john leggott college

John Leggott College REPORT OF GOVERNING BODY AND FINANCIAL STATEMENTS for the year ended 31 July 2017


KEY MANAGEMENT PERSONNEL, BOARD OF GOVERNORS AND PROFESSIONAL ADVISERS

Key management personnel

Key management personnel are defined as members of the College Leadership Team and were represented by the following in 2016/17: Leon Riley Principal and CEO, Accounting Officer (appointed pt September 2016) David Vasse Principal and CEO; Accounting Officer (resigned 31st August 2016) Yvonne Briggs Vice Principal (post redundant 27th February 2017) Claire Holmes Assistant Principal Howard Darwin Assistant Principal Emily Hughes Assistant Principal (resigned 31st August 2016) Craig McDonough Associate Assistant Principal (appointed April 1st 2017) Kelly Rinaldi Associate Assistant Principal (appointed April pt 2017) Becky Robinson Director of Governance

Board of Governors

A full list of Governors is given on page 15 of these financial statements. Becky Robinson acted as Clerk to the Corporation throughout the period.

Professional advisers

Financial statements auditors and reporting accountants:

RSM UK Audit LLP Two Humber Quays Wellington Street West Hull HU12BN

Internal auditors Audit One (formerly East Coast Audit Consortium) Crosskill Hause Mill Lane Beverley HU179JB

Bankers

Lloyds Bank pic 106 High Street Scunthorpe DN156HG

Solicitors

Wilkin Chapman LLP Cartergate House 26 Chantry Lane Grimsby DN312LJ

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CONTENTS

Report of the Governing Body

Statement of Corporate Governance and Internal Control

Governing Body's statement on the College's Regularity, Propriety and Compliance with Funding body terms and conditions of funding

Statement of Responsibilities of the Members of the Corporation

Independent Auditor's Report to the Corporation of John Leggott College

Statement of Comprehensive Income and Expenditure

Balance Sheet as at 31 July 2017

Statement of Changes in Reserves

Statement of Cash Flows

Notes to the Financial Statements

APPENDIX A Corporation Attendance 2016/17 Reporting Accountant's Assurance Report on Regularity

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REPORT OF THE GOVERNING BODY

Nature, objectives and strategies

The members present their report and the audited financial statements for the year ended 31 July 2017.

Legal Status The Corporation was established under the Further and Higher Education Act 1992 for the purpose of conducting John Leggott College (the College). The College is an exempt charity for the purposes of part 3 of the Charities Act 2011.

Background to the College John Leggott College is an open access sixth form College established in 1968 with a primary focus on the education of full time 16-19 year aids. It is situated on an attractive green field site in a residential part of Scunthorpe. It has an excellent reputation throughout North Lincolnshire and beyond for providing high quality education in a supportive environment. The College successfully serves the needs of secondary schools and one secondary special school in North Lincolnshire as well as students from outside the local area. It has a day-time cohort of over 1,800 students, some of whom travel up to 25 miles a day to study, (from Goole, Snaith, Howden, Thorne, Grimsby and Gainsborough). The College offers a wide range of subjects at General Certificate of Education Advanced Level (GCE A-level) and Advanced Subsidiary Level (AS level), GCSE, BTEC level 2 ( First Award, Certificate, Extended Certificate and Diploma), Art Foundation and a small number of Foundation and Entry Level students. The College delivers Level 2 and 3 apprenticeships, HNC/D in IT, in association with a neighbouring College and Access to HE courses. In 2016-17 the College started to directly recruit 14-16 year old students.

North Lincolnshire has a small but significant ethnic community and the College has specifically designed courses to meet this need.

The College Mission The College mission is create an inclusive community with a sense of belonging that challenges and inspires through inspirational teaching, support and care.

Public Benefit John Leggott College is an exempt charity under Part 3 of the Charities Act 2011 and following the Machinery of Government changes in July 2016 is regulated by the Secretary of State for Education. The members of the Governing Body, who are trustees of the charity are disclosed on page 15.

We, at John Leggott College, see huge opportunities to develop in the next period of our history and to make our vision a reality. Through our vision statement we make clear not only our ambitions for success but also the value we attach to progressive ideas and practice. We are a College with a strong desire to innovate and develop new approaches to teaching and learning. We value the progressive work of our professional workforce and we want our learners to push to the highest standards.

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REPORT OF THE GOVERNING BODY (CONTINUED)

Public Benefit (continued)

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 • Links with local Enterprise Partnerships (LEPS)

Implementation of the Strategic & Development Plan

In 2017 the College prepared a Strategic Development Plan for the period 2017-2020. The Development Plan includes strategic aims and objectives and the delivery targets for 2017- 2020. The Corporation monitors the performance of the College against these plans. The plans are reviewed each year

Financial objectives

The College has over a number of years, seen significant change. The priority of this strategic plan is to bring stability. This is reflected in its key recruitment targets, thus ensuring strong and stable finances:

2017/18 2018/19 2019/20 ESFA* Funded Learners (*Education & Skills Funding Agency) 1649 1671 1671 14-16 Learners 90 90 90 International Income £520,000 £520,000 £750,000 Other Income £528,000 £528,000 £528,000

All expenditure will be mapped to ensure that the College achieves at least Good Financial Status by the end of the strategic plan and the College does not breach any of its banking covenants. The College predicts a positive outturn over the three years. It will also strengthen its balance sheet.

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John LeggoU College REPORT OF GOVERNING BODY AND FINANCIAL STATEMENTS for the year ended 31 July 2017

REPORT OF THE GOVERNING BODY (CONTINUED) Peñormance indicators

The College uses the following KPls to measure performance against financial plan

KPI Financial Plan Actual Staff costs as a percentage 67.41% 67.92% of income ( excluding restructure costs) Adjusted Current Ratio 0.54 0.68 Borrowing as a percentage 49.27% 46.26% of net assets Performance Ratio 6.05% 8.59% Reliance on ESFA income 84.69% 84.74% Financial Health Score 120 - satisfactory 150 - satisfactory

The College is committed to observing the importance of sector measures and indicators such as sixth form sector achievement rates.

The College is required to complete the annual Education and Skills Funding Agency ('ESFA') financial planning template which produces a financial health grading. The College currently has an assessed ESFA financial health grading of satisfactory in the financial year 2015-16, this is expected to continue in 2016-17 with the College becoming solid satisfactory moving towards good.

Financial position Financial results The College generated a surplus before other gains and losses in the year of £22,000 (2015- 16 £214,000), with total comprehensive income of £30,000 (2015-16 £300,000 deficit).

In 2016-17 the College was allocated an ESFA 16-18 allocation of £7,027,152 (2015-16 £7,914,000) equivalent to 1,708 FTE day time students. Actual student numbers were equivalent to cohort of 1626 FTE students.

The College has accumulated reserves of £5,184,000 (2015-2016 £5,154,000).

Tangible fixed asset additions during the year amounted to £ nil.

The College has significant reliance on the education sector funding bodies for its principal funding source, largely from recurrent grants. In 2016-17 the funding bodies provided 84.74% (2015/2016 83.17%) of the College's total income.

Treasury policies and objectives

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

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REPORT OF THE GOVERNING BODY (CONTINUED) Treasury policies and objectives (continued)

The College has a separate treasury management policy in place.

All borrowing requires the authorisation of the Corporation and shall comply with the requirements of the College's Financial Regulations and the Funding Agreement.

Cash flows and Liquidity

A net cash inflow of £689,000 (2015-16 £1,102,000 inflow) was generated from operating activities during the year.

The College continues to work within the agreed borrowing framework and has had minimal utilisation of the approved overdraft facility. The College has two loans totalling £3.2m and an overdraft facility of £800,000.

Reserves policy

The College recognises the importance of reserves in the financial stability of an organisation, whilst ensuring that adequate resources are provided for the College's core business. The College has a requirement within its banking covenants to hold a minimum unrestricted reserves level of £3,000,000. As at the balance sheet date, unrestricted reserves were £5,184,000 (2016 £5,154,000). The Corporation approved a Reserves policy in 2016-17.

Financial Health During 2014-15 the College was assessed as being in inadequate financial health and as a result was under a financial notice to improve. In the years since then the College has undertaken ongoing cost reduction programmes in both pay and non-pay costs and having successfully had the notice removed has continued to make positive progress in improving financial health. The financial plan for the period to 2019 is to continue to sustain and improve the financial health score. In 2015-16 the College financial health was assessed as satisfactory, this has continued into 2016-17 and the strategic plan includes an aspiration to achieve good financial health during the period of the plan. During the last three financial years the College has worked closely with its bankers and has made loan repayments on time whilst reducing the reliance upon overdraft facilities.

Student numbers

The College is funded on a lagged basis according to the level of activity it generates each year.

The College enrols primarily from ten 11-16 schools and one secondary special school in North Lincolnshire as well as recruiting students from outside the local area.

