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2022-07-31-accounts

NCFE

Trustees’ Report and Financial Statements

31 July 2022

NCFE

Reference and administrative information

Charity Registration No. 1034808 Company Registration No. 02896700

Registered office and operational address

NCFE Quorum Park Benton Lane Newcastle upon Tyne Tyne and Wear NE12 8BT

Auditor

Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD

Bankers

Barclays Bank Percy Street Newcastle upon Tyne NE1 4QL

Lloyds Bank PLC King Street Manchester M2 4LQ

Investment managers

Brewin Dolphin Ltd Time Central Gallowgate Newcastle upon Tyne NE1 4SR

Solicitors

Womble Bond Dickinson LLP The Spark Draymans Way Newcastle Helix Newcastle upon Tyne NE4 5DE

Bates Wells Braithwaite 10 Queen Street Place London EC4R 1BE

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NCFE

Reference and administrative information

Charity Registration No. 1034808 Company Registration No. 02896700

Trustees

Ms B Ashton – Deputy Chair Ms R Cuschieri Ms D Jenkins - Chair Mr C Peel Mr D Wilson Mrs J Whitfield

Company Secretary

E Hoare

Chief Executive Officer D Gallagher

Chief Financial Officer

K Todd

Chief Regulatory Officer

S Foster

Chief Strategy Officer

P Le Feuvre

Chief Operating Officer

A Goldstein

Chief Commercial Officer

S Brown

Executive Director of People

H Ketteringham (appointed 7 November 2022)

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

The Trustees present their annual directors’ report and the audited financial statements of the charity for the year ending 31 July 2022.

The financial statements comply with current statutory requirements, the Articles of Association and the Charities Statement of Recommended Practice (“Charities SORP”) applicable to charities preparing their accounts in accordance with FRS 102.

OBJECTIVES AND ACTIVITIES

Purposes and aims

NCFE’s core purpose is to promote and advance learning to help create a fairer society, and it is a goal that has inspired our people for more than 170 years. We are serious about changing education for the better, backed by a promise to support the delivery of the highest possible quality of learning experiences for our learners – our ultimate beneficiaries.

For colleagues at NCFE, our purpose is one of our greatest motivations. Employees not only make a positive social impact – influencing the lives of thousands of learners – their contributions affect what people learn, and the way that learning is developed and delivered.

We believe that through shaping smarter learning, we can help to build a fairer society, create opportunities to progress, and ensure that no learner is left behind. This means helping more individuals to realise their true potential and in turn, establishing more sustainable communities.

The strategies employed to achieve the charity’s aims and objectives are

1. Developing deep and credible insight into need We use our deep understanding of the needs or learners, communities and the economy to focus resources on making the biggest difference.

2. Creating brilliant qualifications and content

3. Assessing learner need, progress and attainment

4. Cultivating a purposeful and high-performance culture

5. Leading digital disruption in education

The Trustees review the aims, objectives and activities of the charity each year and ensure compliance with the Charities Act to have due regard to the Charity Commission’s general guidance on public benefit. This report looks at what the charity has achieved and the outcomes of its work in the reporting period, including the benefits the charity has brought to its beneficiaries.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

STRATEGIC REPORT

Achievements and Performance

For over 170 years, NCFE has created qualifications and assessments that are designed to help provide learners with the skills and knowledge they require to succeed in their careers. During 2021-22, through our three core business streams: Learning for Work, Apprenticeships and Technical Education, our products and services supported over 375,000 (2020-21: 380,000) learners to progress onto the next stage of their education, training or career.

Learning for Work

NCFE’s Learning for Work business stream delivers a range of products and services which include qualifications, content, and resources/solutions to support adult (18+) learners reach their potential, through either securing employment, supporting career development and/or progression to higher skilled roles.

The core beneficiaries of the Learning for Work portfolio are funded adult learners, including community learners, unemployed and underemployed adults, offenders and ex-offenders, adults looking to up-skill, re-skill or change career, Armed Forces Service Members and Service Leavers and economically inactive individuals.

In delivering the Learning for Work portfolio to adult learners, NCFE works with approximately 1,500 centres, including Further Education Colleges, Training Providers, Schools, Employers, Local authorities across the UK and internationally.

The Learning for Work portfolio has experienced a challenging 12 months against a backdrop of declining year on year learner volumes, with customers reporting challenges with learner recruitment. Several factors have contributed to this, including high unemployment, changes to sub-contracting rules exposing lack of recruitment capability across primes, changes to funding and the aftermath of COVID-19.

The volume of adult learners enrolling on regulated qualifications accessed by Adult Funding budgets has steadily declined over the last decade, with learner volumes falling from 2.2m per annum in 2013-14, to 1.0m by 2020-21. Despite this decline, NCFE has grown its market share and now delivers qualifications to 24% of all enrolments to the Adult Funding stream, with our Level 2 qualifications (44% market share) and our Cache-branded Health & Social Care (59% market share) doing particularly well.

The Lifetime Skills Guarantee is transforming the adult learning landscape, and we are proud to be the number one awarding organisation for enrolments within the Health and Social Care, and Childcare and early years sectors with 37 qualifications on the free level 3 qualifications list.

Learning for Work’s market-leading adult education products support individuals to enter or re-enter the workplace and progress and excel within their careers, providing employers with a highly skilled and productive workforce.

Apprenticeships

Our Apprenticeships business stream supports learners, providers, and employers from the beginning to the end of their apprenticeship journey through a range of educational technology solutions, on programme mandatory and non-mandatory qualifications, supporting resources and an end point assessment service.

The business stream was formed from a range of disparate products and services as we brought them together into a cohesive, comprehensive and customer-focused offer. This has enabled us to better understand our customers and learners’ requirements and devise and promote appropriate solutions and support to enhance their learning experience and outcomes.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Apprenticeships (continued)

We recognise that the sector continues to face significant challenges including apprentice retention and achievement rates, underutilisation of the levy, the health and social care apprenticeship market is in flux post-COVID-19 and apprenticeships are still not being promoted equally to students alongside academic qualifications restricting social mobility and progression. Through our customer-focused and employer/labour market-led approach to product and solution development however, we have completed a successful year for our Apprenticeships business stream.

In 2021-22 our End Point Assessment service had its best performance year, supporting 7,300 apprentices through gateway assessment and representing 28% growth on the previous year. In the same period, new apprenticeship standards were developed in Accountancy, Payroll, Health and Care and new partnerships built with high profile providers and employers including Health Education England and Association of Taxation Technicians. The business stream created a unique bundle of products called ‘FAST’ which offers Functional Skills along with Initial Assessment and maths and English teaching and learning resources with a view to reaching and supporting more learners to achieve functional skills which is a fundamental part of their apprenticeship programme. This programme is being marketed now to our customers and has generated a great amount of interest.

Technical Education

The Technical Education reforms continue in England, in particular with the awarding of contracts to deliver T-Level qualifications in Further Education. 2021-22 saw our first cohort of T-Level students complete their T-Level in Education and Childcare with over a 97% success rate and it has been inspiring to see how these learners have progressed, with 71% of T-Level students who applied to continue their learning in Higher Education being accepted onto their course.

In the same year we have also welcomed the first cohorts of learners as they enrolled on our Health and Science and Digital T-Level qualifications. These are large, challenging qualifications and designed to stretch learners and equip them for careers in their respective curriculum areas. The release of the Year 1 mid-programme results for the Health and Science cohorts however highlighted that although the grade profile was within normal bounds, it was low. Furthermore, the results left learners concerned about their ability to obtain the grade necessary to continue with their learning and training once the T-Level was complete. As a result, we have been working closely with the Institute for Apprenticeships and Technical Education and our customers to ensure that learners receive the support they need. We have also been supporting our regulator, Ofqual, in its investigation into this matter, providing undertakings and assurances over the delivery of the T-Level assessments.

Outside of our three core business streams we are extending the charity’s reach and impact through a range of new initiatives:

Assessment Innovation

In the summer of 2021, we launched the Assessment Innovation Fund (AIF) to lead innovation within assessment across the sector in a controlled process that delivers robust results and evidence. We committed £1m of funding through our social investment strategy to support this initiative. Any organisation who has an innovative idea can apply for up to £100,000. Applicants are evaluated using the AIF Evaluation Framework, focusing on alignment to the Assessment Innovation principles: benefit to learner; project rigour and feasibility; and research methodology.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

By July 2022, we had successfully:

The launch of our Assessment Innovation Fund has proven to be a popular and impactful initiative for NCFE, tangibly improving our relationships and reputation in the sector as well as generating income and attracting other organisations to support projects with a social purpose and we are genuinely excited to see what is achieved by this fund in the future.

