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2022-07-31-accounts

The City Literary Institute, a company limited by guarantee Registered in England & Wales, Company No.: 02471686 Registered Office: 1-10 Keeley Street WC2B 4BA Registered Charity No.: 803007

The City Literary Institute Annual Report 2022

Annual Report 2022 | City Lit

Contents

Message from the Chair of Governors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Key Highlights and Achievements 2021/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Message from CEO and Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 About City Lit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Operating and Financial Review (including the Strategic Report). . . . . . . . . . . . . . . . . . . . . 16 Disclosure of Information to Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Statement of Corporate Governance and Internal Control . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Governing Body’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Statement of Responsibilities of City Lit’s Governing Body . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Independent Auditor’s Report to the Members of the City Literary Institute . . . . . . . . . . . 36 Reporting Accountant’s Assurance Report on Regularity . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 40 Financial Statements for the Year Ended 31 July 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

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Message from The Chair of Governors

Dame Moira Gibb

This will be my last Annual Report as Chair of City Lit. I have been privileged to lead such an inspiring organisation, which has adapted and evolved during the time that I have been Chair. I have witnessed the College pass its centenary, no easy achievement in the challenging and competitive world of education.

City Lit, described often as London’s hidden gem, is a great place to learn. Walking through the doors of the Institute in Keeley Street you immediately feel the energy, excitement and joy, which comes from the quality of teaching and amazing range of courses helping people to come together to enrich their lives through learning. As a Board we are very proud of the work that City Lit does, the diverse communities it serves and the reputation it has earned.

As we emerge from the pandemic, I am convinced, more than ever, of the importance of adult education and lifelong learning. Access to learning has helped to combat isolation and loneliness during lockdowns and ensured people have maintained their physical and mental wellbeing. It has helped to re-train people who have lost their jobs or want to make a change. It is learning that can help stimulate the economy as new interests and skills drive spending and job creation.

Since the start of the pandemic the College has met with many challenges, not least the financial pressures that the impact of Covid-19 has placed on it. The College has been working closely with the Further Education Commissioner’s team, to stabilise the finances of the College, and secure its future for generations to come. I am pleased to see significant progress has been made in this area, a testament to the hard work and dedication of all the staff and tutors across the College.

I've been enormously impressed at the agility that’s been shown and the sheer hard work that colleagues have put into responding to the changing nature of the pandemic. As we move into the period of ‘living with Covid’ and unprecedented economic turbulence, this agility and resilience will help the College respond to new challenges. City Lit responded to the pandemic by creating a digital offer for as many courses as possible. That digital offer has given us new opportunities to reach even more students and will now be part of the College for the long term. It will help us adapt and change to meet the needs of our students, old and new.

The College continues to serve and provide for those with learning disabilities, Deaf and hard of hearing people and those with speech impediments. These communities continue to be a priority for the College. I was especially delighted that we were once again able to host Deaf Day, Britain’s largest event for the Deaf and hard of hearing community.

It goes without saying that City Lit is nothing without our tutors and we are fortunate to have over 1,000 of them who are experts in their field and who design the most engaging and interesting courses for our students.

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We also have a superb team of staff at the College who work tirelessly to support students and tutors and actively promote the social, mental and economic benefits of lifelong learning to policy makers and business leaders.

It has been a privilege and a pleasure to have been one of the stewards of this great London institution since 2013. 2023 looks like it may be a tough and unpredictable year, with macro-economic and political uncertainty. I am confident that City Lit will be able to respond and adapt to these challenges, and I wish the College well for its future journey.

Dame Moira Gibb DBE Chair of Governors

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Key Highlights & Achievements 2021/22

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Message from CEO and Principal

Mark Malcomson CBE

Over the past few years, we have dealt with unprecedented and hugely challenging times, for us personally and for the College itself. However, the way we have responded has been incredibly uplifting and makes me more optimistic for the future, obviously with so many of the caveats that life inflicts on us nowadays.

It is easy to forget during this year, whilst we had no lockdowns, we have weathered the multiple variants, changing work patterns and economic uncertainty.

However, in each term we have edged more closely to operating the College “normally”. We have taught more students this year, and the college building has had a great buzz recently with students and visitors at exhibitions, productions and events. We have all focused on the College’s purpose of serving our students and giving them high quality education, a sense of community and, for so many, improving their wellbeing. We have all delivered that in spades during the pandemic and made many tens of thousands of people’s lives better in the most difficult of times.

As an educational community, we have learned three important lessons this past year, that:

  1. We must never under-estimate the deep-rooted sense of purpose and personal motivation that comes with learning

  2. Education delivered online can be done really well with the right course design and committed tutors

  3. Adult education in all its forms, has never been more important to society and economic recovery

Here for London… and beyond

City Lit has been delivering learning for over 100 years without a break, including throughout the Second World War, and now through a pandemic. Despite the relentless uncertainty that the pandemic has brought, we have still managed to educate over 24,000 students over the past year, both inperson and online. The FE Commissioner has commended us for our proactive and speedy response to lockdowns and Ofsted praised us for the quality of online delivery and collaboration of tutors in transitioning to online teaching.

The year was relentlessly busy for everyone and, as always, much of the final term was spent planning the new academic year. As with the whole pandemic period, we have had to make the best decisions we can, based on the data and information available at the time. This means that for 2022/23 we expect to welcome back more students to the college campus. Online learning will remain a significant part of our offer, and we are working on enhancing our delivery in this space, which means we can reach learners across the country where adult education is often in short supply.

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Bringing people together to enrich lives through learning

Our core purpose is: To bring people together to enrich lives through learning.

City Lit is not just an adult education college. We serve people by helping them to fulfil an aspiration, which might be to get a better job, or learn a new skill, or satisfy their curiosity. In serving these different aspirations we help people to feel better about themselves and therefore we create a better society. During the year we realigned our academic teams, creating a new School of Skills, Employability & Well-being. This team will focus on the delivery of Government and London Mayor priorities, such as the new initiative in adult numeracy - Multiply. Further development of links with employers will help to ensure that this area of our curriculum remains relevant and ensures that individuals have the skills that employers need.

Our strategy comprises three core goals:

  1. We will put our audience at the heart of everything we do.

  2. We will grow sustainably to benefit our diverse communities’ needs.

  3. We will help forge a positive future for learning for life.

Impact of the pandemic on the College finances

Despite the heroic efforts of all staff and tutors to keep the College functioning during the pandemic, the past few years has placed huge financial strain on the College. We have posted significant financial losses and have been working closely with the Further Education Commissioner’s (FEC) team to restore the College finances to pre-pandemic levels. We have a Financial Recovery plan in place, which has been approved by our Governing Body, and endorsed by the FEC team. I am pleased to see that our performance is ahead of the financial recovery plan, although there are still many challenges that lie ahead.

Fellows and friends

One of the highlights of the past year was announcing our new City Lit Fellows: Ten times Oscar winner Lord Puttnam of Queensgate CBE; Booker Prize winning former City Lit writing student Anna Burns; playwright, broadcaster and critic Bonnie Greer OBE; and Paul Farmer - Chief Executive of Mind, the leading mental health charity.

All of our Fellows provide tireless support for our causes by speaking at virtual events and using their influence to promote our values and the great work done by our tutors. We warmly welcome our four new Fellows and look forward to engaging with them.

We were also delighted that one of existing Fellows, Lulu CBE, agreed to become the new Patron of our School of Performing Arts, and opened our newly refurbished music and drama studios. We also welcomed back Fellow Ruby Wax OBE, who opened our new brand new purpose built Wellbeing Centre.

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Support from the Board and Colleagues

So much has been achieved by the tremendous work of all of our amazing staff and tutors. Nothing that has been done this year could have been achieved without their dedication and commitment. It is an honour and a privilege to serve alongside truly inspirational professionals, who have gone the extra mile in ensuring that this great Institution has continued to support students during these turbulent times.

Finally, and by no means least, we are hugely grateful to Dame Moira Gibb for Chairing the Board of Governors these past nine years. This was her final year as Chair, having agreed to extend her term by an additional year to help steer us through the pandemic. Dame Moira has been a great supporter and superb advocate for City Lit. From a personal perspective, I could not have wished to work with a more committed public servant and feel honoured that we have partnered together over the last decade in making City Lit a cultural and educational beacon in some of the most difficult of times.

We welcome Lindsay Nicholson, MBE, as our new Chair and are excited to have her bring her insight and experience at this crucial juncture. She joins an exceptional board, who continue to give so much of their time, expertise and insight.

Mark Malcomson CBE Principal and Chief Executive

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Fatima Zahra

Centre for Deaf Education and Visual Arts

City Lit has opened a locked door for me. I have been able to learn English, British Sign Language, computing and art. There are interpreters at the College and tutors use BSL. I have learnt so much. I can read by myself now. In the past, I couldn’t, I had to rely on my family. City Lit opened up that door and allowed me to learn and develop myself. I can read the news, and I can communicate with others. I don’t have to have somebody from my family supporting me. I can do that independently now and I feel really proud of myself for doing that.

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----- Start of picture text -----
Christopher Catto
Art class, Centre for
Learning Disability
Education
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I joined City Lit in 2016 just to do art. I like the art teacher because he is very nice to me, even when I first came to the interview he was the first person I met at City Lit. I do like coming here and I like art a lot. When I have my free time, I draw all the time. I started when I was at the residential school, which was for people with Asperger’s and autism like me, and later at home. That is when I found out I wanted to be an artist, it is my dream job. I am building a portfolio at City Lit of my art and try new things to get some inspiration.

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Sandra Bee

Dance and Children’s Writing

I absolutely love coming to City Lit. It’s a fantastic place where I can escape from my busy life as a mum (with an autistic son), and be myself, learn new things, work on my mental wellbeing and be part of a community. I have done so many courses over the years including dance and children’s writing. It has opened up a whole new world for me.

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About City Lit

City Lit (The City Literary Institute) has a national and international reputation as a leading provider of part-time learning for adults.

Established in 1919 to improve post-war literacy, the Institute today offers more than 5,000 courses, including over 3,000 online courses, to over 24,000 students a year. Our wide range of courses include: visual and performing arts, languages, computing, counselling, health and movement, humanities, deaf education, speech therapy and provision for adults with learning disabilities.

We also work in communities across London with disadvantaged groups including: the homeless, immigrants and refugees, ex-offenders, and families.

Based in London’s Covent Garden, City Lit occupies a purpose-designed home for adult learning and is the largest adult education institute in Europe.

City Lit is graded ‘Good’ (with outstanding features) by OFSTED and over 95% of our students rate our courses ‘good’ to ‘excellent’. We hold the Queen’s Anniversary Prize for outstanding work in the field of speech therapy and many of our teachers continue to be distinguished professionals including wellknown authors, artists, actors, broadcasters, musicians and academics.

Famous alumni include: David Bowie; actors Steven Berkoff and Richard Wilson; authors Jake Arnott, Andrea Levy and former Children’s Laureate, Malorie Blackman; comedians Jimmy Carr and Shazia Mirza.

City Lit is Where London learns...

