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MCA The ESFA get tough - Is Your House in Order?

In a recent letter from the Chief Executive of the ESFA to College Principals and Chief Executives, who are colleges’ designated Accounting Officers responsible for the appropriate use of public funds, a strong warning was issued reminding them of their responsibilites. His warning was based on the intervention and review experience of those colleges which had been in need of help.

He cited in particular the imporance of the following in his letter :
  • Quality management information
  • Accurate budgeting and forecasting
  • High quality self assessment supported by appropriate independent challenge to test the college’s position.
These are all areas in which MCA can provide help and support.

In many cases the warning signs of impending financial problems can be detected early enough to take necessary corrective actions to avoid the need for intervention. However, it often takes an external view to identify them.

MCA “Our experience in helping colleges to recover from financial difficulties positions us to identify the warning signs at an early stage” says Malcolm Cooper, MD of MCA. “Sometimes all that is needed is a brief review of a college’s proposed plans to shock test them for robustness, realism and achievability”. Taking volunatary action at an early stage can prevent the situation deteriorating to the point where more drastic action by outside agencies is imposed on the college”.
Malcolm Cooper







MCA Question

We need to improve our bottom line performance and have identified that our staff costs are too high. We are currently thinking of addressing this by reducing spending on part-time staff. What are your views on this?

Answer

When savings are required, staffing cost inevitably is the first area to examine. In answer to the question above, we would say you need to ask “why did we set on these part time staff in the first place?” In our experience, the answer to this question is usually because they have the skills that are needed to deliver the provision. Although they are an easy target for savings, reducing part time staff can be a short term action which turns out not to be a saving but a long term mistake. There is often a need to re-engage them at a later stage in the academic year when the gaps in required skills are identified. If this happens, then the “savings” disappear and the staffing cost ratio once again begins to rise wiping out any anticipated benefit. The remedy for over staffing usually lies in identifying under-utilisation in permanent staff and dealing with that. More painful maybe but far more effective.



IR35 - MCA are Ready

Much has been written about the changes in regulations relating to IR35 which is concerned with off-payroll working. Some have tried to claim that the changes are not significant, but make no mistake they are. It is all about liability to ensure that PAYE and National Insurance are correctly deducted and paid to HMRC and it places colleges directly in the firing line. At MCA we have prepared for the changes and are equipped to deal with the colleges’ responsibility on their behalf from April 2017 when we supply an interim manager who is affected. We will continue the well-received policy we have adopted for years of not charging additionally for expenses which now also fits the IR35 changes as well as those judged to have “employed status” cannot claim accommodation or travel expenses. However, we will make both our interims and college clients aware of the deductions that have been made on their behalf.

MCA So as far as MCA is concerned it is business as usual where supplying interim managers is concerned. We continue to be approached by prospective associates and to recruit new colleagues to our ever-increasing pool. If you have a requirement for an interim manager you can fill in the response form in our regular email-shots or can visit our website at any time and place an enquiry, or of course you can ring Malcolm Cooper direct on 07950 931389.
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College Recovery Planning - How Can We Help?

Development of the Recovery Plan
Years’ of experience supports the view that when colleges attempt to develop a recovery plan solely using internal resources they invariably fail to deliver or fail to deliver on time. This is because they must rely on what are often overstretched resources which are also expected to handle the day to day operations of the college. When faced with a choice of devoting time to the day to day or to the recovery plan the choice is obvious and the casualty is the latter.

By calling upon additional external resources this problem can be avoided. Appointing a project manager to provide advice and ensure that the correct pace is maintained and that agreed deadlines are met has proved to be the best solution. Also many of the issues that a recovery plan needs to address require specialist skills which are often not present in the college.

The current trend is for colleges to appoint a Turnaround Director, but it is not possible for those appointed to be specialists in every field. Also experience of the Sector is essential if the plan is to be robust, realistic and above all achievable.

Curriculum Design and Planning
Recovery plans should always start with the development of a realistic and achievable curriculum plan. This is the key document in any successful plan. When the finances of a college need improving it is invariably due to an imbalance in its operation. In short it is spending more than it earns. Financial means alone cannot correct this situation. Introducing additional finance can only be a short-term solution. The real sustainable solution lies in identifying where the underlying operational characteristics are out of balance and taking steps to correct them.

Undertaking a review of the curriculum and curriculum management is the source of major gains when developing a recovery strategy. Our curriculum design and planning team who would advise you on how best to achieve this is led by a very experienced senior FE professional. Our team also includes other experienced curriculum and MIS professionals who can gather the necessary information to identify where things are going wrong and assess the optimum way forward. Cutting costs will only work if the costs that are cut are in the right areas. If the wrong decisions are made here then invariably the costs will return at a later date.

A well-constructed curriculum plan will also position the college to have quality management information throughout the year on learner numbers, income and staff costs. This will position the senior team to identify variances from the original plan as the year unfolds and to take the necessary, early corrective actions.

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Contributions Analysis
The key to developing a plan for the college which will improve its financial performance is to first identify the financial contributions being made by each of its productive operations. These may be different curriculum areas, subsidiary companies or other income-generating activities. This is what we at MCA term a contributions analysis which may be expected to show for each productive unit:
  • Income
  • Direct costs of delivering that income, especially staff costs
  • Financial contributions to the college shared overhead costs
  • The bottom line for the whole college
Normally this reveals a range of contributions from different parts of the college from healthy to very weak. If the college’s finances are to be sustainably improved then significant focus should be devoted to the weak areas to identify those improvements that should be made.

HR Support
Statistics show that in most college recovery plans staff costs are a key if not the main area needing attention. It is therefore essential that the college has access to quality, experienced HR advice from someone who has “been there and done it before”. The curriculum plan will help to identify where changes in staffing are required but employment law can be unforgiving if the correct processes and procedures are not followed and mistakes can be expensive.

Over the years much experience has been gained on how best to achieve the changes that are required and this experience needs to be called upon to gain maximum benefits. MCA can help.

Estates Planning/Rationalisation
We can advise your College on how to yield the benefits which might be available from the rationalisation, or reorganisation of the use of your estate. Once the curriculum plan is developed it is possible to take a view on how much accommodation is needed. Our Property and Estates Associates have many years’ experience in advising FE colleges in this area. Re-appraising the college’s need for accommodation can serve to liberate cash which can ease some if not all of the pressure whilst the necessary operational changes are being made.

Accessing Additional Financial Support/Funding and Funding Advice
There are various routes for colleges to use to access additional finance, some of which have undesirable strings attached. However, with the right advice and guidance it can be possible for colleges to access, generate or liberate cash without the need to create onerous liabilities to other agencies.Our associates can advise on where to access the best commercial deals and can also, in some cases help colleges to avoid the expense that can come with restructuring of debt, especially fixed-interest rate debt.
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Contact us on 01226 767628 or speak to
Malcolm Cooper direct on 07950 931389
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