West Lothian College

Transcription

1 OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 31 JULY 2008 West Lothian College West Lothian College is situated in Livingston, the largest town in the West Lothian local authority area. With its geographical position between Edinburgh and Glasgow and proximity to the major roads, rail and airport networks, West Lothian is one of the fastest growing economies in Scotland. The College opened in Livingston in July 2001 following a relocation of the full campus from the previously occupied site in Bathgate. Since 2001 the College has consistently delivered successfully on a range of targets. Following the termination in 2007 of the PFI agreement the College has also successfully managed its own estate. The College is sited on one campus and comprises a number of buildings distinctly identified as pavilions, terraces and one street building. The College has six different sector areas for vocational skills within the campus alongside all service functions. The only outreach facility is a small unit leased within Kirkton Business Park, to accommodate the New Deal unit which is sub contracted to the College by West Lothian Council. Nature, Objectives and Strategies The Board present their report and the audited financial statements for the year ended 31 July The Board of Governors has approved these accounts on the basis the College is a going concern. The audited financial statements have been prepared under the historic cost convention in line with the principles and guidance set out in the Statement of Recommended Practice, Accounting for Further and Higher Education. Legal Status The corporation was established under the Further and Higher Education (Scotland) Act 1992 for the purposes of conducting as West Lothian College. The College is a registered charity (Scottish Charity Number SC021216) for the purposes of the Law Reform (Miscellaneous Provision) (Scotland) Act Scope of the Financial Statements The Financial Statements cover all activities of the College. Mission Statement The College s mission was reviewed during the year and is: To drive forward as a College which delivers high quality learning, through a successful, relevant and demand led curriculum which meets the needs of learners, employers, businesses and the community. Accounts 2008 Page 1

2 The Strategic Plan The new Strategic Plan for sets out key targets for the forthcoming period: Drive up participation in high quality learning and skills development Increase from 6,000 to 10,000 learners. Develop the portfolio to reflect a 60% of Non Advanced/40% Advanced Programmes. Develop the portfolio to reflect economic growth in construction, service and creative industries. Achieve highest levels of confidence in learning and teaching from external quality reviews. Drive up attainment for learners to increase sustainable employability in a competitive jobs market Increase the number of NQ learners achieving qualifications from 70% to 80%. Improve progression of HN learners in to relevant employment from 44% to 55%. Increase the number of people achieving skills levels 3 and 4 in employment by 20%. Increase learner articulation to Degree programmes from 76% to 80%. Drive forward a highly motivated and creative organisation which exceeds learner and stakeholders expectations Invest in CPD to ensure workforce skills are fit for purpose. Achieve continuous improvement through a range of staff satisfaction measures. Invest in the ICT infrastructure to improve technology for connection and communication. Develop the estate to provide a customer focused, flexible and adaptable learning environment. Drive up investment in learning through continuous financial improvement Recognise our learners and businesses as investors and measure the return on investment. Develop a 100k investment fund to support individual learners and learning opportunities. Develop a 50k enterprise fund to support business start up opportunities for learners. Achieve an annual operating surplus of 5% of total income. Accounts 2008 Page 2

3 Financial Strategy The key targets in the new Strategic Plan integrate and harmonise with the College s financial strategy. The key aims of this strategy are: To achieve longterm financial security and match resources to College strategic objectives; To invest resources to obtain the best return for the College in the short, medium and longer term; To plan and control the financing of College development, and ensure investment returns are optimised; and To provide a first class and efficient learning environment for students and staff to meet current and future learning and resource objectives through the economic, efficient and effective deployment of resources. Progress on National Priorities West Lothian College has provided good access to a range of appropriate vocational learning opportunities over the past period. The College interviews all applicants for programmes to ensure that good guidance is given and to assess individual and specific support which learners may need to assist them with their study. The College works closely in partnership with research organisations to ensure that labour market information is used to underpin programme approvals and development. This forms part of the self evaluation annual process and is key to ensuring that programmes match economic needs. The College strategy is very much in tune with economic aspirations. All programmes take account of progression opportunities and employability skills development is embedded within all vocational areas. There are many opportunities for enterprising activities across the College and there is a good track record of positive citizenship evidenced through the volume of charitable events which are undertaken by students throughout the year. A successful review from HMIE in November 2007 highlighted the College as Good or Very Good across all learning and teaching and cross College areas. Highlights were noted in work based and flexible support to learners, alongside specific community outreach provision for learners with additional support needs. As previously stated, the College has an exceptionally strong partnership with the schools and provides vocational opportunities for approx 600 school students every week as part of their mainstream programmes. In addition there have been several specific initiatives over the past period to address the needs of young people who have been disengaged with learning. The College is a partner on the local MCMC Strategy group, and has been successful in targeting and supporting learners in to positive destinations. The College works closely with the business community through a highly successful workforce development department, which engages with around 600 employees in the workplace for assessment of competence. The introduction of an electronic portfolio system has further increased this capacity and has proved popular with businesses in meeting their needs. The allocation of Knowledge Transfer funding has enabled the College to widen its scope of involvement with employers and is being targeted to support business improvement. A particular success has been a strong partnership project between the College, the Chamber of Commerce and the Business Gateway service to mentor small businesses and provide management development through VQ s at levels 3 and 4. Accounts 2008 Page 3

