Public Audit and Post-legislative Scrutiny Committee

Meeting date: Thursday, November 17, 2016

Official Report 620KB pdf

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Section 22 Report

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“The 2014/15 audit of Edinburgh College”

We move on to agenda item 3, which is an evidence session on the Auditor General for Scotland’s report entitled “The 2014/15 audit of Edinburgh College”. I welcome, from Edinburgh College, Annette Bruton, principal and chief executive, and Alan Williamson, chief operating officer; from Scott-Moncrieff, internal auditor for the college, Chris Brown, head of audit and assurance; from KPMG, Hugh Harvie, partner, who carried out the external audit; and Dr John Kemp, interim chief executive of the Scottish Further and Higher Education Funding Council.

I invite Annette Bruton to make an opening statement. She will be followed by Dr Kemp, after which I will open up the session to questions from members. I understand that no other witnesses wish to make an opening statement.

Thank you very much, convener. Good morning. Thank you for the opportunity to give evidence to the committee on the matter of the Auditor General’s report on Edinburgh College.

As the committee will have seen from our submission, we accept the report. We were taking action before and have been since the report’s publication to address the problems that led to the failure to meet the agreed delivery targets and the ensuing serious financial problems that were faced as a result of the reduction in budget. The Auditor General previously explained to the committee the arrangements for funding core and additional activity in colleges, but we are happy to clarify that further if the committee wishes us to.

I took up my post in the summer of last year. Since then, we have focused our efforts on understanding the nature of the problems that Edinburgh College faces and, in particular, the problems that we face in relation to the recruitment and retention of the right number of students. I believe that, to date, we have made some good progress on that, and we are working hard to ensure that our students experience a high level of support to gain the qualifications that they need for future jobs.

We are a large college that provides more than 700 vocational and academic courses. We have good evidence of the success that results from the hard work of our staff and students. For example, 99 per cent of our successful full-time students move on to employment or further study within six months of graduating.

However, alongside that, we recognise that there are other areas of our performance that need to improve significantly. There is still much to do in the short and medium term. Those actions include putting in place new courses for the future and, critically, reducing our budget deficit to achieve a balanced position.

Our three-year transformation plan has been shared with and shaped by staff, students and our partners. We recognise that the work that is required will be difficult and challenging, and that it will require determination and sustained effort to improve the college’s position and ensure that we are financially stable for the future.

In our submission, we have summarised what we believe are the key points that led to the college’s past performance difficulties and how we are addressing those. I would be happy to give much more detail, as required, and to answer the committee’s questions.

Thank you very much.

Thank you, again, for inviting me here along with colleagues from Edinburgh College to discuss the Auditor General’s report.

The issues that Edinburgh College faces are deep-seated, and we are working closely with Annette Bruton and her team to address them through the business transformation plan. The underlying financial issue that the college faces is that the activity target at the college was greater than the college could meet. The college has recognised that over several years and has agreed gradual reductions in activity, which has been moved to areas with higher demand since 2012.

However, a year ago the current principal wrote to us asking that the target be reduced in-year by a far larger amount—about 12,000 credits—than had previously been agreed. We supported that move and have assisted with the business transformation plan that will enable the college to be financially sustainable at the lower activity target.

The issues about additionality and the subsequent clawback are a contributing factor to the financial difficulties, but there are wider issues, too.

I am very happy to answer your questions both about additionality and how we are working with the college to address the issues.

Thank you very much. Colin Beattie will open the questioning.

First, I will look at additionality, which, clearly, is not the only problem that the college has. I want to look at the timelines and how the matter was handled.

According to the information that I have, the SFC issued the funding activity guidance to colleges on 22 July 2014. Who in Edinburgh College received the guidance?

It would have gone to the two vice principals who had responsibility for the curriculum. One was responsible for the curriculum; one was responsible for the frameworks on which the curriculum is built. The guidance would have gone to those members of the senior team.

What did they do with it?

They should have cross-checked the curriculum frameworks against what additionality the new guidance allowed. I would expect such an audit to happen every year. Since I came into post, we have done two in-depth audits following that guidance and following what we now know was a problem for the college.

I believe that an exercise was carried out, but not in sufficient depth or with enough outcomes to change the curriculum frameworks in time for the recruitment for the year that was about to start.

Would the question of additionality not be fairly obvious? It would be quite evident that there was a problem.

There were two components to additionality, if memory serves me on that particular guidance, which was issued as I was coming into post. First, a percentage figure was allowed. Secondly, an additional amount was allowed that could be agreed with your outcome manager. There was not just a fixed amount.

The timeline that I have says that, between August and October 2014, the college monitored and reported on activity to both the SFC and the board. Would that reporting to the SFC have indicated that there was a difficulty with additionality?

The college reports to the SFC four times a year. A formal return goes in and that return is also reported to the board. You would not pick up the additionality being over the allowed amount, unless the curriculum frameworks on which it was based had been properly audited. Assumptions were made that amounts of additionality were allowed in the curriculum frameworks that we have.

Each curriculum has a number of points that you are allowed to accumulate on it. Because the audit had not been done thoroughly for each area, assumptions were made that additionality was allowed. That was reported in good faith but, on checking the guidance when I came into post, I found that many of our curriculum frameworks were overapplying the rule and some were underapplying it. Overall, there was an overclaiming of additionality because the curriculum had not been changed.

Dr Kemp, would the SFC not have picked up something from the reports?

You would not automatically pick up the additionality from the further education statistical—FES—returns, although you can do that if you know what you are looking for. In Edinburgh College’s case, the issue was picked up through discussions between the outcome agreement manager and the college—not by looking at the statistics—and the matter was discussed with managers in the college during the period that Annette Bruton is talking about.

