to which the College is exposed, together with the operating, financial and compliance controls that have been implemented to mitigate those risks. The Corporation is of the view that there is a formal ongoing process for identifying, evaluating and managing the College s significant risks that has been in place for the period ending 31 July 2005 and up to the date of approval of the annual report and accounts. The process is regularly reviewed by the Corporation. The Risk and Control Framework The system of internal control is based on a framework of regular management information, administrative procedures including the segregation of duties, and a system of delegation and accountability. In particular, it includes: Comprehensive budgeting systems with an annual budget, which is reviewed and agreed by the Corporation; Regular reviews by the Corporation of monthly and annual financial reports which indicate financial performance against forecasts; Setting targets to measure financial and other performance; Clearly defined capital investment control guidelines; The adoption of formal project management disciplines where appropriate. The College has an internal audit service, which operates in accordance with the requirements of the LSC s Interim Audit Code of Practice. The work of the internal audit service is informed by an analysis of the risks to which the College is exposed, and annual internal audit plans are based on this analysis. The analysis of risks and the internal audit plan are endorsed by the Corporation on the recommendation of the Audit Committee. The Head of Internal Audit provides the Corporation with an annual report on internal audit activity in the College, which includes an independent opinion on the adequacy and effectiveness of the College s system of risk management, controls and governance processes. 14

17 Review of Effectiveness As Accounting Officer, the Principal has responsibility for reviewing the effectiveness of the systems of internal control. The Principal s review of the systems of internal control is informed by: The work of internal audit; The work of the managers within the College who have responsibility for the development and maintenance of the internal control framework; Comments made by the College s financial statements auditors in their management letters and other reports; The management report relating to the interim regularity audit issued by the financial statements auditors. The Principal has been advised on the implications of the result of her review of the effectiveness of the system of internal control by the Audit Committee which oversees the work of the internal auditor, and a plan to address weaknesses and ensure continuous improvement of the system is in place. 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 departments and reinforced by risk awareness training. The senior management team and the Audit Committee also receive regular reports from internal audit, which include recommendations for improvement. The Audit Committee s role in this area is confined to a high level review of the arrangements for internal control. The Corporation s agenda includes a regular item for consideration of risk and control and receives reports thereon from the senior management team and the Audit Committee. The emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception. At its July 2005 meeting, the Corporation carried out the annual assessment for the year ended 31 July 2005 by considering documentation from the senior management team, and taking account of events during the year. The full annual Audit Report was presented to the Corporation at its meeting in November 2004, and, for 2004/05, will be presented in December Going Concern After making appropriate enquires, the Corporation considers that the College has adequate resources to continue in operational existence for the foreseeable future. For this reason it continues to adopt the going concern basis in preparing the financial statements.... Chair of Governors Principal 13 th December th December

18 Statement of the Responsibilities of the Members of the Corporation The members of the Corporation are required to present audited financial statements for each financial year. Within the terms and conditions of the Financial Memorandum agreed between the Learning and Skills Council (the LSC) and the Corporation of the College, the Corporation, through its Principal, is required to prepare financial statements for each financial year in accordance with the Statement of Recommended Practice - Accounting for Further and Higher Education Institutions and which give a true and fair view of the state of affairs of the College and the result for that year. In preparing the financial statements, the Corporation 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; Prepare financial statements on the going concern basis, unless it is inappropriate to assume that the College will continue in operation. The Corporation is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the College, and which enable it to ensure that the financial statements are prepared in accordance with the relevant legislation of incorporation and relevant accounting standards. It is responsible for taking steps that are reasonably open to it in order to safeguard the assets of the College and to prevent and detect fraud and other irregularities. Members of the Corporation are responsible for ensuring that funds from the LSC are used in accordance with the Financial Memorandum with the LSC and any other conditions that the LSC may prescribe from time to time. Members of the Corporation must ensure that there are appropriate financial and management controls in place in order to safeguard public and other funds and to ensure they are used properly. In addition, members of the Corporation are responsible for securing economical, efficient and effective management of the College s resources and expenditure, so that the benefits that should be derived from the application of public funds by the LSC are not put at risk. Signed on behalf of the Corporation Chair of Governors 13 th December

