A college in financial intervention has turned its deficit budget into a surplus after a “significant restructure” that resulted in more than 60 job losses, according to the FE Commissioner.

In spring this year, South Devon College (SDC) sought emergency funding from the government after “depleted” cash reserves left it with only three working days of operating cash.

The college has since borrowed £1.5 million from the government and made redundancies equivalent to 61 full-time employees, saving about £2 million per year on staff costs.

This was against a savings target of up to £2.75 million through up to 65 redundancies from its staff body of nearly 700.

A spokesperson for SDC said the college is “on track” to deliver a small surplus this year. It has an overall income of about £36 million.

The FE Commissioner’s assessment – completed in July but only published today – said SDC’s financial reporting suffered from “errors and delays” that exposed an “urgent” need to integrate its internal reporting systems and build “closer working relationships” between teams.

Issues included failing to classify capital grants as “restricted cash”, “erroneous” assumptions about income that had to be written off, and late reporting of a budget shortfall in apprentice numbers.

Its reserves are now “depleted” after repeated use to cover the college’s £1 million per year capital costs.

By the time the college asked the government for emergency funding in spring, reserves were so low that it “could not afford to restructure”.

But the college’s audit committee, which oversees risk management, only raised financial risk levels to ‘red’, the highest rating, in March this year. 

The FE Commissioner’s benchmarks suggest a college aims to have more than 40 adjusted cash days in hand.

Before reclassification, SDC would have used its overdraft facility to manage low cash balances and restructuring costs, the commissioner noted.

The organisation has been told to carry out a “full review” of its finance team’s structure and skills mix, which has been overseen by a senior director of finance responsible for both operational and strategic management.

Plans to hire a head of finance were also “shelved” in 2024 due to “budgetary constraints”, the commissioner said.

How did it get here?

Governors told the commissioner’s team that financial pressures “commenced” due to the cost of the college’s £17 million ‘Hi Tech & Digital Centre’ in Paignton, which has had a “slower than planned” return on investment “due to Covid”.

The board has reportedly “reflected” on whether funding capital costs from cash reserves, which “weakened” college finances, “should have stopped” earlier.

Apprentice numbers have also “declined” since 2022, with low retention “partly” due to “issues” affecting learners who need “additional learning support and SEND”.

The college sought the FE Commissioner’s advice on curriculum efficiency and financial sustainability in 2023, which resulted in the use of a new planning tool, but work on planning for apprentice numbers in June each year is still “too late”, the assessment found.

A key “gap” in the SDC’s business planning process was a lack of integration between the financial plan and HR systems.

This was done for the first time when planning 2025-26, helping to identify most of the “curriculum staffing efficiencies” in the restructure.

What now?

The FE Commissioner’s team set out eight recommendations for SDC to be implemented in September and October this year, including a three-year financial strategy that “aligns” its vision, ambitions, cashflow, capital expenditure forecasting, and scenario modelling.

Other actions included ensuring “adequate and appropriate” resourcing of the finance team and taking a “whole college approach” to delivering and owning financial sustainability.

Monthly finance updates for governors and senior leaders need “further development” to show spending compared to the original and “reforecast” budget, so issues can be analysed “on a timely basis”.

SDC’s leaders should also agree an internal communications strategy to improve “staff morale”.

A college spokesperson said it has taken “decisive action” to rebuild its cash reserves since the intervention process began.

They added: “Following a recent stocktake visit, the [FE Commissioner] team highlighted visible progress on single improvement plan actions and noted that students expressed confidence in their experience at the college.

“We acknowledge areas for further development, including strengthening finance team capacity, and improving communication of our strategic plans and milestones. 

“These priorities are being addressed as part of our ongoing improvement work.

“We remain focused on delivering high-quality education and training, and are confident that our recovery plan will strengthen our position for the future.”

A Berkshire college is exploring merger options after struggling with “serious cashflow pressures” that triggered government intervention this summer.

Newbury College’s long-term sustainability is being tested through a structure and prospects appraisal (SPA), which examines whether to stay as a standalone college or merge with another.

FE Commissioner Shelagh Legrave undertook an assessment of the college in July after the college fell into a “consequential slippage” of repaying funding advances.

