report and financial statements for the year ended … forest college financial statements for the...

EPPING FOREST COLLEGE

Report and Financial Statements

for the year ended 31 July 2015

EPPING FOREST COLLEGE Financial Statements for the Year Ended 31 July 2015

CONTENTS Page number

Operating and Financial Review 1

Statement of Corporate Governance and Internal Control 11

Statement on the College's regularity, propriety and compliance with funding body terms and conditions of funding 17

Statement of Responsibilities of the Members of the Corporation 18

Independent Auditor's Report to the Corporation of Epping Forest College 19

Independent Auditor's Report on Regularity to the Corporation of Epping Forest College 21

Consolidated Income and Expenditure Account 23

Consolidated Statement of Historical Cost Surpluses and Deficits 24

Consolidated Statement of Total Recognised Gains and Losses 24

Balance Sheets as at 31 July 25

Consolidated Cash Flow Statement 26

Notes to the Accounts 27

Operating and Financial Review

NATURE, OBJECTIVES AND STRATEGIES:

The members present their report and the audited financial statements for the year ended 31 July 2015.

Legal status

The Corporation was established under the Further and Higher Education Act 1992 for the purpose of conducting Epping Forest College. The College is an exempt charity for the purposes of the Charities Act 2011.

The Corporation was incorporated as Epping Forest College.

Public Benefit

Epping Forest College is an exempt charity under the Part 3 of the Charities Act 2011 and from 1st September 2013, is regulated by the Secretary of State for Business, Innovation and Skills as Principal Regulator for all FE Corporations in England. The members of the Corporation Board, who are trustees of the charity, are disclosed on pages 11 to 13.

In setting and reviewing the College's strategic objectives, the Governing Body has had due regard for the Charity Commission's guidance on public benefit and particularly upon its supplementary guidance on the advancement of education. The guidance sets out the requirement that all organisations wishing to be recognised as charities must demonstrate, explicitly, that their aims are for the public benefit.

In delivering its mission, the College provides the following identifiable public benefits through the advancement of education:

• High-quality teaching • Widening participation and tackling social exclusion • Excellent employment record for students • Strong student support systems • Links with employers, industry and commerce.

Mission

Governors reviewed the College's mission during 2014-15 and adopted a revised mission statement as follows:

"Empowering people with the skills and abilities to realise their full potential to achieve their personal aims and goals."

Implementation of strategic plan

In June 2015 the College adopted a strategic plan for the period 1 August 2015 to 31 July 2018. This strategic plan includes the curriculum and accommodation, and financial plans. The Corporation monitors the performance of the College against these plans. The plans are reviewed and updated each year.

The strategic plan specifies six strategic aims with associated objectives:

• Dynamic and Inspirational Teaching, Learning and Assessment • Excellent Success and Progression • Innovative and exciting offer • Aspirational staff • Exceptional Resources

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• Entrepreneurial Edge

The Corporation monitors the performance of the College against these six aims and the plan will be reviewed during the period to 2018.

These aims aid the provision of a high quality, enjoyable and rewarding learner experience and are recurring themes throughout the strategic plan and the operational plans stemming from it.

The College's achievements for 2014-15 are addressed below:

• The College achieved 1,952 16-18 EFA funded learners against a target of 2,104; generated funding of £10,169K against a contract of £10,815K;

• For adult provision single line budget generated funding of £1,407K against a contract of £1,467K.

• The College achieved the Investor in Diversity Award in 2013. Also, The College achieved Matrix accreditation in 2014. The Matrix Standard is the unique quality standard for organisations to assess and measure their advice and support services, which ultimately supports individuals in their choice of career, learning, work and life goals;

• The College achieved student retention of 94 per cent; • Maintaining the financial viability of the College by achieving a target cash days in hand of 93;

achieved 76 cash days, a current ratio of 1:68; achieved 1:27, and accumulated reserves of 175 per cent of income; achieved 170 per cent of income.

Financial objectives

The College's financial objectives were: • The generation of sufficient income for the maintenance and improvement of accommodation

and equipment; • Achieve a minimum of 'good' financial health since July 2011 as defined by the SFA and any

relevant successor bodies. It achieved outstanding financial health in 2011/12, 2012/13 and 2013//14 by July 2015;

• To optimise the use of College resources and to continue to develop the College's estate in line with a robust and realistic accommodation strategy;

• Continually seek value for money and efficiency through benchmarking, market testing and appropriate collaboration;

• To maintain a totally open and honest relationship with all funding bodies; • To adopt realistic and prudent assumptions in all financial plans and forecasts; • Provided targets are met and cash flow allows for annual staff pay awards whilst continuing to

ensure that pay costs are contained to allow for continued investment; • Maintain payroll costs at the sector average or below for general FE colleges (as measured by

SFA). This will be reviewed at least annually; • To continually review all aspects of non-pay expenditure in order to identify appropriate savings; • Maintain the confidence of the SFA in the College's financial operations and of other

stakeholders such as bankers, auditors, other funding agencies and suppliers; • Continue to raise the awareness of College staff and governors in general and middle

management in particular of the financial environment in which they operate and their responsibilities and accountability in the use of college resources;

• To ensure all returns requiring certification by auditors are unqualified and that audit recommendations, once agreed, are implemented within specific timescales;

• Ongoing assessment of course and programme area viability; • Ensure targets relating to utilisation of teaching staff and average class sizes are met; • Work proactively with appropriate third parties to investigate opportunities for rationalisation and

collaboration;

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• To achieve annual generation of cash from operations of at least 8% of income for debt reduction, investment asset replacement and contingency purposes;

• Achieve a borrowing to income ratio of 40%; • To hold at all times a minimum cash balance representing 25 days operations; and • Further develop and embed a culture of risk management that seeks to identify, measure and

prioritise risks according to their impact on strategic objectives.

A series of performance indicators have been agreed to monitor the successful implementation of the policies.

Performance against primary funding targets

Funding Allocation

£'000

Generated

£'000

% of original funding

target

Funded

£'000

% of original funding

target

16-18 Learner

responsive 10,815 10,169 94.03% 10,815 100.00%

Adult Single

Line Budget 1,467 1,407 95.91% 1,368 93.25%

16 to 18

Apprenticeships 290 316 108.97% 316 108.97%

Total 12,572 11,892 94.59% 12,499 99.42%

Performance indicators

FE Choices (formerly the "Framework for Excellence") has four key performance indicators: • Success rates • Learner destinations • Satisfaction survey (formerly "learner views") • Satisfaction survey (formerly "employer views")

The College is committed to observing the importance of the measures and indicators and is monitoring these through the completion of the annual Finance Record for the Skills Funding Agency/Education Funding Agency ("EFA"). The current rating of Outstanding is considered an acceptable outcome.

FINANCIAL POSITION

Financial results

The College had an operating deficit in the year of £278K (2013/14 - surplus £482K); this includes redundancy costs of £290K (2013/14 - £385K). The College has achieved SFA financial health category Good.

The College has total reserves of £20,660K (2013/14 - £21,464K) and cash balances of £3,116K (2013/14 - £4,043K). The College wishes to continue to accumulate reserves and cash balances in order to invest in maintaining accommodation to a high standard and update IT and infrastructure.

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Tangible fixed asset additions during the year amounted to £1,263K (2013/14 - £918K). This was split between enhancements to buildings of £609K (2013/14 - £552K) and equipment purchased of £654K (2013/14-£366K).

The College has significant reliance on the education sector funding bodies for its principal funding source, largely from recurrent grants. In 2014/15 the funding bodies provided 95% of the College's total income.

Treasury policies and objectives

Treasury management is the management of the College's cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.

The College has a separate treasury management policy in place.

Cash flows

The operating cash flow for 2014/15 was a net inflow of £1,379K (2013/14 - £2,138K) which included payments of £290K associated with staff restructuring.

Liquidity

The College had 76 cash days and generated 10 per cent from operational activities. This provides a cushion against unforeseen circumstances and to continue investment in the estate, equipment and learner facilities.

