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ITEM CA9

CABINET – 21 JUNE 2006

ADULT LEARNING SERVICE

Report by Director for Social & Community Services

1. The Adult Learning Service faces an immediate and significant financial challenge, arising from a further substantial reduction in funding from the Learning and Skills Council (LSC) from August 2006. The reduction in LSC funding stems from changes in national priorities away from leisure learning and entry-level skills, towards more narrowly defined accredited vocational training. At the same time there has been an overall reduction nationally in the total amount available to pass on to providers, many of whom are suffering a similar or even larger reduction than Oxfordshire County Council.
2. This report sets out proposals for meeting the challenge and putting the Service on a sustainable footing, partly by increasing the proportion of provision which meets the new national priorities and moving the curriculum away from subsidised leisure learning.

Background

3. Since the year 2000 the duty to ensure provision of adult education and the resources to do so have rested with the LSC. This it does largely by funding providers such as local authorities and colleges. Although the County Council does not now have the primary duty to secure adult and community learning, the Secretary of State for Education and Skills has powers to require it to deliver services for which the LSC provides funding.
4. The County Council makes no net financial contribution to the Service and expects it to be financially self-sufficient on the basis of external income. Since the principal income source is the LSC, changes in that body’s policies and practices can introduce significant risks into the financial performance of the Service. In the current academic year (Aug 05 to July 06) the Service is in receipt of £4.3 million from the LSC – a reduction on previous years – and over £1.75 million from other sources including charges to learners.
5. Provision of adult learning contributes to the achievement of several County Council priorities, in particular that of giving all of us throughout our lives the opportunity to enjoy effective teaching and learning, and that of helping disadvantaged residents to live fulfilling and independent lives. Approximately 22,000 Oxfordshire residents each year enrol on a selection of over 3,000 courses, ranging through leisure pursuits, healthy living, basic skills for life, English for speakers of other languages, and vocational qualifications. Through assisting people to gain basic skills and employment-entry qualifications, and through workforce development, the Service contributes to the economic well-being of the county and its residents.
6. In March 2005 the Service was subject to a comprehensive and detailed inspection by the Adult Learning Inspectorate which showed weaknesses in the delivery of the Healthy Living part of the curriculum and in service-wide arrangements for quality assurance. Rapid action was taken to address these weaknesses and the recent re-inspection feedback in May 2006 confirms that all provision is now satisfactory or better.

Financial out-turn 2005/06

7. Anticipating at an early stage in 2005/06 that the Service would overspend as a result of changed policies and reduced income from the LSC, action was taken to reduce costs, but it was known that this action would come too late in the financial year to bring income and expenditure into line/ It was also realised that one-off redundancy costs would be incurred which would be a direct cost to the County Council.
8. It was intended to meet 2005/06 overspending (including redundancy costs) in-year from within the former Learning & Culture Directorate budget without adverse impact on the future financial position of Adult Learning. However that has not proved entirely possible. Overspending has been partly offset by underspending in the Early Years Service and by use of Adult Learning reserves (the latter largely to meet redundancy costs). There is however an outstanding overspend of £188,000 for 2005/06: a report elsewhere on the agenda proposes a supplementary estimate to address this.

Reduction in income from LSC April 2006 to March 2007

9. The existing gap between income and expenditure for this academic year is expected to continue for the summer term. The resultant pressure is estimated at £229,000.
10. The LSC have indicated that their funding for the academic year 2006/07 will be £3.676 million, a further reduction of £0.645 million on the 2005/06 allocation. It is anticipated that the impact of this cut on the period August 2006 to March 2007 will be a pressure of about £615,000.

Total budgetary pressure in 2006/07

11. The total predictable pressure as things stand in the financial year 2006/07 is therefore as follows:

• the accuracy of the predicted remaining costs of redundancies agreed in 2005/06
• the full effect of cost-cutting actions already taken will be in play by the end of July
• approval of a supplementary estimate to address the remaining £188,000 overspend from 2005/06.

12. Clearly, further radical action is required both to mitigate this potential overspend in 2006/07 and to ensure that the Service is able to bring its expenditure into line with changed expectations of income for the foreseeable future.

