Audit alert at three colleges
In his report to the parliamentary audit committee, Robert Black said the auditors had not qualified their reports for Inverness, West Lothian and Lews Castle colleges, but they have drawn attention to these risks, prompting him to alert MSPs.
The three colleges have a combined deficit of pound;9 million, placing a question mark over whether the FE sector as a whole will meet the funding council's target of achieving financial security by the end of July next year. The council remains "cautiously optimistic".
West Lothian College, with an accumulated deficit of pound;4.3 million at the end of last July, appears to be in the worst position of the three because of the consequences of the complex privately funded contract to build its new pound;17 million campus in Livingston.
The college has been caught out because the contract, signed under what was then known as the private finance initiative (PFI), came at a time when the sector was encouraged to "go for growth" in student numbers, thereby attracting increased grant.
But the policy has now been changed to one of "collaboration and consolidation", which has led to grant reductions - while still committing the college to repay pound;42 million over 25 years under the terms of the PFI contract.
The Auditor General reported: "In 2003-04, this support amounted to Pounds 2,851,000 but the annual level of support will reduce significantly from 2007 and, without a significant increase in other funding the college will be unable to meet its contractual commitments."
Inverness College had accumulated a pound;3.3 million deficit by last July and its forecasts of a surplus have proved wide of the mark. It predicted a Pounds 94,000 surplus in 2003-04 but ended it with a deficit of pound;526,000. "The college now estimates that it will be unable to clear the deficit on its income and expenditure reserve by July 31, 2009," Mr Black's report stated.
Lews Castle College in Stornoway has an accumulated deficit of pound;1.4 million and has still to agree with the funding council how it will repay a council loan of pound;556,600 for the period August 2003 to March 2004.
The college has proposed an initial pound;20,000 repayment in August.
All three colleges are taking action to reduce their costs, chiefly by redundancies. West Lothian, which is seeking volunteers, faced the embarrassment this week of having to defend a 43 per cent rise in its principal's salary last year.
Inverness wants to shed 25 lecturers' jobs and aims to produce an efficiency plan by early June. Lews Castle has already implemented annually recurring savings of pound;255,000, mainly through redundancies, and is to benefit in the coming academic year from a new funding formula favouring island colleges.
The plight of Inverness lecturers "facing their P45s" was raised in the Scottish Parliament last week by Fergus Ewing, the SNP Highland member, who called for ministers to bail out the college.
Mr Ewing reported on a meeting with Roger McClure, chief executive of the FE funding council, who argued that "it would be wrong to use public money to eliminate or pay off part of the deficit of colleges which have been poorly managed, because that would not be fair to colleges that have been well run".