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Fundraising

City Lit does not fundraise directly with individuals and therefore is not registered with the Fundraising Regulator. When donations from individuals are received City Lit aims to protect personal data and does not sell or swap data with other organisations. City Lit manages its own fundraising activities and undertakes to react to and investigate any complaints regarding its fundraising activities and to learn from them and improve its service. During the year ended 31 July 2022, City Lit did not receive any complaints about its fundraising activities.

Public Benefit

City Lit is a registered charity (charity number 803007) under Part 3 of the Charities Act 2011 and is regulated by the Secretary of State for Education. The members of the Governing Body, who are trustees of the charity, are listed on pages 25 and 26. In setting and reviewing City Lit’s strategic objectives, the Governing Body has had due regard for the Charity Commission’s guidance on public benefit and particularly upon its supplementary guidance on the advancement of education. The guidance sets out the requirement that all organisations wishing to be recognised as charities must demonstrate, explicitly, that their aims are for the public benefit. In delivering its mission, City Lit provides the following identifiable public benefits through the advancement of adult education: quality teaching and course offering, inclusive approach to student enrolment, tackling social exclusion and encouraging social participation, providing solutions to education inequality and delivering robust student support programmes.

Force for good

City Lit prides itself on being inclusive and serving areas of the community that often get neglected in an adult college environment, these include:

We adopt the same approach and dedicate the same resources to fulfil the demands of these groups as we would for any other department within the Institute. The number of awards received for our work with these groups evidences this along with our reputation for delivering quality learning and making a real difference to people’s lives.

We are one of the country’s leading adult Deaf Education facilities. Not only do we support many deaf students developing skills in English, Maths and Computing, we also support many of those who work with deaf adults. Our British Sign Language courses are attended by people working in many aspects of London life where deaf awareness helps to support deaf people such as TfL; hospital trusts; schools and universities; and the police.

Our approach to Speech Therapy has gained national and international recognition as a centre of excellence. Our tutors have published the methodology that we use and they are widely cited throughout the world with many professionals believing that ours is the most effective way to help

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people with stammers. As well as specialising in therapy for people who stammer we also work with people who have suffered from speech impairment as a result of a head injury or stroke. Our methodology and therapy helps improve speech, builds confidence and enables people to contribute more positively in all aspects of their lives, particularly at work.

We believe that everyone is entitled to a second chance at education. We know much more now about learning difficulties than we did 20 years ago when children would usually have slipped through the traditional education system with little or no support. Students with learning difficulties at City Lit have opportunities to learn skills in a safe and encouraging environment, which builds confidence, pride and often leads to employment or further education. Our team works hard to ensure that the participants’ positive learning experience continues outside of the classroom, including pathways into work.

In addition to these very specific areas we also know that City Lit as a whole provides Health and Wellbeing benefits to many of our students, particularly our more mature students. Dementia has now been cited as the biggest threat to life and whilst the research continues, it has been claimed that maintaining an active body and mind helps to combat the onset of symptoms. We are also aware that loneliness can lead to mental health issues and we have always believed that in a digital age there is still a real need for interaction with other people in an open and social environment, something that City Lit provides.

Our ‘public benefit’ touches all parts of our work at City Lit from the plays that are performed to public, to artwork that is displayed for all to see, to the stimulating debates that provide a sense of purpose, to the nurturing of talent such as Andrea Levy, Malorie Blackman and Grayson Perry who entertain, amuse and stimulate millions of people through their work.

Charitable status

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Operating and Financial Review (including the Strategic Report)

Performance indicators

City Lit is required to complete the annual Finance Record for the Education and Skills Funding Agency (ESFA). The Finance Record produces a financial health grading. The Institute was severely impacted, financially, by the pandemic which resulted in our rating falling to ‘Inadequate’ for the previous two financial years. As a consequence we have been working closely with the Further Education Commissioners team, and have developed a financial recovery plan that sets out how we will restore our financial health to pre-pandemic levels. We are currently ahead of the financial recovery plan targets and we expect our financial health grade to improve to 'Requires Improvement' for 2021-22, two years quicker than expected in the financial recovery plan. This has been achieved as a result of targeted cost savings during the year, and a focus on improving course profitability. We have started to see some signs of recovery, although trading conditions remain challenging.

Treasury policies and objectives

Treasury management is the management of City Lit’s cash flows, its banking and investment transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. The Principal, who is also the Accounting Officer, authorises all significant investment transactions.

All borrowing requires the authorisation of the Governing Body and shall comply with the requirements of the Financial Memorandum previously agreed with the Learning and Skills Council (LSC) and subsequently transferred to the ESFA.

During the year, we continued to use our overdraft facility of £3.5m. At the start of the financial year it became apparent that our student fee income would be significantly less than we had budgeted. We therefore implemented further cost saving measures. We ended the year with an overdraft balance of £1.2m, incurring a peak overdraft balance of £1.57m. This was an improvement on our budgeted year end overdraft balance of £1.8m, and also a significant improvement on the projection in the financial recovery plan. The current overdraft facility is in place until 30 June 2023, when we expect to renew it.

----- Start of picture text -----
Financial results
2021-22 2020-21
£’000 £’000
Income
Funding body grants 9,444 8,945
Student fees and educational contracts 8,428 9,386
Other income 228 389
18,100 18,720
Expenditure (18,306) (19,796)
Deficit (before actuarial pension adjustments) (206) (1,076)
----- End of picture text -----

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Financial results (continued)

The results of the financial year ended 31 July 2022 continued to be impacted by the Covid pandemic.

Income from student fee income was £8.2m, an increase of 10% on the last financial year but still 26% lower than the pre-pandemic level in 2018-19. We were pleased to welcome students back to attend classes in person. The School of Visual Arts and School of Performing Arts benefitted the most from this after a two year hiatus. Curriculum areas that had performed well during the pandemic, such as Humanities and Languages saw lower enrolments this year as the economy re-opened and the furlough scheme was wound down.

Average enrolments, across all areas, remain at lower level than pre-pandemic. During the latter part of the year, we saw a higher proportion of our courses being cancelled as our focus returned to improving overall contribution. The shortfall in income forecasted at the start of the year was mitigated in part by lower staff costs and targeted cost savings.

As a result of the continued challenging trading conditions, we decided to withdraw from delivering learning under third party contracts with local authorities. This was an area that we have historically subsidised, which was no longer affordable given the impact of Covid-19 on the College finances. We incurred restructuring costs of £237k during the year, which included the cost of withdrawing from the delivery of local authority contracts.

Overall City Lit ended the year with a deficit, before actuarial pension adjustments, of £0.2m (202021: deficit of £1.076m). The result for the year, including pension adjustments was a surplus of £14.1m (2020-21: deficit of £3.3m).

City Lit had net assets of £1.7m at 31 July 2022 (2020-21: net liabilities of £12.5m), after taking into account a pension liability of £7.0m (2020-21: liability of £21.3m). Without the pension liability, the Institute would have net assets of £8.7m (2020-21: net assets of £8.8m).

Pension liability

At the year end the pension liability had decreased from £21.3m (2020-2021) to £7.0m (2021-2022). This is largely because the discount factor used to calculate it has increased from 1.6% to 3.4%. The liability recognised on the balance sheet differs significantly from the last scheme valuation at 31 March 2022 which shows that we have a funding surplus of £3.48m and are 118.5% fully funded, compared to a surplus of £0.12m (100.8% fully funded) at the previous valuation on 31 March 2019. Following the latest valuation our employer contribution rate will increase from 12.9% to 13.6% from 1 April 2023.

Cash flow

City Lit’s cash inflow from operating activities was £0.9m (2020-21: £0.5m outflow) primarily as a result of cost saving measures implemented during the year.

Reserves policy

Our sector and its financial model which relies on a significant amount of statutory funding, does not lend itself to the accumulation of free reserves in the short to medium term. However the Governing Body recognises its responsibility to have financial headroom in the event of any financial shock. Such headroom is provided through a bank overdraft facility, the ability to dispose of or obtain secured borrowing against property assets, and management’s proven ability to reduce variable expenditure

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when necessary in a strictly prioritised and controlled manner. Our net current liability at 31 July 2022 was £4.5m (2021: £4.9m). We currently have an overdraft facility of £3.5m which is reviewed on an annual basis. Once we return to profitability we will look to convert the facility into a long term loan and start capital repayments.

Payment performance

The Late Payment of Commercial Debts (Interest) Act 1998, which came into force on 1 November 1998, requires colleges, in the absence of agreement to the contrary, to make payments to suppliers within 30 days of either the provision of goods or services or the date on which the invoice was received.

The target set by the Treasury for payment to suppliers within 30 days is 95%. During the year ended 31 July 2022, City Lit paid 92% of its invoices within 30 days (2020-21: 91%).

Streamlined energy and carbon reporting

The College’s greenhouse gas emissions and energy use for the period are set out below:

----- Start of picture text -----
UK Greenhouse gas emissions and energy use 1 August 2021 to 1 August 2020 to
data for the period 31 July 2022 31 July 2021
Energy consumption used to calculate emissions (kWh) 1,388,864 1,510,257
Scope 1 emissions in metric tonnes CO2e
Gas consumption 92.81 141.68
Scope 2 emissions in metric tonnes CO2e
Purchased electricity 187.31 156.42
Scope 3 emissions in metric tonnes CO2e Business travel in employee owned vehicles - -
Total gross emissions in metric tonnes CO2e 280.62 298.11
Intensity ratio
Metric tonnes CO2e per student 0.01 0.01
----- End of picture text -----

Qualification 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 2021 UK Government’s Conversion Factors for Company Reporting.

Intensity ratio

The chosen intensity measurement ratio is Metric tonnes CO2e per student.

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Employees

City Lit employs:

During the year City Lit employed an average of 1,253 employees (2020-21: 1,269). Included in this figure are 1,059 part-time tutors (2020-21: 1,046). The staff numbers in Note 7 only include employees that worked for City Lit in the year.

Our staff costs (excluding restructure and pension costs) decreased from £14.4m to £12.6m. In 202021, we supported our tutors by paying them throughout periods of college closure via the furlough scheme. As this was wound down we reverted back to our standard cancellation terms, which resulted in lower staff costs this financial year. As part of our cost savings plan, there were also further reductions in headcount during the year.

Further details of staff costs are provided in Note 7.

Outlook for 2022-23

In 2022-23 we will continue to provide a mix of online and face to face learning, which we will adapt according to the perceived demand from our students. Courses with significant practical elements will continue to be held in person and we hope to build on the enrolments from 2021-22 in these areas.

However, we expect the upcoming year to be another challenging year from a financial perspective, given the current economic climate and the pressures on our students' disposable income. Our key objective continues to be to grow fee income back towards pre-pandemic levels and achieve a cash neutral position for the year.

Principal risks and uncertainties

City Lit has several embedded internal controls to manage and mitigate risk including a Risk Management Group who update and maintain the risk register. The risk register is reviewed termly by the Audit & Risk Committee, as well as a Board Assurance Framework which is a wide-reaching governance tool that informs the Governors of progress against strategic direction including risk management. Risk Management processes are designed to protect its assets, reputation and financial stability. The risk register identifies the key risks, the likelihood of those risks occuring, their potential impact on the College and the actions being taken to reduce or mitigate the risks.