Improving efficiency and customer service

13. In tackling the financial pressure, the Service will need to accelerate progress in improving both working practices and service delivery arrangements, including more responsive provision and improved customer service.
14. Work has already begun on redesigning the curriculum to ensure that it is responsive to LSC priorities and at the same time meet, as far as possible, customer needs. A detailed and comprehensive review is under way and a more appropriate portfolio of provision is being developed for the 2006/07 academic year. The foundations for this will be in place by the end of the 2005/06 academic year, and phased changes will be introduced beginning this September.
15. Work is also under way to review, evaluate and reduce the accommodation that is used by the Service for the delivery of teaching and learning, as well as administrative and other customer focused operations.

Proposed action

16. Meeting the challenge facing the Service requires rapid, effective action, in particular to:

• develop a portfolio of provision that is more responsive to LSC requirements and improve customer service;
• increase income from charges and generate other revenue sources;
• reduce operating costs to within projected income.

17. Proposals for the comprehensive turn-around of the Service are based on a set of short and medium term measures designed to bring income and expenditure back into balance whilst at the same time improving service delivery. These measures are as follows.
18. In the short term, (up until 31 July 2006) action is already being taken to reduce costs whilst establishing the foundations for building a new and revitalised service. Actions to be taken between now and the end of the current academic year include:

• the introduction of centralised budget management with firm cost controls;
• a line-by-line review of expenditure to ensure that all non-essential expenditure is stopped or minimised as soon as possible;
• the freezing of all non-essential appointments to the Service until a revised and slimmer delivery structure can be developed for the future;
• a search for additional funding to ensure that any opportunities for securing alternative resources have been fully explored.

18. In the medium term (between 1 August 2006 and 31 July 2008) a review of the Service will reduce the underlying cost base from which the Service operates, by means of

• a further re-organisation and reduction of the staffing establishment;
• improved deployment of both teaching and non teaching staff;
• reduction in the number of sites and more effective use of the remaining facilities;
• improved arrangements for curriculum design and delivery;
• improved marketing and brand management;
• revised arrangements for pricing and charging;
• updating the ‘organisational skill set’ in line with revised requirements;
• improved management of performance and deployment of resources.

19. All County Council services are to be submitted to fundamental performance review over the next five years. It is likely that applying this process to the Adult Learning Service early in the cycle (April 2007) will provide a useful check on progress in implementing these changes.

Project management of the recovery process

20. The newly appointed Head of Adult Learning will have direct responsibility for ensuring the financial recovery and turn-around of the Service. An initial priority for her will be to finalise a project delivery plan to guide the necessary change process. The project plan will be shared with the LSC to gain their support. The project plan will focus on securing improvements in three main areas detailed below.

Curriculum changes

21. The Service needs to modify its portfolio of provision to match the LSC funding priorities by:

• concentrating Further Education provision on Skills for Life and workforce development courses, maximising the amount of provision that meets LSC priorities;
• enhancing the workforce learning offer to include more NVQ qualifications (e.g. in a range of manual, caring and administrative skills);
• ensuring that 80% of Skills for Life provision will meet national targets;
• devising and offering a simplified structure of Personal and Community Development Learning (PCDL) provision, with a single set of quality and assessment arrangements through RARPA (Recognising and Recording Progress and Achievement in adult learning);
• making an attractive PCDL offer in terms of subject and venue.

22. The Service will improve its internal operation across the County to ensure that:

• it reduces the range of accommodation used (as either administrative bases or service delivery points) by approximately 30% and making more effective use of the remaining facilities;
• the overall staffing cost (as a mixture of both teaching and learning staff, management and administrative staff) is reduced by approximately 25%;
• a revised staffing structure is put in place quickly, that better reflects the functional needs of the Service in terms of operations, delivery and development;
• there is an increased emphasis on the delivery of effective, high quality frontline services to learners;
• better use is made of mobile and flexible working to ensure that the deployment of staff is both effective and efficient and responds more closely to the fluctuating demands of service delivery;
• a more consistent policy for charging learners is introduced and effectively implemented across the Service.

23. A key element in the turn-around plan will be the re-balancing of income and expenditure and the financial recovery of the Service. In addition to ensuring that a closer fit with LSC priorities optimises income from that source, actions to increase income will include identification of additional sources of external funding, better exploiting the income-generating potential of workforce development (including within the County Council), more appropriate charging policy (including full cost recovery for most leisure activities).
24. A review of the Service’s financial controls is being conducted by the County Council’s Internal Audit which will help ensure that a clear understanding of any further weaknesses in the Service’s controls is identified and rectified quickly.