The college blamed “complexities” in the planning system leading to delays in receiving receipts of its Mayfield Point site property sale.

Legrave’s report, published today but conducted in July, recommended leaders refresh its property strategy and create “more realistic” estimates for its income after its financial performance worsened from lower-than-planned student numbers and higher-than-expected English and maths resit provision.

The FE Commissioner also told the college to start an SPA process in the autumn term.

Newbury College was advised to explore a Structure and Prospects Appraisal (SPA) in March 2024 by the DfE’s place based team and the FE Commissioner’s office to test merger options “against the viability of a standalone option”.

The corporation initially agreed to the recommendation but paused the process in June 2024.

“The board has since reflected further and now considers undertaking a SPA would be judicious to ensure the college’s future sustainability,” today’s FE Commissioner report said.

The college said it is expected to complete the SPA in spring of next year and is exploring a range of “possible operating models” for the college.

The governing board has set up a SPA steering committee, thereby suspending the strategic development committee after the chair told the FE Commissioner it has “outlived its usefulness”.

The chair assured that the new committee was for “discussion not decision” but Legrave warned that its relationship with the wider board needs “careful thought” to maintain appropriate engagement with the whole board.

Legrave’s report described the college as “one of the smallest general further education colleges in England” with a “broad curriculum and a high cost base”.

“The sustainability of the college given its current size and its weak financial position, merits a need to consider the various strategic options available to the college,” the report said. 

Newbury’s position ‘still fragile’

Newbury College is one of only a few FE colleges to operate under a PFI. The contracts, greatly expanded under New Labour in the 1990s, saw private firms build and operated public sector infrastructure and facilities, with above-inflation repayments scheduled over many years.

The college has since been crippled by the “very high” repayments costs of its PFI, due to end in 2027.

Its latest accounts show deficits from PFI payments amounting to about £460,000 each year since 2018-19, including massive deficits from interest payments. It was billed £154,000 in 2018-19 just for the interest.

The college will be free of the deficits once the contract expires and the FE Commissioner advised leaders to develop a transition plan by this December that details a “realistic” cost of procuring services needed once the PFI ends.

Meanwhile, Legrave noted that the college’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) in June 2025 has worsened for the year.

The college budget had assumed it would get extra in-year cash from the Department for Education for a growth in 16-18-year-old students, but they enrolled fewer learners than planned in 2024-25.

While the reduction in income was offset by growth in apprenticeship and higher education numbers, its pay costs were higher than its budget “largely” due to a higher-than-expected demand for GCSE English and maths resit provision.

The report said the college has undertaken a staff restructure, reducing management and teaching staff to “address its cost base”.

The report added: “While forecasts show an improving EBITDA, as a result of staff restructuring and the end of the PFI in July 2027, the position is still fragile, and the ongoing underlying financial position will always be challenging. The cashflow is also dependent on the receipts from the land sales and DfE’s consent to use the proceeds for working capital.”

Leadership changes ‘yet to be proven’

Newbury is currently being led by Lee Probert, contracted as interim principal until August 2026, who took up the post last December when Iain Wolloff retired.

Other recent leadership changes include Lee Jamieson, the new deputy principal, and Julian Tucker, a interim director of finance.

The FE Commissioner report said the “interim nature” of two of the three senior appointments means the strength of leadership at the college “has yet to be proven”.

She added that in light of the SPA process, permanent appointments might be “inappropriate” now and does cause “an element of uncertainty and fragility” to a leadership team that has already been through turbulence.

Regarding the governance of the college, chair of the corporation Sally Osmond told the FE Commissioner that leaders needed to provide more detail and data to the board after finding some reports “lacked focus” or were “too wooly”.

Lee Probert, principal of Newbury College, said: “We are pleased to receive the support of the DfE and FE Commissioner to undertake the review and evaluate future options for Newbury College to ensure that its long history is sustainable into the future.

“We continue to be focused on excellence for our students, embedding the key requirements for quality learning and developing skills for our communities providing ‘careers, not courses’.”

“Newbury College has been central to the development of thousands of students over the last 76 years and fundamental to the provision of key skills for businesses in the area.”