The principal risks and uncertainties for City Lit are:

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Our stakeholders

We have a wide range of stakeholders including:

The Institute recognises the importance of these relationships and engages in regular communication with them.

Equality and diversity

At City Lit we seek to achieve the objectives laid out in the Equality Act 2010.

One of our core principles is to value and promote equality and diversity. Equality is about the creation of a fairer organisation where everyone can participate and fulfil their potential as equals, free from discrimination and harassment. Diversity is about respecting, valuing and celebrating different views and cultures.

Our equality and diversity policy applies to all members of staff, Governors and students, and an equality and diversity strategy incorporates our equality schemes as required by the Equality Act 2010. The programme and service areas Self-Assessment Reports (SARs) contain detailed analysis of student progress by a number of diversity strands and equality impact assessments can be shown to lead to improvements in service and performance. We will continue to strive to improve the quality of our teaching by implementing and embedding excellent diversity practices.

Our policy is to provide support that ensures disabled employees have equality with regards to training, career development and promotion opportunities. Where an existing employee becomes disabled, every effort is made to ensure that employment can continue through targeted support.

We also have one of the largest centres for the education and training of deaf people and we employ a significant number of staff with severe hearing impairments.

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We short list and appoint suitable candidates for employment in accordance with an approved policy and all relevant employment legislation. In so far as resources and opportunity permit, all employees, including temporary and agency staff, are entitled to training and development.

Bursary scheme: The ability of the less well-off to be able to access City Lit courses is an area of growing concern. To try and alleviate this problem City Lit setup a bursary scheme in 2011 (see note 21). This fund comprises amounts set aside out of City Lit general funds. This year we received £48,000 in donations and the balance on the fund at 31 July 2022 was £118,000 (31 July 2021: £85,000).

Facilities: The Keeley Street building was designed to comply with modern building standards, and to be fully accessible for staff and students with disabilities. The design process included an access audit. Further accessibility improvements have been made since, based on recommendations in specific access audits and feedback from staff and students. City Lit has a Learning Support Team that provides information, advice and arranges support where necessary for students with disabilities or additional learning support needs. The admissions procedure for students is described in the Student Handbook. Appeals against admission decisions are dealt with under the complaints procedure. There is a list of specialist equipment, such as radio aids, which the Institute can make available for use by students and a range of assistive technology is available in the supported learning centre and the Centre for the Deaf. City Lit has specialist tutors and support staff to assist students with additional learning needs and/or disabilities. There is a continuing programme of staff development to ensure the provision of a high level of appropriate support for such students. Counselling services are available to staff and students and are described in the Institute Student Handbook, which is available to all students.

Trade union facility time

The Trade Union (Facility Time Publication Requirements) regulations 2018 require the Institute to publish information on facility time arrangements for trade union officials at the Institute, for the period covering 1 April 2021-31 March 2022.

----- Start of picture text -----
Number of employees who were trade union representatives: 6 (FTE 2.8)
Percentage of time No of employees Total cost of facility time: £nil
£13.6 million
0% - Total pay bill:
1-50% 6 Percentage of total bill: 0%
51-99% - Time spend on paid trade union activities as a
100% - percentage of total paid facility time: None
----- End of picture text -----

Number of employees who were trade union representatives: 6 (FTE 2.8)

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Lee Ong

Creative Writing - Malorie Blackman Scholarship Recipient 2022

When I read about City Lit's Scholarship for “Unheard Voices”, I thought that accurately described me. There have been moments in my life where I have struggled to be heard, or to express myself, which has been frustrating, and has impacted both personally and professionally. Writing has really helped with that. I was also motivated by the idea that if my piece was shortlisted, that Malorie Blackman would be reading something that I had written, although I never believed for one moment that this would happen. I want to thank City Lit and Malorie for this opportunity. I can’t wait to begin.

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Edward Morley

Psychology and Counselling

I wanted to become a Therapeutic Counsellor because I wanted a new start in life. I wanted to live my life more actively. When I first came to the introduction course four years ago, I knew nothing about Therapeutic Counselling, and thanks to all the support from the tutors and staff at City Lit, I am now a qualified counsellor. City Lit is where it all happened for me and it holds a special place in my heart. City Lit has been instrumental in making me achieve my goal. It has been a journey and it has been worthwhile. It has been tough, but I got a lot of support and a lot of understanding from the tutors at City Lit and I am very grateful for that.

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Disclosure of Information to Auditors

The members who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which City Lit’s auditor is unaware; and each member has taken all the steps that he or she ought to have taken to be aware of any relevant audit information and to establish that City Lit’s auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of S418 of the Companies Act 2006.

Approved by the Governing Body on 6 December 2022 and signed on its behalf by:

Dame Moira Gibb DBE

Chair of Governors

Senior post-holders during this period:

Mark Malcomson CBE - Principal

Katrina O’Sullivan - Clerk to the Governors

Financial statement and regularity auditors:

Buzzacott LLP, 130 Wood Street, London, EC2V 6DL

Internal auditors:

BDO LLP, 55 Baker Street, London, W1U 7EU

Bankers:

Barclays Bank Plc, One Churchill Place, London, E14 5HP

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Statement of Corporate Governance and Internal Control

The following statement is provided to clarify our governance and legal structure.

City Lit strives to conduct its operations:

Governing Body

The members who served on the Governing Body during 2021/22 are listed in the table below:

The total number of meetings held in the year were as follows: Governing Body - 6 (plus 1 day Strategic Review session not included in the figures); Audit & Risk Committee - 3; Finance & Commercial Committee - 6; Governance & People Committee - 4; Quality Committee - 4; and Remuneration Committee - 0.

Name
Lucy
Arnold-Courtney
Donna
Birkett Baida		 No. of
Governing
Body meetings
attended
(not inc. Strategy Session)
5
6		 Date of
appointment/
re-appointment
Term of
offce
11/5/21
4 years
19/10/21
4 years		 Date of
appointment/
re-appointment
Term of
offce
11/5/21
4 years
19/10/21
4 years		 Date of
resignation
Status of
appointment
1
1		 Committees Served
(number in brackets
relates to no. of
meetings attended in
year)
Audit & Risk - 3
Finance & Commercial
- 6
Edward Breen 6 14/10/19 4 years 2 Quality - 4
Jane Cooper
(Deputy Chair)		 6 7/7/20 2nd term
extended to
7/12/22*		 1 Quality - 4;
Governance & People
- 4
Jon Gamble 5 8/3/22 2nd term
extended to
11/7/23*		 1 Audit & Risk - 3
Clancy
Gebler Davies		 6 2/12/21 2 years (plus
1 extended
year)*		 3 Quality - 4
Dame 2nd term Governance &
Moira Gibb
(Chair)		 6 8/3/22 extended to
7/12/22*		 1 People - 4; Finance &
Commercial - 6

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----- Start of picture text -----
No. of Date of
Governing appointment/ Term of Date of Status of Committee(s) served and
Name
Body meetings re- office resignation appointment attendance
attended appointment
Finance & Commercial - 6;
Colin Jones 6 4/12/18 4 years 1
Governance & People - 4
Simon Judge 6 13/10/20 4 years 1 Finance & Commercial - 6
Christine
6 1/12/20 4 years 1 Finance & Commercial - 4
Kinnear
1
Mark Lever 14/7/22 4 years 1 Finance & Commercial
(out of a possible 1)
Finance & Commercial - 6;
Mark
6 11/6/11 N/A 4 Governance & People - 4;
Malcomson
Quality - 4
Lindsay 2 Finance & Commercial -1 (out
Nicholson (out of a possible 2) 9/5/22 4 years 1 of a possible 1)
Alison Pike 5 19/10/21 4 years 1 Quality - 4
4 years (plus Audit & Risk - 3; Governance &
Paula Smith 5 4/7/17 1 extended 15/7/22 1
year)* People - 1
Quality - 4; Governance &
Jill Westerman 6 14/7/22 4 years 1
People - 4
Hayley White - 14/7/22 4 years 1 Audit & Risk
----- End of picture text -----**

Status of appointment: 1 = Governors who have the necessary skills to ensure that the Governing Body carries out its function under Article 8; 2 = Elected by and from staff; 3 = Appointed from the student community; 4 = The Principal.

** Chair Designate - formally appointed as Chair in December 2022.

It is the Governing Body’s responsibility to bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct. The Governing Body is provided with regular and timely information on the overall financial performance of City Lit together with other information such as performance against funding targets, proposed capital expenditure, quality matters and personnelrelated matters such as health and safety and environmental issues. The Governing Body meets at least once a term.

The Governing Body conducts its business through a number of Committees. Each Committee has terms of reference, which have been approved by the Governing Body. These Committees are: Audit & Risk, Finance & Commercial, Governance & People, Quality and Remuneration. Full minutes of all meetings, except those deemed to be confidential by the Governing Body, are available on request.

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The Clerk to the Governors maintains a register of financial and personal interests of the Governors, which is available for inspection on request.

All Governors are able to obtain independent professional advice in furtherance of their duties at City Lit’s expense and have access to the Clerk to the Governing Body, who is responsible to the Board for ensuring that all applicable procedures and regulations are complied with. The appointment, evaluation and removal of the Clerk are matters for the Governing Body as a whole. Formal agendas, papers and reports are supplied to Governors in a timely manner, prior to Board meetings. Briefings are also provided on an ad hoc basis.

The Governing Body is committed to the training and development of both the governors and the Clerk, and ensured that they received appropriate training and development throughout the year. For governors this included: safeguarding/prevent; Ofsted; AoC induction session; induction and buddying programme for new governors; external auditor training in accounting for non-accountants and a Regulatory & Governance update; self-assessment moderation; department presentations; AoC governance conference; AoC finance masterclass; and the ETF Board Assurance Framework module.

The Clerk to the Governors is experienced in the role and is supported by the Governing Body in her continuing training and development. She is a member of the FE Governance Professionals network, attends the annual AoC Governance Professionals conference, and undertakes a range of professional development courses to stay appraised of the latest good governance practices. She has also completed the qualification from the Education & Training Foundation/Institute of Leadership & Management: ‘The technical aspects of being a Governance Professional – Intermediate level programme’.

Currently, the Board undertakes an annual self-assessment of governance practices and produces an associated action plan. However, the Governing Body has considered DfE guidance on board reviews carefully and, as such, intends to commission an external review in 2023/24. This will follow an internal audit governance review in 2022/23.

The Governing Body has a strong and independent non-executive element, in addition to one staff member and one student member, and no individual or group dominates its decision making process. The Governing Body considers that each of its non-executive members is independent of management, and free from any business or other relationship, which could materially interfere with the exercise of their independent judgement.

There is a clear division of responsibility in that the roles of the Chair and Accounting Officer are separate.

Appointments to the Governing Body

Any new appointments to the Governing Body are a matter for consideration of the Governing Body as a whole. The Governing Body has a Governance & People Committee comprised of six Governors, which is responsible for the selection and nomination of any new member for the Governing Body’s consideration. The Governing Body is responsible for ensuring that appropriate training is provided as required.

