Over the summer the annual accounts of the Skills Funding Agency (SFA) were published (click here). If anyone was interested in them, they would have read that these accounts were qualified by the SFA’s auditors – the National Audit Office. While generally in life qualifications are something to be sought, qualified accounts are a bad (and unusual) thing.

The National Audit Office judged in its qualified audit opinion: “the financial statements do not give a true and fair view of the state of affairs of the Skills Funding Agency and its subsidiaries as at 31 March 2011”

The auditors believed that financial reporting standards required that the SFA should have “consolidated” the accounts of further education colleges as “subsidiaries” into the agency’s own accounts because the SFA has control over colleges. (That control is in the form of the borrowing consents which otherwise independent corporation have to seek.)

The SFA declined to do this given the practical challenges of incorporating the accounts of every FE college for the year to 31 March 2011 – a task further complicated by colleges accounting to the 31 July each year on the basis of a different set of reporting standards.

Does any of this matter? Not too much in itself – but it does highlight a wider issue and a potential threat.

In his report on Internal Control, Geoff Russell, as SFA’s chief executive’s noted how the accounting treatment of colleges poses an “unexpected risk” threatening “to contradict the Government’s simplification and cost reduction policy”. This arises both from international financial reporting standards and from last October’s designation of colleges as public sector bodies by the Office for National Statistics (ONS).

In terms of cost-benefit analysis, there is no benefit to colleges from such a return to balance the cost.”

While Geoff Russell does not spell it out, what that means in practice is that in the future FE colleges might be asked to provide the information necessary for the SFA to consolidate all those figures into its own accounts. This would mean a Spring return in addition to the Finance Record and the Financial Plan returns. Inevitably there is a compliance cost for colleges as well as a resource required at the SFA where presumably a shrinking staff could be doing something more useful than chasing accounts and crunching numbers. In terms of cost-benefit analysis, there is no benefit to colleges from such a return to balance the cost.

Similar issues are posed for Sixth Form Colleges although the ONS classification treated them as local government bodies as, until the Education Bill becomes law, councils grant borrowing consent. That difference meant that the Young People’s Learning Agency avoided the embarrassment of qualified accounts (click here).

The DfE and BIS are promising to deal with these issues but the promised “freedoms” may not be enough to remove threat of some more new red tape.

Bob Deed is a financial consultant in the college sector tweeting as @deedconsulting

Accusing colleges of withholding customer information because they have something to hide, as the new Head of the UK Commission on Employment and Skills does in the TES (19^th August – click here), may make for a good headline in the silly season but hardly makes a useful contribution to the debate on accountability.  Michael Davis would have been better advised to follow the recommendations published by his own organisation last year (click here) suggesting that the issues involved in improving information for customers ‘must be addressed with a positive, problem solving attitude rather than as a ‘stick to beat’ the sector’   The reality is that while providing information that helps students make well informed choices is important and something that colleges take very seriously it is also much more difficult than the armchair generals queuing up to advise FE might think.

To begin with customers of the FE sector are not short of data.  Colleges publish success rates for long and short courses annually which, along with observational data also find their way into published inspection grades.  Colleges carry out student satisfaction surveys and regularly receive ratings that many other public and private organisations would die for.  It is not true to suggest that Leicester College is the only one that makes use of more detailed data on student destinations (though it may well be the only one that uses Mr Davis’s pet scheme) and the proportions progressing into further education or employment is an integral part of the information published by every college under ‘Framework for Excellence’.   A helpful further step would be for the YPLA to analyse and publish this destination data for major types of course or by categories of student rather than simply using it as one means of grading colleges.

may make for a good headline in the silly season but hardly makes a useful contribution to the debate on accountability.”

It is good that in moving to a genuinely ‘demand led’ system of further education the government intends to give greater priority to information that serves the needs of customers.  There is no shortage of well meaning advice on how this might be done – ‘food labelling approaches’ ‘traffic lights’ or ‘scorecards’ are regularly proposed by bodies like UKCES in broad brush terms conveniently leaving the awkward detail to others.  Some suggestions are ludicrously impractical such as the Commission’s own suggestion that colleges publish the increase in wages paid to successful graduates of individual courses.  Others are possible but miss the point.  A potential student is not so much interested in average pass rates or employment rates for a programme as in the prospects for someone like me.

What most students need is not more tables of data but skilled and impartial guidance that helps them assess options in the light of their own context, ambitions and attitudes to risk.  Instead of cheap jibes at colleges UKCES would serve the country better if it challenged the serious cuts currently being made to the Careers Service that make the chances of such guidance increasingly remote.

Mick Fletcher is the Visiting Research Fellow at the Institute of Education