19 Independent Auditor s Report to the Corporation of City College Brighton and Hove We have audited the financial statements on pages 19 to 43. This report is made solely to the Corporation, as a body, in accordance with statutory requirements. Our audit work has been undertaken so that we might state to the Corporation, as a body, those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Corporation, as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of the Members of the Corporation of City College Brighton and Hove and Auditors The College s Corporation s responsibilities for preparing the Members Report and financial statements in accordance with the Statement of Recommended Practice - Accounting for Further and Higher Education, applicable law, and United Kingdom Accounting Standards are set out in the Statement of Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Statement of Recommended Practice - Accounting for Further and Higher Education. We also report to you if, in our opinion, the Members Report is not consistent with the financial statements, if the College has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit. We read the Members Report and consider the implications for our report if we become aware of any apparent misstatement within it. Basis of Audit Opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board and the Audit Code of Practice issued by the Learning and Skills Council. An audit includes examination, on a test basis, of evidence relevant to amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the College s Corporation in the preparation of the financial statements, and of whether the accounting policies are appropriate to the College s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give us reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. 17

20 Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the College and the group as at 31 July 2005 and of the group s surplus of income over expenditure for the year then ended, and are properly prepared in accordance with the Statement of Recommended Practice - Accounting for Further and Higher Education. BAKER TILLY Registered Auditor Chartered Accountants International House Queens Road Brighton East Sussex BN1 3XE... 18

21 Consolidated Income and Expenditure Account for the year ended 31 July 2005 Notes Year ended Year ended 31 July July 2004 Income Funding Council Grants 2 13,743 12,971 Tuition fees and education contracts 3 3,275 3,447 Other income 4 1, Investment income Total Income 18,152 17,270 Expenditure Staff costs 6 12,044 11,296 Exceptional restructuring costs Other operating expenses 8 4,944 4,826 Depreciation 12 1, Interest payable Total Expenditure 18,111 17,140 Surplus on continuing operations after depreciation of tangible fixed assets at valuation and before tax Taxation Surplus on continuing operations after depreciation of assets at valuation, disposal of assets and tax The income and expenditure account is in respect of continuing activities. There are no recognised gains or losses other than the profit above and therefore no separate statement of total recognised gains or losses is presented. 19

22 Consolidated Statement of Historical Cost Surpluses and Deficits for the year ended 31 July 2005 Notes Year ended Year ended 31 July July Surplus on continuing operations before taxation Difference between historical cost depreciation and the actual charge for the period calculated on the re-valued amount Historical cost surplus for the period before taxation Historical cost surplus for the period after taxation

23 Balance Sheets as at 31 July 2005 Notes Group 2005 College 2005 Group 2004 College ,196 16,196 15,699 15,699 15,467 15,467 14,948 14, ,167 (2,118) 29 1, ,041 (2,403) 9 1, ,463 (1,956) 9 2, ,387 (2,267) ,120 16,245 16,337 15,974 16,068 Fixed assets Tangible assets 12 Current assets Stock Debtors Investments Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year 16 (1,350) (1,350) (1,452) (1,452) Provisions for liabilities and charges 18 (695) (695) (676) (676) 14,200 14,292 13,846 13,940 NET ASSETS Deferred capital grants 19 2,941 2,941 2,628 2,628 Revaluation reserve General reserve ,796 5,463 5,796 5,555 5,967 5,251 5,967 5,345 Total reserves 11,259 11,351 11,218 11,312 TOTAL 14,200 14,292 13,846 13,940 The financial statements on pages 19 to 43 were approved by the governing body on 13th December 2005 and were signed on its behalf by:-... M Perry Chair of Governors... A P Smith Principal 21

24 Consolidated Cash Flow Statement for the year ended 31 July 2005 Notes Year ended Year ended 31 July July Cash flow from operating activities 22 1, Returns on investments and servicing of finance Capital expenditure and financial investment 24 (1,247) (692) Cash outflow before use of liquid resources and financing 233 (58) Management of liquid resources 25 - (229) Financing 26 (33) (5) Increase / (decrease) in cash in the period (292) Reconciliation of net cash flow to movement in net funds Increase / (decrease) in cash in the period 200 (292) Cash outflow from secured loan Cash outflow from liquid resources Movement in net funds in period 254 (8) Net funds at 1 August Net funds at 31 July

