East Durham College - Members Report and Financial Statements 2022-23

Members’ Report and Financial statements for the year ended 31 July 2023

East Durham College Members Report and Financial Statements Year ended 31 July 2023

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Members’ Report and Financial statements for the year ended 31 July 2023

Contents Strategic Review

3

Operating and Financial Review

7

Key management personnel and Professional Advisers

20

Statement of Corporate Governance and Internal Control

21

Statement of Regularity, Property and Compliance

34

Statement of Responsibilities of the Members of the Corporation

35

Independent Auditor’s Report on the Financial Statements

37

Independent Reporting Accountant’s Report on Regularity

42

Consolidated Statement of Comprehensive Income and Expenditure

45

Consolidated and College Statement of Changes in Reserves

46

Balance Sheets

48

Statement of Cash Flows

49

Notes to the Financial Statements

50

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Members’ Report and Financial statements for the year ended 31 July 2023

Strategic Review OBJECTIVES AND STRATEGY The members present their annual report together with the Financial Statements and Auditor’s report for East Durham College the year ended 31 July 2023.

Legal status East Durham College is an incorporated body and falls within the scope of the Further and Higher Education Act 1992. The College is an exempt charity for the purposes of part 3 of the Charities Act 2011.

East Durham College was formed by statutory instrument, with effect from 1 June 1999, and represented a merger between the former East Durham Community college (EDCC) and Durham College of Agriculture and Horticulture (Houghall). On 1 June 1999 all assets, liabilities and activities of the respective Colleges were transferred to the newly merged entity, and the two former College Corporations were dissolved.

Mission, Vision, Strategy and Objectives Mission To connect people to Opportunities Public Benefit East Durham College is an exempt charity under the Part 3 of the Charities Act 2011 and 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 22-24. In setting and reviewing the college’s strategic objectives, the Governing Body has had due regard for the Charity Commission’s guidance on public benefit and particularly upon its supplementary guidance on the advancement of education. The guidance sets out the requirement that all organisations wishing to be recognised as charities must demonstrate, explicitly, that their aims are for the public benefit.

In delivering its mission, the college provides identifiable public benefits through the advancement of education: • • • • •

High Quality teaching Widening participation and tackling social exclusion Excellent employment and progression record for students Strong student support systems including advice and guidance Strong links with employers. Industry and commerce 3

Members’ Report and Financial statements for the year ended 31 July 2023

•

Strong links with Local Enterprise partnerships (LEPS) and the Chamber of Commerce

The many and varied ways in which the college delivers public benefit are outlined in the various parts of these statements.

Strategic plan The achievement and performance against the strategic plan is monitored by the Corporation on a regular basis. The Senior leadership team ensure the plans are regularly reviewed and updated.

The College’s continuing strategic objectives are to support the mission to “Connect People to Opportunities”. The Colleges’ values are outline below: EXCELLENCE – Quality is at the heart of our curriculum and service delivery enabling our organisation to thrive.

STUDENTS – Students are at the heart of our decision making as we thrive to achieve a highly ambitious curriculum for all.

TRUST – Nurture a culture of respect for all; providing an inclusive environment which promotes a sense of belonging and community amongst student and staff.

SUSTAINABILITY – To build a sustainable provision for our current and future community.

The College strives to achieve these values by the following actions: •

•

• • • • •

It provides access to education for all, with pathways through stages of learning across a broad offer and with close alignment to employment opportunities in the North East region.

The College aspires to contribute significantly to skills development and innovation in our region, to promote economic growth and address social and health challenges in our community.

Provide high quality, integrated and timely student learning support services.

Develop further and promote technical and professional pathways at all levels, in labour market relevant areas, to improve further students’ positive destinations.

Expand and grow our capacity in apprenticeships.

Develop new full cost markets with adults and employers regionally.

Ensure higher education partnership agreements complement our specialisms and add capacity.

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Members’ Report and Financial statements for the year ended 31 July 2023

•

• • • •

•

Develop effective partnerships and respond to the stated needs of local stakeholders, including schools, the Local Enterprise Partnership, local politicians and decisions makers, business, and industry.

Provide opportunities for all students to develop the employability and enterprise skills they need to achieve their career potential.

Continually review College services to produce efficiency savings, improving financial resilience Provide a supportive environment in which staff can flourish.

Invest to provide high quality facilities and state of the art resources across the whole of the College’s estate, improving efficiency and reducing the environmental impact of our facilities.

Ensure our financial strategy supports the reputation of our strategic plan and enhances our financial sustainability.

Resources The College has various resources of both a current and non-current nature it can deploy in pursuit of its strategic objectives.

People The college employs 510 people (2022: 511), of whom 182 (2022: 188) are teaching staff.

The college enrolled approximately 5,188 students. The college’s student population includes 1,936 16-to-19-year-old students, 431 apprentices, 74, 14–16-year-olds and 2,747 adult learners.

Financial The college has £11.5 million (2022: £10.8 million) of net assets and reserves before accounting for pension liabilities of £0,09 million (2022: £5.84 million) and after taking into account long-term debt of £4.77 million (2022: £5.23 million).

Tangible resources include the two main college sites of Willerby grove and Houghall.

Reputation The college has a good reputation locally, regionally and nationally. Maintaining a quality brand is essential for the College’s success at attracting students and developing eternal relationships. The College has developed very fruitful links with major employers such as the NHS and local and regional small and medium enterprises.

The College is continuing to refine its curriculum offer to align with the needs of local and regional employers, by further developing its STEM offer to include progression routes to higher level technical qualifications and higher education pathways delivered within the College.

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Members’ Report and Financial statements for the year ended 31 July 2023

In its last Ofsted inspection in September 2021, it was rated overall Good with outstanding for attitudes and behaviours. The report also stated that leader’s strategic decisions about the range of subjects and types of provision the college provides are well informed by the needs of employers and key regional partners and as a result, learners and apprentices of all ages are provided with opportunities to progress, gain employment or move to alternative jobs.

Stakeholders In line with other colleges and universities the college has many stakeholders including: -

-

its current, future, and past students.

Education sector funding bodies its staff and their trade unions. The senior management team are listed on page 22. The trade unions of which East Durham College staff are members are the University and College Union, National Education Union, and Unison. the employers it works with its partner schools, colleges, and universities the wider college/local community.

Its local authority and Local Enterprise Partnership (LEP).

The College recognises the importance of these relationships and engages in regular communication with them.

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Members’ Report and Financial statements for the year ended 31 July 2023

Operating and Financial Review Financial Results Group Financial Results The consolidated group surplus before tax for 2022/23 and before the effect of actuarial gains and losses in respect of the pension scheme was of £110k (2022: £(1,328k)). This is after additional costs arising from FRS102 relating to pension costs of £510k (2022: 1,830k) have been applied. The total comprehensive income for 2022/23 is £6,370k compared to £13,482k in 2021/22.

The results for 2022/23 include adjustments for Financial Reporting Standard 102 (FRS102) for pension costs of £510 (2022: £1,830k) (note 7 to the accounts). After these are removed the group operating profit for the year is a surplus of £620k (2022: £502k).

In 2022/23 capital expenditure amounted to £3,538k (2022: £956k).

The college continues to have significant reliance on the education sector funding bodies for its principal funding source, largely from recurrent grants.

It received 81,69% (2022: 80.77%) of its total income for 2022/2023 as grants from funding bodies, most notably from the Education and Skills Funding Agency and Department for Education for 16-18 provision.

The increase in performance from the prior year was largely due to another increase in 16-18 numbers.

At the balance sheet date the group held net current liabilities of £739k and net assets of £11,336 K, which includes a defined benefit pension liability of £0,09m.

Subsidiary Financial Results East Durham College has four 100% owned subsidiary companies: Houghall Farm Limited: a company incorporated in Great Britain and registered in England and Wales. The principal activity of Houghall Farm Limited is management of the College’s farming activities. This company is dormant.

Houghall Enterprises Limited: a company incorporated in Great Britain and registered in England and Wales. The principal activity of Houghall Enterprises Limited is commercial activities ancillary to the College’s principal activities. This company is dormant.

The College Company Limited: a company incorporated in Great Britain and registered in England and Wales. The principal activity of The College Company Limited is commercial activities ancillary to the College’s principal activities. In 2022/23 the company made a loss before tax of £5k (2022: £7k).

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Members’ Report and Financial statements for the year ended 31 July 2023

Durham Education Group Limited: a company incorporated in Great Britain and registered in England and Wales. The principal activity of The Durham Education Group Limited is management and operation of international student recruitment and learning.

This company is dormant.

The consolidated group generated a surplus from operations of £110k (2022: £(1335k) deficit. The college received 82% of its total income for 2022/2023 as grants from funding bodies, most notably from the Education and Skills Funding Agency and Department for Education for 16-18 provision. The increase in performance from the prior year was largely due to an increase in funding from the ESFA in relation to 16-18 students.

Cash flows and liquidity During the year cash inflow from operations was £1,892k (2022: £2,287k) and cash increased in the year by £85k (2022: £1,226k). The increase from the prior year is due to an improvement in operating performance before depreciation.

During the year one of the College’s loans was replaced with a loan from the Department of Education.

During the year £1244k of bank debt has been repaid, and a new loan of £773K drawn down resulting in a year-end balance of £4,767k. The size of the college’s total borrowing and its approach to interest rates has been calculated to ensure a reasonable cushion between the total cost of servicing debt and operating cashflow. During the year this cushion was sizeable; the interest paid of £225k was clearly exceeded comfortably by the operating cashflow of £1,892k.

Reserves The college has no formal Reserves Policy but recognises the importance of reserves in the financial stability of any organisation and ensures that there are adequate reserves to support the long-term viability and financial stability of the College. This is considered to be where reserves excluding pension liability exceed the annual other operating expenditure for the year.

At the year end the College group had reserves of £11,426k an increase of £621k from the balance as at 31 July 2022 (£10,806k) excluding the pension reserve. The pension reserve improved from a deficit of £5,840k at 31 July 2022 to £90k by 31 July 2023.

It is the corporation’s intention to increase reserves over the life of the strategic plan through the generation of annual operating surpluses.

Sources of income The group has significant reliance on the education sector funding bodies for its principal funding source, largely from recurrent grants. In 2022/2023, ESFA provided 81.69% (2022: 80.77%) of the group’s total income.

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Members’ Report and Financial statements for the year ended 31 July 2023

Streamlined Energy and Carbon Reporting As an employer and key organisation in the region, East Durham College recognises how important it is for us to make sure we are committed to sustainability in everything we do.

Sustainable development is about embracing every opportunity to make a difference environmentally, socially and financially to create an organisation that is fit for the future and that supports the wellbeing of our staff, students and our wider community.

For our college as a business, it makes sense to make the operation of our buildings and estate more efficient and to invest in carbon reduction. For our college as a educator, it makes sense to introduce sustainable development into the curriculum to provide leavers the skills, value and knowledge needed to mitigate the effects of climate change.

Students with these skills will have increased employment prospects and greater potential for career progression. Additionally, our college has an important part to play in supporting local businesses and our wider community in its journey towards a more sustainable way of living. Finally, we are due to be held accountable by ESFA to help the government reach its net zero target by 2050 and our future funding may be dependent on this.

The College has therefore developed a sustainability strategy that seeks to see a 78% reduction in greenhouse gas emissions by 2035 in line with the Government’s target. This strategy covers a range of areas from food procurement and production to sustainable building and refurbishment.

The college is also an active collaborator, partnering with other organisations such as Defra (Green Skills Hub) and is part of the N8 which is a collection of educational institutions in the North East (Universities and Colleges) which undertake research into green technologies.

As stated above, the college is committed to reducing its carbon emissions and has taken the following measures in the year to improve energy efficiency: Introduced a cross college sustainability group that has prepared a sustainability strategy and will continue to work towards implementing projects to improve sustainability • begun work on a Carbon Adaptation Plan • Worked in partnership and through the N8 bet Zero North Skills Alliance to identify and provide skills required for the Green Agenda • Re-configured the BEMS to reduce the operating temperature • Continued LED replacement strategy across campus • Sustained the use of virtual meeting technology to reduce need for travel between sites • Reviewed its processes internally to reduce paper e.g. electronic enrolment The college’s greenhouse gas emissions and energy use for the period are set out below: •

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Members’ Report and Financial statements for the year ended 31 July 2023

UK Greenhouse gas emissions and energy use data for the period Energy consumption used to calculate emissions (kWh)

1 August 2022 to 31 July 20231 2,105,867

1 August 2021 to 31 July 20222 5,544,222

477,14 19,16 496.30

573.39 20.95 594.34

436,07

450.01

25,54 957,91

20.51 1,064.86

2.10

2.23

Scope 1 emissions in metric tonnes CO2e Gas consumption Owned transport Total Scope 2 emissions in metric tonnes CO2e Purchased electricity Scope 3 emissions in metric tonnes CO2e Business travel in employee owned vehicles Total gross emissions in metric tonnes CO2e Intensity ratio Metric tonnes CO2e per staff member

Why have the ratios declined/improved?

