East Durham College - Members Report and Financial Statements 2019-20

Members' Report and Financial Statements For the Year Ended 31 July 2020

Contents Page number Strategic Review

2

Operating and Financial Review

2

Key Management personnel and Professional Advisers

12

Statement of Corporate Governance and Internal Control

13

Statement of Regularity, Propriety and Compliance

22

Statement of Responsibilities of the Members of the Corporation

23

Independent

auditors' report to the Corporation of East Durham College

(the "institution") Independent

24

Reporting Accountant's Assurance Report on Regularity to the

Corporation of East Durham College and the Secretary of State for

26

Education acting through the Education and Skills Funding Agency

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Consolidated Statements of Comprehensive Income

28

Consolidated and College Statement of Changes in Reserves

29

Consolidated and College Balance Sheets as at 31 July 2020

30

Consolidated Statement of Cash Flows

31

Notes to the Financial Statements

32

East Durham College

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Members' Report and Financial Statements For the Year Ended 31 July 2020

Strategic Review Operating and Financial Review Nature, Objectives and Strategies: The members present their report and the audited Consolidated Financial Statements for the year ended 31 July 2020.

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 Governors reviewed the College's mission as part of a review of the whole Strategic Plan during 2018/19 and adopted the following mission statement:

To be a centre of learning excellence, providing an outstanding experience for all students, generating economic and social prosperity for the region we proudly serve. Public Benefit East Durham College is an exempt charity under Part 3 of the Charities Act 2011 and following the Machinery of Government changes in July 2016 is regulated by the Secretary of State for Education. The members of the Governing Body, who are trustees of the charity, are disclosed in the Statement of Corporate Governance and Control. In setting and reviewing the College's strategic objectives, the Governing Body has had due regard for the Charity Commission's guidance on public benefit and particularly upon its supplementary guidance on the advancement of education. The guidance sets out the requirement that all organisations wishing to be recognised as charities must demonstrate, explicitly, that their aims are for the public benefit. In delivering its mission, the College provides the following identifiable public benefits through the advancement of education: • • • • • •

High-quality teaching Widening participation and tackling social exclusion Excellent employment record for students Strong student support systems Links with employers, industry and commerce. Links with Local Enterprise Partnerships (LEPS)

The many and varied ways in which the college delivers public benefit are outlined in the various parts of these statements. As part of the changes necessary as a result of COVID 19 the college premises were closed during the period from mid-March 2020 to early June 2020. However during this period we continued to deliver online learning to our learners wherever possible and developed a blended approach to the use of on-line and classroom based teaching.

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Members' Report and Financial Statements For the Year Ended 31 July 2020

Implementation

of strategic plan

At the end of 2018/19 the College adopted a new strategic plan for the period August 2019 to July 2022. This strategic plan includes property and financial plans. The Corporation monitors the performance of the College against these plans. The plans are regularly reviewed and updated. The College's continuing strategic objectives are to ensure that: •

East Durham College is committed to delivering outstanding, challenges and supports all students to positively progress

inclusive education

that

The College is on target for achieving these objectives. The College's specific objectives for 2019/20 and achievement of those objectives is addressed below. • • • • • • • •

• • • • •

•

Provide high quality, innovative and inspiring teaching and learning that enables excellence and enhances our reputation Continually improve the performance of our students Provide high quality, integrated and timely student learning support services Develop further and promote our 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 arrangements complement our specialisms and add capacity Develop effective partnerships and respond to the stated needs of local stakeholders, including schools, the Local Economic Partnership, local politicians and decision-makers, business and industry Provide opportunities for all students to develop the employability and enterprise skills they need to achieve their career potential Complete the physical redevelopment of the Houghall campus, with supporting curriculum expansion Continually review College services to produce efficiency savings, improving financial resilience Provide a supportive environment in which all 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 that our financial strategy supports the resourcing of our strategic plan and enhances our financial sustainability

Performance Indicators Key performance Indicator Operating surplus/sector % of income

Measure/Target

Actual for 2019/20

EBITDA as

Staff costs as % of income (excl FRS 102 Pension costs) Adjusted current ratio Borrowing as % of income

3%

3.34%

65%

64.16%

>1 <40% Requires Improvement

Financial Health Grade * *(Equivalent to Satisfactory under the previous terminology)

0.77 34.41% Requires Improvement

*

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 C'ESFA"). The College is assessed by the ESFA as having a "Requires Improvement" grade which is the equivalent of a "Satisfactory" financial health grading under the

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Members' Report and Financial Statements For the Year Ended 31 July 2020

previous terminology. Whilst the current rating, is considered an acceptable outcome, the College is aiming to improve upon this rating in future years. East Durham College's financial objectives were to: • • • •

Generate a surplus of income over expenditure for the year before the impact of the actuarial loss in respect of pension funding required under FRS 102. Continue to improve the College's financial health Improve the College's short term liquidity Ensure the College stayed within the parameters of the banking covenants

The College has delivered these objectives and specifically for the year ended 31 July 2020: Deficit for the year before Actuarial Losses Total Comprehensive Income for the Year Financial Health

Cash in Bank Banking Covenants

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East Durham College

(£1,021k)

(£7,611k) Requires Improvement (Equivalent to Satisfactory previous terminology)

under

£747k Met.

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Members' Report and Financial Statements For the Year Ended 31 July 2020

Financial Position: Group Financial Results The consolidated group deficit before tax for 2019/20 before the effect of actuarial gains / (losses) in respect of the pension scheme was £1,021k (2018/19 deficit £1,050k). This is after additional costs arising from FRS 102 relating to pension costs of £1,120k (2018/19 £1,400k) have been applied. The total comprehensive income for 2019/20 is E(7,611)k compared to E(2,950)k in 2018/19. The group has accumulated reserves of E9,851k (2018/19 E9,752k) before the pension reserve. The pension liability has increased by E7,710k (2018/2019 had an increase of £3,300k) in the year to E20,890k. The closing cash balance was E747k (2018/19 E649k). The College has, during the year seen the student accommodation associated with phase two of the development at the Houghall campus, which was completed in 2018/19, come into use as part of the plans to fully modernise the entire site, which originally opened in 1938. As part of the planning conditions relating to these developments the College has invested in works at its Houghall site. In 2019/20 other non-land and building capital expenditure additions amounted to E282k. The College continues to have a significant reliance on the education sector funding bodies for its principal funding source, largely from recurrent grants. In 2019/20 the Education and Skills Funding Agency (ESFA) provided 74.50% (2018/19 79.58%) of the Group's total income. The results for 2019/20 include adjustments for Financial Reporting Standard 102 (FRS102) for pension costs of £1,120k (Note 7 to the accounts). After these are removed the group operating profit for the year is a surplus of E99k.

Subsidiary Financial Results East Durham College has four subsidiary companies: The College owns 100% of the issued ordinary shares of Houghall Farm Limited, a company incorporated in Great Britain and registered in England and Wales. The principal activity of Houghall Farm Limited is the management of the College's farming activities. The College owns 100% of the issued ordinary shares of Houghall Enterprises Limited, a company incorporated in Great Britain and registered in England and Wales. The principal activity of Houghall Enterprises Limited is the carrying out of commercial activities which are ancillary to the College's principal activities. The College owns 100% of the issued ordinary shares of 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 the carrying out of commercial activities which are ancillary to the College's principal activities. The College owns 100% of the issued ordinary shares of Durham Education Group Limited, a company incorporated in Great Britain and registered in England and Wales. The principal activity of Durham Education Group Limited is to market and operate all activity associated with international student recruitment and learning. In 2019/20 The College Company Limited made a loss before tax of E7k (2018/19 loss of E7k). Houghall Farm Limited, Houghall Enterprises Limited and Durham Education Group Limited were dormant.

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

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Members' Report and Financial Statements For the Year Ended 31 July 2020

The College has a separate treasury management Regulations.

policy in place, contained within the Financial

Short term borrowing for temporary revenue purposes is authorised by the Principal. All other borrowing requires the authorisation of the Corporation and complies with the requirements of the Financial Memorandum.

Cash Flows and liquidity During the year cash inflow from operations was £936k (2018/19 the year by £98k (2018/19 decrease of £201k).

£801k) and cash increased in

During the year £329k of Bank debt has been repaid resulting £6,082k.

in the yearend balance being

Reserves Policy The College aims to maintain their reserves at a sufficient level to support the long term viability and financial stability of the College. This is considered to be where reserves excluding pension liability exceed annual other operating expenditure for the year. At the year end the College group had reserves of £9,8s1k an increase of £99k from the balance as at 31 July 2019 excluding the Pension Reserve. The Pension Reserve increased from a deficit of £13,180k at 31 July 2019 to £20,890k by 31 July 2020.

Current and Future Business Performance: Financial health Despite the impact of Covid 19 the college has continued to build on its financial strength during the year and has seen the successful utilisation of stage 2 of the Houghall development involving the development of student residential accommodation on the site which became operational in September 2018.

Student Numbers In 2019/20 the College has delivered activity worth £11,693k in funding body main allocation funding (2018/19: £12,s22k). The College had 6016 starts funded by the ESFA (2018/19: 5,721).

Student Achievements Students continue to prosper at the College. We maintained contact with the vast majority of students to allow them to achieve in spite of the nationallockdown as a result of Covid-19. In 2019/20 achievement rates are expected to be high and exceed the previous year (2018/19: 78.3%). Pass rates in GCSE maths and English have increased significantly by 20% points on the previous year and Functional Skills - Maths and English pass rates remain the same due to a significant cohort of students sitting exams in 2020/21 academic year due to changes in assessment due to lockdown.