Members of the Governing Body are appointed for a term of office not exceeding four years. Governors are eligible for re-appointment and, unless otherwise agreed by the Governing Body, do not serve for more than two terms.

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Finance & Commercial Committee

The Finance & Commercial Committee is charged with monitoring the Institute’s financial performance, and approving the annual budget. It met six times in 2021-22 and comprises of six members of the Governing Body including the Chair of Governors, who joined the Committee temporarily during the Covid-19 pandemic.

Remuneration Committee

The Remuneration Committee comprises three members of the Governing Body. The Committee’s responsibilities are to make recommendations to the Board on the remuneration and benefits of the Accounting Officer and other senior post-holders.

Details of remuneration for the year ended 31 July 2022 are set out in note 7 to the financial statements.

Governance & People Committee

The purpose of the Governance and People Committee is to advise the Governing Body on the appointment of new Governors and on the reappointment of existing members. The Committee is also responsible for overseeing the aspects of the College’s People resource, and providing general advice to the Board on all governance matters. This Committee met four times during the year and comprises of six members.

Quality Committee

The Quality Committee met four times throughout 2021-22 and comprises of six members, including the student and staff governors. The aim of the Committee is to advise the Governing Body on the appropriateness and operation of the Institute’s Quality Assurance systems, the quality of the learner experience and performance against key quality targets. It also makes recommendations on quality improvements for the Board’s approval.

Audit & Risk Committee

The Audit & Risk Committee comprises three members of the Governing Body (which does not include the Accounting Officer, Chair or members of the Finance & Commercial Committee). Its purpose is to advise the Governing Body on the adequacy and effectiveness of City Lit’s systems of internal control and its arrangements for risk management, control and governance processes.

The Audit & Risk Committee meets on a termly basis and provides a forum for reporting by City Lit’s internal auditors and external auditors. The Committee also reviews the strategic risk register and Board Assurance Framework.

City Lit’s internal auditors review the systems of internal control, risk management controls and governance processes in accordance with an agreed plan and report their findings to Management and the Audit & Risk Committee.

Management is responsible for the implementation of agreed audit recommendations and internal audit undertakes periodic follow-up reviews to ensure such recommendations have been implemented.

The Audit & Risk Committee also makes a recommendation to the Governing Body on the appointment of internal, regularity and financial statements auditors and decides on their remuneration for both audit and non-audit work.

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The Audit & Risk Committee meets at least once a year with the external auditors and without staff members present. The Committee met three times this year.

Internal Control

City Lit’s system of internal financial control includes:

Scope of responsibility

The Governing Body is ultimately responsible for City Lit’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss.

The Governing Body has delegated to the Principal, as Accounting Officer, the day-to-day responsibility for maintaining a sound system of internal control that supports the achievement of City Lit’s policies, aims and objectives, whilst safeguarding the public funds and assets for which he is personally responsible, in accordance with the responsibilities assigned to him in the Financial Memorandum between City Lit and the funding bodies. He is also responsible for reporting to the Governing Body any material weaknesses or breakdowns in internal control.

The purpose of the system of internal control

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of Institute policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The system of internal control has been in place in City Lit for the year ended 31 July 2022 and up to the date of approval of the annual report and financial statements.

Capacity to handle risk

The Governing Body has reviewed the key risks to which City Lit is exposed, together with the operating, financial and compliance controls that have been implemented to mitigate those risks. The Governing Body is of the view that there is a formal ongoing process for identifying, evaluating and managing City Lit’s significant risks that has been in place for the year ended 31 July 2022 and up to the

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date of approval of the annual report and financial statements. This process is regularly reviewed by the Governing Body.

City Lit has conducted a rigorous evaluation of all risks and has maintained a detailed risk register and action plan designed to mitigate to the extent possible, all significant risks identified. This has been approved by the Governing Body. City Lit is confident that it has embedded a culture of risk management into all aspects of its activities through a number of methods:

The risk and control framework

The system of internal control is based on a framework of regular management information, administrative procedures including the segregation of duties, and a system of delegation and accountability. In particular it includes:

As a result of the introduction of the Post 16 Audit Code of Practice, the Institute is no longer required to have an internal audit function. The Audit & Risk Committee reviewed the internal audit arrangements during 2013-14 and believes that internal audit is a cornerstone of the systems of internal control. As a consequence City Lit retendered its internal audit contract during 2014-15, and appointed BDO LLP.

Under the Code of Practice, the Institute is required to have a Board Assurance Framework in place. The creation of this is a task that was taken on by the Audit & Risk Committee, with the assistance of the Executive. The Board Assurance Framework is a useful tool for Boards and brings together the relevant information about the risks to the Board’s strategic objectives. It aims to cover all the areas of City Lit’s operations and informs Governors on how the Institute is working according to the strategic direction set. It also sets out what specific parts Governors play in doing this, as a Governing Body, and through the various Committees. The framework acts as an overarching control document to help see that City Lit’s strategy is being executed. One aspect of that is checking that mechanisms are in place should things go wrong, which is a central part of the risk management process. The framework also acts to focus the work of internal audit.

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Review of effectiveness

As Accounting Officer, the Principal has responsibility for reviewing the effectiveness of the system of internal control. His review of the effectiveness of the system of internal control is informed by:

The Executive Team receives reports setting out key performance and risk indicators and considers possible control issues brought to their attention by early warning mechanisms.

Based on the advice of the Audit & Risk Committee and the Accounting Officer, the Governing Body is of the opinion that the Institute has an adequate and effective framework for governance, risk management and control, and has fulfilled its statutory responsibility for “the effective and efficient use of resources, the solvency of the institution and the body and the safeguarding of their assets”.

Going concern

The Institute incurred an operating deficit of £0.2m during the year (2020-21: deficit of £1.076m), against an original budget deficit of £0.4m. This is a significant improvement compared to the deficits of the last two financial years which were both over £1m. The improvement has been driven by reduced costs, growth in both student fee income and funding, and improving course profitability. Prior to the pandemic, the Institute reported an operating surplus for five consecutive years, with a positive EBITDA (Earnings before Interest Tax Depreciation & Amortisation). 2021-22 is the first time that the Institute is reporting a positive EBITDA since 2018-19. Since the start of the pandemic, the Institute embarked on a cost reduction programme, to realign the cost base to the reduced income. This programme continued in year, with total annualised savings in excess of £2m. Tuition fee income reached £8.2m this financial year, an increase of 10% on the last financial year, as we welcomed students back to attend classes in person. The Institute has been successful in transitioning part of its provision online, enabling a wider audience to be reached.

At 31 July 2022, the Institute had net current liabilities of £4.5m (2021: £4.9m) and an overdrawn balance of £1.25m (2021: overdrawn balance of £1.45m). The overdrawn balance peaked at £1.5m during the year, considerably less than our facility of £3.5m. Both amounts were less than our budgeted cash overdrawn balance of £1.8m, again driven by cost savings. Overall the Institute has a net asset balance of £1.7m (2021: net liability of £12.5m). This includes a pension liability of £7.0m (2021: £21.3m) in relation to the Local Government Pension Scheme. This year there has been a significant reduction in the pension liability as the discount rate has increased and this has resulted in the Institute returning to a net asset position. At the last reported triennial valuation, the scheme was fully funded.

Our budget for the financial year ending 31 July 2023 anticipates a positive EBITDA and an overall improvement in the cash position. Our challenge in the next few years will be to bring our student fee income back to pre-pandemic levels. Given the current economic climate and potential impact of the cost of living on students’ disposable income, the upcoming year will be another challenging year from a financial perspective.

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The budget is based on the following key assumptions:

There are inherently material uncertainties within the above assumptions. Whilst recognising these are as result of the current economic climate, the Board considers that the use of the going concern basis of accounting is appropriate following assessment at its meeting in December 2022. The following factors provide the Board with assurance that the Institute remains a going concern, albeit with recognition that there are material uncertainties.

Approved by the Governing Body on 6 December 2022 and signed on its behalf by:

Dame Moira Gibb DBE Chair of Governors

Mark Malcomson CBE Accounting Officer

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Governing Body’s Statement

Governing Body’s statement on The City Literary lnstitute’s regularity, propriety and compliance with funding body terms and conditions of funding

The Governing Body has considered its responsibility to notify the Education and Skills Funding Agency of material irregularity, impropriety and non-compliance with Education and Skills Funding Agency terms and conditions of funding, under the financial memorandum in place between the Institute and the Education and Skills Funding Agency. As part of our consideration the Governing Body has had due regard to the requirements of the financial memorandum.

We confirm on behalf of the Governing Body that after due enquiry, and to the best of our knowledge, we are able to identify any material irregular or improper use of funds by the Institute, or material noncompliance with the Education and Skills Funding Agency’s terms and conditions of funding under the lnstitute’s financial memorandum.

We confirm that no instances of material irregularity, impropriety or funding non-compliance have been discovered to date. If any instances are identified after the date of this statement, these will be notified to the Education and Skills Funding Agency.

Approved by the Governing Body on 6 December 2022 and signed on its behalf by:

Dame Moira Gibb DBE

Chair of Governors

Mark Malcomson CBE Accounting Officer

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Statement of Responsibilities of City Lit’s Governing Body

The Governing Body of the Institute is required to present audited financial statements for each financial year.

Within the terms and conditions of the Financial Memorandum agreed between the Education and Skills Funding Agency and the Governing Body of the Institute, the Governing Body, through its Accounting Officer, is required to prepare financial statements for each financial year in accordance with the 2015 Statement of Recommended Practice - Accounting for Further and Higher Education Institutions and with the College Accounts Direction for 2021-22 Financial Statements issued by the Education and Skills Funding Agency, and which give a true and fair view of the state of affairs of the Institute and the result for that year.

In preparing the financial statements, the Governing Body is required to:

The Governing Body is also required to prepare an operating and financial review, which describes what it is trying to do and how it is going about it, including the legal and administrative status of the Institute.

The Governing Body is responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the Institute and to enable it to ensure that the financial statements are prepared in accordance with the relevant legislation including the Further and Higher Education Act 1992 and Charities Act 2011, and relevant accounting standards. It is responsible for taking steps that are reasonably open to it to safeguard assets of the Institute and to prevent and detect fraud and other irregularities.

The work carried out by the auditor does not involve consideration of the maintenance and integrity of the lnstitute’s website and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Governing Body is responsible for ensuring that expenditure and income are applied for the purposes intended by Parliament and that the financial transactions conform to the authorities that govern them. In addition they are responsible for ensuring that funds from the Education and Skills Funding Agency are used only in accordance with the Financial Memorandum with the Education and Skills Funding Agency and any other conditions that may be prescribed from time to time. The Governing Body must ensure that there are appropriate financial and management controls in place to safeguard public and other funds and ensure they are used properly.

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In addition, the Governing Body is responsible for securing economical, efficient and effective management of the lnstitute’s resources and expenditure, so that the benefits that should be derived from the application of public funds from the Education and Skills Funding Agency are not put at risk.