We have installed solar PV panels onto the roof at Willerby Grove in July 2023.

Qualification and reporting methodology We have followed the HM Government Environmental Reporting Guidelines. We have also used the GHG Conversion Factors for Company Reporting to produce this report.

Intensity ratio The chosen intensity measurement ration is the total gross emissions in metric tonnes CO2e per staff member, the recommended ratio for the sector.

1 2022 data is not available until after the financial statements approval date.

2 2022 data is not available until after the financial statements approval date.

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Members’ Report and Financial statements for the year ended 31 July 2023

Current Performance Financial Health The College has maintained its Financial Health rating of “Good” despite pressure on costs from inflation, utility price increases, Brexit and the war in Ukraine. There have also been unprecedented challenges with relation to staff costs and recruitment and retention of staff has been difficult. The College continues to monitor ratios and produce forecasts for future years to keep track of performance.

Capital The College was successful in various capital bids in the year in relation to T Levels to provide new and updated student facilities.

Student Numbers 2023/23 saw another year of growth for the college across most aspects of its provision.

The College delivered activity worth £16,341k (2021/22: £12,791k) in funding body, main allocation funding. The College had 7,126 enrolments (2020/21: 4,473) funded by ESFA. 2022/23 saw the third year of growth in the number of 16–18-year-olds on full time study programmes exceeding its target of 1,892; there was also growth in the number of 14– 16-year-olds both directly recruited and on part time programmes (home educated).

FUTURE PROSPECTS Future developments The Board of Governors approved a strategic plan for the three-year period 2023 - 26 in January 2023. This included a change to the mission statement but still recognised the need for the College to remain focused upon its core business, recognising the need to invest in identified skills priority areas which are most in demand in the region. The Board also approved a set of key performance indicators to underpin the plan, and a subset of these formed the first Accountability Agreement which is a requirement of funding from the DfE. The development of higher education provision within land based and higher-level technical qualifications in skills shortages areas remain a strategic focus for the college and will be delivered directly by the College and also via the Institute of technology. An new land-based degree has been validated by the University of Sunderland. T Levels started in September 2022 focusing on Digital, Engineering, healthcare, and Science and Education.

The College was one of 16 colleges nationally to be selected in May 2021 to benefit from a re-development at its Houghall Campus. The college is working with the DfE to 11

Members’ Report and Financial statements for the year ended 31 July 2023

implement this project which will provide new teaching and learning facilities as well as new agricultural buildings to support the growth in that provision. The proposed end date for this project is September 2026.

In addition, the College is also looking to re-locate its specialist construction and engineering provision to its main campus site in Peterlee. Currently, this provision is within a leased building which is not fit for purpose. Relocation will allow the college to provide bespoke facilities for the delivery of T Levels and to benefit from more sustainable practices. The relocation is taking place in two phases, with refurbished space at Willerby Grove providing improved space for engineering. This work will be completed

by March 2024. The second phase will see motor vehicle and building services engineering move to a purpose built annex located at the Willerby Grove campus.

Following the completion of this development, the college plans to launch several new courses which are aligned to the local and regional economies. This will increase student recruitment through both the broader range of courses on offer and the higher standard of delivery.

Curriculum Plan The College continued to deliver a curriculum with sufficient breadth to meet the needs of its community and impact upon social mobility whilst ensuring financial efficiency. The college saw growth in its 16-18 numbers for the third year running with increases in local market share which was the highest for 10 years. Areas of growth included Health Science and Health and Social Care, Construction, A Levels and land-based areas such as arboriculture and land and wildlife. The growth in the land-based curriculum (nonanimal) was 40%, exceeding the target. 2022/23 saw the introduction of T-levels into the college offer with cohorts in Digital, Building Services Engineering, Education (Early Years Educator), Health, and Engineering (Manufacturing). Student numbers in these cohort are good. Work continued developing higher technical programmes at level four and above in Health Science, Digital, Engineering and Building Services for delivery in 2024.

Apprenticeships continued to grow, exceeding the previous year’s outturn with new provision in agricultural engineering and the introduction of the mortuary technician standard of which we are the only provider of this apprenticeship in the country. This year saw growth in construction, arboriculture and teaching assistant / early years. Adult provision saw a significant growth with the college exceeding its allocation for 2022/23 with significant programmes in non-devolved and devolved areas resulting in us exceeding our allocation for AEB in the Tees Valley devolved area and we are on track to meet the allocation for North of Tyne.

2022/23 saw significant investment in curriculum resource with the college securing capital funding which it used to purchase state of the art equipment across the college as well as introduce a new lecture theatre, kitchen and play area for early years education students which has an adjoining room to the college nursery. An extension of the existing 12

Members’ Report and Financial statements for the year ended 31 July 2023

hospital ward to include more beds and AV equipment. We also introduced a digital lab with a local area network and state of the art computers, 3D printers, drones and virtual reality kit. Through Strategic Development Funding the college invested in its existing labs as well as a new clean lab and adjoining training room. Funding was also secured through the Wave 4 capital fund to move the Technical Academy from a rented premises in Peterlee onto the Willerby Grove main campus.

Financial plan The college governors approved a financial plan in July 2022 which sets objectives for the period to 2023. The college aims to maintain its health rating of ‘Good’ and achieve a surplus in the year to 31 July 2023.

The college governors approved a financial plan in July 2023 which sets objectives for the period to 2024. The college aims to maintain its health rating of ‘Good’ and achieve a surplus in the year to 31 July 2024.

The College should see increases in revenue from 16-18 funding due to an increase in student numbers combined with an increase in the underlying funding rate.

Pay continues to remain a priority and the College remains committed to increasing pay and benefits for staff.

The college also plans to review measures it can introduce to reduce utility consumption across its 3 sites and the control of non-pay costs remains a priority.

Treasury policies and objectives The college has treasury management arrangements in place to manage cash flows, banking arrangements and the risks associated with those activities. This policy is contained within the Financial Regulations.

KEY PERFORMANCE INDICATORS The colleges key performance indicators, targets and results are set out below.

Key performance indicator

Measure/Target

Actual for 2022/2023

Actual for 2021/2022

Student number targets

1,892

1,903

1,892

Operating surplus/EBITDA as % of income

3%

10%

3%

Staff Costs as a % of income

64%

61%

63%

Adjusted current ratio

0.856

1.14%

1.16%

Borrowing as a % Income

<20%

19%

25%

Financial health

RI

Good

Good

Ofsted rating

Good

Good

Good

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Members’ Report and Financial statements for the year ended 31 July 2023

The College is committed to observing the importance of sector measures and indicators and uses the FE Choices data available on the GOV>UK website which looks at measures such as success rates. The College is required to complete the annual Finance Record for the Education and Skills Funding Agency (“ESFA”). The College was assessed by the ESFA measures as having “Good” grade in 2021/22. The College’s result for 2022/23 maintains this grade.

East Durham’s financial sustainability objectives include: 2022/23

2021/22

Met

Met

•

Meeting all financial banking covenants

•

Generating a surplus of income over expenditure (before actuarial gains/losses)

Total £620k Comprehensive Income

(£509k)

•

Improving short term liquidity

Cash in bank

3,136k

£3,051k

•

Maintaining financial health

Good

Good

Student achievements Students continue to prosper at the college with the majority achieving their learning goals and increases seen in achievement rates. Students benefit from teachers with expert subject knowledge who deliver effective education and training supported by excellent facilities, which enhance students’ skills and allows them to progress positively.

Progression to a positive destination (HE, employment, further education) remains high with an increased number of students progressing to Higher Education and a high proportion securing their first choice university. For those on A Level programmes, 2023 was a successful year with leavers progressing to a variety of Russell groups including Oxbridge. Destinations and degrees including Cambridge (Natural Science), Oxford (Material Science), Newcastle (Dentistry), Edinburgh (Medicine), The Northern School of Art (Graphic Design), York (Chemistry), Durham (Business and Management) and Higher Apprenticeship in Chemistry.

Staff and students continue to perform well in competitions across college with students from the Peter Jones Enterprise Academy winning the Business Innovation Award, Student of the Year Award and a Highly Commended Award. Students from the colleges hair and beauty department won 34 awards across a range of schools, inter college, regional and national competitions including first place at a 1950’s event at Beamish, the National AHT competitions and College Staff Trainer of the Year. The staff team from Houghall won the best land based stand at the Wolsingham show for the 14

Members’ Report and Financial statements for the year ended 31 July 2023

third year in a row showing our commitment to land based education. Floristry students winning awards at Harrogate and an apprentice in the regional finals for Horticulturist of the Year Payment performance The Late Payment of Commercial Debts (Interest) Act 1998, in the absence of agreement to the contrary, requires organisations to make payments to suppliers within 30 days of either provision of goods or services on the date on which the invoice was received. The target set by the Treasury for payment of suppliers within agreed payment terms of 30 days as appropriate is 95%. During the accounting period 1 August 2022 to 31 July 2023, the college paid 47% (2021/22: 49%) of its invoices within 30 days. The college incurred no interest charges in respect of late payment for this period and continues to make improvements to this position.

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

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

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

This is supported by a risk management group which is a formal group responsible for managing risk, collating a risk register and monitoring risk mitigation through a risk management action plan. The group meet regularly to identify new risks, monitor existing risks and develop plans to mitigate against significate risk. The Corporation receives regular reports updating it to the position on risk management and the progress made in implementing the risk management action plan.

The College makes prudent recognition and disclosure of the financial and no-financial implications of risk. A college risk management strategy was adopted by the Board of 15

Members’ Report and Financial statements for the year ended 31 July 2023 .

Governors and implementation of the strategy is subject to scrutiny at each Audit Committee and at the Full Board meeting. During the year the important of our risk management strategies were amply illustrated by the need to actively manage the college through the risks presented by Covid 19. These being monitored by a separate targeted risk management report produced as an annex to the regular reports.

Outlined below is a description of the principal risk factors that may affect the College.

Not all the factors are within the College’s control. Other factors besides those listed below may also adversely affect the College.

Staff recruitment, retention, and attendance Continued implementation of a pay strategy including a 6.5% pay rise in 2023.

Regularly scrutiny of vacancy rates, turnover and absence trends a by senior leadership and governors.

Failure to maintain financial health and uncertainty of funding.

Robust annual and 3-year planning processes together with regular review of in year forecasts. Active monitoring of curriculum offers in relation to funding rules.

Continued use of Stakeholder surveys.

Curriculum/qualification reform Curriculum planning focus on efficiency with choices made which have the best impact for students.

Governor review of how well college meets local skills needs.

More AEB delivery to be moved into skills priority areas to secure funding.

Student Recruitment and Retention Focus on conversion rate of applications to enrolment and building relationships with local schools.

EQUALITY AND DIVERSITY Promoting Equality and Valuing Diversity The College is committed to ensuring equality of opportunity for all who learn and work here. We respect and value positively differences in race, gender, sexual orientation, disability, religion or belief and age. We strive vigorously to remove conditions which place people at a disadvantage, and we will actively combat bigotry. This policy is resourced, implemented and monitored on a planned basis. The College’s Equality Policy is published on the College’s website. The College also has a legal commitment to uphold protected characteristics of the Equality Act (2010) and the Public Sector Duty (2011). All College staff have undertaken Prevent training (prevent is one of the four strands of the Governments’ counter terrorism strategy). Full time learners have also experiences a 16

Members’ Report and Financial statements for the year ended 31 July 2023

range of activities to raise awareness of the Prevent agenda, cyber bullying and hate/mate crime in order to keep them safe during the year.

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

The college is a ‘Positive about Disabled’ employer and has committed to the principles and objectives of the Positive about Disabled standard. The college considers all employment applications from disabled persons, bearing in mind the aptitudes of the individuals concerned. Where an existing employee becomes disabled, every effort is made to ensure that employment with the college continues. The college's policy is to provide training, career development and opportunities for promotion which, as far as possible, provide identical opportunities to those of non-disabled employees. An equalities plan is published each year and monitored by managers and Governors. Good progress is made by learners who have a stated disability or special emotional needs.

Learners who require extra support achieve as well as their peers. Swift initial guidance is good with a range of partners to ensure that all learners receive the support they need.

The college has committed to the ‘Mindful Employer’ initiative to assist the mental health wellbeing of staff. The college has achieved accreditation to the Committed to Equality (C2E) standard at the gold (highest) level. The college has also implemented an updated Equality & Diversity training programme which all staff have attended. Refresher training and training for new starters is carried out on an ongoing basis.

