Audit Committee, 09 Dec 2003

Meeting date: Tuesday, December 9, 2003

Official Report 193KB pdf

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“Financial performance of the further education sector in Scotland”

Agenda item 4 is a briefing on the report "Financial performance of the further education sector in Scotland". I invite the Auditor General to brief the committee and answer questions—I am stretching this introduction so that people can leave the room and we can have some peace and quiet.

I invite Arwel Roberts to brief the committee on the item and help you with any questions that you may have.

The report "Financial performance of the further education sector in Scotland" provides an update on information in our previous overview reports on the financial health of the education sector. The report covers financial stewardship in further education colleges, the forecast financial health of the colleges and the progress that the Scottish Further Education Funding Council has made in addressing recommendations that the Audit Committee has made arising from previous overview reports on the further education sector.

A number of key points have emerged from the report. The funding council's forecasts suggest that most of Scotland's 42 colleges of further education are on target to become financially secure by 2006, and the report shows that, across the sector, a £14.1 million operating deficit in 2000-01 was turned into a £2.3 million surplus in 2001-02. Only Lews Castle College in Stornoway is not expected to meet the funding council's criteria for financial health by 2006.

The improving picture of college finances has been assisted by significant increases in core funding and additional specific grants to address problems in individual colleges, and specific funding will continue with the funding council's latest campaign for financial security in the sector. However, additional funding does not in itself guarantee better financial results: results in 2001-02 identified three colleges—West Lothian College, Kilmarnock College and Lews Castle College—that recorded deficits rather than the surpluses that had been forecast for them.

It is worth noting that financial stewardship within the sector is of a good standard, and that colleges must pay careful attention to the European funding that they receive and to the provisions that they make for pensions. The funding council is pursuing initiatives to improve the adequacy and efficiency of further education, which were first reported to the committee some three years ago. Information on colleges' efforts to implement action plans for improving their management is now becoming available and, as the committee recently heard when the funding council gave evidence, important information on supply and demand has still to be finalised. Similarly, plans to improve efficiency through rationalising the provision of further education are still on-going, and proposals to merge colleges in Glasgow have been shelved in favour of a new proposal to introduce a revised framework for further education delivery in the city.

In summary, the report contains recommendations for action by the colleges and the funding council. Those recommendations seek to encourage continued improvement in financial stewardship, the implementation of a campaign for financial security in the sector, and the completion of initiatives that are under way to ensure adequate and efficient provision of further education in Scotland. Audit Scotland will continue to monitor progress in all those areas.

I have a question on financial stewardship. The report indicates that a number of colleges will continue to depend on ever-increasing overdraft facilities. Although that was a technical point, it was obviously of concern to Audit Scotland. In your oral presentation, you mentioned three colleges, but paragraph 2.6 of the report identifies a greater number: did you mention only those with the biggest overdrafts?

In such cases, we rely on the reports that the auditors make. They point such issues out based on details of varying technical difficulties that colleges provide. Some cases are more serious than others, and I highlighted the more serious ones.

Do those colleges have difficulty in drawing down money; is money not being made available to them at particular times; or is the problem linked to the way in which colleges receive their European funding?

The three colleges that Arwel Roberts mentioned are those whose actual results were below those that were forecast. There were different reasons for that in the different colleges. In Kilmarnock College, there was an issue with the European funding.

That is fine. Thanks.

As there are no other questions on the report—we will discuss our approach to it under a later agenda item—I thank the Auditor General and his team.

We are running considerably over time, but it would be appropriate to have a comfort break before we move on to item 5, because much water has been consumed in the past hour or two. I suspend the meeting for five minutes.

Meeting suspended.

On resuming—