Approved by the Governing Body on 6 December 2022 and signed on its behalf by:

Dame Moira Gibb DBE Chair of Governors

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Independent auditor’s report to the members of

The City Literary Institute

Opinion

We have audited the financial statements of The City Literary Institute (the “Institute”) for the year ended 31 July 2022 which comprise the statement of comprehensive income, the statement of changes in reserves, the balance sheet, the statement of cash flows, the principal accounting policies, and the notes to the financial statements. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ (United Kingdom Generally Accepted Accounting Practice).

In our opinion, the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Institute in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to the information contained in the Governors report on pages 31 and 32 and to note 1, “going concern” on pages 46 and 47 in the financial statements, which indicates that material uncertainties exist related to going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the members of the Governing Body use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our responsibilities and the responsibilities of the members of the Governing Body with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The Governing Body are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

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Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Institute and its environment obtained in the course of the audit, we have not identified material misstatements in the Governors’ report including the strategic report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of the Governing Body

As explained more fully in the statement of responsibilities of the Governing Body, the Governing Body are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the members of the Governing Body determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the members of the Governing Body are responsible for assessing the Institute’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the members of the Governing Body either intend to liquidate the Institute or to cease operations, or have no realistic alternative but to do so.

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Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

We assessed the susceptibility of the Institute’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

To address the risk of fraud through management bias and override of controls, we:

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In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of noncompliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the members of the Governing Body and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

A further description of our responsibilities is available on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Institute’s members, as a body, in accordance with the Institute’s Articles of Government and Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Institute’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Institute and the Institute’s members as a body, for our audit work, for this report, or for the opinions we have formed.

----- Start of picture text -----
20 December 2022
----- End of picture text -----

Shachi Blakemore (Senior Statutory Auditor)

For and on behalf of Buzzacott LLP Statutory Auditor 130 Wood Street London EC2V 6DL

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Reporting accountant’s assurance report on regularity

To: The Governing Body of The City Literary Institute and the Secretary of State for Education acting through the Department of Education (“the Department”)

In accordance with the terms of our engagement letter and further to the requirements of the financial memorandum with Education and Skills Funding Agency we have carried out an engagement to obtain limited assurance about whether anything has come to our attention that would suggest that in all material respects the expenditure disbursed and income received by The City Literary Institute during the period 1 August 2021 to 31 July 2022 have not been applied to the purposes identified by Parliament and the financial transactions do not conform to the authorities which govern them.

The framework that has been applied is set out in the Post 16 Audit Code of Practice (“the Code”) issued by the Department. In line with this framework, our work has specifically not considered income received from the main funding grants generated through the Individualised Learner Record (ILR) returns, for which the Department has other assurance arrangements in place.

This report is made solely to the Governing Body of The City Literary Institute and the Department in accordance with the terms of our engagement letter. Our work has been undertaken so that we might state to Governing Body of The City Literary Institute and the Department those matters we are required to state in a report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Governing Body of The City Literary Institute and the Department for our work, for this report, or for the conclusion we have formed.

Respective responsibilities of the Governing Body of The City Literary Institute and the reporting accountant

The Governing Body of The City Literary Institute is responsible, under the requirements of the Further & Higher Education Act 1992, subsequent legislation and related regulations and guidance, for ensuring that expenditure disbursed and income received is applied for the purposes intended by Parliament and the financial transactions conform to the authorities which govern them.

Our responsibilities for this engagement are established in the United Kingdom by our profession’s ethical guidance and are to obtain limited assurance and report in accordance with our engagement letter and the requirements of the Code. We report to you whether anything has come to our attention in carrying out our work which suggests that in all material respects, expenditure disbursed and income received during the period 1 August 2021 to 31 July 2022 have not been applied to purposes intended by Parliament or that the financial transactions do not conform to the authorities which govern them.

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Reporting accountant’s assurance report on regularity (continued)

Approach

We conducted our engagement in accordance with the Code issued by the Department. We performed a limited assurance engagement as defined in that framework.

The objective of a limited assurance engagement is to perform such procedures as to obtain information and explanations in order to provide us with sufficient appropriate evidence to express a negative conclusion on regularity.

A limited assurance engagement is more limited in scope than a reasonable assurance engagement and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express a positive opinion.

Our engagement includes examination, on a test basis, of evidence relevant to the regularity of the Institute’s income and expenditure.

The work undertaken to draw to our conclusion includes:

Conclusion

In the course of our work nothing has come to our attention which suggests that in all material respects the expenditure disbursed and income received during the period 1 August 2021 to 31 July 2022 has not been applied to purposes intended by Parliament and the financial transactions do not conform to the authorities which govern them.

20 December 2022

Buzzacott LLP, Statutory Auditor 130 Wood Street London EC2V 6DL

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Statement of Comprehensive Income for the year ended 31 July 2022

----- Start of picture text -----
Notes 2021-2022 2020-2021
Before Actuarial After actuarial Before Actuarial After
actuarial pension pension actuarial pension actuarial
pension adjustments adjustments pension adjustments pension
adjustments (LGPS) adjustments adjustments
£’000 £’000 £’000 £’000 £’000 £’000
INCOME
Funding body grants 2 9,444 - 9,444 8,945 - 8,945
Tuition fees and education
5 8,428 - 8,428 9,386 - 9,386
contracts
Other income 6 166 - 166 315 - 315
Donations 3,4 62 - 62 74 - 74
Total income 18,100 - 18,100 18,720 - 18,720
EXPENDITURE
Staff costs 7 12,596 1,742 14,338 14,426 1,506 15,932
Fundamental restructuring 7 237 - 237 317 - 317
costs
Other operating expenses 9 4,126 - 4,126 3,882 - 3,882
- -
Depreciation & amortisation 11,12 1,317 1,317 1,157 1,157
Interest and other finance costs 10 30 337 367 14 264 278
Total expenditure 18,306 2,079 20,385 19,796 1,770 21,566
Deficit for the year (206) (2,079) (2,285) (1,076) (1,770) (2,846)
Actuarial gain/(loss) in respect
16,20 5 16,385 16,390 15 (449) (434)
of pension schemes
Total comprehensive
income/(expenditure) for (201) 14,306 14,105 (1,061) (2,219) (3,280)
the year
Represented by:
Unrestricted comprehensive
(233) 14,306 14,073 (1,114) (2,219) (3,333)
income/(expenditure)
Restricted comprehensive 21 32 - 32 53 - 53
income
(201) 16,015 14,105 (1,061) (2,219) (3,280)
----- End of picture text -----

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Statement of Changes in Reserves

----- Start of picture text -----
Income and
Revaluation
Expenditure Total
reserve
account
£’000 £’000 £’000
Balance at 31st July 2020 (10,175) 1,000 (9,175)
-
Deficit from the income and expenditure account (2,846) (2,846)
-
Other comprehensive expenditure (434) (434)
-
Total comprehensive expenditure for the year (3,280) (3,280)
Balance at 31st July 2021 (13,455) 1,000 (12,455)
-
Deficit from the income and expenditure account (2,285) (2,285)
-
Other comprehensive income 16,390 16,390
-
Total comprehensive income for the year 14,105 14,105
Balance at 31st July 2022 650 1,000 1,650
----- End of picture text -----

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Balance Sheet as at 31 July 2022

----- Start of picture text -----
Notes 2022 2021
£’000 £’000
Fixed assets
Tangible fixed assets 11 17,872 18,330
Intangible fixed assets 12 380 554
18,252 18,884
Current assets
Trade and other receivables 13 805 778
805 778
Less: Creditors - amounts falling due within one year 14 (5,341) (5,699)
Net current liabilities (4,536) (4,921)
Total assets less current liabilities 13,716 13,963
Less: Creditors - amounts falling due after more than one year 15 (5,022) (5,058)
Provisions
Defined benefit obligations 16, 20 (6,986) (21,292)
Other provisions 16 (58) (68)
Total net assets/(liabilities) 1,650 (12,455)
Funds
Income and expenditure account 21 517 (13,556)
Revaluation reserve 21 1,000 1,000
Restricted Bursary Fund 21 117 85
Restricted funds 21 16 16
Total funds 1,650 (12,455)
----- End of picture text -----

The financial statements on pages 42 to 72 were approved and authorised for issue by the Institute on 6 December 2022 and were signed on its behalf on that date by:

Dame Moira Gibb DBE, Chair

Mark Malcomson CBE, Accounting Officer

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Statement of Cash Flows as at 31 July 2022

----- Start of picture text -----
Notes 2021-22 2020-21
£’000 £’000
Cash inflow from operating activities
Deficit for the year (2,285) (2,846)
Adjustment for non cash items
Depreciation and amortisation 11, 12 1,317 1,157
(Increase)/Decrease in debtors 13 (27) 274
Decrease in creditors due within one year 14 (168) (1,573)
(Decrease)/Increase in creditors due after one year 15 (36) 760
(Decrease)/Increase in provisions (5) 1
Pensions costs less contributions payable 20 2,079 1,765
Net cash flow from operating activities 875 (462)
Cash flows from investing activities
Payments made to acquire tangible fixed assets 11 (665) (1,298)
Payments made to acquire intangible fixed assets 12 (20) (114)
(685) (1,412)
Increase/(Decrease) in cash and cash equivalents in the year 190 (1,874)
Cash and cash equivalents at beginning of the year 18 (1,446) 428
Cash and cash equivalents at end of the year 18 (1,256) (1,446)
----- End of picture text -----

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Notes to the Financial Statements 1

1. Statement of 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

These financial statements have been prepared in accordance with the Statement of Recommended Practice: Accounting for Further and Higher Education 2015 (the 2015 FE HE SORP), the College Accounts Direction for 2021-22 and in accordance with Financial Reporting Standard 102 - “The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland” (FRS 102). The Institute is a public benefit entity and has therefore applied the relevant public benefit requirements of FRS 102.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Institute’s accounting policies.

Basis of accounting

The financial statements are prepared in accordance with the historical cost convention, modified by the revaluation of certain fixed assets treated as deemed cost within these financial statements.

Going concern

The Institute incurred an operating deficit of £0.2m during the year (2020-21: deficit of £1.076m), against an original budget deficit of £0.4m. This is a significant improvement compared to the deficits of the last two financial years which were both over £1m. The improvement has been driven by reduced costs, growth in both student fee income and funding, and improving course profitability. Prior to the pandemic, the Institute reported an operating surplus for five consecutive years, with a positive EBITDA (Earnings before Interest Tax Depreciation & Amortisation). 2021-22 is the first time that the Institute is reporting a positive EBITDA since 2018-19. Since the start of the pandemic, the Institute embarked on a cost reduction programme, to realign the cost base to the reduced income. This programme continued in year, with total annualised savings in excess of £2m. Tuition fee income reached £8.2m this financial year, an increase of 10% on the last financial year, as we welcomed students back to attend classes in person. The Institute has been successful in transitioning part of its provision online, enabling a wider audience to be reached.