25 Notes to the Financial Statements for the Period from 1 August 2004 to 31 July Statement of Accounting Policies Basis of Preparation These financial statements have been prepared in accordance with the statement of recommended practice (SORP): Accounting for Further and Higher Education 2003 and in accordance with applicable Accounting Standards. They conform to guidance published by the LSC, in Circular 05/02. Basis of Accounting The financial statements are prepared in accordance with the historical cost convention modified by the revaluation of certain fixed assets. Basis of consolidation The consolidated financial statements include the College and its subsidiary, BCT Developments Limited. The results of the subsidiary are included in the consolidated income and expenditure account. Intra-group sales and profits are eliminated fully on consolidation. In accordance with FRS2 the activities of the student union have not been consolidated because the College does not control those activities. All financial statements are made up to 31st July Comparatives used are from the College s year ended 31st July 2004 accounts. Recognition of Income Income from contracts and other services rendered is included to the extent of the completion of the contract or service concerned. All income from short-term deposits is credited to the income and expenditure account in the period in which it is earned. Income receivable from the Learning and Skills Council is recognised in line with the latest estimates of grant receivable for an academic year. The final grant income is normally determined in the subsequent February, following an audit of the College s activity. Maintenance of premises The cost of routine corrective maintenance is charged to the income and expenditure account in the period in which it is incurred. Foreign Currency Translation Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Pension Schemes Retirement benefits to employees of the College are provided by the Teachers Pension Scheme (TPS) and the East Sussex County Council Superannuation Fund (ESCCSF). These are defined benefit schemes which are externally funded and contracted out of the State Earnings Related Pension Scheme (SERPS). Variations from regular costs are spread over the expected average remaining working lifetime of members of the schemes after making allowances for further withdrawals. The contributions are determined by qualified actuaries on the basis of triennial valuations, using the projected unit method, for the ESCCSF and on the basis of quinquennial valuations, using the prospective benefit method, for the TPS. The College has adopted the transitional provisions of FRS 17 as set out in note 28 to the accounts. 23

26 Tangible fixed assets a Land and Buildings The College s buildings are specialised buildings and therefore it is not appropriate to value them on the basis of open market value. Land and buildings inherited from the Local Education Authority (LEA) are stated in the balance sheet at valuation on the basis of depreciated replacement cost. Land and buildings acquired since incorporation are included in the balance sheet at cost. Freehold land is not depreciated. Freehold buildings are depreciated over their expected useful economic life to the College in accordance with advice received from professional valuers. Where land and buildings are acquired with the aid of specific grants they are capitalised and depreciated as above. The related grants are credited to a deferred capital grant account and are released to the income and expenditure account over the expected useful economic life of the related asset on a basis consistent with depreciation policy. A review for impairment of a fixed asset is carried out if events or changes in circumstances indicate that the carrying amount of the fixed asset may not be recoverable. On adoption of FRS 15 the College followed the transitional provision to retain the book value of land and buildings, which were valued at Incorporation, but not to adopt a policy of revaluations of these properties in the future. These values are retained subject to the requirement to test for impairment in accordance with FRS 11. Buildings under construction are accounted for at cost, based on the value of architects' certificates and other direct costs incurred to 31 July They are not depreciated until they are brought into use. b Equipment Equipment costing less than 500 per individual item is written off to the income and expenditure account in the period of acquisition. All other equipment is capitalised at cost. Equipment is depreciated over its useful economic life as follows: Fixtures and fittings Motor vehicles and general equipment Computer equipment 10% per annum (5% for major capital works) 20% per annum 33% per annum Where equipment is acquired with the aid of specific grants it is capitalised and depreciated in accordance with the above policy, with the related grant being credited to a deferred capital grant account and released to the income and expenditure account over the expected useful economic life of the related equipment. Leased Assets Costs in respect of operating leases are charged on a straight line basis over the lease term. Stocks Stocks are stated at the lower of their cost and net realisable value. 24

27 Taxation The College is an exempt charity within the meaning of schedule 2 of the Charities Act 1993 and as such is a charity within the meaning of section 506 (1) of the Income and Corporation Taxes Act (ICTA) Accordingly, the College is potentially exempt from taxation in respect of income or capital gains received within categories covered by section 505 of the ICTA 1988 or section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied to exclusively charitable purposes. The College receives no similar exemption in respect of Value Added Tax. Liquid Resources Liquid resources include sums on short-term deposits with recognised banks and building societies. 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. 25