Gender pay gap reporting Year ending 31 March 2022 Mean gender pay gap

4.3%

Median gender pay gap

7.7%

Mean bonus gender pay gap

0%

Median gender bonus gap

0%

Proportion of males/females receiving a bonus

0% / 0%

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Members’ Report and Financial statements for the year ended 31 July 2023

The proportion of males and females in each quartile of the pay distribution are: Males

Females

1 - Lower quartile

22.2%

77.8%

2

32.5%

67.5%

3

29.4%

70.6%

4 – Upper quartile

42.9%

57.1%

The college publishes its annual gender pay gap report on its website.

Accessibility statement The college seeks to achieve the objectives set down in the Equality Act 2010. The College actively makes arrangements to support learners with leaning difficulties and disabilities to ensure they are able to access the full range of services and provision.

Trade union facility time The Trade Union (Facility Time Publication Requirements) Regulations 2017 require the college to publish information on facility time arrangements for trade union officials at the college.

Numbers of employees who were relevant period (FTE)

1

Percentage of time

Number of employees

1-50%

1

Total cost of facility time

£2,000

Total pay bill

£13,504,000

Percentage of total bill spent on facility time

0.02%

Time spent on paid trade union activities as a percentage of total paid facility time

0.02%

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Members’ Report and Financial statements for the year ended 31 July 2023

GOING CONCERN After making appropriate enquiries, the Corporation considers that the college has adequate resources to continue in operational existence for the foreseeable future. A fuller explanation of which can be found in the Notes to the Financial Statements. For this reason, it continues to adopt the going concern basis in preparing the financial statements.

EVENTS AFTER THE REPORTING PERIOD There are no events that need to be reported upon that may affect the viability of the College.

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

Approved by order of the members of the corporation on 21 December 2023 and signed on its behalf by:

D Butler Chair

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Members’ Report and Financial statements for the year ended 31 July 2023

Key Management Personnel and Professional Advisors Key Management Personnel Suzanne Duncan, Principal and CEO; Accounting Officer Carina Tomlinson, Vice principal Curriculum and Performance Sarah Judson, Vice Principal Finance and Business Planning-Resigned 31 August 2023 Jacqueline Owen, Assistant Principal Curriculum – Resigned 1 August 2022 Helen McCoy, Assistant Principal Performance Jackie Lanagan, Assistant Principal Curriculum Planning and Partnerships – Appointed 1 August 2022 Board of Governors A full list of Board of Governors is given in the Statement of Corporate Governance and Internal Control.

Clerk to the Corporation Womble Bond Dickinson LLP / Muckle LLP Professional advisors External auditors RSM UK Audit LLP 1 St James Gate Newcastle upon Tyne NE1 4AD Internal auditors

Audit One Tanfield Lea Business Centre Tanfield Lea Stanley Durham DH9 9DB

Solicitors

Womble Bond Dickinson (UK) LLP St Ann’s Wharf 112 Quayside Newcastle upon Tyne NE1 3DX Muckle LLP Time Central 32 Gallowgate Newcastle Upon Tyne

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Members’ Report and Financial statements for the year ended 31 July 2023

Bankers

Lloyds Bank plc 19 Market place Durham DH1 3NL

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 2022 to 31 July 2023 and up to the date of approval of the annual report and financial statements.

The college endeavours to conduct its business: 1. in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership); 2. in full accordance with the guidance to colleges from the Association of Colleges in The Code of Good Governance for English Colleges (“the Code”) The College is committed to exhibiting best practice in all aspects of corporate governance and in particular, the College has adopted and complied with the Code. We have not adopted and therefore do not apply the Corporate Governance Code. However, we have reported on our Corporate Governance arrangements by drawing upon best practice available, including those aspects of UK Corporate Governance Code we consider relevant to the further education sector and best practice.

In the opinion of the Governors, the College complies with all the provisions of the Code, and it has complied throughout the year ended 31 July 2023. 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, it takes full account of The Code of Good Governance for English Colleges issued by the Association of Colleges in March 2015, which it formally adopted in the year end 2016.

The College is an exempt charity within the meaning of Part 3 of the Charities Act 2001.

The Governors, who are also Trustees for the purposes of the Charities Act 2011, conform that they have had due regard for the Charity Commissions’ guidance on public benefit and that the required statements appear elsewhere in these financial statements.

The Clerk to the Corporation effectively manages the administration of the Governors’ business. Reviews of working practices within the clerking support have resulted in more concise minutes, with large appendices being shared electronically. Minutes are detailed and accurate, deadlines for papers are consistently met and quoracy levels are continuously maintained. A comprehensive introduction for Governors is in place, as well

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Members’ Report and Financial statements for the year ended 31 July 2023

as effective training. The induction process fully incorporates an understanding of key college functions and how this maps into senior management roles.

Further work has taken place in relation to developing the governor’s understanding of what constitutes high quality teaching, learning and assessment. Additionally, there is a need to have a more holistic engagement with all areas of the college, for example governors regularly meet staff and students. In this financial year there have been very successful student governor conferences. Interaction with middle managers and support staff is less consistent. Governors also take their responsibilities seriously with regards to their statutory duty for safeguarding and quality and diversity and undertake regular training in these areas.

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

Name

Date of Appointment

Term of office

Mr J Bromiley

15/10/15

4 years

Reappointed 17/10/19

4 years

Mrs E Bolton

Mr D Butler

Date of resignation /End of term of office

Status of appointment

Committees served

No. of meetings attended in financial year

External Member

Audit & Risk

Board 5/5

Search & Remuneration

Committee 5/5

Reappointed 12/10/23

4 years

11/10/27

Vice Chair from 13/07/23

08/07/21

4 years

Resigned May 2023

External Member

Audit

Board 3/5

Finance and General Purposes

Committee 1/2

10/11/24

External Member

Curriculum, Quality and Standards

Board 5/5

12/11/12

4 years

Reappointed 10/11/20

Chair from 13/2/14

Committee 7/7

Finance and General Purposes Search & Remuneration

Mrs A Chandra

03/03/22

4 years

03/03/26

22

External Member

Finance and General Purposes

Board 2/5 Committee 0/3

Members’ Report and Financial statements for the year ended 31 July 2023

Name

Date of Appointment

Term of office

Date of resignation /End of term of office

Status of appointment

Committees served

No. of meetings attended in financial year

Mr M Curry

26/1/17

4 years

25/2/25

External Member

Audit

Board 5/5

Finance and General Purposes

Committee 5/5

Principal

Curriculum, Quality and Standards

Board 5/5

Reappointed 25/02/21 Mrs S Duncan

1/9/12

N/A

N/A

Committee 10/10

Finance and General Purposes Audit and Risk Search & Remuneration Mr G Field

Mrs J Field

Mr R Harrison

4/7/19

03/03/22

4 years

4 years

Resigned 3/7/23

External Member

Audit & Risk

Board 1/5

Finance and General Purposes

Committee 3/5

Resigned April 2023

External Member

Audit & Risk

Board 2/5

External Member

Curriculum, Quality and Standards

Committee 0/3

26/1/20

4 years

Reappointed 03/07/23

4 years

Mrs E Jose

October 2022

2 years

Resigned 30/07/23

Staff Governor

Curriculum Quality and Standards

Board 3/5 Committee 1/3

Mrs V Mcfarquhar

1/8/15

4 years

EOT 30/7/23

External Member

Curriculum, Quality and Standards

Board 5/5

02/07/27

Reappointed 31/7/19

Chair of Audit & Risk Committee 03/07/23

Committee 4/6

Audit & Risk

Search & Remuneration

23

Board 5/5

Committee 5/5

Members’ Report and Financial statements for the year ended 31 July 2023

Name

Date of Appointment

Term of office

Date of resignation /End of term of office

Status of appointment

Committees served

No. of meetings attended in financial year

Mrs E Oughton

15/12/16 Reappointed 10/12/20

4 years

Resigned February 2023

External Member

Curriculum, Quality and Standards

Board 2/5

Mr D Pilling

19/05/22

4 years

Resigned

External Member

Curriculum Quality & Standards

Board 1

External Member

Finance and General Purposes

Board 2/5

Mrs R Woodhouse

4/7/19

4 years

EOT 03/07/23

Committee 1/3

Committee 0/3

Committee 1/2

The following also acted as Directors of the Colleges wholly owned subsidiaries during the year and up to the date of signature of this report: Houghall Enterprises Limited

Dormant

Mrs S Duncan

Houghall Farm Limited

Dormant

Mrs S Duncan

Durham Education Group Limited

Dormant

Mrs S Duncan

The College Company Ltd

Trading

Mrs S Duncan and Mr D Butler

The dormant subsidiaries are exempt from preparing individual accounts by virtue of s394A of the Companies Act.

The Governance framework It is the corporation’s responsibility to bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct.

The corporation is provided with regular and timely information on the overall financial performance of the college together with other information such as performance against funding targets, proposed capital expenditure, quality matters and personnelrelated matters such as health and safety and environmental issues. During 2022/23 the Corporation met 5 times.

The corporation conducts its business through a number of committees. Each committee has terms of reference, which have been approved by the corporation. These committees 24

Members’ Report and Financial statements for the year ended 31 July 2023

are Curriculum, Quality and Standards, Finance and general Purposes, Audit, Remuneration and Search. Full minutes of all meetings, except those deemed to be confidential by the corporation, are available from the clerk to the corporation at the college’s registered address.

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 provided on an ad hoc basis.

The corporation has a strong and independent non-executive element, and no individual or group dominates its decision-making process. The corporation considers that each of its non-executive members is independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement.

There is a clear division of responsibility in that the roles of the Chair and Accounting Officer are separate. There are role descriptions for Chairs of Committees and Link Governors. The Chair and Vice-Chair of the Corporation and the Chairs of all committees are elected to their positions annually.

East Durham College has an Employer Engagement Strategy to ensure that the views of its stakeholders are listed to and has agreed a Public Value Statement that describes how the College seeks to add value to the social, economic and physical well-being of the community it serves. Governors meet with students at a termly Focus Groups to discuss the overall learner experience and to triangulates information provided by way of reported learner consultation sampling and survey outcomes.

Governors commit a significant amount of time to fulfilling their repos nobilities to determine and review the educational character and mission and values of the College and the overview of its activities for which they do not receive any financial compensation in any form, neither wages, expenses or other payments. All Board reports include specific reference to how decisions required will impact on the strategic objectives and targets that have been agreed by the Board following consultation with relevant stakeholders. The Board scrutinises the performance and management in meetings of the Board and its Committees. Governors undertake an annual self-assessment of the Corporation and receive annual reports on their performance against Governing Body standards of Service. There is an annual 360 degree appraisal of the Chair of the Corporation; and the performance and training and development requirements of 25

Members’ Report and Financial statements for the year ended 31 July 2023

individual Governors is discussed at annual one to one meetings with the Chair of the Corporation.

Appointments to the Corporation Any new member appointments to the corporation are a matter for the consideration of the corporation as a whole. The corporation has a Search committee, consisting of six Members of the Corporation, which is responsible for the selection and nomination of any new External Member for the Corporation’s consideration. The Search Committee meets at least twice per academic year. It considers applications against a skills audit of existing Board members and has due regard for the diversity of the Board. There is an agreed Governor recruitment and Succession Planning Policy and Procedure. The Corporation is responsible for ensuring that appropriate training is provided as required.

Members of the corporation are appointed for a term of office not exceeding four years and area able to serve for two consecutive terms of office.

Corporation performance The corporation was inspected by Ofsted I September 2021 and was graded as “Good” with Outstanding for behaviours and attitudes.

The Board have undertaken an internal process of self-assessment on the effectiveness of governance which has identified area for improvement. The strengths and areas for improvement, along with a detailed action plan, were approved by the Board in July 2023.

Of the 132 areas, the governance process was fully compliant in 105, partially in 19 with 2 areas not applicable. An action plan to address the 6 non-compliance areas was approved by Governors in October 2023. An external review of governance is planned for the spring term of 2024 where progress against the action plan will be considered. The self-assessment has not given rise to any areas of concern and governance is considered effective.

Remuneration Committee The Committee’s responsibilities are to make recommendations to the Board on the remuneration and benefits of the Principal/Accounting Officer, Vice-Principal Finance and Business Planning, Vice Principal Curriculum and Performance, and the Clerk to the Corporation and reflects the guidance given in the Association of Colleges document “The Colleges’ Seniors Post Holder remuneration Code”. The Committee comprises entirely of independent External Board Members. It meets at least once per academic year and takes accounts of peer information, and the College’s financial circumstances, to ensure the long-term success of the organisation.