At 31 July 2022, the Institute had net current liabilities of £4.5m (2021: £4.9m) and an overdrawn balance of £1.25m (2021: overdrawn balance of £1.45m). The overdrawn balance peaked at £1.5m during the year, considerably less than our facility of £3.5m. Both amounts were less than our budgeted cash overdrawn balance of £1.8m, again driven by cost savings. Overall the Institute has a net asset balance of £1.7m (2021: net liability of £12.5m). This includes a pension liability of £7.0m (2021: £21.3m) in relation to the Local Government Pension Scheme. This year there has been a significant reduction in the pension liability as the discount rate has increased and this has resulted in the Institute returning to a net asset position. At the last reported triennial valuation, the scheme was fully funded.

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Notes to the Financial Statements 1 (continued)

Our budget for the financial year ending 31 July 2023 anticipates a positive EBITDA and an overall improvement in the cash position. Our challenge in the next few years will be to bring our student fee income back to pre-pandemic levels. Given the current economic climate and potential impact of the cost of living on students’ disposable income, the upcoming year will be another challenging year from a financial perspective. The budget is based on the following key assumptions:

There are inherently material uncertainties within the above assumptions. Whilst recognising these are as result of the current economic climate, the Board considers that the use of the going concern basis of accounting is appropriate following assessment at its meeting in December 2022. The following factors provide the Board with assurance that the Institute remains a going concern, albeit with recognition that there are material uncertainties.

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Notes to the Financial Statements 1 (continued)

Recognition of income

Government revenue grants include funding body recurrent grants and other grants are accounted for under the accrual model as permitted by FRS 102. Funding body recurrent grants are measured in line with best estimates for the period of what is receivable and depend on the particular income stream involved. Any under achievement for the Adult Skills Budget is adjusted for and reflected in the level of recurrent grant recognised in the income and expenditure account. The final grant income is normally determined with the conclusion of the year end reconciliation process with the funding body following the year end, and the results of any funding audits. 16-18 learner-responsive funding is not normally subject to reconciliation and is therefore not subject to contract adjustments.

Grants from non-government sources are recognised in income when the Institute is entitled to the income and performance related conditions have been met. Income received in advance of performance related conditions being met is recognised as deferred income within creditors on the balance sheet and released to income as the conditions are met.

Government capital grants are capitalised, held as deferred income and recognised in income over the expected useful life of the asset, under the accrual method as permitted by FRS 102. Other capital grants are recognised in income when the Institute is entitled to the funds subject to any performance related conditions being met.

Income from tuition fees is stated gross of any expenditure which is not a discount and is recognised in the period for which it is received.

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

Post retirement benefits

Post-employment benefits to employees of the Institute are principally provided by the Teachers’ Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS). These are defined benefit plans, which are externally funded.

The TPS is an unfunded scheme. Contributions to the TPS are calculated so as to spread the cost of pensions over employees’ working lives with the Institute in such a way that the pension cost is a substantially level percentage of current and future pensionable payroll. The contributions are determined by qualified actuaries on the basis of valuations using a prospective benefit method. The TPS is a multi-employer scheme and the Institute is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis. The TPS is therefore treated as a defined contribution plan and the contributions recognised as an expense in the income statement in the periods during which services are rendered by employees.

The LGPS is a funded scheme. The assets of the LGPS are measured using closing fair values. LGPS liabilities are measured using the projected unit credit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The amounts charged to operating surplus are the current service costs and the costs of scheme introductions, benefit changes, settlements and curtailments.

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Notes to the Financial Statements 1 (continued)

They are included as part of staff costs as incurred. Net interest on the net defined benefit liability is also recognised in the statement of comprehensive income and comprises the interest cost on the defined benefit obligation and interest income on the scheme assets, calculated by multiplying the fair value of the scheme assets at the beginning of the period by the rate used to discount the benefit obligations. The difference between the interest income on the scheme assets and the actual return on the scheme assets is recognised in other recognised gains and losses.

Actuarial gains and losses are recognised immediately in other recognised gains and losses.

Short term Employment benefits

Short term employment benefits such as salaries and compensated absences (holiday pay) are recognised as an expense in the year in which the employees render service to the Institute. Any unused benefits are accrued and measured as the additional amount the Institute expects to pay as a result of the unused entitlement.

Enhanced pensions

The actual cost of any enhanced ongoing pension to a former member of staff is paid by the Institute annually. An estimate of the expected future cost of any enhancement to the ongoing pension of a former member of staff is charged in full to the Institute’s income in the year that the member of staff retires. In subsequent years a charge is made to provisions in the balance sheet using the enhanced pension spreadsheet provided by the funding bodies.

Tangible fixed assets

Tangible fixed assets are stated at deemed cost less accumulated depreciation and accumulated impairment losses. Certain items of fixed assets that had been revalued to fair value on or prior to the date of transition to the 2015 FE HE SORP, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation.

Land and buildings

Freehold buildings are depreciated on a straight line basis over their expected useful lives as follows:

The Institute has a policy of depreciating major adaptations to buildings over the period of their useful economic life of between 10 and 50 years.

Where land and buildings are acquired with the aid of specific grants, they are capitalised and depreciated as above. The related grants are credited to a deferred income account within creditors, and are released to the statement of comprehensive income over the expected useful economic life of the related asset on a systematic basis consistent with the depreciation policy. The deferred income is allocated between creditors due within one year and those due after more than one year.

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Notes to the Financial Statements 1 (continued)

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

Subsequent expenditure on existing fixed assets

Where significant expenditure is incurred on tangible fixed assets after initial purchase it is charged to the statement of comprehensive income in the period it is incurred, unless it increases the future benefits to the Institute, in which case it is capitalised and depreciated on the relevant basis.

Equipment

Equipment costing less than £2,000 per individual item is recognised as expenditure in the period of acquisition. All other equipment is capitalised at cost.

Capitalised equipment is depreciated on a straight-line basis over its remaining useful economic life as follows:

Maintenance of premises

The cost of routine corrective maintenance is charged to the statement of comprehensive income in the period that it is incurred.

Intangible assets

Intangible fixed assets comprise of software licences and Information Technology development. Items costing less than £2,000 are written off to the statement of comprehensive income in the year of acquisition. All other items are capitalised at cost.

Software licenses are amortised over the length of the license. Development expenditure is amortised over the estimated useful life of the project, which is currently 5 years.

The carrying value of intangible fixed assets is reviewed for impairment, events or circumstances that indicate that the carrying value may not be recoverable.

Leased assets

Costs in respect of operating leases are charged on a straight line basis over the lease term to the Statement of Comprehensive Income and Expenditure. Any lease premiums or incentives relating to leases signed after 1 August 2014 are spread over the minimum lease term where material.

Cash and cash equivalents

Cash includes cash in hand, deposits repayable on demand and overdrafts. Deposits are repayable on demand if they are in practice available within 24 hours without penalty.

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Notes to the Financial Statements 1 (continued)

Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of change in value. An investment qualifies as a cash equivalent when it has maturity of 3 months or less from the date of acquisition.

Financial liabilities

Financial liabilities are classified according to the substance of the financial instrument’s contractual obligations, rather than the financial instrument’s legal form.

Short term deposits held by the Institute are classified as basic financial instruments in accordance with FRS 102. These instruments are initially recorded at the transaction price less any transaction costs (historical cost). FRS 102 requires that basic financial instruments are subsequently measured at amortised cost, however the Institute has calculated that the difference between the historical cost and amortised cost basis is not material and so these financial instruments are stated on the balance sheet at historical cost. Investments that are payable or receivable within one year are not discounted.

Taxation

The Institute is considered to have passed the tests set out in Paragraph 1 Schedule 6 Finance Act 2010 and therefore it meets the definition of a charitable company for UK corporation tax purposes. Accordingly, the Institute is potentially exempt from taxation in respect of income or capital gains received within categories covered by sections 478-488 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.

The Institute receives no similar exemption in respect of Value Added Tax. For this reason City Lit is generally unable to recover input VAT it suffers on goods and services purchased. VAT on inputs is included in the costs of such inputs and added to the cost of tangible fixed assets as appropriate, where the inputs themselves are tangible fixed assets by nature.

Provisions and contingent liabilities

Provisions are recognised when the Institute has a present legal or constructive obligation as a result of a past event, it is probable that a transfer of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value using a pre-tax discount rate. The unwinding of the discount is recognised as a finance cost in the statement of comprehensive income in the period it arises.

A contingent liability arises from a past event that gives the Institute a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Institute. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the balance sheet but are disclosed in the notes to the financial statements.

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Judgements in applying accounting policies and key sources of estimation uncertainty

In preparing these financial statements, management have made the following judgements:

Other key sources of estimation uncertainty:

• Tangible fixed assets

Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.

• Local Government Pension Scheme

The present value of the Local Government Pension Scheme defined benefit liability depends on a number of factors that are determined on an actuarial basis using a variety of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions, which are disclosed in note 21, will impact the carrying amount of the pension liability. Furthermore a roll forward approach, which projects results from the latest full actuarial valuation performed at 31 March 2019, has been used by the actuary in valuing the pensions liability at 31 July 2021. Any differences between the figures derived from the roll forward approach and a full actuarial valuation would impact on the carrying amount of the pension liability.

• Impact of Covid-19

Management have estimated the impact of the ongoing Covid-19 pandemic on the Institute’s finances for the purpose of preparing budgets and cash flow forecasts for the years ended 31 July 2023 and 2024. These have been used to assist in the assessment of Institute’s going concern. Confirmed income from funding and expenditure have been included where known and estimates have been used for student fees and related costs based on certain assumptions. In addition to the above, the full impact of the global coronavirus pandemic is still unknown. It is therefore not currently possible to evaluate all the potential implications for the Institute’s activities, beneficiaries, funders, suppliers and the wider economy.

Fund accounting

Restricted funds comprise monies raised for, or their use restricted to, a specific purpose, or contributions subject to donor imposed conditions. Designated funds comprise monies set aside out of general funds and designated for specific purposes by the Governing Body.

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Notes to the Financial Statements 2, 3 & 4

2. Funding Body grants

----- Start of picture text -----
2021-22 2020-21
£’000 £’000
Recurrent grants
Education & Skills Funding Agency 8,429 8,023
Specific Grants
Release of Government capital grants 512 410
Teachers Pension Scheme contribution grant 493 512
Other government grants 10 -
Total 9,444 8,945
3. Appeal fund donations
2021-22 2020-21
£’000 £’000
Release of appeal fund donations 2 2
Total 2 2
4. Other donations
2021-22 2020-21
£’000 £’000
Bursary donations received 48 72
Legacies 2 -
General Donations 10 -
Total 60 72
----- End of picture text -----

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Notes to the Financial Statements 5 & 6

5. Tuition fees and education contracts

----- Start of picture text -----
2021-22 2020-21
£’000 £’000
Gross tuition fees 7,954 7,183
Less: bursaries (16) (19)
Fees for FE loan supported courses 218 239
Total tuition fees 8,156 7,403
Centre for deaf contracts - 272
Community outreach 204 389
Other grants and contracts 46 56
Coronavirus Job Retention Scheme grant 22 1,266
Total education contracts 272 1,983
Total 8,428 9,386
----- End of picture text -----

In 2020-21 we closed our interpreting service, the income from which was disclosed under Centre for Deaf contracts.

