c) CC has confirmed that all material contracts are in writing. We
recommend that a contracts register detailing major contracts is
maintained post merger
2.9 Assets and Liabilities
2.9.1 The principal points to note are as follows:
a) CC has under the provisions of FRS15 retained the land and buildings
value at historical value;
b) A formal valuation of land and buildings was carried out by Watts Group
plc as at March 2009 at a value of £17,370k on a replacement cost basis
compared with a carrying value of £11,149k as at 31 July 2009;
c) We recommend that consideration is given to carrying out a valuation of
land and buildings to assess the carrying value.
d) The impact of any upward valuation in the land and buildings would be to
increase the ongoing depreciation charge for CC resulting in a reduced
financial surplus being achieved;
e) CC appears to have been upgrading its estates in recent years with
expenditure of approximately £6m between 2007 and 2009; which senior
management believe has resulted in significant improvement to the
College facilities;
f) CC has certain estates projects which require expenditure as detailed in
section 9 of the report;
g) If any of the current estates are sold off as part of the City Centre Estates
Project there may be a permanent diminution in value which would have
to be reflected in the financial statements of CC. The accounting treatment
would depend upon the circumstances of disposal.
h) We understand that there is unclear title to a small area of the Allan Glen
site. The issue was subject to previous due diligence and was assessed as
low risk. We recommend that land and buildings are reviewed for
evidence of any encumbrances as part of the legal due diligence process;
i) The Marine Skills Project is being capitalised one third each across the
Colleges. The project is currently expected to come in on budget at a level
of approximately £5.5 million;
j) The approximate average rate of depreciation was calculated for land and
buildings across the three Colleges: GMC (3.4%), CC (1.7%), and GCNS
(3.6%). The rate applied at Central College is lower than that applied at
both Glasgow Metropolitan College and Glasgow College of Nautical
Studies. This stems from the fact that Central depreciates all land and
buildings over 50 years whereas the other two Colleges both apply
different rates across different buildings. Convergence of accounting
Appendix 5: Due Diligence Executive Summaries
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