Social Investments

NCFE has made several social investments which are highly aligned with our purpose and strategy. We work closely with each of our partners as we seek to extend our charity’s reach and impact, tracking the performance of our investment through a clear set of KPIs. During 2021-22 we supported the following programmes:

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Social Investments (continued)

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Energy and Carbon Report

We report under the UK energy and carbon reporting requirements (‘SECR’) and have set out in the table below our direct emissions.

GHG emission and energy data

Year to 31 July
2022		 Year to 31 July
2021
ENERGY CONSUMPTION TO CALCULATE
EMISSIONS
Gas combustion KilowattHours (kWh) 43,234 45,706
Purchased electricitykWh 503,725 537,881
Transportfuel * kWh 94,617 19,461
Total energy consumption kWh 641,576 603,048
EMISSIONS
Gas combustiontonnes CO2equivalent (tCO2e) (Scope1) 7.9 8.4
Purchased electricity tCO2e (Scope2) 97.7 114.2
Business travel in employee-owned vehicles where the
organisation is responsible for purchasing the fuel *tCO2e
(Scope 3)		 21.3 4.3
Total gross emissions tCO2e based on above 126.9 126.9
INTENSITY RATIOS
tCO2e per £m revenue 3.24 3.26
tCO2e per m2 of floorspace 0.04 0.04

Quantification and reporting methodology

We have followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2022 UK Government’s Conversion Factors for Company Reporting.

Intensity measurement

The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e.

Measures taken to improve energy efficiency

NCFE has continued to utilise a range of energy efficient measures including:

NCFE purchases 100% renewable electricity and natural gas for our Q6 Office. This is procured backed by recognised certification schemes (i.e. REGOs, GOOs), which provide evidence that the energy is from appropriately accredited renewable sources.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Additional voluntary reporting activities

The majority of NCFE’s carbon footprint comprises Scope 3 emissions from business travel i.e. fuel associated with transport (personal cars on business use) where the organisation does not operate the vehicle / service. Although this data is outside the mandatory requirements of the ‘Energy and Carbon Report, the organisation voluntarily reports a full carbon emissions data set (including all Scope 3 emissions from business travel) on an annual basis.

FINANCIAL REVIEW

2021-22 represented a challenging year for NCFE, and more broadly in the educational and skills sector, as we transitioned from a prolonged series of lockdowns and restrictions during the COVID-19 pandemic, tentatively back towards a more open economy and society.

Our income for the year was £39.1m, slightly ahead of the prior year (2020-21: £38.8m) but behind our Budget and reflective of the difficult trading conditions, with our customers experiencing significant uncertainty over learner enrolment levels.

Total Expenditure during the year was £41.9m (2020-21: £37.8m) an increase of 11% compared to the prior year. We had always budgeted to generate a Net Deficit in 2021-22 as a result of our planned and significant investment by NCFE in three areas:

Against a backdrop of a turbulent market, adopting hybrid ways of working, rising levels of inflation and switching back to a more traditional assessment approach after two years of adopting centre assessed and teacher assessed grading models, we are pleased with how we have controlled our costs during the year.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Investment policy, objectives and performance

Under its Articles of Association, the Trustees have the authority to invest as they see fit in order to meet the charity’s purpose. The investment policy agreed by the Trustees has continued to follow a ‘managed funds’ approach, based on a progressive risk profile. Day to day investment decisions are delegated to NCFE’s investment advisors at Brewin Dolphin. This approach allows for tactical asset allocation across a range of investment types:

Asset Allocation Ranges Asset Allocation Ranges
Strategy Fund Trading Shock Fund Legacy Fund
Investment Horizon Up to 4 years 5 years 10 years +
Fixed Interest 36% - 52% 17% - 33% 0% - 14%
UK Equities 0% - 14% 11% - 26% 21% - 27%
Overseas Equities 4% - 20% 26% - 42% 45% - 62%
Alternative Investments 15% - 30% 7% - 23% 0% - 14%
Property 0% - 15% 0% - 13% 0% - 10%
Cash 0% - 15% 0% - 10% 0% - 10%

The discrete funds have differing investment time horizons based on the charity’s expectations on when they will be utilised. The Trustees’ objective is to protect the capital value of its Reserves in real terms and maximise the return on investment for the acceptable and agreed level of risk.

In the summer of 2021, we invested £27.8m of its reserves in managed portfolios overseen by our advisors at Brewin Dolphin. Our investments showed a promising start in the first half of 2021-22 but have, like most investments, suffered since January 2022 principally due to the investment market’s growing nervousness over rapidly rising levels of inflation and interest rates and the ongoing crisis caused by the war in Ukraine. As a result, our portfolios lost £2,438,000 over the year.

The performance of the portfolios is monitored by the Board of Trustees and the Audit, Risk and Investment Committee. The Trustees are disappointed with the performance of the portfolios since January but understand this is in line with the wider investment market trends and is satisfied that given the longer-term investment horizons our portfolios should generate a better level of return than would have been achieved had the monies been held as cash.

PRINCIPAL RISKS AND UNCERTAINTIES

Our principal risks are recorded on the Strategic Risk Register and updated and reviewed regularly by the Executive and Audit, Risk and Investment Committee. The register captures risk ratings and controls in place to mitigate risks where possible.

Impact of changes in Government policy

NCFE relies on indirect government funding via colleges, training providers and schools and therefore is exposed to changes in government policy direction and funding for education. A recent example of this has been outlined in the Skills and Post-16 Education Bill where the Department for Education is proposing to remove the availability of funding from some Level 3 qualifications. This is mitigated to some extent with NCFE winning tenders for the development and delivery of 9 T-Level Qualifications which grants NCFE an exclusive license to deliver the T-Levels awarded. NCFE continues to work with closely with government bodies, regulators, stakeholders and customers to ensure influence in decision making and to be as proactive as possible in relation to changes to policy and regulatory direction.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Financial pressures within the education sector

The disruption and volatility caused by the COVID-19 pandemic, followed immediately by significant increases in inflation and interest rates have placed considerable financial pressures on our sector. Our centres are having to carefully manage their finances and without support, some may struggle to continue to trade. This in turn presents a risk to NCFE either through loss of income and surplus or by monies due from customers becoming uncollectable. We manage this risk through our credit monitoring and regular credit control meetings to identify customers that may present a risk.

An increasing reliance on data

Due to changes in the regulatory frameworks, and identification that data sharing between the different aspects of the educational system needs improvement, there has been a focus from educational regulators on the collection of data, with a 5-fold increase in the number of returns compared to the previous year. Regulators informed NCFE that this increased level would continue for the foreseeable future which increased the risks in relation to resourcing these requests and in ensuring their accuracy. To mitigate this NCFE’s Head of Provider Data role oversees the management of data returns and leads on improving the data that is collected to ensure appropriate support and management is maintained. This also fits into NCFE’s wider data strategy under the remit of a new role of Director of Data and Analytics.

COVID-19 recovery

Since 2020, the global economy has been hugely impacted by the pandemic outbreak of the Coronavirus (COVID-19). The restrictive lockdowns created a significant challenge for Awarding Organisations and resulted in Centre and Teacher Assessed grading models for two academic sessions. The disruption this has caused the sector is considerable but as global economies emerge from the lockdowns, Awarding Organisations are returning to their more standard assessment models. NCFE is supporting its customers and learners transition back to this standard form of assessment. As the COVID-19 pandemic slowly becomes endemic, the financial, cultural and societal impact is likely to felt for the foreseeable future.

Significant investment in Transformation projects within NCFE

The Transformation programme was created to elevate NCFE’s position within the education sector, align different parts of the NCFE organisation and develop innovative ways to address educational challenges. The programme requires significant investment and there is therefore a risk that the return on investment is not achieved. In order to mitigate this a number of controls have been put in place, including; a programme management structure including boards at workstream, project, programme and executive level, named accountable owners and leads for each of the projects and the requirement for investment to be business cased and approved by the board of Trustees.

