Item 3 concerns the section 22 report on Inverness College. Members will receive a briefing from the Auditor General to accompany the paper that was circulated late. If members do not have a paper copy, they can get one from the clerk.
In my remarks on the previous item, I touched on Inverness College and said that there was a separate report on it. This section 22 report on the accounts of Inverness College draws Parliament's attention to the continuing financial difficulties at the college. The committee will recall that, in June 2005, it took evidence from the principal and the chairman of the college following a similar report that I made on the college's 2003-04 accounts.
It is interesting that you said that the further education development directorate has been working closely with the college since January. I take it from that that it was not working as closely as it should have been with the college in previous years.
I am sure that members of my team can help you with the detailed information, but I know that, in general terms, the funding council has offered support to Inverness College in the past. However, in view of the deteriorating position, the funding council has now put in a significant resource to assist the college. As I am sure members will recall, the colleges are independent entities within the public sector and the funding council has no direct powers to intervene. Clearly, the funding council needs to offer assistance, but it cannot take over the running of a college, so we must acknowledge that it has to exercise its involvement in the matter with care and within its own statutory remit.
I have no comment other than to say that, before the FEDD team went in, the funding council held a long series of meetings with the college board and finance executives before the decision was taken. The funding council was monitoring the situation, but when it saw that the position was getting worse it decided to get the FEDD team in.
So the offer was in the wings last year, but it was never taken up by the college management.
Putting in FEDD is the last resort after going through a series of processes.
It is fair to say that access to the facilities of the funding council is always available to colleges, but in this situation the college called in the funding council to help it out.
Given that we took evidence on Inverness College, were aware of its financial situation and knew that the offers of assistance were open to the college last year, I am just trying to tease out who decided that FEDD's services were required, when that happened and why it was not done before.
I am sorry, but I am not sure that we can help terribly much with that. It is a question that is probably best answered by the college management.
Margaret Jamieson's question is one that we might ask of other accountable officers. One gets a picture of people turning up at the college in raincoats with their collars turned up.
We can see the problems. Having investigated them, can Audit Scotland be quite clear that everybody knows exactly what the source of the problems was that led to proposed surpluses turning into deficits? In other words, is there absolute clarity as to why that has happened, or are there areas that still have to be investigated?
It would be the responsibility of the management to answer those questions in detail. Clearly, the auditor has a good sense of where the pressures are coming in the budget, but the management would be better placed than we are to give you an authoritative answer.
I would like to pick up on the pension provision sum of £442,000. From the most recent audit, can we say any more about possible future provision? Are you aware of any further provision that might be required and that might have an impact on recovery? On a more general theme, running across the college sector, is that sort of provision out of step? We know that there is concern about other public authority pensions. Is that provision unusual?
The auditor identified a need to increase the pensions liability by £442,000. That relates to the cost of early retirement pensions for members of the Highland Council pension fund who were released by the college under earlier restructuring programmes. I am advised that, although the college calculated the first-year charge for each person, no provision was made for subsequent years' costs. Those costs were provided for in the financial year 2004-05 and charged to the income and expenditure account.
Does that mean that there will need to be provision in future years for the on-going pension costs?
That is what the adjustment does.
Now that the cost has been identified, it will need to be built into next year's costs.
It is built into 2004-05. Am I correct?
Yes.
But not the years after that.
The adjustment in 2004-05 creates the provision to pay for future years. The provision will have to be reviewed annually to ensure that it is still sufficient.
I assume that we will not find ourselves in a situation where unknown costs arise that affect the college's recovery plan.
As long as the pension provision remains big enough to meet the demands on it, it should not affect the recovery plan in the future.
The committee and witnesses might be interested to know that, on 10 February, there was a meeting of the board of Inverness College and a cross-party group of Highlands and Islands MSPs. The meeting was instigated by Fergus Ewing MSP, who is the constituency MSP for Inverness College. At the meeting, we talked about the college's financial problems. I was slightly late for the meeting so I missed a wee bit at the beginning, but the college continues to talk about the burden of being part of the UHI Millennium Institute network. We have heard about that before. We asked whether the college could quantify that burden and it undertook to do so although it seemed to say that that would be difficult. We heard about a financial burden, a human resources burden and a people burden. I am not clear why there should be a burden, given that the UHI Millennium Institute comes with its own funding. However, we said that, if it was appropriate for politicians to argue for increased funding to take account of that burden, we would need that information. Should it be readily available?
The short answer is yes. That information should be available. In the forward programme of work that we are thinking about at the moment, we have registered the possibility of a performance audit of the university of the Highlands and Islands. However, that will be the subject of consultation during the summer months. We are aware that Inverness College considers that the UHI places a burden on it, but the people who are best able to give you accurate and up-to-date information are clearly the management of the college itself.
The college talked about savings of £200,000 on academic staff, but it was not at the stage of having any detail on that. There is the inevitable tension between having to make savings and providing courses in, say, construction in the fastest-growing city in the UK. Is there a risk that such courses may be slimmed down to the extent that they might be financially secure but are no longer fit for the purpose of meeting the further education needs of the Inverness and Moray firth area?
That is a reasonable question, but we cannot answer it at this point. We need to do more work in the area before we can answer it.
Although the situation may appear irreconcilable, it is possible to reduce staff numbers if those concerned are specialists in courses that the college may decide not to continue specialising in. If the college wants to concentrate on particular disciplines, it can still reduce staff numbers in the disciplines in which it does not intend to focus.
Do members have any further questions?
No.
Again, our response to the report can be discussed under agenda item 8 and taken into account with our discussion on the funding council.