AUDIT COMMITTEE REPORT ON COLLEGE FINANCES

CAUD006/2005 | 11 October 2005

The financial health of further education colleges is improving, but it is unclear how much of the improvement is due to extra funding rather than better financial management, according to a report published today by the Scottish Parliament’s Audit Committee.

The report follows the Committee’s inquiry into reports by the Auditor General for Scotland (AGS) on the financial accounts of three Further Education (FE) Colleges, West Lothian College, Inverness College and Lews Castle College in Stornoway.

Committee Convener Brian Monteith MSP said:

“We welcome the fact that the finances of colleges across the further education sector have improved significantly over the last three years.

“However, whether this is due to better financial management or increased funding remains unclear. We shall continue to monitor the progress of colleges in improving their finances.”

The Committee also expressed concern about the lack of clarity in relation to the extra costs incurred by colleges delivering courses as part of the University of the Highlands and Islands.

Committee findings in relation to each of the three colleges include:

West Lothian College: West Lothian College faces an £11m funding gap over the next 20 years in meeting the costs of the 1999 PFI contract that provides its main campus facilities.

This is due to a change in the Scottish Executive’s policy on the number of FE students which has meant that the college is no longer funded to support the higher number of students assumed when the PFI contract was originally negotiated. The Scottish Further Education Funding Council (SFEFC) has confirmed that funding will be provided to support the college until negotiations on the future of the PFI contract are resolved. In future a wider range of options for capital funding will be available to colleges. In its report the Committee emphasised the need to be clear about the financial impact that sectoral policy changes can have on individual colleges.

Inverness College: Inverness College has struggled to meet the terms of a financial recovery plan agreed with SFEFC. In 2003/04, despite forecasting a surplus of £94,000, the college recorded a significant deficit of £526,000. The main reasons for the deficit were unanticipated demand for construction and care courses and higher than average staff costs.

The Committee is very concerned by the college’s failure to keep to the financial recovery plan and seeks assurances that proper cost controls are now in place.

The College’s Strategic Development Plan and financial forecasts do not of themselves provide great reassurance since similar plans have been produced previously but the college’s financial difficulties have persisted. The Committee is therefore seeking assurance that proper cost controls are in place to ensure the financial recovery plan will be achieved.

The Committee is also extremely concerned that the high demand for construction and care courses was not predicted. The Committee is therefore seeking reassurance that procedures have been developed to better predict demand in future.

Lews Castle College: Lews Castle College incurred a deficit of £358,000 for the year ended July 2004. The college has high costs because of its remote location. Extra funding has now been provided following a review by the SFEFC of funding for colleges in such remote environments. The Committee welcomes this additional funding but noted that there may be an impact on funding available for non-remote colleges.

Background notes:

The report sets out the Committee’s findings and recommendations in relation to its inquiry into the reports of the Auditor General for Scotland (AGS) on the accounts of West Lothian College, Inverness College and Lews Castle College.

In taking evidence the Committee sought to examine:

1. The financial implications of the PFI contract at West Lothian College;
2. The threats to the financial recovery plan at Inverness College;
3. The additional costs of providing further education facilities at a remote college such as Lews Castle; and
4. Actions being taken by SFEFC and the Scottish Executive to support the individual colleges.

The Audit Committee held one oral evidence session on 28 June 2005 when it took evidence from: Mrs Sue Pinder, Principal and Chief Executive and Dr Tony Kinder, Chair of the Board of Management, West Lothian College; Mr David R Green, Principal, Lews Castle College; Professor J Little, Principal and Chief Executive, and Mr Ken Mackie, Chair of the Board of Management, Inverness College; Mr Roger McClure, Chief Executive, Brian Baverstock, Deputy Director, Governance and Management : Appraisal and Policy, and Riona Bell, Director of Funding, Scottish Funding Councils for Further & Higher Education; Eddie Frizzell CB, Head of Enterprise, Transport & Lifelong Learning Department, and Aileen McKechnie, Head of Further and Adult Education Division, Scottish Executive.

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email: sally.coyne@scottish.parliament.uk

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