RESERVES POLICY AND GOING CONCERN

The Trustees have reviewed the Charity’s needs for reserves in line with guidance issued by the Charity Commission. At 31 July 2022, the Group had reserves of £39.7m (2021: £44.9m). All reserves are unrestricted funds.

The Reserves policy sets out minimum level of reserves to protect the Group from any significant financial shocks of £15m. The remaining reserves will be available for the delivery of the strategic plan aimed at maximising our social impact and ensuring a sustainable future for the Group.

Going Concern

The Trustees have considered the company’s current and future prospects and its availability of financing and are satisfied that the company can continue to pay its liabilities as they fall due for a period of at least 12 months from the date of approval of these financial statements. For this reason, the Trustees continue to adopt the going concern basis of preparation for these financial statements.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

STRUCTURE, GOVERNANCE AND MANAGEMENT

NCFE is a company limited by guarantee, governed by its Articles of Association dated 10 February 1994 and last amended on 19 August 2020. It is a registered charity with the Charity Commission. Anyone over the age of 18 can become a member of the company and there are currently 6 members (2021: 6), each of whom agrees to contribute £1 in the event of the Charity winding up.

The members of the Board of Trustees, who are directors for the purposes of company law, are listed on page 2.

Method of appointment or election of Trustees

The management of the company and the group is the responsibility of the Trustees who are elected and co-opted under the terms of the Articles of Association.

The Chair and Deputy Chair of the Trustees is nominated in line with the Articles of Association by Trustees.

Individual Trustees are sought when a vacancy arises on the Board. The Board seeks to maintain a reasonable balance of gender, ethnicity, skills and work backgrounds. They will target individuals who have the requisite mix for any specific vacancy. The Board makes a positive effort to remove, reduce or prevent obstacles to people being trustees, allocating budgets, where necessary, to achieve this within the charity’s available resources.

Trustees serve a 3 year term, at the end of which they may seek re-election. There is no outside party who can appoint trustees.

In accordance with the Articles of Association (14.2) no Director shall serve in office for more than nine consecutive years provided that a Director may be reappointed annually thereafter by the Board if there are exceptional circumstances.

Trustee induction and training

All new Trustees undergo a detailed induction at which members of the Executive brief them on their legal obligations under charity and company law, the content of the Memorandum and Articles of Association, the committee and decision-making processes, the business plan and the recent financial performance of the charity. During the induction they are also introduced to numerous key members of staff.

The Trustees undertake an annual self-assessment of performance which will either take the form of a one-to-one meeting with the Chair or Deputy Chair (for the Chair of Trustees) or a survey. A skills assessment will be undertaken at junctures where it is required for succession planning purposes or new members of the board join.

Organisational structure and decision making

The Board of Trustees, which can have up to 12 members, administers the charity.

The Board meets at least 4 times a year, at least one meeting of which is extended to enable members to give greater consideration to the future strategic direction of the organisation, as well as ensuring that the organisation’s charitable purposes, and its external environment in which it works, continue to be relevant and valid.

The Board applies the Charity Governance Code as an internal framework to review and monitor its own performance and compliance via the Audit, Risk and Investment Committee, reporting back to the Board through the NCFE Group Assurance document.

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Organisational structure and decision making (continued)

The Board look to comply with the code in most parts except for the follow two principles which are not applicable to the business:

2.6.2 Where individual board members are also involved in operational activities, for example as volunteers, they are clear about the capacity in which they are acting at any given time and understand what they are and are not authorised to do and to whom they report. – No Board member is active operationally or volunteers for the business (as the business has no volunteers) .

7.7 Member engagement (where trustees are appointed by an organisational membership wider than the trustees) - Not currently applicable as membership to the charity is linked to the appointment as a trustee and Board Membership is self-contained.

The charity has noted the revisions made to the Code at the end of 2020 for the Integrity Principle (Principle 3) and Equality, Diversion and Inclusion (Principle 6) and in year have been working towards adopting the changes recommended in the revised framework. They have set up an EDI Forum with colleagues and undertaken an independent audit. An EDI Plan has been drafted internally and continues to be implemented following the recommendations from the independent audit.

Members also meet with the Executive between quarterly formal meetings to exchange views and receive updates on the organisation’s progress. As stated above, none of the Trustees are directly involved in the operational activity of the Group. Where there are any conflicts, these are carefully reported, recorded and managed.

A Chief Executive is appointed by the Trustees to manage the day-to-day operations of the charity. To facilitate effective operations, the Chief Executive has delegated authority, within terms of delegation approved by the Trustees, for operational matters including finance, employment and education-related activity.

The Chief Executive manages the Executive who have Directorate level responsibility. Within each Directorate there are a number of teams each of which has a manager who sits as part of the Management team group with responsibility for operational activity.

Related parties

The links between Board members and the organisations in which they hold senior positions are disclosed in note 21.

Pay policy for senior staff

The company undertakes independent benchmarking of remuneration for all staff.

Trustees set out the process for setting the remuneration of senior staff, and their remuneration levels, and are currently reviewing the scope of the People Committee. On completion of this the policy it will be published on the charity’s website aligning to the requirements of the Charity Governance Code.

Risk management

The Trustees have a risk management strategy which comprises:

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NCFE

Report of the Board of Trustees (incorporating the Strategic Report)

for the year ended 31 July 2022

Employee involvement and employment of disabled people

A full review of all employee focused forums and committees has been undertaken and the new structure is being set up to ensure that employees have the opportunity to contribute towards the running of the charity and also be consulted with on various initiatives and issues.

Employees continue to be communicated with through many communication channels used across the business. The company carry out exit interviews for all staff leaving the organisation and has adopted a procedure of upward feedback for senior management and the Trustees on common themes and issues that arise as a result of these interviews.

The company have implemented a number of detailed policies and training in relation to all aspects of personnel matters. In accordance with the company and the group’s equal opportunities policy, the company and the group has long established fair employment practices in the recruitment, selection, retention and training of disabled staff.

Full details of these policies are available from the company and the Group’s offices.

Disclosure of information to auditor

Each of the persons who are Trustees at the time when the Report of the Board of Trustees is approved has confirmed that:

that Trustee has taken all the steps that ought to have been taken as a Trustee in order to be aware of any relevant audit information and to establish that the charitable group’s auditor is aware of that information.

This report was approved by the Trustees on 25 April 2023 and signed on their behalf by:

Ms D Jenkins MBE DL Chair

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NCFE

Statement of Trustees’ responsibilities

The Trustees (who are also directors of NCFE for the purpose of company law) are responsible for preparing the Report of the Board of Trustees and the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Company law requires the Trustees to prepare financial statements for each financial year. Under company law the Trustees must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the charitable company and the group and of the net income and application of resources, including the income and expenditure, of the charitable group for that period.

In preparing these financial statements, the Trustees are required to:

select suitable accounting policies and then apply them consistently;

The Trustees are responsible for keeping adequate accounting records that are sufficient to show and explain the chartable company and group’s transactions and disclose with reasonable accuracy at any time the financial position of the charitable company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the charitable company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

