THE BOURNEMOUTH & POOLE COLLEGE · THE BOURNEMOUTH AND POOLE COLLEGE OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 31 JULY 2013 Page 3 of 52 FINANCIAL POSITION Financial Results

FINANCIAL STATEMENTS

For Year Ended 31 July 2013

THE BOURNEMOUTH & POOLE COLLEGE

ANNUAL REPORT

and

THE BOURNEMOUTH AND POOLE COLLEGE

REPORTS and FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JULY 2013

CONTENTS

Page

Operating and Financial Review 1

Members and Professional Advisors 10

Statement of Corporate Governance and Internal Control 11

Statement of Responsibilities of the Members of the Corporation 15

Independent Auditors' Report to the Corporation 16

Independent Auditors' Report on Regularity 18

Consolidated Income and Expenditure Account 20

Consolidated Statement of Historical Cost Surpluses and Deficits 21

Consolidated Statement of Total Recognised Gains and Losses 21

Balance Sheets - Group and College 22

Consolidated Cashflow Statement 23

Notes to the Financial Statements 24

THE BOURNEMOUTH AND POOLE COLLEGE OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 31 JULY 2013

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NATURE, STRATEGIES AND OBJECTIVES

The members present their report and the audited financial statements for the year ended 31 July 2013.

Legal Status

The Corporation was established under The Further and Higher Education Act 1992 for the purpose of conducting

the affairs of The Bournemouth & Poole College. The College is an exempt charity for the purposes of the Charities

Act 1993 as amended by the Charities Act 2006.

Mission

In 2008 we adopted the following Mission Statement:

‘Aspire • Achieve • Succeed’

This was reviewed and endorsed when we adopted our new Strategic Plan in July 2011.

Implementation of Strategic Plan

The Board has agreed the following Strategic Outcomes as the defining purpose of The Bournemouth and Poole

College:

The Bournemouth & Poole College exists so that students, employers and communities from

Bournemouth, Dorset and Poole and beyond are equipped for the futures to which they aspire at a

cost that represents excellent value for money.

SO-1 for our Students

Students have the skills, confidence and knowledge to make a successful transition into work or the

next stage of their career or education.

SO-2 for Employers

Employers have the skilled people they need to create and develop a prosperous and sustainable

economy.

SO-3 for Communities

Community organisations have relationships with the College that help them fulfil their aims /

outcomes.

In July 2011 we adopted a new Strategic Plan for the period 1 August 2011 to 31 July 2014. The Strategic Plan sets

out a framework of six strategic aims. These are:

Outstanding education, training and employability opportunities

Engagement with our employers, partners and community

Personalised support leading to success

A flexible workforce that is highly skilled and highly motivated

Resources and buildings that are accessible, welcoming and sustainable

Sound financial management and control


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These aims are underpinned by Strategic Objectives covering the progress required in the three year planning

period. The full set of Objectives is in the Strategic Plan. Each year, we set key performance targets relating to the

achievement of the Strategic Plan. Progress against these is monitored at each business meeting of the Corporation.

Financial Condition and Objectives

With regard to Financial Condition, the Board’s Governance Policy Manual stipulates that:

The Principal shall not:

Allow The College’s financial health assessment to fall below “satisfactory”.

Spend funds that would exceed any approved overdraft facility.

Enter into any long-term borrowing arrangement.

Breach any loan covenants.

Deliver surpluses that are lower than agreed.

Allow the cash flow delivery to be lower than agreed.

In response to the above, the Strategic Plan sets out two Strategic Objectives:

Financial Planning that maximises our investment in providing and supporting teaching and learning and assures long term viability

Sound controls and transparent processes that deliver compliance with legislation and regulation while minimising administrative processes

Performance Indicators

FE Choices has four key performance indicators:

Success rates

Learner destinations

Satisfaction survey (formerly Learner Views)

Satisfaction survey (formerly Employer Views).

The College is committed to observing the importance of the above indicators.

Financial performance is monitored through the completion of the annual Finance Record for the Skills Funding

Agency. The current rating of Good is considered an acceptable outcome.

The Board continued to operate a framework for setting key performance targets and monitoring these at Board

meetings throughout the year.


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FINANCIAL POSITION

Financial Results

The total reported retained surplus for 2012/13 was £2.3m (11/12: £1.7m). This surplus is stated after the deduction

of a net FRS17 cost of £0.6m (11/12: £0.3m) and after a net gain of £2.2m from the sale of some of the college’s art

collection that took place during the year. With the exception of £0.1m that has been used to establish an Art Prize,

the proceeds from the sale are funding our on-going investment in improving the college estate in line with our

Property Strategy.

Accumulated income and expenditure reserves at 31 July 2013 were £13.7m (11/12: £10.9m) and net current assets

were £2.5m (11/12: £3.0m). There was a decrease during the year, of £1.4m in the pension fund deficit as calculated

under FRS17 rules (11/12: an increase in the deficit of £4.9m). As a result, the overall balance sheet as at 31 July

2013 shows total funds of £5.8m (11/12: total funds of £0.07m).

The cash inflow from operating activities was £5.8m (11/12: £4.1m). If the impact of the sale of the art pieces is

excluded then the operational inflow for 12/13 would be £3.1m. Total cash balances, including cash on deposit at

the year end, increased by £0.1m in year (11/12: £2.4m). Cash at bank and on hand on 31 July 2013 was £2.1m

(11/12: £2.7m) and cash on deposit was £4.3m (11/12: £3.6m). Cash levels are expected to decrease during 2013/14

due to planned expenditure on the Property Strategy.

Fixed asset additions during 2012/13 totalled £6.9m (11/12: £4.3m). Of this, £5.1m was property related

expenditure (11/12: £2.0m) and expenditure on new equipment was £1.8m (11/12: £2.3m). The increase reflects

our continuing strategy of investing to improve our estate and our resources that directly impact on teaching and

learning.

During the year under review, the College’s wholly owned subsidiary, Bournemouth and Poole College Services Limited, changed the nature of its trade from a property leasing company to an Apprenticeship Training Agency. Most of the subsidiary’s trading is with the College, and is eliminated from group results on consolidation. Its contribution to the group surplus in 2012/13 was £nil (2011/12 £0.02 million). Treasury Policies and Objectives

Treasury management is the management of our cash flows, our 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. Borrowing requires the authorisation of the Corporation and must comply

with the requirements of the Financial Memorandum agreed with the Skills Funding Agency.

We are proactive in maximising the return from Treasury Management activities and work to the following

requirements:

funds are available to cover outgoings as they fall due.

temporary cash surpluses are invested to earn the best return available – consistent with appropriate management effort and the minimisation of risk – bearing in mind that investment is not a primary activity of colleges.

borrowing is only undertaken when commercially prudent and on the most advantageous terms – consistent with the need to ensure financial stability.


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CURRENT AND FUTURE DEVELOPMENT AND PERFORMANCE

Student Numbers

In 2012/13 the college delivered activity that produced £24.3m in funding body main allocation funding (2011/12:

£25.6m). The college had approximately 8,000 FE funded students, 1,100 HE students and 3,350 non funded

students (2011/12: 9,000, 1,050 and 3,450).

Student Success

Student success continues to focus on success rates but now incorporates a number of additional outcomes:-

Progression and employment rates

English and mathematics achievement

Employment skills

Value Added measures

Students continue to be challenged to be the best they can be and to access the exceptional support provided to

ensure they reach their potential. The rising trend in our FE Long Qualification Success Rates continues, as

demonstrated by the table below:

12/13 11/12 10/11

16-18 year olds 84% 82% 78%

19+ 86% 80% 72%

Total 84% 82% 76%

To ensure our students are equipped to progress to their next level of study and successfully compete for jobs, we

have focused on the additional measures of success as listed above including:-

We have produced a comprehensive Maths and English strategy led by the Head of each area.

We have increased by 100% the number of English and mathematics qualifications taken by our students and wherever possible students are working towards GCSEs and GCSE equivalence A*-C.

We have identified actions required by staff and students to ensure students are positioned to progress successfully.

Students develop employment skills as part of their course and are facilitated to access work experience and related activities.

Students are supported to ‘travel the most distance possible’ by gaining high grades and developing the required skills.

Students are encouraged to compete and are frequently successful, which raises ambition.

Curriculum

Our teaching and learning strategy continues to develop and it incorporates learning opportunities to stimulate all

round development. This year all full time 16-18 year old students access Study Programmes which includes their

main qualification, English, maths and ICT skills, study skills, work experience, volunteering and community activities,


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fund raising and other career related experiences to enhance their employability. We are now considered to be a

leading authority in this field and regularly host visits from other providers.

Following the creation of a Science, Technology, Engineering and Mathematics (STEM) Centre, the Peter Jones

Enterprise Academy and the Marine Technology Centre, further curriculum modernisation and development has

resulted in a Financial Services Centre, an International Centre and advanced plans for a Care Centre.

Our outstanding provision now includes a significant proportion of the Creative and Service Industries, Health &

Medical Sciences, Business and Professional Studies, Foundation Studies, Teacher Training, Access to Higher

Education, Computing and Construction. We also have good successes in our International Directorate and

Construction, Engineering, Hospitality and Catering and Accounting Apprentices.

We have launched our ‘Student First’ strategy with the aim of refreshing our approach to placing students’ success at

the centre of our thinking and decision making and to use student feedback and involvement to shape and develop

our college.

Future Developments

The current economic climate is challenging for the whole of the public sector. The Further and Higher Education

sectors are taking their share of the reductions in public expenditure and rates of funding and financial support for

students are both diminishing. At the same time, we are seeking to ensure that our core activities are aligned to the

needs of the local economy and our wider community. Our key challenge at the present time is to ensure that we

continue to develop and improve further our core infrastructure, to support teaching and learning and to ensure

that all our students are given every opportunity to achieve and progress to their chosen destination. We will

maintain a sharp focus on our core values, delivering our core activities, meeting our key targets, flexibility and

adaptability regarding the future, shaping a clear identity for ourselves within our community and maintaining a

strong emphasis on performance, quality and efficiency in all that we do.