CURRENT AND FUTURE DEVELOPMENT AND PERFORMANCE

Student numbers

In 2014/15 the College has delivered activity that has produced £12,499K in funding body main allocation funding (2013/14 - £13,056K). The College had approximately 3,128 funded and 364 non-funded students.

Student achievements

Students continue to prosper at the College. Success rates rose from 84 per cent 2013/14 to 85 per cent (both excluding functional skills) in 2014/15.

Curriculum developments

The College continues to extend its provision at full-time entry level in order to provide a platform for students to progress. In particular this has been in Construction and Skills for Life. The College has introduced new courses in Air Cabin Crew, Access to Nursing and Access to Trading and Finance in response to student demand. Work Based Learning has expanded and the College offers Apprenticeships in a variety of vocational areas. The College also works closely with Partners to deliver Apprenticeships. The College has worked with JCP to provide skills for the local community.

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

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within 30 days of either the provision of goods or services or the date on which the invoice was received. The College incurred no interest charges in respect of late payment for this period.

Post-balance sheet events

There are no significant post balance sheet events.

Future developments

The College has continued to model its accommodation in order to provide outstanding facilities for its students. The College intends to run Higher National courses initially in Travel and Tourism Management, Foundation Degree in Early Years, and Level 4 Diplomas in Beauty, Hair and Media Makeup, Creative Practitioners, and Art and Design. This will provide progression routes for students in these areas.

The College would like to reduce dependency on the Skills Funding Agency/EFA and is seeking opportunities to develop other income streams where possible whilst maintaining quality of provision.

Going concern

After making appropriate enquiries, 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.

RESOURCES:

The College has various resources that it can deploy in pursuit of its strategic objectives.

Tangible resources include the main college site, a £38 million building which opened in 2008 and includes a significant investment in new IT equipment and infrastructure. The College vacated the Middle Buildings in summer 2011 and Art and Design, and Hair and Beauty provisions moved into the new building. Since then the Construction area in the main building has been refurbished to provide additional facilities. The strategic options for the future use of this site together with the sports field, circa 11 acre, have been considered in the curriculum and accommodation strategy approved by the Corporation Board in July 2014. The preferred option continues to be progressed during 2015-16.

Financial The College has £27,057K (2013/14 -£27,997K) of net assets (including £6,409K pension liability (2013-14 £5,748K)) and long term debt of £6,784K (2013/14 - £7,530K).

People The College employs 217 people (expressed as full time equivalents), of whom 108 are teaching staff.

Reputation The College is working in partnership with local schools and the local community both directly through the provision of community learning and by encouraging and expanding the use of facilities by local residents and community groups.

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PRINCIPAL RISKS AND UNCERTAINTIES:

The College has undertaken further work during the year to develop and embed the system of internal control, including financial, operational and risk management which is designed to protect the College's assets and reputation.

Based on the strategic plan, the Senior Management Team undertakes a comprehensive review of the risks to which the College is exposed. They identify systems and procedures, including specific preventable actions which should mitigate any potential impact on the College. The internal controls are then implemented and the subsequent year's appraisal will review their effectiveness and progress against risk mitigation actions. In addition to the annual review, the Senior Management Team will also consider any risks which may arise as a result of a new area of work being undertaken by the College.

A risk register is maintained at the College level which is reviewed at least annually by the Audit Committee and more frequently where necessary. The risk register identifies the key risks, the likelihood of those risks occurring, their potential impact on the College and the actions being taken to reduce and mitigate the risks. Risks are prioritised using a consistent scoring system.

This is supported by a risk management training programme to raise awareness of risk throughout the College.

Outlined below is a description of the principal risk factors that may affect the College. Not all the factors are within the College's control. Other factors besides those listed below may also adversely affect the College.

1. Government funding

The College has considerable reliance on continued government funding through the further education sector funding bodies and through HEFCE. In 2014/15, 95% of the College's revenue was ultimately public funded and this level of requirement is expected to continue. There can be no assurance that government policy or practice will remain the same or that public funding will continue at the same levels or on the same terms.

The College is aware of several issues which may impact on future funding;

• The demand led funding system which applies a series of factors such as guided learning hours and success rates to calculate an amount of funding to be received for each learner. Such funding cannot be guaranteed though;

• Impact of increased sixth form provision in local schools; and • Funding reductions, particularly in adult provision.

This risk is mitigated in a number of ways;

• Funding is derived through a number of direct and indirect contractual arrangements; • By ensuring the College is rigorous in delivering high quality education and training; • Considerable focus and investment is placed on maintaining and managing key relationships

with the various funding bodies; • Ensuring the College is focused on those priority sectors which will continue to benefit from

public funding; • Regular dialogue with funding bodies; and • Curriculum planning that is rigorous, robust and responsive.

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2. Tuition fee policy

In line with the majority of other colleges, Epping Forest College will seek to increase tuition fees in accordance with the fee assumptions. The price elasticity of adult learning is not yet fully understood. The risk for the College is that demand falls off as fees increase. This will impact on the growth strategy of the College.

This risk is mitigated in a number of ways: • By ensuring the College is rigorous in delivering high quality education and training, thus

ensuring value for money for students; and • Close monitoring of the demand for courses as prices change.

3. Maintain adequate funding of pension liabilities

The financial statements report the share of the Local Government Pension Scheme deficit on the College's balance sheet in line with the requirements of FRS 17.

4. Failure to achieve financial targets

The College has achieved financial health rating of Good. Sustaining this is dependent on achieving a number of financial objectives including:

• reducing payroll costs as a percentage of income to a level at or below the sector average; • generating cash to reduce debt, invest in the College and meet contingencies; • a minimum underlying operating breakeven position in 2014/15 and underlying operating

surpluses thereafter; and • completion of outstanding land sales and implementation of an accommodation strategy.

Failure to sustain the improvement in cash flow could restrict the College's capacity to invest in facilities and resources and ultimately presents a threat to the College's capacity to operate as a going concern. This risk is mitigated in a number of ways:

• Regular monitoring of financial performance by senior managers and governors; and • Sharing financial information with key stakeholders including SFA and Lloyds Bank.

STAKEHOLDER RELATIONSHIPS

In line with other colleges and with universities, Epping Forest College has many stakeholders. These include:

• Students; • Education sector funding bodies; • Staff; • Local employers (with specific links); • Local authorities; • Government Offices/ Regional Development Agencies/Local Enterprise Partnerships; • Local Strategic Partnership; • London Stansted Cambridge Consortium; • The local community; • Other FE institutions; • Trade unions, and; • Professional bodies.

The College recognises the importance of these relationships and engages in regular communication with them through the College Internet site and by meetings.

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Equal opportunities

The College is committed to ensuring equality of opportunity for ail who learn and work here. We respect and value positively differences in race, gender, sexual orientation, disability, religion or belief and age. We strive vigorously to remove conditions which place people at a disadvantage and we will actively combat bigotry. This policy is resourced, implemented and monitored on a planned basis. The College's Equal Opportunities Policy is published on the College's Intranet site.

The College publishes an Annual Equality Report and Equality Objectives to ensure compliance with all relevant equality legislation including the Equality Act 2010. The College undertakes equality impact assessments on all new policies and procedures and publishes the results. Equality impact assessments are also undertaken for existing policies and procedures on a prioritised basis.

The College is a 'Positive about Disabled' employer and has committed to the principles and objectives of the Positive about Disabled standard. The College considers all employment applications from disabled persons, bearing in mind the aptitudes of the individuals concerned, and guarantees an interview to any disabled applicant who meets the essential criteria for the post. 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 which, as far as possible, provide identical opportunities to those of non-disabled employees.

The College has committed to the 'Mindful Employer' initiative to assist the mental health wellbeing of staff. The College has achieved accreditation to the Committed to Equality (C2E) standard at the gold (highest) level. The College has also implemented an updated Equality & Diversity online training programme entitled 'What's It Got To Do With Me'. Staff completed this on CPD Day. Refresher training and training for new starters is carried out on an ongoing basis.

