Financial overview of Scotland’s colleges – podcast transcript

Simon: We’re here today talking to Mark MacPherson about Audit Scotland’s latest report Financial overview of Scotland’s colleges 2006/07.  So Mark, what’s this report about?
Mark:  Well Simon, this report is an overview of the financial performance and governance arrangements of Scotland’s colleges in 2006/07.  It looks at the financial state of the sector and reports how well colleges and the Scottish Funding Council are managing finances.  It also considers any current developments and challenges in the near future including their possible impacts on the sector.  

Simon:  And what have you found?
Mark:  We found that the sector has improved significantly in terms of its financial position since the last overview report published in December 2003.  More colleges are recording operating surpluses, the average size of those operating surpluses has increased and the sector overall has a larger accumulated surplus on its reserves than previously.  

Simon:  And are you able to tell us what the reasons have been for this improvement?
Mark:  The improvements can be attributed to a number of factors.  Partly down to increased funding, better management and peer support and the sector learning lessons from earlier problems.  However, it’s important to note that the sector does face challenges over the next few years due to cost pressures, tighter funding.  The Scottish Government’s current budget proposals will see smaller funding increases in the future and colleges may get less money from other income sources such as European funding.  In June 2007 seven colleges were forecasting deficits in at least one of the next three years.  

Simon:  You said before this report looks at the financial management and the governance of colleges – what’s the importance of this for students and the public?
Mark:  It’s clearly important that colleges manage their finances well.  If a college doesn’t manage its finances well the results can range from facilities and buildings not being properly maintained or modernised through to students studying in less than ideal conditions or not having access to particular courses at certain colleges.  Colleges, of course, have a key role in the government’s lifelong learning and social inclusion agenda.  As primary providers of further education and also providers of higher education and other vocational training colleges deliver services to a wide range of people and communities and they are planning to widen access to learning in the future.  The financial position will have an impact on their ability to fulfil these aims.  

Simon:  OK, you’ve spoken there about the impact on students but what other public interest reasons are there for doing this report?
Mark:  Well just to reiterate it is obviously an important part of the education and social inclusion agenda.  This is also an area of significant public sector spend.  In 2006/07 the sector spent almost £630 million providing education to 363 thousand students so there are a considerable number of students and a significant amount of money involved.  However, we also wanted to follow-up on the report that we published in December 2003 to see if financial performance had improved.

Simon:  You’ve said that there’ve been some very significant improvements in the financial situation of colleges but you also allude to some challenges coming up.  What would you like to see happen now?
Mark:  Of course we would like to see the sector continue to achieve financial sustainability and we’ve made a number of recommendations as a result of our findings for both colleges and the Scottish Funding Council.  We would like colleges to ensure they have robust financial planning in place to reduce deficits where relevant.  We would like to see colleges also improve their financial forecasting and provide good quality draft accounts to support good governance and transparency.  We would like the SFC and colleges to continue to work together to improve financial sustainability in the sector, to agree a core set of financial performance measures benchmarking data and wider performance measurements arrangements and continue to support networking and benchmarking arrangements throughout the sector.

Simon: OK Mark, thanks very much for your time.