09 Sep 2020 10:03 AM

Capital funding

Funding to upgrade FE estates will be available for 2020/21 to assist upgrading the condition of college estates.

Redundancy Support Service for Apprentices

On 1 August the ESFA launched its support service in response to the impact of COVID on the employment of apprentices.

As the furloughed scheme comes to an end the full impact of the pandemic on the economy and employers will become more evident.

As with previous recessions unemployment will increase and the opportunity for apprentices to secure employment or re-employment will become more difficult.

This service has been established to:

  • Provide advice and guidance on the impact of redundancy;
  • Signposting to local and national support services;
  • Vacancy sharing services

This service is in addition to employer incentives announced by the Chancellor for recruiting new apprentices aged under 25 of £2,000 and £1,500 aged 25 and above. These incentives are in addition to those already in place.

Post-16 audit code of practice 2019-20

This updated guidance has been published later than usual this year having been issued in July 2020 applicable for financial periods commencing on or after 1 August 2020. Changes include:

  • Confirmation that the devolved authorities (MCAs & the GLA) and ESFA will co-operate in respect of their audit and assurance arrangements in respect of AEB funding;
  • Inclusion of a summary of the requirements relevant to independent training providers;
  • Clarification in relation to the ESFA’s expectations regarding how providers should manage their subcontracting arrangements;
  • Reminder that internal and external audit services will need to be commissioned from separate audit providers;
  • Further clarification of the ESFA’s own programme of funding validation and assurance;
  • Recognition that colleges that have registered with OfS will be required to comply with the OfS accounts direction including the provision of an audit opinion on the appropriate use of funds;
  • A new requirement that any amendments to the standard terms of engagement for regularity assurance reviews (as prescribed in this Code) must be approved by the ESFA;
  • An update to the anti-fraud checklist including the provision of a link to the ESFA’s published fraud indicators;
  • Clarification has also been provided over the meaning of the following within the guidance:
    • ‘Must’ - means a condition or requirement
    • ‘Should’ – identifies minimum good practice that should be applied unless an alternative better suits circumstances

Reminder – fraud reporting

Due to remote working or potentially reduced levels of scrutiny a reminder over the procedures associated in cases of suspected or discovered instance of fraud, theft, bribery, corruption, irregularity, major weakness or breakdown in the accounting or other control framework are identifiable.

Where identified, corporations must inform the chair of the audit committee, external auditors and internal auditors (if applicable) as soon as practically possible.

The ESFA, and where relevant the MCA or GLA, must also be informed when the amounts are significant, that is exceeding £10,000 in value, as soon as possible. Specific Update for Colleges Summary updates and reminders 18

Going concern considerations

The nature and scale of the virus and the measures introduced to tackle it will have had a significant impact on all aspects of corporations’ finances, budgeting and strategic planning. The ESFA issued a brief reminder for corporations to ensure it continued to receive timely and accurate information to monitor financial sustainability. Key considerations identified included:

  • scenarios planning and the financial sensitivity analysis
  • impact on KPIs and key funding streams
  • availability of external finance
  • government assistance received
  • impact on accounting estimates
  • implications for carrying values of assets and liabilities

With the impact of the pandemic it is even more important for corporations to complete a robust going concern assessment. This assessment will be under greater scrutiny from auditors and other stakeholders.

An impaired financial performance and position may also adversely affect compliance with bank loan covenants. Corporations are advised to ensure that conversations with their lenders take place promptly where covenants are in danger of being breached, to mitigate the risk that amounts will become repayable on demand.

If bank covenants have been breached, the going concern assessment within the financial statements should include a summary of the outcome or status of negotiation with the lender, including whether waivers have been obtained. The outcome of these negotiations is likely to be critical to corporations in determining whether the borrowings are classed as short or long-term in the financial statements (waiver received pre or post 31 July accordingly), and so constitutes a major factor in the determination of solvency as well as the formal assessment of financial health by the ESFA.

Accounts direction

Due to public interest in the sector there are areas of the financial statements that attract more interest than others. Included below is a reminder of the guidance associated with these areas:

  • Staff numbers – this should now be the average headcount for each category. Previously this was calculated on a full time equivalent basis;
  • Key management personal (KMP) – number of individuals emoluments included within bands of £5,000 starting from £Nil and aggregate emoluments received as well as waived;
  • Justification for total KMP and the accounting officer’s emoluments (separate disclosures) linked to value & performance delivered as well as an explanation of the process for judging performance and means of market comparison;
  • Disclosure and explanation where previous KMP and/or a previous accounting officer (separate disclosures) continue to be remunerated by the college;
  • Accounting officer emoluments, this tends to receive significant scrutiny from the press and mistakes within this disclosure could result in unwarranted attention. Please note that the definition of emoluments does not include employer’s national insurance;
  • Pay multiples usually between the accounting officer, as the highest paid employee, ‘basic’ & ‘total’ emolument and the median (full time equivalent) pay of all other employees;
  • Details of compensation for loss of office and severance payments, please note that OfS have additional disclosures in this area;
  • Transactions with governors, where remuneration is paid to a governor for services as a governor then Charity Commission approval is required before payment should be made.