RESOURCES

We have various resources to support the achievement of our strategic objectives.

Financial

Tangible resources include £21.9m held in fixed assets. These include the main college sites and £0.4m of Heritage

assets

At 31 July 2013, we had total net assets of £17.7m before taking into account the pension liability of £14.6m. Net

current assets were £2.5m and long term debt was £4.0m.

Physical Resources

We continue to invest in equipment and buildings to support teaching and learning. A revised Property Strategy was

approved by the Board in November 2012 and covers the period up to December 2015. During 2012/13, £5.1m was

expended, with capital and revenue expenditure since 2009/10 totalling £8.9m. The total planned cost of the

Strategy to the end of 2015 is £22.6m which is being funded from a mixture of loan funding (£5.0m), capital grants

from the Skills Funding Agency and its predecessor bodies (anticipated as £6.8m), sales of assets (£4.5m) with the

remaining £6.3m from our reserves.


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Development of our IT infrastructure is guided by our Digital College Strategy. During 2012/13 we invested £1.2m in

IT capital purchases. We also have a smaller capital budget to support other capital needs: during 2012/13 this

expenditure was £0.6m

People

During 2012/13 we employed 674 full-time equivalent staff (FTE’s), of which 345 FTE’s were teaching staff. This is an

overall decrease of 12 FTE’s from the numbers employed during 2011/12.

Throughout the year, we continued to work hard with our staff to create a culture of openness, integrity and

transparency whilst at the same time implementing a number of organisational and strategic changes designed to

contribute to achieving the College’s strategic aims and objectives, including continuing improvements to the

success rates and employability of our students. A key college theme for 2012/13 was Employee Engagement, under

which a number of initiatives were launched. This continues as a major focus for 2013/14.

Reputation

We have a good reputation locally and nationally and this was consolidated by the outcome of our Ofsted inspection

in February 2011 and our IQER in March 2012. Maintaining a quality brand is essential for us to continue to attract

students and businesses and to develop external relationships in a highly competitive market.

PRINCIPAL RISKS AND UNCERTAINTIES

We have developed and embedded a system of internal control, including financial, operational and risk

management, that is designed to protect our assets, operations and reputation. A recent review, which was

supported by the Internal Auditors, has led to changes for 2013/14 that are intended to strengthen the links

between operational activities and risk.

Based on the strategic and operational plans, the Senior Leadership Team, which acts the Risk Management Group,

undertakes a comprehensive review of the risks we face. It identifies systems and procedures, including specific

preventable actions which should mitigate any potential impact. The internal controls are then implemented and

progress and effectiveness are regularly reviewed to ensure that, as far as possible, risks are mitigated by

management actions. In addition to reviews, the Risk Management Group considers any new risks which may arise

eg as a result of new activities or by changes in the external environment.

A risk register is maintained at college level and is reviewed at each Audit Committee meeting and a risk movement

chart is presented to each meeting of the Corporation. The risk register identifies the key risks, the likelihood of

those risks occurring, their potential impact and the actions being taken to reduce and mitigate the risks. Risks are

prioritised using a consistent scoring system.

We have identified the principal risk factors that may affect our ability to achieve our strategic objectives; not all

factors are within our control and other factors besides those listed below may also adversely affect us. We analyse

our risks into six categories:

1. Academic and Quality risks 2. Human Resource Risks 3. Physical Resource Risks 4. Financial Risks


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5. Partnership Risks 6. Project Risks 7. Strategic Environment Risks 8. Compliance and Data Security Risks

Principal themes concern:

the impact of the current recession on the appetite and / or ability of individuals and organisations pay for education and training,

the scale of current and future funding reductions that now demand radically new approaches to service delivery

the strategic importance of collaboration and external engagement to future success

the impact on our reputation of any adverse event or poor perception

the need to ensure the high quality of educational delivery

the importance of the recruitment, reward and development of staff and of engagement with our staff

failures of control and / or statutory compliance, including fraud and error

business continuity risks

change management and project implementation risks.

Risks are being mitigated in a variety of ways including:

maintaining relationships with key partners, including funding agencies, local bodies (including LEP, Local Authorities and planners) and delivery partners.

ensuring that we are aware of political thinking and likely policy change.

defining our own strategic direction and focussing on our key strategic aims.

scrutinising our performance regularly, in terms of efficiency, effectiveness and relevance.

ensuring that expectations of staff are clearly communicated.

maintaining rigorous systems of scrutiny and control that ensure that all our activities, both teaching and non teaching, are of high quality, are efficient and encompass the core values that generate a safe, equal and diverse environment.

maintaining open channels of communication with staff and students and ensuring that feedback is acted upon.

adopting a mindset that the situation represents a challenge and generates an opportunity to foster innovation.

undertaking a fundamental review of all areas of our activities.

setting realistic targets and monitoring to ensure that they are met.

developing long term resource plans and ensuring they are fully integrated into financial planning.

implementing and monitoring our Value for Money Strategy and Plan.

undertaking sensitivity analysis and contingency planning.

STAKEHOLDER RELATIONSHIPS

In line with other colleges and with universities, we have many stakeholders. These include:

Students

Staff

Local employers

The local community

Local authorities

Trade unions


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Education sector funding bodies

Government offices / LEP

Other educational institutions

Professional and sector bodies.

We recognise the importance of these relationships and communicate regularly with all stakeholders by various

means.

Equality and Diversity

We are committed to the principles of equality and diversity for all who learn and work here and within partner

organisations. We are opposed to any form of discrimination. We respect and value the positive contributions that

differences in ethnicity, gender, disability, age, faith and beliefs, sexual orientation, marriage and civil partnership,

gender identity, pregnancy and maternity and socio-economic status bring to the College. We strive vigorously to

remove conditions which place people at a disadvantage and we are committed to providing an environment in

which people feel comfortable and assured that they will be treated with dignity and respect. The College expects all

employees, students and associated partner organisations to adopt this policy.

This commitment is developed further in our Single Equality Scheme and accompanying action plan which sets out

the steps we will take to ensure equality for the protected characteristics under the Equality Act 2010. The Single

Equality Scheme is resourced, implemented and monitored on a planned basis and the Equality & Diversity Action

Plan is published annually and monitored at regular intervals throughout the year by the Equality & Diversity

Committee and the Corporation.

Disability Statement

The College seeks to achieve the objectives set down in the Disability Discrimination Act 1995 as amended by the

Special Education Needs and Disability Acts 2001 and 2005.

As part of the Property Strategy, we complete Access Audits at the end of each stage. The results form the basis for

future capital projects aimed at improving access. We also publish a Property Strategy Access and Inclusion

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

The college has an appointed staff member who provides information and advice, and arranges support where

necessary for student with disabilities.

There is a list of specialist equipment, such as radio aids, which the College can make available for use by students

and a range of assistive technology is available in the Study Advice Centres.

We have a Student Admissions Policy and appeals against a decision not to offer a place are dealt with under the

Complaints Policy.

The College has made a significant investment in the appointment of specialist lecturers to support students with

learning difficulties and / or disabilities. There are a number of learning support staff who can provide a variety of

support for learning. There is a continuing programme of staff development to ensure the provision of a high level

of appropriate support for students who have learning difficulties and / or disabilities.

Specialist programmes are described in College prospectuses and achievements and destinations are recorded and

published in the standard College format.


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Counselling and welfare services and the Complaints and Disciplinary Procedures are described in the College

Student Handbook, which is issued to students at induction.

Disclosure of Information to Auditors

The members who held office at the date of approval of this report confirm that, so far as they are each aware, there

is no relevant audit information of which the College’s auditors are unaware; and each member has taken all the

steps that he or she ought to have taken to be aware of any relevant audit information and to establish that the

College’s auditors are aware of that information.

Approved by order of the members of the Corporation on 12 December 2013 and signed on its behalf by:

Joy Postings

Chair

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MEMBERS

Name Date of Appointment Term of Office

Date of

Resignation Committees Served

Miss A Alaverdjana 1 September 2012

1 academic year

(Student) 20 March 2013

Mr C Beale 9 July 2009 Audit

Re-appointed:

8 July 2013 3 years

Mr R Blaber 11 December 2008 Audit

Re-appointed:

10 December 2012 4 years

Ms Liz Kite 8 December 2011 4 years 28 June 2013

Mrs G Lacey 1 April 1997 Search

Re-appointed:

1 April 2001

1 April 2005

1 April 2009 4 years 31 March 2013

Mr A McQueen 1 April 2013 3 years Audit

Mr T Millar 18 October 2012 3 years

Mrs J Postings 30 January 2006

Re-appointed:

29 January 2010 4 years

Mr R Rowney 16 October 2008

Re-appointed:

16 October 2012 4 years 27 July 2013

Mr A Smirnovs 1 September 2012

1 academic year

(Student) 23 May 2013

Mr G Spencer 16 December 1999 Search

Re-appointed:

16 December 2003

20 December 2007

11 December 2008



Mr L Vincent 1 December 2007 Principal Search

Ms L Walford 1 September 2012 3 years

Mrs C Whittle 16 December 2010 3 years (Staff)

Harry Mears - Chair of Audit Committee (open Invitation to all Board Meetings).

External Auditors:

Internal Auditors:

Bankers:

Solicitors:

HSBC Bank plc, Poole

Steele Raymond LLP, Bournemouth


The members who served on the Corporation during the year and up to the date of signature of this report as

listed in Table 2

Table 2: Governors serving on the College Board during 2012/13

Professional Advisers

Baker Tilly Audit Limited, Basingstoke

TIAA Ltd, Gosport, Hants

Vice Chair: Corporation

Search

Chair: Corporation

Chair: Search

THE BOURNEMOUTH AND POOLE COLLEGE STATEMENT OF CORPORATE GOVERNANCE AND INTERNAL CONTROLS

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The following statement is provided to enable readers of the annual report and accounts of the College to obtain a better understanding of its governance and legal structure. 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);and

ii. in compliance with all the provisions of the UK Corporate Governance Code (“the Code”) issued by the FRC in June 2010 insofar as it is applicable to the further education sector. In the opinion of the Corporation it has complied throughout the year ended 31 July 2013.