Details of remuneration of these three senior post-holders for the year ended 31 July 2023 are set out in note 7 to the financial statements.

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Members’ Report and Financial statements for the year ended 31 July 2023

Audit and Risk Committee The Audit and Risk Committee comprises five members of the corporation (excluding the Accounting Officer and Chair) and a co-opted member. The Committee operates in accordance with written terms of reference approved by the Corporation.

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

The college’s internal auditors monitor and 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 auditors and regularity and financial statements auditors and their remuneration for audit and non-audit work as well as reporting annually to the Corporation.

The audit committee met three times in the year to 31 July 2023 as follows.

Meeting Dates Member Name

24/11/2022

23/03/2023

22/06/2023

Suzanne Duncan







James Bromiley







Richard Harrison







Michael Curry







Geoff Field



-

-

Judith Field

-

-

-

Search Committee The committee is responsible for oversight of the search process for finding any new Board Members.

Finance and General Purposes Committee The committee meets on a regular basis to make recommendations to the Audit Committee and Main board as appropriate.

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Members’ Report and Financial statements for the year ended 31 July 2023

Curriculum, Quality and Standards Committee The Committee monitors academic performance and makes recommendations to the Board of Governors in respect of areas relating to teaching, learning an assessment; quality and curriculum; equality; and the stakeholder voice. Its remit includes overseeing the College’s Self-Assessment report and monitoring progress of the Quality Improvement Plan.

The Committee meets at least once a term.

INTERNAL CONTROL Scope of responsibility The corporation is ultimately responsible for the College’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

The Corporation has delegated the day-to-day responsibility to the Principal, as Accounting Officer, for maintaining a sound system of internal control that supports the achievement of the College’s policies, aims and objectives, whilst safeguarding the public funds and assets for which she is personally responsible, in accordance with the responsibilities assigned to her in the Funding Agreement between East Durham College and the funding bodies. She is also responsible for reporting to the corporation any material weaknesses or breakdowns in internal control.

The purpose of the system of internal control The system of internal control is 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 East Durham College for the year ended 31 July 2023 and up to the date of approval of the members 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, and arrangements for compliance with legal and regulatory matters including those relating to the regularity and propriety of public funding 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 2023 and up to the date of approval of the annual report and accounts. This process is regularly reviewed by the corporation.

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Members’ Report and Financial statements for the year ended 31 July 2023

The risk and control framework The system of internal control is based on a framework of regular management information, administrative procedures including the segregation of duties, and a system of delegation and accountability. In particular, it includes: •

comprehensive budgeting systems with an annual budget, which is reviewed and agreed by the governing body

•

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

•

setting targets to measure financial and other performance

•

clearly defined capital investment control guidelines

•

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 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 Head of Internal Audit (HIA) provides the governing body with a report on internal audit activity in the College. The report includes the HIA’s independent opinion on the adequacy and effectiveness of the College’s system of risk management, controls and governance processes.

The internal audit service undertakes a planned programme a spart of a risk-based approach, which is reported and scrutinised by Audit Committee. The 22/23 audit work include work on subcontracting, health and safety and curriculum planning. There were no areas of significant weakness and College management agreed all recommendations and action plans were introduced accordingly.

The Audit Committee assesses the performance of the auditors annually against the terms and conditions of their appointment letters, along with their respective in year planning documents, which detail assessment against performance indicators.

The College’s Internal Auditors and External Auditors were both appointed from 1 st August 2018 following a suitable tending exercise. The internal auditor went out to tender in 2019/20 for a period of three years, with the option to extend for a further 2 periods of 12 months and has resulted in new internal auditors being appointed for 2020/21 onwards. The Audit Committee assesses the performance of the auditors annually on the terms and conditions of their appointment letters, along with their respective in year planning documents, which details assessment against set performance indicators.

The Audit Committee has formally reviewed the independence of its auditors and letters have been provided form the auditors confirming they remain independent within the meaning of the regulations on this matter and their professional standards. To fulfil its 29

Members’ Report and Financial statements for the year ended 31 July 2023

responsibilities regarding he independence of the external auditors, the Audit Committee has reviewed: • •

details of the senior audit personnel in the audit plan for the current year; a report from the external auditors describing their arrangements and safeguards to ensure no conflicts of interest; and the extent on non-audit services provided.

To assess the effectiveness of the external auditors, the Committee reviewed: • • •

the external auditors’ fulfilment of the agreed audit plan and variations from it; reports highlighting major issues that arose during the course of the audit; feedback form the Vice principal Finance and Business Planning that evaluated the performance of each audit team.

The audit committee has advised the Board of Governors that the Corporation has an effective framework for governance and risk management in place. The Audit Committee believes the Corporation have effective internal controls in place.

The specific areas of work undertaken by the audit committee in 2022/23 and up to the date of the approval of the financial statements are: • • • • •

Risk Managements Accounts payable Subcontracting Controls Recruitment and Induction GBPR

Risks faced by the corporation.

The College assesses all risks and has a Risk register that is categorised under each of the College’s Strategic Risks. These Strategic risks and reported under each of the college’s five Strategic Objectives: People: Design, deliver and recruit with integrity to high quality progression pathways to meet regional economic skills needs and continue to grow our income. Develop and implement our workforce development strategy.

Performance: Achieve and celebrate excellence in all our activities. Maintain very high levels of student satisfaction. Maintain financial health.

Partnerships: Continue to collaborate to support, develop and extend the regional educational skills offer to meet community and employer needs Promotion: Further develop our position as brand leader in our key markets. Continue to mobilise our student body to take positive action to support their community.

Planning: Provide sustainable, world-class facilities and resources for our students, customers, employers and staff to support our growth. Review our workflow practice in key support areas to improve our efficiency and reduce our carbon footprint.

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Members’ Report and Financial statements for the year ended 31 July 2023

Meetings of the Risk management group take place termly to review the register in terms of scoring of identified existing risks, the effectiveness of mitigating actions, the identification of new risks or the removal of existing risks. During the year special emphasis was placed on the continuing management of risk around Covid 19. The Risk management group is chaired by the principal and its membership covers expertise in finance, human resources, estates, curriculum, marketing, governance, and student support. The Register and Action Plan is monitored and discussed at every meeting of Audit Committee. The College Leadership group has responsibility for overseeing the risks and ensuring risks are managed. All risks are categorised in terms of likelihood and impact.

This year the risk register has also been integrated into a new reporting template which pulls together the strategic KPIs, risk, progress against the strategic plan and any key changes to operations across the key strategic areas of the plan. The aim of this was to make risk fully integrated into reporting and strategy.

Responsibilities under funding agreements The college has ensured that it is has submitted all returns on time, provided and retained evidence of learner data to support the claims and ensured funds are spent appropriately.

The Department for Education and Skills Funding Agency introduced new controls for the college on 29 November 2022 on the day that the Office for National Statistics reclassified colleges as public sector organisations in the national accounts. The ESFA chief executive communicated these changes to all college accounting officers and explained plans to introduce a college financial handbook in 2024. The college has reviewed its policies, procedures, and approval processes in line with the new requirements. The college is establishing systems and processes to identify and handle any transactions which DfE approval is required.

Statement from the audit committee The Audit Committee and the Accounting Officer has advised the Board of Governors that the corporation has an effective framework for governance, risk management and control and has fulfilled its statutory responsibilities for the “effective and efficient use of resources, the solvency of the institution and the body and the safeguarding of assets”.

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

the work of the internal auditors

•

the work of the executive managers within the college who have responsibility for the development and maintenance of the internal control framework; and 31

Members’ Report and Financial statements for the year ended 31 July 2023

•

comments made by the college’s financial statements auditors and the reporting accountant for regularity assurance, in their management letters and other reports.

The Accounting Officer has been advised on the implications of the result of their review of the effectiveness of the system of internal control by the Audit Committee, which oversees the work of the internal auditor and other sources of assurance, and a plan to address weaknesses and ensure continuous improvement of the system is in place.

The senior management team receives reports setting out key performance and risk indicators and considers possible control issues brought to their attention by early warning mechanisms, which are embedded within the departments and reinforced by risk awareness training. The senior management team and the Audit Committee also receive regular reports from internal audit and other sources of assurance, which include recommendations for improvement.

The Audit Committee's role in this area is confined to a high-level review of the arrangements for internal control. The Corporation's agenda includes a regular item for consideration of risk and control and receives reports thereon from the senior management team and the Audit Committee. The emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception.

In addition, the Corporation received the Financial management Report including financial KPI’s every month. This is supported by reports in connection to the financial health of the College as appliable. The Corporation also approve the Financial Regulations, which set out authorisation requirements to be adhered to for various expenditure levels. These include Board approval for any spend exceeding £250k (including VAT). In addition to the financial information presented to the Corporation, the curriculum KPI’s are presented to all Curriculum, Quality and Standards Committee meetings and all Board meetings.

Based on the advice of the Audit Committee and the Accounting Officer, the corporation is of the opinion that the college has an adequate and effective framework for governance, risk management and control, and has fulfilled its statutory responsibility for “the effective and efficient use of resources, the solvency of the institution and the body and the safeguarding of their assets”.

Going Concern After making appropriate enquiries, the Corporation considers that the College has adequate resources to continue in operational existence for the foreseeable future. A fuller explanation of which can be found in the Notes to the Accounts. 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 21 December 2023 and signed on its behalf by: 32

Members’ Report and Financial statements for the year ended 31 July 2023

David Butler Chair

Suzanne Duncan Accounting Officer

Statement of Regularity, Propriety and Compliance

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Members’ Report and Financial statements for the year ended 31 July 2023

As accounting officer, I confirm that the corporation has had due regard to the framework of authorities governing regularity, propriety and compliance and the requirements of grant funding agreements and contracts with ESFA and has considered its responsibility to notify ESFA of material irregularity, impropriety, and non-compliance with those authorities terms and conditions of funding.

I confirm on behalf of the Corporation, that after due enquiry, and to the best of my knowledge, I am able to identify any material irregular or improper use of funds by the Corporation, or material non-compliance with the framework of authorities and the terms and conditions of funding, under the Corporation’s grant funding agreements and contracts with ESFA, or any other public funder. This includes the elements outlined on the ‘’Dear Accounting Officer’’ letter of 29 November 2022 and ESFA’s bite size guides.

I confirm that no instances of material irregularity, impropriety, or funding noncompliance with the framework of authorities have been discovered to date. If any instances are identified after the date of this statement, these will be notified to ESFA.

Suzanne Duncan Accounting Officer 21 December 2023

Statement of the Chair of Governors On behalf of the Corporation, I confirm that the accounting officer has discussed their statement of regularity, propriety and compliance with the board and that I am content that it is materially accurate.

David Butler Chair of Governors 21 December 2023

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Members’ Report and Financial statements for the year ended 31 July 2023

Statement of Responsibilities of the Members of the Corporation The members of the Corporation (who act as trustees for the charitable activities of the College) are required to present audited financial statements for each financial year.

The law applicable to charities in England and the terms and conditions of the Corporation’s grant funding agreement and contracts with Education and Skills Funding Agency (ESFA) and any other relevant funding bodies, the corporation is required to prepare financial statements which give a true and fair view of the financial performance and position of the College for that period. Corporations must also prepare a strategic report which includes an operating and financial review for the year.

The bases for the preparation of the financial statements and strategic report are the Statement of Recommended Practice – Accounting for Further and Higher Education, ESFA’s College Accounts Direction, and United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards.

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 UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements • assess whether the corporation is a going concern, noting the key supporting assumptions, qualifications or mitigating actions, as appropriate • 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 strategic report, in accordance with paragraphs 3.23 to 3.27 of the FE and HE SORP, that describes what it is trying to do and how it is going about it, including information about the legal and administrative status of the corporation.

The Corporation is responsible for keeping proper accounting records which are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy, at any time, the financial position of the Corporation, and enable it to ensure that the financial statements are prepared in accordance with the Further and Higher Education Act 1992, the Charities Act 2011 and relevant accounting standards. It is responsible for taking steps that are reasonably open to it in order to safeguard its assets 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 35

Members’ Report and Financial statements for the year ended 31 July 2023

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 and that the financial transactions conform to the authorities that govern them. In addition, they are responsible for ensuring that funds from ESFA, and any other public funds, are used only in accordance with ESFA’s grant funding agreements and contracts and any other conditions, that may be prescribed from time to time by ESFA, or any other public funder, including that any transactions entered into by the corporation are within the delegated authorities following the reclassification of college corporations on 29 November 2022. Members of the corporation must ensure that there are appropriate financial and management controls in place to safeguard public and other funds and ensure they are used properly. In addition, members of the corporation are responsible for securing economic, efficient and effective management of the corporation’s resources and expenditure so that the benefits that should be derived from the application of public funds from ESFA and other public bodies are not put at risk Approved by order of the members of the corporation on 21 December 2023 and signed on its behalf by:

David Butler Chair of Governors

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Members’ Report and Financial statements for the year ended 31 July 2023

Independent Auditor’s Report on the Financial Statements Opinion We have audited the financial statements of East Durham College (the “College”) and its subsidiary (the “Group”) for the year ended 31 July 2023 which comprise the consolidated and college statements of comprehensive income, the consolidated and college balance sheets, the consolidated and college statements of changes in reserves, the consolidated statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice) and the Accounts Direction issued by the Education and Skills Funding Agency.

