Land-based college handed finance warning as commercial income takes £1m hit

The college received a visit from the FE Commissioner after its financial health dropped to 'inadequate'

The college received a visit from the FE Commissioner after its financial health dropped to 'inadequate'

A land-based college is “ploughing on” after being put into formal intervention due to its commercial income suffering a “major impact” from coronavirus.

Having generated a £1.4 million deficit in 2019/20, Kingston Maurward College in Dorset has now been handed a financial health notice to improve by the Education and Skills Funding Agency.

“As the college’s financial health has been confirmed as inadequate following the assessment of the CFFR (college financial forecasting return) submitted in July 2021, the college is now being placed into intervention in line with the ESFA policy released in July 2021,” the notice reads.

The ESFA has placed extra conditions on the Ofsted grade two college’s public funding in the notice, published today but dated for September.

This includes continuing to work with the ESFA, FE Commissioner Shelagh Legrave, and her advisers Meredydd David and Becky Edwards.

Legrave visited the college for its first formal intervention visit on November 22, the college has said.

It must also submit management accounts with a revised cash flow forecast by the 20th of each month.

The ESFA has also warned the college could face an independent business review, which would further assess its financial position.

This is the first financial health notice issued to a college since June.

Pandemic made principal’s job ‘even more challenging’

Principal Luke Rake told FE Week running a college is “challenging” and the pandemic made it “even more challenging”.

Having financial problems on top of that only adds to the challenge, but “we’ve been very well supported by the FE Commissioner team and our local ESFA are very supportive and we’re working through it together to make sure that the right outcome comes out for the people.

“We’re just ploughing on,” Rake said, and will not be cutting back provision or laying off any more staff after ten workers from its commercial arm were let go when Covid hit.

The college has suffered a “major impact,” from Covid-19, its latest accounts reveal.

Its deficit in 2019/20 was £1,419,000 before costs such as pension revaluation were taken into account, double what it was in 2018/19 – £662,000. After the pension liability was added, the college’s deficit reached £5 million last year.

Rake

Commercial income, including conferences and its animal park featuring goats, peacocks, ponies and other animals, was £400,000 behind budget by the end of the year.

Rake explained the drop off in commercial income was “primarily” the reason for the college falling into intervention, as they lost £1 million when the first lockdown came in last year.

Following this, the college asked the FE Commissioner for a diagnostic assessment and is now subject to a structure and prospects appraisal.

“Our challenge is primarily our cash reserves position,” he explained as the college’s accounts reveal these were limited at the start of financial year of 2019/20 and took a “major impact” from Covid-19.

College has seen fall in adult learners and apprenticeship numbers

Kingston Maurward is less dependent on government funding than many other colleges: just 65 per cent of its income is from the public purse.

Yet it has acquired a £1.2 million coronavirus business interruption loan from the government, to be repaid over five years starting this month.

That is on top of three outstanding loans totalling £1.5 million from the college’s banks, due to be repaid this year, next year and in 2032 – though Rake is not worried about being able to repay them.

The provider has also acquired a £400,000 rolling overdraft to ensure it has “sufficient working capital and liquidity”.

Despite the negative financial outlook, student numbers on 16 to 18 full time courses have increased by 5.5 per cent.

But the college has seen a “continued reduction” in adult learners, blamed on changes to loans policy, as well as apprenticeships.

Like many colleges, Kingston Maurward could not meet the controversial 90 per cent performance threshold for their national adult education budget allocation this year.

It only delivered 51 per cent of its allocation in 2020/21 and faced having £200,000 clawed back by the ESFA.

Yet, after the government finally relented and allowed providers to present business cases as to why they should keep any underspend, the college will not face any clawback.

Its future cash position is looking “ok,” said Rake and he thinks the college will be able to improve on inadequate financial health this year, but: “A lot will depend on what happens with potential future lockdowns and changes to Covid.

“Our current monthly management accounts are very positive, as a result of a firm hand on costs, and there has been a return of commercial income. So that’s good.”

Latest education roles from

A Level Biology Teacher

A Level Biology Teacher

Barnsley College

Electrical Installation Trainer

Electrical Installation Trainer

Barnsley College

Sessional Science Lab Technician

Sessional Science Lab Technician

Merton College

Sessional Lecturer – Plumbing

Sessional Lecturer – Plumbing

South Thames College

Lecturer – Business (x 1 Banking Specialism & x 1 Accounting/Business Finance Specialism)

Lecturer – Business (x 1 Banking Specialism & x 1 Accounting/Business Finance Specialism)

Kingston College

Apprentice Development Leader

Apprentice Development Leader

GP Strategies

Sponsored posts

Sponsored post

Why we’re backing our UK skills ‘Olympians’ (and why you should too)

This August, teams from over 200 nations will gather to compete in the sticky heat of the Paris summer...

Advertorial
Sponsored post

Is your organisation prepared for a major incident?

We live in an unpredictable world where an unforeseen incident or environmental event could disrupt a Further Education (FE)...

Advertorial
Sponsored post

A new chapter in education protection!

Gallagher is a specialist in the Further Education sector, working with over 75% of Further Education colleges in the...

Advertorial
Sponsored post

Pearson is planting the seed for sustainability talent with new HTQ

Sustainability is rapidly becoming a key organisational goal for many businesses looking to make a difference in society, the...

Advertorial

More from this theme

Colleges, Ofsted

Second ‘outstanding’ for Cheshire college

Inspectors said teachers and leaders were “passionate” about providing life-changing opportunities for young people and adults

Josh Mellor
Colleges

City of Wolverhampton College announces new principal after financial turnaround

Comes shortly after the college exited long-running government intervention

Josh Mellor
Colleges

Students volunteer to support their local communities

Colleges took part in loneliness and local sports initiatives as part of volunteers’ week

Anviksha Patel
Colleges

Squeezed margins could put more colleges on government notice  

AoC's finance guru explains why cash is up but proportion of healthy EBITDAs is down

Billy Camden

Your thoughts

Leave a Reply

Your email address will not be published. Required fields are marked *