The College recruited a significant cohort of fee paying international students, currently 83 (2015-1696).

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Student Achievements The College recruits students with a large range of qualifications on entry and delivers successful courses from level 1 to level 4. The primary volume of students work at level 3 - mainly A Levels and Level 3 BTEC vocationally based courses.

The College is successful in terms of providing a springboard for progression to Higher Education, apprenticeships or employment and a greater than average number of students access prestigious Russell Group universities - most commonly in courses related to science, technology and mathematics, linking to the industrial focus of the town, and also to national skills-gap agendas and regional LEP priorities.

The College was inspected by OFSTED in April 2014 and was judged to be GOOD across areas of the Inspection Framework. The inspection praised a strong culture for learning and a high level of student engagement in learning and student leadership.

College high grade outcomes remain high overall, and at a record level owing to outstanding performance in vocational courses. In these courses, over 80% of learners acquired top grades. This broad area also saw significant increases in pass rate and retention. A level high grades dipped as courses adjust to newly reformed specifications, though remain above 40%. Pass rates overall for level 3 vocational courses and A levels combined, remain high and above sector averages. The progress of learners towards ambitious target grades was outstanding in a range of courses such as A level Physics, A level Further Maths, A level Law, BTEC Sport and BTEC Business Studies; though in some course such as A level Religious Studies and A level English Literature, insufficient learners reached challenging target grades.

Diverse groups of learners are well supported to successful programmes of study and there is no success gap between white British and non-white British ethnicity. Bangladeshi, Pakistani and Indian groups all attain above the College average, as do white - non-British (mainly from eastern European origin).

Support for students is strong and personalised with a well-qualified team of 'Academic Advocates' providing targeted, timely and effective support for students across their study programmes. Pastoral work is overseen by curriculum leaders in association with the academic advocates working closely with a subject specialist alignment.

There is a focus on employability skills throughout College and a key component of this is the increasing provision for work experience. Over 15% of all students access a substantive work experience placement over an extended period. We have engaged over 250 employers to facilitate this. A further significant number of students have been supported on to summer work placements or other short-term placements. Many other students benefit from industry contexts within their learning through, for example, external speakers from industry or the use of real industry briefs and assessments. The impact of this has been to enhance our College wide ethos of independent learning and high aspiration - students now more readily see a link between academic progress and future career or training goals.

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Curriculum Developments

The broad curriculum at College has diversified to respond to existing and emerging markets and funding opportunities. We now have many strands of provision - some well-established and others developing:

• New courses: We have introduced some new courses to tailor provision more specifically to the needs and aspirations of learners. These include mainly vocationally based courses such as A level Accountancy, WJEC Level3 Criminology, BTEC Games Development.

• We have discontinued some courses which were unviable due to very small numbers, such as BTEC Music Technology and A level German.

• A Level: We currently offer an extensive range of A level courses. • Approximately 48% of our students follow an academic pathway with the residual

students following a vocational pathway. • BTEC and other vocational courses are offered at Level 3 and Level 2. The bulk of

enrolments are at level 3, with a focus on health, media, sport, business and IT - closely relating to LEP priorities.

• GCSE Levels in Maths and English are worked towards by all students with a grade 3 or below - grade 4 students automatically resit to improve to grade 5 and the College performs well above national average in terms of improving these key grades for learners. A small number of other GCSE courses, such as Physics, supplement Level 2 programmes.

• Level 1 and 2 functional skills qualifications are accessed by a small number of students to enhance baseline qualifications and life skills.

• A Healthcare Cadets programme is done in partnership with the NHS to educate and train prospective future NHS staff, primarily in the nursing sector.

• We currently have a small number of students on both the Intermediate and Advanced apprenticeships, mainly in Business Administration and Customer Services.

• The College is on the Register of Apprenticeship Training Providers and is able to provide apprenticeships for levy paying employers.

• We run Access to HE courses for adults in Science and Health Professions. These are highly effective progression pathways to HE for students.

• We offer a Foundation Diploma Art & Design course - Level 4, for access to Art and Design degrees.

• We run a level 4/5 HNC/D in Computer Science which can be topped up to degree level at partner institutions - in association with North Lindsey College.

• We currently have an international provision which includes students from China, Hong Kong, Russia, Latvia, Vietnam, Kazakhstan, Nigeria, Azerbaijan, Spain, Italy, France and Romania. International students access primarily A Level provision.

• We have begun a 14-16 direct recruitment programme for 2016-17. During 2016-17 there were 45 students on the programme.

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Going Concern

In line with sector challenges, John Leggott College is operating within very strict financial constraints. Increases in employment costs such as national insurance, pension contributions and implementation of the national living wage have added to the pressure of budgets limited by the funding rate per learner. The College has continued to make cost reductions in both pay and non-pay areas and has closely monitored performance against financial plans. The College has for a third consecutive year delivered a final outturn in line with the financial plan, and the College financial health is now considered to be solidly satisfactory.

In 2016-17 the College was part of Wave 4 of the ABR process, the final report concluded that the College can remain as a standalone organisation working in partnership with 3 other local sixth forms under the Venn 4 Federation.

The College has a financial plan which is regularly reviewed and updated for changing circumstances when needed. All income streams are risk assessed on a regular basis and mitigating actions taken as needed. Management accounts track diversified income streams to ensure that these are financially sustainable.

The financial statements, management accounts and financial plans all indicate that all banking covenants will be met. The College continues to operate comfortably within its borrowing package and is scheduled in cash flow projections to make all loan repayments as they become due in 2017/18.

Payment Peñormance The College has an excellent local and international reputation. Analysis of demographics show that from 2018 onwards, potential learner numbers will start to grow. The College, due to its reputation and curriculum offer, is well placed to start managed growth.

2016-17 saw the College go through the ABR process. The College will be part of a federation who support future improvements in quality and size potential for financial efficiencies.

The current year resulted in a reduction in staffing as the College remodelled its curriculum and management focus. These cost savings will result in improved efficiency Resources

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

Planned Maintenance

During the 2016-17 academic year the College identified key priorities. The College has continued to maintain its regime of cyclical planned and preventative maintenance. During the summer of 2017 the College has undertaken refresh works in D and E blocks, in addition additional computer resources have been added to a number of teaching spaces.

Financial The College has £5,184,000 (2015-2016 £5,154,000) of net assets (including £1,874,000 pension liability - 2016 £1,694,000).

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People The College employs 195 people (157 when expressed as full time equivalents - FTE).

Reputation The College has a good reputation locally and nationally. Maintaining a quality brand is essential for the College's success at attracting students and external relationships.

Principal risks and uncertainties The College has a formal on-going process for identifying, evaluating and managing the College's risks which includes:-

• identification of risks affecting the enabling of the Strategic Development Plan by the Risk Management Group (RMG) (comprised of Senior Management Team (SMT) and Directors) to form a Strategic Risk Register

• regular review of the Strategic Risk Register by the RMG • reporting at regular SMT meetings • reporting at every meeting of the Audit Committee • reporting at regular Corporation Board meetings • a sensitivity analysis and costed contingency plan which accompanies the commentary

to the 3 year financial forecast. • external audit provides feedback to the Audit Committee on the operation of the internal

financial controls of the College • utilisation of external risk management facilitator to train staff and advise of best practice

periodically Risk Management was reviewed as part of the Internal Audit Plan during 2014-15 and received a grade of "substantial" assurance.

Outlined as follows 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. External Factors &Government Funding The College has considerable reliance on continued government funding via the ESFA. In 2016-17,84.92% 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 which include: • 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.

• The apprenticeship reforms which differentiate between levy and non-levy paying employers. The College is developing a strategy in response to this reform.

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REPORT OF THE GOVERNING BODY (CONTINUED) External Factors & Government Funding (continued)

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 the ESFA • Income diversification including adult learning and partnership working with local

schools and Colleges.

2. Maintain adequate funding of pension liabilities

The financial statements report the share of the pension scheme deficit on the College's balance sheet in line with the requirements of FRS1 02.

3. Failure to maintain the financial viability of the College The College's current financial health grade is classified as Satisfactory as described above. This is largely due the consequences of historic borrowings in 2012 and 2015. Notwithstanding that, the continuing challenge to the College's financial position remains the constraint on sixth form funding arising from ongoing cuts in public sector spending whilst maintaining the student experience. This risk is mitigated in a number of ways:

• Diversified income streams reducing reliance upon public sector income • Robust financial controls • By rigorous budget setting procedures and sensitivity analysis • Regular financial monitoring during the year

Stakeholder Relationships

In line with other Colleges John Leggott College has many stakeholders. The Corporation has adopted a stakeholder engagement strategy and action plan which is monitored for implementation and impact by the search committee. This was subject to an extensive review at the Corporation Planning Day in June 17. Stakeholders identified include:

• Schools/Academies • Local Authority • Parents • International • LEPs • Employers • Students • Other educational providers

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REPORT OF THE GOVERNING BODY (CONTINUED) Stakeholder Relationships (continued)

• Education Sector Funding Bodies • Community • Representative bodies • Third sector (voluntary) organisations • Staff • Corporation • Universities • Other educational professionals • Educational Standards Bodies including Ofsted

Equality

The College is committed to a policy of equality of opportunity and aims to provide a working and learning environment free from any discrimination, harassment and victimisation. We are a diverse College that respects and celebrates differences in race, disability, gender, age, gender identity, sexual orientation, faith and religious beliefs, background or personal circumstance. We want everyone to feel valued and included in the College community and to achieve his or her full potential. The College's Equality Policy is published on the College's external website.

