1. ETF Project – Management Course Costing & Finance Management Dr Tim Strickland – CEO, FE Sussex Dave Stokes – Deputy Principal, Plumpton College FRIDAY 6 TH JUNE 2014

2. EDUCATION AND TRAINING FOUNDATION ETF

3. Why are we here? We are here to: Gain an understanding of the ‘More for Less’ agenda Raise our understanding of effective and realistic course costing Assist you in costing courses against a background of continual funding reduction Assist in enhancing college financial performance

4. Why are we here? Outcomes: a)Identify the costs associated with an educational establishment b)Estimate the costs of ‘income-generating’ staff time c)List potential sources of educational income d)Calculate approximate course costings for full recovery

5. Do you know? 1995 Average Level of Funding (ALF) reduced from £30 / unit to £17 / unit 2000 LSC created to encourage localism (stimulated growth) 2008 general recession hits – banks bailed out 2010 fiscal tightening in education starts School budgets (pre 16) protected University Fees increased up to £9,000 per annum FE experiences disproportionate cuts Typical College 2010 - £10.6m educational income 2014 - £10.0m (but 150 more full time students and £600,000 extra staff costs FE – 2010 - £6,500 per full time student (750 contact hours) FE – 2014 - £5,600 per full time student (600 contact teaching hours) So, why can‘t we just throw more staff at the increased numbers ?

6. FE Sector Background  Doom  Gloom  Recession  Reduction  Impact

7. FE Sector overheads – the misconceptions and myths It only costs £35 per hour for a part time teacher My bit of the college is viable – it is everyone else’s that isn’t Why should I pay for ‘management’ In industry this wouldn’t happen…. This isn’t a business – it’s a college….

8. Income sources Schools (Junior) 14 – 16 16-18 (18year olds – 17.5%) 19+ SFA HE Apprenticeships Full cost Grant supported – Personal and community related Research grants

9. What costs comprise Commercial (Staff and non staff) £3m20% Resources £6m40% Staffing – non teaching time £3m20% Staffing – teaching time £3m20%

10. The overheads of colleges If you were asked to identify overheads you might say ?

11. The commercial reality

12. Cost identification Separate out the teaching related costs from the commercial activity Teaching related costs Staffing (£6m annually) Salary and range On costs – 20% (Employers NI and pension) Teaching staff – admin Teaching staff – teaching Admin support staff Resources (non staff) (£6m annually) - examples Wide ranging eg Heating and lighting - £320k Maintenance - £330k General running (admin related) - £240k Exam costs -£250k Marketing - £125k Interest - £135k Bursaries and buses £600k Teaching resources £1.1m Depreciation - £1.5m

13. Calculating course costing – exercise 1 Resources £8m33.3% Staffing – non teaching time £8m33.3% Staffing – teaching time £8m33.3% Average member of staff spends 60% of their time contact teaching (900 hours annually) Average annual salary for the teaching time (900 hours) is say £20,000 per year (plus on costs at 20%) The course lasts 450 hours What is the total income required for full contribution to the costs? If the income from the funding body is £6 per individual student teaching hour, how many students do we need on the course?

14. Calculating course costing – exercise 2 Average member of staff spends 40% of their time contact teaching (600 hours annually) Average annual salary for the teaching time (600 hours) is say £25,000 per year (plus on costs at 20%) The course lasts 200 hours What is the total income required for full contribution to the costs? If the income from the funding body is £15per individual student teaching hour, how many students do we need on the course? Nuclear Physics College Resources £18m50.0% Staffing – non teaching time £12m33.4% Staffing – teaching time £6m16.6%

15. Costing a course Producing a standard costing sheet: Determine teaching costs – number of hours, hourly rate, support time, multiplier overhead (50%?, 75%?) Determine non-teaching overheads – materials, travel, expenses, materials – ie anything extra you will need. Apply overhead multiplier to non-teaching overheads Add costs together Divide by number of learners. Assist in enhancing college financial performance

16. Costing a course Questions to ask yourself Is the final cost reasonable? Does it allow for contingency? Is there a profit in it for the college/department? Is it at a rate the market will stand?

17. The standard costing form

18. In summary Identify income Identify income sources Identify all overheads - teaching/non teaching Add on the appropriate margin for the college Calculate the return to the college Calculate the cost per learner

19. That’s all folks Thank you Questions to tim@fesussex.org.uk