Affordability
All proposals will be subject to an affordability assessment to determine the grant support required. Providers are to submit a financial plan which needs to demonstrate they attain financial health category Group A or a strong Group B three years after substantive completion of the project. (Refer to the Capital Handbook Appendix B for full guidance on this subject).
Delegated Approval Authority
Levels of capital delegation as at November 2006 are summarised below.
Approval Required | Proposed Delegation | Proposed Delegated Authority to Approve |
Project Approval and Grant Support | Projects up to £5 million and 35% grant | Regional Directors/ Director of Resources |
| Projects up to £10 million –up to 50% grant | Chief Executive or National Chairman |
| Projects up to £30 million –up to 100% grant (including fee support to detailed applications) | Capital Committee
|
| Projects above £30 million – up to 100% grant (including fee support to detailed application) | National Council
|
Project Feasibility Studies | 50% Contribution to up front feasibility fee costs of up to £200,000. | Regional Directors/ Director of Resources |
| 50% contribution to pre approval in principle fee support costs of up to £500,000 | Regional Directors/ Director of Resources |
Property Related Consents with no grant support | Projects with values or costs of up to £5 million and/or secured borrowing up to £10 million | Regional Directors/ Director of Resources |
| Proposals with value or costs over £5 million and/or secured borrowings above £10 million | Chief Executive or National Chairman |
Qualifying Project Expenditure
The minimum level of support for a project that meets all the LSC criteria is 10% except where other grant funds or asset sales receipts make such a contribution unnecessary. The deminimus level of qualifying project expenditure is as follows:
Most recent audited college turnover | Minimum qualifying project expenditure |
Less than £2 million | £100,000 |
More than £2 m less than £10 million | 5% of college turnover |
More than £10 million | £500,000 |
Capital Grant Support and Borrowing
The LSC will decide on the level of grant support. The provider will be required to demonstrate need by producing financial forecasts for a range of grant levels. The starting grant level should be agreed with the regional provider financial management team.
Providers are expected to increase these borrowings to reasonable levels in order to finance capital projects before the LSC will consider capital grant applications. The expectation is for colleges in financial health groups A and B to have a borrowing level of between 30% and 40% of total income (by the 3rd year after substantive project completion). For providers currently in financial health group C with recovery plans instigated by the LSC, 15% to 25% is expected. Providers should look to repay borrowing over a 20 to 25 year term.
Funding Sources
Providers should investigate the opportunity to fund their proposal from other funding agencies. This can include agencies such as Regional Development Agencies, English Partnerships, Local Authorities and Government Office. The LSC should be considered the funder of last resort.
VAT
Colleges should seek advice on the implications of VAT on their project. There are a number of areas where capital expenditure may be zero rated in respect of VAT. This can apply to the project as a whole or in part dependent upon the provision. Where VAT is applicable payment mechanisms can be employed to reduce the impact of the VAT payments. Separate rules also apply to land acquisition and disposal. Specialist VAT consultants can advise on what might be achievable.
Leasehold Projects
The arrangements for the eligibility of leasehold projects to obtain grant support are being reviewed. Providers should discuss these arrangements with the relevant RPA at an early stage for any leasehold proposal.
Residential Accommodation
With the exception of specialist residential colleges catering for learners with learning difficulties and/or disabilities, the LSC will not normally provide capital funding towards the cost of residential developments. Any proposal of this nature should be discussed at an early stage with the relevant RPA.
Feasibility and Project Fee Support
Fee support for engaging consultants is available in the form of an upfront pre-payment. There are three stages at which fee support applications can be made: feasibility study (not property strategy preparation), AIP and Detailed. The funding is to be matched for both feasibility and AIP stages whereas funding will be provided at the in principle grant intervention rate. The following table summaries the support level and qualification project thresholds.
Post Project Review
All capital grant recipients are required to undertake a post project review to be completed between 12 and 18 months after the date of practical completion. The review must be in accordance with Guidance Note D of the Capital Handbook. For FE Colleges the review must be reviewed by the Board o Governors prior to submission.
Disposal and Acquisition Consent
The Financial Memorandum (FEFC Circular 98/30) between an incorporated FE College and the Council stipulates that Colleges should obtain the consent of the Council prior to disposing or acquiring land or buildings where the total cost exceeds £1million or 5% of the Colleges annual revenue, whichever is the lower. This relates to both freehold and leasehold property.
E-Mandate
It is a pre-requisite for Colleges to participate in the E-Mandate project in order to obtain capital funding from the LSC.
14-16 places in FE colleges
From 2007-08 the LSC will extend the eligibility for capital funds to building works undertaken by colleges on their campuses to provide additional facilities for 50 or more additional full-time equivalent (FTE) places for 14-16 vocational provision, where it can be demonstrated that such provision cannot be provided by the more intensive use of existing facilities. Development in support of 14-16 provision can include all necessary capital works including separate social and recreational space. Where colleges are delivering vocational provision on school premises, all necessary enabling works will be the responsibility of the school which may have access to capital funds from the DfES and will not be eligible for capital support from the LSC for these purposes. Colleges should include details of existing and projected 14-16 provision in their capital application forms.
Higher education provision
Where up to 20 per cent of the guided learning hours or FTEs of a project proposal is for higher education (HE) purposes, then colleges may include this provision in their capital applications to the LSC which will regard it as incidental to the main FE purpose of the proposal. HE provision of 20 per cent or more will not be eligible for capital funding from the LSC.
Specialist Colleges
Specialist Colleges (and other non-specialist external institutions) can apply for main stream FE LSC Capital funds if the LSC regularly provides 50% or more of their annual revenue. The recommendation of the Peter Little OBE report entitled "Through Inclusion to Excellence" will be reflected in this process. Where possible provision will be locally / regionally based and if appropriate, co-located with other provision.
Accessibility Improvement Grants
Dedicated funding for capital works associated with compliance with the Disability Discrimination Act Part 4 as amended by Special Educational Needs and Disability Act 2001 has ceased. Further compliance works can be included within capital project grant support applications and will be subject to the criteria as set out within the capital handbook.