Curriculum Developments The College continued to deliver a curriculum with sufficient breadth to meet the needs of its community in 2019/20. In line with the strategic plan target to grow specific areas of land-based provision, we increased applications by 44% in areas other than animal care; and by 2% in animal care, throughout the year. The Animal Science and Welfare degree delivered in partnership with Teesside University welcomed its first year two students and we gained approval to run an additional degree in conjunction with the Royal Agricultural University commencing in 2020/21. Apprenticeship provision recruited well despite lockdown with Horticulture continuing to grow whilst other areas slowed slightly. The Business Development Team continued to work during lockdown securing levy based business that will come to fruition during 2020/21. We worked hard on implementation plans with all apprenticeship subject areas prepared to deliver standards in line with the deadline date of 31st July 2020. We are also delighted to be part of the North East Institute of Technology, one of only 12 across the country, focussing on construction and advanced

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Members' Report and Financial Statements For the Year Ended 31 July 2020

manufacturing. This brought with it significant capital investment that will allow us to purchase cutting edge technology in GPS farming, hybrid and electric vehicles and engineering. Many of the students in college have previous low attainment and, in some instances, have also had poor experiences in the education system. The College offers a broad range of programmes to students from a range of backgrounds and has particular expertise in those returning to learning after a period away. The College continues to work closely with employers and Jobcentre Plus to ensure a good range of provision in the workplace, and pre-employment, including an expanding range of Apprenticeship opportunities. Access provision was further enhanced by moving to specific pathways that lead to sector based HE progression and jobs. These pathways included Education, Social Sciences, Science and Nursing and Midwifery. The recruitment of 14-16 year aids grew in 2019/20 with the opening of an additional centre at the Houghall Campus with 54 directly recruited young people going into Engage having being referred from local feeder schools. This was further enhanced by 58 electively home education young people who studied GCSE's in maths, English and science at Willerby Grove.

Payment Performance The Late Payment of Commercial Debts (Interest) Act 1998, which came into force on 1 November 1998, requires Colleges, in the absence of agreement to the contrary, to make payments to suppliers within 30 days of either the provision of goods or services or the date on which the invoice was received. The target set by the Treasury for payment to suppliers within agreed payment terms or 30 days as appropriate is 95%. During the accounting year 1 August 2019 to 31 July 2020, the College paid n.8% of its invoices within 30 days (2018/19 78.5%). Although there was a slight increase in the length of time to pay creditors, it is worth noting this was achieved despite the difficulties of the remote working made necessary due to Covid 19. The College will aim to improve the payment performance in the coming year.

Future Developments The Board of Governors approved a strategic plan for the three-year period commencing 1 August 2019. This included a change to the mission statement but still recognised the need for the College to remain focused upon its core business, whilst retaining the nimbleness and flexibility to respond to the challenges of the Comprehensive Spending Review, the rapidly changing intervention policy, the slow take up of the apprenticeship levy and the general uncertainty as to the impact of Covid 19 upon the economy in general. The development of higher education provrsion within land based and higher-level technical qualifications in skills shortage areas, remains a strategic focus for the college and will be delivered via the Institute of Technology and across curriculum areas. We were also successful in a bid to deliver T-Levels, starting in September 2022, focussing on Digital, Engineering, Healthcare and Science and Education.

Resources: The College has various resources of both a current and non-current pursuit of its strategic objectives.

nature that it can deploy in

Financial The group has f9.8sm (2018/19 f9.7sm) of net assets and reserves before accounting for pension liabilities of f20.89m (2018/19 f13.18m) after taking into account borrowings of f6.08m (2018/19 f6.41m).

People The College employs 361 people (339 in 2018/19) whom 133 (123 in 2018/19) are teaching staff.

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East Durham College

people (expressed as full time equivalents), of

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Members' Report and Financial Statements For the Year Ended 31 July 2020

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 external 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 and higher education delivered within the College. The College was inspected by Ofsted in January 2018 and received a 'Good' rating. The report stated that the college had a clear strategic direction, that we work particularly well with employers, the local enterprise partnership and other partners to ensure that our provision is responsive to local and regional demands. We were also part of an Ofsted review of remote and online learning in June 2019 to ascertain what worked well to ensure good practice was shared across the sector. Feedback was positive and we will use this as a base to develop further those areas of strength.

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 then implemented and the subsequent year's appraisal will review their effectiveness and progress against risk mitigation actions. In addition to the annual review, the 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 the 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 significant risk. The Corporation receives regular reports updating it as 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 non-financial implications of risk. A college risk management strategy was adopted by the Board of Governors and implementation of the strategy is subject to scrutiny at each Audit Committee and at Full Board meetings. During the year the importance 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.

Failure to deliver a vibrant teaching and learning environment and enhances our reputation

that enables excellence

The College must be continually improving our achievements and promoting the positive reputation of the College to enhance our reputation and make us a desirable study destination. Recent positive results and promoting the dramatic improvement on the Houghall campus all help to ensure that

East Durham College

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Members' Report and Financial Statements For the Year Ended 31 July 2020

we minimise this risk. This is supported by ensuring we operate a resilient quality assurance programme with values embedded throughout the staff structure.

Failure to innovate financial viability

and respond,

improving

efficiency

and effectiveness

to ensure

The College actively manages their resources to ensure the continuing financial viability of the college. This includes taking proactive steps to plan for the future as demonstrated by the capital programmes being planned and managed across the multi campus site. Regular updates and reports to key personnel and Board ensure that progress is monitored and tracked throughout the year. The enhancement of links with local employers has helped to strengthen links that will reduce the exposure risk arising from the changing apprenticeship environment.

Failure to add value and support the prosperity community the College serve

of the social, economic and physical

The College through regular contact with stakeholders aims to ensure that this risk is minimised by ensuring we are responsive to changes in their needs and the impact we have on the wider community. This is balanced with, and informed by, our ability to be responsive to changes in both government policy and local requirements through our close working relationships with other teaching establishments, the LEP and others. This has been demonstrated to be successful by the results of the recent Area Review exercise.

Failure to develop a highly skilled, innovative, inclusive and flexible workforce. The College has a system of business continuity planning which means that the risk associated with the departure of key staff is minimised by robust succession planning and a high level of emphasis on supporting and developing our own staff. All staff are aware of and support the need to be innovative and flexible in both our teaching styles and working practices.

Failure to safeguard the future viability

and positioning of the College

The College is an active participant in education sector bodies such as Landex and AOC which both help to assist us in implementing national polices and providing a voice to influence national decision makers. The recent Area Based Review has also helped to minimise this risk as providing a good sign post of governmental thoughts and objectives which we are able to take into consideration as part of our risk mitigation strategies.

Failure to effectively

manage the impact of COVIO on the College

The College implemented a separate risk management process looking specifically at the impact of COVID and how to manage the associated risks. As a consequence of which the College has been able, subject to national and local requirements, been able to predominantly deliver face to face teaching while still maintaining a safe environment for staff and learners. As a result of which the College is confident that it can implement appropriate measures to manage any future risks arising from the pandemic.

Stakeholder relationships In line with other colleges and with universities, These include: • • • • • • • • • •

East Durham College has many stakeholders.

Students; Education sector funding bodies; Staff; Local employers (with specific links); Local authorities; Local Enterprise Partnerships (LEPs); The local community; other FE institutions; Trade unions; Professional bodies.

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Members' Report and Financial Statements

For the Year Ended 31 July 2020

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

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) Percentage of time 1% - 50%

1 Number of employees 1

Total cost of facility time T otal pay bill

£2,240 £11,339,000

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%

Promoting Equality and Valuing Diversity East Durham 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, ability, class and age. We strive vigorously to remove conditions which place people at a disadvantage and we actively combat bigotry. This policy will be resourced, implemented and monitored on a planned basis and is published on the College's website. The College has a legal commitment to uphold the 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 experienced a range of activities to raise awareness of the Prevent agenda, cyber bullying and hate/mate crime in order to keep them safe during 2019/20.

Equal Opportunities

and Employment of Disabled Persons

The College considers all 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 is, as far as possible, identical to those for other 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 educational need. Learners who require extra support achieve as well as their peers. Swift initial advice and guidance is good with a range of partners to ensure that all learners receive the support they require.

Accessibility

Statement

The College seeks to achieve the objectives set down in the Equality Act 2010, which encompasses and expands the existing legislation covered by the Disability Discrimination Act 1995 as amended by the Special Education Needs and Disability Acts 2001 and 2005. The College actively makes arrangements to support learners with learning difficulties and disabilities to ensure that they are able to access the full range of services and provision.

Going Concern After making appropriate enqumes, 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.

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Members'

Report and Financial Statements

Disclosure of information

For the Year Ended 31 July 2020

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 20 January 2021 and signed on its behalf by:

D Butler Chair Key Management Personnel, Board of Governors and Professional Advisers

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Members' Report and Financial Statements For the Year Ended 31 July 2020

Key management personnel Key management personnel are defined as members of the College Leadership Team and were represented by the following in 2019/20: Suzanne Duncan, Principal and CEO; Accounting Officer Carina Tomlinson, Vice Principal Curriculum Brian Fitzgerald, Vice Principal Resources Jacqueline Owen, Assistant Vice Principal Curriculum

Board of Governors A full list of Governors is given in the Statement of Corporate Governance and Internal Control. Bond Dickinson LLP acted as Clerk to the Corporation throughout the year.