The College is committed to exhibiting best practice in all aspects of corporate governance. This summary describes

the manner in which the College has applied the principles set out in the Code. Its purpose is to help the reader of the

accounts understand how the principles have been applied.

The Corporation recognises that, as a body entrusted with both public and private funds, it has a particular duty to

observe the highest standards of corporate governance at all times. In carrying out its responsibilities, it takes full

account of The English Colleges’ Foundation Code of Governance issued by the Association of Colleges in December

2011, which is in accordance with the College’s Policy Governance.

The Corporation

The list of members who served on the Corporation during the year and up to the date of signature of this report is set

out on page 10. 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, academic

quality indicators and personnel related matters such as health and safety and environmental issues.

The Corporation operates the Policy Governance Model. There are usually at least eight meetings a year and this was

the case in 2012/13. During the year, the Corporation was supported in the conduct of its business by a number of

committees, each of which has terms of reference that have been approved by the Corporation. These committees are

Remuneration, Search & Governance and Audit. Full minutes of all meetings, except those deemed to be confidential

by the Corporation, are available on the college’s website or from the Clerk to the Corporation at:

Bournemouth and Poole College

North Road

Poole

BH14 0LS.

The Clerk to the Corporation maintains a register of financial and personal interests of the governors, which is available

for inspection at the above address.

All governors are able to take independent professional advice in furtherance of their duties at the College’s expense

and have access to the Clerk to the Corporation, who is responsible to the Board for ensuring that all applicable

procedures and regulations are complied with. The appointment, evaluation and removal of the Clerk are matters for

the Corporation as a whole.


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Formal agendas, papers and reports are supplied to governors in a timely manner, prior to Board meetings. Briefings

are also provided on a regular basis and Board members participate in strategic planning each year.

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.

Appointments to the Corporation

Any new appointments to the Corporation are a matter for the consideration of the Corporation as a whole. The Corporation has a Search & Governance Committee, consisting of five members of the Corporation including the Principal. The Committee is responsible for the selection and nomination of any new member for the Corporation’s consideration. 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.

Remuneration Committee

Throughout the year ending 31 July 2013 the College’s Remuneration Committee comprised five members of the Corporation. The Committee’s responsibilities are to make recommendations to the Board on the remuneration and benefits of the Principal and other senior post-holders.

Details of remuneration for the year ended 31 July 2013 are set out in notes 6 and 7 to the financial statements.

Audit Committee

The Audit Committee comprised three members of the Corporation (excluding the Principal and Chair) plus one external co-opted member who is a qualified accountant and who acts as Committee Chair. The Committee operates in accordance with the written terms of reference approved by the Corporation.

The Audit Committee meets on 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 College management. The Committee also receives and considers those reports from the main FE funding

bodies that affect the College’s business.

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.


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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 he is personally responsible, in accordance with the responsibilities

assigned to him in the Financial Memorandum between the College and the funding bodies. He is also responsible for

reporting to the Corporation any material weaknesses or breakdowns in internal control.

The Purpose of the System of Internal Control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure

to achieve policies, aims and objectives. It can, therefore, only provide reasonable and not absolute assurance of

effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks

to the achievement of College policies, aims and objectives, to evaluate the likelihood of those risks being realised and

the impact should they be realised, and to manage them efficiently, effectively and economically. The system of

internal control has been in place in the College for the year ended 31 July 2013 and up to the date of approval of the

annual report and accounts.

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 2013 and up to the date of approval of the annual reports and accounts. 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 Corporation

regular reviews by the Corporation, of periodic and annual financial reports which indicate financial performance against forecasts

setting and monitoring targets to measure financial and other performance

clearly defined capital investment control guidelines

the adoption of formal project management disciplines, where appropriate.

The College has an internal audit service, which operates in accordance with the requirements of the Skills Funding

Agency’s Joint 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 a minimum


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annually, the Head of Internal Audit (HIA) provides the Corporation with a report on internal audit activity in the

College. The report includes the HIA’s independent opinion on the adequacy and effectiveness of the College’s system

of risk management, controls and governance processes.

Review of Effectiveness

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

His review of the effectiveness of the system of internal control is informed by:

the work of the internal auditors

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

comments made by the College’s financial statements, the regularity auditors and the appointed funding auditors, in their management letters and other reports.

The Principal has been advised on the implications of his review of the effectiveness of the system of internal control by

the Audit Committee, which oversees the work of the internal auditor, and a plan to address weaknesses and ensure

continuous improvement of the system is in place.

The Principal and Senior Leadership 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 Principal and Senior Leadership 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 Executive Team and the Audit Committee. The emphasis is on obtaining the relevant degree of assurance and not

merely reporting by exception. At its December 2013 meeting, the Corporation carried out the annual assessment for

the year ended 31 July 2013 by considering documentation from the Executive Team and internal audit, and taking

account of events since 31 July 2013.

Based on the advice of the Audit Committee and the Principal, the Corporation is of the opinion that the College has

an adequate and effective framework for governance, risk management and control, and has fulfilled its statutory

responsibility for “the effective and efficient use of resources, the solvency of the institution and the body and the

safeguarding of their assets”.

Going Concern

After making appropriate enquiries, the Corporation considers that the College has adequate resources to continue in operational existence for the foreseeable future. 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 12 December 2013 and signed on its behalf by: J Postings L Vincent Chair Principal & Chief Executive

THE BOURNEMOUTH AND POOLE COLLEGE STATEMENT OF RESPONSIBILITIES OF THE MEMBERS OF THE CORPORATION

Page 15 of 52

The members of the Corporation are required to present audited financial statements for each financial year.

Within the terms and conditions of the Financial Memorandum agreed between the Skills Funding Agency and the

Corporation of the College, the Corporation, through its Principal, is required to prepare financial statements for each

financial year in accordance with the 2007 Statement of Recommended Practice – Accounting for Further and Higher

Education and with the Accounts Direction for 2012-13 financial statements issued jointly by the Skills Funding Agency

and the Education Funding Agency and which give a true and fair view of the state of affairs of the College and the

result for that year.

In preparing the financial statements, the Corporation is required to:

select suitable accounting policies and apply them consistently

make judgements and estimates that are reasonable and prudent

state whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements

prepare financial statements on the going concern basis unless it is inappropriate to assume that the College will continue in operation.

The Corporation is also required to prepare an Operating and Financial Review which describes what it is trying to do

and how it is going about it, including the legal and administrative status of the College.

The Corporation is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any

time, the financial position of the College and which enable it to ensure that the financial statements are prepared in

accordance with relevant legislation of incorporation and other relevant accounting standards. It is responsible for

taking steps that are reasonably open to it in order to safeguard the assets of the College and to prevent and detect

fraud and other irregularities.

The maintenance and integrity of the College website is the responsibility of the Corporation of the College; the work

carried out by the auditors does not involve consideration of these matters and accordingly, the auditors accept no

responsibility for any changes that may have occurred to the Financial Statements since they were initially presented

on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements

may differ from legislation in other jurisdictions.

Members of the Corporation are responsible for ensuring that expenditure and income are applied for the purposes

intended by Parliament and that the financial transactions conform to the authorities that govern them. In addition

they are responsible for ensuring that funds from the Skills Funding Agency are used only in accordance with the

Financial Memorandum with the Skills Funding Agency and any other conditions that may be prescribed from time to

time. Members of the Corporation must ensure that there are appropriate financial and management controls in place

in order to safeguard public and other funds and to ensure they are used properly. In addition, members of the

Corporation are responsible for securing economical, efficient and effective management of the College’s resources

and expenditure, so that the benefits that should be derived from the application of public funds from the Skills

Funding Agency are not put at risk.

Approved by order of the members of the Corporation on 12 December 2013 and signed on its behalf by:

J Postings

Chair

THE BOURNEMOUTH AND POOLE COLLEGE INDEPENDENT AUDITOR’S REPORT TO THE GOVERNING BODY OF BOURNEMOUTH AND POOLE COLLEGE OF FURTHER AND HIGHER EDUCATION

Page 16 of 52

We have audited the Group and College financial statements [(“the financial statements”)which comprise the

Income and Expenditure Account, the Statement of Total Recognised Gains and Losses, the Consolidated Balance

Sheet, College Balance Sheet, the Cash Flow Statement, the Reconciliation of Movement on Net Funds and the

related notes. The financial reporting framework that has been applied in their preparation is United Kingdom

Accounting Standards (United Kingdom Generally Accepted Accounting Practice.

This report is made solely to the Governing Body, as a body, in accordance with the Financial Memorandum

published by the Chief Executive of Skills Funding and our engagement letter. Our audit work has been undertaken

so that we might state to the Governing Body, as a body, those matters we are required under our engagement

letter 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 Governing Body, as a body, for our audit work, for this

report, or for the opinions we have formed.

Respective Responsibilities of the Governing Body of Bournemouth and Poole College and Auditor

As explained more fully in the Statement of the Governing Body’s Responsibilities set out on page 15, the Governing Body is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with the terms of our engagement letter dated August 2011, Audit Code of Practice issued by the Learning and Skills Council and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s

website at http://www.frc.org.uk/Our-Work/Codes-Standards/Audit-and-assurance/Standards-and-

guidance/Standards-and-guidance-for-auditors/Scope-of-audit/UK-Private-Sector-Entity-(issued-1-December-

2010).aspx

Opinion on financial statements

In our opinion the financial statements:

give a true and fair view of the state of the Groups’ and the College’s affairs as at 31 July 2013 and of the Group’s deficit of income over expenditure for the year then ended; and

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

THE BOURNEMOUTH AND POOLE COLLEGE INDEPENDENT AUDITOR’S REPORT TO THE GOVERNING BODY OF BOURNEMOUTH AND POOLE COLLEGE OF FURTHER AND HIGHER EDUCATION

Page 17 of 52

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the revised Joint Audit Code of Practice (Part 1) issued jointly by the Skills Funding Agency and the Young People’s Learning Agency and the Audit Code of Practice issued by the Learning and Skills Council requires us to report to you if, in our opinion:

proper accounting records have not been kept; or

the financial statements are not in agreement with the accounting records.