15

Independent auditor's report to the members ofNCFE Oplnlon We have audited the financial staletnenls of NCFE l-the CoTnpany"l and its subsidiaries I'lhe GTOUP'I foT the ycar Lndcd 31 July 2022 which eomprisc th¢ Group s￿lemen1 of finaneial acli%ilics. Group balanLe sh¢¢t. COMp￿Y balance sheet. Cjroup ststemeni of c&4h fl¢Mks and the r¢&t¢d JJot¢s I to 26. Jllcluding a summary of signiliranl acwunting w>lici¢s. Th¢ finan¢ial reporting framework ihat has be¢n applied in (heir prLparaiion Is applieablc la%4 and Uniied Kingdom Aeeouniing Stsndards Iuniicd Kingdom (ien¢rally Acc¢pied Accounting Prnciic¢l. including FRS 102"Thc Financial R¢￿rting siandaTd appliLable in the UK and Republic of Ireland-. In our opinion the f￿ancIal S￿le￿¢Dts.. give a true and fair view of th¢ CITOUP'S and ihe company's atTaiTS as ai 31 July 2022 and of the GTOUP'S nLII lA￿d)I￿re and applicaiioth ofTesources, including ils incOrt￿ and exptndilure. for Ihe year Ihtn ended: have been properly preptred in accordathce with Unitsd Kin8dom Ge￿IlY Aecepied A£couniin8 Praciicc. and have been prepared ID accordance with ihe requirements of the CompaniesAci 2006. Bails lor oplnlon Wc conducted our audit in accordance with IniernaiioThol Siandards on Audiiing (UK) IISAN IUKII and appli¥abli luw. Our T¢SSM)n%ibilitics und¢r Ihoyc ¥thndards arc funhcrd￿ribd in th¢ AudiwT'¥ rc%pun%ibililit% for the audil of the financial slLtemeni% ￿ellon of our Tew>rt. Wc are indcpendeni ofihe Ciroup in ￿e0rdance with Ihc eihical requir¢mcnis Ihai are relevani 10 our audii of ihe financial slaicmen15 in Ihl UK. InLluding Ihc FRC 4 EihiLal Siandard. and wc havc fuifill¢d ouroihcr cihical r￿ponsibIlItieS in ¢¢ordRn¢¢ with Ih¢x r¢9uir¢rn¢nls. Wc bcliev¢ Ihlll the 8udil ¢vid¢n¢¢ w¢ hiv¢ obtain¢d 15 5uffi¢i¢nt $ppr4)riAt¢ its provid¢ x b&%1% for our (>pinion. Concluslon5 rcllltln% Io EolnR rothccr In aiidiling Ihc linallcial %lalctncnts. we haie ¢i>ncluded that the Tru5tets' use of the going concem ba51S of aiLouniing in Ihe prepara11￿ of the financial siaiemenis is appropriaie. Bas¢d on th¢ work w¢ hav¢ FKrforrn¢d. w¢ hav¢ not id¢niifi¢d any ma*rial un¢¢rtainl]￿ ￿lating to ¢v¢nt5 or condition5 that. individiially or collectiTr"ely. may ca515jBrtificarti doubt the GtDup and Company'5 ability 10 coniinuc as a going concern for Ihc pcriod 10 30 April 2024. Our rcsponsibiliiics and lh¢ r￿￿￿nsIbilIti¢S of Ihc ITUSl¢¢S wilh res￿¢1 10 going conccrn arc describcd in th¢ r¢l¢vanl wctions of this r¢p)N. How¢v¢r. b¢caus¢ not all futur¢ •¢ntS OT conditions can b¢ PT¢di¢Trd. thi5 statement is not a guarantee a5 to the GTDUP and Comparty's ability to continue a5 a going concem. 16

Independent auditor's report to the members ofNCFE Other InfornJ#tlott "rhe other infortnation cotnprises the information included in the Jnnual Te]M)rt, otheT than the financial siaicmtnts and our audiknr's re￿rt IheTeon. The Trnsicts aTe [L￿pOnsibl¢ for (he oihcr irtfomiaiion contain¢d wiihin ihe annual rerth. Our opinion on IhL finaneial sthiemcnts does noi cover the thhcr ithfi)rniaiion and. excepi 10 Ihc exteni oih¢rwis¢ ¢xplicJtly stated Jn this repor( we do expr￿ any forn) of assurnThce conclusjOII thereon. Our responsibility is to r¢ad th¢ oth¢r infornjation and. in doing so. consid¢r wh¢th¢rth¢ oiher information is tnaLL'rially inLonsisienl wilh IhL finanei#l staLetnenlS or oui know'l¢dgrL 0bttsiTh￿ in ihL Coutst of ihe audit or oihlnyist appears ￿ bt marially Mi&$￿(cd. Ifwe i(knl1fy sueh makrial Itteonsis￿4McIeS or appar¢ni maierkql mi￿41a1¢m¢nts. we are r¢quiTed 10 d¢rn?ine whether this gives Ti4e io a mai¢nal missiaiLmcni in ihe finarteial staitmtnis themselves. If. basthl on Ihe work we hove wforniLd. we Concludl￿ thai there is a material misstsiemeni of the other inf0m￿lI0t). we are required io report Ihai faei. We have nothing 10 report in this regard. Oplnlon other m4tler prescrlb¢d bv ¢h¢ CompaDles Act 21M In our opinion, based on ih¢ work und¢nak¢n in th¢ couTh¢ ofih¢ a￿jIt- Ihe inlunnaiion ¥iv¢n in ihe Trus￿$. r¢ron. which in¢lude¥ th¢ direcwTS' rewrt and Ihc slrnt¢¥ic rcpurt pripJr¢d for lh¢ purposc of company law, for th¢ firwncial y¢ar for which th¢ financial staicmeni& are prepared is eothsisicni with the fIn￿ellI siaiemethts.. Ithd The siraiegie report and the direciots. ineluded wiihin the Tnjstres. rerx)rt have been prcpared in accordance with applicable l¢gal requirtnxnis. M#iters on whl¢h He ore rtqulred io ￿port bi. txeepilon In the light of Ihc knot¥led¥t at)d understanding of Ihe liroup and the Company and its environmeni obiain¥d in ih¥ iour%c ofihc audii. w¢ hav¢ id¢niificd no ma￿n&1 missiaicm¢nts in ihc sir4t¢gic TCPOrt OT the dire¢iors' report in¢ludd within the TTusts' rewt. We havc nothin8 to r¢rffirt in T¢SPCft orth¢ following rrL4tt¢r5 wh¢r¢ the Companies Ad 21N)fy r¢quir¢5 U5 10 report 10 you if. in our opinion.. adcquale actouniLrt8 records have rtot beert kept retllms adequate for our audit have not been reciii'Ld from branches noi V￿lled by us: OT the comparty financial statements are nDI in a￿emen1 with the ¢ourttirt8 re¢oriLs atyj retUrn5'. or ertain di5c105UTes of TTuslee5' remuneralion 5pecifLed by law are not made: we tLave tLOt received all the information and explanatio]J5 we tEquire forout audit.

