Public Accounts Committee to look at FE ‘financial meltdown’

Concerns the FE sector is heading for “financial meltdown” are set to be investigated by the Public Accounts Committee (PAC).

The committee will next week “challenge government” as it picks up on the findings of the National Audit Office (NAO), which in July reported that the financial health of the FE college sector had been in decline with 110 colleges recording an operating deficit in 2013/14, up from 52 in 2010/11.

The NAO report, entitled Overseeing financial sustainability in the FE sector, further said that in the same period, the number of colleges assessed by the Skills Funding Agency (SFA) to have ‘inadequate’ financial health rose from 12 (5 per cent of colleges) to 29 (12 per cent).

The SFA, it said in the NAO report, had been too slow to spot problems with colleges’ finances because of failures to check the “realism” of their “over-optimistic” forecasts, and that the SFA’s formal interventions, once it finds a college’s financial health is ‘inadequate’, “has often lacked sufficient impact”.

The findings drew a stark warning from PAC committee chair Meg Hillier, who said at the time: “I do not believe it is any exaggeration to say the future sustainability of the FE sector is at risk of financial meltdown.”

cartoon 130
A cartoon from edition 130 of FE Week, dated March 9, 2015, about the NAO inquiry into FE college sector finances

And her committee will be looking further into the issues raised by the NAO report with its own inquiry, taking evidence from a number of high-ranking sector figures (see gallery below) including Department for Business, Innovation and Skills (BIS) permanent secretary Martin Donnelly, Department for Education permanent secretary Chris Wormald and SFA and Education Funding Agency chief executive Peter Lauener.

A PAC spokesperson said: “This inquiry will challenge government on whether it is taking responsibility for protecting the taxpayers’ money invested in the sector; examine whether the balance between ‘prevention’ and ‘intervention’ is correct when responding to financial sustainability issues; and obtain assurances that government has robust plans in place for creating a sustainable college infrastructure for the future.”

They added: “The SFA anticipates that the number of colleges it assesses as having inadequate financial health will continue to grow. On current trends, it could be around 70 colleges by the end of 2015/16.

“The financial support that the SFA offers to struggling colleges has increased significantly since 2010, but most has not yet been repaid. The outstanding balance, including new advances, stood at £45m by February 2015, relating to 13 colleges.”

The PAC’s first evidence session takes place on Monday, October 19, at 4pm. In addition to those already listed, committee members will hear evidence from Sarah Wright, principal of Central Sussex College, Stuart Laverick, principal of Heart of Worcestershire College, and Ian Ashman, principal of Hackney Community College.

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Main image, top: PA

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  1. FE Lecturer

    Financial reporting often indicates what has already happenned i.e before significant budget cuts. I think the current situation is far worse than the great and good realise and the rate of decline of financial health and quality will be rapid in the next twelve to eighteen months.
    Many colleges have quietly reduced staff numbers by voluntary severance schemes and then they make a few compulsory redundancies to meet a target. They are not announcing any of these job losses so the public (and politicians) are not aware of what is happening. Some colleges are paying 0% pay rise and others have halted salary increments which are contractual obligations. Some have done both. Many Principals have demonstrated poor leadership skills by rewarding themselves with a generous pay rise whilst they freeeze the salaries of others. They could lose the support of their staff and find the next OFSTED grade is much worse than expected.

  2. Learner Support

    As a support worker, I have seen these cuts first hand and find them terrifying. How will learners cope if they don’t have the support and opportunities that colleges offer? I was a mature learner at a college as I left school aged 13 due to bullying, and it was college that gave me a second chance at both education and life. I went on to gain a 1st class degree at university and now support learners myself, but government reforms and cuts are hurting the students and the staff. Where will students learn new skills and improve their lives and their community?

  3. In and out of education there are organisations which when under financial pressure, assume cost reduction equates to cutting back resources and staff reduction. Whilst for business it often results in closure. To date, FE has tended to be propped up and its management continue to ‘manage.’ But no longer it would seem which appears to come as a surprise to some, but not to those working inside and outside Post-16 education.
    So it infuriates me and many others within my area of interest that whatever other steps might be taken and after a decade of ‘could have known better’. It is estimated that only 25% of SFA funded learning providers use appropriate technology to reduce cost, improve quality, increase business and provide learners with an experience in keeping with 2015 education. That’s just 25% delivering far more for a lot less, which in any kind of organisation is regarded as good business practice.
    My point of course is that approximately 75% do not use appropriate technology to run their ‘business’ and whilst technology for technology’s sake isn’t the answer, in fact has led to appalling waste. The colleges and learning providers that are using learning technology effectively have gone a long way to improving their position, financial or otherwise as management take back control of their ‘business’ from traditional or simply inefficient practices. A bit like successful business’s in or out of education. Go figure!