In our opinion the financial statements: •

give a true and fair view of the state of the Group’s and of the College’s affairs as at 31 July 2023 and of the Group’s and the College’s surplus of income over expenditure for the year then ended;

•

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•

have been prepared in accordance with the Accounts Direction issued by the Education and Skills Funding Agency.

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 group and 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.

Conclusion relating to Going Concern In auditing the financial statements, we have concluded that the governors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s or the college’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

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Members’ Report and Financial statements for the year ended 31 July 2023

Our responsibilities and the responsibilities of the governors with respect to going concern are described in the relevant sections of this report.

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. The governors are responsible for the other information contained within the Report and Financial Statements. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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 issued by the Education and Skills Funding Agency 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 East Durham College As explained more fully in the Statement of the Member of the Corporation’s Responsibilities set out on pages 35 to 36, 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 Group’s and the College’s ability to continue as a going concern, disclosing, as applicable, 38

Members’ Report and Financial statements for the year ended 31 July 2023

matters related to going concern and using the going concern basis of accounting unless the Corporation either intend to liquidate the Group or 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.

The extent to which the audit was considered capable of detecting irregularities, including fraud.

Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the financial statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit.

In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit.

However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity's operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team: •

obtained an understanding of the nature of the sector, including the legal and regulatory frameworks that the group and College operate in and how the group and college are complying with the legal and regulatory frameworks.

39

Members’ Report and Financial statements for the year ended 31 July 2023

•

inquired of management, and those charged with governance, about their own identification and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud.

•

discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the financial statements may be susceptible to fraud.

As a result of these procedures, we consider the most significant laws and regulations that have a direct impact on the financial statements are FRS 102, Further and Higher Education SORP, the College Accounts Direction published by the Education and Skills Funding Agency and tax compliance regulations. We performed audit procedures to detect non-compliances which may have a material impact on the financial statements which included reviewing financial statement disclosures and reviewing relevant correspondence with the main funding bodies.

The most significant laws and regulations that have an indirect impact on the financial statements are those which are in relation to the Education Inspection Framework under the Education and Inspections Act 2006, Keeping Children Safe in Education under the Education Act 2002 and the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018. We performed audit procedures to inquire of management and those charged with governance whether the group is in compliance with these law and regulations and inspected correspondence and inspected correspondence with licensing or regulatory authorities.

The group audit engagement team identified the risk of management override of controls and income recognition as the areas where the financial statements were most susceptible to material misstatement due to fraud. Audit procedures performed included but were not limited to testing manual journal entries and other adjustments and evaluating the business rationale in relation to significant, unusual transactions and transactions entered into outside the normal course of business, challenging judgments and estimates and review of income transactions surrounding the year end.

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.

40

Members’ Report and Financial statements for the year ended 31 July 2023

Use of our report This report is made solely to the Corporation, as a body, in accordance with the Funding Agreement published by the Education and Skills Funding Agency and our engagement letter dated 15 November 2021. Our audit work has been undertaken so that we might state to the Corporation, as a body, those matters we are engaged 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 1 St James’ Gate Newcastle Upon Tyne NE1 4AD 21 December 2023

41

Members’ Report and Financial statements for the year ended 31 July 2023

INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON REGULARITY TO THE CORPORATION OF EAST DURHAM COLLEGE AND THE SECRETARY OF STATE FOR EDUCATION ACTING THROUGH EDUCATION AND SKILLS FUNDING AGENCY Conclusion We have carried out an engagement, in accordance with the terms of our engagement letter dated 15 November 2021 and further to the requirements of the grant funding agreements and contracts with the Education and Skills Funding Agency (the “ESFA”) or those of any other public funder, to obtain limited assurance about whether the expenditure disbursed and income received by East Durham College during the period 1 August 2022 to 31 July 2023 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 2022 to 31 July 2023 have 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 (the Code) issued by the ESFA and in any relevant conditions of funding concerning adult education notified by a relevant funder.

We have complied with the independence and other ethical requirements of the FRC’s Ethical Standard and the ethical pronouncements of the ICAEW. We also apply International Standard on Quality Management (UK) 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements and accordingly maintain comprehensive systems of continuing quality management.

Responsibilities of Corporation of East Durham College for regularity The Corporation of East Durham College is responsible, under the grant funding agreements and contracts with the ESFA 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 are applied for the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. The Corporation of East Durham College is also responsible for preparing the Governing Body's Statement of Regularity, Propriety and Compliance.

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Members’ Report and Financial statements for the year ended 31 July 2023

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 Code.

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 2022 to 31 July 2023 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 grant funding agreements and contracts with the ESFA and those of any other public funder 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.

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

43

Members’ Report and Financial statements for the year ended 31 July 2023

Signed:

RSM UK AUDIT LLP Chartered Accountants 1 St James’ Gate Newcastle upon Tyne NE1 4AD 21 December 2023

44

Members’ Report and Financial statements for the year ended 31 July 2023

East Durham College Consolidated Statements of Comprehensive Income and Expenditure For the year ended 31 July 2023 Notes

INCOME Funding body grants Tuition fees and education Other grants and contracts contracts Other income Endowment and Investment income Total income EXPENDITURE Staff costs Other operating expenses Depreciation Interest and other finance costs Total expenditure Surplus (Deficit) before other gains and losses Loss on disposal of assets Surplus (Deficit) before tax Taxation Surplus (Deficit) for the year losses Remeasurement of net defined benefit pension asset/liability

Year ended 31 July 2023 Group £’000

Year ended 31 July 2022

College £’000

Group £’000

College £’000

2 3 4

19,487 1,415 2,484

19,487 1,415 2,471

17,233 1,556 641

17,233 1,556 629

5 6

2,044 44

2,044 46

1,959 (31)

1,960 (31)

25,474

25,463

21,358

21,347

15,516 8,042 1,581 225 25,364 110

15,516 8,042 1,563 225 25,346 117

15,334 5,678 1,496 185 22,693 (1,335)

15,334 5,678 1,478 185 22,675 (1,328)

110 110

117 117

7 (1,328) (1,328)

7 (1,321) (1,321)

6,260

6,260

14,810

14,810

6,370

6,377

13,482

13,489

7 8 11 9

10

24

Total Comprehensive Income for the year

All items of income and expenditure relate to continuing activities.

45

Members’ Report and Financial statements for the year ended 31 July 2023

East Durham College Consolidated and College Statement of Changes in Reserves

Group

Income and expenditure account

Pension Reserve

Revaluation Reserve

Total

£’000

£’000

£’000

£’000

Balance at 31 July 2021

8,160

(18,820)

2,144

(8,516)

Surplus/(deficit) from the income and expenditure Movement on pension reserve account

(1,328)

-

-

(1,328)

(12,980)

12,980

-

-

Other comprehensive income

14,810

-

-

14,810

Transfers between revaluation and income and expenditure

95

-

(95)

-

Total Comprehensive income Reserves

597

12,980

(95)

13,482

8,757

(5,840)

2,049

4,966

110

-

-

110

(5,750) 6,260 95

5,750 -

(95)

6,260 -

715

5,750

(95)

6,370

9,472

(90)

1,954

11,336

Balance at 31 July 2022 Surplus/(deficit) from the income and expenditure account Movement on pension reserve Other comprehensive income Transfers between revaluation and income and expenditure Total Comprehensive income Reserves

Balance at 31 July 2023

46

Members’ Report and Financial statements for the year ended 31 July 2023

East Durham College Consolidated and College Statement of Changes in Reserves

College

Income and expenditure account £’000

Pension Revaluation Reserve Reserve

Total

£’000

£’000

£’000

Balance at 31 July 2021

8,228

(18,820)

2,144

(8,448)

Surplus/(deficit) from the income and expenditure Movement on pension reserve account Other comprehensive income Transfers between revaluation and income and expenditure reserves Total Comprehensive income

(1,321)

-

-

(1,321)

(12,980) 14,810 95

12,980 -

(95)

14,810 -

604

12,980

(95)

13,489

8,832

(5,840)

2,049

5,041

117

-

-

117

(5,750)

5,750

-

-

Other comprehensive income Transfers between revaluation and income and expenditure reserves Total Comprehensive income

6,260 95

-

(95)

6,260 -

722

5,750

(95)

6,377

Balance at 31 July 2023

9,554

(90)

1,954

11,418

Balance at 31 July 2022

Surplus/(deficit) from the income and expenditure account Movement on pension reserve

47

Members’ Report and Financial statements for the year ended 31 July 2023

East Durham College Consolidated and College Balance sheets as at 31 July 2023 Notes

Group 2023 £’000

College 2023 £’000

Group 2022 £’000

College 2022 £’000

11 12

44,001 63 44,064

43,926 83 44,009

42,043 67 42,110

41,951 87 42,038

Stocks Trade and other receivables Cash at bank and in hand

13 14 20

Creditors – amounts falling due within one year Net current liabilities

16

394 876 3,136 4,406 (5,145)

394 941 3,136 4,471 (5,140)

406 1,032 3,051 4,489 (5,695)

406 1,094 3,051 4,551 (5,682)

(739)

(669)

(1,206)

(1,131)

43,325 (31,595)

43,340 (31,528)

40,904 (29,896)

40,907 (29,824)

(90) (304) 11,336

(90) (304) 11,418

(5,840) (202) 4,966

(5,840) (202) 5,041

(90) 9,472 1,954 11,336

(90) 9,554 1,954 11,418

(5,840) 8,757 2,049 4,966

(5,840) 8,832 2,049 5,041

Non current assets Tangible Fixed assets Investments

Current assets

Total assets less current liabilities Creditors – amounts falling due after more than one year Provisions Defined benefit obligations Other provisions Total net assets

17

24 19

Unrestricted Reserves Pension reserve Income and expenditure account Revaluation reserve Total unrestricted surplus

The financial statements on pages 45 to 80 were approved and authorised for issue by the corporation on 21 December 2023 and were signed on its behalf on that date by:

D Butler Chair

S Duncan Accounting Officer

48

Members’ Report and Financial statements for the year ended 31 July 2023

East Durham College Consolidated Statement of Cash Flows Notes Cash flow from operating activities Surplus/(Deficit) for the year Adjustment for non-cash items Depreciation (Increase)/decrease in stocks (Increase)/decrease in debtors Increase/(decrease) in creditors Increase/(decrease) in provisions FRS102 pension costs less contributions payable Deferred Capital grants released to income Fair value loss on investment joienturventure/associate] Adjustment for investing or financing activities Investment revaluation Interest payable Taxation paid Profit/ (Loss) on disposal of fixed assets Net cash flow from operating activities Cash flows from investing activities Deferred Capital Grants received Payments made to acquire fixed assets Cash flows from financing activities Interest paid Proceeds from borrowing Repayments of amounts borrowed

49

2022 £’000

110

(1,328)

1,581 12 155 53 102 510 (860) 4

1,496 (62) (138) 989 101 1,830 (810) -

225 1,892

31 185 (7) 2,287

15 11

2,427 (3,538) (1,111)

593 (956) (363)

9

(225) 773 (1,244) (696)

(185) (513) (698)

85

1,226

3,051 3,136

1,825 3,051

11

24 15

9

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

2023 £’000

20 20

Members’ Report and Financial statements for the year ended 31 July 2023

East Durham College Notes to the Financial Statements 1.

Statement of accounting policies and estimation techniques

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

Basis of preparation These financial statements have been prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education 2019 (the 2019 FE HE SORP), the College Accounts Direction for 2022 to 2023 and in accordance with Financial Reporting Standard 102 – “The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland” (FRS 102). 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 Corporation has the view that the College is a going concern. It is aware of the Net Liabilities position, however there are other sources of income and the financial position is monitored closely.

Basis of accounting The financial statements are prepared in accordance with the historical cost convention as modified by the use of previous valuations as deemed cost at transition for certain non-current assets.

Basis of consolidation The consolidated financial statements include the college and its subsidiaries, The College Company Limited, Houghall Farm Limited, Houghall Enterprises Limited and Durham Education Group Limited. Control is achieved where the group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Intra-group sales and profits are eliminated fully on consolidation.