External Independent

Internal

East

I

Auditors throughout

year:

RSM UK Audit LLP 1 St. James Gate Newcastle upon Tyne NE14AD RSM Risk Assurance Services LLP 1 St. James Gate Newcastle upon Tyne NE14AD

Internal Auditors (from Aug 2020):

Audit One Kirkstone Villa Lanchester Road Hospital Durham DH1SRD

Bankers:

Lloyds Bank pic 19 Market Place Durham DH1 3NL

Solicitors:

Muckle LLP Time Central 32 Gallowgate Newcastle upon Tyne NE14BF

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Auditors:

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Members' Report and Financial Statements For the Year Ended 31 July 2020

Statement

of Corporate

Governance

and Internal

Control

(19/20)

Statement of Corporate Governance and Internal Control The following statement is provided to enable readers of the annual report and financial statements of the College to obtain a better understanding of its governance and legal structure. This statement covers the year from 1st August 2019 to 31st July 2020 and up to the date of approval of the annual report and financial statements The College endeavours to conduct its business: i.

in accordance with the seven principles identified by the Committee on Standards in Public Life (selflessness, integrity, objectivity, accountability, openness, honesty and leadership); ii. in full accordance with the guidance to colleges from the Association of Colleges in The Code of Good Governance for English Colleges ("the Code"). iii. having due regard to the UK Corporate Governance Code 2018 insofar as it is applicable to the further education sector. The College is committed to exhibiting best practice in all aspects of corporate governance and in particular, the College has adopted and complied with the Code. We have not adopted and therefore do not apply the UK Corporate Governance Code. However, we have reported on our Corporate Governance arrangements by drawing upon best practice available, including those aspects of the UK Corporate Governance Code we consider relevant to the further education sector and best practice. In the opinion of the Governors, the College complies with/exceeds all the provisions of the Code, and it has complied throughout the year ended 31 July 2020. The Governing Body recognises that, as a body entrusted with both public and private funds, it has a particular duty to observe the highest standards of corporate governance at all times. The College is an exempt charity within the meaning of Part 3 of the Charities Act 2011. The Governors, who are also the Trustees for the purposes of the Charities Act 2011, confirm that they have had due regard for the Charity Commission's guidance on public benefit and that the required statements appear elsewhere in these financial statements. The 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 induction for Governors is in place, as well 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 Governors' 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 students and senior managers, however interaction with middle management, teachers and support staff is less consistent. Governors take their responsibilities seriously in relation to their statutory duty for safeguarding and equality and diversity.

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Members' Report and Financial Statements

For the Year Ended 31 July 2020

The Corporation The Members who served on the Corporation

Name

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Date of Appointment

Term of Office

during the year were as listed in the table below:

Date of Resignation lEnd of Term of Office

Status of Appointment

Committees Served

External Member (Vice-Chair from 12/12/13)

Audit Finance & General Purposes Remuneration Search

Dr D Boyes

27/01/12 Re-appoi nted 27/01/16

4 years

25/01/20 End of Term of Office

MrJ Bromiley

15/10/15 Re-appointed 17/10/19

4 years

16/10/23

External Member

Audit Remuneration (both from 15/10/15) Curriculum, Quality and Standards Finance & General Purposes Remuneration Search

Number of Meetings attended in financial year (possible attendances in brackets)

1/2 Board 2/2 Committee

5/6 Board (6) 0/1 Committee

Mr D Butler

12/11/12 Re-appoi nted 10/11/20

4 years

10/11/24

External Member (Chair from 13/02/14)

Miss L Crichton

08/04/13 Reappointed 15/12/19

4 years

06/04/21

External Member

Finance & General Purposes Remuneration

5/6 Board 1/1 Committee

Mr M Curry

26/01/17

4 years

25/01/21

External Member

Audit

5/6 Board 1/1 Committee

6/6 Board 4/4 Committee

6/6 Board 2/2 Committee

Mrs S Duncan

01/09/12

N/A

N/A

Principal

Curriculum, Quality Standards Search Finance & General Purposes Audit

MrM Etherington

27/02/20

4 years

26/02/22

Staff Member

Curriculum Quality & Standards

2/3 Board

Mr G Field

04/07/19

4 years

03/07/23

External Member

Audit Committee

6/6 Board 1/1 Committee

MrF Harrison

01/08/12 Re-appointed 07/07/16

4 years

06/07/20 End of Term of Office

External Member

Audit Curriculum, Quality and Standards Finance & General Purooses

MrR Harrison

26/01/20

4 years

25/01/24

External Member

Curriculum, Quality and Standards

Mrs K Hartis

24/05/18

4 years

27/02/20

Staff Member

Curriculum Quality and Standards

Miss H Lightowler

18/12/18

1 year

July 2020 End of Term of Office

Student Member

Mrs V McFarquhar

01/08/15 Re-appoi nted 31/07/19

4 years

30/07/23

External Member

Curriculum, Quality and Standards Search Remuneration

Prof J MacIntyre

24/03/14 Reappointed 22/02/18

4 years

22/03/22

External Member

Curriculum, Quality and Standards

MrS Nicholson

27/02/20

26/02/22

Staff Member

Curriculum, Quality and Standards

Mrs E Oughton

15/12/16

14/12/20

External Member

Curriculum, Quality and Standards

East Durham College

4 years

5/6 Board 4/4 Committee 2/4 Board 1/1 Committee 1/2 Board 2/3 Committee 5/5 Board

6/6 Board 2/2 Committee 4/6 Board 0/1 Committee 3/3 Board 6/6 Board 1/1 Committee

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Members' Report and Financial Statements For the Year Ended 31 July 2020

Date of Appointment

Term of Office

Miss J Turnbull

18/12/18

1 year

July 19 End of Term of Office

Student Member

Mrs R Woodhouse

04/07/19

4 year

03/07/23

External Member

Finance & General Purposes

5/6 Board 1/1 Committee

I West

07/07/16

4 years

06/07/20 End of Term of Office

External Member

Audit Finance & General Purposes

1/6 Board 1/2 Committees

Name

Date of Resignation lEnd of Term of Office

Status of Appointment

Committees Served

Number of Meetings attended in financial year (possible attendances in brackets) 0/4 Board

S Pritchard is the Clerk to the Corporation

The following also acted as Directors of the College's wholly owned subsidiaries during the year and up to the date of signature of this report:

Houghall Enterprises Limited (currently dormant) Mrs S Duncan (and Mr D Butler and Mr B Fitzgerald only when the company is trading)

Houghall Farm Limited (currently dormant) Mrs S Duncan (and Mr D Butler and Mr B Fitzgerald only when the company is trading)

Durham Education Group Limited (currently dormant) Mrs S Duncan (and Mr D Butler and Mr B Fitzgerald only when the company is trading) The College Company Limited Mrs S Duncan Mr D Butler Mr B Fitzgerald The dormant subsidiaries above are exempt from preparing individual accounts by virtue of s394A of the Companies Act. It is the Corporation's responsibility to bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct. The Corporation is provided with regular and timely information on the overall financial performance of the College together with other information such as performance against funding targets, proposed capital expenditure, quality matters and personnel-related matters such as health and safety and environmental issues. During 2019/20 the Corporation met on six occasions for ordinary meetings. The Corporation conducts its business through a number of committees. Each committee has terms of reference, which have been approved by the Corporation. These committees are Search; Remuneration; Curriculum, Quality and Standards; Finance and General Purposes and Audit. Full minutes of all meetings, except those deemed confidential by the Corporation, are available from the Clerk to the Corporation at the registered office at: East Durham College Willerby Grove Peterlee Co. Durham SR82RN 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.

~~ East Durham College

;:,_

Page 15 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

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 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 meetings. Briefings are also provided on an ad hoc basis.

in a timely manner, prior to Board

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 Principal are separate. There are role descriptions for each of these roles and for the Chairs of Committees and individual 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 listened 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 termly Focus Groups to discuss the overall learner experience and to triangulate information provided by way of reported learner consultation sampling and survey outcomes. Governors commit a significant amount of time to fulfilling their responsibilities 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 nor 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 appropriate consultation with relevant stakeholders. The Board scrutinises the performance of management in meeting the plans and targets, by way of regular reports and constructive challenge at meetings of the Board and its Committees. Governors undertake an annual self-assessment of the Corporation and receive an annual report on their performance against Governing Body Standards of Service. There is an annual 3600 appraisal of the Chair of the Corporation; and the performance and training and development requirements of individual Governors is discussed at annual one to one meetings with the Chair of the Corporation.

Appointments

to the Corporation

I Search Committee

Any new appointments to the Corporation are a matter for the consideration of the Corporation as a whole. The Corporation has a Search Committee, consisting of 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 benefits of diversity on 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 are eligible to serve for two consecutive terms of office.

Corporate performance The Corporation carried out a self-assessment of its own performance in August 2019 which indicated the Corporation would be graded as "Good" on the Ofsted scale.

East Durham College

Page 16 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

Remuneration Committee The Remuneration Committee's responsibilities are to make recommendations to the Board on the remuneration and benefits of the Principal, Vice-Principal Finance and Business Planning, VicePrincipal Curriculum and Performance, and the Clerk to the Corporation and reflects the guidance given in the Association of Colleges document "The Colleges' Senior Post Holder Remuneration Code". The Remuneration Committee consists entirely of independent External Board Members. It meets at least once per academic year and takes account of peer comparison information, and the College's financial circumstances, to ensure the long-term success of the organisation. Details of remuneration for the Principal and the two Vice-Principals (as the three senior postholders for the College) for the year ended 31 July 2020 are set out in the notes to the Financial Statements.