Independent auditor's report to the members ofNCFE Reyponsibllitlts of Trusltts As Lxplainid mor¢ full) In Ihc Trustees, reswnsibililies stsien￿nl sd out on page 15. thc T￿J￿¢t$ (who ar¢ al£0 the dir¢ctQTS of the Cjroup and th¢ Company for the puryA)%¢s ofcomp3ny la￿.) gr¢ res￿￿81b1¢ for the preparation of the financial ytalements and foT being saii5fied thai a iTue and faiT view, and foi such inlL'rnal Lunlrol as ihe TTusiees d￿¢T[nin¢ is nLxessary 10 enablL Ihe prepotaiion orr]]￿ntial siaiLmLnts thai are free from material misstsiemenL whdher due 10 frnud OT error. Tn preparing the financial stsiemenis. the Trusites are respLY)sible for assesslng the Group's and the Company s gbility 10 coniJllu¢ as a going coneern. di_Ylo%ing. a% applicable. matT% Telgted to going conLern using ihc ¥oin¥ concern bLsix ofaccountin¥ unless tnJna¥etncnt ciiher inr¢nd io liquidal¢ th¢ Group or Company or 10 cLust optraiions. or have no realisiie al￿malive bui 10 do w. Audltor's regpothilbllltles for the udli of Iht ntthtlAI si#itmenis Our objLLlivts are kn obtain Teasonable atrMMJi whe1￿[ Ihe finath¢ial sthitmtnis as a whole arc fr¢c from material missmicmcni. wh¢thcr du¢ io frnud OT ¢rror. and io Jssuc an auditsiT'S rcpon Ihat iniluJ¢% our opinion. R¢a￿nable assuranc¢ is a hi¥h l¢vel ofa%%urnnc¢, bui is noi a ¥uarJnt¢¢ Ihai an auclil LonduciLxI in aeeoTdanee wilh ISAS IUKI will always dtltei a maieti#l missiaiemcni when il exists. Mi%statLmLni% can ari.K Irom ITaud or crror and arc considered maicrial if. indii'idually or in Uic J¥¥r¢¥ut¥, th¢y Luuld r&Jsonably b¢ ¢Kp¢¢i¢d Mb iDfluaK¢ th¢ ￿0￿(b￿li￿ d¢cisiuns v(us¢rs ￿k￿n on lh¢ basis ol'ihc%e financial siaiemenis. ExplAntlon $ to what txttni the a￿dI1 M"a$ ¢onsldtred tpblt ofdtittilnR IrrtRlllrliles, IntludlnR fraud IrN¥ularili¢%. includin¥ fraud. are ins¢an¢es of wn-compliancc wilh law% and rcgulaiion%. Wc dc%i¥n pro¥¥diir¢s in linc with our T¢srykn%ibiliEl¢%, ouilincd aEovc. ￿ d¢1￿[ i￿gUla￿lI¢%. in¢ludin¥ fraud. Thc risk of noi detectin¥ a material mi￿￿1￿1¢M¢￿t dut 10 frRud 1% hi8her than the ri%k ofnoi deie¢Tin¥ one rc%uliing from error. fraud may invol￿e dtliberaie ¢otKealmeni by. forexample. forgery or inieniional mi%r¢pr¢s¥nlalion%, OT throu¥h ¢ollusion. Th¢ ¢xicni EO whi¢h our pro￿l￿r¢S aT¢ ¢apabl¢ of d¢l¢ilin¥ irrc¥ularilics. in¢ludin8 fraud is dttailcd below. Ilowtver. Ihe primary TCSp>nsibilily for ihc pre￿C￿li0￿ ¥Lnd d￿¢¢liOn offraud rests WLih knih those charged with governance of Ihe eniity and mana¥emeni. nur approach wa% as follows.. W¥ obtsin¢d an undcrsianding of th¢ l¢B818nd rcgulgw framcworks Ih8r 8rc applicablc lo ihc company and dclcrmincd that Ihc mosl Significant arc Lompanie5 Acl 2(MI6. Clhariiie5 Act 2UI l. the Charities SORP and FRS102 Tax ligiblaiion Igo%'crncd by HM Rcvcnuc & Cusiomsl and inLluding furlough Icgislaijon QualificatiDns and ¢xaminatii>n5 r¢8ulation$ IT¢gulRid by ofqyall Health and Safety leBislalion Gencral Daia PTOlCCliOn R¢8ulaiion We under51[￿ hoNN' NQFE 1% coJnplyin8 Wlth those fra[newo￿5 by reading inlen]al wklicies and of conduci and asyessing Ihe eniiiy level control environmeni. WL madL cnquiries ofihe Group's 5¢nior managem¢nr of known instsn¢¢s ofnon-compl￿n¢¢ or su$p¢oed non-complianc¢ with laws and regulaliot15. includitLg atLy ThatteT5 raised ith whistleblowing. We a150 considered the ovirsighi procedurcs of Ihc Gmup's Boaftl OrTnJ￿ecs. Wi a&8essed the susccpiibiliiy ofihe ¢￿)panY'S finan¢ial sthiemeni$ 10 maietial mi8sts*m¢ni, Including how fraud mighi occur by making LY¢qUiTi¢S ofsLmioT managcmcni. including ihe Chicf Financial Qtficer We obtained details of incidents and allegaEiOtL5 of fraud rdised iniernally and Jnvcsiigaicd by ihe Group's compliancc Icam. Wc planncd wr audii 10 idctbiify risks of managemcni ov¢rrid¢ orbias by agre¢itL8 journal ¢ntrJes in th¢ are35 involving significani estitnaLion and jud8e]netLt, recognition of revenue 3]]d profits on contracts lo supporting documentation.

Independent auditor's report to the members ofNCFE Explx]Jtlon #$ to wh#t extent the audlt wa$ tonsldered tpble o(dtte¢tlll¢ Irreguliritles, intludlthg fraud leontinuedl Bastd on ihls undtrslanding we designed our audii pnKedures io identify non-compllance ￿1th such laws and regulations. Our procedures ini'olved a review of knard meetings and i>theT COTtunittee [ninuie￿. inLluding the Audii, Risk and Ini'esiTneThi C'ommire, and inC￿en1 TewkTis' lo identify any non-LompliancL wilh laws and rcgulaiions. (￿r pr￿edureS also Involved joumal ¢nny ksting and data analytJc%. s¢t out above. (hjr t¢sting al40 included consid¢ration of complianc¢ of ¢mploytts with poliLies and L(xles of eonduLI. We revitw'td rewrts ftx>m Ofqual. we diSc￿$s¢d findin￿ wilh management and those restxinsible for l¢gal and cornpliJn¢¢ PToc¢dw¢s. revi¢w¢d the findings of ¢xt¢rnal legal advisor& assessing the reayundbiliiy uf dny a¢liun plat￿ nLLYicd dnd pul furw'atd by tn&nagLmLnl. undcrsiandinbi if polLnlial regulaiory find)ngs and makit)g ewuiries of Ihe Group's advisors as ￿ their i'iews on ihe maller. A furthcr d¢wripiion of QUT Tcsponsibiliiics for th¢ audii of th¢ firwjrial srai¢m¢nts is located on th¢ Financidl Rtportinb Couneil's website * hI￿&..//Wi￿.f￿.0r&.￿kI1￿llt0TsrQspOn5ibililies. This description torm% part ol'our audiior'.q Teport. Ujt of our report ThiN rLlXlrt 14 made wlely 10 th¢ Company's memt¢rs. as a btyjy. in accordance with Chamer 3 of Part 16 of lh¥ C'umpwii¥% Act 2M6. Our audit work b¢¢n und¢nakcn ¥0 rhJi wc In1￿1 ¥tat¢ ro ihL C'ompaDy'S members Iho¥e mailers we are rcquired 10 S￿[¢ io Ihem ith an audilOT'S rewi and for no 0ihLf PUTPO%e. To the I'iillL'.%l txieni PL'miiiied by law. wt do noi accepi or *￿uMe Tesponsibiliiy 10 anyone other than Ih Lompany Ihl Lompany's mcmbirs as a bL%Jy. for our audii work. for this TLVOrt. OT for Ih¥ opinion5 w¢ hav¢ form¢d. 1ts-3 Carolin¢ Mulley (Senior sialuiory a￿J110r} tor and on behall'ot'Ern41 & Youth8 LLP. Siahjiory Auditor NeWL￿1￿11e upon Tyne 27 April 2023 19

NCFE

Group statement of financial activities (incorporating an income and expenditure account)

for the year ended 31 July 2022

Notes
Income from:
Investment income
2
Other trading activities
Charitable activities:
Examination and assessment
Other income
3
Total income
Expenditure
Raising funds:
Trading
Investment management costs
4
Charitable activities:
Examination and assessment
5
Total expenditure
Net (expenditure)/income before other
recognised gains and losses
(Losses)/gains on revaluations of investment
assets
12
Net movement in funds for the year
Reconciliation of funds:
Total funds brought forward
Total funds carried forward		 2022
£000
423
532
38,140
-
39,095
401
90
41,415
41,906
(2,811)
(2,438)
(5,249)
44,941
39,692		 2021
£000
303
1,385
36,808
296
38,792
2,023
54
35,700
37,777
1,015
520
1,535
43,406
44,941

All funds are unrestricted.