In accordance with FRS 102, the activities of the student union have not been consolidated because the college does not control those activities. All financial statements are made up to 31 July 2023.

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Members’ Report and Financial statements for the year ended 31 July 2023

Going concern The activities of the college, together with the factors likely to affect its future development and performance are set out in the Strategic Report.

The financial position of the college, its cashflow, liquidity and borrowings are presented in the Financial Statements and accompanying Notes. The college currently has £4,767m of loans outstanding with bankers on terms negotiated in 2016, which is equivalent to 20% of College income. Additionally, there is £1m of uncommitted facility available for unconditional drawdown with all being secured by a fixed and floating charge on college assets.

A robust set of financial models have been applied to the college’s forecasts and financial projections (including significant stress testing on the cashflow position) for the 12 months succeeding the approval of these financial statements. Which show that the college would be able to meet its financial liabilities as they fall due. No overdraft is forecast to be required for the coming year, however, if one was required the college is confident that such a facility would be obtained from our bankers, Lloyds, who have supported such facilities in the past.

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

Recognition of income Revenue grant funding Government revenue grants include funding body recurrent grants and other grants and are accounted for under the accrual model as permitted by FRS 102. Funding body recurrent grants are measured in line with best estimates for the period of what is receivable and depend on the particular income stream involved. The final grant income is normally determined with the conclusion of the year end reconciliation process with the funding body following the year end, and the results of any funding audits. 16-18 funding is not subject to reconciliation and is therefore not subject to contract adjustments.

The recurrent grant from OFS represents the funding allocations attributable to the current financial year and is credited direct to the Statement of Comprehensive Income.

Where part of a government grant is deferred, the deferred element is recognised as deferred income within creditors and allocated between creditors due within one year and creditors due after more than one year as appropriate.

Grants (including research grants) from non-government sources are recognised in income when the college is entitled to the income and performance related conditions have been met. Income received in advance of performance related conditions being met 51

Members’ Report and Financial statements for the year ended 31 July 2023

is recognised as deferred income within creditors on the balance sheet and released to income as the conditions are met.

Capital grant funding Government capital grants are capitalised, held as deferred income and recognised in income over the expected useful life of the asset, under the accrual model as permitted

by FRS 102. 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.

Fee income Income from tuition fees is stated gross of any expenditure which is not a discount and is recognised in the period for which it is received.

Investment income All income from short-term deposits is credited to the income and expenditure account in the period in which it is earned on a receivable basis.

Agency arrangements The college acts as an agent in the collection and payment of certain discretionary support funds and any other arrangements. Related payments received from the funding bodies and subsequent disbursements to students are excluded from the income and expenditure of the college where the college is exposed to minimal risk or enjoys minimal economic benefit related to the transaction.

Accounting for post-employment benefits Post-employment benefits to employees of the college are principally provided by the Teachers’ Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS).

These are defined benefit plans, which are externally funded and contracted out of the State Second Pension.

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 qualified actuaries on the basis of valuations using a projected unit 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 recognised as an expense in the income statement in the 52

Members’ Report and Financial statements for the year ended 31 July 2023

periods during which services are rendered by employees.

Durham County Council Local Government Pension Scheme (LGPS) The LGPS is a funded scheme. The assets of the LGPS are measured using closing fair values. LGPS liabilities are measured using the projected unit credit method and discounted at the current rate of return on a high-quality 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 as incurred.

Net interest on the net defined benefit liability/asset is also recognised in the Statement of Comprehensive Income and comprises the interest cost on the defined benefit obligation and interest income on the scheme assets, calculated by multiplying the fair value of the scheme assets at the beginning of the period by the rate used to discount the benefit obligations. The difference between the interest income on the scheme assets and the actual return on the scheme assets is recognised in staff costs.

Re-measurement comprising actuarial gains and losses, the effect of the asset ceiling and the return on scheme assets (excluding amounts included in net interest on the defined benefit liability) 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. Any unused benefits are accrued and measured as the additional amount the college expects to pay as a result of the unused entitlement.

The LGPS assets are managed by the scheme trustees as scheme level and determination/allocation of assets to each individual employer in the scheme is managed by the scheme actuary. The assets are allocated to each employer for accounting purposes based on the valuation of the assets at the latest triennial valuation as adjusted for subsequent contributions received from the employer, asset returns and benefit payments made (either on a cash basis or actuarial basis).

The retirement benefit obligation recognised represents the deficit or surplus in the defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

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Members’ Report and Financial statements for the year ended 31 July 2023

Enhanced Pensions The actual cost of any enhanced ongoing pension to a former member of staff is paid by a 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 the college’s income in the year that the member of staff retires. In subsequent years a charge is made to provisions in the balance sheet.

Tangible fixed assets Tangible fixed assets are stated at cost / valuation less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its current working condition for its intended purpose.

Land and buildings Land and buildings inherited from the Local Education Authority are stated in the balance sheet at valuation on the basis of open market value for existing use. The associated credit is included in the Revaluation reserve.

On adoption of FRS 102, the college followed the transitional provision to retain the book value of land and buildings, which were revalued in 1994, as deemed cost but not to adopt a policy of revaluations of these properties in the future.

Where land and buildings are acquired with the aid of specific grants, it is capitalised and depreciated in accordance with the policy, with the related grant being credited to a deferred capital grant account and released to the Consolidated Statement of Comprehensive Income in line with the depreciation.

Finance costs, which are directly attributable to the construction of land and buildings, are capitalised as part of the cost of these assets.

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

Assets under construction Assets under construction are accounted for at cost, incurred to 31 July. They are not depreciated until they are brought into use.

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

Market value of the tangible asset has substantially improved Asset capacity increases 54

Members’ Report and Financial statements for the year ended 31 July 2023

• •

Substantial improvement in the quality of output or reduction in operating costs Significant extension of the asset’s life beyond that conferred by repairs and maintenance.

Equipment Equipment costing less than £500 per individual item is recognised as expenditure in the period of acquisition. All other equipment is capitalised at cost. Equipment inherited from the Local Education Authority is included in the balance sheet at valuation.

Capitalised equipment is depreciated on a straight-line basis over its remaining useful economic life as follows: A review for impairment of a fixed asset is carried out if events or changes in circumstances indicate that the carrying value of any fixed asset may not be recoverable.

Where equipment is acquired with the aid of specific grants, it is capitalised and depreciated in accordance with the policy, with the related grant being credited to a deferred capital grant account and released to the Consolidated Statement of Comprehensive Income in line with the depreciation.

Motor Vehicles Motor vehicles are capitalised at cost.

Where motor vehicles are acquired with the aid of specific grants, it is capitalised and depreciated in accordance with the policy, with the related grant being credited to a deferred capital grant account and released to the Consolidated Statement of Comprehensive Income in line with the depreciation.

Depreciation Depreciation is provided to write down the cost or valuation of tangible fixed assets and is provided on a straight line basis over their useful life as follows: • • • • •

Freehold buildings – not more than 50 years Building improvements – not more than 10years Land – not depreciated Motor vehicles - 4 years Equipment - 4 to 10 years

Land is not depreciated as it is believed to have an indefinite useful life.

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

Leased assets Costs in respect of operating leases are charged on a straight-line basis over the lease term to the Statement of Comprehensive Income and Expenditure. Any lease premiums 55

Members’ Report and Financial statements for the year ended 31 July 2023

or incentives relating to leases signed after 1 August 2014 are spread over the minimum lease term.

Leasing agreements which transfer to the college substantially all the benefits and risks of 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) at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as an obligation under finance leases. Assets held under finance leases are included in tangible fixed assets and depreciated and assessed for impairment losses in the same way as owned assets.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charges are allocated over the period of the lease in proportion to the capital element outstanding.

Investments Investments in subsidiaries Investments in subsidiaries are accounted for at cost less impairment in the individual financial statements.

Other investments Listed investments held fixed asset investments, are stated at fair value, with movements recognised in Comprehensive Income. Investments comprising unquoted equity instruments are measured at fair value, estimated using a valuation technique.

Inventories Inventories are stated at the lower of their cost and net realisable value, being selling price less costs to complete and sell. Where necessary, provision is made for obsolete, slow-moving and defective items. Farm stocks are professionally valued at the year end

by Youngs Chartered Surveyors, Agricultural and Industrial Valuers. Finished goods stocks are valued on an open market basis.

Cash and cash equivalents Cash includes cash in hand, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty.

Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of change in value. An investment qualifies as a cash equivalent when it has maturity of 3 months or less from the date of acquisition.

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

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Members’ Report and Financial statements for the year ended 31 July 2023

All loans, investments and short-term deposits held by the group are classified as basic financial instruments in accordance with FRS 102. These instruments are initially recorded at the transaction price less any transaction costs (historical cost). FRS 102 requires that basic financial instruments are subsequently measured at amortised cost, however the college has calculated that the difference between the historical cost and amortised cost basis is not material and so these financial instruments are stated on the balance sheet at historical cost. Loans and investments that are payable or receivable within one year are not discounted.

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

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

The college’s subsidiary companies are subject to corporation tax and VAT in the same way as any commercial organisation.

Provisions and contingent liabilities Provisions are recognised when • • •

the Group 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.

The unwinding of the discount is recognised as a finance cost in the statement of comprehensive income in the period it arises.

57

Members’ Report and Financial statements for the year ended 31 July 2023

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 measured reliably.

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

Judgements in applying accounting policies and key sources of estimation uncertainty Judgements in applying accounting policies In preparing these financial statements, management have made the following judgements: •

•

•

Determine 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 lease basis.

Determine whether there are indicators of impairment of the group’s tangible assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset.

Determining the existence of a minimum funding requirements for the Local Government Pension Scheme to be included in the asset ceiling in measuring and recognising a surplus in the scheme. This judgement is based on an assessment of the nature of the scheme as a statutory scheme and its inherent implied continuance as well as the operation of the primary and secondary contributions.

Other key sources of estimation uncertainty Tangible fixed assets, other than investment properties, 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 and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. The depreciation charge for the year was £1,555k.

• The present value of the Local Government Pension Scheme defined benefit obligation 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 24, will impact the carrying amount of the pension obligation. The actuary has used a roll forward approach which

•

58

Members’ Report and Financial statements for the year ended 31 July 2023

projects results from the latest full actuarial valuation performed on 31 March 2022 to value the pensions obligation at 31 July 2023. 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 obligation. The carrying value of the pension obligation is £90k.

2

Funding body grants

Y/end 31 July

Y/end 31 July

2023

2023

2022

2022

Group

College

Group

College

£’000

£’000

£’000

£’000

Education and Skills Funding Agency – adult education budget

2,534

2,534

2,021

2,021

Education and Skills Funding Agency – 16 -18

12,507

12,507

9,570

9,570

Education and Skills Funding Agency Apprenticeships Office

1,203

1,203

1,200

1,200

Teacher Pension Scheme contribution grant

322

322

260

260

Releases of government capital grants Equipment Contribution Releases of government capital grants Buildings

51

51

23

23

809

809

770

770

334

334

489

489

285

285

Recurrent grants

Specific grants

Grants from combined authorities Covid support funding Other

1,727

1,727

2,615

2,615

Total

19,487 19,487

17,233

17,233

59

Members’ Report and Financial statements for the year ended 31 July 2023

3

Tuition fees and education contracts

Y/end 31 July

Y/end 31 July

2023

2023

2022

2022

Group

College

Group

College

£’000

£’000

£’000

£’000

Adult education fees

-

-

Apprenticeship contracts

-

-

Fees for FE loan supported courses

845

845

1,045

1,045

Fees for HE loan supported courses

570

570

510

510

-

-

International students’ fees Total tuition fees Education contracts

1,415

1,415

1,555 -

1,555 -

Total

1,415

1,415

1,555

1,555

4

Y/end 31 July

Y/end 31 July

2023

2023

2022

2022

Group

College

Group

College

£’000

£’000

£’000

£’000

Other grants and contracts

Releases of non-SFA capital grants 1Buildings

13

-

12

-

-

-

4

4

-

-

-

-

Other grant income

2,471

2,471

625

625

Total

2,484

2,471

641

629

Releases of non-SFA capital grants Equipment Coronavirus Job Retention Scheme grant

In the prior year the college furloughed some of the catering and sports staff, who were funded by commercial activities, under the government’s Coronavirus Job Retention Scheme. The funding received in respect of 61 staff was £68k and relates to staff costs which are included within the staff costs note 7 as appropriate.