28 2 Funding Council Grants Year ended Year ended 31 July July Recurrent grant 12,241 11,145 Work Based Learning Releases of deferred capital grants Centres for vocational excellence Local Initiative Funds FE Standards Fund Other Funds Total 13,743 12,971 3 Tuition Fees and Education Contracts UK Higher Education students UK Further Education students 924 1,156 European Union (EU) (excluding UK) students Non-EU students * Total fees paid by or on behalf of individual students 1,703 2,181 Education contracts: Higher education income Other contracts Total 3,275 3,447 * 2004 includes 48,000 of non-eu higher education fees included under UK higher education fees in the 31 July 2004 Financial Statements. 4 Other Income Residencies, catering and conferences - 15 Other income generating activities Other grant income Releases from deferred capital grants (non Funding Council) 20 - Other income Total 1, Investment Income Other interest receivable Total

29 6 Staff Costs Year ended Year ended 31 July July 2004 The average monthly number of persons (including senior post-holders) employed by the College during the year, expressed as full-time equivalents, was: Number Number Teaching departments - teaching staff Teaching departments - other staff Teaching support services Other support services Administration and central services Premises Total Staff costs for the above persons: Wages and salaries 10,232 9,656 Social security costs Other pension costs 1, Exceptional restructuring costs 6 31 Total 12,050 11,327 Teaching departments 6,867 6,571 Teaching support services 1,415 1,348 Other support services Administration and central services 2,693 2,389 Premises Sub total 12,044 11,296 Exceptional restructuring costs 6 31 Total 12,050 11,327 27

30 6 Staff Costs (continued) Year ended Year ended 31 July July Employment costs for staff on permanent contracts 10,231 9,599 Employment costs for staff on short-term and temporary contracts 1,813 1,697 Restructuring costs 6 31 Total 12,050 11,327 The restructuring costs were approved by the institution s remuneration committee. The number of staff, including senior post holders and the Principal, who received emoluments in the following ranges was: Senior Post-holders Other staff No. No. No. No. 50,001 to 60, ,001 to 70, ,001 to 80, ,001 to 90, ,001 plus Total A pay award of 3% was approved by the Corporation and paid with effect from 1 August 2004 for all staff. A previous 3% pay award had been paid with effect from 1 April 2003 to all College staff. In addition the College adopted the AoC s pay harmonisation recommendation, giving on average a further increase of approximately 3% to all staff other than senior post holders. 28

31 7 Senior Post-holders' Emoluments Senior post-holders are defined as the Principal and holders of the other senior posts whom the Corporation has selected for the purposes of the articles of government of the College relating to the appointment and promotion of staff who are appointed by the Corporation. Number Number The number of senior post-holders including the principal was: 5 5 Senior post-holders emoluments are made up as follows: Salaries 464, ,876 Pension contributions 53,079 48,273 Total emoluments 517, ,149 The above emoluments include amounts payable to the Principal (who is also the highest paid senior post-holder) of: Year ended Year ended 31 July July 2004 Salary 130, ,800 Pension contributions 14,580 13,500 Total 144, ,300 The pension contributions in respect of the Principal and senior post-holders are in respect of employer s contributions to the Teachers Pension Scheme and the East Sussex County Council Superannuation Fund and are paid at the same rate as for other employees. The members of Corporation other than the Principal and the staff members did not receive any payment from the College other than the reimbursement of travel and subsistence expenses incurred in the course of their duties. Senior post-holders, including the Principal, received pay increases between 8% and 10%. Bonuses of 10% of salary have been agreed for all senior post holders. 29

32 7 Senior Post-holders' Emoluments (continued) Overseas activities The following costs were incurred during the year ended 31 July 2005 in respect of overseas activities which were carried out in accordance with the strategy approved by the Corporation: Total Contributions Net costs cost received to College Members Senior post-holders 2,714-2,714 Other higher paid staff 2,682-2,682 Other staff 13,456-13,456 Total 18,852-18,852 8 Other Operating Expenses Year ended Year ended 31 July July Teaching departments 1,374 1,021 Teaching support services Other support services Administration and central services General education Premises running costs Premises maintenance costs Premises rents and leases Catering and residence operations Franchised provision Total 4,944 4,826 Other operating expenses include: Auditors remuneration: Year ended Year ended 31 July July financial statements audit* internal audit** 14 9 Hire of other assets - operating leases *includes 14,000 in respect of the College (2003/04 12,000) **includes 14,000 in respect of the College (2003/04 9,000) 30