All forms of prejudice and discrimination are unacceptable, and any form of discrimination or harassment needs to be reported.

This means the College is a place where ALL students and staff, whatever their circumstances or background:

• are fully respected • feel welcomed • are treated in a friendly way • have equality of opportunity • have appropriate support

The College's Equality Policy is published on the College's website and intranet site.

Disability Statement

The College believes that the diversity of its community is an essential part of its values and enriches employment, research, studying and learning experiences.

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REPORT OF THE GOVERNING BODY (CONTINUED) Disability Statement (continued)

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

• In 2016 the College was awarded the 'Disability Confident' award. The award is Jobcentre plus co-ordinated national award to organisations demonstrating a positive attitude towards employing disabled people.

• Specialist programmes are provided within College with good progression rates. • The College employs a Special Educational Needs Co-ordinator, who provides

information, advice and arranges support where necessary for students with disabilities.

Counselling and welfare services are available within College and are signposted via the Intranet, Student Support and Well-being team.

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/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 \ ~ J)e__c_ 2017 and signed on its behalf by:

A Pascoe Chairperson

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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. This statement covers the period from 1 August 2016 to 31 July 2017 and up to the date of approval of the annual report and financial statements.

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 Code of Good Governance for English Colleges

and

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

The College is committed to exhibiting best practice in all aspects of corporate governance and in particular the College has adopted and seeks to comply with the Code of Good Governance. The College complies with the main principles of the UK Corporate Governance Code insofar as they are applicable to the further education sector.

In the opinion of the governors, the College complies with most of 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 2017. These are monitored by the Search Committee and an action plan put in place to address areas of non-compliance. The action plan is available for scrutiny.

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 in carrying out its responsibilities.

The College is an exempt charity within the meaning of Part 3 of the Charities Act 2011. The Governors, who are also the Trustees for the purposes of the Charities Act 2011 , confirm that they have had due regard for the Charity 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 follows: (Please refer to appendix for attendance at meetings) The members who served on the Corporation during the year and up to the date of signature of this report were as follows:

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STATEMENT OF CORPORATE GOVERNANCE & INTERNAL CONTROL (cont'd) The Corporation (continued)

Date of Term of Date of Status of Committees Attendance Appointment Office Resignation Appointment Served In 2016/17

yIn

MrJ Aslam 5 July 2016 2 years External Audit y Mr A Douglas March 2014 4 years External Financial y

Monitoring Rem uneration

Mr S Driver 2008 and 2 years External Financial y reappointed July Monitoring 2012 & 2016

Miss M Farooq June 2016 2 years November Student y 2016

Mr J Fitzgerald 18 October 16 2 years External Quality Assurance y Audit

Mrs S Hotchin 14 December 16 2 years External Search y Miss M Lingard 14 December 16 2 years Student y Mr MJ McCormick 1992, 1996, 2000, 4 years September External Search, y

2004, 2008 and 2016 Remuneration, reappointed Financial September 2012 Monitoring

Vice Chairperson Mrs GA Moore 1996, 2000, 2004, 2 years External Search y

2008 and Audit reappointed September 2012 & 2016

Mr J Myhill 1 September 2014 2 years August 2016 Student y Mr AW Pascoe 2004,2008 and 2 years External Chairperson y

reappointed Corporation, September 2012 & Remuneration 2016

Mr L Riley 1 September 2016 Ex-Officio Principal y Mrs K Rinaldi November 2012, 2 years Staff Search y

and re-appointed November 2014 and 2016

Mr G Thomas 16 December 2014 2 years December 16 Parent Search y Mr P Townsley 26 February 2015 4 years External Financial y

Monitoring Remuneration

Mr D Vasse 1 October 2010 Ex-Officio August 2016 Principal n Miss J Ye 18 October 16 1 year August2017 Student y Mrs B Robinson acts as Clerk to the Corporation y Mrs P AIIanson acted as a co-opted member on the Audit Committee effective from November 2014 y and resìqned in September 2016.

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STATEMENT OF CORPORATE GOVERNANCE & INTERNAL CONTROL (cont'd) The Corporation (continued)

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 and quality matters. The Corporation meets monthly (excluding summer recess).

The Corporation has five working committees. Each committee has terms of reference, which have been approved by the Corporation. These committees are audit, remuneration, search and financial monitoring and quality assurance.

Full minutes of all meetings, except those deemed to be confidential by the Corporation, are available on the College's website at www.leggott.ac.uk or from the Clerk to the Corporation at:

John Leggott College West Common Lane Scunthorpe ON17 10S [email protected]

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 roles of the Chairman and Principal are separate.

Appointments to the Corporation Any new appointments to the Corporation are a matter for the consideration of the Corporation as a whole. 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 two years.

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STATEMENT OF CORPORATE GOVERNANCE AND INTERNAL CONTROL (CONTINUED)

Corporation Performance The Corporation considers its own performance annually and uses the Ofsted framework for which to draw its conclusions. In addition each of the three key committees (audit, financial monitoring and search) have undertaken an annual assessment of their own performance and impact. This will be extended to the quality assurance committee in future. The Corporation also considers their performance against the Code of Good Governance and its own governance improvement plan. In addition the CIPFA self-evaluation toolkit was used during 16-17 to measure the performance of the audit and Financial Monitoring Committees.

Remuneration Committee Throughout the year ending 31 July 2017, the College's remuneration committee comprised the Chairperson, Vice Chairperson and Chair of Financial Monitoring Committee. The committee's responsibilities are to make recommendations to the Board on the performance, remuneration, contracts and benefits of the Principal and other senior post-holders.

Details of remuneration for the year ended 31 July 2017 are set out in note 8 to the financial statements.

Audit Committee The Audit Committee comprises three members of the Corporation (excluding the Principal). The committee operates in accordance with written terms of reference approved by the Corporation. It ensures that at least one member is experienced and qualified in audit and compliance matters.

The Audit Committee meets on a quarterly 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 FE funding body, as it affects 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.

Financial Monitoring Committee

The Financial Monitoring Committee comprises of three governors. It meets on a half-termly basis and scrutinises all matters relating to finance and funding. The chair of this committee attends the Audit Committee prior to approval of these accounts by the Corporation.

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Search Committee The Search Committee comprises three members of the Corporation (excluding the Principal). The Committee operates in accordance with written terms of reference approved by the Corporation.

The main focus is on recommending to Corporation on appointments of governors and best practice in terms of governance arrangement. The Search Committee is responsible for monitoring compliance with the Code of Good Governance for English Colleges.

Quality Assurance Committee The Quality Assurance Committee comprises two governors plus the Principal. The Committee is advised by the two Assistant Principals. The Committee operates in accordance with written terms of reference approved by the Board. The Chair of this Committee is experienced in quality assurance matters having served as a local secondary head teacher for many years. The committee triangulates the evidence it receives via the use of data, learning walks and expert witnesses.

The Committee at every meeting scrutinises progress and impact of the College Quality Improvement Policy.

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.

Governors have focussed their use of internal audit time to provide sources or assurance on matters that they know to be of higher risk as underpinned by the risk management process. In doing this they ensure that the internal audit process delivers best value for money.

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 he is personally responsible, in accordance with the responsibilities assigned to him in the Financial Agreements between the College and the funding body. He 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

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Internal Control (continued)

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 John Leggott College for the year ended 31 July 2017 and up to the date of approval of the annual report and Financial Statements.

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 2017 and up to the date of approval of the annual report and Financial Statements. 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 manaç¡ement 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

• the adoption of formal project management disciplines, where appropriate.

The College has an internal audit service, which operates in accordance with the requirements of the funding providers ESFA's Post 16 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 internal audit provider issues the governing body with a report on internal audit activity in the College. The report includes the provider's opinion on the adequacy and effectiveness of the College's system of risk management, controls and governance processes.

Page 19 of 56



Internal Control (continued)

Review of effectiveness

As Accounting Officer, the Principal has responsibility for reviewing the effectiveness of the system of internal control. His 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

• comments made by the College's financial statements auditors and the regularity auditors in their management letters and other reports.

