Finance
The Finance Dimension consists of three Key Performance Areas (KPAs):
• Use of Resources
• Financial Management and Control
• Financial Health
Each KPA is graded and the results combined to arrive at the overall grade for the Dimension.
The Use of Resources (UoR) KPA consists of three Performance Indicators (PI):
• Funding Economy
• Resource Efficiency
• Use of Capital
The Funding Economy PI assesses to what extent a provider has used LSC funds to deliver priority provision and has delivered in relation to their original allocation or contract value. It consists of two performance measures:
• UoR1 - the proportion of LSC funding applied to priority provision
• UoR2 - delivery as a percentage of funding allocation or contract value
Each provider is assigned a score for each measure based on their performance.
The Resource Efficiency PI assesses a provider’s use of LSC funds for each successful outcome and their comparative cost for each learner. It consists of two performance measures:
• UoR3 - LSC funding for each successful outcome
• UoR4 - the provider’s operating cost by a weighted standard learner number
Each provider is assigned a score for each measure based on their performance.
The Use of Capital PI assesses the current condition of the college’s building stock and, where relevant, the progress being made to improve its condition. It consists of two performance measures:
• Condition
• Renewal
Each provider is assigned a score for each measure based on their performance. At present, the Use of Capital PI applies only to colleges.
For the Condition Measure, Regional Property Advisors assess the proportion of the college’s total Gross Internal Area (GIA) in each of the following categories:
• As New
• Sound
• Operational
• Inoperable
The Renewal Measure is based on the college’s current capital application approvals according to the following three main stages and the GIA concerned:
• Stage 2 Fee Support (Submissions)
• approval in principle (AIP)
• detailed approval
The scores for each measure are combined and the overall score for each provider assigned a grade for the Use of Resources KPA.
The Financial Management and Control KPA examines a provider’s financial management and governance in the use and application of LSC funds. Providers self-assess and grade their financial management and control arrangements using the LSC’s Financial Management and Control Evaluation (FMCE) form. This supersedes three existing questionnaires (the Self-Assessment Review Questionnaire, the Business Environment Questionnaire and the Provider Control Risk Assessment) and includes sections on:
• Accountability
• Financial Planning
• Internal Control
• Financial Monitoring
The LSC supplies guidance to help providers complete the forms in a consistent manner. On receipt, the LSC validates the forms, taking into account the results of audit work at providers and other relevant information, to arrive at the final grade for this KPA.
The Financial Health KPA measures provider’s financial status in terms of current financial performance and ability to meet ongoing financial commitments. It consists of three Performance Indicators (PI):
• Solvency - Current ratio = current assets divided by current liabilities
• Sustainability - Operating surplus/deficit divided by turnover/income
• Status - Borrowing as a percentage of certain reserves and debt
The score for each PI is added together with a score for consistent good performance and the total score graded as outstanding, good, satisfactory or inadequate. Under certain defined circumstances, for example where a lower PI score is due solely to a capital scheme, the LSC may moderate the automatic grading.