Baker Tilly Audit Limited Date (On 1 October 2013 RSM Tenon Audit Limited changed its name to Baker Tilly Audit Limited) Chartered Accountants Highfield Court Tollgate Chandlers Ford Hampshire SO53 3TY

THE BOURNEMOUTH AND POOLE COLLEGE INDEPENDENT AUDITOR’S REPORT ON REGULARITY TO THE GOVERNING BODY OF BOURNEMOUTH AND POOLE COLLEGE (‘THE GOVERNING BODY’) AND THE CHIEF EXECUTIVE OF SKILLS FUNDING

Page 18 of 52

In accordance with the terms of our engagement letter dated and further to the requirements of the Skills Funding

Agency, we have carried out a review to obtain assurance about whether, in all material respects, the expenditure

(disbursed) and income (received) of Bournemouth and Poole College of Further and Higher Education (‘the College’)

during the year ended 31 July 2013 have been applied to the purposes identified by Parliament and the financial

transactions conform to the authorities which govern them.

This report is made solely to the Governing Body and the Chief Executive of Skills Funding in accordance with the terms

of our engagement letter. Our work has been undertaken so that we might state to the Governing Body and the Chief

Executive of Skills Funding 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 Governing Body and the

Chief Executive of Skills Funding, for our work, for this report, or for the opinion we have formed.

Respective responsibilities of the Members of the Governing Body of Bournemouth and Poole College of Further and Higher

Education and Auditors

The College’s Governing Body is responsible, under the requirements of the Further & Higher Education Act 1992,

subsequent legislation and related regulations, and the funding agreement for ensuring that expenditure disbursed and

income received are applied for the purposes intended by Parliament and the financial transactions conform to the

authorities which govern them.

Our responsibilities for this engagement are established in the United Kingdom by our profession’s ethical guidance and

the audit guidance set out in the revised Joint Audit Code of Practice (Part 1) issued jointly by the Skills Funding Agency

and the Young People’s Learning Agency and the Audit Code of Practice and the Regularity Audit Framework 2006/07

issued by the LSC and are to obtain reasonable assurance and report in accordance with our engagement letter and the

Regularity Audit Framework 2006/07. We report to you whether, in our opinion, in all material respects, the College’s

expenditure disbursed and income received during the year ended 31 July 2013 have been applied to purposes

intended by Parliament and the financial transactions conform to the authorities which govern them.

Basis of opinion

We conducted our review in accordance with the revised Joint Audit Code of Practice (Part 1) issued jointly by the Skills Funding

Agency and the Young People’s Learning Agency and the Audit Code of Practice and the Regularity Audit Framework 2006/07

issued by the LSC.

We performed a reasonable assurance engagement as defined in our engagement letter.

Our review includes examination, on a test basis, of evidence relevant to the regularity and propriety of the College’s income

and expenditure.

THE BOURNEMOUTH AND POOLE COLLEGE INDEPENDENT AUDITOR’S REPORT ON REGULARITY TO THE GOVERNING BODY OF BOURNEMOUTH AND POOLE COLLEGE (‘THE GOVERNING BODY’) AND THE CHIEF EXECUTIVE OF SKILLS FUNDING

Page 19 of 52

Opinion

In all material respects the expenditure disbursed and income received during the year ended 31 July 2013 have been applied to

purposes intended by Parliament and the financial transactions conform to the authorities which govern them.

Baker Tilly Audit Limited Date (On 1 October 2013 RSM Tenon Audit Limited changed its name to Baker Tilly Audit Limited) Chartered Accountants Highfield Court Tollgate Chandlers Ford Hampshire SO53 3TY

Page 20 of 52


CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT


2013 2012

£'000 £'000

Notes

Income

Funding body grants 2 24,330 25,600

Tuition fees and education contracts 3 8,131 7,676

Other income 4 3,435 4,209

Endowment and investment income 5 109 26

T ota l income 36,005 37,511

Expenditure

Staff costs 6 23,577 23,454

Exceptional restructuring costs 6 169 492

Other operating expenses 8 9,166 8,172

Depreciation 12 2,584 3,274

Interest and other finance costs 9 378 404

T ota l expenditure 35,874 35,796

Surplus on continuing opera tions a fte r

deprecia tion of tangible fixed asse ts a t

va lua tion and be fore exceptiona l items and tax 131 1,715

Gain on disposal of assets 16 2,180 -

Surplus on continuing operations after

depreciation of tangible fixed assets at

valuation, exceptional items and disposal

of assets but before tax 2,311 1,715

Taxation 10 - -

Surplus on continuing opera tions

a fte r deprecia tion of asse ts a t va lua tion

and tax 11 2,311 1,715

Transfer to endowment funds 24 (55) -

Surplus for the year re ta ined within genera l reserves 2,256 1,715

The income and expenditure account is in respect of continuing activities.

Page 21 of 52


CONSOLIDATED STATEMENT OF HISTORICAL COST SURPLUSES AND DEFICITS


2013 2012

£'000 £'000

Notes

Surplus on continuing operations before taxation 2,311 1,715

Difference between historical cost depreciation and

the actual charge for the year calculated

on the revalued amount 25 94 89

Historica l cost surplus for the year

be fore taxa tion 2,405 1,804

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES


2013 2012

£'000 £'000

Notes

Surplus on continuing operations after

depreciation of assets at valuation and tax 2,311 1,715

Actuarial loss in respect of pension scheme 32 1,983 (4,556)

Revaluation surplus released on reclassification of heritage assets - (1,994)

Historic cost of Heritage Assets sold 24 611 -

Appreciation of Endowment Asset Investments 17 11 -

T ota l recognised ga ins/(losses) re la ting to the year 4,916 (4,835)

Reconcilia tion of movement in reserves

Opening reserves and endowments (1,793) 3,042

Total recognised gains/(losses) for the year 4,916 (4,835)

Closing reserves and endowments 3,123 (1,793)

Page 22 of 52


BALANCE SHEETS AS AT 31 JULY 2013

Group College Group College

2013 2013 2012 2012

Notes £'000 £'000 £'000 £'000

Fixed assets

Tangible assets - Property & Equipment 12 21,528 21,528 17,264 17,264

Tangible assets - Heritage assets 13 399 399 399 399

Total fixed assets 21,927 21,927 17,663 17,663

Endowment assets 17 240 240 74 74

Current assets

Stock 14 14 11 11

Debtors 18 2,380 2,382 1,633 1,633

Assets held for resale 15 - - - -

Investments 4,350 4,350 3,600 3,600

Cash at bank and in hand 2,066 2,057 2,734 2,711

Total current assets 8,810 8,803 7,977 7,955

Creditors: amounts falling due within one year 19 (6,290) (6,283) (4,994) (4,971)

Net current assets 2,520 2,520 2,983 2,984

Total assets less current liabilities 24,687 24,687 20,720 20,721

Creditors: amounts falling due after more than

one year 20 (3,680) (3,680) (3,969) (3,969)

Provisions for liabilities 22 (667) (667) (683) (683)

Net assets excluding pension liability 20,340 20,340 16,068 16,069

Net pension liability 33 (14,573) (14,573) (16,003) (16,003)

5,767 5,767 65 66

Deferred capital grants 23 2,644 2,644 1,858 1,858

Restricted endowments 24 240 240 74 74

Reserves

Income and expenditure account excluding 26 13,694 13,694 10,891 10,892

pension reserve

Pension reserve 26 (14,573) (14,573) (16,003) (16,003)

Income and expenditure account including (879) (879) (5,112) (5,111)

pension reserve

Revaluation reserve 25 3,762 3,762 3,245 3,245

Total reserves 2,883 2,883 (1,867) (1,866)

TOTAL 5,767 5,767 65 66

The financial statements on pages 20 - 52 were approved by the corporation on 12 December 2013 and were signed

on its behalf on that date by:

J Postings L Vincent

Chair Principal

NET ASSETS INCLUDING PENSION LIABILITY

Page 23 of 52


CONSOLIDATED CASHFLOW STATEMENT


2013 2012

Notes £'000 £'000

27 3,571 4,070

Returns on investments and

servicing of finance 28 (35) (41)

Capital expenditure and financial

investment 29 (3,165) (3,436)

Management of liquid resources 30 (750) (1,850)

Financing 31 (289) 1,844

(Decrease)/Increase in cash in the year (668) 587

Reconciliation of net cash flow to movement in net funds

2013 2012

£'000 £'000

(Decrease)/Increase in cash in the year (668) 587

Cash outflow to liquid resources 30 750 1,850

Cash outflow/(inflow) to unsecured loan 31 289 (1,844)

Movement in net funds in the year 371 593

Net funds/(debt) at 1 August 2,076 1,483

Net funds at 31 July 32 2,447 2,076

Cash inflow from operating activities

THE BOURNEMOUTH AND POOLE COLLEGE NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013

Page 24 of 52

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

Basis of preparation

These financial statements have been prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education 2007 (the SORP), the Accounts Direction for 2012/13 Financial Statements and in accordance with applicable Accounting Standards.

Basis of accounting

The financial statements are prepared in accordance with the historical cost convention modified by the revaluation of certain fixed assets and in accordance with applicable United Kingdom Accounting Standards.

Going concern

The activities of the College, together with the factors likely to affect its future development and performance are set out in the Operating and Financial Review. The financial position of the College, its cashflow, liquidity and borrowings are described in the Financial Statements and accompanying Notes.

The College currently has £3.9m of loans outstanding with bankers including a £2m loan which commenced during the year ended 31st July 2012. The terms of the original loan agreement are for up to another 14 years. The new loan which commenced during the year ended 31st July 2012 has terms for another 15 years. The College’s forecasts and financial projections indicate that it will be able to operate within this existing facility and covenants for the foreseeable future.