The Accounting Officer has been advised on the implications of the result of his 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 Principal and the senior management team receive 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 to provide an opinion on whether the College has an adequate and effective assurance 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". In addition, the Audit Committee confirms whether the College's financial statements fulfil statutory and regulatory responsibilities in line with funding body specific requirements. 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 2017 meeting, the Corporation carried out the annual assessment for the year ended 31 July 2017 by considering documentation from the senior management team and internal audit, and taking account of events since 31 July 2017.

Based on the advice of the Audit Committee and the Principal, 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".

Page 20 of 56



Going Concern

After making appropriate enquiries as outlined in the accounting policies (pages 32-33) and the Going Concern section of the Report of the Governing Body (page 9), the Corporation considers that the College has adequate resources to continue in operational existence for the period of the 2 year financial plan submitted July 2017. Overdraft facilities extending to November 2018 have been agreed. During 2019 the borrowing package commenced in 2015 will be extended as was originally intended by the College and the Bank. 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 \ ~ 1)e.c_ 2017 and signed on its behalf by:

A Pascoe - Chairperson

L Riley - Accounting Officer

L_~. ---

Page 21 of 56


GOVERNING BODY'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 Education and Skills Funding Agency (ESFA) of material irregularity, impropriety and non-compliance with terms and conditions of funding, under the College's Funding Agreement. As part of our consideration we have had due regard to the requirements of the Funding Agreement.

We confirm, on behalf of the Corporation, that after due enquiry, and to the best our knowledge, we are able to identify any material irregular or improper use of funds by the College, or material non-compliance with the terms and conditions of funding under the College's Funding Agreement.

We confirm that no instances of material irregularity, impropriety or funding non compliance have been discovered to date. If any instances are identified after the date of this statement, these will be notified to ESFA.

Approved by order of the members of the Corporation on \ 3. 'De-C 2017 and signed on its behalf by:

A Pascoe [¡:Il; L Riley - Accounting Officer

L.~ ---

Page 22 of 56


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 College's Funding Agreement agreed with the ESFA, the Corporation, through its Accounting Officer, is required to prepare financial statements for each financial year, in accordance with the 2015 Statement of Recommended Practice - Accounting for Further and Higher Education and with the Accounts Direction for 2016-17 financial statements issued by the EFSA 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 a Report of the Governing Body 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 Education and Skills Funding Agency (ESFA) are used only in accordance with the Funding Agreements 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 Education and Skills Funding Agency (ESFA) are not put at risk.

Page 23 of 56


STATEMENT OF RESPONSIBILITIES OF THE MEMBERS OF THE CORPORATION (CONTINUED)

Approved by order of the members of the Corporation on \ ~ '"De..c_ 2017 and signed on its behalf by:

A Pascoe Chairperson

Page 24 of 56

INDEPENDENT AUDITOR'S REPORT TO THE CORPORATION OF JOHN LEGGOTT COLLEGE

Opinion

We have audited the financial statements of John Leggott College (the "College") for the year ended 31 July 2017 which comprise the college statement of comprehensive income, the college balance sheet, the college statement of changes in reserves, the college statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is United Kingdom accounting standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" as set out in our engagement letter dated 24 July 2017.

In our opinion the financial statements: • give a true and fair view of the state of the College's affairs as at 31 July 2017 and of the

College's surplus of income over expenditure for the year then ended; and • have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the college in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the governors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the governors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the college's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information The governors are responsible for the other information. The other information comprises the information included in the Report and Financial Statements other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Page 25 of 56

INDEPENDENT AUDITOR'S REPORT TO THE CORPORATION OF JOHN LEGGOTT COLLEGE (CONTINUED)

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Post-16 Audit Code of Practice 2016 to 2017 issued by the Department for Education requires us to report to you if, in our opinion: • adequate accounting records have not been kept; • the financial statements are not in agreement with the accounting records; or • we have not received all the information and explanations required for our audit.

Responsibilities of the Corporation of John Leggott College

As explained more fully in the Statement of the Corporation's Responsibilities set out on page 23, the Corporation is responsible for the preparation of financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Corporation determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Corporation is responsible for assessing the College's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Corporation either intend to liquidate the College or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Page 26 of 56

INDEPENDENT AUDITOR'S REPORT TO THE CORPORATION OF JOHN LEGGOTT COLLEGE (CONTINUED)

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at http://www.frc.org.uk/auditorsresponsibilities this description forms part of our auditor's report.

This report is made solely to the Corporation, as a body, in accordance with the Funding Agreement published by the Education Funding Agency and our engagement letter dated 24 July 2017. Our audit work has been undertaken so that we might state to the Corporation, as a body, those matters we are required under our engagement letter dated 24 July 2017 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.

RSM UK AUDIT LLP Chartered Accountants Two Humber Quays Wellington Street West HULL HU12BN

Dale i s-II L ( 20(4-

Page 27 of 56


STATEMENT OF COMPREHENSIVE INCOME AND EXPENDITURE

Notes 2017 2016 £'000 £'000

INCOME Funding body grants 3 7,508 8,169 Tuition fees and education contracts 4 1,062 1,246 Other income 5 271 406 Investment income 6 1 Total income 8,841 9,822

EXPENDITURE Staff costs 7 5,959 6,504 Other operating expenses 9 2,161 2,390 Depreciation 12 524 535 Interest and other finance costs 10 175 179 Total expenditure 8,819 9,608

Surplus before other gains and losses 22 214 Loss on disposal of tangible fixed assets

Surplus before tax 22 214 Taxation 11 Surplus for the year 22 214 Re-measurement of net defined benefit 21 pension liability 8 (514)

Other Comprehensive income for the year 8 (514)

Total Comprehensive Income for the year 30 (300)

Total Comprehensive Income for the year attributable to Corporation of the College 30 (300)

Page 28 of 56


BALANCE SHEET AS AT 31 JULY 2017

2017 2016 Notes £'000 £'000

Fixed assets Tangible assets 12 14,684 15,208

14,684 15,208 Current assets Debtors 13 287 370 Cash at bank and in hand 657 302

944 672 Current liabilities Creditors - amounts falling due within one year 14 (1,869) (1,902)

Net current liabilities {925} {1,230}

Total assets less current liabilities 13,759 13,978

Creditors - amounts falling due after more 15 (6,696) (7,125) than one year

Provisions for liabilities Defined benefit pension scheme 21 (1,874) (1,694) Other provisions 16 (5) (5)

Total net assets 5,184 5,154

Unrestricted reserves Income and expenditure reserve 1,786 1,692 Revaluation reserve 3,398 3,462 Attributable to the College Corporation and total unrestricted reserves 5,184 5,154

The financial statements on pages 28 to 54 were approved and authorised for issue by the Corporation on 13th December 2017 and were signed on its behalf on that date by:

Andy Pascoe ChiJ~ Leon Riley Accounting Officer

Page 29 of 56


STATEMENT OF CHANGES IN RESERVES FOR THE YEAR ENDED 31 JULY 2017

Income and Revaluation Total expenditure reserve

reserve £'000 £'000 £'000

Balance at 1 August 2015 1,928 3,526 5,454

Surplus for the year 214 214 Other comprehensive income (514) (514)

Transfers between revaluation and income and 64 (64) expend iture reserves Total comprehensive income for the year (236) (64) (300)

Balance at 31 July 2016 1,692 3,462 5,154

Surplus for the year 22 22 Other comprehensive income 8 8 Transfers between revaluation and income and expenditure reserves 64 (64)

Total comprehensive income for the year 94 (64) 30

Balance at 31 July 2017 1,786 3,398 5,184

Page 30 of 56


STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 JULY 2017

Notes 2017 £'000

2016 £'000

Operating activities Cash generated from operations Net cash from operating activities

18 689 1,102 1,102 689

Investing activities Investment income 1

1

(132) (139) (180) (107) (22) (22)

(334) {268~ 355 835

302 (533)

657 302

657 302 657 302

Financing activities Interest paid Repayments of borrowings Capital elements of finance lease repayments

Increase in cash and cash equivalents in the year

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

Cash and cash equivalents comprise: Cash at bank and in hand

Page 31 of 56


NOTES TO THE FINANCIAL STATEMENTS

1. Accounting policies

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

General Information

John Leggott College is a corporation established under the Further and Higher Education Act 1992 as an English general College of further education. The address of the College's principal place of business is given on page 16. The nature of the College's operations are set out in the Report of the Governing Body.

Basis of accounting

These financial statements have been prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education 2015 (the 2015 FE HE SORP), the College Accounts Direction for 2016 to 2017 and in accordance with Financial Reporting Standard 102 - "The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland" (FRS 102) under the historical cost convention. The College is a public benefit entity and has therefore applied the relevant public benefit requirements of FRS 102.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the College's accounting policies.

The financial statements are presented in sterling which is also the functional currency of the College.

Monetary amounts in these financial statements are rounded to the nearest whole £1,000, except where otherwise indicated.

Going concern

The activities of the College, together with factors likely to affect its future development and performance are set out in the Report of the Governing Body. External factors including future spending reviews have been considered in the preparation of the financial plan.