20

NCFE

Group balance sheet

at 31 July 2022

Notes
Fixed assets
Intangible assets
10
Tangible assets
11
Investments
12
Current assets
Stocks
13
Debtors
14
Cash at bank and in hand
Creditors:amounts falling due within one year
15
Net current assets
Total assets less current liabilities
Net assets
Charity funds
Unrestricted funds:
Unrestricted funds
16
Merger reserve
16
Total funds		 2022
£000
4,004
2,501
21,503		 2021
£000
3,306
2,926
9,089
28,008 15,321
400
5,925
10,653		 18
5,218
29,094
16,978
(5,294)		 34,330
(4,710)
11,684 29,620
39,692 44,941
39,692 44,941
40,620
(928)		 44,941
-
39,692 44,941

The financial statements were approved by the Trustees on 25 April 2023 and signed on their behalf by:

Ms D Jenkins MBE DL

21

NCFE

Company balance sheet

at 31 July 2022

Notes
Fixed assets
Intangible assets
10
Tangible assets
11
Investments
12
Current assets
Stocks
13
Debtors
14
Cash at bank and in hand
Creditors:amounts falling due within one year
15
Net current assets
Total assets less total liabilities
Net assets
Charity funds
Unrestricted funds:
Unrestricted funds
Merger reserve
Total funds		 2022
£000
4,004
2,501
21,503		 2021
£000
3,020
2,900
10,017
28,008 15,937
400
5,925
10,528		 2
5,004
28,739
16,853
(5,584)		 33,745
(4,517)
11,269 29,228
39,277 45,165
39,277 45,165
40,205
(928)		 45,165
-
39,277 45,165

The financial statements were approved by the Trustees on 25 April 2023 and signed on their behalf by:

Ms D Jenkins MBE DL

22

NCFE

Group statement of cash flows

for the year ended 31 July 2022

Notes
Cash flows from operating activities:
Net cash (used in)/provided by operating activities
17
Cash flows from investing activities:
Dividends, interest and rents from investments
Purchase of tangible fixed assets
Purchase of intangible fixed assets
Proceeds from sale of investments
Purchase of listed investments
Purchase of other investments
Net cash used in investing activities
Change in cash and cash equivalents in the year
Cash and cash equivalents brought forward
Cash and cash equivalents carried forward
18		 2022
£000
(2,189)
423
(137)
(1,686)
9,968
(24,791)
(29)
(16,252)
(18,441)
29,094
10,653		 2021
£000
2,798
303
(398)
(1,659)
4,831
(2,655)
(89)
333
3,131
25,963
29,094

23

NCFE

Notes to the financial statements

for the year ended 31 July 2022

1. Accounting policies

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

The financial statements have been prepared in accordance with Accounting and Reporting by Charities; Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) (effective 1 January 2015) – (Charities SORP (FRS 102)), the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the Companies Act 2006. The financial statements are prepared in sterling which is the functional currency of the charity and rounded to the nearest £1,000.

NCFE meets the definition of a public benefit entity under FRS 102. Assets and liabilities are initially recognised as historical cost or transaction value unless otherwise stated in the relevant accounting policy.

The statement of financial activities (SOFA) and balance sheet consolidate the financial statements of the company and its subsidiary undertakings. The results of the subsidiaries are consolidated on a line by line basis.

No separate SOFA has been presented for the company alone as permitted by section 408 of the Companies Act 2006.

Basis of consolidation

The financial statements consolidate the accounts of NCFE and its subsidiary undertakings, NCFE Trading Limited, Skills Forward Limited and Peer Tutor Limited up to 31 July 2022. The results of the subsidiaries are consolidated on a line by line basis.

No separate SOFA has been presented for the parent company alone as permitted by section 408 of the Companies Act 2006 and paragraph 397 of the SORP. The net income and expenditure for the year dealt within the accounts of the company was a deficit of £5.0m (2021: income of £2.3m).

Company status

The charity is a company limited by guarantee, incorporated in England and Wales with Company number: 02896700. The members of the charity are the Trustees named on page 2. In the event of the charity being wound up, the liability in respect of the guarantee is limited to £1 per member of the charity.

Going concern

The Trustees have considered the company’s current and future prospects and its availability of financing and are satisfied that the company can continue to pay its liabilities as they fall due for a period of at least 12 months from the date of approval of these financial statements. For this reason, the Trustees continue to adopt the going concern basis of preparation for these financial statements.

Fund accounting

General funds are unrestricted funds which are available for use at the discretion of the Trustees in furtherance of the general objectives of the company and which have not been designated for other purposes. Designated funds compromise unrestricted funds that have been set aside by the Trustees for particular purposes. The aim and use of each designated fund, is set out in the notes to the financial statements.

Investment income, gains and losses are allocated to the appropriate fund.

24

NCFE

Notes to the financial statements

for the year ended 31 July 2022

1. Accounting policies (continued)

Income

All income is recognised once the company has entitlement to the income, it is probable that the income will be received and the amount of income receivable can be measured reliably.

Income from charitable activities represents the values of fees for the provision of examinations and assessments and related services.

Registration income is included within income resources in the period in which the relevant registration is made as all performance obligations have been met.

Certification income is recognised in the period in which the certificate is issued.

Interest receivable is included when receivable by the company.

Other income is recognised in the period in which it is receivable and to the extent the goods have been provided or on completion of the service.

Government grants

Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants are of a revenue nature, and as such are credited to income to match them with the expenditure to which they relate.

Expenditure

Expenditure is recognised once there is a legal or constructive obligation to transfer payment to a third party, it is probable that settlement will be required and the amount of the obligation can be measured reliably.

All expenditure is accounted for on an accruals basis. All expenses, including support costs are allocated to the applicable expenditure heading on a basis consistent with the use of resources.

Charitable activity costs include expenditure relating to the provision of examination and assessment services and include both the direct costs and support costs relating to these activities.

Support costs are those costs incurred directly in support of expenditure on the objects of the group and include project management carried out at the head office.

Grants payable are payments made to third parties in the furtherance of the charity’s objects. Grants are accounted for when either the recipient has a reasonable expectation that they will receive a grant and the Trustees have agreed to pay the grant without condition, or the recipient has a reasonable expectation that they will receive a grant and that any condition attaching to the grant is outside of the control of the Charity.

25

NCFE

Notes to the financial statements

for the year ended 31 July 2022

1. Accounting policies (continued)

Intangible fixed assets and amortisation

Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses.

Software development costs are recognised as an intangible asset when all of the following criteria are demonstrated:

Brands acquired are valued as the difference between the identifiable net assets of the purchase, and the consideration paid.

Product development costs are recognised as intangible assets measured at cost.

Intellectual property is capitalised at cost on acquisition and amortised over their estimated useful lives using an amortisation method that reflects the pattern of their consumption.

Amortisation is provided on all intangible assets so as to write off the cost of an asset over its estimated useful life as follows:

life as follows:
Brands - 5 years straight line
Software - 2 - 5 years straight line
Product development - 4 years straight line
Intellectual property - 4 years straight line

Intangible assets are reviewed for impairment where market conditions or other factors indicate a reduction in future economic benefits. Impairment losses are recognised in the statement of financial activities where an asset’s realisable amount exceeds its carrying value.

Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost, less accumulated depreciation and accumulated impairment losses. Costs include the original purchase price plus any further costs directly attributable to bringing the asset to its working condition for its intended use.

Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their estimated useful lives as follows:

Long-term leasehold property Over the term of the lease Fixtures and fittings 5 – 15 years straight line Office and computer equipment 3 – 5 years straight line

Assets residual values and useful lives are reviewed at the end of each reporting period, and adjusted if appropriate. The effect of any change is accounted for prospectively. Assets under construction are not depreciated until the related assets are complete.

26

NCFE

Notes to the financial statements

for the year ended 31 July 2022

1. Accounting policies (continued)

Impairment of assets

At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in the statement of financial activities.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the statement of financial activities.

Fixed asset investments

Listed investments, which have been classified as fixed asset investments, are measured initially and subsequently at fair value. The statement of financial activities includes the net gains and losses arising on revaluations and disposals throughout the year.

Fixed asset investments in unquoted companies are stated at cost less impairment.

Leases

All of the group’s leasing arrangements are operating leases. Rental payments under operating leases are charged to the statement of financial activities on a straight-line basis over the lease term, even if payments are not made on such a basis.

Taxation

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

Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Debtors

Trade and other debtors are recognised at the settlement amount after any trade discount offered. Prepayments are valued at the amount prepaid net of any trade discounts due.

Cash at bank and in hand

Cash at bank and in hand includes cash and short term highly liquid investments with a short maturity of three months or less from the date of acquisition or opening of the deposit or similar account.

Liabilities and provisions

Liabilities are recognised when there is an obligation at the balance sheet date as a result of a past event, it is probable that a transfer of economic benefit will be required in settlement, and the amount of settlement can be estimated reliably. Liabilities are recognised at the amount that the company anticipates it will pay to settle the debt or the amount it has received as advanced payments for the goods or services it must provide. Provisions are measured at the best estimate of the amounts required to settle the obligation. Where the effect of the time value of money is material, the provision is based on the present value of those amounts, discounted at the pre-tax discount rate that reflects the risks specific to the liability. The unwinding of the discount is recognised within interest payable and similar charges.

