College Mid-Year Financial Forecast Return 2024-25

4. The financial forecast return (FFR) is an established part of SFC’s financial health monitoring framework. Financial projections are a key source of information in enabling SFC to monitor and assess the medium-term financial planning and health of institutions. The FFR submitted by institutions in June 2024 included forecasts for
   to 2026-27.
5. The mid-year return (MYR) enables SFC to obtain a meaningful revised forecast of institutions’ financial position in terms of income and expenditure, adjusted operating position, balance sheet and liquidity part way through the current academic year. It also draws comparisons with the previous 2024-25 forecast provided in the June 2024 FFR.
6. We have worked with college Finance Directors to agree income and expenditure assumptions that should be used in preparing the financial forecasts (see Annex A).

7. Guidance for completion of the return can be found in Annex B. A blank copy of the spreadsheet is published along with this Call for Information on the SFC website. The return follows the same format as the June 2024 FFR.
8. Finance Directors will receive an individual spreadsheet which we have
   pre-populated with the 2024-25 forecast from the 2024 FFR. Institutions are required to complete the 2024-25 MYR figures. For assigned colleges, we will send the
   pre-populated return to the RSB.
9. Where a variance between the FFR and the revised MYR forecast is significant (variance +/- 5% or over 2% of total expenditure), explanations must be included on the spreadsheet and in the accompanying financial commentary. As with previous forecast exercises, we may come back to institutions with queries and requests for further details following our analysis of the forecast information.

10. There is one change to our information request for this and for future financial monitoring returns.

Efficiencies worksheet

11. As with the FFR return, we have asked institutions to provide information on staffing and non-staffing efficiencies included in the MYR forecast.

12. Please email an electronic copy of the return in Excel format, along with a financial commentary and any relevant recent papers presented to your Governing Body, to isg-returns@sfc.ac.uk by 28 March 2025.

13. Please contact Andrew Millar, Assistant Director, Finance (tel: 0131 313 6538; email: amillar@sfc.ac.uk), or Wilma MacDonald, Senior Financial Analyst, Finance (tel: 0131 313 6565; email: wmacdonald@sfc.ac.uk) to discuss any aspect of this communication.

Ursula Lodge CPFA
Deputy Director, Institutional Sustainability & Capital

Key planning assumptions

1. We have worked with the college Finance Development Network Lead Group in developing income and expenditure assumptions that should be used in preparing the MYR. These assumptions are provided to support planning consistency across the sector.
2. Institutions should also develop any additional planning scenarios they consider appropriate to their own operating environment and circumstances.

SFC grant assumptions

3. Guidance on SFC grant funding assumptions reflects Scottish Government funding for the college sector confirmed at the time of writing. SFC will update colleges if further funding is allocated.

Credits and teaching income

4. Core funding for 2024-25 should be based on the final college sector funding allocations for AY 2024-25 announced on 30 May 2024 (College Final Funding Allocations 2024-25 – Scottish Funding Council).
5. If it is anticipated that core credit thresholds will not be met, funding should be reduced accordingly, after mitigations of 2% tolerance and the reduction of recovery by 20% permitted to reduce planning volatility. All other funds should also be considered as subject to recovery unless agreed directly with SFC.

Capital Maintenance

6. SFC Capital Maintenance funding should be based on the final 2024-25 funding allocations announced on 30 May 2024.
7. SFC has agreed colleges’ requests to switch FY 2024-25 capital maintenance budget from CDEL to RDEL and wrote to individual colleges/RSBs to confirm the amounts that are reclassified as RDEL. Colleges should reflect the revised budget splits in the MYR forecast.

Other SFC grants

8. Additional funding is being provided to cover the cost of increased employer contributions to the Scottish Teachers Superannuation Scheme which were implemented from April 2024. Colleges will receive funding in February 2025 for the period April 2024 to March 2025.
9. Scottish Government has confirmed funding will be made available in AY 2025-26 to support pressures from the increase in National Insurance rates. For for the purposes of this MYR, colleges should assume no additional funding will be made available covering the period April 2025 to July 2025.

Other assumptions

Non-SFC income

10. Non-SFC income projections should be prepared taking account of local circumstances. Institutions will need to take account of the latest available information from staff with responsibility for securing and delivering non-SFC funded activity while taking account of anticipated levels of demand.

Staff costs

11. The impact of National Bargaining harmonisation/job evaluation costs for all staff and any workforce planning requirements should be incorporated in the MYR.
12. Colleges should continue to accrue for the costs of implementing support staff job evaluation as per the detail provided by Colleges Scotland. Colleges should continue to follow the agreed accounting treatment set out in the 2023-24 Accounts Direction.
13. Institutions should also reflect in the MYR 2024-25 cost of living pay award increases for lecturing and support staff of £1,500 per FTE. Incremental increases should also be reflected.
14. Institutions should assume that funding will not be provided for severance costs.
15. FRS 102 pension adjustments should be excluded from the forecasts.

Non-staff costs

16. Non-staff cost projections should be prepared taking account of local circumstances. Colleges should use actual expenditure to date and extrapolate costs for the remainder of the academic year as appropriate.