Colleges Scotland audit reveals reserves of #163;108m
The level of reserves held by colleges in Scotland is significantly lower than the figures cited by the Griggs review and half the level quoted by Audit Scotland for the previous year, a survey by Colleges Scotland has shown.
According to a paper sent to Colleges Scotland members, the amount of actual reserves held by all Scottish colleges in 2011-12 was just over #163;108 million. Of that, #163;38 million was already earmarked to fund new facilities or improvements to their estate.
An Audit Scotland report on Scottish colleges' finances, published last year, put their reserves for 2010-11 at #163;206.4 million. The latest figure suggests that they have dropped in value by almost half in a year. Two colleges told Colleges Scotland they planned to use some of their remaining reserves for meeting the cost of merger, and with nine mergers still to take place, it is expected more colleges will have to do the same.
Professor Russel Griggs estimated in his review of 2011 that colleges held reserves of #163;409 million, although that figure included #163;283 million of revaluation of property so does not offer a direct comparison.
It is believed that the year-on-year reduction is attributable, at least in part, to colleges using some of their reserves to deal with cuts and merger costs, as well as to upgrade or add to their estates.
The fact that some colleges had managed to accumulate significant reserves over the years has been used as a justification for recent cuts to their government funding. The survey, however, "indicates that the sector is operating in a very tight cash position, with reserves far lower than previously stated - with most of these reserves being held with specific plans for future investment in the colleges estate", Colleges Scotland said.
Reserves, unlike cash, cannot be spent or withdrawn from a bank account, and a large proportion of them are tied up in college buildings.
The figures collated by Colleges Scotland also show that the sector is cash-poor. In 2011-12, colleges held #163;178 million in cash, of which #163;131 million was to cover short-term liabilities, and #163;5.1 million was committed to future spending, leaving only #163;42 million for immediate use.
But the Scottish Funding Council's guidance is that colleges should aim to have, as a minimum, the equivalent of two months' cash available to cover expenditure. "The #163;42 million remaining would equate to roughly 19 days," Colleges Scotland warns.
Cash held by colleges is used to pay for all day-to-day expenditure, such as wages and bills, but also has to meet additional costs which may occur, such as urgent repairs to buildings or equipment.
"Audit Scotland, when reviewing college accounts from 2010-11, said colleges were operating in very tight margins, and the accounts from 2011-12 show these margins are going to be tighter still, with very little flexibility," the Colleges Scotland report concludes.
A government spokesman said: "As Mr Russell has made clear, reserves have been established with public expenditure and we need to think how best to apply them to the sector, particularly in times of change.
"College principals themselves recognise surpluses should be invested in the process of change, and that is happening around the country."
- Total value of college sector: just under #163;1bn (mostly held as land and buildings).
- Income and expenditure account, including pension reserves, in 2010-11: #163;141.5m and in 2011-12: #163;108.2m.
- Total reserves quoted by Griggs: about #163;409m.
- Cash at bank and in hand in 2010-11: #163;190.5m.
- And in 2011-12: #163;177.7m.
- Number of colleges with positive reserves in 2011-12: 38.
- Number with negative reserves: 3.
- Colleges with more than #163;10m of reserves: 4
- Total number of colleges in the survey: 41.