Audit Committee The Audit Committee comprises five Members of the Corporation (excluding the Principal and Chair) and one co-opted member. The Committee operates in accordance with written terms of reference approved by the Corporation, meets on at least a termly basis and provides a forum for reporting by the College's internal, regularity and financial statements auditors, who have access to the Committee for independent discussion, without the presence of the College management. The Committee also receives and considers reports from the main further education funding bodies that affect the College's business. The Committee met during the year both physical and electronically as required to meet COVIO guidelines. The number of meetings and associated attendances are given in the table above. The College's internal auditors monitor the systems of internal control, risk management controls and governance processes in accordance with an agreed plan of input and report their findings to management and the Audit Committee. Management is responsible for the implementation of agreed audit recommendations and internal audit undertakes periodic follow-up reviews to ensure such recommendations have been implemented. The Audit Committee also advises the Corporation on the appointment of internal, regularity and financial statements auditors and their remuneration for both audit and non-audit work.

Curriculum, Quality and Standards Committee The Curriculum, Quality and Standards Committee monitors academic performance and makes recommendations to the Board of Governors in respect of areas relating to teaching, learning and 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 per term.

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

Finance and General Purposes Committee The Finance and General Purposes Committee meets on a regular basis to make recommendations to the Audit committee and main Board as appropriate on financial and general matters affecting the College. The Committee met during the year both physical and electronically as required to meet COVIO guidelines. The number of meetings and associated attendances are given in the table above.

~~

East Durham College

Page 17 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

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 the Principal is personally responsible, in accordance with the responsibilities assigned to them in the Financial Memorandum between East Durham College and the Funding Bodies. The Principal is also responsible for reporting to the Corporation any material weaknesses or breakdowns in internal control. The Purpose

of the System

of Internal

Control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the College's 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 2020 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 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 year ending 31 July 2020 and up to the date of approval of the Members' Report and Financial Statements. This process is regularly reviewed by the Corporation.

The Risk and Control

Framework

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

comprehensive budgeting systems with an annual budget, which is reviewed and agreed by the governing body; regular reviews by the governing body of periodic and annual financial reports which indicate financial performance against forecasts; setting targets to measure financial and other performance; clearly defined capital investment control guidelines; and the adoption of formal project management disciplines, where appropriate.

East Durham 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 rnanaqernent, conlr ols and governance processes.

~~ East Durham College

Page 18 of 56

Members' Report and Financial Statements

For the Year Ended 31 July 2020

The internal audit service undertakes a planned programme as part of a risk-based approach, which is reported to and scrutinised by the Audit Committee. The 2019/20 work included reports on safeguarding and prevent: work based learning, careers guidance and marketing strategies. The College management agreed all recommendations and action plans were introduced accordingly. The College's Internal Auditors and External Auditors were both appointed from pt August 2018 following a suitable tendering exercise. The internal auditor appointment 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 detail assessment against set performance indicators. The Audit Committee has formally reviewed the independence of its auditors and letters have been provided from the auditors confirming that they believe they remain independent within the meaning of the regulations on this matter and their professional standards. To fulfil its responsibility regarding the independence of the external auditors, the Audit Committee 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 of non-audit services provided by the external auditors.

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

the external auditor's fulfilment

of the agreed audit plan and variations from it;

•

reports highlighting

•

feedback from the Vice-Principal performance of each audit team.

the major issues that arose during the course of the audit; Finance and Business Planning who had evaluated

the

Review of Effectiveness As Accounting Officer, the Principal has responsibility for reviewing the effectiveness of the system of internal control. The Principal's 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 development and maintenance of the internal control framework; and

•

comments made by the College's financial statements auditors, the reporting accountant for regularity assurance, the appointed funding auditors (for colleges subject to funding audit) in their management letters and other reports

for the

The Principal 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 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

~-

~~ East Durham College

Page 19 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

management team and the Audit Committee also receive regular reports from internal audit, 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. The Corporation receives 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 applicable. 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. The external audit service undertakes an annual review of the financial statements including the use of funds. The College assesses all risks and has a Risk Register that is categorised under each of the College's five Strategic Objectives: •

Achieve and celebrate excellence in all our activities.

•

Design, deliver and recruit with integrity to high quality progression pathways to meet regional economic skills needs and grow our income.

•

Explore partnerships with other providers to support, develop educational and skills offer and allow for growth in our income.

•

Develop our position as a recognised premier specialist land-based college.

•

Provide world-class facilities and resources for our students, customers, employers and staff to support our growth.

and extend the

regional

Meetings of the internal Risk Management Group take place termly to review the Register in terms of the 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 has been placed on managing the risks around Covid 19. Accordingly this has warranted a separate risk register and report as an annex to the main register. The Risk Management Group is chaired by the Principal and its membership covers expertise in finance, human resources, curriculum, estates, marketing, governance, and student support. The Register and Action Plan is monitored and discussed at every meeting of the Audit Committee. The College Leadership Group has responsibility for overseeing the risks and ensuring the risks are managed. All risks are categorised in terms of likelihood and impact. 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".

~-

~~ East Durham College

Page 20 of 56

Members' Report and Financial Statements

For the Year Ended 31 July 2020

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. Approved by order of the Members of the Corporation on 20th January 2021 and signed on its behalf by:

D Butler Chair

::.1

East Durham College

S Duncan Principal

Page 21 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

Statement of Regularity, Propriety and Compliance The Corporation has considered its responsibility to notify the Education and Skills Funding Agency (ESFA) of material irregularity, impropriety and non-compliance with terms and conditions of funding, under the college's grant funding agreement and contracts with ESFA. As part of our consideration we have had due regard to the requirements of the grant funding agreements and contracts with ESFA. We confirm on behalf of the Corporation, that after due enquiry, and to the best of our knowledge, we are able to identify any material irregular or improper use of funds by the College, or material non-compliance with the terms and conditions of funding under the College's grant funding agreements and contract with ESFA. We confirm that no instances of material irregularity, impropriety or funding non-compliance have been discovered to date. If any instances are identified after the date of this statement, these will be notified to the ESFA.

D Butler Chair Dated 2...c;7

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East Durham College

S Duncan Accounting Officer Dated

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Page 22 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

Statement of Responsibilities

of the Members of the Corporation

The members of the corporation, as charity trustees, are required to present audited financial statements for each financial year. Within the terms and conditions of the college's grant funding agreements and contracts with ESFA, the corporation - through its accounting officer - is required to prepare financial statements and an operating and financial review for each financial year in accordance with the 2015 Statement of Recommended Practice - Accounting for Further and Higher Education, ESFA's college accounts direction and the UK's Generally Accepted Accounting Practice, and which give a true and fair view of the state of affairs of the college and its surplus / deficit of income over expenditure for that period. In preparing the financial statements, the Corporation is required to: • select suitable accounting policies and apply them consistently • make judgements and estimates that are reasonable and prudent • state whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements • prepare financial statements on the going concern basis, unless it is inappropriate to assume that the College will continue in operation. The corporation is also required to prepare a Members' Report, which describes what it is trying to do and how it is going about it, including information about the legal and administrative status of the college. The corporation is responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the college and which enable it to ensure that the financial statements are prepared in accordance with relevant legislation including the Further and Higher Education Act 1992 and Charities Act 2011, and relevant accounting standards. It is responsible for taking steps that are reasonably open to it to safeguard its assets and to prevent and detect fraud and other irregularities. The corporation is responsible for the maintenance and integrity of the college's website; the work carried out by auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Members of the corporation are responsible for ensuring that expenditure and income are applied for the purposes intended by Parliament and that the financial transactions conform to the authorities that govern them. In addition, they are responsible for ensuring that funds from ESFA 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. 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 economical, efficient and effective management of the college's resources and expenditure so that the benefits that should be derived from the application of public funds from ESFA are not put at risk. Approved by order of the members of the Corporation on zo» January 2021 and signed on its behalf by:

D Butler Chair

~~ East Durham College

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Page 23 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

INDEPENDENT AUDITOR'S REPORT TO THE CORPORATION OF EAST DURHAM COLLEGE Opinion We have audited the financial statements of East Durham College (the 'College') and its subsidiaries (the 'Group') for the year ended 31 July 2020 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 a summary of 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). 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 2020 and of the Group's and the College's deficit of income over expenditure for the year then ended;

•

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

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the 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. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: •

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

•

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

Other information The 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. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

East Durham Colleqe

Page 24 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

Matters on which we are required to report by exception We have nothing to repart in respect of the following matters where the Post-16 Audit Code of Practice 2019 to 2020 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 Corporation's Responsibilities set out on page 22, the Corporation is responsible far 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, 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, ar 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 fram fraud or errar 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. 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.uklauditorsresponsibilities This description forms part of our auditor's report. 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 23 November 2020. 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 NE14AD Date

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East Durham College

Page 25 of 56

Members'

Report and Financial Statements

For the Year Ended 31 July 2020

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 r We have carried out an engagement, in accordance with the terms of our engagement letter dated 23 November 2020 and further to the requirements of the grant funding agreements and contracts with the Education and Skills Funding Agency (the "ESFA"), to obtain limited assurance about whether the expenditure disbursed and income received by East Durham College during the period 1 August 2019 to 31 July 2020 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 2019 to 31 July 2020 has not been applied to purposes intended by Parliament and the financial transactions do not conform to the authorities which govern them. Basis for conclusion The framework that has been applied is set out in the Post-16 Audit Code of Practice (the "ACoP") issued by the ESFA. In line with this framework, our work has specifically not considered income received from the main funding grants generated through the Individualised Learner Record (ILR) returns, for which the ESFA has other assurance arrangements in place. We are independent of East Durham College in accordance with the ethical requirements that are applicable to this engagement and we have fulfilled our ethical requirements in accordance with these requirements. We believe the assurance evidence we have obtained is sufficient to provide a basis for our conclusion Responsibilities of Corporation of 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 is 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. 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 ACoP. 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 2019 to 31 July 2020 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

East

I

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Page 26 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

of authorities including the specific requirements of the grant funding agreements and contracts with the ESFA 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.

