Scottish colleges pound;15m in the red;FE Focus
Scotland's further education system is deep in debt, with 40 of its 43 colleges trading at a loss, according to a new report.
The report, published today by the National Audit Office, says that colleges' financial health has steadily deteriorated since incorporation. The number of colleges with overall deficits has more than trebled in the past five years and the sector as a whole is pound;15 million in the red.
Although the Government has announced an additional pound;214m in funding over the next three years "there is a continuing need for colleges to reduce the unit cost of their core provision", the report adds.
Despite a 23 per cent reduction in unit costs since incorporation, there are still "wide variations" between institutions, with some colleges spending twice as much as others. If the highest-spending colleges could reduce their unit costs to the median, the report estimates, they would wipe pound;13m off the sector's debts at a stroke.
A minority of colleges attribute their debts to restructuring costs involving one-off early retirement payments, which in time should improve their finances. But eight colleges are being "closely monitored" by the Scottish Office, and the predicament of two is so bad that consultants have been called in to help draw up rescue plans.
The new Scottish Further Education Funding Council, which begins work next month, has been asked to investigate college management and the Audit Office report says many of the cost-cutting measures are within the reach of college managers.
The staff payroll, which accounts for just over half of colleges' expenditure, is a prime target for cost-cutting, the report says. Good practice in managing staff costs includes increasing the amount of contact time, reducing leave, using temporary agency staff and closing financially non-viable courses, it suggests.
Some colleges used simple good housekeeping to improve their balance sheets. One saved pound;35,000 a year by installing long-life, low-energy lights, while another cut pound;40,000 from its annual stationery bill by competitive tendering.
However, the report found that colleges' costing processes were immature and only 23 per cent of them had clear processes for assessing expenditure.
The Audit Office report outlines a six-step framework to improve Scottish colleges' performance, drawing on the benchmarking system already in place in England and Wales, and which it says could be implemented within six months.
The new funding council would identify up to 50 "key processes" in colleges' success, analyse them, prepare and issue "best-practice" documents, set goals, and support and assess progress.
It concludes: "Opportunities for Everyone, the new strategic framework for FE in Scotland, encourages greater collaboration, and the new Scottish funding council will have a key role in ensuring this happens."