33 9 Interest Payable Year ended Year ended 31 July July On bank loans, overdrafts and other loans: Repayable wholly or partly in more than 5 years Total Taxation The Governors are advised that the College was not liable for any corporation tax arising out of its activities during this period. 11 Surplus on continuing Operations for the Period The surplus on continuing operations for the period is made up as follows: Year ended Year ended 31 July July College s surplus for the period Surplus generated by subsidiary undertakings 2 35 Total

34 12 Tangible Fixed Assets (GROUP) Land and Buildings Freehold In course of Equipment Total construction Cost or Valuation At 1 August , ,306 22,637 Additions 15 1, ,785 At 31 July ,974 1,572 6,876 24,422 Depreciation At 1 August ,487-4,683 7,170 Charge for year ,056 At 31 July ,888-5,338 8,226 Net book value At 31 July ,086 1,572 1,538 16,196 Net book value At 31 July , ,623 15,467 Inherited 5, ,796 Financed by capital grant 2, ,850 Other 4,904 1,572 1,074 7,550 Net book value At 31 July ,086 1,572 1,538 16,196 32

35 12 Tangible Fixed Assets (College only) Land and Buildings Freehold In course of Equipment Total construction Cost or Valuation At 1 August , ,231 22,059 Additions 15 1, ,785 At 31 July ,471 1,572 6,801 23,844 Depreciation At 1 August ,464-4,647 7,111 Charge for year ,034 At 31 July ,853-5,292 8,145 Net book value At 31 July ,618 1,572 1,509 15,699 Net book value At 31 July , ,584 14,948 Inherited 5, ,796 Financed by capital grant 2, ,850 Other 4,436 1,572 1,045 7,053 Net book value At 31 July ,618 1,572 1,509 15,699 The opening balance in respect of Land and Buildings - in course of construction has been restated to 372,000 (2004: 117,000) to reflect the true position at 31 July The adjustment has required reallocations between Freehold Land and Buildings and Equipment. This is not a prior period adjustment as defined in FRS3 Reporting Financial Performance and there has been no impact on cumulative reserves. The transitional rules set out in FRS15 Tangible Fixed Assets have been applied on implementing FRS15. Accordingly the book values at implementation have been retained. Land and buildings were valued in 1993 at depreciated replacement by a firm of independent chartered surveyors. Other tangible fixed assets inherited from the LEA at incorporation have been valued by the College on a depreciated replacement cost basis. 33

36 13 Investments College College Year ended Year ended 31 July July Investments in subsidiary companies - - The College owns 100% of the issued ordinary 1 shares of BCT Developments Limited, a company incorporated in England and Wales. The principal business of BCT Developments Ltd is the provision of library services. 14 Debtors Group College Group College Year ended Year ended Year ended Year ended 31 July July July July Amounts falling due within one year Trade debtors ,324 1,421 Amounts owed by group undertakings: Subsidiary undertakings* Prepayments and accrued income Total 942 1,815 1,458 2,382 * Amounts owed by subsidiary undertakings includes 834,179 due after more than one year (2004: 834,179). 15 Creditors: Amounts Falling Due Within One Year Group College Group College Year ended Year ended Year ended Year ended 31 July July July July Bank loans and overdrafts Payments received in advance Trade creditors Amounts owed to group undertakings: Subsidiary undertakings Other taxation and social security Accruals* 1,293 1,292 1,290 1,410 Total 2,118 2,403 1,956 2,267 * 2005 Includes 11,000 received from the LSC in respect of Standards Funds and 212,000 in respect of LID Funding. 34

37 16 Creditors: Amounts Falling Due After More Than One Year Group College Group College Year ended Year ended Year ended Year ended 31 July July July July Bank loans HM Customs and Excise VAT Total 1,350 1,350 1,452 1, Borrowings Bank loans and overdrafts Bank loans and overdrafts are repayable as follows: Group College Group College Year ended Year ended Year ended Year ended 31 July July July July In one year or less or on demand Between one and two years Between two and five years In five years or more Total Provisions for Liabilities and Charges Group and College Pension Provision 000 At 1 August Expenditure in the period (36) Transferred from income and expenditure account 55 At 31 July The enhanced pension provision relates to the cost of staff who have already left the College s employ. This provision has been recalculated in accordance with the Learning and Skills Council circular 05/02. 35