RSM UK AUDIT LLP Chartered Accountants 1 St James' Gate Newcastle upon Tyne Ne14AD Date

East

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..

Page 27 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Consolidated Statement of Comprehensive Income For the year ended 31 July 2020 Year

Year

Year

2020

2020

2019

2019

Group

College

Group

College

£'000

£'000

£'000

£'000

14,177 1,213 654 1,621 9

14,177 1,213 642 1,621 10

14,003 1,194 417 1,981 2

14,003 1,194 405 1,981 2

17,674

17,663

17,597

17,585

12,459 4,624 1,426 186

12,459 4,624 1,408 186

11,965 4,983 1,500 199

11,965 4,983 1,481 199

Total expenditure

18,695

18,677

18,647

18,628

(Deficit)/surplus before other gains

(1,021 )

(1,014)

(1,050)

(1,043)

(Deficit) before tax

(1,021 )

(1,014)

(1,050)

(1,043)

(1,021 )

(1,014)

(1,050)

(1,043)

(6,590)

(6,590)

(1,900)

(1,900)

(7,611)

(7,604)

(2,950)

(2,943)

Notes

INCOME Funding body grants Tuition fees and education contracts Other grants and contracts Other income Endowment and investment income

2 3 4 5 6

Total income EXPENDITURE Staff costs Other operating expenses Depreciation Interest and other finance costs

7 8 11 9

10

Taxation (Deficit) for the year Actuarial gain/(Ioss) in respect of pensions schemes

Total Comprehensive

East

I

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Year

Income for the year

25

Page 28 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Consolidated and College Statement of Changes in Reserves For the year ended 31 July 2020 Income and Expenditure Account £'000 Group Balance at 31st July 2018

~J;!P..

Pension Reserve £'000

Revaluation Reserve £'000

6,973

(9,880)

Other comprehensive income Movement on Pension Reserve Surplus from the income and expenditure account Transfers between revaluation and income and expenditure reserves Total comprehensive income for the year

(1,900) 3,300

(3,300)

95 445

(3,300)

Balance at 31st July 2019

7,418

(13,180)

Other comprehensive income Movement on Pension Reserve Surplus from the income and expenditure account Transfers between revaluation and income and expenditure reserves Total comprehensive income for the year

(6,590) 7,710

(7,710)

95 194

(7,710)

Balance at 31st July 2020

7,612

(20,890)

2,239

(11,039)

College Balance at 31st July 2018

7,017

(9,880)

2,429

(434)

Other comprehensive income Movement on Pension Reserve Deficit from the income and expenditure account

(1,900) 3,300 (1,043)

(3,300)

Transfers between revaluation and income and expenditure reserves Total comprehensive expense for the year

95 452

(3,300)

Balance at 31st July 2019

7,469

(13,180)

Other comprehensive income Movement on Pension Reserve Surplus from the income and expenditure account Transfers between revaluation and income and expenditure reserves Total comprehensive income for the year

(6,590) 7,710

(7,710)

95 200

(7,710)

(95) (95)

(7,605)

Balance at 31st July 2020

7,669

(20,890)

2,239

(10,982)

East Durham College

2,429

Total £'000 (478) (1,900)

(1,050)

(1,050) (95) (95) 2,334

(2,950) (3,428) (6,590)

(1,021 )

(1,021) (95) (95)

(7,611)

(1,900) (1,043) (95) (95) 2,334

(2,943) (3,377) (6,590)

(1,015)

(1,015)

Page 29 of 56

Members' Report and Financial Statements

East Durham Consolidated

College and College

Balance

For the Year Ended 31 July 2020

Sheets as at 31 July 2020 Notes Group

College

Group

College

2020 £'000

2020 £'000

2019 £'000

2019 £'000

Fixed assets Tangible fixed assets Investments

11 12

43,374 74 43,448

43,245 94 43,339

44,372 65 44,437

44,225 85 44,310

Current assets Stocks Trade and other receivables Cash and cash equivalents

13 14 20

444 1,278 747 2,469

444 1,339 747 2,530

456 1,407 649 2,512

456 1,467 649 2,572

Less: Creditors - amounts falling due within one year

16

(3,979)

(3,966)

(4,320)

(4,307)

Net current liabilities

(1,510)

(1,436)

(1,808)

(1,735)

Total assets less current liabilities

41,938

41,903

42,629

42,575

17

(32,087)

(31,995)

(32,877)

(32,772)

19,25

(20,890)

(20,890)

(13,180)

(13,180)

Total Net Liabilities

(11,039)

(10,982)

(3,428)

(3,377)

Unrestricted reserves Pension Reserve Income and Expenditure Account Revaluation Reserve

(20,890) 7,612 2,239

(20,890) 7,669 2,239

(13,180) 7,418 2,334

(13,180) 7,469 2,334

Tótàl unrestricted

(11,039)

(10,982)

(3,428)

(3,377)

Less: Creditors - amounts falling due after more than one year Provisions Defined benefit obligations

deficit

The financial statements on pages 27 to 55 were approved and authorised for issue by the Corporation on 20th January 2021 and were signed on its behalf on that date by: D Butler Chair

:=.1

East Durham College

S Duncan Principal

~.

Page 30 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Consolidated Statement of Cash Flows For the year ended 31 July 2020 2020 £'000 Cash inflow from operating activities Surplus/(deficit) for the year

(1,021 )

(1,050)

Adjustment for non cash items Depreciation Deferred Capital Grants Released to Income (Increase)/decrease in stocks FRS 102 Pension Cost less Contributions Payable (Increase)/decrease in debtors Increase/(decrease) in creditors

1,426 (754) 12 1,120 129 (153)

1,500 (800) (7) 1,400 (450) 11

Adjustment for investing or financing activities Interest payable Interest / Investment Income Receivable

186 (9)

199 (2)

Net cash flow from operating activities

936

801

Cash flows from investing activities Deferred Capital Grants Received Payments made to acquire fixed assets Net cash flow from/(used in) investing activities

105 (428) (323)

(370) (370)

Cash flows from financing activities Interest paid Repayments of amounts borrowed Net cash flow (used in)/from financing activities

(186) (329) (515)

(199) (433) (632)

98

(201 )

649

850

747

649

Increase / (decrease) 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

~J-

2019 £'000

East Durham College

Page 31 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

Notes to the Financial Statements 1.

Accounting Policies

Statement of Accounting Policies The following accounting policies have been applied consistently considered material in relation to the financial statements.

in dealing with items which are

Basis of Preparation These financial statements have been prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education 2015 (the 2015 FE HE SORP), the College Accounts Direction for 2019 to 2020 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 publìc 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. Intra-group sales and profits are eliminated fully on consolidation. In accordance with Financial Reporting Standard (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 2020.

Going Concern The activities of the College, together with the factors likely to affect its future development and performance are set out in the Members 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 £6.08m of loans outstanding, with bankers, equivalent to 34% of College Income, relating to capital spends that have taken place at both the Houghall and Peterlee campuses. A robust set of financial models have been applied to the College's forecasts and financial projections (including cash flow forecasts) for the 12 months succeeding the approval of these accounts which demonstrates that the College would be able to meet its financial liabilities as they fall due. This is dependent on a decision in principle from the College bankers that there will be an overdraft of £250k which will be in place 1st March 2021 to 30th April 2021, to cover any short term difficulties arising in March and April 2021 as a consequence of the funding cycle. This approach being the same as successfully followed in previous years. Accordingly, we are satisfied that the College, will be able to operate within its existing and expected borrowing facilities and to meet covenants, and for this reason the college will continue to adopt the going concern basis in the preparation of its Financial Statements. The impact of Covid 19 upon the college has been considered as to how it affects the going concern basis of the accounts. As the college is mainly funded by ESFA grants which have been unaffected by the pandemic and based on the experience of the period of Covid since March 2020. Where appropriate, the College has made use of the government Job Retention Scheme and management

East Durham College

Page 32 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

have revised forecasts to reflect the changing circumstances. Costs are monitored regularly and have been reduced where possible. The college believes that reporting on a going concern basis continues to be the correct accounting treatment.

Recognition of Income 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. Any under achievement for the Adult Education Budget is adjusted for and reflected in the level of recurrent grant recognised in the Consolidated Statement of Comprehensive Income. 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 learner-responsive funding is not normally subject to reconciliation and is therefore not subject to contract adjustments. The recurrent grant from HEFCE represents the funding allocations attributable financial year and is credited direct to the Statement of Comprehensive Income.

to the current

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 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 recognised in the period for which it is received.

which is not a discount and is

Investment income All income from short-term deposits is credited to the Consolidated Statement of Comprehensive Income 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 Learner Support Funds. Related payments received from the LSC and successor bodies and subsequent disbursements to students are excluded from the Consolidated Statement of Comprehensive Income and are shown separately in Note 27, except for the 5% of the grant received which is available to the College to cover administration costs relating to the grant. The College employs one member of staff dedicated to the administration of Learner Support Fund applications and payments.