60

Members’ Report and Financial statements for the year ended 31 July 2023

5

Y/end 31 July 2023 2023

Y/end 31 July 2022 2022

Group

College

Group

College

£’000

£’000

£’000

£’000

Catering and residences

522

522

586

586

Farming activities

321

321

183

183

Sports centre

101

101

101

101

Accommodation

28

28

53

53

Childcare

346

346

355

355

Other income

726

726

681

682

Total

2,044

2,044

1,959

1,960

6

Y/end 31 July 2023 2023

Y/end 31 July 2022 2022

Group

College

Group

College

£’000

£’000

£’000

£’000

Interest receivable

48

48

-

-

Investment income

-

2

-

-

Investment fair value adjustment

(4)

(4)

(31)

(31)

Total

44

46

(31)

(31)

7

Other income

Investment income

Staff costs – Group and College

The average number of persons (including key management personnel) employed by the college during the year, described as average headcount, was: 2023

2022

No.

No.

Teaching staff

182

188

Non-teaching staff

250

266

Premises

78

57

510

511

2023

2022

£’000

£’000

Wages and salaries

11,628

10,650

Social security costs

953

860

Other pension costs

2,177

1,967

Payroll sub total

14,758

13,477

Staff costs for the above persons

61

Members’ Report and Financial statements for the year ended 31 July 2023

Restructuring costs: Contractual Non contractual

Pension costs arising from FRS 102

Total Staff costs

217

27

31

-

15,006

13,504

510

1,830

15,516

15,334

The corporation does not have any salary sacrifice arrangements in place. i) The FRS 102 costs include financing costs of £180k (2022: £310k) as detailed in note 24 Severance payments The college paid 12 severance payments in the year, disclosed in the following bands: £0 - £25,000

11

£25,000 - £50,000

1

Included in staff restructuring costs are special severance costs of £31,361 (2022: £nil).

Individually the payments were: £15,022, £10,000, £5,415 and £924.

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 College Leadership Team which comprises the Principal and holders of other senior posts (as detailed on page 20) whom the Governing Body has selected for the purposes of the articles of government of the College relating to the appointment and promotion of staff who are appointed by the Governing Body.

62

Members’ Report and Financial statements for the year ended 31 July 2023

Emoluments of key management personnel, Accounting Officer and other higher paid staff

The number of key management personnel including the Principal was: Key management personnel 2023 No.

2022 No.

2023 No.

2022 No.

7

Other staff 2023 No.

2022 No.

£30,001 to £35,000 p.a. £50,001 to £55,000 p.a.

2 The number of key management personnel and other staff who received annual £60,001 to £65,000 p.a.

1 2 emoluments, excluding employer contributions to national insurance and £70,001 to £75,000 p.a 1 pensions but including benefits in kind, in the following ranges was: £75,001 to £80,000 p.a 1 £80,001 to £85,000 p.a.

1 £85,001 to £90,000 p.a.

1 £115,001 to £120,000 p.a.

1 £120,001 to £125,000 p.a 1 £135,001 to £140,000 p.a 1 7 5 -

-

There were no amounts due to key management personnel that were waived in the year, nor any salary sacrifice arrangements in place.

Key management personnel compensation is made up as follows:

Basic salary Employer’s national insurance Benefits in kind Pension contributions Restructuring costs Total key management personnel compensation

2023 £’000 535 67 3 89 50 744

2022 £’000 398 50 2 80 530

The above emoluments include amounts payable to the Accounting Officer, who is the Principal. Their pay and remuneration is as follows: 2023 2022 £’000 £’000 Basic salary 122 117 Performance related pay and bonus Other including benefits in kind Pension contributions 23 23 145 140 63

5

Members’ Report and Financial statements for the year ended 31 July 2023

The highest paid officer was the Vice Principal Finance and Estates who received the following emoluments: 2023 Basic salary Compensation for loss of office Pension contributions

87 50 16

Total 153 The highest paid officer in the prior year was the Accounting Officer.

The governing body adopted AoC’s Senior Staff Remuneration Code in July 2019 and assesses pay in line with its principals.

The remuneration package of key management staff, including the Principal and Chief Executive, is subject to annual review by the Remuneration Committee of the governing body who benchmark the remuneration against the AOC published data and deem the package reasonable. No member of key management was involved in setting their remuneration package for the year to 31 July 2023. The remuneration package was further justified due to the fact that despite the rising inflationary pressures the college has again achieved a ‘Good’ financial health score and has attracted significant growth in student numbers which will enable the college to attain increased funding for 2024 and invest further in the college’s future.

Relationship of Principal/Chief Executive pay and remuneration expressed as a multiple 2023

2022

Principal’s basic salary as a multiple of the median of all staff *

5.97

6.28

Principal’s remuneration as a multiple of the median of all staff *

7.13

7.49

* The median calculated for all staff has been calculated using all payroll flexible /atypical staff but excludes agency staff as these are not paid via payroll.

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

64

Members’ Report and Financial statements for the year ended 31 July 2023

8

Other operating expenses 2023

2023

2022

2022

Group

College

Group

College

£’000

£’000

£’000

£’000

Teaching costs

3,707

3,707

3,502

3,502

Non-teaching costs

1,934

1,934

946

946

Premises costs

2,401

2,401

1,230

1,230

Total

8,042

8,042

5,678

5,678

Other operating expenses include:

2023

2022

£’000

£’000

Auditors’ remuneration: Financial statements audit*

43

31

Other assurance services provided by the financial statements auditor

1

1

Internal audit fees**

12

13

Hire of assets under operating leases

132

627

(Profit) /Losses on disposal of noncurrent assets Depreciation

(7) 1,581

1,496

* includes £43,000 in respect of the college (2022: £31,000) ** includes £12,000 in respect of the college (2022: £13,000) Other operating expenses (continued) 2023

Over £5000

28

5

Write offs and losses & rationale: £’000 Old student debt unsuccessfully pursued

65

Members’ Report and Financial statements for the year ended 31 July 2023

9

Interest and other finance costs – Group and College 2023

2022

£’000

£’000

On bank loans, overdrafts and other loans:

225

185

On finance leases

225 -

185 -

-

-

225

185

Net interest on defined pension liability (note 24) Total

10

Taxation – Group only

The members do not believe that the college was liable for any corporation tax arising out of its activities during either year.

11

Tangible fixed assets (Group)

Cost or valuation At 1 August 2022

Land and Buildings

Equipment

Motor vehicles

£’000

£’000

£’000

Assets in the course of construction £’000

Total

£’000

56,665

3,465

11

667

60,806

Additions

-

1,087

-

2,451

3,538

Disposals

-

-

-

Transfers

202

-

56,867

4,552

At 1 August 2022

16,284

Charge for the year

(202)

-

11

2,916

64,344

2,472

8

-

18,764

1,231

347

3

-

1,581

-

-

-

-

-

At 31 July 2023

17,515

2,819

11

-

20,345

Net book value at 31 July 2023

39,352

1,733

-

2,916

44,001

Net book value at 31 July 2022

40,379

994

3

667

42,043

At 31 July 2023 Depreciation

Disposals

66

Members’ Report and Financial statements for the year ended 31 July 2023

College

Land and buildings

Equipment

Motor vehicles

£’000

£’000

£’000

Cost or valuation Tangible fixed assets (College only) At 1 August 2022 56,209 3,437

Assets in the course of construction

£’000

Total

£’000

11

667

60,323

Additions

-

1,087

-

2,451

3,538

Disposals

-

-

-

-

-

Transfers

202

-

-

(202)

-

56,411

4,524

11

2,916

63,861

At 1 August 2022

15,921

2,444

8

-

18,373

Charge for the year

1,213

347

3

-

1,563

Elimination in respect of disposals

-

-

-

-

-

At 31 July 2023

17,134

2,791

11

-

19,936

Net book value at 31 July 2023

39,276

1,733

-

2,916

43,926

Net book value at 31 July 2022

40,287

994

3

667

41,951

At 31 July 2023 Depreciation

Included with the net book value of freehold land and buildings is land at a valuation of £1,985k (2022: £1,985k) which is not subject to depreciation. The net book value of land and buildings includes an amount of £Nil (2022: £Nil) in respect of assets held under finance leases. The depreciation charge on these assets for the year was £Nil (2021/22: £Nil). Inherited land and buildings were valued in 1994 at open market value for existing use by the local District Valuer in accordance with the RICS Statement of Asset Valuation Practice and guidance notes. Other tangible fixed assets inherited from the Local Education Authority at incorporation have been valued by the Corporation on a depreciated replacement cost basis with the assistance of independent professional advice. Land and buildings with a net book value of £2,055k (2022: £2,055k) have been funded from Local Education Authority sources. Should these assets be sold, the College would have to use the sales proceeds in accordance with the Financial Memorandum with the SFA.

67

Members’ Report and Financial statements for the year ended 31 July 2023

If fixed assets had not been revalued before being deemed as cost on transition they would have been included at the following historical cost amounts: £’000 Cost

Nil

Aggregate depreciation based on cost

Nil

Net book value based on cost

Nil

12

Non-current investments

Investments in subsidiary companies Other investments – Listed

College 2023 £’000 20 63

College 2022 £’000 20 67

83

87

Total

12

Non-current investments (continued)

The following companies are wholly owned and registered in England and Wales, the registered office being at East Durham College, Willerby Grove, Peterlee, Co. Durham, SR8 2RN. Company

Activity

Issued Share Capital

£

The College Company Limited

Engage in commercial activities

10,000 £1 Ordinary Share

10,000

Houghall Farm Limited

Engage in agricultural activities

422,126 £1 Ordinary Share

*10,000

Houghall Enterprises Limited

Engage in commercial activities

1 £1 Ordinary Share

1

*The value of these shares has been reduced to reflect the underlying net assets. The Durham Education Support services 1 £1 Ordinary Share 1 directors believe that the carrying value of the investments are supported by their Group Limited for overseas underlying net assets. The Market value of the listed shares at 31 July 2023 was £63k activities (2022: £67k)

68

Members’ Report and Financial statements for the year ended 31 July 2023

13 Stock

Group & College 2023

Group & College 2022

£’000

£’000

Farm stock 14

314

329

Trade and other receivables Group

College

Group

College

2023

2023

2022

2022

£’000

£’000

£’000

£’000

Amounts falling due within one year: Trade receivables

277

277

355

355

-

65

-

63

Prepayments and accrued income

206

206

451

451

Amounts owed by the ESFA

335

335

207

207

Taxation and social security

-

-

2

2

Other debtors

58

58

16

16

Total

876

941

1,031

1,094

Amounts owed by group undertakings: Subsidiary undertakings

General consumables Gen

69

Members’ Report and Financial statements for the year ended 31 July 2023

15 Capital Grant

Group

College

SFA Grants £’000

Other Grants £’000

Total £’000

SFA Grants £’000

Other Grants £’000

Total £’000

Land and buildings

16,858

9,298

26,156

16,858

9,213

26,071

Equipment

635

6

641

635

6

641

17,493

9,304

26,797

17,493

9,219

26,712

Land and buildings

651

-

651

651

-

651

Equipment

1,776

-

1,776

1,776

-

1,776

Total

2,427

-

2,427

2,427

-

2,427

Land and buildings Equipment

809

-

809

791

-

791

48

3

51

48

3

51

Total

857

3

860

839

3

842

16,700

9,298

25,998

16,718

9,213

25,931

Equip

2,363

3

2,366

2,363

3

2,366

Total

19,063

9,301

28,364

19,081

9,216

28,297

At 1 August 2022

Total Cash received:

Release to Statement of Comprehensive income:

At 31 July Equipment 2023 Total Land and buildings

70

Members’ Report and Financial statements for the year ended 31 July 2023

16

Creditors: Amounts falling due within one year

Bank Loans

Group

College

Group

College

2023

2023

2022

2022

£’000

£’000

£’000

£’000

505

505

1,252

1,252

Deferred capital grants

1,031

1,031

887

874

Trade payables

1,522

1,522

1,234

1,234

Other creditors

373

369

215

215

-

-

Amounts owed to group undertakings: Subsidiary undertakings Amounts owed to ESFA

-

-

407

407

142

142

159

159

Accruals and deferred income

1,571

1,571

1,541

1,541

Total

5,145

5,140

5,695

5,682

Group

College

Group

College

2023

2023

2022

2022

£’000

£’000

£’000

£’000

4,262

4,262

3,986

3,986

Deferred income - government capital grants

27,333

27,266

25,910

25,838

Total

31,595

31,528

29,896

29,824

Group

College

Group

College

2023

2023

2022

2022

£’000

£’000

£’000

£’000

Other taxation and social security

17

Creditors: amounts falling due after one year

Bank loans

18

Maturity of debt

(a)

Bank loans and overdrafts

Bank loans and overdrafts are repayable as follows:

In one year or less

505

505

1,252

1,252

Between one and two years

518

518

414

414

Between two and five years

1,644

1,644

1,333

1,333

In five years or more

2,100

2,100

2,239

2,239

Total

4,767

4,767

5,238

5,238

71

Members’ Report and Financial statements for the year ended 31 July 2023

The Original principal borrowed is split, £6.3m repayable at a fixed interest rate of 4.605%, £2.1m repayable at a variable interest rate of 0.35% above the Bank’s rate. The full loan is unsecured and repayable by instalments. The college commenced repayments of principal against this loan on 1 October 2009, from when it was repayable over 22 years.