4 There has also been some research undertaken to inform development of a Health and Well Being centre of excellence. This has been supported by partners from Napier University and Skills Development Scotland. Whilst West Lothian College does not have a great number of international students studying at the College, there have been a number of initiatives which have strengthened international links for staff and students. These have been undertaken in partnership with other organisations i.e. SCDI, the Local Authority and Scotland s Colleges to maximise any return on investment. One of the Hospitality lecturers was invited to Texas to demonstrate his skills at the Grapevine Food Festival and this will be followed up by student exchange. We have delivered training on Quality Standards to a group of officials from Kazakhstan. Staff worked with Vocational Education representatives from Kosovo and we have further developed links with recruitment agencies in India for future links. The College has also had representation on a Scotland s Colleges visit to New York where presentations were made to an international audience to highlight the work of Scotland s Colleges. Performance Indicators Although the College has challenging post PFI financial commitments, management and control to ensure financial stability is sound. Corporate Governance arrangements were reviewed by the College s internal auditors during 2008 and were considered to be satisfactory. There are clear management structures and reporting arrangements in place, with operating plans, performance indicators and risk management processes in place to support delivery of strategic aims. To monitor progress against strategy and operations the College works with a range of performance indicators, which are reviewed by the Senior Management Team and the Board of Governors on a regular basis. Accounts 2008 Page 4

5 The table below details performance in and and sets out the targets for Actual Actual TARGET WSUMs 45,139 45,239 44,920 Student Retention 91% 91% 91% Staff Attendance 96% 95% 96% Learner Progress 87% n/a 90% Early Student Retention 96% 96% 96% Learner Satisfaction 86% 87% 90% Student Achievement Ratio per Unit (SARU) 67% 71% 72% Learner Enrolments Surplus on continuing operations as a % of total income 2.4% 3.2% 5% Surplus on continuing operations as a % of total expenditure 2.5% 3.3% 5% Surplus on nonsummable commercial income as % of total commercial income n/a n/a 20% Staff costs as % of total income (excludes exceptional costs) 50% 63%* 63% Ratio of Current Assets to Current Liabilities 1:5 1:04 2:1 Days Cash to Total Expenditure Debtor days *Increase in staff costs is due to transfer of Estates Staff to the college following termination of the PFI contract. Financial Position Financial Results The College has generated an operating surplus of 383,000 ( ,000). The Income and Expenditure Account for the period shows a Historical Cost Surplus of 383,000. This results in a reduction in the cumulative trading deficit (excluding early retirement provision) from 1,142,000 to 745,000 on the Income and Expenditure account, and a decrease in the early retirement provision from 3,323,000 to 3,135,000. The deficit associated with the voluntary agreed PFI termination is 5,540,000. The transfer to reserves is 383,000. The College has adopted FRS17 in full in these financial statements which affects the amounts disclosed in each of the Balance Sheet, Income and Expenditure Account, and Statement of Total Recognised Gains and Losses. The FRS17 pension liability for is 1,228,000 ( 687, ). Accounts 2008 Page 5

6 Taxation Status The College is registered with the Office of the Scottish Charities Regulator as a Scottish Charity and is exempt from corporation tax and capital gains tax. The College receives no similar exemption in respect of Value Added Tax. Treasury Policies and Objectives The College has a treasury management policy. The objectives of this policy are: Cash Flows To optimise the management of income to ensure that sufficient funds are available on a daytoday basis to meet anticipated expenditure requirements related to the management of the College. To identify from cash flow projections any exceptional funds, in addition to the normal daytoday surpluses, and the periods for which these funds are available for deposit. Cash flow projections are prepared annually, broken down on a monthly basis to ensure that these are sufficient to meet the needs of the College. These are reviewed monthly and reports are provided to the Senior Management Team and the Finance and General Purposes Committee. Bank balances are checked on a daily basis and dayto day surplus funds are deposited overnight in a high interest bank account. Liquidity The College uses a number of ratios to assess the College s liquidity. The two key ratios are current assets: current liabilities and days cash to total expenditure. At the end of current assets: current liabilities was 1:04 and days cash to total expenditure was 53. In the target for current assets: current liabilities is 2.1 and a target of 31 days for days cash to total expenditure has been set. Creditor Payment Policy The College complies with the Confederation of British Industry (CBI) Prompt Payment Code and has a policy of paying its suppliers within 30 days of invoice unless the invoice is contested. All disputes and complaints are handled as quickly as possible. The proportion of yearend creditors to the aggregate invoiced amounts during the year was 6.8% ( %). The College did not pay any late interest payments during the year. Accounts 2008 Page 6