Post Retirement 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.

~-

~~ East Durham College

Page 33 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

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 prospective benefit method. The TPS is a multi-employer scheme and there is insufficient information available to use defined benefit accounting. The TPS is therefore treated as a defined contribution plan and the contributions recognised as an expense in the Consolidated Statement of Comprehensive Income in the 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 interest and other finance costs. Actuarial

gains

and

losses

are

recognised

immediately

in

other

comprehensive

income.

Short term Employment benefits Short term employment benefits such as salaries and compensated absences (holiday pay) are recognised as an expense in the year in which the employees render service to the College. Any unused benefits are accrued and measured as the additional amount the College expects to pay as a result of the unused entitlement.

Enhanced Pensions The actual cost of any enhanced ongoing pension to a former member of staff is paid by the 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 Consolidated Statement of Comprehensive Income in the year that the member of staff retires. In subsequent years a charge is made to provisions in the balance sheet using the enhanced pension spreadsheet provided by the funding bodies.

Non-current Assets -Tangible Fixed Assets Tangible Fixed Assets are stated at historical purchase cost/valuation less accumulated depreciation and impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

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. Building improvements made since incorporation are included in the balance sheet at cost. Where land and buildings are acquired with the aid of specific grants, they are capitalised and depreciated in accordance with the policy. The related grants are credited to a deferred capital

I East Durham College ~tr East

'-'_

Page 34 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

grant account, and are released to the Consolidated Statement of Comprehensive Income over the expected useful economic life of the related asset on a basis consistent with the depreciation policy. Finance costs, which are directly attributable capitalised as part of the cost of those assets.

to the construction

of land and buildings,

are

On adoption of FRS 102, the College followed the transitional provision to retain the book value of land and buildings, which were valued in 1994, as deemed cost but not to adopt a policy of revaluations of these properties in the future. A review for impairment of fixed assets 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, based on direct costs, incurred to 31 July. They are not depreciated until they are brought into use.

Subsequent Expenditure on Existing Tangible Fixed Assets Where significant expenditure is incurred on tangible fixed assets it is charged to the Consolidated Statement of Comprehensive 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 fixed asset has subsequently improved Asset capacity increases 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 bundles costing less than £500 are written off to the Consolidated Statement of Comprehensive Income in the period of acquisition. All other equipment is capitalised at cost. Equipment inherited from the Local Education Authority is included in the balance sheet at valuation. Inherited equipment has been depreciated on a straight-line fully depreciated.

basis from incorporation and is now

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 over the expected useful economic life of the related equipment.

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 off cost or valuation of tangible fixed assets and is on a straightline basis over their useful life as follows: • Building - not more than SO years • Building Improvements - not more than I O years • Land - not depreciated • Equipment - 4 to LO years • Motor Vehicles - 4 years

~J;:p~

East Durham College

Page 35 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

Leased Assets Costs in respect of operating leases are charged on a straight-line basis over the lease term to the Consolidated Statement of Comprehensive Income. Any lease premiums or incentives relating to leases signed after 1st August 2014 are spread over the minimum lease term. The College has taken advantage of the transitional exemptions in FRS 102 and has retained the policy of spreading lease premiums and incentives to the date of the first market rent review for leases signed before 1st August 2014. Leasing agreements which transfer to the College substantially ownership of an asset are treated as finance leases.

all the benefits and risks of

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 a finance lease obligation. 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 Listed investments held as fixed assets are stated at market value and investments in subsidiaries are accounted for at cost less impairment in the college's individual financial statement. A review for impairment of investments is carried out if events or changes in circumstances indicate that the carrying value may not be recoverable.

Stocks Stocks are stated at the lower of their cost and net realisable value. Where necessary, provision is made for obsolete, slow-moving and defective stocks. Farm stocks are professionally valued at year end by Youngs Chartered Surveyors, Agricultural and Industrial Valuers. Finished goods stocks are valued on a market value 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. 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

I East Durham College

~-

East

~".

Page 36 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

translated at the rates of exchange ruling at the end of the financial period with all resulting exchange differences being taken to Consolidated Statement of Comprehensive Income in the period in which they arise.

Taxation The College is considered to pass the tests set out in Paragraph 1 Schedule 6 of the Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the College is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 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 (VAT), so that it can only recover a minor element of VAT charged on its inputs. Irrecoverable VAT on inputs is included in the costs of such inputs and added to the cost of tangible fixed assets as appropriate, where the inputs themselves are tangible fixed assets by nature. The College's subsidiary companies are subject to corporation tax and VAT in the same way as any commercial organisation.

Provisions 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. A contingent liability arises from a past event that gives the Group 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 Group. 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 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. Other key sources of estimation uncertainty • Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, manufacturer warranties, expected useful lives and maintenance

~trI East Durham College

~-

East

Page 37 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

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 present value of the Local Government Pension Scheme defined benefit liability depends on a number of factors that are determined on an actuarial basis using a variety of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions, which are disclosed in note 25, will impact the carrying amount of the pension liability. Furthermore a roll forward approach which projects results from the latest full actuarial valuation performed at 31 March 2019 has been used by the actuary in valuing the pensions liability at 31 July 2020. Any differences between the figures derived from the roll forward approach and a full actuarial valuation would impact on the carrying amount of the pension liability.

~~ East Durham College

tp ..

Page 38 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 2

Funding council grants

Recurrent grants Education and Skills Funding Agency - adult Education and Skills Funding Agency -16 -18 Education and Skills Funding Agency - apprenticeships

2020

2020

2019

2019

Group

College

Group

College

£'000

£'000

£'000

£'000

2,419 8,524

2,419 8,524

2,726 8,939

2,726 8,939

750

750

857

857

278

278

725

725

726

726

Specific Grants Teacher Pension Scheme contribution grant Releases of government capital grants - Buildings (Note 15) Releases of government capital grants - Equipment (Note 15) Tees Valley Combined Authority Other

7

7

52

52

170 1,304

170 1,304

703

703

Total

14,177

14,177

14,003

14,003

3

Tuition fees and education contracts

Fees for FE loan supported courses Fees for HE loan supported courses Total

4

2020

2020

2019

2019

Group

College

Group

College

£'000

£'000

£'000

£'000

888 325

888 325

844 350

844 350

1,213

1,213

1,194

1,194

Other grants and contracts

2020

2020

2019

2019

Group

College

Group

College

£'000

£'000

£'000

£'000

Releases of non-SFA capital grants - Buildings (Note 15) Releases of non-SFA capital grants - Equipment (Note 15) Coronavirus Job Retention Scheme grant Other grants and contracts

12 10 189 443

10 189 443

12 10

10

395

395

Total

654

642

417

405

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 of £189k relates to staff costs which are included within the staff costs note 7 as appropriate.

East

I

~Ir East Durham College ;!P_

Page 39 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 5

Other income

Catering and residences Farming Activities Sports Centre Accommodation Childcare Other income

2020

2020

2019

2019

Group

College

Group

College

£'000

£'000

£'000

£'000

311 150 84 64 295 717

311 150 84 64 295 717

417 146 115 84 339 880

417 146 115 84 339 880

1,621

1,621

1,981

1,981

Total

6

Endowment and Investment income

Interest Receivable Investment Income

2020

2020

2019

2019

Group

College

Group

College

£'000

£'000

£'000

£'000

9

10

2

2

9

10

2

2

Paqe 40 or 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 7

Staff costs - Group and College

The average number of persons (including key management personnel) employed by the College during the year was as shown below. This has previously been stated in terms of full time equivalents:

Teaching staff Non teaching staff Premises

Staff costs for the above persons

Wages and salaries Social security costs Other pension costs Historic Restructuring Costs

i) Pension costs arising from FRS 102 (note 25)

2020 £'000

2020

2019

No.

No.

157 221 40

153 208 48

418

409

2020 £'000

2019 £'000

2019 £'000

8,980 695 1 628 11,303 36 11,339

8,585 666 1,209 10,460 12 10,472

1,120

1,400

ii) Non recurring staff costs Wages and salaries Social security costs Other pension costs

71 6 16 93 12,459

11,965

i) The FRS 102 costs include financing costs of £280k (2019: £270k) as detailed in note 25 ii) The non recurring staff costs referred to above is the costs associated with one off restructuring

costs in 2019 and 2018 arising from two distinct restructuring exercises. 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 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. Emoluments of Key management personnel, Accounting Officer and other higher paid staff

The number of key management personnel including the Principal during the year was:

~-

~~ East Durham College

4

2020

2019

No.

No.

4

Page 41 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 7

Staff costs - Group and College (cont.)

The number of key management personnel and other staff who received annual emoluments, excluding pension contributions and employer's national insurance but including benefits in kind, in the following Key management Other staff personnel

£60,001 to £65,000 £75,001 to £80,000 £105,001 to £110,000 £110,001 to £115,000

2020

2019

2020

2019

No. 2 1 1

No. 2 1

No.

No.