When the SFC’s funding on activity guidance came out, it went to the two vice principals. Would it automatically go to internal audit?

Internal audit would be using the same guidance as the college.

Which means?

Yes.

They would have received it.

Yes.

Did internal audit receive it?

Internal audit does not automatically receive all guidance that goes to colleges. The colleges—

You do not receive the guidance that comes from the SFC?

No, we do not get it automatically from the SFC.

How can you do your job?

The college gives us the guidance or draws our attention to its existence. In this case, we went on to the funding council’s website and downloaded the guidance from it.

10:30  

When did you do that?

It was just before we did the audit—during the course of the planning for the audit. In this case, the audit took place after the end of the year, so shortly before—

There should have been evidence of the problem by the end of 2014. I presume that you were doing the audit at the end of the year. What is the end of your year?

It was the end of the 2014-15 academic year—

Which month?

It would have been July 2015.

You would have picked up the problem in July 2015.

Yes.

Did you?

As part of the audit programme, the funding council issues guidance that is 45 pages long, and the new requirement on additionality was included in the guidance for the first time in 2014-15.

It is included in that 45-page document.

I think that it is in paragraphs 84 and 85 of that document.

At 45 pages long, the guidance is not exactly “War and Peace”.

No, it is not, but that requirement does not jump out at you as a new requirement. In the guidance, the funding council includes suggested audit tests, none of which refers to additionality.

Would you have expected audit tests to come from the SFC?

Yes. That is typically what it does. The audit guidance comes from the funding council because it is an audit that the funding council requires us to do. In the guidance, it summarises the tests that it wants us to carry out as part of the audit. In fact, it summarises the tests that it wants the colleges to ask their internal auditors to carry out on its behalf.

Are you saying that, as the internal auditors, you look at the position only once a year?

We do an annual audit of the student activity, which happens after the end of the year—

But your on-going internal audit programme comes only at the end of the year—only at the end of the year do you download the directions from the SFC that you are going to measure people against.

No. The annual internal audit programme happens throughout the course of the year.

How often do you download or check that you have received all the directives that you need?

We do that on an audit-by-audit basis.

You just told me that you do it at the end of the year.

We do it then for that particular audit because that particular audit happens after the end of the year. When we are planning for the whole audit programme, we try to make ourselves aware of the key guidance changes and the bits of information that we need to be aware of to enable us to do the audit.

Would it not have been possible for you to pick that up in the course of the year?

Yes. Absolutely. The internal audit programme is based on risk, and one of the highest risks for most colleges was—and still is—the risk of its not recruiting enough students. We did an audit in January 2015 that looked at how the college management were using the student activity data that was coming out of the system to make changes to the curriculum and to take action to recruit enough students if the college was underperforming on student—

We have just been told that the college reports four times a year to the SFC, which would include information on additionality. Do you see those returns?

We are not formally given those returns. They would be in the—

You do not get the returns that go to the SFC.

No. They would be included in the—

They play no part in your audit.

No, they would be included in the board papers, to which we get access.

What do you do with the board papers?

Typically, we review what is going through the board. We do not read every paper that goes through the board, but—

You do not read them all. Are they so extensive?

Well, the board packs are long. We work with the college and the audit committee, which is a sub-committee of the board. We attend all the audit committee meetings throughout the year and work with it to identify the key areas that we want to focus on in the internal audit programme. As a sub-committee of the board, the audit committee includes board members, and the principal and the director of corporate services typically attend audit committee meetings. That is the forum in which we agree what we should include in the audit programme or any changes that we need to make to the audit programme.

Dr Kemp, why did the SFC issue no internal audit tests on additionality? The auditors say that it is the normal course for such tests to be issued, but that did not happen in this case.

I will check the guidance, but my recollection is that it was fairly clear on what was allowable activity and what was not, and what the systems round about that were. It is worth stressing, though, that this is not a new issue or something that was introduced in 2014. There were related study rules as part of the old funding systems, which are now part of the new funding system. All that has changed is how we define full time and what is over and above that. It is something that most colleges have been dealing with for many years.

We understand that the college missed this aspect. It is a question of what other mechanisms were in place that should have picked it up and why it was not picked up.

In this case, as well as what was published in the guidance, the college was told about the rule verbally by its outcome manager in several meetings.

The college was told about it.

Yes. As well as the publication of the guidance and so on, there was discussion of the issue.

Who specifically would have been told about it?

From our point of view, our outcome manager was dealing with it. I ask Annette Bruton to clarify.

When I came into post, I looked at the issue in some detail. I found evidence—it was one of the things that I picked up quite quickly when in post—that there was a problem with our curriculum frameworks. We began working on that within a couple of months of my being in post. I wanted to look into the issue to see what had gone wrong. There was certainly evidence of the outcome agreement manager having had discussions with several different people in the executive team about reducing that additionality over time. Some of that had been done, but not sufficiently so to meet the guidelines that were issued in 2014. Mr Beattie was just discussing what the auditor might pick up at the end of the year, but I picked up the issue through the work of the senior team I was directing when I came into post.

It was not the auditors who brought the issue to your attention?

I picked it up as part of a review that I was having done on the curriculum frameworks because I could see from the student recruitment problems that we were having that something was wrong.

It was not the auditors who brought it to your attention.

It was not brought to my attention by the auditors at that stage, although the auditors did some work on it later.

You already knew about it by the time that the auditors came to you.