7 Current and future developments and performance Student numbers and achievements Participation rates in Further and Higher Education in West Lothian are well behind the Scottish average. The College enrolled 6,000 learners in 2007/08 from a working population of 86,000 (6.9%). Of the qualifications undertaken 74.4% were at non advanced level (VQ s Level 2/3), with only four curriculum areas offering qualifications at High National Diploma level (VQ Level 4). Curriculum developments Vocational opportunities offered by the College are available from introductory and access level through to Higher National Diploma provision. Programmes are offered in: Healthcare, Social Care, Social Science and Early Education and Childcare Sport and Fitness Beauty Therapy and Hairdressing Computing and Digital Media Art and Photography Business and Management Training Hospitality Retail and Distribution Motor Vehicle Carpentry and Joinery Electrical and Engineering Core skills and ESOL Assisted Programmes From 2008 the College will offer a BA in Business Management in partnership with Napier University. Programmes are available for full time, part time, work based and flexible study, with some community outreach also provided. The learner profile of the College shows a higher percentage of females to males, and almost one third of enrolments are students under the age of 19. This is variable across the vocational sectors with many young males in engineering and construction skills and more mature females in Care and Early Education and Childcare. The College clearly continues to recruit to programmes on the basis of ability, experience and aspiration and not on the grounds of gender, age or any other basis. There is an exceptionally strong college/school partnership programme which specifically aims to increase the vocational options for 1419 year olds. This is further supported by a national strategy to meet the needs of the More Choices More Chances group. Whilst the College is widely acknowledged as being successful, it has a challenging local economic context in terms of demand, which the College with a capped level of funding struggles to meet. Accounts 2008 Page 7

8 West Lothian s economy has migrated from a manufacturing base to a service economy with retail, logistics, financial services, public services and customer service centres accounting for a large proportion of employment in the area. The number of large employers in West Lothian is higher than the Scottish average; however 84% of businesses are small to medium enterprises (SMEs). West Lothian has the highest economic activity rates in Scotland and a record of sustained jobs growth since 1998, with 86,800 people in employment. Positive demographic trends indicate that the West Lothian population will increase by 25% over the next 16 years. The average age of the population is younger than the Scottish average and currently the number of young people is still increasing. There is a 12% increase predicted in the working age population up to In percentage terms, West Lothian has also seen the 3 rd highest increase of all local authority areas in Scotland in the migrant workforce. These factors are all relevant to the future challenge of increasing productivity in the workplace, a key issue for the economy of Scotland in a global landscape. Whilst the local area has a vibrant and expanding economy, the main challenges are to drive up the skills levels of the employment base to ensure a high value knowledge economy which maximise levels of participation and productivity in the workplace. With average weekly earnings lagging behind the Scottish average and a widening gap in earnings, the aspirations of West Lothian Economic Partnership are to address this. Key major developments in West Lothian over the next ten years, which will contribute to the jobs growth both in terms of the initial construction phase and then in to service or production sectors are: Reestablishment of the rail link between Bathgate and Airdrie J4M8 Johnson & Johnson Expansion BSkyB Establishment of HMP Addiewell Almondvale Development of The Elements Core Development Areas Tesco Distribution Centre Civic Centre Grampian Food HQ Heartlands Projects A snapshot of the workforce skills levels in West Lothian demonstrates that, although West Lothian has a higher than average number of employees qualified at VQ Level 1, the area lags behind the Scottish average at Levels 2,3,4 and above. West Lothian currently has 11 Secondary Schools and 66 Primary Schools, with 10,753 and 15,059 enrolments respectively. There are 1,292 Special Education Needs enrolments with 193 pupils placed in Special Educational provision. The free school meals entitlement averages at 12% in West Lothian against a Scottish figure of 15%. Accounts 2008 Page 8