4

4

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:

2020 £'000

2019 £'000

305 37

313 34

Salaries - gross of salary sacrifice and waived emoluments Employers National Insurance Benefits in kind Pension contributions Total key management personnel

2

2

344 55 399

349 43 392

The above emoluments include amounts payable to the Accounting Officer, who is the Principal (who is also the highest paid officer) of:

2020 £'000

2019 £'000

109

112

109

112

18

15

2020

2019

4.97 4.97

5.04 5.13

Salaries Benefits in kind

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

Principal's basic salary as a multiple of the median of all staff * Principal total remuneration as a multiple of the median of all staff *

* The median calulated for all staff has been calculated using including all payroll flexible I atypical staff (i.e. hourly paid) but exclude agency staff as these are not paid via payroll. None of the members of the Corporation, other than the Accounting Officer and the staff member, received any payment from the institution other than the reimbursement of travel and subsistence expenses incurred in the course of their duties.

~~ East Durham College

'-P..

Page 42 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 8

Other operating expenses

2020

2019

Group & College

Group & College

£'000

£'000

Teaching costs Non teaching costs Premises costs

3,029 354 1,241

3,431 287 1,265

Total

4,624

4,983

Other operating expenses include: Auditors' remuneration: Financial statements audit* Other assurance services Internal audit** Hire of assets under operating leases

2020 £'000 22 1 14 567

2019 £'000 20 1 13 695

* includes £21,500 in respect of the College (2018/19 £20,000) ** includes £14,000 in respect of the College (2018/19 £13,000)

9

Interest and other finance costs

2020 £'000

2019 £'000

On bank loans, overdrafts and other loans:

186

199

Total

186

199

10 Taxation - Group only The members do not believe the College was liable for any corporation tax arising out of its activities during either year.

East Durham College

Page 43 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 11

Tangible fixed assets

GROUP Tangible fixed assets Cost or valuation At 1 August 2019 Additions Disposals Transfers At 31 July 2020

Assets in the Course of Construction £'000

Land and buildings £'000

Motor Vehicles £'000

Equipment £'000

56,163 52

6,396 272

3 10

168 94

62,730 428

56,215

6,668

13

262

63,158

Total £'000

Accumulated Depreciation At 1 August 2019 Charge for the year Elimination in respect of disposals At 31 July 2020

12,726 1,217

5,629 208

3 1

18,358 1,426

13,943

5,837

4

19,784

Net book value at 31 July 2020 Net book value at 31 July 2019

42,272 43,437

831 767

9

COLLEGE Cost or valuation At 1 August 2019 Additions Disposals Transfers At 31 July 2020

£'000

Accumulated Depreciation At 1 August2019 Charge for the year Elimination in respect of disposals At 31 July 2020 Net book value at 31 July 2020 Net book value at 31 July 2019

£'000

£'000

262 168 £'000

43,374 44,372 £'000

55,708 52

6,368 272

3 10

168 94

62,247 428

55,760

6,640

13

262

62,675

12,417 1,199

5,602 208

3 1

18,022 1,408

13,616

5,810

4

19,430

42,144 43,291

830 766

9

262 168

43,245 44,225

Included with the net book value of freehold land and buildings is land at a valuation of £1, 985k (2019 £1 ,985k) which is not subject to depreciation. The net book value of land and buildings includes an amount of £Nil (2019: £Nil) in respect of assets held under finance leases. The depreciation charge on these assets for the year was £Nil (2018/19: £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 £2,238k (2019: £2,334k) 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.

~~ East Durham College ~~

Page 44 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 12 Non current Investments

Group College

Group

College

2020 £'000

2020 £'000

2019 £'000

2019 £'000

Investments in subsidiary Other Investments - Listed

74

20 74

65

20 65

Total

74

94

65

85

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 The College Company Limited Engage in commercial activities Engage in agricultural activities Houghall Farm Limited Engage in commercial activities Houghall Enterprises Limited Support Services for Overseas Durham Education Group Activities Limited

£

Issued Share Capital 10,000 £1 Ordinary Share 422,126 £1 Ordinary Share 1 £1 Ordinary Share 1 £1 Ordinary Share

10,000 *10,000 1

20,002 * The value of these shares has been reduced to reflect the underlying net assets.

The directors believe that the carrying value of the investments are supported by their underlying net assets. The market value of the listed shares at 31 July 2020 was £74k (2019: £65k). 13 Stock

Group & Group & College College

Farm stock Goods for resale General consumables

2020 £'000

2019 £'000

282 9 153

291 11 154

444

456

14 Trade and other receivables

Amounts falling due within one year: Trade receivables Amounts owed by group subsidiary undertakings Prepayments and accrued income Amounts owed by ESFA Other taxation and social security Other Debtors Total

Group

College

Group

College

2020 £'000

2020 £'000

2019 £'000

2019 £'000

241

354

394 273 7 363

241 61 394 273 7 363

689

354 60 689

364

364

1,278

1,339

1,407

1,467

The Other Debtors includes an amount of £124,000 which is unlikely to be recovered before 31 July 2021.

~J-

~-

East Durham College

Page 45 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) Deferred Capital Grants

15

Group At 1 August 2019 Land and Buildings Equipment Total

SFA Grants £'000

Group Other Grants £'000

18,131 20 18,151

9,332 21 9,353

Cash Received: Land and Buildings Equipment Total

105 105

£'000

SFA Grants £'000

College Other Grants £'000

£'000

27,463 41 27,504

18,133 20 18,153

9,213 21 9,234

27,346 41 27,387

105 105

105 105

Total

Total

105 105

Released to Statements of Comprehensive Income: Land and Buildings Equipment Total

725 7 732

12 10 22

737 17 754

725 7 732

10 10

725 17 742

At 31 July 2020 Land and Buildings Equipment Total

17,406 118 17,524

9,320 11 9,331

26,726 129 26,855

17,408 118 17,526

9,213 11 9,224

26,621 129 26,750

Group 2020 £'000 402 1,384 130 572 704 775 12

College 2020 £'000 402 1,384 130 572 704 762 12

Group 2019 £'000 449 1,822 4 324 755 753 50 163

College 2019 £'000 449 1,822 4 324 755 740 50 163

3,979

3,966

4,320

4,307

16

Creditors: amounts falling due within one year

Bank loans and overdrafts Trade payables Other Creditors Other taxation and social security Accruals and deferred income Deferred capital grants Amounts owed to ESFA VAT due under the Lennartz Scheme Total

East

I

~,... East Durham College ~~

Page 46 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 17

Creditors: amounts falling due after more than one year Group College

Group

College

2020 £'000

2020 £'000

2019 £'000

2019 £'000

Bank loans Deferred capital grants VAT due under the Lennartz Scheme

5,680 26,080 327

5,680 25,988 327

5,962 26,751 164

5,961 26,647 164

Total

32,087

31,995

32,877

32,772

Group & College

Group & College

2020 £'000

2019 £'000

In one year or less Between one and two years Between two and five years In over five years

402 477 1,520 3,683

449 463 1,474 4,025

Total

6,082

6,411

18 Maturity of debt (a) Bank loans and overdrafts Bank loans and overdrafts are repayable as follows:

The original principal borrowed is split, £6.3m repayable at a fixed interest rate of 4.605% £2.1 m 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 L1BOR.

I East Durham College ~tr

~-

Easf

Page 47 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 18 Maturity of debt (cont.) (b) VAT payable under Lennartz Scheme VAT repayable under the Lennartz scheme is repayable by instalments over a ten year period, with the first payment made in January 2011. Group & College 2020 £'000 In one year or less Between two and five years

326

Group & College 2019 £'000 163 163

Total

326

326

19

Provisions

Group and College Defined benefit Obligations Other £'000 £'000

Total £'000

At 1 August 2019 Charged to the Consolidated Statement of Comprehensive Income

(13,180)

(13,180)

(7,710)

(7,710)

At 31 July 2020

(20,890)

(20,890)

Defined benefit obligations relate to the liabilities under the College's membership of the Local Government pension Scheme. Further details are given in Note 25. 20 Cash and cash equivalents Group and College At 1 August Cash flows At 31 July 2019 2020 £'000 £'000 £'000 Cash and cash equivalents

649

98

747

Total

649

98

747

East Durham College

Page 48 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 21

Capital commitments Group and College 2020 2019 £'000 £'000

Commitments contracted for at 31 July

22 lease Obligations At 31 July the College had minimum lease payments under non-cancellable operating leases, the amounts being due as follows: Group and College 2020 2019 £'000 £'000 Future minimum lease payments due land and buildings Not later than one year Later than one year and not later than five years

Other Not later than one year Later than one year and not later than five years

Total Not later than one year Later than one year and not later than five years Total lease payments due

193 97 290

193 290 483

500 428 928

434 682 1,116

693 525

627 972

1,218

1,599

23 Contingent liabilities There are no contingent liabilities to be reported this year (2019: £Nil).

24 Events after the reporting period There are no events after the reporting period that need to be reported.

~-

~~ East Durham College

Page 49 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 25

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 Local Government Pension Scheme (LGPS) for non-teaching staff, which is managed by Durham County Council (DCC). 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 31 March 2016 and of the LGPS 31 March 2019. 2020 £'000

Total pension cost for the year

Teachers Pension Scheme: contributions paid Local Government Pension Scheme: Contributions paid FRS 102 (28) charge Charge to the Statement of Comprehensive Income

Total Pension Cost for Year

2019 £'000

728 900 840

489 720 1,130

1,740

1,850

2,468

2,339

Contributions amounting to £195k (2019: £150k) were payable to DCC and of £86k (2019: £130k) 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. The valuation of the TPS is carried out in line with regulations made under the Public Service Pension Act 2013. Valuations credit the teachers' pension account with a real rate of return assuming funds are invested in notional investments that produce that real rate of return.

