Colleges ‘face finance meltdown’

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MINISTERS HAVE been warned that the further education sector faces “financial meltdown” with scores of colleges in serious difficulty.

A report from the government spending watchdog highlighted a “rapid decline” in the positions of the 244 institutions across England.

The number of colleges running a deficit more than doubled between 2010-11 and 2013-14, from 52 to 110, according to the National Audit Office (NAO).

Some 29 were assessed as “financially inadequate” by the Skills Funding Agency (SFA) - meaning they were at “signficant risk” of failing to meet contractual duties.

That figure could rise to 70 by the end of this year.

The NAO report said in September 2013 colleges were in receipt of £49 million of emergency funding. By last autumn the SFA had converted £40 million of the advances to grants.

However, there was still an outstanding balance of £45 million to 13 colleges as of this February.

The auditors said the Business Department and the SFA had been relying on “unrealistic” financial forecasts produced by institutions - which receive a total of £7 billion a year in public funding.

It also argued that the oversight bodies needed to analyse risks better and intervene earlier to prevent problems gathering pace.

NAO head Amyas Morse said: “The further education college sector is experiencing rapidly declining financial health, and lacks a clear process to inform decisions about local provision.

“The Department for Business, Innovation & Skills and the Skills Funding Agency have taken steps to improve their analysis of risk in the sector, and to intervene more effectively in the colleges in most difficulty.

“But there needs to be more than a college-by-college approach. Until then, the oversight and intervention arrangements cannot be regarded as value for money.”

Meg Hillier, chair of the cross-party Public Accounts Committee (PAC), said the report was “deeply alarming”.

A BIS spokesman said: “We are committed to developing a further education system which creates a productive, innovative and competitive workforce for the 21st century.

“The NAO report correctly highlights where we have already taken action to provide young people with the skills they need and to deliver greater value for money within the sector.

“Furthermore, we are already implementing many of the report’s recommendations and will be going even further to strengthen the system by giving local areas a greater say over how and what young people are taught.”

The NAO also announced that it had qualified the accounts of the SFA over the £49.9 million of advance funding to FE colleges.

The SFA said internal financial management and control arrangements would be reviewed.

Earlier this month The Yorkshire Post revealed college and union bosses in the county said a barrage of funding cuts was placing hundreds of teaching and lecturing jobs in the county at risk.

Further Education colleges will see their adult education budgets dropping by 24 per cent from this September - resulting in course closures and redundancies across Yorkshire.