9 With a general upward trend, schools attainment has been improving with 73% of S4 students now gaining 5 or more Standard Grades and 19% of S5 students gaining 3 or more Highers. The percentage of young people entering Further Education was at the highest level for five years in 2007 at 21.4%. Despite the many positive aspects of the West Lothian economy, pockets of deprivation are still prevalent in some of the more rural areas in the west of West Lothian and in some parts of Livingston. There are currently 17,400 benefit claimants and of these 10,000 have declared themselves actively seeking work. In addition the estimated number of young people not engaged in learning, training or employment is estimated at around 1,100. To meet economic growth the College needs to drive up participation in learning and increase the attainment levels of learners. Additionally the Scottish Government presents many opportunities and joint challenges through Skills for Scotland and the Single Outcome Agreements under the auspices of the Community Planning Partnerships. Our Strategic plan for the next period therefore is for growth, both in driving up participation levels in high quality learning and skills development and in the attainment of learners. These are key to meeting the needs of the fast growing economy in which we live. Future developments Since termination of the PFI arrangement, the College has continued to develop the estate to meet the ever changing needs of the curriculum. Investment over the past period has been in the development of improved facilities and resources for construction skills, specifically to support training in electrical and engineering studies with some extension for carpentry and joinery skills. Alongside there has been some refurbishment to support the area of Care as part of the development of a Centre of Excellence, and significant investment has been made in mobile and smart technology across the College, to further improve the delivery of learning and teaching. An option appraisal of the College s estate is to be undertaken during to inform future developments. Postbalance sheet events There are no postbalance sheet events. Resources While the College is in receipt of recurrent grant funding, it also generates income from its commercial activities. Commercial income is derived from three main strands of activity, the New Deal Unit which is a commercial sub contract from West Lothian Council, professional qualifications in management and training and the delivery of vocational programmes in the workplace. Accounts 2008 Page 9

10 Principal risks and uncertainties The College has updated the risk register to align with the new strategic plan for The College risk register for covers 4 key risk areas; reputation, financial, operational and estates with 29 key risks being identified. The risk areas provide details of individual risks associated with the area and controls in place to negate the risk. A member of the Senior Management Team has lead responsibility for controls and the Senior Management Team is responsible for monitoring the controls on a quarterly basis. The principal risks are: Reputation the approach used to deal with risks linked to reputation is to ensure that the planning process is robust and that there is a transparent communication process internally and externally. The College involves key stakeholders in discussions and utilises resources effectively to provide a high quality service. Internal and external controls are in place to monitor risks associated with reputation to avoid any impact on the College s long term financial position. Financial robust financial monitoring and implementation of financial procedures ensures that standards are maintained at a high level. Where there is any uncertainty regarding funding streams controls are in place to monitor, review and take action. The Senior Management Team are proactive in planning for changes in funding streams and ensure that SFC and legislative guidance is followed in addition to the College s own financial regulations. Internal and external controls are in place to monitor risks associated with finance and regular reports are presented to the Finance and General Purposes Committee, the Audit Committee and the Board of Governors to avoid any impact on the College s long term financial position. Operational risks in this area cover a range of operational functions and a variety of measures are in place to minimise the risks. Key strategies, policies and procedures and continuous professional development for staff ensure that operational risks are minimised. Internal and external controls are in place to monitor risks associated with operational issues and regular reports are presented to the Board of Governors to avoid any impact on the College s long term financial position. Estates risks in the area of estates were initially linked to the transition from a PFI estate to a wholly owned college. Having successfully made the transition risks are now associated with the utilisation and security as well as the longer term strategy for the estate. Internal and external controls are in place to monitor risks associated with the estate and regular reports are presented to the Finance and General Purposes Committee of the Board of Governors. The Senior Management Team will undertake an option appraisal on the estate over the next year to inform future developments and avoid any impact on the College s future financial position. Stakeholder relationships The College believes strongly in the value of partnership working and seeks to maximise the benefits of these partnerships for our learners through positive engagement with a wide range of organisations and stakeholders. The College has a well developed External Relations Mapping document which it reviews periodically. This captures all key contacts for organisations and further details the aims of specific partnerships and highlights commonality of aims and objectives. Accounts 2008 Page 10

11 Equal opportunities and employment of disabled persons The College actively promotes equality as required by statute and associated regulatory frameworks. Policies and procedures, work practices and terms and conditions of employment are continuously reviewed to ensure compliance with legislation and identified best practice. The College considers all applications for employment from disabled persons, in respect of the qualifications and skills required to fulfil the requirements of the position. The College policy is to provide training career development and opportunities for promotion which are identical to those for other employees. Professional Advisers for Year to External Auditors: Internal Auditors: Bankers: Solicitors : ScottMoncrieff BDO Stoy Hayward Bank of Scotland Brechin Tindall Oatts Morton Fraser, Commercial Accounts 2008 Page 11