~I East Durham College ~

Page 50 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 25

Defined benefit obligations (continued)

The latest actuarial review of the TPS was carried out as at 31 March 2016. The valuation report was published by the Department for Education (the Department) in April 2019. The valuation reported total scheme liabilities (pensions currently in payment and the estimated cost of future benefits) for service to the effective date of £218 billion, and notional assets (estimated future contributions together with the notional investments held at the valuation date) of £198 billion giving a notional past service deficit of £22 billion. As a result of the valuation, new employer contribution rates were set at 23.68% of pensionable pay from September 2019 onwards (compared to 16.48% during 2018/9. DfE has agreed to pay a teacher pension employer contribution grant to cover the additional costs during the 2019-20 academic year. A full copy of the valuation report and supporting documentation can be found on the Teachers' Pension Scheme website.

The pension costs paid to TPS in the year amounted to £728,000 (2019: £489,000) 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 contribution made for the year ended 31 July 2020 was £1, 170k (2019: £960k), of which employer's contributions totalled £900k (2019: £720k) and employees' contributions totalled £270k (2019 £240k). The agreed contribution rates for future years are 19.5 % for employers and range from 5.5% to 7.5% cent for employees, depending on salary. Principal Actuarial Assumptions The following information is based upon a full actuarial valuation of the fund at 31 March 2016 updated to 31 July 2017 by a qualified independent actuary At 31 July At 31 July

Rate of increase in salaries Future pensions increases Discount rate for scheme liabilities Inflation assumption (CPI) Pension accounts revaluation rate

2020

2019

3.20% 2.20% 1.40% 2.20% 2.20%

3.70% 2.20% 2.20% 2.20% 2.20%

The current mortality assumptions include sufficient allowance for future improvements in mortality rates. The assumed life expectations on retirement age 65 are: At 31 July At 31 July

2020

2019

years

years

Retiring today Males Females

22.20 24.20

22.30 23.80

Retiring in 20 years Males Females

23.20 25.70

24.00 25.70

East Durham College

Page 51 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

Sensitivity analysis +0.1% p.a. Discount rate assumption: Adjustment to discount rate Present value of total obligation (£m) % change in present value of total obligation Projected service cost (Ern) Approximate % change in projected service cost

45.24 -2.30% 2.28 -3.60%

46.31

Rate of general increase in salaries: Adjustment to salary increase rate Present value of total obligation (£m) % change in present value of total obligation Projected service cost (£m) Approximate % change in projected service cost

46.4 0.20% 2.37 0.00%

46.31

Rate of increase to pensions in payment and deferred pensions assumption, and rate of revaluation of pension accounts assumption: Adjustment to pension increase rate Present value of total obligation (£m) % change in present value of total obligation Projected service cost (fm) Approximate % change in projected service cost

47.28 2.10% 2.46 3.70%

46.31

Post retirement mortality assumption: Adjustment to mortality age rating Present value of total obligation (£m) % change in present value of total obligation Projected service cost (£m) Approximate % change in projected service cost

48.07 3.80% 2.47 4.20%

46.31

~trI East Durham College East

;J_

Base figure

2.37

2.37

2.37

2.37

-0.1% p.a. 47.42 2.40% 2.46 3.70%

46.22 -0.20% 2.37 0.00%

45.34 -2.10% 2.28 -3.60%

44.6 -3.70% 2.27 -4.10%

Page 52 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 25 Defined benefit obligations (continued) Local Government Pension Scheme (Continued) The College's share of the assets in the plan were:

Equities Government Bonds Corporate Bonds Property Cash

Fair Value at 31 July

Fair Value at 31 July

2020 £'000

2019 £'000

49.30% 24.20% 14.70% 7.20% 4.60%

Total market value of assets

12,582 6,176 3,751 1,837 1,174

12,250 6,575 3,000 1,850 1,325

49.00% 26.30% 12.00% 7.40% 5.30%

25,520

25,000

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

Fair value of plan assets Present value of plan liabilities Present value of unfunded liabilities Net pensions (Iiability)/asset (Note 19)

2020 £'000

2019 £'000

25,520 (46,310) (100)

25,000 (38.080) (100)

(20,890)

(13,180)

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

2020 £'000

2019 £'000

1,730 10 280 2,020 (900)

1,150 700 270 2,120 (720)

1,120

1,400

20

20

Amounts recognised in Other Comprehensive Income Asset gains/(Iosses) arising during the period Liability gains/(Iosses) arising during the period

(400) (6,190)

1,680 (3,580)

Amount recognised in Other Comprehensive Income

(6,590)

(1 ,~OO)

Amounts included in staff costs Current service cost Past service cost Financing cost - interest on net defined benefit liability / (asset) see Note 7 Total Employer contributions Pension costs arising from FRS 102 (Note 7) Allowance for administration expenses included in Current Service

~-

~~ East Durham College

Page 53 of 56

Members' Report and Financial Statements

For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 25

Defined benefit obligations (continued)

Local Government Pension Scheme (Continued) Movement in net defined benefit (Iiability)/asset during the year 2020 £'000 (13,180)

2019 £'000 (9,880)

(1,730) 900 (10) (280) (6,590) (20,890)

(1,150) 720 (700) (270) P,9OO} (13,180)

2020 £'000

2019 £'000

Defined benefit obligations at start of period Current Service cost Interest cost Contributions by Scheme participants Experience gains and losses on defined benefit obligations Changes in financial assumptions Estimated benefits paid Past Service cost

38,1BO 1,730 B30 270 6,190

32,430 1,150 900 240 3,580

(800) 10

(B20) 700

Defined benefit obligations at end of period

46,410

38,180

25,000 550 (400) 900 270 (BOO} 25,520

22,550 630 1,680 720 240 (820) 25,000

Surplus/(deficit) in scheme at 1 August Movement in year: Current service cost Employer contributions Past service cost Net interest on the defined (Iiability)/asset Actuarial gain or loss Net defined benefit (liability)/asset at 31 July

Asset and Liability Reconciliation

Changes in the present value of defined benefit obligations

Reconciliation of Assets Fair value of plan assets at start of period Interest on plan assets Remeasurement gains/(Iosses) on assets Employer contributions Contributions by Scheme participants Estimated benefits paid Fair value of plan assets at end of period

~J-.. ~

East Durham College

Page 54 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 26

Related party transactions

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

~-

Endeavour:

an institution in which S Duncan, Principal, C Tomlinson, the Vice-Principal Curriculum and Performance and F Harrison, Governor, has an interest. Sales in the year amounted to £72k (2019: £69k). The Trade Debtors balance outstanding at the Year End was £Nil (2019: £36k). Purchases in the year amounted to £1 k (2019: £16k). The Trade Creditors balance outstanding at the Year End was £1 k (2019: £Nil).

Association of Colleges:

an institution in which S Duncan, Principal, has an interest. Sales in the year amounted to £1 k (2019: £Nil) and purchases to £19k (2019:£18k). The Trade Debtors balance outstanding at the Year End was £Nil (2019: £Nil), the Trade Creditors balance at the Year End was £19k (2019: £Nil)

Durham County Council:

an institution in which D Boyes, Governor, has an interest. Sales in the year amounted to £643k (2019: £1, 123k). The Trade Debtors balance outstanding at the Year End was £6k (2019: £Nil). Purchases in the year amounted to £175k (2019: £169k). The Trade Creditors balance outstanding at the Year End was £1 08k (2019: £112k).

Landex

an institution in which S Duncan, Principal, has an Interest. Purchases in the year amounted to £1 Ok (2019: £9k). The Trade Creditors balance outstanding at the Year End was £2k (2019: £1 k).

Middlesbrough County Council:

an institution in which j Bromley, Governor, has an interest. Sales in the year amounted to £3k (2019: £Nil). The Trade Debtors balance outstanding at the Year End was £3k (2019: £1 k).

North East Local Enterprise Partnership

an institution in which j Macintyre, Governor, has an interest. Sales in the year amounted to £2k (2019: £Nil). The Trade Debtors balance outstanding at the Year End was £NiI (2019: £Nil).

Shotton Ha II School:

an institution in which S Duncan, Principal, has an interest. Sales in the year amounted to £1 k (2019: £118k). The Trade Debtors balance outstanding at the Year End was £Nil (2019: £Nil).

Teesdale School

an institution in which S Duncan, Principal, has an interest. Sales in the year amounted to £20k (2019: £4k). The Trade Creditor balance outstanding at the Year End was £3k (2019: £Nil).

University of Sunderland:

an institution in which j Macintyre and D Butler, Governors, have an interest. Sales in the year amounted to £281 k (2019: £332k). The Trade Debtors balance outstanding at the Year End was £3k (2019: £1 k). Purchases in the year amounted to £Nil (2019: £Nil). The Trade Creditors balance outstanding at the Year End was £Nil (2019: £Nil).

~~ East Durham College

Page 55 of 56

Members' Report and Financial Statements For the Year Ended 31 July 2020

East Durham College Notes to the Accounts (continued) 27

Amounts disbursed as agent for Learner Support Funds

Balance b/fwd ESFA Grants Disbursed to students Administration costs Balance included in creditors I (overspend) as at 31 July

2020 £'000

2019 £'000

14 1,013 1,027 (996) (41 )

(36) 944 908 (852) (42)

(10)

14

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.

,,_

~~ East Durham College

Page 56 of 56