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Moray College – Podcast transcript 
I’m speaking today with Mark Macpherson, senior manager at Audit Scotland, about a new audit report on financial management and sustainability at Moray College. Moray is one of 10 colleges overseen by the University of Highlands and Islands and in 2015/16, the college served nearly 4,200 registered students and employed almost 250 members of staff. 
Mark, can you talk me through what the report today is about?
This is a section 22 report, which is used to alert the Scottish Parliament to issues found in the annual audits of specific public bodies. 
The auditor of Moray College has raised concerns about the financial position of the college following the 2015/16 audit. During the year the college had asked for an advance of funding as it did not have enough money to meet operational costs.
Today’s report sets out why the college needs to take action to achieve financial balance. 
And how long has the college been struggling with financial difficulties?
The college also had to ask for an advance of funding in 2014/15, and we highlighted this in our colleges overview report last year. 
So this is the second year in which it experienced similar difficulties, which led to this report on the challenges facing the college. 
What are the weaknesses with financial management and reporting at the college? 
Steps have been taken in the past two years to improve the clarity of information provided to the college Board and its committees, but there is still room to improve these arrangements. 
There has also been a lack of capacity within the college’s finance department, including a permanent Director of Finance. This led to issues with the effectiveness of financial planning and management. 
As I say, steps have been taken to address this, including appointments in key roles, but it’s too early to see an impact on the financial performance of the college. 
So what does the future look like at the moment for the college’s finances?
The current financial position is not sustainable and the college will continue to face challenges without changes to its cost base and its financial management arrangements. 
The college is forecasting a deficit of just over £470,000 in 2016/17, and it has identified funding shortfalls until 2019. 
There is a risk that the college will not manage to make the necessary savings to meet the shortfall in its funding in the longer term. For example, the auditor has reported that the college’s staffing costs appear to be unsustainable. 
So what needs to happen next? 
The college is taking steps to address its financial difficulties, but it needs urgently to agree a recovery plan with UHI and the Scottish Funding Council to deliver a sustainable, balanced budget. 
It is also important that the University of Highlands and Islands makes sure that the college can deliver on its priorities within the resources available, to minimise the impact on staff and students.
We’ll report the findings of this audit to the Parliament’s public audit committee next month, and we’ll continue to review the college’s financial position through our annual audit work.
Mark, thank you. And the report is available to download from our website, www.audit-scotland.gov.uk