12 MEMBERS The members who served on the Board during the period were as follows: Name Status Job Title Dr Tony Kinder Chair Researcher, The University of Edinburgh Mr Robert Black Governor Retired Ms Kate Carnegie (resigned 31/1/08) ViceChair and Chair, Audit Committee Managing Director, Triage Central Limited Ms Angela Carty Governor Student Member (resigned 20/12/07) Mr Graham Clark Governor Teaching Staff Member Ms Sue Cook (appointed 17/6/08) Governor Independent Consultant Mr Denis Cunningham Governor Support Staff Member Mr James Farrelly Chair, Learning and Teaching Committee Mr Terry Lafferty (appointed 17/6/08) Ms Mhairi Laughlin (appointed 13/2/08) Mr Alex Linkston Governor Governor Head of Human Resources, Diagnostics & Oral Health, NHS Greater Glasgow & Clyde, Southern General Hospital, Glasgow. Deputy Head of Finance, Bausch & Lomb Principal and Chief Executive, West Lothian College Chief Executive, West Lothian Council Governor and Chair, Audit Committee from 17/6/08 Ms Veronica Lynch Governor Team Leader, Scottish Enterprise Mr Robert McKechnie Governor Programme Manager, Selex Sensors and Airborne Systems Ms Morag McKelvie Governor Human Resources Manager, Jabil Circuit Ltd Professor Peter McKiernan Professor Patricia Peattie OBE Mrs Sue Pinder (resigned 6/1/08) Ms Fiona Stewart (appointed 17/6/08) Governor Chair, Finance and General Purposes Committee Governor Governor School of Management, University of St Andrews Retired Principal and Chief Executive, West Lothian College Assistant Director of Facilities Services (Project Director), Napier University Accounts 2008 Page 12

13 Board of Governors Name Possible Attendance Actual Attendance Tony Kinder (Chair) 5 4 Robert Black 5 3 Kate Carnegie 2 1 Angela Carty 2 0 Graham Clark 5 5 Sue Cook 1 1 Denis Cunningham 5 5 James Farrelly 5 3 Terry Lafferty 1 1 Mhairi Laughlin 2 2 Alex Linkston 5 3 Veronica Lynch 5 5 Robert McKechnie 5 3 Morag McKelvie 5 5 Peter McKiernan 5 3 Patricia Peattie 5 3 Sue Pinder 2 2 Fiona Stewart 1 1 Audit Committee Name Possible Attendance Actual Attendance Kate Carnegie (Chair to /1/08) Graham Clark 4 3 Alex Linkston (Chair from /6/08) Robert McKechnie 4 2 Finance and General Purposes Committee Name Possible Attendance Actual Attendance Patricia Peattie (Chair) 6 6 Robert Black 6 5 Denis Cunningham 6 3 Tony Kinder 6 2 Mhairi Laughlin 4 4 Veronica Lynch 6 5 Sue Pinder 2 2 Learning and Teaching Committee Name Possible Attendance Actual Attendance James Farrelly (Chair) 3 3 Angela Carty 1 1 Graham Clark 3 3 Mhairi Laughlin 2 2 Morag McKelvie 3 3 Peter McKiernan 3 1 Accounts 2008 Page 13

14 Membership Committee Name Possible Attendance Actual Attendance Tony Kinder (Chair) 1 1 Patricia Peattie 1 1 James Farrelly 1 1 Remuneration Committee Name Kate Carnegie (Chair) James Farrelly Tony Kinder Patricia Peattie There were no meetings in the period 1 August 2007 to N/A N/A N/A N/A RELATED PARTY TRANSACTIONS Due to the nature of the College s operations and the composition of its 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 College s Board of Governors may have an interest, and will be recorded as such in the Minutes of the Meetings and/or the Register of Interest. All transactions involving organisations in which a member of the Board of Governors may have a material interest are conducted at arm s length and in accordance with normal project and procurement procedures. The related party transactions due to/by the College for the year ended, and the amount outstanding at this date is disclosed in note 30. STATEMENT TO AUDITORS In accordance with legislation, the Board of Governors certify that: so far as we are aware, there is no relevant audit information of which the College s auditors are unaware; and as members of the Board of Governors we have taken all the steps that we ought to have taken in order to make ourselves aware of any relevant audit information and to establish that the College s auditors are aware of that information. Date of signing: Tony Kinder Chair Board of Governors Authorised for issue (date): Accounts 2008 Page 14

