a) A formal valuation of land and buildings was carried out by James Barr
as at 31
st July 2008 resulting in a valuation of £15,952k against a carrying
value at 31st July 2009 of £15,384k;
b) The impact of the latest upward valuation is to increase the ongoing
depreciation charge for GCNS by approximately £100k in 2009 which
reduces the financial surplus achieved;
c) GCNS is currently considering an Estates project, in relation to
residences;
d) GCNS appears to have been upgrading its estates in recent years with
expenditure of approximately £4 million between 2007 and 2009;
e) GCNS has certain estates projects which require significant expenditure as
detailed at 2.9.1(c) of the report;
f) 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 GCNS. The accounting
treatment would depend upon the circumstances of disposal;
g) 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
policies will therefore be required to be considered should the Colleges
merge.
h) 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;
2.9.2 In connection with the City Centre Estates Strategy the key point to note is as
follows: -
a) The Residences project being considered by GCNS may or may not attract
SFC funding as it principally relates to commercial income for GCNS.
This point would have to be clarified with SFC.
2.9.3 GCNS should bear in mind that its net worth could be adversely affected by
any FRS 17 pension deficit arising in the Scottish Teachers' Superannuation
Scheme.
Appendix 5: Due Diligence Executive Summaries
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