Disability statement

The College seeks to achieve the objectives set down in the Equality Act 2010.

• As part of its accommodation strategy the College continues to assess the College's ability to meet its obligations under existing legislation.

• The College has appointed an Access Co-ordinator, who provides information, advice and arranges support where necessary for students with disabilities.

• There is a list of specialist equipment, such as radio aids, which the College can make available for use by students and a range of assistive technology is available in the learning centre.

• The admissions policy for all students is clearly publicized. Appeals against a decision not to offer a place are dealt with under the complaints policy.

• The College has made a significant investment in the appointment of specialist lecturers to support students with learning difficulties and/or disabilities. There are a number of student support assistants who can provide a variety of support for learning. There is a continuing programme of staff development to ensure the provision of a high level of appropriate support for students who have learning difficulties and/or disabilities.

• Specialist programmes are described in College prospectuses, and achievements and destinations are recorded and published in the standard College format.

• Student Engagement Officers update students on Student Welfare Support Services and their rights and responsibilities.

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Disclosure of information to auditors

The members who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which the College's auditors are unaware; and each member has taken all the steps that he or she ought to have taken to be aware of any relevant audit information and to establish that the College's auditors are aware of that information.

Approved by order of the members of the Corporation on 10 December 2015 and signed on its

Michael Gammack Vice-Chair

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Professional advisers

Financial statement and regularity auditors: MHA Maclntyre Hudson New Bridge Street House 30-34 New Bridge Street London EC4V 6BJ

Internal auditors: Scrutton Bland Fitzroy House Crown Street Ipswich Suffolk IP1 3LG

Bankers: Lloyds Bank 25 Gresham Street London EC2V7HN

Solicitors: Eversheds LLP 1 Wood Street London EC2V 7WS

Shakespeare Martineau LLP No.1 Colmore Square Birmingham B4 6AA

Thomas Eggar LLP 14 New Street London EC2M4HE

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Statement of Corporate Governance and Internal Control

The following statement is provided to enable readers of the annual report and accounts of the College to obtain a better understanding of its governance and legal structure.

The College endeavours to conduct its business:

i) in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership);

ii) in full accordance with the guidance to colleges from the Association of Colleges in The English Colleges' Foundation Code of Governance ("the Foundation Code"); and

iii) having due regard to the UK Corporate Governance Code ("the Code") insofar as it is applicable to the further education sector.

The College is committed to exhibiting best practice in all aspects of corporate governance. This summary describes the manner in which the College has applied the principles set out in the UK Corporate Governance Code ("the Code") issued by the FRC in June 2010. We have not adopted and therefore do not apply the UK Corporate Governance Code. However, we have reported on our Corporate Governance arrangements by drawing upon best practice available, including those aspects of the UK Corporate Governance Code we consider to be relevant to the further education sector and best practice.

In the opinion of the governors, the College complies with all the provisions of the Code in so far as they apply to the Further Education Sector, and it has complied throughout the year ended 31 July 2015. The Governing Body recognises that, as a body entrusted with both public and private funds, it has a particular duty to observe the highest standards of corporate governance at all times.

The College is an exempt charity within the meaning of Part 3 of the Charities Act 2011. The Governors, who also Trustees for the purposes of the Charities Act 2011, confirm they have had due regard for the Charity's Commission's guidance on public benefit and that the required statements appear elsewhere in these financial statements.

The Corporation

The members who served on the Corporation during the year and up to the date of signature of this report were as listed in the table below.

Date of Term of Date of Status of Committees Attendance Appointment office resignation appointment served

William Breare- 26.05.11 4 years 31.7.15 Governor Search (Chair 80% Hall from 19.07.13 Chair of Board until 31.7.15) (from 01.08.13 Audit (Chair until 31.7.15) 04.12.12 until

31.07.13) Remuneration Quality Monitoring (until 31.07.14) Finance (from 01.08.14 until 31.7/15)

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Date of Appointment

Term of office

Date of resignation

Status of appointment

Committees served

Attendance

Ken Clarke Vice-Chair of the Board until 31.7.15 (Chair of Board from 1.8.15)

01.8.15 (originally appointed 17.03.05, reelected 12.03.09, reelected 12.03.13),reelected 31.7.14)

1 year Governor Finance (Chair) Quality Monitoring Search Chair from 01.8.15) Remuneration (Chair)

93%

Michael Gammack (Vice Chair of the Board from 1.8.15)

18.07.13 4 years Governor Audit Student Liaison (Chair) Remuneration Search

57%

Rebecca Adeyeye

10.07.14 1 year 09.7.15 Student Governor

Student Liaison Quality Monitoring

36%

Shaun Clifford 01.08.14 4 years Staff Governor (Academic)

Audit Quality Monitoring

100%

Anita Garrard 03.04.14 4 years Governor Finance Student Liaison

71%

Caroline Hands 30.9.15 4 years Governor Quality Monitoring

N/A

Maiyoor Joshi 10.07.14 1 year 9.7.15 Student Governor

Student Liaison Quality Monitoring

50%

Atif Khan 10.07.14 4 years Governor Finance 57% Penny Morgan 16.12.13 Principal Finance 100% Diana Murray 03.04.14 4 years Governor Quality

Monitoring Remuneration

88%

Joanne Nathan 26.3.15 4 years Staff Governor (Support)

Finance Student Liaison

100%

Tommy Paxeus 30.9.15 4 year Governor Finance N/A

Chris Seward 01.10.14 (originally appointed 01.10.10),reelected 01.10.14)

1 years Governor Quality Monitoring (Chair)

88%

Brian Spinks 04.12.12 4 years Governor Audit (Chair) Student Liaison Search

90%

Mark Webster 08.10.14 4 years Governor Audit 57%

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Co-optee to Audit Committee Date of Appointmen

Term of office

Date of resignation

Status of appointment

Committees served

Attendance

Dave Stanley 19.10.14 (originally appointed 25.07.02, reappointed 19.10.06, reappointed 19.10.10)

4 years External to Audit Committee

Audit 67%

Genevieve Catt - Clerk to the Corporation

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 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, Finance, Quality Monitoring, Remuneration, Search and Governance and Student Liaison. Full minutes of all meetings, except those deemed to be confidential by the Corporation, are available from the Clerk to the Corporation at:

Epping Forest College Borders Lane Loughton Essex IG10 3SA

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.

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 Board for ensuring that all applicable procedures and regulations are complied with. 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 Board 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 Chairman and Principal (Accounting Officer) are separate.

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Appointments 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, consisting of three members of the Corporation not including the Principal (Accounting Officer), 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.

Remuneration Committee

Throughout the year ending 31 July 2015 the College's Remuneration Committee comprised three members of the Corporation. The Committee's responsibilities are to make recommendations to the Board on the remuneration and benefits of the Principal (Accounting Officer) and other senior post-holders.

Details of remuneration for the year ended 31 July 2015 are set out in note 6 to the financial statements.

Audit Committee

The Audit Committee comprises four members of the Corporation (excluding the Principal (Accounting Officer) and Chair) and an external co-opted member. The Committee operates in accordance with written terms of reference approved by the Corporation.

The Audit Committee meets on a termly basis and provides a forum for reporting by the College's internal, regularity and financial statements auditors, who have access to the Committee for independent discussion, without the presence of College management. The Committee also receives and considers reports from the main FE funding bodies as they affect the College's business.

The College's internal auditors review the systems of internal control, risk management controls and governance processes in accordance with an agreed plan of input and report their findings to management and the Audit Committee.

Management is responsible for the implementation of agreed audit recommendations and internal audit undertakes periodic follow-up reviews to ensure such recommendations have been implemented. The Audit Committee also advises the Corporation on the appointment of internal, regularity and financial statements auditors and their remuneration for both audit and non-audit work as well as reporting annually to the Corporation.

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 and not absolute assurance against material misstatement or loss.