I picked it up through two routes, one of which was a review that I had asked for of the curriculum frameworks. The first issue was that I wanted to know how much additionality there was around the curriculum frameworks; the second was that I wanted to know whether our curriculum frameworks were generally complying with all the rules that are set, because I was worried that we were not recruiting and I wanted to know what the curriculum frameworks looked like. That was one of the things that we picked up and one of the reasons why we went to the funding council to ask it to reduce our target in-year. I did not know the full extent of the additionality until further work had been done later in the year and I had had that verified by the audit team.

The timeline that I am looking at says that 10 October 2015 was the deadline that you had for returning data for funding purposes to the SFC and that that data was accompanied by an audit certificate and report that was provided by internal audit. What did that audit certificate and report signify? What did the report say? Did it agree with the figures? Did it agree that the figures were compliant?

Yes, it did.

The report said that the college was complying with SFC guidelines. Clearly, it was not.

No. By that time, the college had amended its certificate because the funding council had identified the excessive use of additionality. The college had taken the approximately 5,000 weighted student units of measurement—SUMs—out of the claim and had signed an amended certificate. When we signed our audit certificate, it was accurate and the college’s claim was accurate. That is all described in our report, which accompanied our audit certificate and which we submitted to the college.

Was that the point at which the SFC was aware that there was a problem?

We were aware of the problem around a year before that.

A year before that.

Yes.

You knew about it before internal audit did.

Yes. Our outcome manager would have had discussions in November 2014.

In November 2014, you were aware that there was a problem—

Yes.

—and internal audit was not aware of that until July or whatever 2015. The incoming principal found it before internal audit picked it up. That seems odd—the timing does not look good.

We do audits at a particular point in time and we report on what we find in that audit at that point in time. Everything that we reported in our audit in October/November 2015 was absolutely accurate. That is not to say that we were not aware of the issues before then, but we had not done the SUMs audit that we do every year.

You told me before that you were not aware.

No. What I said was—

You told me that you became aware at the end of the financial year when you downloaded the 45 pages from the website.

Well, we were not aware of the specific guidance that the funding council had issued to us to allow us to do the SUMs audit. We were aware before then of the discussions between the funding council and the college on one plus activity.

Would that not have triggered a thought in your head that you needed to look into the issue a bit more?

We did look into it. The underlying issue for the college is that it is under-recruiting students. It is not recruiting a sufficient number of students and it has known about that for a number of years. Indeed, the issue has been on the college’s risk register for a number of years and our audit plan is based on that risk register. We had an audit in financial year 2014-15 that we agreed with the audit committee and management and that we carried out in January 2015. The audit looked at how the college took action when it identified that it was under-recruiting students, what action it took and how it reported that action to the executive and the board.

As part of the audit programme, we flagged up the underlying issues that were causing or at least contributing to the college’s not being able to recruit sufficient students. The outcome of that was that the college recognised that it was under-recruiting. At that point in January 2015, it was something like 43,000 SUMs below its target, so it had to do a lot of recruitment. It was able to recruit a large number of students, but one of the things that it did to increase its activity was to apply more activity to some of its existing students in breach of some of the funding council’s guidelines.

I think that there is a bit of a circular argument with regard to timing, but I will leave it at that for now.

I believe that Mr Williamson’s previous title was director of finance.

That is right.

So we have this problem in the college. The funding council is aware of it in 2014; the auditors pick it up in mid-2015; and then the new principal picks it up. You were the director of finance. When did you know about the problem and what did you do about it?

Generally, throughout the year, quite a lot of work is undertaken on additionality. Any additionality changes go through the reporting, and there was certainly a belief that the reporting that we were looking at included additionality agreed with the funding council. That is my perspective.

So when did you realise that this problem existed?

The problem really came out in the final further education statistics return, which was round about October time.

Of two thousand and what?

Of 2015. With the final FES return, it became much more apparent that there were difficulties with the additionality claim that we had put in.

When did the guidance come out?

It came out in June 2014.

So why did it take all that time for you to highlight that?

It was not a case of me highlighting it. The guidance was given to all the executives, and the vice principals of curriculum and quality are there to implement the changes to the frameworks through the staff. Under that procedure, I rely on the reports that I receive from that and the information that I am given through reporting.

Sitting here, I think that it looks like a total failure. The funding council was aware of the problem. Did it not get on to you and say, “You’ve got a problem here”?

The funding council was liaising with the vice principals through the outcome agreement manager.

So nobody from the funding council got on to you and said, “You’ve got a financial problem here.”

Not to me. I would rely on the information internally.

It seems to me that there are an awful lot of cooks with this bit of broth and nobody seems to be in charge and looking at the whole system. There are fundamental systemic issues that need to be addressed. How much money does the college spend on audit?

It is probably about £35,000 or £40,000 a year.

And how much does the funding council spend on audit?

I do not have that information.

Right, but I suspect that it is a lot more than £35,000. It seems to me that we have a lot of people involved and nobody seems to be talking to others.

10:45  

Let us be clear that the funding council was speaking to almost all of the senior management team at various times—the two vice principals who had curriculum responsibility and the depute principal at the time. The issue would have been well known to the people in the college who were responsible for the curriculum framework.

You are all passing the buck. At the end of the day, who should have picked this up when it should have been picked up and done something about it? You are all passing the buck.

We are fairly clear. We spoke to the college towards the latter part of 2014 while the activity was still going on. We indicated that it was an issue and, when it came through that it still had not been addressed when the final further education statistics came in, we clawed back money, because we felt that the college had not abided by the rules on one plus activity or related study.

Well, I mean—

Sorry, Mr Neil, but Ms Bruton wants to come in.