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

Basis of consolidation

The consolidated financial statements include the College and its subsidiary undertaking, Bournemouth and Poole College Services Limited using acquisition accounting. Intra-group sales and profits are eliminated fully on consolidation. In accordance with Financial Reporting Standard (FRS) 2, 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 2013.

Recognition of income

Funding body recurrent grants are recognised in line with best estimates for the period of what is receivable and depend on the particular income stream involved. Any under or over achievement for the adult learner responsive funding element is adjusted for and reflected in the level of recurrent grant recognised in the income and expenditure account. The final grant income is normally determined with the conclusion of the year end reconciliation process with the funding body at the end of November following the year end and the results of any funding audits. Employer responsive grant income is recognised based on a year end reconciliation of income claimed and actual delivery. 16-18 learner-responsive funding is not normally subject to a reconciliation and is therefore not subject to contract adjustments.

Non-recurrent grants from the funding bodies or other bodies received in respect of the acquisition of fixed assets are treated as deferred capital grants and amortised in line with depreciation over the life of the assets.

The recurrent grant from HEFCE represents the funding allocations attributable to the current financial year and is credited direct to the income and expenditure account.


Page 25 of 52

Income from tuition fees is recognised in the period for which it is received and includes all fees payable by students or their sponsors, for example the National Health Service.

Income from grants, contracts and other services rendered is included to the extent the conditions of the funding have been met or the extent of the completion of the contract or service concerned.

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

Post retirement benefits

Retirement benefits to employees of the College are provided by the Teachers’ Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS). These are defined benefit schemes, which are externally funded and contracted out of the State Earnings-Related Pension Scheme (SERPS).

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 quinquennial valuations using a prospective benefit method. As stated in Note 33, the TPS is a multi employer scheme and the College is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. The TPS is therefore treated as a defined contribution scheme and the contributions recognised as they are paid each year.

The assets of the LGPS are measured using closing market values. LGPS liabilities are measured using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The increase in the present value of the liabilities of the scheme expected to arise from employee service in the period is charged to the operating surplus. The expected return on the scheme’s assets and the increase during the period in the present value of the scheme’s liabilities, arising from the passage of time, are included in pension finance costs. Actuarial gains and losses are recognised in the statement of total recognised gains and losses.

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 income and expenditure account 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.

Tangible Fixed Assets

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. The difference between depreciation charged on the historic cost of assets and the actual charge for the year calculated on the revalued amount is released to the income and expenditure account reserve on an annual basis. Building improvements made since incorporation are included in the balance sheet at cost. Freehold land is not depreciated. Freehold buildings are depreciated over their expected useful economic life of up to 50 years. Leasehold land and buildings are amortised over 50 years or, if shorter, the period of the lease.

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

Buildings under construction are accounted for at cost, based on the value of architects’ certificates and other direct costs incurred to 31 July. Finance set-up costs directly attributable to freehold developments


Page 26 of 52

are capitalised up to the date of completion of the project. Buildings are not depreciated until they are brought into use. Depreciation in the first year of use is charged from the month the building comes into use.

Where land and buildings are acquired with the aid of specific grants, they are capitalised and depreciated as above. The related grants are credited to a deferred capital grant account and are released to the income and expenditure account over the expected useful economic life of the related asset on a basis consistent with the depreciation policy.

On adoption of FRS 15 the College followed the transitional provisions to retain the book value of inherited land and buildings, which were re-valued in 1993, but not to adopt a policy of revaluation of these properties in the future. These values are retained subject to the requirement to test assets for impairment in accordance with FRS 11.

Where significant expenditure is incurred on existing buildings, it is charged to the income and expenditure account 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 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 costing less than £500 per individual item is written off to the income and expenditure account in the year of acquisition. All other equipment is capitalised at cost.

Capitalised equipment has been depreciated on a straight line basis over its useful economic life as follows:

Motor vehicles and general equipment 5 years

Computer equipment 3 years

Depreciation in the first year of use is charged in full.

Fully depreciated items are removed from the balance sheet on an annual basis.

Where equipment is acquired with the aid of specific grants, it is capitalised and depreciated as above. The related grants are credited to a deferred capital grant account and are released to the income and expenditure account over the expected useful economic life of the related asset on a basis consistent with the depreciation policy.


Page 27 of 52

Heritage Assets

Where an asset is deemed to have historic, artistic, scientific, technological, geophysical, or environmental qualities, and is held principally for its contribution to knowledge and culture it is classified as a heritage asset.

The College has a collection of artwork, consisting of sculptures and paintings, collected over the years for their educational value to art students in particular, but also to all vocational students and to the community as a whole.

Acquisitions are made by purchase or donation. Purchases are initially recorded at cost and donations are recorded at market value for insurance purposes ascertained by the College at the time of the donation.

Heritage assets which were acquired on incorporation for no consideration, and pieces of artwork acquired after that date and prior to 31 July 2010, were brought into the accounts during the year ended 31st July 2010 via a prior year adjustment, at their market value for insurance purposes, or at the most reliable valuation available for each piece. The comparatives were restated to reflect the increase to their 2010 value for insurance purposes, with the surplus on revaluation being reported in the Statement of Total Recognised Gains and Losses, and within the revaluation reserve.

A revaluation will be carried out every five years with any surplus or deficit on revaluation being reported in the Statement of Total Recognised Gains and Losses. The collection of artwork is deemed to have an indeterminate life and a high residual value: hence the Trustees do not consider it appropriate to charge depreciation.

Preservation costs – expenditure which, in the Trustees’ view, is required to preserve individual pieces of artwork is recognised in the Income and Expenditure account when it is incurred.

Further information on the collection is given in Notes 13 in the accounts.

Leased assets

Costs in respect of operating leases are charged on a straight line basis over the lease term.

Leasing agreements which transfer to the College substantially all the benefits and risks of ownership of an asset are treated as if the asset had been purchased outright. The assets are included in fixed assets and the capital element of the leasing commitments is shown as obligations under finance leases. The lease rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is charged to the income and expenditure account in proportion to the reducing capital element outstanding. Assets held under finance leases are depreciated over the shorter of the lease term or the useful economic lives of equivalent owned assets. The capital element outstanding is shown as obligations under finance leases.

Investments and endowment assets

Listed investments held as fixed assets or endowment assets are stated at market value. Current asset investments are included in the balance sheet at the lower of their original cost and net realisable value.

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.


Page 28 of 52

Taxation

The College is considered to pass the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the College is potentially exempt from taxation in respect of income or capital gains received within categories covered by Chapter 3 Part 11 Corporation Tax Act 2010 or Section 256 of the Taxation of Chargeable Gains Act 1992, to the extent that such income or gains are applied exclusively to charitable purposes.

The College is partially exempt in respect of Value Added Tax, so that it can only recover a minor element of 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 company is subject to corporation tax and VAT in the same way as any commercial organisation.

Liquid resources

Liquid resources include sums on short-term deposits with recognised banks and building societies.

Provisions

Provisions are recognised when:

a. the College has a present legal or constructive obligation as a result of a past event,

b. it is probable that a transfer of economic benefit will be required to settle the obligation and

c. a reliable estimate can be made of the amount of the obligation.

Endowment Funds

The College has Restricted Endowment Funds that are managed on the College’s behalf by the Community Foundation for Bournemouth Dorset and Poole (Charity no 1122113). Income to the funds is expended in accordance with the relevant trust deeds.

Agency arrangements

The College acts as an agent in the collection and payment of discretionary support funds. Related payments received from the funding bodies and subsequent disbursements to students are excluded from the Income and Expenditure Account and are shown separately in Note 38, except for the 5 per cent of the grant received which is available to the College to cover administration costs relating to the grant. The number of staff employed by the College to administer Learner Support Fund applications and payments is one full time equivalent.

Page 29 of 52


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013

2 FUNDING BODY INCOME

2013 2012

£'000 £'000

Recurrent grant 19,559 21,327

Recurrent grant - HEFCE 155 -

Non-recurrent grants ** 4,511 4,196

Release of deferred capital grant (note 23) 105 77

TOTAL24,330 25,600

2013 2012

£'000 £'000

European Social Fund - -

Payments to FE college partners - -

Payments to non College partners - (17)

Net income - (17)

** There was no consortium income claimed from funding bodies in the year under review. In the year ended 31

July 2012 there was a final adjustment to Dorset Training Plus partner payments as shown below:

Page 30 of 52



3 TUITION FEES AND EDUCATION CONTRACTS

2013 2012

£'000 £'000

Tuition fees 3,239 3,037

Education contracts * 4,892 4,639

TOTAL 8,131 7,676

Included within the above amounts are tuition fees funded by bursaries of £327,347 (2011/12 £222,822).

2013 2012

£'000 £'000

Jobcentre Plus income (3) 145

Work Programme income 1,638 945

Payments to non college partners (861) (550)

Payments to FE college partners (119) (63)

Net income 655 477

* The College was the lead partner in a consortium to deliver New Deal, and as of June 2011 the Government's

new Work Programme. New Deal finished prior to the year under review. The income shown above includes that

earned by the College in its capacity both as a provider and as the consortium lead. All other income claimed

from Jobcentre Plus and payable to consortium partners has been excluded from these accounts. Total income

claimed in the year under this arrangement and the related payments to partners were as follows:

The Education Contracts income includes £99,500 which is a deferred capital grant release relating to income

received from Bournemouth University.

Page 31 of 52



4 OTHER INCOME

2013 2012

Other income: £'000 £'000

Cafeterias 616 516

Nursery 196 335

Sales of books, equipment and materials 350 329

Other grant income 897 548

Other income 1,376 2,481

3,435 4,209

5 ENDOWMENT AND INVESTMENT INCOME

2013 2012

£'000 £'000

Endowment fund grant income (note 17) 50 -

Income from restricted endowment asset investments (note 17) 5 -

Interest receivable 54 26

109 26

The Endowment fund was granted to the College by the College Foundation during 2011.