The Corporation has delegated the day-to-day responsibility to the Principal, as Accounting Officer, 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 Epping Forest College and the funding bodies. She is also responsible for reporting to the Corporation any material weaknesses or breakdowns in internal control.


The purpose of the system of internal control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control 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 Epping Forest College for the year ended 31 July 2015 and up to the date of approval of the annual report and 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 2015 and up to the date of approval of the annual report and accounts. This 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 governing body;

• regular reviews by the governing body of periodic and annual financial reports which indicate financial performance against forecasts;

• setting targets to measure financial and other performance; • clearly defined capital investment control guidelines; and • the adoption of formal project management disciplines, where appropriate.

Epping Forest College has an internal audit service, which operates in accordance with the requirements of the EFA and SFA Joint 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 plans are endorsed by the Corporation on the recommendation of the audit committee. At minimum annually, the Head of Internal Audit (HIA) provides the governing body with a report on internal audit activity in the College. The report includes the HIA's independent opinion on the adequacy and effectiveness of the College's system of risk management, controls and governance processes.

Review of effectiveness

As Accounting Officer, the Principal has responsibility for reviewing the effectiveness of the system of internal control. Her review of the effectiveness of the system of internal control is informed by:

• the work of the internal auditors; • the work of the executive managers within the College who have responsibility for the

development and maintenance of the internal control framework; and • comments made by the College's financial statements auditors, the regularity auditors, the

appointed funding auditors (for colleges subject to funding audit) in their management letters and other reports.

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The Principal (Accounting Officer) 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 other sources of assurance, 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 the departments and reinforced by risk awareness training. The senior management team and the Audit Committee also receive regular reports from internal audit and other sources of assurance, 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 December 2015 meeting, the Corporation carried out the annual assessment for the year ended 31 July 2015 by considering documentation from the senior management team and internal audit, and taking account of events since 31 July 2015.

Based on the advice of the Audit Committee and the Principal (Accounting Officer), the Corporation is of the opinion that the College has an adequate and effective framework for governance, risk management and control, and has fulfilled its statutory responsibility for "the effective and efficient use of resources, the solvency of the institution and the body and the safeguarding of their assets".

Going concern

After making appropriate enquiries, 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.

Approved by order of the members of the Corporation on 10 December 2015 and signed on its


Brian Page Acting Principal (Accounting Officer)

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Corporation's statement on the College's regularity, propriety and compliance with Funding body terms and conditions of funding

The Corporation has considered its responsibility to notify the Skills Funding Agency of material irregularity, impropriety and non-compliance with Skills Funding Agency terms and conditions of funding, under the financial memorandum in place between the College and the Skills Funding Agency. As part of its consideration the Corporation has had due regard to the requirements of the financial memorandum.

We confirm, on behalf of the Corporation, that to the best of its knowledge, the Corporation believes it is able to identify any material irregular or improper use of funds by the College, or material noncompliance with the Skills Funding Agency's terms and conditions of funding under the College's financial memorandum.

We further confirm that any instances of material irregularity, impropriety or funding non-compliance discovered to date. If any instances are identified after the date of this statement, these will be notified to the Skills Funding Agency.

17


Statement of 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 between the Skills Funding Agency and the Corporation of the College, the Corporation, through its Principal (Accounting Officer), is required to prepare financial statements for each financial year in accordance with the 2007 Statement of Recommended Practice - Accounting for Further and Higher Education and with the Accounts Direction for 2014-15 financial statements issued jointly by the Skills Funding Agency and the EFA, 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 also required to prepare an Operating and Financial Review which describes what it is trying to do and how it is going about it, including the legal and administrative status of the College.

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 other 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.

The maintenance and integrity of the College website is the responsibility of the Corporation of the College; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Members of the Corporation are responsible for ensuring that expenditure and income are applied for the purposes intended by Parliament and that the financial transactions conform to the authorities that govern them. In addition they are responsible for ensuring that funds from the Skills Funding Agency/EFA are used only in accordance with the Financial Memorandum with the Skills Funding Agency/EFA and any other conditions that may be prescribed 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 from the Skills Funding Agency/EFA are not put at risk.

* " " rder of the members of the Corporation on 10 December 2015 and signed on its


18


Independent auditor's report to the Corporation of Epping Forest College

We have audited the College financial statements ("the financial statements") of Epping Forest College for the year ended 31 July 2015 set out on pages 23 to 45. The financial reporting framework that has been applied in their preparation is applicable law and UK accounting standards (UK Generally Accepted Accounting Practice).

This report is made solely to the Corporation, as a body, in accordance with Article 22 of the College's Articles of Government. 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 auditor's 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 Corporation of Epping Forest College and Auditor

As explained more fully in the Statement of the Corporation's responsibilities set out on page 18, the Corporation is responsible for the preparation of financial statements which give a true and fair view.

Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the College's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Corporation; and the overall presentation of the financial statements. In addition we read all the financial and non-financial information in the Operating and Financial Review to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies, we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of the College's affairs as at 31 July 2015 and of the College's deficit of income over expenditure for the year then ended;

• have been properly prepared in accordance with the 2007 Statement of Recommended Practice - Accounting for Further and Higher Education

19


Opinion on other matters prescribed by the revised Joint Audit Code of Practice issued jointly by the Skills Funding Agency and the EFA

In our opinion:

• proper accounting records have been kept, and • the financial statements are in agreement with the accounting records.

i ? ~ ' x ~ ' r

MHA Maclntyre Hudson Chartered Accountants Registered Auditors

20


Reporting Accountants' Assurance Report on Regularity to the Corporation of Epping Forest College ('the Corporation') and the Secretary of State for Business, Innovation and Skills acting through the Skills Funding Agency

In accordance with the terms of our engagement letter and further to the requirements of the financial memorandum with Skills Funding Agency we have carried out an engagement to obtain limited assurance about whether anything has come to our attention that would suggest that in all material respects the expenditure disbursed and income received by Epping Forest College during the period 1 August 2014 to 31 July 2015 have not been applied to the purposes identified by Parliament and the financial transactions do not conform to the authorities which govern them.

The framework that has been applied is set out in the Joint Audit Code of Practice issued jointly by Skills Funding Agency and Education Funding Agency. In line with this framework, our work has specifically not considered income received from the main funding grants generated through the Individualised Learner Record (ILR) returns, for which the Skills Funding Agency has other assurance arrangements in place.

This report is made solely to the corporation of Epping Forest College and the Skills Funding Agency in accordance with the terms of our engagement letter. Our work has been undertaken so that we might state to the corporation of Epping Forest College and the Skills Funding Agency those matters we are required to state 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 of Epping Forest College and the Skills Funding Agency for our work, for this report, or for the conclusion we have formed.

Respective responsibilities of the Corporation of Epping Forest College and the Reporting Accountant The corporation of Epping Forest College is responsible, under the requirements of the Further and Higher Education Act 1992, subsequent legislation and related regulations and guidance, 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 engagement are established in the United Kingdom by our profession's ethical guidance and are to obtain limited assurance and report in accordance with our engagement letter and the requirements of the Joint Audit Code of Practice. We report to you whether anything has come to our attention in carrying out our work which suggests that in all material respects, expenditure disbursed and income received during the period 1 August 2014 to 31 July 2015 have not been applied to purposes intended by Parliament or that the financial transactions do not conform to the authorities which govern them.

Approach We conducted our engagement in accordance with the Joint Audit Code of Practice issued jointly by Skills Funding Agency and Education Funding Agency. We performed a limited assurance engagement as defined in that framework. The objective of a limited assurance engagement is to perform such procedures as to obtain information and explanations in order to provide us with sufficient appropriate evidence to express a negative conclusion on regularity. A limited assurance engagement is more limited in scope than a reasonable assurance engagement and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express a positive opinion. Our engagement includes examination, on a test basis, of evidence relevant to the regularity of the college's income and expenditure.