It is in direct response to Mr Neil’s question. We need to be clear that management mistakes were made by the college. The college should have picked up that guidance and taken action. One of the problems that I found when I went to the college was that the management structure was getting in the way of somebody taking ultimate responsibility for the issue. We have since changed that, and we now have a clear lead and responsibility on everything to do with credit, application, the curriculum and so on. I took quite quick action, supported by the board, to ensure that we got the structure into the right shape. We should never say never, but it is highly unlikely that that would happen now, because the guidance goes to a single person rather than different people. Also, we have made the lines of accountability much clearer.

To answer Mr Neil’s question, management errors were made in the college, because the issue should have been picked up and dealt with.

How many full-time equivalent permanent lecturers now work in the college, and how does that compare to the last couple of years?

I am sorry, but I do not have that information with me. It is in the region of 547, I think.

Right. Has there been an increase or decrease in the number of lecturing staff in recent years, given that you have been underrecruiting students, or do you not know?

I do not know, because the number of FTE lecturing staff changes year on year. We have some people on permanent contracts and some people on part-time contracts. Some people work only two or three days a week, and some people come in for just one semester to deliver short full-time courses. We have the figure, but I just do not have it with me—sorry.

Could you let us have the current figure and the figure for each of the past two years?

Yes, we can make that available.

Since the previous hearing that we had on Edinburgh College, a number of people have written to me and to other members of the committee. I do not know whether the comments reflect reality but, as they are circulating widely, I will mention some of the most disturbing ones and give you the opportunity to tell me whether they are right or wrong. I have four or five, so bear with me.

The first allegation, if I can put it that way, is that almost all the heads of department took voluntary severance in 2016 and a new set of heads has just been recruited, most of whom have no previous experience of further education. Point 2 is that there is no Government control over what is said to be super-inflated pay for the senior management team or principals. Point 3 is that the lack of an organisation chart helps to obscure the number of staff who are working on projects, and they are hand-picked staff, as project opportunities are not advertised. For example, a curriculum head was hand picked to improve the enrolment system. The result was the worst ever student recruitment year and a £3 million SFC clawback. The final point is that the principal’s response to that—I do not know whether this refers to the current principal, who is Annette Bruton, or the previous one—was to promote the head to a new job with the title “associate principal” with no interview and no job advert. Are those allegations true?

I will try to deal with them in turn.

As I have just explained, we had a change in structure because we had problems with lines of accountability. The heads of faculty run big teams—for example, our head of health, wellbeing and social science runs a part of the organisation that is bigger than Borders College—and I needed to change the responsibility levels of those heads. The majority of the heads of faculty have changed. Three of the heads were promoted internally to assistant principal posts, so they did not leave under a voluntary severance scheme. From recollection, I think that two of the heads left on VS, and that was because their posts had been deleted from the structure. We have fewer heads now than we had before, and we have invested that money in front-line staff and front-line leadership—we have created a new leadership role in front-line staff.

Dr Kemp might want to talk later on about the issue of the Government having no control over super-inflated salary levels. There is an organisational chart for the college, which is published on our intranet for staff. I do not want to comment on what I think are potentially malicious comments about an individual that have been made. I certainly recruited someone to help with recruitment and retention because they were already working on a project in that regard when I arrived at the college, and I thought that they were making a good job of it. That person was interviewed by me to see whether they would be suitable to do that project.

The information that we have is that, in 2011-12—obviously, you were not there at that time—there was a total full-time equivalent staffing complement of 1,165.8, of whom 517, or 44 per cent, were lecturing staff. In 2015-16, that figure was 1,162, of whom only 504—13 fewer than previously—or 41 per cent were lecturing staff. Does that not show that the figures are going in the wrong direction?

I can provide you with more detailed figures, but there are two or three influencers to take note of.

After the merger—here, again, I am reporting what I have subsequently found out, because I was not there at the time, so I need to be very careful—learning development tutor posts were created. Those tutors took on some of the roles of lecturing staff—administration, student support work and so on—which freed up lecturing staff to do teaching and preparation. The balance between those people who work directly with students and lecturing staff changed.

Another thing that has influenced the number of staff working in the college is the college’s decision to bring catering back in-house. We did that for a couple of reasons: first, we thought that we would get better value and save money; secondly, we thought that we would get better quality; and, thirdly, we thought that it would provide an opportunity for the catering staff to work alongside the hospitality students. Therefore, although staff numbers in some areas of the college were decreasing through, for example, voluntary severance, staff numbers in other areas were increasing in the interests of getting better value and, in the case that I am discussing, as a result of a decision that it was better to have our catering handled in-house rather than by a private company.

There are a lot of nuances under the figures that you cite. With your permission, convener, I will write to the committee to give you some of the detail that we have on that.

On the catering issue, my understanding is that, between April and June—and perhaps at other times, too—the internal catering seemed to operate at a surplus, which is welcome news. However, it seems that, although there was a commitment to reinvest that surplus in improving the canteen facilities, the quality of the food and so on, there is a feeling that that has not happened. Is that correct?

Mr Williamson might be able to say something about that. A catering review involving the students and staff is currently on-going.

Yes, there is an on-going review. We will be investing in some catering equipment, as well. Ultimately, however, the shops in the colleges are far better stocked and the atrium area is far better than it was before. There has been investment in that regard. I would also point out that the surplus was very small.

I want to come back to the issue of the 50 learning development tutor posts. According to the information that I have, the learning development tutors do not teach, they do not provide academic tutorials, there is no record of how many students they see in any one week and no other job has that job title. Is that all true?

I have one final question. How many agency workers do you have?

I am not sure that I know how many agency workers we have, but I will let Alan Williamson give you an indication of the kind of areas in which we might need agency staff. Usually, they are required just for cover when someone is off sick, but Alan will say whether I am right.