For the period to 31 July 2017 all banking covenants have been met and the College has demonstrated its ability to operate within its borrowing package. The Financial Plans for 2018 and 2019 also indicate that the College will continue to meet covenants and operate within borrowings.

The financial position of the College, its cashflow, liquidity and borrowings are described in the Financial Statements and accompanying notes.

The College currently has £3.2m of loans outstanding with bankers, of which £1.5m is on terms negotiated in 2012 and a further £1.7m is on terms negotiated in 2015.

Page 32 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1. Accounting policies (continued) Going concern (continued)

The terms of the 2012 agreement are for up to another 10 years to 30th November 2027.

The terms of the 2015 agreement are up to another 3 years to March 2020. This loan was subject to a repayment holiday for the first 2 years of the loan. Repayments commenced March 2017. The College intention is to renegotiate this loan with the bankers with a view to extending the terms of repayment.

In addition, the College has an overdraft facility of £800,000 renewable in December 2017. During the year the College has utilised the facility during the period March and April 2017 only with ample headroom. The College cash flow indicates a smaller overdraft facility will be required for the period to December 2018. The College foresee no issues with renewing the bank overdraft facility in December 2017.

The College meets quarterly with the bank and indications are that they are satisfied with the management of the finances within the facility and that future facilities will be approved.

The financial plans for 2017-18 and 2018-19 are regularly reviewed in terms of recruited numbers and the impact of both student numbers and funding per learner. The College currently has a sustainable financial plan which allows for confirmed lagged funding numbers. This plan has been stress tested with sensitivities such as reduction of funding per learner and other funding reductions. The planning assumptions for 2018-19 are:

• Funding per learner is maintained at current levels

• 1671 ESFA funded learners as the lagged funded number for 2017-18

• Direct recruitment of 14-16 continues with no growth in year group cohort size

• The College continues to be able to maintain cost savings without impacting on quality of provision

The College's financial forecasts and projections indicate that the College will be able to operate within all banking covenants for the foreseeable future. All income streams are risk assessed on a half termly basis, management accounts are produced with a new focus on cost centre accounting and all new revenue streams are monitored closely for financial viability and contribution to core costs. The College has continually demonstrated its ability to reduce both pay and non-pay costs.

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 Financial Statements.

Page 33 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Accounting policies (continued)

Recognition of income Revenue Grants Government revenue grants are accounted for under the accrual model and are recognised where a reliable estimate of the fair value of the asset received or receivable can be made on a systematic basis over the periods in which the related costs for which the grant compensates are recognised. Funding body recurrent grants are measured in line with best estimates for the year of what is receivable and depend on the particular income stream involved. Any under achievement of the Adult Education 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 following the year end. 16-18 learner-responsive funding is not normally subject to reconciliation and is therefore not subject to contract adjustments and is recognised when receivable. Grants from non-government sources, including grants relating to assets, are recognised in income when the College has met the performance-related conditions and the grant will be received. Income received in advance of performance-related conditions being met is recognised as a liability.

Capital Grant Funding Government capital grants other than land, are capitalised, held as deferred income and recognised as income over the expected useful life of the asset, under the accrual model as permitted by FRS102. Other, non-governmental, capital grants are recognised in income when the College is entitled to the funds subject to any performance related conditions being met. Income received in advance of performance related conditions being met is recognised as deferred income within creditors on the Balance Sheet and released to income as conditions are met.

Other income Income from the supply of services is recognised at fair value of the consideration received or receivable and represents the value of services to the extent there is a right to consideration. Income from tuition fees is recognised over the period for which it is received. The associated costs of overseas recruitment are recognised in the period in which they are incurred. The costs of any fees waived by the College are included in note 9. All income from short-term deposits is accrued in the period in which it is earned on a receivable basis. Retirement benefits Retirement benefits to employees of the College are principally provided by Teachers' Pensions Scheme (TPS) and the East Riding Pension Fund (ERPF), which are multi employer defined benefit plans.

Page 34 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. Accounting policies (continued)

Retirement benefits (continued) Teachers' Pension Scheme (TPS) The TPS is an unfunded scheme. 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 the qualified actuaries on the basis of valuations using a prospective benefit method.

The TPS is a multi-employer scheme and there is insufficient information available to use defined benefit accounting. The TPS is therefore treated as a defined contribution plan and the contributions are recognised as an expense in the income statement in the periods during which services are rendered by employees. East Riding Pension Scheme (ERPF)

The ERPF is a funded scheme. The assets of the ERPF are measured using the closing fair values. ERPF liabilities are measured using the projected unit credit method and discounted at the current rate of return on a high corporate bond of equivalent term and currency to the liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The amounts charged to operating surplus are the current service costs and the costs of scheme introductions, benefit changes, settlements and curtailments. They are included as part of staff costs. The net interest cost on the net defined benefit liability/asset is charged to comprehensive income and included within interest and other finance costs. Actuarial gains and losses are recognised immediately in other comprehensive income. Short-term employment benefits Short-term employment benefits such as salaries and compensated absences (holiday pay) are recognised as an expense in the year in which the employees render service to the College. The cost of any unused holiday entitlement the College expects to pay in future periods is recognised in the period the employees' services are rendered. Enhanced pensions The actual cost of any enhanced ongoing pension to a former member of staff is paid by College annually. An estimate of the expected future cost of any enhancement to the ongoing pension of a former member of staff is charged in full to comprehensive income in the year that the member of staff retires. In subsequent years a charge is made to provisions in the balance sheet using the enhanced pension spreadsheet provided by the funding body. Tangible fixed assets Tangible fixed assets are stated at cost/deemed cost less accumulated depreciation and accumulated impairment losses. Certain items of fixed assets that have been revalued to fair value on or prior to the date at transition to the 2015 FE HE SORP, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation. Land and buildings are stated at cost or deemed cost for land and buildings at the date of transition to FRS 102 less accumulated depreciation and accumulated impairment losses.

Page 35 of 56



1. Accounting policies (continued) Tangible fixed assets (continued)

Equipment

Equipment costing less than £2,000 per individual item or set of items acquired together is recognised as expenditure in the period of acquisition. All other equipment is capitalised and recognised at cost less accumulated depreciation and accumulated impairment losses.

Depreciation and residual values

Freehold land is not depreciated as it is considered to have an infinite useful life. Depreciation on other assets is calculated, using the straight line basis, to write off the cost of each asset to its estimated residual value over its expected useful lives, as follows:

• Freehold buildings - 10-50 years • Leasehold improvements - over the term of the lease • Furniture, fixtures and fittings - 10 years • Computer equipment and other equipment - 5 years

Residual value is calculated on prices prevailing at the reporting date, after estimated costs of disposal, for the asset as if it were at the age and in the condition expected at the end of its useful life.

Subsequent costs, including replacement parts, are only capitalised when it is probable that such costs will generate future economic benefits. Any replaced parts are then derecognised. All other costs of repairs and maintenance are expenses as incurred.

Impairments of fixed assets

A review for impairment of fixed asset is carried out if events or changes in circum stances indicate that the carrying value of any fixed asset may not be recoverable. Shortfalls between the carrying value of fixed assets and their recoverable amounts are recognised as impairments. Impairment losses are recognised in the Statement of Comprehensive Income and Expenditure.

Impairment of revalued assets, are treated as a revaluation loss. All other impairment losses are recognised in comprehensive income.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Reversals of impairment losses are recognised in comprehensive income or, for revalued assets, as a revaluation gain. On reversal of an impairment loss, the depreciation or amortisation is adjusted to allocate the asset's revised carrying amount (less any residual value) over its remaining useful life.

Page 36 of 56



1. Accounting policies (continued)

Borrowing costs

Borrowing costs are recognised as expenditure in the period in which they are incurred.

Leased assets

Finance leased assets

Leasing agreements which transfer to the College substantially all the benefits and risks and rewards incidental to ownership of an asset are treated as finance leases.

Assets held under finance leases are recognised initially at the fair value of the leased asset or, if lower, the present value of minimum lease payments as determined at inception of the lease. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Assets are depreciated over the shorter of the lease term and the estimated useful economic life of the asset and assessed for impairment losses in the same way as owned assets.

Operating leases

All leases are operating leases and annual rents are charged to The Statement of Comprehensive Income and Expenditure on a straight line basis over the lease term.

Cash and cash equivalents

Cash includes cash in hand, deposits repayable on demand and overdrafts.

Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of change in value.

Page 37 of 56




Financial Instruments

The College has chosen to adopt Sections 11 and 12 of FRS 102 in full in respect of financial instruments.

Financial assets and liabilities

Financial assets and financial liabilities are recognised when the College becomes a party to the contractual provisions of the instrument.

Financial liabilities are classified according to the substance of the financial instrument's contractual obligations, rather than the financial instrument's legal form.