The entire Endowment fund is on deposit with the Community Foundation for

Bournemouth Dorset and Poole (Charity no 1122113), for use in accordance with

specific restrictions as defined in the relevant trust deeds. The funds will be applied at the direction

of the College, and the funds are repayable to the College upon written direction from the

College directors. Income to this fund during the year under review was £3,665.

A separate Endowment fund was set up during the year under review, also on deposit with the

Community Foundation for Bournemouth Dorset and Poole (Charity no 1122113), as an Arts

Prize fund. This was set up using proceeds from the sale of artwork during the year under review.

The College contributed £100,000 to this fund, and the Community Foundation contributed a

further £50,000 shown as grant income. Income to the Arts prize fund during the year under review

was £1,438.

Page 32 of 52



6 STAFF COSTS

The average number of persons (including senior post holders) employed by the College during the

year, expressed as full-time equivalents, was:

2013 2012

No. No.

Teaching staff 345 345

Non-teaching staff 329 341

674 686

2013 2012

£'000 £'000

Staff costs for the above persons:

Wages and salaries 18,369 18,482

Social security costs 1,281 1,287

Other pension costs (including FRS17

adjustments of £264,000 (2011/12 £5,000)) 2,711 2,319

Payroll sub-total 22,361 22,088

Contracted out staffing services 1,216 1,366

23,577 23,454

Exceptional restructuring costs 169 492

Total 23,746 23,946

The number of senior post-holders and other staff who received emoluments

(excluding pension contributions and including benefits in kind) in the following ranges was:

2013 2012 2013 2012

No. No. No. No.

£ 60,001 to £ 70,000 - - - 1

£ 70,001 to £ 80,000 - - 1 -

£ 80,001 to £ 90,000 2 2 1 1

£ 90,001 to £ 100,000 - - - -

£ 130,001 to £ 140,000 1 1 - -

3 3 2 2

Senior Post Holders Other Staff

Page 33 of 52



7 SENIOR POST-HOLDERS' EMOLUMENTS

Senior post-holders are defined as the Principal and holders of the 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.

2013 2012

No. No.

The number of senior post-holders including the

Principal was: 3 3

Senior post-holders' emoluments are made up as follows:

£'000 £'000

Salaries 303 293

Benefits in kind - -

Pension contributions 45 43

Total emoluments 348 336

2013 2012

£'000 £'000

Salary 138 130

Benefits in kind - -

138 130

Pension contributions 19 18

Total 157 148

The above emoluments include amounts payable to the Principal (who is also the highest paid

senior post holder) of:

The pension contributions in respect of the Principal and senior post-holders are in respect of

employer's contributions to the Teachers' Pension Scheme and the Local Government Pension

Scheme and are paid at the same rate as for other employees.

The members of the Corporation other than the Principal and other staff governors did not receive

any payment from the College other than the reimbursement of travel and subsistence expenses

incurred in the course of their duties.

Page 34 of 52



8 OTHER OPERATING EXPENSES

2013 2012

£'000 £'000

Teaching costs 5,466 4,469

Non teaching costs 1,601 1,936

Premises costs 2,099 1,767

Total 9,166 8,172

Other operating expenses include:

Auditors' remuneration

Financial Statements audit 22 17

Internal audit 17 17

Other services from internal audit 1 4

40 38

Hire of plant and machinery - operating leases 169 162

Hire of other assets - operating leases 14 48

183 210

223 248

Page 35 of 52



9 INTEREST PAYABLE

2013 2012

£'000 £'000

On bank loans and overdrafts:

Repayable in more than five years 89 67

Pension finance costs (note 33) 289 337

Total 378 404

10 TAXATION

2013 2012

£'000 £'000

United Kingdom corporation tax NIL NIL

11 SURPLUS ON CONTINUING OPERATIONS FOR THE YEAR

The surplus on continuing operations

is made up as follows:

2013 2012

£'000 £'000

College's surplus for the year 2,311 1,693

Surplus generated by subsidiary undertakings and - 22

transferred to the College under gift aid

2,311 1,715

The College owns 100% of the issued ordinary £1 shares of Bournemouth and Poole College

Services Limited, a company incorporated in England and Wales, whose principal business is

operating as an Apprenticeship Training Agency.

Page 36 of 52



12 TANGIBLE FIXED ASSETS (GROUP AND COLLEGE)

Land and Buildings

Freehold Leasehold Equipment TOTAL

£'000 £'000 £'000 £'000

Cost or valuation

At 1 August 2012 22,121 1,992 4,448 28,561

Additions 5,094 - 1,768 6,862

Disposals - - (1,353) (1,353)

At 31 July 2013 27,215 1,992 4,863 34,070

Depreciation

At 1 August 2012 7,290 1,951 2,056 11,297

Charge for the year 772 1 1,811 2,584

Eliminated on disposals - - (1,339) (1,339)

At 31 July 2013 8,062 1,952 2,528 12,542

Net book value

At 31 July 2013 19,153 40 2,335 21,528

Net book value

At 1 August 2012 14,831 41 2,392 17,264

Inherited land and buildings were valued at open market value for existing use on 3 February 1993 at an

amount of £6,985,000. They were acquired at incorporation at nil cost.

The transitional rules set out in FRS 15 Tangible Fixed Assets were applied on implementing FRS 15 and

the valuation has been retained with annual depreciation charged accordingly.

Land and buildings with a net book value of £10,051,114 have been partly financed by exchequer funds

through for example the receipt of capital grants. Should these assets be sold, the College may be liable,

under the terms of the Financial Memorandum, to surrender part of the proceeds.

Page 37 of 52



13 TANGIBLE FIXED ASSETS - HERITAGE ASSETS (GROUP AND COLLEGE)

Paintings &

Sculptures Other TOTAL

£'000 £'000 £'000

Cost or valuation

At 1 August 2012 383 16 399

Additions - - -

Surplus on Revaluation - - -

Reclassification of assets as held for resale

At 31 July 2013 383 16 399

14 FIVE YEAR FINANCIAL SUMMARY OF HERITAGE ASSET TRANSACTIONS

2012-13 2011-12 2010-11 2009-10 2008-09

£000 £000 £000 £000 £000

Purchases

Artwork - - - - --

Donations

Artwork - - 15 - -

Total Additions - - 15 - -

Additions in 2010/11 included £14,600 that were previously treated as investments.

15 FURTHER INFORMATION ON THE COLLEGE'S HERITAGE ASSETS

In the year ended 31 July 2012, the decision was taken to actively market the majority of the

College's heritage assets. They were therefore re-classified as assets held for re-sale, and at 31

July 2013 unsold items were held in current assets at the lower of cost and net realisable value (see

note 15). Artwork sold during the year realised net proceeds of £2.2 million (see note 16).

As detailed in Note 13, the College took the decision in the year ended 31 July 2012 to actively

market paintings and sculptures previously held as heritage assets. These assets were classified

as assets held for resale and held at the lower of cost and net realisible value, which is £nil, as the

assets were acquired on incorporation for no consideration.

A market valuation of the artwork acquired by the College on incorporation for no consideration was

carried out for insurance purposes by Hazlitt Holland-Hibbert in September 2010. This gave a

valuation for the main pieces of artwork inherited on incorporation of £1,888,150. The remaining

significant pieces in the collection were valued by various different sources. This artwork was first

reported on the College balance sheet during the year 2010/11. Three main valuations had been

used in the past, one by Christies in 1997, and later valuations for insurance purposes by Hazlitt

Holland-Hibbert in 2003 and 2004. The artwork is disclosed on the balance sheet at 31 July 2013 at

the September 2010 valuation for insurance purposes.

On the sale of the heritage assets in the year it was identified that previous transfers from the

revaluation reserve in respect of heritage assets had been overstated. This has resulted in a £611k

transfer from the profit and loss reserve to the revaluation reserve.

Page 38 of 52



16 GAIN ON DISPOSAL OF ASSETS

The gain on disposal of assets that arose during the year under review is made up as follows:

2012/13

£000

Disposal of Artwork 2,132

Disposal of Equipment 48

2,180

The artwork sold during the year under review was held in assets held for sale at nil value at

1 August 2012.

Gains on disposal of artwork during the year under review were as follows:

£000

Henry Moore - 'Mother and Child with Apple' 2,074

Other pieces of artwork 58

2,132

Page 39 of 52



17 ENDOWMENT ASSETS


2013 2013 2012 2012

£'000 £'000 £'000 £'000

Balance as at 1 August 2012 74 74 74 74

Additions (note 24) 150 150 - -

Appreciation of Endowment Asset Investments (note 24) 11 11 - -

Increase in cash balances held at fund managers (note 5) 5 5

Balance at 31 July 2013 240 240 74 74

Represented by:

Funds held and managed on behalf of

the College by the Community Foundation

for Bournemouth Dorset and Poole

(Charity no 1122113) (note 24) 240 240 74 74

Total 240 240 74 74

18 DEBTORS


2013 2013 2012 2012

£'000 £'000 £'000 £'000

Amounts Falling Due Within One Year

Trade debtors 1448 1447 927 927

Amount due from subsidiary - 3 - -

Prepayments and accrued income 554 554 400 400

Amounts owed by the SFA 378 378 306 306

2,380 2,382 1,633 1,633

19 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR


2013 2013 2012 2012

£'000 £'000 £'000 £'000

Bank loans and overdrafts 289 289 289 289

Trade creditors 856 856 768 768

Pension scheme contributions 185 185 279 279

Other taxation and social security 407 403 447 447

Payments received in advance * 2,948 2,948 1,174 1,174

Accruals 1,605 1,602 2,037 2,014

6,290 6,283 4,994 4,971

* Payments received in advance include £1,461,853 (2011/12 £240,896) grant received from the funding

bodies.