We have learning development tutors, we have student support services and we have specialists who work with students with additional support needs. That is currently under review. Learning development tutors will meet class groups or individuals on a weekly basis. They support pastoral care—in that respect, they do a similar job to the job that guidance teachers do in school—but they also support career development for students.

We know that there will be opportunities to look at all our support services, and our new head of services for students is looking at all that to see how we can achieve a better fit in how those services work together. The LDTs work very closely with the curriculum faculties that they work in.

Will you write to us about the number of agency staff, or do you have the figure to hand?

I can give you an indication of the areas in which we occasionally employ agency staff. Last year, quite a number of staff in the nursery were on maternity leave. In catering, it is sometimes necessary to pull in staff at very short notice to deal with the volume of students who are buying food. The position is similar in our leisure facilities, and we use agency staff for roles that involve giving instruction in the gym or in sports.

Will you send us the detail?

Yes, we can send you the detail.

I want to ask about the financial side of things. The college faces severe financial challenges—there is a £2.5 million funding gap. Is that correct?

Yes—the drop in activity that was agreed with the college would equate to roughly that sum.

I want to look at voluntary severance. It would appear that the cost of the merger was about £17 million, of which voluntary severances cost about £14.8 million or £15 million. According to the figures that Alex Neil gave earlier, there appears to have been a net change in staff of nearly four. Does that not suggest that the cost per individual shed has been about £4 million?

I make it clear that the figures that were cited earlier, which were circulated yesterday, are not ones that we recognise. There are figures on the number of staff who left, but they are different. I think that Annette Bruton has said that she will give you those.

As part of our post-merger analysis, we did an additional evaluation for Edinburgh College, because we did not feel that the process had gone smoothly. Neither the current management of the college nor the funding council felt that the voluntary severance process that was gone through at the time of the merger was carried out as effectively as it could have been. I do not think that the senior management team or the funding council would argue with that, but we simply do not recognise the figures that you cited.

Do you recognise the figures from a different source that suggest that 18 management staff left by voluntary severance at a cost of £1.8 million, which represents an average of £102,000 per person?

Which year are we talking about?

According to the paper in front of me,

“One reason for the high cost of the merger ... was that the College paid out £1,836,000 in VS to 18 top management individuals”.

I do not have the year, but the figure relates to the merger.

I do not know whether Alan Williamson can help with that. We do not recognise that figure.

I would have to look into the figures.

Let me rephrase the question. Do you recognise that 18 management staff have left the college over the past few years? If that is the case, how much was paid to them?

11:00  

I am sorry, but I do not have first-hand information about what happened before I started in 2015. I can get that information for the committee.

From my understanding of it, there was a significant reduction in middle managers at the point of merger and, as the three colleges came together, that was the main area for the reduction in posts. Looking back on it—although you have to be careful about hindsight—I think that the voluntary severance could have been managed differently. Any voluntary severance that we have now is under completely different arrangements and is far more cost effective for the public purse.

Is it, though? Talk to me about how voluntary severance is calculated under the Edinburgh model.

By that, I take it that you are referring to the fact that Edinburgh College offered a far higher number of months per year worked than many other colleges at the time of merger. Most colleges offered something equivalent to a year’s salary if someone had worked there for 12 years—a month’s salary for each year worked—but Edinburgh College’s scheme went up to 21 months. The funding council only funded schemes up to a year’s payback so, if someone had worked for a college for 12 years, we would fund up to a year’s salary, roughly. The Edinburgh College scheme was far more generous. The element over and above the one-year payback was paid by the college and we could not control that.

In the current circumstances—now that colleges are part of the public sector—we can control that and the current VS schemes that operate in colleges, including Edinburgh College, are at a far lower rate.

What rate?

Broadly, payback is one year. If someone worked for 12 years, they would get one year’s salary.

A maximum of 12 months’ salary.

Roughly, a month for a year, up to a maximum of 12 months.

If one accepts voluntary severance, one will get a month’s pay per year of service.

Yes, broadly, although the schemes have some banding that simplifies that.

Up to 12 months.

Is that over and above a notice period?

Under current agreements, we would not make a payment in lieu of notice.

We would not pay in lieu of notice. The set notice period is contractual. For college reasons, we might want to keep somebody for a longer period or to let them go right away, but we would not pay for their notice.

There was a significant period during which up to 21 months’ pay was paid, around half of which was funded by the college. Who took that decision?

The decision to offer 21 months was taken by the then principals and boards of the three colleges and that was the deal that was on offer at the time of merger.

What happened to them?

They left.

Under voluntary severance?

One of them took the post of principal at the college and the others left.

I appreciate that we are running out of time, so I will move on to student numbers.

There is plenty of time, Mr Kerr.

I have picked up somewhere that student numbers seem to have dropped rather significantly and I would like confirmation of that. At the point of merger, there seemed to be 35,000 students.

I have been at pains to make it clear in the public domain where the 35,000 number came from, as there were never 35,000 students in the three legacy colleges. That figure might have referred to the number of applications or to individual applicants, which is not the same as the number of unique students. Last year, we had 19,000 unique students and that figure has stayed roughly the same since merger—recruitment went down last year, as you know, which is one of the reasons for our financial difficulty. The confusion came about when the figure of 35,000 applications was published.

At that time, students were able to make up to five applications to the college. It was therefore very difficult to tell from the management information that was around in the college whether it was 35,000 single students applying to do only one course, or 35,000 divided by any number up to five, because each student could have made more than one application. However, the numbers of students coming through the door has stayed roughly consistent with the number from last year’s downturn following merger. We therefore need to be careful with the claim, which persists in some quarters, that there were 35,000 students.

