Scotland's college finances are sound but further savings needed

The finances of Scotland's colleges continue to be generally sound. However, funding for colleges continues to fall, and further savings will be needed from the current programme of college mergers.

An Audit Scotland report, Scotland's colleges 2013, provides an update on the sector's financial standing and reviews recent progress towards the structural reform of colleges. The reforms are aimed at helping colleges better meet local needs for further education and make savings through increased efficiency.

The report says that in 2011-12:

• there were 37 incorporated colleges with 258,000 students
• the sector's overall finances were generally sound, with a relatively small combined surplus of £2.2 million
• income fell by nine per cent, including a £56 million real terms cut in Scottish Funding Council (SFC) grants, the main income source. SFC funding will continue to drop over the next two years
• colleges cut total staff from 12,800 full-time equivalents to 11,600, with most reductions falling on teaching staff.

The sector is restructuring, creating 13 new regions and merging colleges to reduce the number to 21 by the end of 2013. The status of colleges is also changing; they will become public bodies in April 2014 and this may restrict their ability to build up financial surpluses.

Colleges have sustained the level of education they deliver and continued to meet their annual targets. However, a Scottish Government emphasis on full-time courses has led to a drop in the total number of students, and prioritising learning opportunities for young people may limit opportunities for people older than 24.

Auditor General for Scotland Caroline Gardner said:

"The finances of Scotland's colleges are generally sound. However, income has fallen significantly and this will continue for the foreseeable future. Colleges will have to manage these funding reductions and changes in structure and status while meeting local communities' demands for further education.

"The Scottish Government and Scottish Funding Council will need to assess and manage the impact of colleges becoming public bodies on their finances. They will also need to monitor the savings and other benefits from mergers, and the impact that prioritising younger students and full-time courses has on the opportunities for older people."