Page 40 of 52



20 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR


2013 2013 2012 2012

£'000 £'000 £'000 £'000

Bank loans 3,680 3,680 3,969 3,969

21 BORROWINGS

The bank loans are repayable as follows:


2013 2013 2012 2012

£'000 £'000 £'000 £'000

In one year or less 289 289 289 289

Between one and two years 289 289 289 289

Between two and five years 867 867 867 867

In five years or more 2,524 2,524 2,813 2,813

3,969 3,969 4,258 4,258

22 PROVISIONS FOR LIABILITIES AND CHARGES

Group and College

Enhanced Other Total

Pension

Provision

£'000 £'000 £'000

At 1 August 2012 494 189 683

Expenditure in the year (40) - (40)

Transferred from income and expenditure account 24 - 24

At 31 July 2013 478 189 667

One outstanding bank loan is repayable by instalments falling due between 1 January 2007 and 31 December

2026 and is unsecured. The terms of the loan were renegotiated during the year 2010/11. Interest is payable on

this loan at 1.5% above LIBOR. The other outstanding bank loan commenced during the year ended 31 July 2012

and is unsecured, it is repayable by instalments falling due between August 2012 and May 2027. Interest is

payable on this loan at 1.55% above LIBOR.

The Enhanced Pension Provision relates to the ongoing cost for staff who have left the College. It is calculated in

accordance with guidance issued by the funding bodies.

The other provision is in respect of a potential repayment of VAT claimed in the period from February 1999 to July

2005 under a leasing contract arrangement. A European Court of Justice ruling appears to favour the view of HM

Revenue and Customs that this type of arrangement confers an unfair tax advantage on participating entities.

There is uncertainty as to the future date when this matter will be resolved.

Page 41 of 52



23 DEFERRED CAPITAL GRANTS

Funding

bodies Other Total

Funding

bodies Other Total

£'000 £'000 £'000 £'000 £'000 £'000

At 1 August 2012

Land and buildings 1,727 9 1,736 1,727 9 1,736

Equipment - 122 122 - 122 122

1,727 131 1,858 1,727 131 1,858

Income receivable

Land and buildings 943 50 993 943 50 993

2,670 181 2,851 2,670 181 2,851

Land and buildings 105 2 107 105 2 107

Equipment - 100 100 - 100 100

105 102 207 105 102 207

2,565 79 2,644 2,565 78 2,644

At 31 July 2013

Land and buildings 2,565 57 2,622 2,565 57 2,622

Equipment - 22 22 - 22 22

2,565 79 2,644 2,565 79 2,644

24 ENDOWMENTS

Restricted Total 2011/12

Permanent

£'000 £'000 £'000

At 1 August 2012 74 74 74

Appreciation of endowment asset investments (note 17) 11 11 -

Net additions/disposals (note 17) 150 150 -

Income for year (note 5) 5 5 -

At 31 July 2013 240 240 74

Endowment funds owned by the College Foundation (charity no 1042508) were granted to the College in

July 2011, prior to the winding up of the College Foundation. These funds are being held and managed on

behalf of the College by the Community Foundation for Bournemouth Dorset and Poole (Charity no 1122113)

in accordance with the terms of the trust deeds.

A separate Endowment fund was set up during the year under review, also on deposit with the

Community Foundation for Bournemouth Dorset and Poole (Charity no 1122113), as an Arts

Prize fund. This was set up using proceeds from the sale of artwork during the year under review.

The College contributed £100k and the Community Fund contributed a further £50k.

Group College

Released to income and expenditure

account

The deferred capital grant received was an enhanced renewal grant issued by the SFA for 2012/13. The total

amount of which is £120K for work completed during the year under review.

Page 42 of 52



25 REVALUATION RESERVE


2013 2013 2012 2012

£'000 £'000 £'000 £'000

At beginning of year 3,245 3,245 5,328 5,328

Transfer from revaluation reserve to general reserve

in respect of:

Depreciation on revalued assets (94) (94) (89) (89)

Correction for deemed historic cost of Heritage Assets sold 611 611 - -

(note 15)

Accelerated release of reserves relating to assets held for sale - - (1,994) (1,994)

At 31 July 3,762 3,762 3,245 3,245

26 MOVEMENT ON GENERAL RESERVES


2013 2013 2012 2012

£'000 £'000 £'000 £'000

Income and Expenditure Account

At beginning of year (5,112) (5,111) (2,360) (2,359)

Surplus retained for year 2,256 2,255 1,715 1,715

Transfer from revaluation reserve 94 94 89 89

Transfer to endowment reserve (100) (100) - -

Actuarial loss in respect of pension scheme 1,983 1,983 (4,556) (4,556)

At 31 July (879) (879) (5,112) (5,111)

Balance represented by:

Pension reserve (14,573) (14,573) (16,003) (16,003)

13,694 13,694 10,891 10,892

At 31 July (879) (879) (5,112) (5,111)

Income and expenditure account reserve excluding

pension reserve

Page 43 of 52



27 RECONCILIATION OF CONSOLIDATED OPERATING SURPLUS TO NET CASH

INFLOW FROM OPERATING ACTIVITIES

2013 2012

£'000 £'000

Surplus on continuing operations after depreciation

of assets at valuation and tax 2,256 1,715

Depreciation (note 12) 2,584 3,274

Profit on sale of assets (note 16) (2,180) -

Deferred capital grants released to income (note 23) (207) (1,297)

Interest payable (note 9) 89 67

Interest receivable (note 5) (54) (26)

FRS17 pension cost less contributions payable (note 33) 264 5

FRS17 pension finance costs (note 9) 289 337

(Increase)/Decrease in stocks (3) 9

(Increase)/Decrease in debtors (747) 40

Increase/(Decrease) in creditors 1,296 (13)

Decrease in provisions (note 21) (16) (41)

Net cash inflow from operating activities 3,571 4,070

28 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

2013 2012

£'000 £'000

Interest received 54 26

Interest paid (89) (67)

Net cash outflow from returns on investments and

servicing of finance (35) (41)

29 CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT

Purchase of tangible fixed assets (6,862) (4,330)

Disposal of tangible fixed assets 61 -

Deferred capital grants received 993 894

Endowment fund investment (100) -

Disposal of heritage assets 2,743 -

Net cash outflow for capital expenditure (3,165) (3,436)

and financial investment

Page 44 of 52



30 MANAGEMENT OF LIQUID RESOURCES

2013 2012

£'000 £'000

Withdrawal from deposits 3,600 1,750

Placing of deposits (4,350) (3,600)

Net cash outflow from management of (750) (1,850)

liquid resources

31 FINANCING

New Unsecured Loan - 2,000

Repayment of amounts borrowed (289) (156)

Net cash (outflow)/inflow from financing (289) 1,844

32 ANALYSIS OF CHANGES IN NET FUNDS

At Other At

1 August 2012 Cashflows Changes 31 July 2013

£'000 £'000 £'000 £'000

Cash at bank and in hand 2,734 (668) - 2,066

Current asset investments 3,600 750 - 4,350

Bank loans - due within one year (289) 289 (289) (289)

- due after one year (3,969) - 289 (3,680)

Total 2,076 371 - 2,447

Page 45 of 52



33 PENSION AND SIMILAR OBLIGATIONS

Total pension cost for the year

2013 2012

£'000 £'000

TPS: contribution paid 1,307 1,222

LGPS:

Contributions paid 1,116 1,047

FRS 17 adjustment 264 5

Charge to the Income and Expenditure Account ( staff costs) 1,380 1,052

Enhanced pension charge to Income and Expenditure Account (staff costs) 24 45

Total Pension Cost for Year 2,711 2,319

The pension costs are assessed in accordance with the advice of independent qualified actuaries.

The latest actuarial valuation of the TPS was 31 March 2004 and of the LGPS 31 March 2010.

Teachers' Pension Scheme

The Teachers' Pension Budgeting and Valuation Account

Valuation of the Teachers' Pension Scheme

Not less than every four years the Government Actuary ("GA"), using normal actuarial principles, conducts a

formal actuarial review of the TPS. The aim of the review is to specify the level of future contributions.

The College's employees belong to two principal pension schemes, the Teachers' Pension Scheme England

and Wales (TPS) for academic staff and related staff; and the Local Government Pension Scheme (LGPS) for

non-teaching staff, which is managed by Dorset County Council. Both are defined benefit schemes.

The Teachers' Pension Scheme ("TPS") is a statutory, contributory, defined benefit scheme. The regulations

under which the TPS operates are the Teachers' Pensions Regulations 2010. These regulations apply to

teachers in schools and other educational establishments in England and Wales maintained by local

authorities, to teachers in many independent and voluntary-aided schools, and to teachers and lecturers in

establishments of further and higher education. Membership is automatic for full-time teachers and lecturers

and from 1 January 2007 automatic too for teachers and lecturers in part-time employment following

appointment or a change of contract. Teachers and lecturers are able to opt out of the TPS.

Although teachers and lecturers are employed by various bodies, their retirement and other pension benefits,

including annual increases payable under the Pensions (Increase) Acts are, as provided for in the

Superannuation Act 1972, paid out of monies provided by Parliament. Under the unfunded TPS, teachers'

contributions on a 'pay-as-you-go' basis, and employers' contributions, are credited to the Exchequer under

arrangements governed by the above Act.

The Teachers' Pension Regulations require an annual account, the Teachers' Pension Budgeting and

Valuation Account, to be kept of receipts and expenditure (including the cost of pensions' increases). From 1

April 2001, the Account has been credited with a real rate of return (in excess of price increases and currently

set at 3.5%), which is equivalent to assuming that the balance in the Account is invested in notional

investments that produce that real rate of return.

Page 46 of 52



33 PENSION AND SIMILAR OBLIGATIONS (continued)

Scheme Changes

The Proposed Final Agreement can be found at:

http://media.education.gov.uk/assets/files/ppt/t/tps%20proposed%20final%20agreement.pdf

The pension costs paid to TPS in the year amounted to £1,307,000 (2012: £1,222,000).