21


The work undertaken to draw to our conclusion includes:

Reviewing the Minutes of the meetings of the Governing Body and other evidence made available to us,

Review of the objectives and activities of the College, with reference to the income streams and other information available to us as auditors of the College

Testing of a sample of payroll payments to staff

Testing of a sample of payments to suppliers and other third parties

Testing of a sample of grants received and other income streams

In the course of our work, nothing has come to our attention which suggests that in all material respects the expenditure disbursed and income received during the period 1 August 2014 to 31 July 2015 has not been applied to purposes intended by Parliament and the financial transactions do not conform to the authorities which govern them.

Conclusion

\y - v j r

MHA Maclntyre Hudson Chartered Accountants Registered Auditors

22


Income and Expenditure Account

Note 2015 2014 £'000 £'000 £'000 £'000

INCOME Funding body grants 2 13,346 13,639 Tuition fees and education contracts 3 447 414 Other income 281 291 Endowment and investment income 4 15 16

Total income 14,089 14,360 EXPENDITURE Staff costs 5 8,792 8,333 Exceptional restructuring costs 5 290 385 Other operating expenses 7 3,559 3,473 Depreciation 11 1,328 1,238 Interest and other finance costs 8 398 449

Total expenditure 14,367 13,878

(Deficit)/Surplus on continuing operations after depreciation of tangible fixed assets at valuation and before exceptional items and tax Loss on disposal of assets

(Deficit)/Surplus on continuing operations after depreciation of assets at valuation, and exceptional items but before tax Taxation

(Deficit)/Surplus on continuing operations after depreciation of assets at valuation exceptional items and tax (Deficit)/Surplus for the year transferred from accumulated income in endowment funds (Deficit)/Surplus for the year retained within general reserves

<278) 482

11 (1) (15)

(279) 467

9 - -

10 (279) 467

(279) 467

The income and expenditure account is in respect of continuing activities.

The notes on pages 27 to 45 form part of these financial statements

23


Note of Historical Cost Surpluses and Deficits

Notes 2015 £'000

2014 £'000

(Deficit)/Surplus on continuing operations before taxation Difference between historical cost depreciation and the actual charge for the year calculated on the revalued amount

17 (279)

57 467 57

Disposal of fixed assets _

Historical cost (deficit)/surplus for the year before (222) 524

Historical cost (deficit)/surplus for the year after taxation (222) 524

Statement of Total Recognised Gains and Losses

(Deficit)/Surplus on continuing operations after depreciation of assets at valuation and disposals of assets and tax

Notes 2015 (279)

2014 467

Actuarial loss in respect of pension scheme 26 (525) (791)

Total (losses)/recognised gains since last report (804) (324)

Reconciliation

Opening reserves and endowments Total recognised gains for the year

21,464 (804)

21,788 (324)

Closing reserves and endowments 20,660 21,464

24


Balance sheets as at 31 July

Notes

Fixed assets Tangible assets 11

2015

39,526

2014

39,592

Total fixed assets

Current assets Debtors 12 Investments Cash at bank and in hand Total current assets

Less: Creditors - amounts falling due 13 within one year Net current assets

Total assets less current liabilities

Less: Creditors - amounts falling due after 14 more than one year

Net assets excluding pension (liability)/asset Net pension (liability)/asset 26 NET ASSETS INCLUDING PENSION ASSET/(L1AB1L1TY)

Deferred capital grants 16

Reserves Income and expenditure account excluding 18 pension reserve Pension reserve 26 Income and expenditure account including 18 pension reserve

Revaluation reserve 17 Total reserves

TOTAL FUNDS

39,526

314 1,513 1,603 3,430

(2,706)

724

40,250

(6,784)

33,466 (6,409) 27,057

6.397

23,669

(6,409)

17,260

3.400 20,660

27,057

39,592

276 1,505 2,538 4,095

(2,636)

1,683

41,275

(7,530)

33,745 (5,748) 27,997

6,533

23,755

(5,748) 18,007

3,457 21.464

27,997

The financial statements on pages 23 to 45 were approved by the Corporation on 10 December 2015 and were signed on its behalf on that date by:

) ) - J'


gr

Brian Page Acting Principal (Accounting Officer)

25


Cash Flow Statement

Notes 2015 2014 £'000 £'000

Cash inflow from operating activities 19 1,379 2,138

Returns on investments and servicing of finance 20 (324) (336)

Capital expenditure and financial investment 21 (1,263) (918)

Financing 22 (728) (735)

(Decrease)/lncrease in cash in the year 23 (936) 149

Reconciliation of net cash flow to movement in net funds

(Decrease)/lncrease in cash in the period (936) 149 Cash outflow from financing 22 728 735

Movement in net funds in the period (208) 884 Net funds at 1 August (4,213) (5,097)

Net funds at 31 July (4,421) (4,213)


Notes to the Accounts

1. Accounting policies

Statement of accounting policies

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.

Basis of preparation

These financial statements have been prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education 2007 (the SORP), the Accounts Direction for 2014-15 financial statements and in accordance with applicable Accounting Standards.

Basis of accounting

The financial statements are prepared in accordance with the historical cost convention modified by the revaluation of certain fixed assets and in accordance with applicable United Kingdom Accounting Standards.

Going concern

The inherent uncertainties in future FE College funding coupled with the effects of changes in the attitudes of the major banks towards lending and the known cost increases expected in 2015/16 and 2016/17, mean that the disclosures around the basis for adopting the going concern basis for the preparation of the financial statements, are extremely important

The activities of the College, together with the factors likely to affect its future development and performance are set out in the Operating and Financial Review. The financial position of the College, its cash flow, liquidity and borrowings are described in the Financial Statements and accompanying Notes.

The College currently has £5.90m of loans outstanding with bankers on terms negotiated in 2008. The terms of the existing agreement are for up to another 17 years. The College's forecasts and financial projections indicate that it will be able to operate within this existing facility and covenants for the foreseeable future.

Accordingly the College has a reasonable expectation that it has adequate resources to continue in operational existence for the foreseeable future, and for this reason will continue to adopt the going concern basis in the preparation of its Financial Statements.

Basis of consolidation

In accordance with Financial Reporting Standard (FRS) 2, 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 31 July 2015.

Recognition of income

The recurrent grant from SFA, EFA and HEFCE represents the funding allocations attributable to the current financial year and is credited direct to the income and expenditure account.

27


Funding body recurrent grants are recognised in line with best estimates for the period of what is receivable and depend on the particular income stream involved. Any under or over achievement for the Adult Skills Budget is adjusted for and reflected in the level of recurrent grant recognised in the income and expenditure account. The final grant income is normally determined with the conclusion of the year end reconciliation process with the funding body at the end of November following the year end, and the results of any funding audits. 16-18 learner-responsive funding is not normally subject to reconciliation and is therefore not subject to contract adjustments.

Non-recurrent grants from the funding bodies or other bodies received in respect of the acquisition of fixed assets are treated as deferred capital grants and amortised in line with depreciation over the life of the assets.

Income from tuition fees is recognised in the period for which it is received and includes all fees payable by students or their sponsors, for example the National Health Service.

Income from grants, contracts and other services rendered is included to the extent the conditions of the funding have been met or 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 from restricted purpose endowment funds not expended in accordance with the restrictions of the endowment in the period is transferred from the income and expenditure account to accumulated income within endowment funds.

Post retirement benefits

Retirement benefits to employees of the College are provided by the Teachers' Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS). These are defined benefit schemes, which are externally funded and contracted out of the State Earnings-Related Pension Scheme (SERPS).

Contributions to the TPS are calculated so as to spread the cost of pensions over employees' working lives with the College in such a way that the pension cost is a substantially level percentage of current and future pensionable payroll. The contributions are determined by qualified actuaries on the basis of quinquennial valuations using a prospective benefit method. As stated in Note 26, the TPS is a multi employer scheme and the College is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. The TPS is therefore treated as a defined contribution scheme and the contributions recognised as they are paid each year.