15 CORPORATE GOVERNANCE STATEMENT 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 of good governance set out in Section 1 of the Combined Code on Corporate Governance 2006 issued by the London Stock Exchange. Throughout the period ended, the College has been in compliance with all the Code provisions set out in Section 1 of the Combined Code on Corporate Governance 2006 insofar as they relate to Colleges. The College s Board of Governors is responsible for the College s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board of Governors is of the view that there is a process for identifying, evaluating and managing the College s significant risks, that it has been in place for the year ended and up to the date of approval of the annual report and financial statements, that it is regularly reviewed by the Board of Governors and that it accords with the internal control guidance for directors on the Combined Code. The College s Board of Governors comprises lay members, students and employees appointed under the Further and Higher Education (Scotland) Act 1992, the majority of whom are nonexecutive. The roles of Chairman and ViceChairman of the Board of Governors are separated from the role of the College s Principal. The matters specifically reserved to the Board for decision are set out in the College s Constitution and Standing Orders, by custom and under the Financial Memorandum with the Scottish Funding Council. The Board acknowledges the responsibility for the ongoing strategic direction of the College, approval of major developments and the receipt of regular reports from the Principal on the day to day operations of its business. The Full Board meets four times a year and has several subcommittees, including a Finance and General Purposes Committee, a Learning and Teaching Committee, a Remuneration Committee, a Membership Committee and an Audit Committee. All of these Committees are formally constituted with terms of reference. The Finance and General Purposes Committee inter alia recommends to the Board the College s annual revenue and capital budgets and normally meets four times a year. The Learning and Teaching Committee meets three times a year, and focuses on the quality of the student experience. The Remuneration Committee determines the remuneration of the most senior staff, including the Principal and meets as required, normally once a year. The Membership Committee considers candidates to fill vacancies on the Board and meets as required, normally at least once per year The Audit Committee meets four times a year, with the College s external and internal auditors in attendance where required. The Committee considers detailed reports together with recommendations for the improvement of the College s systems of internal control and management s responses and implementation plans. It also receives and considers reports from the Scottish Funding Council as they affect the College s business and monitors adherence to the regulatory requirements. Whilst the Principal attends meetings of the Audit Committee as necessary, she is not a member of the Committee. The Board, and its subcommittees, participate in annual selfevaluation reviews of its performance. The Board of Governors considers that the College has adequate resources to continue in operational existence for the foreseeable future. Accounts 2008 Page 15

16 Statement On System Of Internal Financial Control We, the Board of Governors are aware of the need for effective internal financial control, and acknowledge our responsibility for the system for such control operated by West Lothian College. The system can provide only reasonable and not absolute assurance that assets are safeguarded, transactions authorised and properly recorded, and that material errors or irregularities are either prevented or would be detected within a timely period. Our review of the effectiveness of the system of internal financial control is conducted through the work of the internal auditors (BDO Stoy Hayward), the Board of Governors, the Finance and General Purposes Committee and the Audit Committee. The internal financial control framework includes: a budgeting system with an annual budget which is approved by the Board of Governors; the provision of management information on a planned, regular basis and as required; regular reviews by the Finance and General Purposes Committee of monthly and annual financial reports which indicate financial performance against the forecasts; financial regulations, which identify policy and set up a control system within which management can delegate authority whilst informing staff of correct financial procedures. West Lothian College has an internal audit service, the work of which concentrates on areas of key activities determined in accordance with the annual internal audit plan approved by the Board of Governors. The internal auditors report to the Audit Committee, and have direct access to the chairman of the Audit Committee if required. The internal auditors issue an annual report that gives an opinion of the adequacy, reliability and effectiveness of the College s internal control system. In conclusion, it is the opinion of the Board of Governors that 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 through out the year to. Tony Kinder Chair Board of Governors Accounts 2008 Page 16

17 STATEMENT OF THE RESPONSIBILITIES OF THE BOARD OF GOVERNORS The Board of Governors are required to present audited financial statements for each financial year. In accordance with the Further and Higher Education (Scotland) Act 1992, the Board of Governors is responsible for the administration and management of the College s affairs, including ensuring an effective system of internal control, and is required to present audited financial statements for each financial year. The Board of Governors is responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the College and enable it to ensure that the financial statements are prepared in accordance with the Further and Higher Education (Scotland) Act 1992, the 2007 Statement of Recommended Practice Accounting for Further and Higher Education Institutions and other relevant accounting standards. In addition, within the terms and conditions of a Financial Memorandum agreed between the Scottish Funding Council and the College s Board of Governors, the Board of Governors, through its designated office holder, is required to prepare financial statements for each financial year which give a true and fair view of the College s state of affairs and of the surplus or deficit and cash flows for that year. In preparing the financial statements, the Board of Governors 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 presume that the College will continue in operation. The Board of Governors is satisfied that it has adequate resources to continue in operation for the foreseeable future and for this reason the going concern basis continues to be adopted in the preparation of the financial statements. The Board of Governors has taken reasonable steps to: Ensure that funds from the Scottish Funding Council are used only for the purposes for which they have been given and in accordance with the Financial Memorandum with the Funding Council and any other conditions which the Funding Council may from time to time prescribe; Ensure that there are appropriate financial and management controls in place to safeguard public funds and funds from other sources; Safeguard the assets of the College and prevent and detect fraud; Secure the economical, efficient and effective management of the College s resources and expenditure. Accounts 2008 Page 17