The Institute continued to place staff who were not able to perform their duties on furlough under the government’s Coronavirus Job Retention Scheme, until it closed on 30th Septemeber 2021. The £22,000 funding received relates to staff costs which are included within the staff costs disclosed in note 7.

----- Start of picture text -----
6. Other income
2021-22 2020-21
£’000 £’000
Sales relating to courses 16 6
Consultancy 50 24
Other income 100 285
Total 166 315
----- End of picture text -----

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Notes to the Financial Statements 7

7. Staff costs

The average number of persons (including senior post-holders) employed during the year was:

----- Start of picture text -----
2021-22 2020-21
No. No.
Teaching staff 570 679
Non teaching staff 63 69
Total Staff 633 748
Staff costs for the above persons, analysed by department 2021-22 2020-21
£’000 £’000
Teaching departments 8,992 9,623
Administration and central services 3,468 4,753
Agency staff 136 50
Actuarial pension adjustment 1,742 1,506
Total staff costs 14,338 15,932
Restructuring costs 237 317
Staff costs, analysed by cost type 2021-22 2020-21
£’000 £’000
Salaries 9,880 11,388
Social security costs 808 913
Other pension costs (excluding FRS 102 charge) 1,772 2,075
Agency staff 136 50
Actuarial pension adjustment 1,742 1,506
Total staff costs 14,338 15,932
Restructuring costs 237 317
Staff costs, analysed by type of contract 2021-22 2020-21
£’000 £’000
Employment costs for staff on permanent contracts 7,832 8,310
Employment costs for staff on short term and temporary contracts 4,628 6,066
Agency staff 136 50
Actuarial pension adjustment 1,742 1,506
Total staff costs 14,338 15,932
Restructuring costs 237 317
----- End of picture text -----

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Notes to the Financial Statements 7 (continued)

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Institute and are represented by the Institute’s Executive Team.

The Executive Team comprises of the Principal, the Chief Financial Officer, the Vice Principal and the Executive Director of Human Resources. The post of Executive Director of External Engagement (which was part of the Executive) was made redundant in the year.

The Clerk to the Governors is also included within key management personnel. Staff costs include compensation paid to key management personnel for loss of office.

Emoluments of key management personnel, Accounting Officer and other higher paid staff

----- Start of picture text -----
2021-22 2020-21
No. No.
The number of key management personnel at the end of the year was: 5 6
----- End of picture text -----

The number of key management personnel and other staff who received annual emoluments, excluding employer’s pension contributions and national insurance contributions, but including benefits in kind, in the following ranges was:

----- Start of picture text -----
Key Management Personnel Other
2021-22 2020-21 2021-22 2020-21
No. No. No. No.
£40,001 to £45,000 1 1 - -
£60,001 to £65,000 - - 4 5
£65,001 to £70,000 - 1 2 -
£70,001 to £75,000 - - 1 1
£75,001 to £80,000 1 - - -
£90,001 to £95,000 3 4 - -
£100,001 to £105,000 - - 1 -
£125,001 to £130,000 - 1 - -
£130,001 to £135,000 1 - - -
6 7 8 6
----- End of picture text -----

The table includes part time workers’ earnings grossed up to full time equivalent earnings. This also includes staff on maternity, paternity or sickness leave.

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Notes to the Financial Statements 7 (continued)

Total key management personnel emoluments are detailed below.

Key management personnel emoluments are made up as follows:

----- Start of picture text -----
2021-22 2020-21
£’000 £’000
Salaries 535 606
Employers National Insurance contributions 66 72
Pension contributions 75 83
Total emoluments 676 761
----- End of picture text -----

There were no amounts due to key management personnel that were waived in the year.

----- Start of picture text -----
The emoluments above include amounts payable to the Accounting Officer of:
2021-22 2020-21
£’000 £’000
Salaries 132 129
Employers National Insurance contributions 17 16
Pension contributions 17 16
Total emoluments 166 161
----- End of picture text -----

The pension contributions in respect of the Accounting Officer and key management personnel are in respect of employer’s contributions to the Teachers’ Pension Scheme or the Local Government Pension Scheme and are paid at the same rate as for other employees.

The Accounting Officer reports to the Chair of the Governing Body, who undertakes an annual review of his performance against the College’s overall objectives.

----- Start of picture text -----
Accounting Officer pay and remuneration expressed as a multiple:
2021-22 2020-21
Accounting Officer’s basic salary as a multiple of the median of all
2.4 2.4
staff
Accounting Officer’s total remuneration as a multiple of the median
2.3 2.4
of all staff
----- End of picture text -----

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Notes to the Financial Statements 7 (continued)

Compensation for loss of office paid to former key management personnel:

----- Start of picture text -----
2021-22 2020-21
£’000 £’000
Compensation paid to one (2020-21: one) former key management
19 30
personnel, including contractual and non contractual payments
----- End of picture text -----

The Governors other than the Accounting Officer did not receive any payments from City Lit other than the reimbursement of travel and subsistence expenses in attending Governor meetings and charity events in 2021-22, which totalled £905 for one Governor (2020-21:None).

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Notes to the Financial Statements 8 & 9

8. Taxation

City Lit is a charity with no additional trading activities. The Governing Body do not believe that any corporation tax liability was incurred in 2021-22 (2020-21: £nil).

----- Start of picture text -----
9. Other operating expenses
2021-22 2020-21
£’000 £’000
Teaching purchases 265 182
Exam fees 88 72
Teaching departments 353 254
Learner services 41 70
Teaching and other support services 41 70
Administration purchases 780 744
Contracted out IT support 306 442
Administration and central services 1,086 1,186
Marketing expenditure 743 636
Premises running costs 1,553 1,363
Maintenance 98 38
Rent 252 335
Premises 1,903 1,736
Total operating expenses 4,126 3,882
----- End of picture text -----

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Notes to the Financial Statements 9 (continued) &10

----- Start of picture text -----
2021-22 2020-21
£’000 £’000
Total operating expenses includes the following:
Auditor’s remuneration
Financial statements and regularity audit 26 26
Internal audit charge for the year 37 23
63 49
Operating leases
Office Equipment 23 28
10. Interest payable
2021-22 2020-21
£’000 £’000
Interest Payable on overdraft 29 13
Pension finance costs (note 20) 337 264
Enhanced Pension finance costs (note 20) 1 1
Total interest payable 367 278
----- End of picture text -----

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Notes to the Financial Statements 11

11. Tangible fixed assets

----- Start of picture text -----
Freehold Land Building
Equipment Total
and Buildings Refurbishment
£’000 £’000 £’000 £’000
Cost or valuation
At 1 August 2021 19,903 4,254 2,945 27,102
Additions - 466 199 665
-
Disposals (30) (102) (132)
At 31 July 2022 19,903 4,690 3,042 27,635
Depreciation
At 1 August 2021 6,043 933 1,796 8,772
Charge for the year 377 357 389 1,123
-
Elimination in respect of disposals (30) (102) (132)
At 31 July 2022 6,420 1,260 2,083 9,763
Net book value at 31 July 2022 13,483 3,430 959 17,872
Net book value at 31 July 2021 13,860 3,321 1,149 18,330
----- End of picture text -----

On adoption of FRS 102 the Institute followed the transitional provision to retain the book value of land and buildings, which were revalued in 2004, as deemed cost but not to adopt a policy of revaluations of these properties in the future. This was a valuation by Governors on professional advice on the basis of an open market value for existing use.

At 31 July 2022, building and equipment, with a net book value of £3.9m and £2.5m have been financed by the ESFA and the GLA respectively. Should these assets be sold, the Institute may be required, under the terms of the funding agreement, to surrender the proceeds.

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Notes to the Financial Statements 12 & 13

12. Intangible fixed assets

----- Start of picture text -----
Software Licences
& Information
Technology
Development
£’000
Cost or valuation
At 1 August 2021 1,166
Additions 20
Disposals (8)
At 31 July 2022 1,178
Amortisation
At 1 August 2021 612
Charge for the year 194
Elimination in respect of disposals (8)
At 31 July 2022 798
Net book value at 31 July 2022 380
Net book value at 31 July 2021 554
13. Trade and other receivables
----- End of picture text -----

----- Start of picture text -----
13. Trade and other receivables
31 July 2022 31 July 2021
£’000 £’000
Trade receivables 557 323
Other receivables - 1
Prepayments and accrued fee income 248 454
Total Debtors 805 778
----- End of picture text -----

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Notes to the Financial Statements 14 & 15

14. Creditors: amounts falling due within one year

----- Start of picture text -----
31 July 2022 31 July 2021
£’000 £’000
Bank overdraft 1,256 1,446
Trade payables 343 187
Other taxation and social security 221 267
Accruals and deferred income 2,183 2,034
Deferred income - Government capital grants 531 441
Deferred income - Government revenue grants 254 376
Other creditors 553 948
Total 5,341 5,699
15. Creditors: amounts falling due after one year
31 July 2022 31 July 2021
£’000 £’000
Deferred income - Government capital grants 5,022 5,058
Total 5,022 5,058
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Notes to the Financial Statements 16 & 17

16. Provisions

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Defined
Enhanced
benefit Total
pensions
obligations
£’000 £’000 £’000
At 1 August 2021 21,292 68 21,360
Expenditure in the period (457) (6) (463)
Charged to the income and expenditure account 2,536 1 2,537
Actuarial gain (16,385) (5) (16,390)
At 31 July 2022 6,986 58 7,044
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Defined benefit obligations relate to the liabilities under the Institute’s membership of the Local Government Pension Scheme. Further details are given in note 20.

The enhanced pension provision relates to the cost of staff who have already left the Institute’s employment and commitments for reorganisation costs from which the Institute cannot reasonably withdraw at the balance sheet date. This provision has been recalculated in accordance with guidance issued by the funding bodies.

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The principal assumptions for this calculation are:
2021-22 2020-21
Price inflation 2.90% 2.60%
Discount rate 3.40% 1.60%
17. Cash and cash equivalents
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The principal assumptions for this calculation are:

17. Cash and cash equivalents

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At 1 August At 31 July
Cash flows
2021 2022
£’000 £’000 £’000
Overdraft facility (1,446) 190 (1,256)
Total (1,446) 190 (1,256)
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Our overdraft facility was maintained at £3.5m. The interest rate charged was 2.25% plus Bank of England rate. It ranged from 2.35% to 3.50% during the year. The overdraft is expected to be converted to a long term loan once we return to profitability.

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Notes to the Financial Statements 18 & 19

18. Capital commitments

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31 July 2022 31 July 2021
£’000 £’000
Commitments contracted for at 31 July - 139
19. Lease Obligations
At 31 July 2022 the Institute had minimum lease payments under non-cancellable operating leases as
follows:
31 July 2022 31 July 2021
£’000 £’000
Future minimum lease payments due
Land and buildings
Not later than one year 224 224
Later than one year and not later than five years 782 840
Later than five years 419 584
1,425 1,648
Other
Not later than one year 21 23
21 23
Total lease payments payable 1,446 1,671
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Notes to the Financial Statements 20

20. Defined benefit obligations

The Institute’s employees belong to two principal post-employment benefit plans: the Teachers’ Pension Scheme England and Wales (TPS) for academic and related staff; and the Local Government Pension Scheme (LGPS) for non-teaching staff, which is managed by London Pension Fund Authority. Both are multi-employer defined-benefit plans.