The assets of the LGPS are measured using closing market values. LGPS liabilities are measured using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The increase in the present value of the liabilities of the scheme expected to arise from employee service in the period is charged to the operating surplus. The expected return on the scheme's assets and the increase during the period in the present value of the scheme's liabilities, arising from the passage of time, are included in pension finance costs. Actuarial gains and losses are recognised in the statement of total recognised gains and losses.


Tangible fixed assets

Land and buildings

Land and buildings inherited from the Local Education Authority are stated in the balance sheet at valuation on the basis of depreciated replacement cost as the open market value for existing use is not readily obtainable. The associated credit is included in the revaluation reserve. The difference between depreciation charged on the historic cost of assets and the actual charge for the year calculated on the revalued amount is released to the income and expenditure account reserve on an annual basis. Building improvements made 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 of between 20 and 60 years. The College has a policy of depreciating major adaptations to buildings over the period of their useful economic life of between 20 and 60 years.

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 the depreciation policy,

Finance costs, which are directly attributable to the construction of land and buildings, are not capitalised as part of the cost of those assets.

A review for impairment of a fixed asset is carried out if events or changes in circumstances indicate that the carrying amount of any fixed asset may not be recoverable.

On adoption of FRS 15, the College followed the transitional provision to retain the book value of land and buildings, which were revalued in 1996, but not to adopt a policy of revaluations of these properties in the future. These values are retained subject to the requirement to test assets for impairment in accordance with FRS 11.

Assets under construction

Assets 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.

Subsequent expenditure on existing fixed assets Where significant expenditure is incurred on tangible fixed assets it is charged to the income and expenditure account in the period it is incurred, unless it meets one of the following criteria, in which case it is capitalised and depreciated on the relevant basis:

• Market value of the fixed asset has subsequently improved; • Asset capacity increases; • Substantial improvement in the quality of output or reduction in operating costs; and • Significant extension of the asset's life beyond that conferred by repairs and maintenance.

Buildings owned by third parties

Where the College enjoys the use of an asset which it does not own and for which no rental or a nominal rental is paid, if practicable, a value is attributed to this benefit and capitalised, with a corresponding credit to deferred capital grants which are subsequently released to the income and expenditure account over the useful economic life of the asset at the same rate as the depreciation charge on the related asset(s).

29


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 inherited from the local education authority is included in the balance sheet at valuation. Inherited equipment has been depreciated on a straight-line basis over its remaining useful economic life to the College of between one and three years from incorporation and is now fully depreciated. All other equipment is depreciated over its useful economic life as follows:

• computer equipment (PCs) - 4 years on a straight-line basis; • computer equipment (servers) - 5 years on a straight-line basis; • plant & general equipment - 8 years on a straight-line basis; • motor vehicles - 4 years on straight-line basis; and • furniture, fixtures and fittings - 6 to 10 years on a straight-line basis.

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. Leasing agreements which transfer to the College substantially all the benefits and risks of ownership of an asset are treated as if the asset had been purchased outright and are capitalised at their fair value at the inception of the lease and depreciated over the shorter of the lease term or the useful economic lives of equivalently owned assets. The capital element outstanding is shown as obligations under finance leases.

The finance charges are allocated over the period of the lease in proportion to the capital element outstanding. Where finance lease payments are funded in full from funding council capital equipment grants, the associated assets are designated as grant-funded assets.

Investments and endowment assets

Listed investments held as fixed assets or endowment assets are stated at market value. Current asset investments, which may include listed investments, are stated at the lower of their cost and net realisable value.

Stocks

Stocks are stated at the lower of their cost and net realisable value. Where necessary, provision is made for obsolete, slow-moving and defective stocks.

Foreign currency translation

Transactions denominated in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the end of the financial period with all resulting exchange differences being taken to the income and expenditure account in the period in which they arise.

30


Taxation

The College is considered to pass the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the College is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 Corporation Tax Act 2010 or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied exclusively to charitable purposes.

The College is partially exempt in respect of Value Added Tax, so that it can only recover a minor element of VAT charged on its inputs. Irrecoverable VAT on inputs is included in the costs of such inputs and added to the cost of tangible fixed assets as appropriate, where the inputs themselves are tangible fixed assets by nature.

Liquid resources

Liquid resources include sums on short-term deposits with recognised banks, building societies and government securities.

Provisions

Provisions are recognised when the College has a present legal or constructive obligation as a result of a past event, it is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Agency arrangements

The College acts as an agent in the collection and payment of Discretionary Support Funds and Bursary Funds. Related payments received from the funding bodies and subsequent disbursements to students are excluded from the Income and Expenditure account and are shown separately in Note 31, except for the 5 per cent of the grant received which is available to the College to cover administration costs relating to the grant. The College employs one member of staff dedicated to the administration of Discretionary Support Fund and Bursary Fund applications and payments.

31


2 Funding body grants 2015 2014

rooo £'ooo EFA and SFA recurrent grant 12,499 13,056 Local Authorities - High Needs 460 425 HEFCE Recurrent grant - -EFA and SFA non recurrent grants 206 6 Non recurrent grants 45 -Releases of deferred capital grants (note 16) 136 152

Total 13,346 13,639

3 Tuition fees and education contracts 2015 2014

£'000 £'000 Tuition fees 352 351 Education contracts 95 63

Total 447 414

Tuition fees funded by bursaries

Included within the above amounts are tuition fees funded by bursaries of £nil (2012/13 £nil).

4 Endowment and investment income 2015 2014 r000 £'000

Other interest receivable 15 16

Total 15 16

32


5 Staff costs The average number of persons (including senior post-holders) employed by the College during the year, described as full-time equivalents, was:

2015 2014 No. No.

Teaching staff 108 92 Non teaching staff 109 110

217 202 Staff costs for the above persons

2015 2014 £'000 £'000

Wages and salaries 6,487 6,280 Social security costs 460 446 Other pension costs (including FRS 17 adjustments of £77,000; 987 839 2013/14 £21,000)

Payroll sub total 7,934 7,565 Contracted out staffing services 858 768

8,792 8,333 Exceptional restructuring costs 290 385

Total Staff costs 9,082 8,718

The number of senior post-holders and other staff who received annual emoluments, excluding pension contributions but including benefits in kind, in the following ranges were:

Senior post-holders Other staff 2015 2014 2015 2014

£60,001 to £70,000 p.a. £70,001 to £80,000 p.a. £80,001 to £90,000 p.a. £90,001 to £100,000 p.a. £100,001 to £110,000 p.a. £110,001 to £120,000 p.a. £120,001 to £130,000 p.a. £130,001 to £140,000 p.a.

No. No. No. No.

33


6 Senior post-holders' emoluments Senior post-holders are defined as the Principal and holders of the other senior posts whom the Governing Body 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 Governing Body.

2015 2014 No. No.

The number of senior post-holders including the Principal was: 3 4

Senior post-holders' emoluments are made up as follows: 2015 2014

£'000 £'000 Salaries 274 339 Benefits in kind - 5 Pension contributions 36 42

Total emoluments 310 386

The above emoluments include amounts payable to the Principal (who is also the highest paid senior post-holder) of:

2015 2014 £'000 £'000

Salary - P Morgan 119 74

119 122

Pension contributions 17 17

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 are paid at the same rate as for other employees.

The members of the Corporation other than the Principal and the staff members did not receive any payment from the institution other than the reimbursement of travel and subsistence expenses incurred in the course of their duties.

Compensation for loss of office paid to a former senior post-holder 2015 2014

£ £ Compensation paid to the former senior post-holder 50,000 -

The severance payment was approved by the College's Remuneration Committee and endorsed by the Corporation Board.

34


7 Other operating expenses 2015 2014

£'000 £'000 Teaching costs 957 957 Non teaching costs 1,716 1,547 Premises costs 886 969

Total 3,559 3,473

Other operating expenses include: 2015 2014 £'000 £'000

Auditors' remuneration: Financial statements audit 16 16 Internal audit 19 18 Other services provided by the financial statements 6 5 auditors

Hire of other assets - operating leases 19 96

8 Interest and other finance costs 2015 2014

£'000 £'000 On bank loans, overdrafts and other loans: Repayable within five years, not by instalments - -Repayable within five years, by instalments - -Repayable wholly or partly in more than five years 339 352

339 352

On finance leases - -Pension finance costs (note 26) 59 97 Total 398 449

9 Taxation

The members of the Corporation do not consider the College liable for any corporation tax arising out of its activities during the year.