27

NCFE

Notes to the financial statements

for the year ended 31 July 2022

1. Accounting policies (continued)

Financial instruments

The group only enters into financial instruments transactions that result in the recognition of basic debt financial assets and liabilities like trade and other accounts receivable and payable, cash and bank balances and loans to or from related parties. All such instruments are due within one year, and are measured, initially and subsequently at the transaction price.

Employee benefits

Short term benefits

Short-term benefits, including holiday pay and other similar non-monetary benefits are recognised as an expense in the period in which the employee’s entitlement to the benefit accrues.

Defined contribution pension plan

The group operates a defined contribution pension plan for its employees. Contributions are recognised as an expense when they fall due. Amounts due but not yet paid are included within creditors on the balance sheet.

NCFE makes an employer’s contribution of 9% of pensionable pay, provided that the employee makes a minimum contribution of 3% and 6% provided that the employee contributes 2%. These amounts are paid over to the fund on a monthly basis.

Judgements in applying accounting policies and key sources of estimation uncertainty

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Key sources of estimation uncertainty

Estimates included within these financial statements include depreciation and amortisation charges based upon the useful economic lives of both tangible and intangible assets, and provisions against debtors. None of the estimates made in the preparation of these financial statements are considered to carry significant estimation uncertainty, nor to bear significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Critical areas of judgement

A critical area of judgement is considered to be the amount of income deferred in relation to annual fees received at the start of the academic year, which relies upon judgement over the rate of drop out of students, and hence the amount of income that will not be collected. No material uncertainty is considered to exist in relation to this key area of judgement.

Judgement is also required in the assessment of the carrying values of fixed assets and investments, in the performing impairment tests. The impairment test calculations make assumptions around future trading performance, customer retention, cost rationalisation and external factors such as government funding. No material uncertainty is considered to exist in relation to this key area of judgement.

2. Investment income

Rent receivable
Dividends
Interest receivable		 2022
£000
126
293
4
423		 2021
£000
133
161
9
303

28

NCFE

Notes to the financial statements

for the year ended 31 July 2022

3. Other income

Government grants of £nil (2021: £296,000) have been recognised in the Group Statement of Financial Activities and relate to claims under the COVID-19 job retention scheme.

4. Investment management costs

Investment management fees 2022
2021
£000
£000
90
54

5. Analysis of expenditure by activities

Examination and assessment
activities
Direct costs
Examination and assessment costs
Wages and salaries
National insurance
Pension costs
Support costs
Governance
Wages and salaries
National insurance
Pension costs		 Activities
undertaken
directly
2022
£000
35,647		 Support
costs
2022
£000
5,768		 Total
2022
£000
41,415		 Total
2021
£000
35,700
2022
£000
11,832
20,081
1,992
1,742
35,647
2022
£000
132
4,587
505
544
5,768		 2021
£000
11,343
16,534
1,549
1,304
30,730
2021
£000
137
3,957
423
453
4,970

6. Direct costs

7. Support costs

Support costs all relate to the provision of examination and assessment support, in undertaking the objectives of the charitable company.

29

NCFE

Notes to the financial statements

for the year ended 31 July 2022

8. Net income

This is stated after charging:

Depreciation of tangible fixed assets:
-
owned by the charity
Loss on disposal of intangible assets
Operating lease rentals:
-
IT equipment
-
other operating leases
Amortisation of intangible assets
Impairment of intangible assets
Auditor’s remuneration
Auditor’s remuneration – non-audit services
taff costs
taff costs were as follows:
Wages and salaries
Social security costs
Other pensions costs		 2022
£000
562
136
40
33
852
-
48
8
2022
£000
24,668
2,497
2,286
29,451		 2021
£000
533
-
43
48
883
380
58
8
2021
£000
21,799
2,104
1,815
25,718

9. Staff costs

Staff costs were as follows:

The average monthly number of employees, expressed as headcount figures (including casual and part time staff), was 900 (2021: 804).

The number of higher paid employees was:

me staff), was 900 (2021: 804).
he number of higher paid employees was:
2022 2021
No. No.
In the band £60,001 - £70,000 19 5
In the band £70,001 - £80,000 7 8
In the band £80,001 - £90,000 2 3
In the band £90,001 - £100,000 4 3
In the band £100,001 - £110,000 2 1
In the band £110,001 - £120,000 2 2
In the band £130,001 - £140,000 - 2
In the band £140,001 - £150,000 2 1
In the band £180,001 - £190,000 - 1
In the band £230,001 - £240,000 1 -

During the year, redundancy payments totalling £2,000 (2021: £46,000) were paid as part of the continuing restructuring of the business. These are included within staff costs.

30

NCFE

Notes to the financial statements

for the year ended 31 July 2022

9. Staff costs (continued)

None of the employees whose emoluments exceed £60,000 have retirement benefits accruing under defined benefit schemes. All of the above members of staff are members of the company’s defined contribution scheme.

The increase in employee numbers from prior year are a result of investment across the Group to allow delivery of the strategy and meet the increasing challenges of the market.

Remuneration and benefits received by key management personnel

Key management personnel are deemed to be those having authority and responsibility, delegated to them by the Trustees for planning, directing and controlling the activities of the charity. The aggregate remuneration of the executive team who were considered by the Trustees to be the key management of the charity totalled £821,000 (2021: £686,000).

10. Intangible fixed assets

Group
Cost
At 1 August 2021
Additions
Disposals
At 31 July 2022
Amortisation
At 1 August 2021
Disposals
Charge for the year
At 31 July 2022
Net book value
At 31 July 2022
At 1 August 2021		 Negative
goodwill
£000
(42)
-
-		 Brands
£000
7,869
-
-		 Software
£000
1,794
257
-		 Product
development
£000
2,700
1,379
(137)		 Intellectual
property
£000
-
50
-		 Total
£000
12,321
1,686
(137)
(42) 7,869 2,051 3,942 50 13,870
(42)
-
-		 7,869
-
-		 1,081
-
328		 107
(1)
513		 -
-
11		 9,015
(1)
852
(42) 7,869 1,409 619 11 9,866
- - 642 3,323 39 4,004
- - 713 2,593 - 3,306

31

NCFE

Notes to the financial statements

for the year ended 31 July 2022

10. Intangible fixed assets (continued)

Company
Cost
At 1 August 2021
Additions
Disposals
At 31 July 2022
Amortisation
At 1 August 2021
Disposals
Charge for the year
At 31 July 2022
Net book value
At 31 July 2022
At 1 August 2021		 Brands
£000
4,926
-
-		 Software
£000
725
467
-		 Product
development
£000
2,700
1,379
(137)		 Intellectual
property
£000
-
50
-		 Total
£000
8,351
1,896
(137)
4,926 1,192 3,942 50 10,110
4,926
-
-		 298
-
252		 107
(1)
513		 -
-
11		 5,331
(1)
776
4,926 550 619 11 6,106
- 642 3,323 39 4,004
- 427 2,593 - 3,020

Included in the group cost of additions is £709,000 (2021: £1,113,000) (Company - £709,000 (2021: £990,000)) from internal development.

11. Tangible fixed assets

Group
Cost
At 1 August 2021
Additions
Disposals
At 31 July 2022
Depreciation
At 1 August 2021
Disposals
Charge for the year
At 31 July 2022
Net book value
At 31 July 2022
At 1 August 2021		 Long-term
leasehold
property
£000
1,419
-
-		 Fixtures and
fittings
£000
2,747
34
-		 Office
equipment
£000
1,633
103
(13)		 Total
£000
5,799
137
(13)
1,419 2,781 1,723 5,923
237
-
28		 1,357
-
290		 1,279
(13)
244		 2,873
(13)
562
265 1,647 1,510 3,422
1,154 1,134 213 2,501
1,182 1,390 354 2,926

32

NCFE

Notes to the financial statements

for the year ended 31 July 2022

11. Tangible fixed assets (continued)

Company
Cost
At 1 August 2021
Additions
Disposals
At 31 July 2022
Depreciation
At 1 August 2021
Disposals
Charge for the year
At 31 July 2022
Net book value
At 31 July 2022
At 1 August 2021		 Long-term
leasehold
property
£000
1,419
-
-		 Fixtures and
fittings
£000
2,671
47
-		 Office
equipment
£000
1,619
107
(13)		 Total
£000
5,709
154
(13)
1,419 2,718 1,713 5,850
236
-
28		 1,304
-
282		 1,269
(13)
243		 2,809
(13)
553
264 1,586 1,499 3,349
1,155 1,132 214 2,501
1,183 1,367 350 2,900

12. Fixed asset investments

Group
Market value
At 1 August 2021
Additions
Disposals
Revaluations
At 31 July 2022
Historical cost		 Listed
securities
£000
9,000
24,791
(9,968)
(2,438)
21,385
23,156		 Other
investments
£000
89
29
-
-
118
118		 Total
£000
9,089
24,820
(9,968)
(2,438)
21,503
23,274

33

NCFE

Notes to the financial statements

for the year ended 31 July 2022

12. Fixed asset investments (continued)

Valuation

Listed investments are valued at the market rate at the year-end date.