The pension costs are assessed in accordance with the advice of independent qualified actuaries. The latest formal actuarial valuation of the TPS was as at 31 March 2016 and of the LGPS as at 31 March 2022.

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Pension costs for the year 2021-22 2020-21
£’000 £’000
Teachers Pension Scheme
Contributions paid (included within the general reserve) 1,354 1,562
Local Government Pension Scheme
Pension costs 2,536 2,257
Contributions paid (457) (487)
Total allocated to the pension reserve 2,079 1,770
Enhanced Pension
Pension costs (allocated to the general reserve) 1 1
Total pension costs 3,434 3,333
Total actuarial loss/(gain) (16,385) 449
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Contributions amounting to £192,049 (2021: £295,015) payable to the schemes as at 31 July 2022 are included in creditors.

Teachers’ Pension Scheme

The Teachers’ Pension Scheme (TPS) is a statutory, contributory, defined benefit scheme, governed by the Teachers’ Pension Scheme Regulations 2014. These regulations apply to teachers in schools and other educational establishments, including colleges. Membership is automatic for teachers and lecturers at eligible institutions. Teachers and lecturers are able to opt out of the TPS.

The TPS is an unfunded scheme and members contribute on a ’pay as you go‘ basis – these contributions, along with those made by employers, are credited to the Exchequer under arrangements governed by the above Act. Retirement and other pension benefits are paid by public funds provided by Parliament.

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Notes to the Financial Statements 20 (continued)

Under the definitions set out in FRS 102 (28.11), the TPS is a multi-employer pension plan. The Institute is unable to identify its share of the underlying assets and liabilities of the plan.

Accordingly, the Institute has taken advantage of the exemption in FRS 102 and has accounted for its contributions to the scheme as if it were a defined-contribution plan. The Institute has set out above the information available on the plan and the implications for the Institute in terms of the anticipated contribution rates.

Valuation of the Teachers’ Pension Scheme

The valuation of the TPS is carried out in line with regulations made under the Public Service Pension Act 2013. Valuations credit the teachers’ pension account with a real rate of return assuming funds are invested in notional investments that produce that real rate of return.

The latest actuarial review of the TPS was carried out as at 31 March 2016. The valuation report was published by the Department for Education (the Department) in April 2019.

The valuation reported total scheme liabilities (pensions currently in payment and the estimated cost of future benefits) for service to the effective date of £218 billion, and notional assets (estimated future contributions together with the notional investments held at the valuation date) of £198 billion giving a notional past service deficit of £22 billion.

As a result of the valuation, new employer contribution rates were set at 23.68% of pensionable pay from September 2019 onwards (compared to 16.48% during 2018/19). DfE has agreed to pay a teacher pension employer contribution grant to cover the additional costs during the 2021-22 academic year.

A full copy of the valuation report and supporting documentation can be found on the Teachers’ Pension Scheme website.

The pension costs paid to TPS in the year amounted to £1,354,000 (2020-21: £1,562,000).

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Notes to the Financial Statements 20 (continued)

Local Government Pension Scheme

The LGPS is a funded defined-benefit plan, with the assets held in separate funds administered by London Pension Fund Authority. The total contribution made for the year ended 31 July 2022 was £715,000 (2020-21: £764,000), of which employer’s contributions totalled £457,000 (2020-21: £487,000) and employees’ contributions totalled £258,000 (2020-21: £277,000). The contribution rates were 12.9% for employers and ranged from 5.5% to 12.5% for employees, depending on salary.

Principal actuarial assumptions

The following information is based upon a full actuarial valuation of the fund at 31 March 2019 updated to 31 July 2022 by a qualified independent actuary.

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At 31 July 2022 At 31 July 2021
Rate of increase in salaries 2.75% 2.80%
Future pensions increases 2.75% 2.80%
Discount rate for scheme liabilities 3.40% 1.60%
Inflation assumption (CPI) 2.75% 2.80%
Commutation of pensions to lump sums 50% 50%
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The current mortality assumptions include suifficient allowance for future improvements in mortality rates. The assumed life expectations from age 65, weighted by liability, are:

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At 31 July 2022 At 31 July 2021
Years Years
Retiring today
Males 21.80 21.80
Females 24.30 24.20
Retiring in 20 years
Males 23.50 23.40
Females 25.90 25.80
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Notes to the Financial Statements 20 (continued)

Sensitivity analysis

The table below shows the impact of a change in key assumptions on the present value of the defined benefit obligation and the total service cost charge:

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Change in discount rate +0.1% 0.0% -0.1%
Present value of defined benefit obligation (£’000) 29,339 30,047 30,773
Projected service cost (£,000) 960 1,002 1,045
Change in long term salary increase +0.1% 0.0% -0.1%
Present value of defined benefit obligation (£’000) 30,074 30,047 30,020
Projected service cost (£,000) 1,002 1,002 1,001
Change to pension increases and deferred revaluation +0.1% 0.0% -0.1%
Present value of defined benefit obligation (£’000) 30,750 30,047 29,361
Projected service cost (£,000) 1,045 1,002 960
Change in life expectancy assumptions +1 year None -1 year
Present value of defined benefit obligation (£’000) 31,101 30,047 29,030
Projected service cost (£,000) 1,041 1,002 964
The Institute’s share of the assets in the plan and the expected rates of return were:
Share of assets Fair Value at Share of assets Fair Value at
31 July 2022 31 July 2022 31 July 2021 31 July 2021
£’000 £’000
Equities 57% 13,087 56% 11,906
Target return portfolio 22% 5,007 22% 4,644
Infrastructure 10% 2,426 9% 1,903
Property 10% 2,264 9% 1,792
Cash 1% 277 4% 837
Total market value of assets 100% 23,061 100% 21,082
Long-term Fair Value at Long-term Fair Value at
rate of return 31 July 2022 rate of return 31 July 2021
expected at (£’000) expected at (£’000)
31 July 2022 31 July 2021
Total market value of assets 23,061 21,082
Weighted average expected
3.40% 1.60%
long term rate of return
Actual return on plan assets 1,712 2,212
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Notes to the Financial Statements 20 (continued)

The amount included in the balance sheet in respect of the defined benefit pension plan is as follows:

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31 July 2022 31 July 2021
£’000 £’000
Fair value of plan assets 23,061 21,082
Present value of plan liabilities (30,047) (42,374)
Net pensions liability (6,986) (21,292)
Amounts recognised in the statement of comprehensive income in respect of the plan are as follows:
31 July 2022 31 July 2021
£’000 £’000
Amounts included in staff and investment costs
Service cost 2,172 1,969
Net interest on the defined liability 337 264
Administration expenses 27 24
Total 2,536 2,257
Amounts recognised in other comprehensive income
Return on pension plan assets 1,372 1,948
Changes in assumptions underlying the present value of plan liabilities 17,826 (3,642)
Changes in demographic assumptions - 462
Experience (gain)/loss on defined benefit obligation (2,813) 783
Amount recognised in Other Comprehensive Income 16,385 (449)
Movement in net defined benefit liability during the year
31 July 2022 31 July 2021
£’000 £’000
Deficit in scheme at 1 August (21,292) (19,073)
Movement in year:
Current service cost (2,096) (1,969)
Employer contributions 457 487
-
Past service cost, including curtailments (76)
Net interest on the defined liability (337) (264)
Administration expenses (27) (24)
Actuarial (gain)/loss 16,385 (449)
Net defined pension liability at 31 July (6,986) (21,292)
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Notes to the Financial Statements 20 (continued)

Asset and liability reconciliation

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31 July 2022 31 July 2021
£’000 £’000
Changes in the present value of defined benefit obligations
Defined benefit obligations at start of period 42,374 37,893
Current service cost 2,096 1,969
Interest cost 677 528
Contributions by scheme participants 258 277
Experience loss/(gain) on defined benefit obligations 2,813 (783)
Change in financial assumptions (17,826) 3,642
-
Change in demographic assumptions (462)
Estimated benefits paid (421) (690)
Past service cost, including curtailments 76 -
Defined benefit obligations at end of the period 30,047 42,374
Reconciliation of assets
Fair value of plan assets at start of period 21,082 18,820
Interest on plan assets 340 264
Return on plan assets less interest 1,372 1,948
Administration expenses (27) (24)
Employer contributions 457 487
Contributions by scheme participants 258 277
Estimated benefits paid (421) (690)
Assets at end of period 23,061 21,082
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Notes to the Financial Statements 21

21. Reserves

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Restricted
General Pension Revaluation Restricted
Notes Bursary Total
Reserve Reserve Reserve Funds
Fund
Reserves as at 31 July 2021 7,736 (21,292) 1,000 85 16 (12,455)
- - - -
Deficit for the year (206) (206)
- - - -
Net FRS 102 pension charge (2,079) (2,079)
- - - -
Actuarial gain in respect of pension scheme 16,385 16,385
Actuarial gain in respect of enhanced pension 5 - - - - 5
Bursary donations received - transfer to (48) - - 48 - -
restricted fund
Bursary resources expended - transfer from 16 - - (16) - -
restricted fund
Reserves as at 31 July 2022 7,503 (6,986) 1,000 117 16 1,650
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The pension reserve represents the liability under FRS102 for the Local Government Pension Scheme.

The revaluation reserve was created on 1 April 1991 to account for the difference between the transfer cost of City Lit’s land (£nil) and its market value at the time. Other restricted funds consist of four trust funds.

A bursary fund was established on 31 July 2011 by the Governors. City Lit’s bursary schemes have been set up to help students with financial difficulties. The schemes provide help with course fees, books and materials and are particularly aimed at students who wish to study courses for vocational reasons or to help transform their lives.

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Notes to the Financial Statements 22

22. Related party transactions

Owing to the nature of the Institute’s operations and the composition of the Board of Governors being drawn from local public and private sector organisations, it is inevitable that transactions will take place with organisations in which a member of the Governing Body may have an interest. All transactions involving such organisations are conducted at arm’s length and in accordance with the Institute’s financial regulations and normal procurement procedures.

The total expenses paid to or on behalf of the Governors during the year was £905; one Governor (2020-21: None). This represents travel and subsistence expenses and other out of pocket expenses incurred in attending Governor meetings and charity events in their official capacity.

No Governor has received any remuneration or waived payments from the Institute during the year (2020-21: None).

23. Events after the reporting period

On 29 November 2022, the Office for National Statistics reclassified all colleges to Central Government sector with immediate effect. This will mean that colleges will now be subject to the framework for financial management set out in Managing Public Money (MPM) and the Department for Education will introduce new rules for colleges, some of which will take effect immediately including permission for new borrowing and drawing down on existing credit facilities. The Institute has noted the implications of this latter point within going concern disclosures on pages 31-32 and pages 46-47.

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