Another aspect, which I cannot talk about at first hand but which I saw from my review of what happened, is that, at the point of merger, the legacy colleges of Edinburgh College were asked to estimate how many students they thought they would have. They answered that in terms of the number of applications that they expected to have, which is where I think the 35,000 figure came from. Looking back, I do not think that that was a reasonable assumption: it was overoptimistic.

Now that we have done enough with our management information systems in the college to get good data, which I now believe we have got, we can see that student numbers, apart from last year when there was a problem with recruitment, have roughly stayed the same. That was the basis on which I went to Dr Kemp earlier in the year to say that I thought that I had good evidence for the need to rebase Edinburgh College lower and then, if the region demanded it, think about growth from there.

There is a lot of confusion around that figure of 35,000. I can say categorically that there were never 35,000 students in those three colleges.

How many were there?

The problem is that I do not know, because the students were counted differently in the different colleges, which had different ways of counting.

But they were counted.

Their SUMs value was counted and reported to the founding council.

If we talk about students, we are talking about individual enrolments and head count. We can end up with a very large number of students, some of whom are on very short courses, and it is quite confusing to compare. The underlying issue at Edinburgh College that we think has affected some of what has happened there is that, if we count the number of credits, which again is slightly confusing because we start the period on weighted SUMs and end up on credits, it shows that the demand is insufficient for the amount of activity that the college has. That is something that we recognised some years ago, and we had been working through the outcome agreement to reduce the activity at Edinburgh College and move activity to other places where there was higher demand. That was operating with a relatively slow slope down because we wanted stability in the college as well and wanted to understand exactly what the demand was there.

When Annette Bruton came into post, she reviewed all the curriculum and recognised that that gap was a bit bigger than had previously been estimated and asked us to rebase the college. The number of students as defined by credits or FTEs has declined in Edinburgh College, and the drop relating to the rebasing was about 6 per cent of the total numbers. However, we think that that is in some ways a positive thing in that we now have a better understanding of what the demand is in Edinburgh College. We can fund that and use the activity that is freed up there elsewhere, where there might be greater demand, and so get a better balance between supply and demand across Scotland. That leaves us with the task of supporting Edinburgh College through the business transformation plan to get it to the right size.

But, presumably, you would not say, going back to our discussion earlier, that what was a significant fall—whatever else it might be, it seems to be a significant fall—in student numbers is a measure of success.

No, absolutely not, but let us be clear. I talked earlier about the success of the mergers programme—I have been open and honest with Annette Bruton and her board on this—but Edinburgh College is the one college where we think that the merger has not been as well implemented. Our post-merger evaluation is fairly clear on that point.

I have a final question on that, Dr Kemp. If you accept that the merger has not been as successful as it should have been, who is responsible and what has happened to them?

There have been changes at the top in Edinburgh College. Annette Bruton is new in post, as is much of the senior management team.

I am a little bit confused. Dr Kemp cannot tell me how many students there are, because some are on full-time courses and others are on part-time courses. He then talked about the demand for courses.

We can tell you the number of students.

Was that not a question that somebody asked but we did not get an answer to? Am I the only one who is confused here?

I was a bit puzzled by that, too.

Let us give the witnesses the chance to answer.

Just to be clear, my answer to Mr Kerr was that I cannot say with any certainty exactly how many students that there were at the point of merger. I am very clear about how many students we have right now: a little more than 15,000 students are enrolled for semester one. At the end of last year, we had just over 19,000 students enrolled. We anticipate having slightly above that number for this year.

That is a much more specific response. I had totally misunderstood what you were saying. That threw me off, but it is fine now. It was important to get that clarification.

I am going to ask a couple of questions. Will Ms Bruton or Mr Williamson tell me how much Edinburgh College has spent on consultants?

There is a very small spend on consultancy. Which year are you talking about? Last year?

Yes.

The figure would be very small. I would guess that it was about £50,000 to £60,000.

How about the spend over the past few years?

I would have to check.

Dr Kemp, is that spend more than you would expect there to be in other colleges?

I would have to see the figures. We are not aware that there is a high spend. It depends on how you define consultants. There was an interim principal for a while—that could be defined as a consultancy. I am not aware that there has been an out-of-line spend at Edinburgh College.

How about spend on garden leave, Mr Williamson?

On garden leave?

You are smiling. Why?

Again, I would have to check that. From recollection, I would probably say that the figure was about £70,000.

How many staff over the past few years have been on garden leave?

I would have to check that out as well.

Are you aware of any staff being on garden leave?

Previously?

Yes.

I am aware of one member of staff on garden leave.

Is it usual in the college sector for staff to be on garden leave, Dr Kemp? I have heard of that happening in the City, but not in colleges.

It is not usual in the college sector; it would be quite rare. Like Mr Williamson, I am aware of one case in Edinburgh College.

There is just the one case.

I am not aware of any more, but I would have to check that.

What percentage of your staff have been checked through the protecting vulnerable groups scheme, Ms Bruton?

We are almost up at 100 per cent. Had you asked that question six months ago, the answer would have been slightly different, because we needed to catch up with our PVG checks. We have put a lot of resources in human resources into PVG checking and we have improved our systems.

Everyone who had direct contact with students was PVG checked on their way into the college. We needed to roll over the programme of the rechecking of those who had predated PVG checks.

We have recently reviewed our PVG position, and we are now in a very good position with our checks. We are now at the stage where, I think, half a dozen people who previously had the right qualifications need to update their PVG. I would need to check the exact figures. The PVG system for checking people as they come into post is well established.