The contribution rate paid into the TPS is assessed in two parts. First, a standard contribution rate

(“SCR”) is determined. This is the contribution, expressed as a percentage of the salaries of teachers and

lecturers in service or entering service during the period over which the contribution rate applies, which if it

were paid over the entire active service of these teachers and lecturers would broadly defray the cost of

benefits payable in respect of that service. Secondly, a supplementary contribution is payable if, as a

result of the actuarial investigation, it is found that accumulated liabilities of the Account for benefits to

past and present teachers, are not fully covered by standard contributions to be paid in future and by the

notional fund built up from past contributions. The total contribution rate payable is the sum of the SCR

and the supplementary contribution rate.

The last valuation of the TPS related to the period 1 April 2001 - 31 March 2004. The GA's report of

October 2006 revealed that the total liabilities of the Scheme (pensions currently in payment and the

estimated cost of future benefits) amounted to £166,500 millions. The value of the assets (estimated

future contributions together with the proceeds from the notional investments held at the valuation date)

was £163,240 millions. The assumed real rate of return is 3.5% in excess of prices and 2% in excess of

earnings. The rate of real earnings growth is assumed to be 1.5%. The assumed gross rate of return is

6.5%.

As from 1 January 2007, and as part of the cost-sharing agreement between employers’ and teachers’

representatives, the SCR was assessed at 19.75%, and the supplementary contribution rate was

assessed to be 0.75% (to balance assets and liabilities as required by the regulations within 15 years).

This resulted in a total contribution rate of 20.5%, which translated into an employee contribution rate of

6.4% and employer contribution rate of 14.1% payable. The cost-sharing agreement also introduced –

effective for the first time for the 2008 valuation – a 14% cap on employer contributions payable.

From 1 April 2012 to 31 March 2013, the employee contribution rate will range between 6.4% and 8.8%,

depending on a member’s Full Time Equivalent salary. Further changes to the employee contribution rate

will be applied in 2013-14 and 2014-15.

Actuarial scheme valuations are dependent on assumptions about the value of future costs, design of

benefits and many other factors. Many of these are being discussed in the context of the design for a

reformed TPS, as set out in the Proposed Final Agreement, and scheme valuations are, therefore,

currently suspended. The Government, however, has set out a future process for determining the

employer contribution rate under the new scheme, and this process will involve a full actuarial valuation.

Page 47 of 52




FRS 17

LGPS

FRS 17

At 31 July 2013 At 31 July 2012

Rate of increase in salaries 4.4% 3.1%

Inflation assumption (RPI) 3.4% 2.6%

Inflation assumption (CPI) 2.6% 1.8%

Discount rate for liabilities 4.8% 3.9%

Commutation of pensions to lump sums 50% 50%

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 2013 At 31 July 2012

Retiring today

Males 20.1 20.0

Females 24.1 24.0

Retiring in 20 years

Males 22.1 22.0

Females 26.0 25.9

Principal Actuarial Assumptions

Under the definitions set out in Financial Reporting Standard 17 Retirement Benefits, the TPS is

a multi-employer pension scheme. The College is unable to identify its share of the underlying

assets and liabilities of the scheme. Accordingly, the College has accounted for its

contributions as if it were a defined contribution scheme. The College has set out above the

information available on the scheme and the implications for the College in terms of the

anticipated contribution rates.

The LGPS is a funded defined benefit scheme, with the assets held in separate trustee

administered funds. The total employers' contribution for the year was £1,116,000 (2011/12

£1,172,000). Employee contributions range from 5½% to 7½% dependent on their whole time

pay rate, whilst the College pays 16.1%.

Page 48 of 52




Long-term Value at Long-term Value at

rate of return 31 July 13 rate of return 31 July 12

expected expected

At 31 July 13 At 31 July 12

% £'000 % £'000

Equities 7.0 19,166 6.4 15,653

Gilts 3.4 5,873 2.8 5,132

Other Bonds

Absolute Return Funds 5.2 1,546 4.8 1,283

Property 6.5 2,782 5.9 2,310

Cash 0.5 1,546 0.5 1,283

Total market value of assets 30,913 25,661

Present value of scheme liabilities (45,486) (41,664)

Deficit in the scheme (14,573) (16,003)

Analysis of the amount charged to income and expenditure account2013 2012

£'000 £'000

Employer service cost 1,370 1,147

Past service gain 0 0

Curtailments and settlements 98 30

Total operating charge/(credit) 1,468 1,177

2013 2012

Analysis of pension finance costs£'000 £'000

Expected return on pension scheme assets 1,350 1,538

Interest on pension scheme liabilities (1,639) (1,875)

Net interest (289) (337)

The College's estimated share of assets and liabilities in the scheme and the expected

rates of return were:

Page 49 of 52




Amount recognised in the statement of total recognised gains and losses (STRGL)

2013 2012

£'000 £'000

Actual return less expected return on pension scheme assets 3,543 (119)

Experience gains and losses - -

Changes in assumptions underlying the scheme liabilities (1,560) (4,437)

Actuarial gain recognised in STRGL 1,983 (4,556)

Movement in deficit during year

Deficit in scheme at 1 August 2012 (16,003) (11,105)

Employer service cost (1,370) (1,147)

Employer contributions 1,204 1,172

Net interest (289) (337)

Curtailments and settlements (98) (30)

Actuarial gain/(loss) 1,983 (4,556)

Deficit in scheme at 31 July 2013 (14,573) (16,003)

Asset and Liability Reconciliation

Reconciliation of Liabilities

Liabilities at start of period 41,664 35,385

Service cost 1,370 1,147

Interest cost 1,639 1,875

Employee contributions 413 420

Actuarial loss 1,560 4,437

Benefits paid (1,258) (1,630)

Curtailments and settlements 98 30

Liabilities at end of period 45,486 41,664

2013 2012

Reconciliation of Assets£'000 £'000

Assets at start of period 25,661 24,280

Expected return on assets 1,350 1,538

Actuarial gains/(losses) 3,543 (119)

Employer contributions 1,204 1,172

Employee contributions 413 420

Benefits paid (1,258) (1,630)

Assets at end of period 30,913 25,661

The estimated value of employer contributions for the year ended 31 July 2014 is £1,095,000.

Page 50 of 52




History of experience gains and losses

2013 2012 2011 2010 2009 2008 2007 2006

Difference between the expected 3,543 (119) 857 1,991 (4,296) (4,598) 502 728

and actual return on assets

% of scheme assets 11.5% (0.5%) 3% 8% (25%) (24%) 2% 4%

Experience gains and losses on scheme - - 269 - - 662 - -

liabilities% of scheme liabilities - - 1% 0% 0% 3% 0% 0%

Total amount recognised in STRGL 1,983 (4,556) (408) 740 (5,211) (2,919) 3,132 (864)

% of scheme liabilities 4% (11%) 2% 2% (18%) (11%) 12% (3%)

34 CONTINGENT LIABILITIES

35 CAPITAL COMMITMENTS

Group and College

2013 2012

£'000 £'000

Commitments contracted for at 31 July 2013 1,968 1,881

At 31 July 2012 and at 31 July 2013, the College had an outstanding liability to Reed in relation to outcome

payments for job placements for our students. Under the contract, Reed can claim payments for successful

placements up to 12 months after they leave the College. The outstanding liability, to the extent not already reflected

in the accounts is capped at £92,000. This has not been included within the accounts as there is no firm basis for

estimating the likely cost.

The cumulative amount of losses since 2004 recognised in the Statement of Total Recognised Gains and

Losses amounted to £6,526,000 (2012 £8,509,000).

The College has provided a guarantee to the Dorset County Pension Fund section of the Local Government Pension

Scheme, in respect of the past and future liabilities to the Funds for 49 employees. These 49 employees had their

employment transferred to Wessex Education Shared Services Limited, an associate company of the College, on 1

August 2013. The guarantee will only be triggered in the event that the associate company is declared insolvent, or

that the associate company fails to pay a contribution to the Fund within sixty days of the date it falls due. It is not

possible to quantify what the liability would be in this event.

Page 51 of 52



36 FINANCIAL COMMITMENTS

At 31 July 2013 the College had annual commitments under non-cancellable operating leases

as follows:

Group and College

2013 2012

£'000 £'000

Land and buildings

Expiring within one year - -

Expiring in over five years 1 1

1 1

Equipment

Expiring within one year 5 4

Expiring within two and five years 76 110

81 114

37 RELATED PARTY TRANSACTIONS

Wessex Education Shared Services Limited - An associate of Bournemouth and Poole College

There were no transactions between Wessex Shared Services Limited and the College during the

year under review.

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 may have an interest. All

transactions involving organisations in which a member of the board of governors may have an

interest are conducted at arm's length and in accordance with the College's financial regulations

and normal procurement procedures. Members of the Corporation sat on the Boards of The Study

Gallery, Poole and the Bournemouth and Poole College Foundation, two charities which ceased

trading on 30 November 2010 and 31 July 2011 respectively.

The College has provided a guarantee to the Dorset County Pension Fund section of the Local

Government Pension Scheme, in respect of the past and future liabilities to the Funds for 49

employees. These 49 employees had their employment transferred to Wessex Education Shared

Services Limited on 1 August 2013.

Page 52 of 52



38 AMOUNTS DISBURSED AS AGENT

Learner Support Fund 2013 2012

£'000 £'000

Funding Body Grants 1,134 777

Interest earned - -

1,134 777

Disbursed to students (1,081) (675)

Audit and administration (53) (35)

Balance unspent - 67

39 POST BALANCE SHEET EVENTS

On 1 August 2013 forty nine employees who were staff of the College at 31 July 2013 had their

employment transferred to Wessex Education Shared Services Limited, an associate company of

the College.

Funding Body grants are available solely for students. In the majority of instances, the College only acts as

paying agent. In these circumstances, the grants and related disbursements are therefore excluded from the

Income and Expenditure Account.The income and expenditure consolidated in the College's financial

statements relates to the purchase of some equipment from the access fund and the payment of

accommodation by the College on the student's behalf.

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THE BOURNEMOUTH & POOLE COLLEGE · THE BOURNEMOUTH AND POOLE COLLEGE OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 31 JULY 2013 Page 3 of 52 FINANCIAL POSITION Financial Results