CITY OF GLASGOW COLLEGE / MERGER PROPOSAL DOCUMENT
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SECTION 6: Supporting Evidence Base
6.3 Financial Benefi ts
The following table is an outline i nancial sensitivity analysis for
the merged college, which is based upon the Due Diligence
report prepared by professional advisors:
The above analysis shows that an operating dei cit would
occur on this scenario in each year from 2010 to 2013 although
there would be a net surplus carried forward to the income
and expenditure account reserve in each year after transfers
from the revaluation and pension reserves.
The above sensitivity analysis assumes the following:
That merger costs would be covered in full by SFC
funding. To the extent they were not this would
increase the potential dei cit;
That full harmonisation costs (estimated at £3,314K per
annum) would be covered either by direct SFC funding
or by merger savings which are currently estimated to
build up to £992k per annum excluding any other savings
and ei ciency gains on curriculum delivery. To the extent
they were not this would increase the potential dei cit.
•
•
The current estimate of full harmonisation costs is split as follows:
The above costs would be submitted as part of the merger
funding request to SFC.
If the above full harmonisation costs are incurred the impact on
the ongoing income and expenditure account of increased staf
costs is estimated at £3,314K per annum, as the £6,628K covers
two years.
Unless cost savings and ei ciencies of at least £3,314K per annum
can be achieved, after the initial two years which are assumed to
be i nanced by SFC, full harmonisation of wage costs will not be
achievable in the short to medium term.
The current estimate of savings and ei ciencies builds up to
approximately £992k per annum.
It is therefore the most likely scenario that the merged college
will not be able to af ord the cost of full harmonisation costs in
the short to medium term if a breakeven position or a surplus
is to be achieved post merger.
Conclusion
The merged college will only be able to achieve partial
harmonisation of payroll costs in the short to medium term if
signii cant savings and ei ciencies can be identii ed beyond the
£992k per annum already identii ed.
£K
Harmonisation of terms and conditions (for two years) 6,628
Severance/Early Retirement 6,087
Total 12,715
2009-10
£K
2010-11
£K
2011-12
£K
2012-13
£K
Operating surplus per
projections before FRS17
318 479 269 141
Increase payroll costs at 1% -400 -407 -410 -414
Reduction of net income
from residences (assumed
December 2011)
- - -100 -200
Net impact of FRS15 -80 -80 -80 -80
Potential reduction in tuition
fees and educational contracts
-200 -200 -200 -200
Revised Operating Surplus/
(Dei cit) pre-FRS17
-362 -208 -521 -753
FRS17 pension adjustment -530 - - Transfer
from revaluation reserve 1,192 1,192 1,192 1,192
Transfer from pension reserve 530 - - Amount carried
forward
to income & expenditure
account reserve
830 984 671 439