‘Colleges still running out of money’, claims top ESFA official

A top director in the Education and Skills Funding Agency has warned that colleges are “still running out of money”, as officials launch a new early warning system for college finances.

It was announced this morning that college financial returns will be consolidated into a single annual return from January 2020.

Providers have historically submitted their financial returns at least twice a year.

The ESFA claimed this will help college governors, and the agency, “spot signs of declining financial health and ensure preventative action can be taken at an earlier stage”.

But college leaders aren’t convinced.

In reaction to the announcement, Ian Pryce, chief executive of Bedford College, tweeted: “You don’t wait until you hear the football results and learn your team lost 10-0 as a basis for preventing problems and poor performance. You spot things early by developing strong human relationships.

“I find this very disappointing especially if this is what college finance directors think.”

And Chris Todd, principal at Derwentside College, said: “Cash flow is often the issue and an annual return won’t help identify cash flow deterioration quickly enough.”

Responding to Pryce’s concern, the ESFA’s director of provider market oversight, Matthew Atkinson, tweeted: “This is the forecast return we have discussed Ian I think it does address those concerns. It’s a forward look forecast on a monthly basis aimed at cash allowing us to work with colleges sooner not later. Colleges are still running out of money.”

He later deleted the tweet.

Atkinson was first recruited by the ESFA to lead the Transaction Unit, responsible for the £700 million college Restructuring Fund.

His biography on the DfE’s website states: “Prior to joining the ESFA Matthew spent 20 years working with distressed and stressed corporates and their stakeholders. He joined from PwC where he worked in the Deals Team for over 10 years, working in insolvency and restructuring.”

FE Week has asked the ESFA to further explain how moving to a once a year financial returns model will help spot signs of poor financial health earlier.

The agency has also been asked to confirm that Lord Agnew will lead on the new early warning system, considering he was named yesterday as the Department for Education minister responsible for the “further education provider market”.

The move comes just weeks after the ESFA announced that Dame Mary Ney would lead a review into the way the government monitors college finances, and less than a month after the National Audit Office said they were also preparing to launch a value for money review on the management of colleges’ financial sustainability.

The agency labelled today’s announcement as a new “funding model”, which was described by the deputy chief executive of the Association of Colleges as a “major upgrade”.

The ESFA is, however, yet to say how it will be an improvement on the old model.

Colleges will need to submit their finance record for the last time in December with the new “simpler” model coming into force in the new year.

As is the case already, colleges in early intervention or formal intervention; or otherwise in receipt of ESFA loans, will need to submit returns on a more frequent basis.

Julian Gravatt, deputy chief executive at the Association of Colleges said: “Colleges work with a robust set of financial rules developed by ESFA and its predecessors over the last 25 years.

“The new financial model is a major upgrade”

“The new financial model is a major upgrade and we’re pleased at the Association of Colleges that the agency is working closely with college finance directors to put it in place.”

ESFA chief executive Eileen Milner said: “We are committed to ensuring that we balance the risks of protecting public funds, and preventing colleges going into financial decline with a commitment to ask from the sector for things which are reasonable.

“We are recruiting a qualified team to implement the model, which our process of testing with colleagues in the sector, suggests will save colleges a significant amount of time and resources so they can focus their efforts on delivering high quality education.”

Nearly 50 colleges, involving their financial directors, were said to have engaged with user research sessions and contributed to the design and build phase of the new model, with the Association of Colleges and Sixth Form College Association supporting the ESFA on its intent and scope.

Describing the new financial model, the ESFA said: “The new financial model has been developed to replace the longstanding biannual returns of the finance record in December and the financial plan in July, as well as the Cash Flow Against Debt Servicing and the cash flow template.

“The introduction of the new financial model follows on from recent changes to the way colleges submit their financial information with the development of an online submission portal that was first used by colleges in July.”