Communication

25. Communicating effectively with the range of stakeholders concerned with the Service will be an important element of this process. The Service has already drawn up a communication strategy and will proactively monitor and update this. Specific arrangements to brief Adult Learning staff are being put in place, and the trade unions have been briefed with regard to the content of this Report.

Timescale for recovery

26. Annex 1 (download as .doc file) outlines a planned budget for the Service over the next three financial years, based on the actions outlined above. It is anticipated that the potential overspend in 2006/07 will be reduced and annual operational costs should be contained within income from 2007/08 onwards. However, it will not be possible to avoid an estimated overspend of £174,000 in 2006/07 which is beyond the capacity of the Service reserves, and which cannot be offset by underspending elsewhere in the Directorate.his Report therefore seeks a temporary supplementary estimate of £174,000 in the current financial year, repayable in 2008/09, in order to avoid the Service overspending.
27. This plan as proposed is not without its risks, for example:

• there is a possibility of further reductions in LSC funding in the form of a "clawback" if agreed targets are not met;
• funding in the region of £250,000 over the next three years needs to be secured for minor works to improve premises;
• changes in staffing (including loss of posts) must be achieved in time but not in a way which destabilises the Service.

28. Attempting to telescope the recovery plan would incur far greater risks, such as:

• failure to achieve the necessary staff reductions leading to a continued deficit;
• the scale and speed of staff reductions impacting negatively on the Service’s ability to hit LSC funding and delivery targets, and public perception of the County Council as a service provider;
• curriculum changes introduced too slowly or poorly, leading to a fall in learner numbers and income.

29. A shorter timescale would also require a fundamental renegotiation of targets with the LSC which the LSC are likely to resist. The planned autumn programme currently being put in place would have to be delayed and redesigned to reflect renegotiated targets, and would lead to significant dissatisfaction among learners. Programmes funded from non-LSC sources would be negatively affected by the required staffing reductions.
30. To achieve the turn-around within a three-year timescale the Service will need substantial support, flexibility and responsiveness in the areas of personnel, finance, property and ICT. Good quality financial information will be essential to keep the recovery plan on track. The impact of major staff restructuring will create a demand for a substantial amount of personnel expertise and advice.

Service reserves

31. As a result of centralising financial control of the service, reserves accumulated by local community education committees amounting to £869,000 were drawn in at the start of 2005/06. These had reduced to £699,000 by 31 March 2006, largely as a result of meeting redundancy costs. The existence of this reserve is an important factor in bringing the budget into balance by 2008/09.
32. £74,000 is earmarked by the Service as part of a matched contribution to a bid for approximately £650,000 LSC capital to replace temporary buildings at the East Oxford Community English School. This bid has now been confirmed as successful by the LSC. The new premises will be in an area of relative educational deprivation and should give a much needed boost to the Service and the people living in East Oxford.

Financial implications

33. The financial implications of the current position are described in paragraphs 7 to 11 above.
34. The budgetary implications of the proposed plan are laid out in Annex 1. By implementing the plan, the potential for overspending in 2006/07 will be reduced, the costs of operating in 2007/08 will be contained within income, and by 2008/09 the Service will again be on a sustainable financial footing.
35. However a potential overspend is predicted for 2006/07, which will be beyond the capacity of the Service and the Directorate to consume. Therefore a temporary supplementary estimate of £174,000 is sought in order to avoid the Service overspending in this financial year. This will be repaid by the Service in full in 2008/09.

Staffing Implications

36. It will be evident from the plan outlined in this Report that there will be a substantial impact upon staff in the Service, including reduction in the number of posts, and requirements for new roles and ways of working. This will demand good communications and a high level of support for staff throughout the process.

RECOMMENDATIONS

37. The Cabinet is RECOMMENDED to

1. approve the approach outlined in the report to ensure the future financial viability and organisational fitness of the Adult Learning Service;
2. noting the budgetary implications outlined in Annex 1 (download as .doc file) , approve a temporary supplementary estimate of £174,000 to avoid the Adult Learning Service overspending in 2006/07, to be repaid in full by the Service in 2008/09.

CHARLES WADDICOR
Director for Social & Community Services

Contact officer: Richard Munro, Head of Cultural and Adult Learning Services, Tel: (01865) 810191

Background papers: Nil

June 29006

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