10 (Deficit)/Surplus on continuing operations for the year

The (Deficit)/Surplus on continuing operations for the year is made up as follows:

2015 2014 £'000 £'000

College's (deficit)/surplus for the year (279) 467

35


11 Tangible fixed assets Land and Assets Equipment Total buildings under

Freehold construction Freehold construction £'000 £'000 rooo £'000

Cost or valuation At 1 August 2014 43,200 166 4,218 47,584 Additions 404 205 654 1,263 Transfers 166 (166) - -

Disposals (76) (76) At 31 July 2015 43,770 205 4,796 48,771 Depreciation At 1 August 2014 5,079 - 2,913 7,992 Charge for the year 873 - 455 1,328 Elimination in respect of disposals (75) (75) At 31 July 2015 5,952 - 3,293 9,245

Net book value at 31 July 2015 37,818 205 1,503 39,526

Net book value at 31 July 2014 38,121 166 1,305 39,592

Land and buildings were valued in 1996 at depreciated replacement cost by a firm of independent chartered surveyors (WS Atkins). Other tangible fixed assets inherited from the LEA at incorporation have been valued by the College on a depreciated replacement cost basis with the assistance of independent professional advice.

The new building with a net book value of £32,360K has been partly financed by exchequer funds, through the receipt of capital grants. Should these assets be sold, the College may be liable, under the terms of its Financial Memorandum, to surrender the proceeds.

12 Debtors 2015 2014

£'000 £'000 Amounts falling due within one year: Trade debtors 152 85 Prepayments and accrued income 152 187 Other debtors 10 4 Total 314 276

36


13 Creditors: amounts falling due within one year 2015 2014

£'000 £'000 Bank loans and overdrafts 207 197 HM Revenue and Customs 546 529 Payments received in advance - 348 Trade creditors 340 498 Other creditors 641 158 Other taxation and social security 269 260 Accruals 603 646 Amounts owed to the Skills Funding Agency 100 -

Total 2,706 2,636

14 Creditors: amounts falling due after one year 2015 2014

£'000 £'000 Bank loans 5,702 5,910 HM Revenue and Customs 1,082 1,620 Total 6,784 7,530

15 Borrowings

(a) Bank loans and overdrafts Bank loans and overdrafts are repayable as follows:

2015 2014 £'000 £'000

In one year or less 207 197 Between one and two years 220 207 Between two and five years 233 660 In five years or more 5,249 5,043 Total 5,909 6,107

Bank loans and overdrafts at 5.715 percent repayable by instalments falling due between March 2009 and June 2032 totalling £5,900K.

16 Deferred capital grants Funding Other

body grants Total £'000 £'000 £'000

At 1 August 2014 6,533 - 6,533 Cash received - - -

Released to income and expenditure account (136) - (136)

At 31 July 2015 6,397 _ 6,397

37


17 Revaluation reserve 2015 2014 £'000 £'000

At 1 August 3,457 3,514 Transfer from revaluation reserve to general reserve in respect of:

Disposals - -

Depreciation on revalued assets (57) (57)

At 31 July 3,400 3,457

18 Movement on general reserves 2015 2014

£'000 £'000 Income and expenditure account reserve At 1 August 18,007 18,274 (Deficit)/Surplus retained for the year (279) 467 Transfer from revaluation reserve 57 57 Actuarial (loss)/gain in respect of pension scheme (525) (791) At 31 July 17,260 18,007

Balance represented by: Pension reserve (6,409) (5,748) Income and expenditure account reserve 23,669 23,755 excluding pension reserve

At 31 July 17,260 18,007

19 Reconciliation of consolidated operating surplus to net cash inflow from operating activities

2015 2014 £'000 £'000

(Deficit)/Surplus on continuing operations after depreciation of assets (279) 467 at valuation Depreciation (notes 1 and 11) 1,328 1,238 Deferred capital grants released to income (note 16) (136) (152) Loss on disposal of tangible fixed assets 1 15 Interest payable (note 8) 339 352 Interest receivable (note 4) (15) (16) FRS 17 pension cost less contributions payable (notes 5 and 26) 77 21 FRS 17 pension finance income (note 8 and 26) 59 97 Increase in debtors (38) (75) (Decrease)/increase in creditors 43 191 Net cash inflow from operating activities 1,379 2,138

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20 Returns on investments and servicing of finance 2015 2014

£'000 £'000 Other interest received 15 16 Interest paid (339) (352)

Net cash outflow from returns on investment and servicing of (324) (336) finance

21 Capital expenditure and financial investment 2015 2014

£'000 £'000 Purchase of tangible fixed assets (1,263) (918) Sales of tangible fixed assets (see note 11) - -Deferred capital grants received - -

Net cash inflow/(outflow) from capital expenditure and financial (1.263) (918) investment

22 Financing 2015 2014

£'000 £'000 Debt due beyond a year:

Repayment of amounts borrowed (206) (186) Other creditors - VAT (522) (549)

Net cash outflow from financing (728) (735)

23 Analysis of changes in net funds At 1 August Cash Other At 31 July

2014 flows changes 2015 £'000 £'000 £'000 £'000

Cash in hand, and at bank 2,538 (935) - 1,603 Current asset investments 1,505 8 - 1,513

4,043 (927) - 3,116 Debt due within 1 year (726) (27) - (753) Debt due after 1 year (7,530) 746 • (6,784)

Total (4,213) (208) - (4,421)

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24 Cash flow relating to exceptional items

Provision as at 1 August Income and expenditure account charge

Provision as at 31 July

The operating cash outflows relate to restructuring costs.

25 Major non-cash transactions

There were no items of non-cash transactions during the year.

2015 £'000

290

2014 £'000

385

26 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 Local Government Pension Scheme (LGPS) for non-teaching staff, which is managed by Essex County Council. Both are defined-benefit schemes.

Total pension cost for the year 2015 £000

2014 £000

Teachers' Pension Scheme: contributions paid Local Government Pension Scheme:

Contributions paid FRS 17 charge

Charge to the Income and Expenditure Account Enhanced pension charge to Income and Expenditure Account {staff costs)

Total Pension Cost for Year

480

433 399 77 21

510

990

421

420

841

The pension costs are assessed in accordance with the advice of independent qualified actuaries. The latest actuarial valuation of the TPS was 31 March 2012 and of the LGPS 31 March 2013.

Contributions amounting to £96K (2013-14 £101K) were payable to the scheme at 31st July and are included within creditors.

Teachers' Pension Scheme

The Teachers' Pension Scheme (TPS) is a statutory, contributory, defined benefit scheme, governed by the Teachers' Pensions Regulations 2010, and, from 1 April 2014, by the Teachers' Pension Scheme Regulations 2014. These regulations apply to teachers in schools and other educational establishments, including academies, in England and Wales that are maintained by local authorities. In addition, teachers in many independent and voluntary-aided schools and teachers and lecturers in some establishments of further and higher education may be eligible for membership. Membership is automatic for full-time teachers and lecturers and, from 1 January 2007, automatic too for teachers and lecturers in part-time employment following appointment or a change of contract. Teachers and lecturers are able to opt out of the TPS.

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The Teachers' Pension Budgeting And Valuation Account

Although members may be employed by various bodies, their retirement and other pension benefits are set out in regulations made under the Superannuation Act 1972 and are paid by public funds provided by Parliament The TPS is an unfunded scheme and members contribute on a 'pay as you go' basis - these contributions, along with those made by employers, are credited to the Exchequer under arrangements governed by the above Act.