All financial assets and liabilities are initially measured at transaction price (including transaction costs) except for those financial assets measured at fair value through the profit or loss, which are initially measure at fair value (which is normally the transaction price excluding transaction costs), unless arrangement constitutes a financing transaction. A financial asset or financial liability that is payable or receivable in one year is measured at the undiscounted amount expected to be received or paid net of impairment, unless it is a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

Financial assets and financial liabilities are offset only when there is a current legally enforceable right to set off the recognised amounts and the intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

A financial asset is derecognised only when the contractual rights to cash flows expire or are settled, or substantially all the risks and rewards of ownership are transferred to another party, or if some significant risks and rewards or ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party. A financial liability (or part thereof) is derecognised when the obligation specified in the contract is discharged, cancelled or expires.

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 sections 478-488 of the 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 receives no similar exemption in respect of Value Added Tax. For this reason the College is generally unable to recover input that it suffers on goods and services purchases. Capital costs and non-pay expenditure are therefore shown inclusive of VAT.

Page 38 of 56




Provisions and contingent liabilities

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

Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value using a pre-tax discount rate that reflects the risks specific to the liability. The unwinding of the discount is recognised as a finance cost in the statement of comprehensive income in the period it arises.

A contingent liability arises from a past event that gives the College a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the College. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be reliably measured

Contingent liabilities are not recognised in the balance sheet but are disclosed in the notes to the financial statements.

Agency arrangements

The College acts as an agent in distributing discretionary support funds from the funding body. Payments received from the funding body and subsequent disbursements to students are excluded from the income and expenditure of the College where the College does not have control of the economic benefit related to the transaction.

2. Critical accounting judgements and estimation uncertainty

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical areas of judgement

In preparing these financial statements, management have made the following judgements:

• Determined whether leases entered into by the College either as a lessor or a lessee are operating or finance leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the lessee on a lease-by-Iease basis.

• For East Riding Pension Fund valuation purposes the College has assumed a 1 % pay increase until 31 July 2018.

Page 39 of 56



3. Critical accounting judgements and estimation uncertainty (continued)

Critical accounting estimations and assumptions

• Tangible fixed assets

Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re assessing asset lives, factors such as technological innovation, maintenance programmes, economic utilisation and physical condition of the assets are taken into account. Residual value assessments consider issues such as future market conditions and the remaining life of the asset.

• East Riding Pension Fund

The present value of the East Riding Pension Fund defined benefit liability depends on a number of factors that are determined on an actuarial basis using a variety of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions, which are disclosed in note 21, will impact the carrying amount of the pension liability. Furthermore a roll forward approach which projects results from the latest full actuarial valuation performed at 31 March 2016 has been used by the actuary in valuing the pensions liability at 31 July 2017. Any differences between the figures derived from the roll forward approach and a full actuarial valuation would impact on the carrying amount of the pension liability.

• Impairment of fixed assets

The College considers whether tangible fixed assets are impaired. Where an indication of impairment is identified the estimation of the recoverable amount of the asset or the recoverable amount of the cash-generating unit is required. These will require an estimation of the future cash flow and selection of an appropriate discount rate in order to calculate the net present value of those cash flows.

3. Funding body grants 2017 2016 £'000 £'000

Recurrent grants ESFA: 16-18 7,027 7,914 ESFA: 14-16 208 ESFA: Adults 69 72 ESFA: Apprenticeships 39 48

Specific grants 165 135

Total 7,508 8,169

Page 40 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. Tuition fees and education contracts

Tuition fees Education contracts

Total 5. Other income

2017 2016 £'000 £'000

748 824 314 422

1,062 1,246

2017 2016 £'000 £'000

122 181 32 53 89 67 28 105

271 406

2017 2016 £'000 £'000

1 1

Miscellaneous income Exam fee income Travel pass income Visit contributions Total

6. Investment income

Other interest receivable Total

7. Staff costs and key management personnel remuneration The average number of persons (including key management personnel) employed by the College during the year, expressed as full time equivalents, was:

2017 2016

Wages and salaries Social security costs Other pension costs Payroll subtotal

Contracted-out staff Restructuring costs

Number Number

82 82 75 92

157 174

2017 2016 £'000 £'000 4,484 5,038 402 394 955 919

5,841 6,351

83 75 34 48

1 30

5,959 6,504

Teaching staff Non-teaching staff

Staff costs for the above persons:

- contractual - non contractual

Total staff costs

The restructuring costs were approved by the Principal under delegated authority from the Corporation.

Page 41 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 8 Key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the College and are represented by the senior leadership team which comprises the Principal, Assistant Principals and Director of Governance. Emoluments of Key management personnel, Accounting Officer and other higher paid staff

2017 2016

The number of key management personnel including the Accounting Officer was:

No. g

No. 6

The number of key management personnel and other staff who received annual emoluments, excluding pension contributions but including benefits in kind, in the following ranges was:

Key management personnel

2017 2016

Other staff

2017 2016

£1 to £10,000 p.a. £10,001 to £20,000 p.a. £40,001 to £50,000 p.a. £50,001 to £60,000 p.a. £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.

No. 2 2 1 2

No. No. No.

1 3

1 1

1

1 g 6

Key management personnel (including the Accounting Officer) total compensation is made up as follows:

2017 2016 £'000 £'000

Salaries 373 409 Benefits in kind National Insurance 42 45

415 454 Pension contributions 60 59 Total emoluments 475 513

There were no amounts due to key management personnel that were waived in the year. The College has salary sacrifice arrangements in place for childcare vouchers, cycle to work and computing scheme. In addition to the above compensation an amount of £1 ,342 (2016 £1,160) was incurred for childcare salary sacrifice scheme.

Page 42 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 8 Key management personnel (continued)

The above emoluments include amounts payable to the Accounting Officer (who is also the highest paid of key management personnel) of:

Current Principal: 2017 £'000

92 12

2016 £'000

Salaries National Insurance

Salaries National Insurance

104 15

119

2017 2016 £'000 £'000

9 111 1 13

10 124 2 18

12 142

Pension contributions

Former Principal:

Pension contributions

All severance payments were approved by the College's Remuneration Committee.

Governors' remuneration The Accounting Officer and the staff members only receive remuneration in respect of services they provide undertaking their roles of Principal and staff members under contracts of employment and not in respect of their roles as governors. The other members of the Corporation did not receive any payments from the College in respect of their roles as governors.

Governors have received reimbursement of travel costs in line with College policy of £100 (2016: £143). No Governor has received remuneration or waived any payments from the College during the year (2016: nil)

9. Other operating expenses 2017 2016 £'000 £'000

Teaching costs 814 944 Non-teaching costs 810 854 Premises costs 537 592 Total 2,161 2,390

Page 43 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 9. Other operating expenses (continued)

2017 2016 Surplus before taxation is stated after charging:

£'000 £'000 Auditors' remuneration: Financial statements audit Other services provided by the financial statements auditors Internal audit Operating lease rentals

12 1 8

35

28 2 9

95

10. Interest and other finance costs 2017 2016 £'000 £'000

Bank loans, overdrafts and other loans 132 139 Finance leases Net interest on defined pension liability (note 21) 43 40

Total 175 179

11. Taxation

The Governors do not believe the College is liable for any Corporation tax arising out of its activities during either year.

12. Tangible fixed assets Freehold land and Leasehold buildings improvements Equipment Total

£'000 £'000 £'000 £'000 Cost or valuation At 1 August 2016 19,226 118 2,235 21,579 Disposals {203} {203} At 31 July 2017 19,226 118 2,032 21,376

Depreciation At 1 August 2016 4,456 102 1,813 6,371 Charge for year 413 1 110 524 Disposals {203} {203} At31 July2017 4,869 103 1,720 6,692

Carrying amount at 31 July 2017 14,357 15 312 14,684

Carrying amount at 31 July 2016 14,770 16 422 15,208

Page 44 of 56



12. Tangible fixed assets (continued)

Land and buildings include land valued at £ 2,500,000 (2016: £2,500,000) on 1 August 2014 (the transition date for FRS102) this is not depreciated. This was included at deemed cost. The valuation was performed by CBRE Limited, an independent valuer, on a fair value basis.

The net book value of equipment includes an amount of £36,000 (2016 - £48,000) in respect of assets held under finance leases. The depreciation charge on these assets for the year was £12,000 (2016: £12,000)

If inherited land and buildings had not been re-valued they would have been included at the following historical cost amounts:

£'000 Cost nil Aggregate depreciation based on cost nil

Carrying amount based on cost nil

13. Debtors

2017 2016 £'000 £'000

Amounts falling due within one year: Trade debtors 160 250 Other debtors 4 9 Prepayments and accrued income 119 111 Amounts owed by ESFA 4 Total 287 370 Trade debtors are inclusive of impairment losses of £35,355 (2016 £17,262). This consists of specific provisions in respect of trade debtors due from customers.