38 19 Deferred Capital Grants At 1 August 2004 Cash received Group and College Funding Council Other Grants Total Land and buildings 2,174-2,174 Equipment Land and buildings Equipment Released to income and expenditure account Land and buildings (61) - (61) Equipment (144) (20) (164) Total 2, ,941 At 31 July 2005 Land and buildings 2,386-2,386 Equipment Total 2, ,941 Analysis of capital grants received from the Learning and Skills Council during 2004/ DDA works 334 Post Inspection Action Plan 9 Workforce Skills Development 2 Centres of Vocational Excellence 70 Information Learning Technology 12 Total Revaluation Reserve Group College Group College Year ended Year ended Year ended Year ended 31 July July July July At 1 August ,967 5,967 6,138 6,138 Transfer from revaluation reserve to general reserve in respect of: Depreciation on revalued assets (171) (171) (171) (171) At 31 July ,796 5,796 5,967 5,967 36

39 21 Movement on General Reserves Group College Group College Year ended Year ended Year ended Year ended 31 July July July July Income and Expenditure Account Reserve At 1 August ,251 5,345 4,950 5,079 Surplus retained for the year Transfer from revaluation reserve At 31 July ,463 5,555 5,251 5, Reconciliation of Consolidated Operating Surplus to Net Cash Inflow from Operating Activities Year ended Year ended 31 July July Surplus on continuing operations after depreciation of assets at valuation Depreciation (note 1 & 12) 1, Deferred capital grants released to income (note 2&4) (225) (215) Interest payable (note 9) Increase in stocks (20) (1) Decrease/(increase) in debtors 516 (158) Increase/(decrease) in short term creditors 141 (576) (Decrease)/increase in long term creditors (48) 507 Increase in provisions 19 - Interest receivable (note 5) (88) (55) Net cash inflow from operating activities 1, Returns on Investments and Servicing of Finance Year ended Year ended 31 July July Other interest received Interest paid (61) (40) Net cash inflow from returns on investment and servicing of finance

40 24 Capital Expenditure and Financial Investment Year ended Year ended 31 July July Purchase of tangible fixed assets (1,785) (909) Deferred capital grants received Net cash outflow from capital expenditure and financial investment (1,247) (692) 25 Management of Liquid Resources Year ended Year ended 31 July July Placing of deposits - (229) Net cash inflow from management of liquid resources - (229) 26 Financing Debt due beyond a year: Year ended Year ended 31 July July Repayment of amounts borrowed (33) (5) Net cash outflow from financing (33) (5) 27 Analysis of Changes in Net Funds At 1 August Cashflows At 31 July Cash in hand, and at bank Debt due after 1 year (945) 54 (891) Current Asset Investments Total

41 28 Pension and similar obligations The College s employees belong to two principal pension schemes: the Teachers Pension Scheme England and Wales (TPS) for academic and related staff; and the East Sussex County Council Superannuation Fund (ESCCSF) for non-teaching staff, which is managed by Serco Solutions Limited. Both are defined benefit schemes. The total pension cost to the College in 2004/05 was 1,021,000 ( ,000) of which 582,000 ( ,000) relates to the TPS and 439,000 ( ,000) relates to ESCCSF. The pension costs are assessed in accordance with the advice of independent qualified actuaries. The latest actuarial valuations of the schemes were as at 31 March 2001 (TPS) and 31 March 2004 (ESCCSF). Teachers Pension Scheme The Teachers' Pension Scheme is an unfunded defined benefit scheme. Contributions on a pay as you go basis are credited to the exchequer under arrangements governed by the Superannuation Act A notional asset value is ascribed to the Scheme for the purposes of determining contribution rates. SSAP 24 The pensions cost is assessed every five years in accordance with the advice of the government actuary. The assumptions and other data that have the most significant effect on the determination of the contribution levels are as follows: Latest actuarial valuation 31 March 2001 Actuarial method Prospective Benefits Investment returns per annum 7.0% per annum Salary scale increases per annum 5.0% per annum Market value of assets at date of last valuation 142,880 million Proportion of members accrued benefits covered by the actuarial value of the assets - 100% Following the implementation of Teachers Pensions (Employers Supplementary Contributions) Regulations 2000 the government actuary carried out a further review on the level of employer contributions. For the period from 1 August 2004 to 31 July 2005 the employer contribution was 13.5%. An appropriate SSAP 24 provision in respect of unfunded pensioners' benefits is included in provisions. FRS 17 Under the definitions set out in Financial Reporting Standard 17 (FRS17) Retirement Benefits, the TPS is a multi-employer pension scheme. The College is unable to identify its share of the underlying assets and liabilities of the scheme. Accordingly, the College has taken advantage of the exemption in FRS17 and has accounted for its contributions to the scheme as if it were a defined contribution scheme. The College has set out above the information available on the deficit in the scheme and the implications for the College in terms of the anticipated contribution rates. 39