You were behind, but you have managed to improve the situation.

We were behind, but we have caught up.

Okay; good.

I will return to the topic of additionality. It is this committee’s job to follow the public pound as best we can. It is clear to me and to members that things have gone wrong with the spend of the public pound at Edinburgh College. I want to delve a little deeper into that.

The response to Colin Beattie’s initial questioning was very unclear. Mr Neil said that people were passing the buck on who knew about the guidelines from the SFC that said that additionality was no longer claimable. Mr Williamson, will you give me an idea of the number of staff who you think were aware of the guidelines?

11:15  

The senior team and the heads of the curriculum areas would have been aware of them, so we are talking about maybe 30-odd staff. I emphasise that, when the guidelines come in, a lot of work is undertaken in looking at course frameworks, subjects on those courses, and the attraction of credits against them. That is all very much within the curriculum end. There was a view that that work had been undertaken.

Were you part of that senior team?

I was. That is right.

Were you aware of the new guideline that additionality was no longer claimable?

It is allowable to claim for additionality in some circumstances. The issue is when that has not been previously agreed with the funding council. There are courses for which it makes sense to offer some credits over and above the full-time equivalent, as that suits employers better or better prepares the students. The issue is that we need to control that amount, so we require limits on it and that is agreed with the funding council in order that the amount is not uncontrolled. However, there are circumstances in which additionality is perfectly acceptable and is a good thing.

I am sorry—I probably misphrased what I wanted to say. We are talking about the change in guidelines from the SFC and that change not being properly implemented, are we not? Were you aware of that change, Mr Williamson?

I was aware of the change in the policy, but there was on-going, regular dialogue between the curriculum vice principals and the funding council.

My understanding is that the college continued to overclaim. Is that correct?

Yes, that is correct.

Why was that, Mr Williamson?

There was a belief in the college that what had been agreed with the funding council was represented through the reports that we received on the weighted SUMs figures.

I am sorry, but I do not understand that. You will have to tell me that in layman’s terms.

If there is additionality above the agreed additionality level, the courses in the framework really have to be changed to bring down the weighted SUMs that are attached to them. That brings the level down to the level that it ought to have been at. Therefore, the teaching of them would not attract credits. The reports give the up-to-date position. There was a view that the up-to-date position included the changes in additionality.

Okay, but you knew about the change in the guidelines.

I knew that there was a change in the guidelines.

So if you were director of finance at the time, why did the college continue to overclaim?

Because the curriculum side is responsible for the implementation of the guideline.

So it was not your fault.

I rely on the information that I receive through the reporting and—

Receive from whom?

From the system. The reports are system generated.

The system in the college?

Yes.

I presume that people populate that.

That is right.

So you are saying to me that you received false information from colleagues that led you to overclaim on behalf of the college.

I do not know whether the information was false. I took the information as read and therefore I based my financial projections on the numbers that were coming off.

So you knew the new guidance from the SFC. Did you think to check at all that the information that you received was correct?

The responsibility for that lay on the curriculum side, which had the dialogue with the funding council. I believed that what was being agreed on additionality was being changed in the system and that therefore the reports that I received gave me the accurate picture.

You are saying to me that there was a misunderstanding among some staff in the college who provided you with information about the new guidelines.

That is what I believe.

Were they members of your team or other senior managers?

I think that there was a mixture of both. I think that they were in the team and senior managers.

Okay. How come the issue has been such a problem at Edinburgh College but maybe not at other colleges?

It is an issue on which we are actively engaging with quite a few colleges. It is not that there has been a substantial change of policy on this—there have always been rules for what used to be called related study. However, the difference is with the new simplified funding method. I am sorry if this sounds really boring and technical. There used to be something called the full-time tariff, which related to the number of SUMs going into a full-time place: if you got a particular number, you were paid for a slightly different number, and there was less clarity about the number of SUMs in a college and about what it was paid for. The removal of the full-time tariff makes additionality more financially advantageous for a college, so we need to make it quite clear when an additional course is a genuinely good use of public money.

We clarified the rules in the context of the new funding system a couple of years ago, and we have been engaging with quite a few colleges to understand why they have a particular level of additionality and whether that is appropriate. Sometimes, that has led to the amount going down and sometimes we are quite happy with the situation, so the amount does not go down. This is something that we are doing across the sector.

Are you satisfied that the Scottish funding council did enough to apprise staff at Edinburgh College of the new guidelines and to educate them in that respect?

Yes. As far as Edinburgh College is concerned, that is one of the reasons why we applied a clawback. However, we used that money to help with the business transformation plan. We had engaged very heavily with the college through the outcome manager and with senior managers on the issue. I am absolutely satisfied about that.

I understand that there was even a workshop. Is that correct?

Yes. The outcome manager engaged on the matter several times and with several people in the college.

Okay. Mr Williamson—if the funding council was going to such lengths with the outcome manager and holding a workshop, why were so many staff still providing you with wrong information that allowed Edinburgh College to overclaim?

I am not so sure that all were being provided with “wrong information”—

I am sorry—I cannot hear you.

I am not certain about “wrong information”. There was a belief that the information that was being agreed on additionality had worked its way through into the reporting system, and we were using the reports that came off that.

As for who attended the funding council events, I cannot comment on that; I do not know who attended them.

Were concerns being raised by any of your senior colleagues or members of your team with regard to what was going on with claims?

All I know is that there was dialogue with the funding council on additionality.

Were any concerns raised with you personally?

No other concerns were raised with me, which is why, as I have said, I was using the reports that were coming off the system.

So, you were not concerned at all. Did you attend one of the SFC workshops?