14. Creditors: Amounts falling due within one year:

Bank loans and overdrafts Obligations under finance leases Payments received in advance Trade creditors Other taxation and social security Other creditors Accruals and deferred income Government capital grants Amounts due to the ESFA Total

2017 £'000 252 18

537 158 97

171 496 113 27

2016 £'000 140 20

666 148 116 195 504 113

1,869 1,902

Page 45 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 15. Creditors amounts falling due after more than one year:

2017 2016 £'000 £'000

Bank loans 2,934 3,226 Obligation under finance lease 18 Government capital grants 3,762 3,881

6,696 7,125

Bank Loans 2017 2016 £'000 £'000

Bank loans are repayable as follows:

In one year or less 252 140 Between one and two years 256 233 Between two and five years 1,822 2,000 I n five years or more 856 993 Total 3,186 3,366

The College has two loans with Lloyds Banking Group, the first was set up in August 2012 and is repayable by quarterly instalments of £43,662 commencing August 2012 and finishing in November 2027, at a fixed interest rate of 4.07% on the reducing balance.

In January 2015 the College entered into a new loan of £1. 77m repayable over 15 years with a repayment holiday of 2 years. The interest charges on this loan are variable and set at 3.5% above the base rate of the Bank of England, interest is payable quarterly. All amounts owing to the Bank under, or in connection with, the facility are secured by first legal charge in the Bank's standard form over the property dated 24 November 2014.

Finance Leases The total future minimum lease payments are payable:

In one year or less Between two and five years

2017 £'000

18

2016 £'000

20 18

Total 18 38

Finance lease obligations are secured on the assets to which they relate.

Page 46 of 56



16. Provisions for liabilities

At 1 August 2016 Expenditure in the period

Enhanced Pension

£'000 5

At 31 July 2017 5

The enhanced pension provision relates to the cost of staff who have already left the College's employ. This provision has been recalculated in accordance with guidance issued by the funding bodies.

The principal financial assumptions for this calculation are: 2017 2016

Price Inflation Discount Rate

1.3% 2.3%

1.3% 2.3%

17.Financial instruments

The College has the following financial instruments: 2017 2016 £'000 £'000

Financial assets Financial assets measured at fair value through profit or loss Debt instruments measured at amortised cost: Trade debtors 160 250

160 250 Total

2017 2016 £'000 £'000

Financial liabilities Financial liabilities measured at fair value through profit or loss Financial liabilities measured at amortised cost Trade creditors 158 148 Bank loans and overdrafts 3,186 3,366 Finance leases 18 38 Accruals 523 504 Total 3,885 4,056

Page 47 of 56



18 Notes to cash flow statements 2017 2016 £'000 £'000

Surplus after tax for the year 30 214 Adjustment for: Depreciation 524 535 Investment income (1 ) Interest payable 132 139 Decrease in provisions (1 ) Pensions costs less contributions payable 188 108 Operating cash flow before movements in working capital 874 994

Decrease in debtors 77 136 (Decrease) in creditors (262) (28)

Cash generated from operations 689 1,102

19. Financial commitments

The College had total future minimum lease payments under non-cancellable operating leases as follows:

Payments due: Not later than one year Later than one year and not later than five years Later than five years

Total lease payments due

2017 2016 £'000 £'000

19 25 44 13 10 13

73 51

20. Related party transactions

Key management compensation disclosure is given in note 8.

Page 48 of 56



21 Retirement benefits

The College's employees belong to two principal post-employment benefit plans: the Teachers' Pensions Scheme England and Wales (TPS) for academic and related staff; and the East Riding Pension Fund (ERPF) for non-teaching staff which is managed by East Riding of Yorkshire Council. Both are multi-employer defined-benefit plans.

Total pension cost for the year 2017 2016 £'000 £'000

Teachers' Pension Scheme contributions paid 474 516 East Riding Pension Fund:

Contributions paid - normal 336 335 FRS 102 (28) charge 145 68 Charge to the Statement of Comprehensive Income 481 403

Total pension cost for the year within staff costs 955 919

The pension costs are assessed in accordance with the advice of independent qualified actuaries. The latest formal actuarial valuation of the TPS was 31 March 2012 and the ERPF 31 March 2016.

Contributions amounting to £31,875 (2016: £50,582) were payable to the ERPF scheme at 31 st July and are included in creditors.

Contributions amounting to £55,708 (2016: £ 62,861) were payable to the TPS scheme at 31 st July and are included in creditors.

Teachers' Pension Scheme

The Teachers' Pension Scheme (TPS) is a statutory, contributory, defined benefit scheme, governed by the Teachers' Pension Scheme Regulations 2010 and from 1April 2014, the Teachers' Pensions Scheme Regulations 2014. 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. Retirement and other pension benefits are paid by public funds provided by Parliament.

Valuation of the Teachers' Pension Scheme

Not less than every four years the Government Actuary (liGA"), using normal actuarial principles, conducts a formal actuarial review of the TPS. The aim of the review is to specify the level of future contributions. Actuarial scheme valuations are dependent on assumptions about the value of future costs, design of benefits and many other factors.

Page 49 of 56



21. Retirement benefits (continued)

The latest actuarial valuation 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 in June 2014. The key results of the valuation and subsequent consultation are:

• Total scheme liabilities for service (pensions currently payable and the estimated cost of future benefits) of £191.5 billion

• Value of notional assets (estimated future contributions together with the proceeds from the notional investments held the valuation date) of £176.6 billion

• Notional past service deficit of £14.9 billion • Assumed real rate of return is 3.0% in excess of prices and 2% in excess of earnings • Rate of real earnings growth is assumed to be 2.75% • Assumed nominal rate of return is 5.06%

The new employer contribution rate was 14.1 % until 1 September 2015, when it increased to 16.48% (including 0.08% administration fees), with an employer cost cap of 10.9% of pensionable pay. The employer contribution rate will be payable until the next valuation as at March 2016, whereupon the employer contribution rate is expected to be reassessed and will be payable from 1 April 2019.

The pension costs paid to TPS in the year amounted to £474,000 (2016: £516,000). The TPS is a multi-employer pension plan and there is insufficient information to account for the scheme on as a defined benefit plan so it is accounted for as a defined contribution plan.

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

https:l/www.teacherspensions. co. uk/newslemployers/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 representatives on reform of theTPS, 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

Page 50 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 21. Retirement benefits (continued)

Scheme Changes (continued)

when they retire. There will also be further transitional protection, tapered over a 3% year period, for people who would fall up to 3% 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 commenced on 1 April 2015.

FRS 102 (28)

Under the definitions set out in FRS 102 (28.11), the TPS is a multi-employer pension plan. The College is unable to identify its share of the underlying assets and liabilities of the plan.

Accordingly, the College has taken advantage of the exemption in FRS 102 and has accounted for its contributions to the scheme as if it were a defined-contribution plan. The College has set out above the information available on the plan and the implications for the College in terms of the anticipated contribution rates.

East Riding Pension Fund

The ERPF is a funded defined benefit scheme, with the assets held in separate funds administered by the local authority. The total contribution made for the year ended 31 July 2017 was £422,000 of which employers' contributions totalled £336,000 and employees' contributions totalled £86,000. The agreed contribution rates for future years are 22.2 % for employers and range from 5.5% to 12.4% for employees.

Page 51 of 56



21. Retirement benefits (continued) Principal Actuarial Assumptions The following information is based upon a full actuarial valuation of the fund at 31 March 2016 updated to 31 July 2017 by a qualified independent actuary.

At 31 July 2017 At 31 July 2016

Rate of increase in salaries Future pension increases Discount rate Inflation assumption (CPI) Commutation of pensions to lump sums

*2.3% 2.5% 2.7% 2.5%

30.0%

1.8%* 1.9% 2.4% 1.9% 30.0%

* The salary increase assumption for 31 July 2017 is 1 % per annum until 31 July 2018 reverting to the long-term assumptions shown thereafter.

