Colleges set up trusts to safeguard surpluses

9th May 2014 at 01:00
But pound;80 million of `stashed' funds could be at risk, experts warn

Scottish colleges have transferred almost pound;80 million into independent charitable trusts and foundations over fears that they could lose money set aside for vital projects, TESS can reveal.

But politicians and college chiefs have called for clarity on the issue amid concerns that colleges will have no legal guarantees to the use of the money that has been stashed away. A survey of 14 colleges carried out by TESS showed that they moved millions into newly established organisations earlier this year in order to protect themselves from the impact of being reclassified as public bodies from 1 April.

Under the changes, colleges are no longer able to hold on to surpluses at the end of each financial year, and money earmarked for projects such as building works could be raked back by the Scottish government.

Labour MSP Hugh Henry, who raised worries about the new organisations in the Scottish Parliament's Public Audit Committee, said that "serious concerns" remained.

"If they are totally independent of the colleges, how can they give any guarantee of what the money might be spent on in future? In theory, they could choose to do different things," he said. "I don't think there is any significant clarity on how these new bodies will work and what their relationship will be with the contributing colleges."

Mr Henry added that it was "a shame" the colleges were being forced to create financial devices to protect their resources.

Scottish Liberal Democrat education spokesman Liam McArthur agreed. "We are only just beginning to see the repercussions of the decision by Scottish ministers to increase their control over the college sector," he said. "Serious questions are already being asked, however, about the fate of up to pound;80 million to improve the college estates."

He said that colleges had taken "a great leap of faith in transferring their savings to the arm's-length foundations", adding: "They will now just have to hope they can still gain access to these vital resources."

Principals and college leaders have also raised other concerns. One senior figure told TESS that independent auditors at their college had already suggested the new foundations might not prove independent enough. "They could take a view that they are just a part of the college," the manager said, which might allow the Scottish government to reclaim the money.

City of Glasgow College has placed pound;20 million in a newly established trust, according to a spokesman, with the majority earmarked for the college's "supercampus".

Before it became a public body, meanwhile, Glasgow Clyde College transferred just over pound;14 million of cash-backed reserves into a charitable organisation. A spokeswoman said the foundation's aims were to "advance education and, in particular, the learning experience for students and potential students of Glasgow Clyde College".

"The college will submit bids to the foundation to utilise the funds for appropriate future projects," she said.

A spokeswoman for Glasgow Kelvin College, which has set up a Scottish charitable incorporated organisation and donated pound;3.2 million to it, said the change in status had caused "additional administration and bureaucracy" and "uncertainty" as the college no longer had control over the application of the funds.

"Decisions on the use of this resource will now lie with the independent trustees. In addition, the college's income will reduce as interest on this sum will now accrue to the foundation - estimated to equal pound;55,000 per annum," she said.

New College Lanarkshire and South Lanarkshire College have transferred more than pound;9 million and pound;1.5 million into a foundation, respectively.

Ayrshire, Fife, Forth Valley, Dumfries and Galloway, Edinburgh and Borders colleges, as well as West College Scotland, all confirmed that independent organisations were now in place in their regions, with some of them now administering millions of pounds' worth of funds.

John Henderson, chief executive of Colleges Scotland, said that although institutions would not themselves have chosen reclassification, "since we had to, this was the best route to go down".

He stressed that the new organisations allowed colleges the security of holding on to their reserves instead of having to "surrender them to government".

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