No, I do not think so.

Okay—but you knew the guidelines.

I was aware of them.

Were you not concerned about the information that you were receiving and the sums that it was leading you to claim.

No. I place some reliance on my colleagues, too. If they are working with the funding council and are interpreting the guidelines, any changes that are required to the course frameworks will be followed through.

Is not it your job as director of finance, however, to be apprised of the guidance and to double-check with colleagues that the information that you are getting is correct before you submit the claims?

I am responsible for the finance, estates, human resources and information technology. With regard to the data, I rely on my colleagues to ensure that whatever is being interpreted through the guidelines and whatever has been agreed with the funding council actually work their way into the reports.

With respect, I would expect a director of finance at an institution the size of Edinburgh College who commands a salary such as you command to be aware of a guideline change and to ask questions of colleagues who provide you with the information. After all, you knew that you were responsible for the claims for the additional money.

I am not responsible for the claims. The funding comes through the activity that we produce.

So who is responsible? You were director of finance.

Yes, but the two VPs were responsible for implementation of the guidance on additionality. If they had raised a concern to say that they were overclaiming on additionality, I would have liaised with the funding council, as well, to establish the extent of any clawback.

Surely that is only part of a vice principal’s job—they perform a number of functions in a college. Your role was director of finance, and it was your job to keep the finances in order. Should you have raised questions with them rather than them raising questions with you?

Given the outcome, and with hindsight, perhaps I should have been questioning more.

So you feel that, looking back, you should have questioned more the data that you were receiving before submitting claims to the SFC?

Given the outcome, and with hindsight, I should have done that.

Mr Williamson, you have since been promoted, have you not?

No.

I understand that your title is now chief operating officer.

The title has changed, but I have not been promoted.

Okay. There has been a financial mess at Edinburgh College—I cannot think of any other way of describing it. What would you put that down to?

Since the merger, Edinburgh College has had quite a lot of difficulty achieving its income targets. That has probably been compounded by the austerity measures. In addition, we have had real difficulty with commercial and international aspects and with tuition fees. A supplementary aspect is that, when a college is not achieving credits, particularly on the HE side, it also does not attract a Student Awards Agency for Scotland fee on top. The big challenges have predominantly been on the income side.

You said that, looking back, you probably should have questioned colleagues more on the information that they were giving you regarding additionality. Do you take some personal responsibility for the situation that has emerged at Edinburgh College?

Not to do with additionality.

Do you take personal responsibility to do with something else related to the situation?

No.

But you said that you should have asked questions of colleagues.

What I said was that, with hindsight, I perhaps should have asked.

Does that suggest that you are taking some personal responsibility for not asking those questions?

If the additionality had come in and we had been fine with that, I would have been using the same types of reports and the same numbers. The additionality was not completed in accordance with the agreed figures, so perhaps—with hindsight—I should have asked more, but we were not working on the basis that we were not going to achieve the additionality figure that had been agreed.

Can you confirm that no colleagues in your team and no senior colleagues raised concerns with you about the issue at all?

Nobody raised concerns.

It seems to have been quite an unsatisfactory situation. However, unless members have any other questions—

I have one more question, convener. We have heard nothing from Mr Harvie, so I wonder whether he will comment about efficiency and the results that came from internal audit.

In my role and in giving my opinion on the financial statements, I look to the confirmations that come from the funding council and the work that is done by internal audit to provide me with evidence on additionality and all the other credits that are claimed. As you pointed out in discussing the sequence of events, I was not aware of there being an issue until October, when Mr Williamson made me aware of it.

Was that in October 2015?

Yes—sorry. That was when I was looking at the July 2015 results. At that stage, I understood that Mr Williamson also told Mr Brown about the potential issue.

That was when the SFC came back and told the college that there was a problem. That was when you became aware of the issue.

That is correct—that was the first time I was made aware of the issue. At that stage, the focus of my work was to understand what the funding council’s position would be in relation to the clawback so that I could ensure that it was correctly reflected in the accounts.

11:30  

Mr Brown has said that he was aware of the problem some time before. Would you have expected to be alerted to that at any point?

I was surprised that people were aware of the problem in advance; I was not made aware of it. As I said, before I form my opinion I wait until I have the best available evidence, and that would be confirmation from the funding council. I would not necessarily have expected to be told about the problem in advance of such confirmation. However, as I say, I was surprised when I heard about that today.

Thank you.

I have one final question. Ms Bruton, at what point did you become aware that Mr Williamson was in receipt of money that the college was not entitled to claim?

We were not in receipt of it, because we claim it as we go through the year. There were two elements to it. When I came into post I could see that there was something wrong with student recruitment, and the funding council made me aware that we needed to drive down the amount of additionality that we were claiming. Therefore, within weeks of coming into post, I asked for a review of the curriculum frameworks, which was undertaken by the senior curriculum staff. We reduced the claim that we were making at that point, and I went to the funding council to ask it to reduce our overall targets.

Then, coming up to the fourth quarter of the year and the FES 4 report, I asked further questions about whether we had driven out all the additionality that we needed to drive out. I sought further assurances on that and asked again for that to be done. I asked a member of staff from outside the executive team, whose department was expert in doing work on additionality, to take another look at it with the management information team. At that point they uncovered that the fact there was still additionality over and above what we had agreed for that year, so we spoke to the funding council again. We were still uncovering those facts as the final figures were going in.

I am not sure whether I have answered your question, convener.

I think you have. Thank you.

I draw the public part of our meeting to a close and thank our panel of witnesses very much indeed for their evidence this morning.

11:32 Meeting continued in private until 11:39.