18 The key elements of the College s system of internal financial control, which is designed to discharge the responsibilities set out above, include the following: Clear definitions of the responsibilities of, and the authority delegated to, heads of academic and administrative departments; A comprehensive medium and shortterm planning process, supplemented by detailed annual income, expenditure, capital and cash flow budgets; Regular reviews of key performance indicators and business risks and quarterly reviews of financial results involving variance reporting and updates of forecast outturns; Clearly defined and formalised requirements for approval and control of expenditure, with investment decisions involving capital or revenue expenditure being subject to formal detailed appraisal and review according to approval levels set by the Board of Governors; Comprehensive Financial Regulations, detailing financial controls and procedures, approved by the Audit Committee and the Finance and General Purposes Committee; Professional internal audit team whose annual programme is approved by the Audit Committee and endorsed by the Board of Governors and whose head provides the Board of Governors with a report on internal audit activity within the College and an opinion on the adequacy and effectiveness of the College s system of internal control, including internal financial control. Any system of internal financial control can, however, only provide reasonable, but not absolute, assurance against material misstatement or loss. Approved by order of the members of the Board on 16 December 2008 and signed on its behalf by: Tony Kinder Chair Board of Governors Accounts 2008 Page 18

19 Independent auditor s report to the members of the Board of Governors of West Lothian College, the Auditor General for Scotland and the Scottish Parliament We have audited the financial statements of West Lothian College for the year ended 31 July 2008 under the Further and Higher Education (Scotland) Act These comprise the Income and Expenditure Account and Statement of Total Recognised Gains and Losses, the Balance Sheet, the Cash Flow Statement, and the related notes. These financial statements have been prepared under the accounting policies set out within them. This report is made solely to the parties to whom it is addressed in accordance with the Public Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 123 of the Code of Audit Practice approved by the Auditor General for Scotland, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Respective responsibilities of the Board of Governors, Principal and auditor The Board of Governors and Principal are responsible for preparing the Annual Report and the financial statements in accordance with the Further and Higher Education (Scotland) Act 1992 and the Accounts Direction issued thereunder by the Scottish Funding Council which requires compliance with the Statement of Recommended Practice on Accounting in Further and Higher Education Institutions. The Board of Governors and Principal are also responsible for ensuring the regularity of expenditure and income. These responsibilities are set out in the Statement of the Responsibilities of the Board of Governors Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and with International Standards on Auditing (UK and Ireland) as required by the Code of Audit Practice approved by the Auditor General for Scotland. We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the Further and Higher Education (Scotland) Act 1992 and the Accounts Direction. We report to you whether, in our opinion, the information which comprises the Operating and Financial Review, included in the Annual Report, is consistent with the financial statements. We also report whether in all material respects: the expenditure and income shown in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers; funds provided by the Scottish Funding Council have been applied in accordance with the Financial Memorandum dated 1 January 2006 and any other terms and conditions attached to them for the year ended ; and funds from whatever source administered by the college for specific purposes have been properly applied for the intended purposes. In addition, we report to you if, in our opinion, 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 review whether the Statement of Corporate Governance and Internal Control reflects the college s compliance with the requirements of the Scottish Funding Council and we report if, in our opinion, it does not. We are not required to consider whether the statement covers all risks and controls, or form an opinion on the effectiveness of the college s corporate governance procedures or its risk and control procedures. Accounts 2008 Page 19

20 We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Statement of the Responsibilities of the Board of Governors. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with the Public Finance and Accountability (Scotland) Act 2000 and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board as required by the Code of Audit Practice approved by the Auditor General for Scotland. Our audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of expenditure and income included in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Board of Governors and Principal in the preparation of the financial statements, and of whether the accounting policies are most 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 reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error, and that in all material respects the expenditure and income shown in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinions Financial statements In our opinion: the financial statements give a true and fair view, in accordance with the Further and Higher Education (Scotland) Act 1992 and the Accounts Direction made thereunder by the Scottish Funding Council, of the state of affairs of the college as at and of its surplus, total recognised gains and losses and cash flows for the year then ended; the financial statements have been properly prepared in accordance with the Further and Higher Education (Scotland) Act 1992 and the Accounts Direction made thereunder by the Scottish Funding Council; and information which comprises the Operating and Financial Review, included with the Annual Report, is consistent with the financial statements. Regularity In our opinion in all material respects: the expenditure and income shown in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers funds provided by the Scottish Funding Council have been applied in accordance with the Financial Memorandum dated 1 January 2006 and any other terms and conditions attached to them for the year ended ; and funds from whatever source administered by the college for specific purposes have been properly applied for the intended purposes. ScottMoncrieff Chartered Accountants Registered Auditor Accounts 2008 Page Melville Street Edinburgh EH3 7PH