The Teachers' Pensions Regulations 2010 require an annual account, the Teachers' Pension Budgeting and Valuation Account, to be kept of receipts and expenditure (including the cost of pension increases). From 1 April 2001, the Account has been credited with a real rate of return, which is equivalent to assuming that the balance in the Account is invested in notional investments that produce that real rate of return.

Valuation Of The Teachers' Pension Scheme

The latest actuarial review of the TPS was carried out as at 31 March 2012 and in accordance with The Public Service Pensions (Valuations and Employer Cost Cap) Directions 2014. The valuation report was published by the Department for Education (the Department) on 9 June 2014. The key results of the valuation and the subsequent consultation are:

• employer contribution rates were set at 16.48% of pensionable pay (including a 0.08% levy for administration);

• total scheme liabilities for service to the effective date of £191.5 billion, and notional assets of £176.6 billion, giving a notional past service deficit of £14.9 billion;

• an employer cost cap of 10.9% of pensionable pay will be applied to future valuations

The new employer contribution rate for the TPS will be implemented in September 2015.

A full copy of the valuation report and supporting documentation can be found on the Teachers' Pension Scheme website at the following location:

https://www.teacherspensions-co.uk/news/emplovers/2014/06/publication-of-the-valuation-report.aspx

Scheme Changes

Following the Hutton report in March 2011 and the subsequent consultations with trade unions and other representative bodies on reform of the TPS, the Department published a Proposed Final Agreement, setting out the design for a reformed TPS to be implemented from 1 April 2015.

The key provisions of the reformed scheme include: a pension based on career average earnings; an accrual rate of 1/57th; and a Normal Pension Age equal to State Pension Age, but with options to enable members to retire earlier or later than their Normal Pension Age. Importantly, pension benefits built up before 1 April 2015 will be fully protected.

In addition, the Proposed Final Agreement includes a Government commitment that those within 10 years of Normal Pension Age on 1 April 2012 will see no change to the age at which they can retire, and no decrease in the amount of pension they receive when they retire. There will also be further transitional protection, tapered over a three and a half year period, for people who would fall up to three and a half years outside of the 10 year protection.

Regulations giving effect to a reformed Teachers' Pension Scheme came into force on 1 April 2014 and the reformed scheme will commence on 1 April 2015.

Local Government Pension Scheme

The LGPS is a funded defined-benefit scheme, with the assets held in separate funds administered by Essex County Council. The total contribution made for the year ended 31 July 2015 was £464K, of

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which employer's contributions totalled £319K and employees' contributions totalled £145K. The agreed contribution rates for future years are 14.9% for employers and range from 5.5% to 12.5% for employees, depending on salary.

FRS 17 Principal Actuarial Assumptions

The following information is based upon a full actuarial valuation of the fund at 31 March 2013 updated to 31 July 2015 by a qualified independent actuary:

At 31 July At 31 July 2014 2014

Rate of increase in salaries 4.3% 4.4% Rate of increase for pensions in payment/inflation 2.5% 2.6% Discount rate for scheme liabilities 3.7% 4.2% Inflation assumption (CPI) 2.5% 2.6% Commutation of pensions to lump sums 50% 50%

The current mortality assumptions include sufficient allowance for future improvements in mortality rates. The assumed life expectations on retirement age 65 are:

At 31 July At 31 July 2015 2014

Retiring today Males 22.8 22.7 Females 25.2 25.1 Retiring in 20 years Males 25.1 24.9 Females 27.6 27.4

Local Government Pension Scheme

The College's share of the assets and liabilities in the scheme and the expected rates of return were:

Long-term rate Value at 31 Long-term rate Value at 31 of return July 2015 of return July 2014

expected at 31 £'000 expected at 31 £'000 July 2015 July 2014

Equities 6.5% 8,918 6.5% 7,838 Government bonds 3.4% 555 3.4% 752 Other bonds 4.3% 1,331 4.3% 1,304 Property 5.5% 1,587 5.5% 1,408 Cash 0.5% 339 0.5% 347 Alternative Assets 4.3% 988 4.3% 467 Total market value of assets 13,718 12,116 Present value of scheme liabilities - Funded (20,127) (17,864) - Unfunded - _

Related deferred tax liability - -

Surplus/(deficit) in the scheme (6,409) (5,748)

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Analysis of the amount charged to income and expenditure account 2015 2014

£'000 £'000 Employer service cost (net of employee contributions) 533 442 Past service cost - -Total operating charge 533 442

Analysis of pension finance income/(costs) Expected return on pension scheme assets 696 655 Interest on pension liabilities (755) (752) Pension finance (costs) (59) (97)

Amount recognised in the statement of total recognised gains and losses (STRGL) 2015 2014

£'000 £'000 Actuarial (losses)/gains on pension scheme assets 749 (102) Actuarial (losses) on scheme liabilities (1,274) (689)

Actuarial gain/(loss) recognised in STRGL (525) (791)

Movement in surplus/(deficit) during year 2015 2014

£'000 £'000 Surplus/(deficit) in scheme at 1 August (5,748) (4,839) Movement in year:

Employer service cost (net of employee contributions) (533) (442) Employer contributions 456 421 Net interest/return on assets (59) (97) Actuarial (Loss)/gain (525) (791)

(Deficit)/Surplus in scheme at 31 July (6,409) (5,748)

Asset and Liability Reconciliation 2015 2014 £'000 £'000

Reconciliation of Liabilities

Liabilities at start of period 17,864 16,282 Service cost 533 442 Interest cost 755 752 Employee contributions 146 140 Actuarial loss 1,274 689 Benefits paid (445) (441) Liabilities at end of period 20,127 17,864

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Reconciliation of Assets

Assets at start of period 12,116 11,443 Expected return on assets 696 655 Actuarial gain/(loss) 749 (102) Employer contributions 456 421 Employee contributions 146 140 Benefits paid (445) (441) Assets at end of period 13,718 12,116

The estimated value of employer contributions for the year ended 31 July 2016 is £458K.

Deficit contributions

The College has entered into an agreement with the LGPS to make additional contributions of £119K per annum in addition to normal funding levels until the next full valuation at which point the situation will be reviewed again.

History of experience gains and losses 2015

Difference between the expected and actual return on assets: Amount £'000 (1,274)

Experience gains and losses on scheme liabilities:

Amount £'000 749

Total amount recognised in STRGL: Amount £'000 (525)

27 Post-balance sheet events

There are no post balance sheet events.

28 Capital commitments

2015 2014 £'000 £'000

Commitments contracted for at 31 July 335 364 Authorised but not contracted at 31 July NIL NIL

2014 2013 2012 2011

(689) (35) (1,053) 85

(102) 1,377 (503) (643)

(791) 1,342 (1,566) (558)

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29 Financial commitments At 31 July the College had annual commitments under non-cancellable operating leases as follows:

2015 2014 £'000 £'000

Photocopying Contract Expiring within one year - -Expiring within two and five years inclusive 289 289 Expiring in over five years - -

289~ 289

30 Related party transactions

Owing 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 such organisations are conducted at arm's length and in accordance with the College's financial regulations and normal procurement procedures.

There were no expenses paid to or on behalf of the Governors during the year; ( 2014; £75; 1 governor). This represents travel and subsistence expenses and other out of pocket expenses incurred in attending Governor meetings and charity events in their official capacity.

No Governor has received any remuneration or waived payments from the College during the year (2014: None).

Transactions with the funding bodies and HEFCE are detailed in notes 2, 12, 13 and 16.

31 Amounts disbursed as agent

" " " 2015 2014

£'000 £'000

Funding body grants - hardship support 645 467 Funding body grants - childcare 35 87 Interest earned 1 -

681 554 Disbursed to students (337) (361) Administration costs (24) (25) Balance unspent as at 31 July, included in creditors 320 168

Funding body grants are available solely for students. In the majority of instances, the College only acts as a paying agent. In these circumstances, the grants and related disbursements are therefore excluded from the income and expenditure account. The income and expenditure consolidated in the College's financial statements relates to the purchase of some equipment from the access fund and the payment of accommodation by the College on the students' behalf.

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