The average life expectancy for a pensioner retiring at 65 on the reporting date is:

At 31 July 2017 At 31 July 2016 Retiring today: Males 21.7 Years 21.9 Years Females 24.2 Years 24.1 Years Retiring in 20 years: Males 23.7 Years 24.2 Years Females 26.4 Years 26.7 Years The College's share of the assets in the plan at the balance sheet date were as follows:

Fair Value at 31 July 2017

£'000

Fair value at 31 July 2016

£'000

Equity instruments Debt instruments Property Cash Total fair value of plan assets

7,177 944

1,039 284

6,297 923 923 253

Actual return on plan assets

9,444

787

8,396

862

Page 52 of 56


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 21. Retirement benefits (continued)

The amount included in the balance sheet in respect of the defined benefit pension plan is as follows:

Fair value of plan assets Present value of plan liabilities Present value of unfunded liabilities Net pensions liability

2017 £'000 9,444

(11,318)

2016 £'000 8,396

(10,090)

(1,874) (1,694)

Amounts recognised in the Statement of Comprehensive Income in respect of the plan are as follows:

Current service cost Past service costs including curtailments Net interest on defined benefit pension liability

Total

2017 2016 £'000 £'000 (459) (403) (22) (43) (40)

(524) (443)

8 (514) 8 (514)

2017 2016 £'000 £'000

10,090 8,326 459 403 22

247 306 86 91

575 1,110 (161 ) (146)

11,318 10,090

2017 2016 £'000 £'000

8,396 7,254 204 266

583 596 336 335 86 91

(161 ) (146} 9,444 8,396

Page 53 of 56

Amount recognised in Other Comprehensive Income: Re-measurement of net defined benefit pension liability Amount recognised in Other Comprehensive Income

Changes in the present value of defined benefit obligations

Defined benefit obligations at start of period Current service cost Past service costs including curtailments I nterest cost Contributions by scheme participants Actuarial losses Benefits paid Defined benefit obligations at end of period

Changes on fair value of plan asset Fair value of plan at start of period Interest income Return on plan assets excluding net interest in the net defined benefit liability Employer contributions Contributions by scheme participants Benefits paid Fair value of plan assets at end of period


NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 22. Amounts disbursed as agent

Balance unspent at 31 July included in creditors

Funding body grants are available solely for students. In the majority of instances, the College only acts only as a paying agent. In these circumstances, the grants and related disbursements are therefore excluded from the Statement of Comprehensive Income.

2017 2016 £'000 £'000

232 200 (220) (173) (12) (8)

19

Bursary funds and discretionary bursary awards

Funding body grants Disbursed to students Administration costs

Page 54 of 56


APPENDIX A Corporation Attendance 2016/17

• The Corporation membership comprises 14 members (currently 2 vacancies) • The Corporation delegates responsibility to five committees - Audit, Search, Remuneration,

Quality Assurance and Financial Monitoring • Audit is comprised of 3 members • Search is comprised of 3 members • Remuneration is comprised of 3 members • Quality Assurance is comprised of 2 members • Financial Monitoring is comprised of 3 members • Governors have set a target of 75% for individual governor attendance and per meeting.

The following details the members' attendance during 2016/17:

Key p = present X = absent Yellow shading - not a governor Blue shadind - exempt from

at this time this meeting

Corporation Governor ...a. ...a. ...a. ...a. N W ...a. N o o o o (Q~ N

!-1' !:lO ~ ~ ~ o !=» ...a. !-1' CD CD !-1' o o o < C" ...a. o ...a. ...a. ...a. o o o o o o o o (11 !D o ...a. ~ ...a. ...a. ~ s- ~ CI !=» ...... CD'o( ... - ...a. ...a. ...a. ...a. ...a. ...a. ...a. ...a. ...a. ...a. ...a. ...a. ::l ...a. CI CI CI CI ...... ...... ...... ...... ...... ...... ...... ...... o CI - ...

N .. - .. J Aslam P P P P P P P P P X X X 75 A Douglas P P P P X X P X X X X P 50 S Driver P P P X P P P P P P P X 83 M Farooq P X 50 J Fitzgerald P P P P P P P P P P P 100 S Hotchin P P P P P P P P P 100 M Lingard X X ~~. X P X X - ~ X 14 M McCormick P 100 A Moore P P P P P P P P P P P P 100 A Pascoe P P P P P P P P X P P P 92 L Riley P P P P P P P P P P P P 100 K Rinaldi P P P P P to{ P P P P , P 100 G Thomas P P P P 100 P Townsley P P X X P P P P P P P X 75 J Ye P P X P ;..li~.~ X X X X 1,,··' , X 33

% by meeting ->. co co en œ œ œ œ en en ...... ()1 CD ...... o N ->. co W co w w ...... ...... cc cc o ...... o ~ o

Page 55 of 56


Audit Governor 21.09.16 04.10.16 29.11.16 21.03.17 13.06.17 % by governor J Aslam P P P P P 100 J Fitzqerald P P X 67 S Hotchin P (Sub) 100 A Moore P P P P 100 P Townslev P 100 % by rneetinq 100 100 100 100 75 95%

Search Governor 28.09.16 16.11.16 30.11.16 01.03.17 07.06.17 % by governor S Hotchin P P 100 M McCormick X O A Moore P P P P P 100 K Rinaldi P P P P P 100 G Thomas P P P 100 % by meetino 75 100 100 100 100 95%

Remuneration Governor 13.03.17 % by governor A Douclas P 100 A Pascoe P 100 P Townsley P 100 % by meeting 100 100 %

Q rt A ua Ity ssurance Governor 08.02.17 14.03.17 08.05.17 19.06.17 % by governor J Fitzqerald P P P P 100 P Townsley P P P P 100

% by meetlnq 100 100 100 100 100 %

F' . I M mancia omtormg Governor ...,¡, ...,¡, N ...,¡, ""'" o N % by governor

~ ~ ~ ...... ~ ~ N o ...,¡, ""'" o (:, o o CD ? ...,¡, ...,¡, ~ ~ ~ ...,¡, ...,¡, ...,¡, ...,¡, ...,¡, ...,¡, ...,¡, O) O) O) ...... ...... ...... ......

A Douglas P P P P P P P 100 S Driver P P P P P P P 100 M McCormick P 100 P Townsley P P P P P P P 100 % by meeting 100 100 100 100 100 100 100 100%

Attendance Total

Total number of actual attendances (Corporation & Committee) x 100 = overall rate (%) Total number of possible attendances (Corporation & Committees)

166 x 100 = 85.56% 194

(78.57% in 15/16)

Page 56 of 56

INDEPENDENT REPORTING ACCOUNTANT'S REPORT ON REGULARITY TO THE CORPORATION OF JOHN LEGGOTT COLLEGE AND THE SECRETARY OF STATE FOR EDUCATION ACTING THROUGH THE DEPARTMENT FOR EDUCATION

Conclusion

We have carried out an engagement, in accordance with the terms of our engagement letter dated 24 July 2017 and further to the requirements of the Funding Agreement with the Education Funding Agency, to obtain limited assurance about whether the expenditure disbursed and income received by John Leggott College during the period 1 August 2016 to 31 July 2017 have been applied to the purposes identified by Parliament and the financial transactions conform to the authorities which govern them.

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 2016 to 31 July 2017 has not been applied to purposes intended by Parliament and the financial transactions do not conform to the authorities which govern them.

Basis for conclusion

The framework that has been applied is set out in the Post-16 Audit Code of Practice 2016 to 2017 issued by the Department for Education. 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 Education and Skills Funding Agency has other assurance arrangements in place.

We are independent of John Leggott College in accordance with the ethical requirements that are applicable to this engagement and we have fulfilled our ethical requirements in accordance with these requirements. We believe the assurance evidence we have obtained is sufficient to provide a basis for our conclusion

Responsibilities of Corporation of John Leggott College for regularity

The Corporation of John Leggott College is responsible, under the Funding Agreement and the requirements of the Further & 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. The Corporation of John Leggott College is also responsible for preparing the Governing body's Statement of Regularity, Propriety and Compliance.

INDEPENDENT REPORTING ACCOUNTANT'S REPORT ON REGULARITY TO THE CORPORATION OF JOHN LEGGOTT COLLEGE AND THE SECRETARY OF STATE FOR EDUCATION ACTING THROUGH THE DEPARTMENT FOR EDUCATION (CONTINUED)

Reporting accountant's responsibilities for reporting on regularity

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 Post-16 Audit Code of Practice 2016 to 2017.

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 the procedures performed vary in nature and timing from, and are less in extent than for a reasonable assurance engagement; consequently a limited assurance engagement 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.

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 2016 to 31 July 2017 have not been applied to purposes intended by Parliament or that the financial transactions do not conform to the authorities which govern them.

Our work included identification and assessment of the design and operational effectiveness of the controls, policies and procedures that have been implemented to ensure compliance with the framework of authorities including the specific requirements of the Funding Agreement with the Education Funding Agency and high level financial control areas where we identified a material irregularity is likely to arise. We undertook detailed testing, on a sample basis, on the identified areas where a material irregularity is likely to arise where such areas are in respect of controls, policies and procedures that apply to classes of transactions.

This work was integrated with our audit of the financial statements and evidence was also derived from the conduct of that audit to the extent it supports the regularity conclusion.

This report is made solely to the Corporation of John Leggott College and the Secretary of State for Education acting through the Department for Education in accordance with the terms of our engagement letter. Our work has been undertaken so that we might state to the Corporation of John Leggott College and the Secretary of State for Education acting through the Department for Education 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 John Leggott College and the Secretary of State for Education acting through the Department for Education for our work, for this report, or for the conclusion we have formed.

RSM UK AUDIT LLP Chartered Accountants Two Humber Quays Wellington Street West HULL HU12BN

Date: t S ( i: ( Lo(q-

john leggott college

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