21 INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 JULY 2008 Income SFC grants Exceptional item SFC PFI Availability Grant Tuition fees and education contracts Other income Investment income Notes ,450 1,249 1, Restated 8,813 1,765 1,318 1, Total Income 12,259 13,787 Expenditure Staff Costs Other operating expenses Exceptional item PFI Availability Expenditure Depreciation Interest payable ,619 3, ,815 4,665 1, Total Expenditure 11,876 13,447 Surplus on continuing operations after depreciation of tangible fixed assets at valuation and before exceptional items and tax Exceptional item Net cost of PFI voluntary agreed termination (5,540) Taxation 12 Surplus / (deficit) on continuing operations after depreciation of assets at valuation and tax taken to reserves 383 (5,200) A Statement of Historical Cost Surpluses and Deficits is not required as there are no differences between the historical cost surplus/(deficit), and the surplus/ (deficit) on continuing operations in the Income and Expenditure Account. The notes on pages 25 to 47 form part of these accounts. Accounts 2008 Page 21

22 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 JULY 2008 Notes Surplus / (deficit) on continuing operations after taxation Reduction in the revaluation reserve in respect of the valuation of surplus land 383 (5,200) 20 (457) FRS 17 Actuarial (loss) / gain 24 (369) 817 Total recognised gain / (loss) for the year 14 (4,840) Total recognised gain / (loss) since last annual report 14 (4,840) Reconciliation Opening reserves (10,662) (5,822) Total recognised gain / (loss) for the year 14 (4,840) Closing Reserves (10,648) (10,662) Accounts 2008 Page 22

23 BALANCE SHEET AS AT 31 JULY 2008 Notes Tangible Fixed Assets 14 19,664 19,812 Current Assets Debtors Cash at bank and in hand ,708 1, Creditors: amounts falling due within one year 16 (2,269) (1,217) Net Current Assets Total Assets less Current Liabilities 19,766 20,498 Creditors: amounts falling due after more than one year 17 (6,387) (6,702) Provision for liabilities and charges 18 (3,135) (3,530) NET ASSETS excluding pension liability 10,244 10,266 Net Pension Liability 24 (1,228) (687) NET ASSETS including pension liability 9,016 9,579 Deferred Capital Grants 19 19,664 20,241 Reserves I&E account Pension Reserve (9,420) (9,975) (1,228) (687) (10,648) (10,662) TOTAL FUNDS 9,016 9,579 The financial statements on pages 21 to 47 were approved by the Board of Governors and signed on its behalf by: Tony Kinder Chair Mhairi Laughlin Principal Date of signing: Accounts 2008 Page 23

24 CASH FLOW STATEMENT FOR YEAR ENDED 31 JULY 2008 Note s Restated Net cash inflow / (outflow) from operating activities 21 1,219 (6,629) Returns on investments and servicing of finance Capital Expenditure and Financial Investment 22 (429) 528 Financing 22 (12) 6,486 Increase in cash in the period Reconciliation of net cash flow to movement in net debt: Increase in cash in the period Change in net debt resulting from cash flows (6,486) Movement in net funds in period 869 (6,023) Net (debt) / funds at 1 August (5,861) 162 Net debt at (4,992) (5,861) Accounts 2008 Page 24

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 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 2007 and in accordance with appropriate Accounting Standards. As a result a number of statements and notes use a different presentation from previous years. They conform to guidance published by the Scottish Funding Council. The financial statements have been prepared on a going concern basis which assumes the College will continue in operational existence for the foreseeable future. Basis of Accounting The financial statements have been prepared under the historical cost convention as modified by the revaluation of surplus land. Recognition of Income Income from grants, contracts and other services rendered is included to the extent of the completion of the contract or service concerned. This is generally equivalent to the sum of the relevant expenditure incurred during the year. All income from shortterm deposits is credited to the income and expenditure account in the period in which it is earned. Recurrent grants from the Funding Council are recognised in the period in which they are receivable. Nonrecurrent grants from Funding Council or other bodies received in respect of the acquisition or construction of fixed assets are treated as deferred capital grants amortised in line with depreciation over the life of the assets. Pension Schemes Retirement benefits to employees of the College are provided by the Teachers' Superannuation Scheme (Scotland) (STSS) and the Lothian Pension Fund (LPF). These are defined benefit schemes which are externally funded and contracted out of the State Earnings Related Pension Scheme. a STSS The College is unable to identify its share of the underlying assets and liabilities of the STSS on a consistent and reasonable basis and therefore, as required by FRS17 Retirement Benefits, accounts for the scheme as if it were a defined contribution scheme. The amount charged to the Income and Expenditure Account represents the contributions payable to the scheme in respect of the year. The contributions are determined by qualified actuaries on the basis of periodic valuations using the projected unit method. Accounts 2008 Page 25