A further loan was entered into in 2016 to part fund the development of the Houghall campus. This loan of £1.7m is repayable at a variable interest rate of 2.75% above LIBOR. The balance of this loan was repaid in July 2023 when it was replaced by a loan from the Department for Education. The Department for Education loan of £0.8M is repayable by instalments over 9 years at the PWLB standard interest rate.

19

Provisions Defined benefit obligations

Dilapidation provisions

£’000

£’000

£’000

At 1 August 2022

(5,840)

(202)

(6,042)

Expenditure in the period Additions in period

5,750

(102)

5,648

-

-

-

(90)

(304)

(394)

At 31 July 2023

Total

Defined benefit obligations relate to the liabilities under the college’s membership of the Local Government Pension Scheme. Further details are given in note 24.

20 Cash and cash equivalents At 1 August 2022 £’000

Cash flows

At 31 July 2023 £’000

£’000

Cash and cash equivalents

3,051

85

3,136

Total

3,051

85

3,136

72

Members’ Report and Financial statements for the year ended 31 July 2023

21

Capital and other commitments Group and College

Commitments contracted for at 31 July 22

2023

2022

£’000

£’000

640

168

Lease obligations

At 31 July the college had minimum lease payments under non-cancellable operating leases as follows: Group and College 2023

2022

£’000

£’000

Future minimum lease payments due Land and buildings Not later than one year

193

193

Later than one year and not later than five years

580

581

Later than five years

773

774-

Other Not later than one year

224

374

Later than one year and not later than five years

302

195

Later than five years

-

Total lease payments due

23

526

569

1,300

1,343

Contingencies

There are no contingent liabilities to be reported this year (2022: £Nil).

24

Defined benefit obligations

The College’s employees belong to two principal post-employment benefit plans: the Teachers’ Pension Scheme England and Wales (TPS) for academic and related staff; and the Durham County Council Local Government Pension Scheme (LGPS) for non-teaching staff. Both are multi-employer defined-benefit plans.

The pension costs are assessed in accordance with the advice of independent qualified actuaries. The latest formal actuarial valuation of the TPS was as at 31 March 2020 and of the LGPS 31 March 2022.

73

Members’ Report and Financial statements for the year ended 31 July 2023

Total pension cost for the year

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

2023

2022

£000

£000

1,071

880

Contributions paid

976

1,030

FRS 102 (28) charge

510

1,520

Charge to the Statement of Comprehensive Income Enhanced pension charge to Statement of Comprehensive Income Total Pension Cost for Year within staff costs

1,486

2,550

-

-

2,557

3,430

Contributions amounting to £110k (2022: £113k) were payable to DCC and of £124k (2022: £102k) to TPS at 31 July. Both amounts 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 2014. These regulations apply to teachers in schools, colleges and other educational establishments. Membership is automatic for teachers and lecturers at eligible institutions. Teachers and lecturers are able to opt out of the TPS. The TPS is an unfunded scheme and members contribute on a ’pay as you go‘ basis – these contributions, along with those made by employers, are credited to the Exchequer under arrangements governed by the above Act. Retirement and other pension benefits are paid by public funds provided by Parliament.

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.

Valuation of the teachers’ pension scheme.

The latest actuarial valuation was carried out as at 31 March 2020 and in accordance with The Public Service Pensions (Valuation and Employer Cost Cap) Directions 2023 and the Employer Contributions Rate was assessed using the agreed assumptions in line with the

74

Members’ Report and Financial statements for the year ended 31 July 2023

Directions and was accepted at the original assessed rate as there was no cost control mechanism breach.

The key results of the valuation are: -

Total scheme liabilities for service (the capital sum needed at 31 March 2020 to meet the stream of future cash flows in respect of benefits earned) of £262 billion.

Value of notional assets (estimated future contributions together with the proceeds from the notional investments held at the valuation date) of £222 billion.

Notional past service deficit of £39,8 billion (2016: £22 billion) Discount rate is 1,7% in excess of CPI (2016: 2,4% in excess of CPI (this change has had the greatest financial significance))

As a result of the valuation, new employer contribution rates have been at 28,6% of pensionable pay from 1 April 2024 until 31 March 2027 (compared to 23,68% under the previous valuation including a 0,08% administration levy. DfE agreed to pay a Teachers Pensions employee contribution grant to cover the additional costs during the 2021-22 academic year, and currently through to July 2024.

The pension costs paid to TPS in the year amounted to £1,071k (2022: £880k).

Local Government Pension Scheme The LGPS is a funded defined-benefit plan, with the assets held in separate funds administered by Durham County Council Local Authority. The total contributions made for the year ended 31 July 2023 were £1,283k (2022: £1,320k), of which employer’s contributions totalled £976 (2022: £1,030k) and employees’ contributions totalled £307k (2022: £290k). The agreed contribution rates for future years are 19.5% for the college and range from 5.5% to 7.5% for employees, depending on salary according to a national scale.

The following information is based upon a full actuarial valuation of the fund at 31 March 2019 updated to 31 July 2023 by a qualified independent actuary.

At 31 July 2023

At 31 July 2022

Rate of increase in salaries

3.60%

3.60%

Future pensions increases

2.60%

2.60%

Discount rate for scheme liabilities

5.00%

3.40%

Inflation assumption (CPI)

2.60%

2.60%

Pensions accounts revaluation rate

2.60%

2.60%

75

Members’ Report and Financial statements for the year ended 31 July 2023

The college’s share of the assets in the plan at the balance sheet date and the expected rates of return were:

At 31 July 2023

At 31 July 2022

Years

Years

Retiring today Males

21,7

22,1

Females

22,9

24,2

Males

23,9

23,2

Females

25,0

25,7

Retiring in 20 years

The college’s share of the assets in the plan at the balance sheet date and the expected rates of return were: Long-term rate of return expected at 31 July 2023

Fair Value at 31 July 2023

Longterm rate of return expected at 31 July 2022

Fair Value at 31 July 2022

Equity instruments

50.9%

15,150

54.70%

15,694

Debt instruments

10.6%

3,150

11.30%

3,242

Corporate bonds

9.4%

2,800

4.40%

1,262

Property

7.5%

2,230

8.40%

2,410

Cash

2.0%

0,600

1.40%

402

Multi Asset credit

15.3%

4,550

14.50%

4,160

Other

4.3%

1,280

5.30%

1,520

Total fair value of plan assets Weighted average expected long term rate of return

£’000

29,760 3.5%

Actual return on plan assets

28,690 34.50%

630

76

£’000

(2,290)

Members’ Report and Financial statements for the year ended 31 July 2023

The amount included in the balance sheet in respect of the defined benefit pension plan and enhanced pensions benefits is as follows: 2023

2022

£’000

£’000

Fair value of plan assets

29,760

28,690

Present value of plan liabilities

(29,220)

(34,440)

Restriction to level of asset ceiling

(540)

-

Present value of unfunded liabilities

(90)

(90)

Net pensions asset/(liability) (note 19)

(90)

(5,840)

The value of the college’s share of net assets has been restricted due to the effect of the asset ceiling being the maximum value of the present economic benefits available in the form of the unconditional right to reduced contributions from the plan. A corresponding charge has been made to other comprehensive income in the period.

Amounts recognised in the Statement of Comprehensive Income in respect of the plan are as follows: 2023 2022 £’000

£’000

Amounts included in staff costs Current service cost

1,380

2,550

Past service cost

70

-

Financing costs – interest on net defined benefit liability (asset)

180

310

1,630 (1,120)

2,860 (1,030)

Total

510

1,830

Allowance for administration expenses included in current service

20

20

20

20

Asset gains /(losses) arising during the period

(350)

(2,810)

Liability gains / (losses) arising during the period

11,000

17,620

Total Employer contribution

Amount recognised in Other Comprehensive Income

77

Members’ Report and Financial statements for the year ended 31 July 2023

Changes in assumptions underlying the present value of plan liabilities

370

-

(4,220)

-

Adjustment in respect of paragraph 28.22

(540)

-

Amount recognised in Other Comprehensive Income

6,260

14,810

Actuarial gains/(losses) due to liability experience

Movement in net defined benefit asset/(liability) during year

2023

2022

£’000

£’000

(5,840)

(18,820)

Current service cost

(1,380)

(2,550)

Employer contributions

1,120

1,030

Past service cost

(70)

-

Net interest on the defined (liability)/asset Actuarial gain or (loss) due to liability Liability experience

(180)

(310)

6,260

14,810

(90)

(5,840)

Net defined benefit (liability)/asset in scheme at 1 August Movement in year:

Net defined benefit asset/(liability) at 31 July Asset and Liability Reconciliation

2023

2022

£’000

£’000

Defined benefit obligations at start of period

34,440

49,460

Current service cost

1,380

2,550

Interest cost

1,160

830

300

290

(11,000)

(17,620)

Changes in the present value of defined benefit obligations

Contributions by Scheme participants Experience gains and losses on defined benefit obligations Changes in financial assumptions

(370)

Estimated benefits paid

(980)

(980)

70

-

Actuarial (gain)loss due to liability experience

4,220

-

Defined benefit obligations at end of period

29,220

34,530

Past Service cost

Changes in fair value of plan assets

78

Members’ Report and Financial statements for the year ended 31 July 2023

Fair value of plan assets at start of period

28,690

30,640

Interest on plan assets

980

520

Return on plan assets

(350)

(2,810)

Employer contributions

1,120

1,030

Contributions by Scheme participants

300

290

Estimated benefits paid

(980)

(980)

29,760

28,690

Fair value of plan assets at end of period 25

Related party transactions

Owing to the nature of the college’s operations and the composition of the board of governors being drawn from local public and private sector organisations, it is inevitable that transactions will take place with the organisations in which a member of the board of governors may have an interest. All transactions involving such organisations are conducted at arm’s length and in accordance with the College’s financial regulations and normal procurement procedures.

Endeavour (Also known An institution in which S Duncan, Principal, C Tomlinson, the as Apollo Schools Trust) Vice-Principal Curriculum and Performance has an interest.

Sales in the year amounted to £141k (2022: £105k). The trade debtors balance outstanding at the year end was £39k (2022: £37k). Purchases in the year amounted to £Nil (2022: £ Nil).

The trade creditors balance outstanding at the year end was £Nil (2022: £ Nil) Association of colleges

An institution in which S Duncan, Principal, has an interest.

Sales in the year amounted to £Nil (2022: £Nil) and purchases to £26k (2022: £21k). The trade debtor balance outstanding at the year end was £Nil (2022: £Nil). The trade creditors balance outstanding at the year end was £22k (2022: £21k)

Landex

An institution in which S Duncan, Principal, has an interest.

Purchases in the year amounted to £13k (2022: £9k). The trade creditors balance outstanding at the year end was £Nil (2022: £5k)

Middlesbrough County An institution in which J Bromiley, Governor, has an interest.

Council Sales in the year amounted to £Nil (2022: £Nil. The trade debtor balance outstanding at the year end was £Nil (2022: £Nil).

Shotton Hall School (A An institution in which S Duncan, Principal, has an interest. school within North East Sales in the year amounted to £32k (2022: £105k). The trade Learning Trust) 79

Members’ Report and Financial statements for the year ended 31 July 2023

debtors balance outstanding at the year end was £Nil (2022: £Nil) Teesdale School (A An institution in which S Duncan, Principal, has an interest. school within North East Sales in the year amounted to £Nil (2022: £Nil). Trade Learning Trust) debtors balance outstanding at the year end was £Nil (2022: £Nil).

University Sunderland

of An institution in which J Macintyre and D Butler, Governors, have an interest. Sales in the year amounted to £411k (2022: £343k). The trade debtor balance outstanding at the year end was £2k (2022: £Nil). Purchases in the year amounted to £14k (2022: £40k). The trade creditors balance outstanding at the year end was £Nil (2022: £2k).

Land Based Assessment An institution in which S Duncan, Principal, has an interest.

Ltd Sales in the year amounted to £Nil (2022: £10k). The trade debtors balance outstanding at the year end was £Nil (2022: £5k)

26

Amounts disbursed as agent - Learner support funds 2023

2022

£’000

£’000

Balance b/fwd

(15)

(25)

ESFA Grants

1,097

911

-

-

1,082

886

Disbursed to students

(1,045)

(860)

Administration costs

(51)

(41)

Balance unspent as at 31 July, included in creditors

(14)

(15)

Interest earned

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

80