Company
Market value
At 1 August 2021
Additions
Disposals
Revaluations
Transfer to merger reserve
At 31 July 2022
Historical cost		 Listed
securities
£000
9,000
24,791
(9,968)
(2,438)
-
21,385
23,156		 Subsidiary
undertakings
£000
928
-
-
-
(928)
-
-		 Other
investments
£000
89
29
-
-
-
118
118		 Total
£000
10,017
24,820
(9,968)
(2,438)
(928)
21,503
23,274

Listed investments held

UK bonds
Overseas bonds
UK equities
Overseas equities
Pooled funds		 2022
£000
1,660
3,438
3,801
7,949
4,537
21,385		 2021
£000
389
580
1,708
-
6,323
9,000

All listed investments are held in funds managed by Brewin Dolphin Investment Management on behalf of the company.

The charity owns one £1 ordinary share, 100% of the voting capital in NCFE Trading Limited, a company incorporated and registered in England and Wales. The company has not traded during the year.

The company holds 100% of the voting capital in Skills Forward Limited, a company incorporated and registered in England and Wales. The principal activity of the company up to 30 November 2021 was the provision of online assessments, diagnostics and e-learning resources. On 1 December 2021 all of the assets and liabilities were transferred to the parent company NCFE and Skills Forward Limited ceased to trade.

The company holds 100% of the voting capital in Peer Tutor Limited, a company incorporated and registered in England and Wales. The company has not traded during the year.

13. Stocks

Finished goods and goods for resale Group
Company
2022
2021
2022
2021
£000
£000
£000
£000
400
18
400
2

34

NCFE

Notes to the financial statements

for the year ended 31 July 2022

14. Debtors

Debtors
Trade debtors
Amounts due from subsidiary undertakings
Other debtors
Prepayments and accrued income		 2022
£000
5,144
-
24
757		 Group
2021
£000
4,023
-
46
1,149		 2022
£000
5,144
-
24
757		 Company
2021
£000
3,834
11
22
1,137
5,925 5,218 5,925 5,004

15. Creditors: amounts falling due within one year

Trade creditors
Amounts due to subsidiary undertakings
Other taxation and social security
Other creditors
Accruals and deferred income		 2022
£000
659
-
1,061
453
3,121
5,294		 Group
2021
£000
716
-
721
258
3,015
4,710		 2022
£000
659
290
1,061
453
3,121
5,584		 Company
2021
£000
707
-
627
226
2,957
4,517

Deferred income

Deferred income at 1 August 2021
Resources deferred during the year
Amounts released during the year
Deferred income at 31 July 2022		 2022
£000
26
126
(128)
24		 Group
2021
£000
58
3,125
(3,157)
26		 2022
£000
23
126
(125)
24		 Company
2021
£000
23
3,125
(3,125)
23

35

NCFE

Notes to the financial statements

for the year ended 31 July 2022

16. Statement of funds

Group

Group
Designated funds
Resilience fund
General funds
General funds
Total unrestricted
funds
Merger reserve
Total funds		 Brought
forward
£000
15,000
15,000
29,941
29,941
44,941
-
44,941		 Income
£000
-
-
39,095
39,095
39,095
-
39,095		 Expenditure
£000
-
-
(41,906)
(41,906)
(41,906)
-
(41,906)		 Investment
losses
£000
-
-
(2,438)
(2,438)
(2,438)
-
(2,438)		 Transfer
£000
-
-
928
928
928
(928)
-		 Carried
forward
£000
15,000
15,000
25,620
25,620
40,620
(928)
39,692

The income funds of the charitable company include the following designated fund which has been set aside out of unrestricted funds by the Trustees for specific purposes:

The Resilience fund is used to ensure that the Charity remains financially sound in the case of any significant changes in the market.

On 1 December 2021 the assets and liabilities of the subsidiary undertaking Skills Forward Limited were transferred to NCFE at net book value. On transfer, the investment cost is recognised as a merger reserve.

36

NCFE

Notes to the financial statements

for the year ended 31 July 2022

17. Reconciliation of net income to net cash flow from operating activities

Net (expenditure)/income for the year before investment gains/(losses)
(as per Statement of Financial Activities)
Adjustment for:
Depreciation charges
Amortisation charges
Loss on disposal of intangible assets
Impairment of fixed assets
Dividends, interest and rents from investments
Increase in stocks
Increase in debtors
Increase in creditors
Net cash (used in)/provided by operating activities		 2022
£000
(2,811)
562
852
136
-
(423)
(382)
(707)
584
(2,189)		 2021
£000
1,015
533
883
-
380
(303)
-
(295)
586
2,798

18. Analysis of cash and cash equivalents

Cash in hand
Notice deposits (less than 3 months)		 2022
£000
6,425
4,228
10,653		 2021
£000
10,246
18,848
29,094

19. Pension commitments

NCFE operates a defined contribution pension scheme, the Group Personal Pension Scheme. The assets of the scheme are held separately from those of the charitable company in a separately administered fund. The pension costs charge represents contributions payable by the group to the fund and amounted to £2,286,000 (2021: £1,815,000). Contributions totalling £427,000 (2021: £203,000) were payable to the fund at the balance sheet date and are included within creditors.

20. Operating lease commitments

Future minimum lease payments under non-cancellable operating leases fall due as follows:

Group and Company
Not later than 1 year
Later than 1 year and not later than 5 years		 2022
£000
74
83
157		 2021
£000
78
-
78

37

NCFE

Notes to the financial statements

for the year ended 31 July 2022

21. Related party transactions

During the year, transactions were carried out at full market value with the following individuals or organisations in which directors of NCFE also held senior positions or held shares, as follows.

Kindling Limited Value of
transactions
2022
£000
18		 Outstanding
at the
year end
2022
£000
-		 Value of
transactions
2021
£000
Outstanding
at the year
end
2021
£000
16
-

Ms D M Jenkins MBE DL, a Trustee is also a Director of Kindling Limited which invoiced NCFE for Chair’s remuneration.

Three Trustees were reimbursed travelling expenses in the year totalling £687 (2021: none).

22. Principal subsidiaries

rincipal subsidiaries
Company name Country Percentage Description
Shareholding
NCFE Trading Limited UK 100% Non trading company
Skills Forward Limited UK 100% Provision of online
assessments, diagnostics
and e-learning resources.
Dormant from 1
December 2021.
Peer Tutor Limited UK 100% Non trading company

23. Controlling party

The charitable company is controlled by the Board of Trustees.

24. Financial instruments

inancial instruments
Financial assets measured at fair value through income and expenditure
Financial assets measured as amortised cost
Financial liabilities measured at amortised cost		 2022
£000
21,385
15,830
37,215
4,209		 2021
£000
9,000
33,278
42,278
3,962

Financial assets measured at fair value through income and expenditure comprise listed investments.

Financial assets measured at amortised cost comprise trade debtors, other debtors, accrued income and cash.

Financial liabilities measured at amortised cost comprise trade creditors, other creditors and accruals.

38

NCFE

Notes to the financial statements

for the year ended 31 July 2022

25. Contingent liability

Following feedback from this summer's T-Level results in Health and Science, Ofqual is conducting an investigation into the delivery of our assessments. It is possible that Ofqual may find NCFE to be in breach of its conditions and impose a fine or penalty as a result. We are unable to quantify the likelihood or value of this happening at the Balance Sheet date.

26. Post balance sheet event

NCFE acquired 100% of the issued share capital of Active IQ Limited on 22 November 2022 for a consideration of £3,306,000.

39