42 28 Pension and similar obligations (continued) ESCCSF The ESCCSF is a funded defined benefit scheme, with the assets held in separate trustee administered funds. The total contribution made for the year ended 31 July 2005 was 627,000 of which employer s contributions totalled 439,000 and employees contributions totalled 188,000. The agreed contribution rates for future years are 14.8% for employers and 6% for employees. SSAP 24 The pensions cost is assessed every three years in accordance with the advice of a qualified independent actuary. The assumptions and other data that have the most significant effect on the determination of the contribution levels are as follows: Latest actuarial valuation 31 March 2004 Actuarial method Projected Unit Investment returns per annum - Equities 6.70% per annum Investment returns per annum - Bonds 5.10% per annum Pension increases per annum 2.9% per annum Salary scale increases per annum 4.4% per annum Market value of assets at date of last valuation 1,111 million Proportion of members accrued benefits covered by the actuarial value of the assets - 84% FRS 17 The following information is based upon a full actuarial valuation of the Fund at 31 March 2004 updated to 31 July 2005 by a qualified independent actuary. At 31 July At 31 July At 31 July Rate of increase in salaries 4.3% 4.4% 4.1% Rate of increase for pensions in payment/inflation 2.8% 2.9% 2.6% Discount rate for liabilities 5.0% 5.8% 5.5% The assets in the scheme and the expected rates of return were: Long term 000 Long term 000 Long term 000 rate of return rate of return rate of return expected at Value at expected at Value at expected at Value at 31 July 2005 July July 2004 July July 2003 July 2003 Equities 7.3% 973, % 817, % 755,400 Bonds 4.7% 157, % 140, % 109,900 Property 5.4% 140, % 130, % 111,200 Cash 4.5% 94, % 30, % 52,000 Total market value of assets 1,366,242 1,118,714 1,028,500 College s estimated asset share 9,793 8,460 7,382 Present value of scheme liabilities (13,214) (10,995) (9,936) Deficit in the scheme (3,421) (2,535) (2,554) 40

43 28 Pension and similar obligations (continued) ESCCSF (continued) Under the transitional arrangements of FRS17, no provision has been made by the College for the institution's share of the deficit of the scheme. If provision were made, the following entries would be made: Balance Sheet Presentation Year ended Year ended 31 July July Net assets excluding FRS17 pension liability* 14,200 13,170 Net pension liability (3,421) (2,535) Net assets including FRS17 pension liability 10,779 10,635 Reserves Note Income and expenditure account excluding FRS17 pension liability* 5,463 4,575 Pension reserve (3,421) (2,535) Income and expenditure account including FRS17 pension liability 2,042 2,040 * Amounts exclude SSAP 24 provisions for LGPS scheme underfunding included within the College balance sheet. Under the transitional arrangements of FRS17, the College s pension charge for the year calculated under FRS 17 assumptions is not included in the financial statements (as this is currently calculated on a SSAP 24 basis). If the charge had been included on an FRS 17 basis, the following entries would be made: Analysis of the amount charged to income and expenditure account Employer service cost (net of employee contributions) Past service cost Total operating charge Analysis of net return on pension scheme Expected return on pension scheme assets Interest on pension liabilities (645) (561) Net return (13) (18) Amount recognised in the statement of total recognised gains and losses (STRGL) Actual return less expected return on pension scheme assets 1, Experience gains and losses arising on the scheme liabilities (583) 1 Change in financial and demographic assumptions underlying the scheme liabilities (1,467) (14) Actuarial (loss) / gain recognised in STRGL (901) 198 Movement in surplus during year Deficit in scheme at 1 August 2004 (2,535) (2,554) Movement in year: Current employer service charge (419) (448) Employer contributions Past service costs (3) (110) Net interest / return on assets (13) (18) Actuarial gain or loss (901) 198 Deficit in scheme at 31 July 2005 (3,421) (2,535) 41

