“The 2006/07 Audit of James Watt College”<br />“The 2006/07 Audit of Kilmarnock College”
I remind committee members of the continuing police investigation in relation to Kilmarnock College, which means that what Audit Scotland can say is somewhat constrained. We can still ask general questions and make comments, but some specifics might have to be avoided until the police have completed their inquiries. We will discuss any further action on the reports under agenda item 5.
Both reports are short. They were made under section 22 of the Public Finance and Accountability (Scotland) Act 2000 and they relate to the accounts of two further education colleges—James Watt College and Kilmarnock College—for the 2006-07 financial year.
I suggest that we take the discussion in two parts: we will consider James Watt College first and then, once we have exhausted questions on it, come to Kilmarnock College.
The accountable officer for each college is the principal. As the accountable officer, the principal has a duty of care that is overseen through the audit process and may result in reports to the committee. The board of each college has a duty to monitor the performance of the college as a whole and to ensure good governance and financial control in the college. The Scottish funding council has duties and powers in relation to general oversight of the financial management and performance of the sector as a whole and a duty to satisfy itself regarding the governance and financial controls in individual colleges.
However, no one is ultimately democratically accountable, other than through the funding council's oversight. The college is almost responsible to itself.
There is no doubt that democratic responsibility for the use of funds comes principally through my reports to the committee and the funding council's responsibility to advise the Scottish Government on such matters.
Yes, but no one can intervene in or take action on a college's situation other than the college itself; the minister has no power to intervene.
The funding council has evolved its policy, custom and practice over the past few years so that it takes a closer interest in the affairs of individual colleges than perhaps it did several years ago. It has a group called the FEDD—I cannot recall what that stands for, but it is a wonderful title—which, if it believes that a college is in difficulties, is required to engage closely with the college's management to support it in getting out of those difficulties and to monitor closely what is happening.
That is an evolution of practice rather than a statutory requirement.
Yes, that is correct.
James Watt College has a board that is responsible for governance and for monitoring the principal's performance. There has clearly been a failure somewhere, whether on the part of the principal or the board, or both. That suggests to me that there are significant concerns about how effective governance has been, at least in this case. Is that the case?
The section 22 report is based on the report that the auditors provided to me. It is not, therefore, a detailed audit of the governance arrangements of James Watt College. The best source of up-to-date and reliable information, independent of the college, on those would come from the Scottish funding council.
But for a number of years in a row there have been question marks about the accounts. Clearly, there have also been question marks about management, because there have been management changes; you referred to the substantial steps that have been taken. What has been the role of the board during those years in carrying out its duties? What should be the role of a board in relation to inappropriate actions by or weaknesses in management?
The other members of the team may want to say more about that, because they are closer to the detail of what we have said in previous reports.
It is fair to say that the board of the college asked for help during 2006 from the Scottish funding council, and the FEDD went in and carried out a review of governance arrangements. FEDD is the further education development directorate—I thought it might help if I spelled that out for you.
We thought that it was Eliot Ness and the FBI.
I am afraid that it is not as glamorous as that. The board requested the FEDD's help, and it undertook a review of governance arrangements and reported back. Since then, the college and the board itself have taken a number of actions to address the weaknesses that the FEDD report highlighted.
But the board itself was incapable of taking action up to that point.
The board had been taking action, but it reached a point at which the deficit was increasing and financial performance was not improving as the board had expected it to, so it asked for help to turn things around.
The situation was raised when we discussed the overview report—a very cheeky letter came in from some principal somewhere. The example that we are discussing highlights yet again that there is something wrong. The arrangement is self-perpetuating: the principal suggests members of the board, and once they are on the board, they feel obliged to the principal. We need people on the boards who are independent, who can challenge the principal and the staff without fear or favour and who have some expertise, including financial expertise. There is nothing to ensure that that happens, is there?
I am not sure that we can help the committee much further, because there has been more than one review of the governance of the FE sector over the past few years and, for perfectly understandable reasons, the decision has been taken to leave the arrangements as they are. As members of the committee will be aware, one of the key factors that was mentioned in the overview report and which I am sure influences the thinking in the Scottish Government is the importance of the colleges' charitable status, which requires them to have a degree of independence from Government agencies.
Did we not find out from the review that John Wheatley College lost its charitable status, or had that status questioned, whereas the private school in Dundee got its charitable status? It is not clear that charitable status is guaranteed because of that separation.
That is correct. There is, therefore, an element of risk to the finances of the FE sector, but it is a risk of which the Government and the Parliament are well aware.
If there was an independent public appointments committee of some kind that made appointments to college boards, would that change the charitable status position?
That is a matter of policy in relation to which we do not have expertise, but the question is entirely reasonable.
As someone who stays in the Inverclyde area, I know that over the past three or four years there have been many stories in the local press about the running of the college. Have you had any dealings with the new principal, who started earlier this year, on the college's direction? I know that your report refers to a "projected … surplus", but have you received any other information?
As I have said, it is more for the funding council than the Auditor General to manage such relationships much more closely. As a result, any such questions would be best directed towards the chief executive of the funding council.
If members have no more questions about James Watt College, we will move on to the section 22 report on Kilmarnock College.
The principal was in place during the financial year 2006-07 but, according to the latest set of accounts, resigned in September 2007.
In any future consideration of how public resources have been used, we would find it helpful to know whether a resignation was a straight resignation or whether the person in question took early retirement or enhanced redundancy, and whether the college board approved any enhanced financial package for them. Given the concerns raised by Audit Scotland and the on-going police investigation, such information would be useful.
We do not have that information, but we will ask the auditors for it.
I understand that the college's accounts were presented to Audit Scotland seven months late. I do not want to get into any detail that might be subject to investigation, but was the late submission directly related to the issues that are being investigated or were there other reasons?
The accounts were submitted seven months beyond the year end and two months after the deadline because of the two issues that the college's internal auditors were having problems with. They were trying to gain information to form an opinion, but could not do so.
I understand that. Again, without getting into any of the issues under investigation, can you say whether there has been any indication that the college's current performance will be reported on time this year?
We do not have any information at the moment, but we have asked the auditor to keep us informed of any developments. If any concerns arise, we will certainly raise them.
I appreciate that you are constrained in what you can say about the qualified opinion. However, the section 22 report refers to an
I am afraid that we cannot answer that question, as the issue is part of the police investigation.
I understand that.
I thank Audit Scotland for its evidence.
Meeting continued in private until 11:05.