That is the verdict of the Scottish Funding Council, following a review of management action plans in the colleges. The council says it is “very pleased to note the positive conclusions”.

Its report, issued today (Friday), adds that not only are colleges in better managerial shape, but they are seeking to maintain the improvements.

“The evidence also points to the successful embedding of continuous improvement processes in the operations of colleges, particularly through the discipline of regular self-evaluation at all levels,” the report comments.

The FE sector is facing continuous pressure to ensure colleges improve the way they are led and how they handle their finances. The Auditor General’s latest report, in January, said the funding council was building a “steady momentum” in bringing improvements to the colleges.

The council set up an FE development directorate, currently headed by Donald Leitch, deputy principal of Glasgow Metropolitan College, to provide management support to colleges. The Scottish Further Education Unit also manages a programme on leadership skills for college principals.

And the council has launched a campaign to ensure that all colleges become financially secure by the end of July next year. A total investment of Pounds 38 million to bring this about seems to be paying off since, according to their own financial forecasts, almost all colleges believe they will be financially secure this year.

Five years ago, 18 colleges recorded an operating deficit which totalled Pounds 2.2 million for the whole sector. In 2003-04, this had been reduced to nine colleges and the sector notched up a pound;5.4 million surplus.

While the report states that one college is forecasting a deficit for 2007, Martin Fairbairn, the council’s director of governance and management, reveals that no college is expected to be in such a position that year and the sector’s overall operating surplus is predicted to be more than pound;8 million.

Mr Fairbairn dismisses any suggestion that cash is the only catalyst. “The extra investment has helped in delivering financial security, but we wouldn’t have achieved that security without improved governance and management,” he says.

Graeme Dalziel, chairman of the board at Lauder College, goes further and argues that the private sector could learn a great deal from how colleges operate. “I was surprised at the high quality of college management when I came on to the Lauder board in 2000,” Mr Dalziel, chief executive of the Dunfermline Building Society, says.

HMIE reviews found that colleges’ educational leadership and direction were very good or good in 100 per cent of cases in 2003-04, against 86 per cent in 2000-01. Overall, college-wide activities rated very good or good by inspectors rose to 96 per cent in 2003-04, from 79 per cent in 2000-01.

The council’s conclusion is that colleges are successfully complying with the seven pointers for action set out in a management review in 2000 by its predecessor council.

There is “widespread involvement of boards of management in setting the college’s vision and in developing and monitoring its strategies to achieve that vision”, the funding council’s report states. There are also better induction and training arrangements for board members, who are showing more “financial literacy”.

A number of colleges mentioned, however, that the problem was not so much about training board members but recruiting a sufficient number with the right mix of skills and experience. And colleges say there needs to be more awareness of “governance” issues among middle managers.

The council also found improvements in colleges’ planning, including risk assessment and the integration of academic, financial and physical planning.