44 28 Pension and similar obligations (continued) ESCCSF (continued) History of experience gains and losses Difference between the expected and actual return on assets: Amount 000 1, (100) % of scheme assets 11.7% 2.5% (1.4%) Experience gains and losses on scheme liabilities: Amount 000 (583) 1 (13) % of scheme liabilities (4.4%) 0.0% (0.1%) Total amount recognised in STRGL Amount 000 (901) 198 (1,280) % of scheme liabilities (6.8%) 1.8% (12.9%) 29 Post Balance Sheet Events There have been no significant post balance sheet events that are not already reflected in these statements. 30 Capital Commitments Group and College Year ended Year ended 31 July July Commitments contracted for at 31 July 1,243 - Total 1, Financial commitments At 31 July the College had annual commitments under non-cancellable operating leases as follows: Group and College Year ended Year ended 31 July July Other Expiring within one year 33 - Expiring within two to five years inclusive Total

45 32 Contingent Liability The College has a contingent liability not recognised in the accounts in respect of potential pension provisions for part-time staff. This resulted from changes in European legislation and cannot be quantified. 33 Related Party Transactions Due to the nature of the College's operations and the composition of the board of governors being drawn from local public and private sector organisations, it is inevitable that transactions will take place with organisations in which a member of the board of governors may have an interest. All transactions involving an organisation in which a member of the board of governors may have an interest are conducted at arm s length and in accordance with the College s financial regulations and normal procurement procedures. No transactions were identified which should be disclosed under Financial Reporting Standard 8 Related Party Disclosures. 34 Access Funds Access Funds 31 July July Learning + Skills Council Grants Interest earned Disbursed to students ( 283) ( 310) Administration costs ( 15) ( 16) Balance unspent as at 31 July Learning & Skills Council grants are available solely for students; the College acts only as a paying agent. Accordingly, the grants and related disbursements are excluded from the Income and Expenditure Account. 43

46 Independent report to the Corporation of City College Brighton and Hove ( the Corporation ) and the Learning and Skills Council ( the LSC ) In accordance with the terms of our engagement letter dated 29 September 2005 and further to the requirements of the LSC, we have carried out a review to obtain assurance about whether, in all material respects, the expenditure disbursed and income received of City College Brighton and Hove ( the College ) during the year ended 31 July 2005 have been applied to the purposes identified by Parliament and the financial transactions conform to the authorities which govern them. This report is made solely to the Corporation and the LSC. Our review work has been undertaken so that we might state to the Corporation and the LSC those matters we are required to state to it in a report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Corporation and the LSC, for our review work, for this report, or for the opinion we have formed. Respective responsibilities of the Members of the Corporation of City College Brighton and Hove and Auditors The College s Corporation is responsible, under the requirements of the Further & Higher Education Act 1992, subsequent legislation and related regulations, for ensuring that expenditure disbursed and income received is applied for the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. Our responsibilities for this review are established in the United Kingdom by our profession s ethical guidance and the audit guidance set out in the Audit Code of Practice and the Regularity Audit Framework 2004/05 issued by the LSC. We report to you whether, in our opinion, in all material respects, expenditure disbursed and income received during the year ended 31 July 2005 have been applied to purposes intended by Parliament and the financial transactions conform to the authorities which govern them. Basis of opinion We conducted our review in accordance with the Audit Code of Practice and the Regularity Audit Framework 2004/05 issued by the LSC. Our review includes examination, on a test basis, of evidence relevant to the regularity and propriety of the College s income and expenditure. Opinion In all material respects the expenditure disbursed and income received during the year ended 31 July 2005 have been applied to purposes intended by Parliament and the financial transactions conform to the authorities, which govern them. BAKER TILLY Chartered Accountants International House Queens Road Brighton East Sussex BN1 3XE... 44

47 city college brighton and hove Pelham Street, Brighton, East Sussex BN1 4FA T F