‘Regular accounting’ plan settles college year-end row

A “compromise approach” to a dispute about forcing colleges to move the start of their financial year from August to April has been announced.

Rather than submitting accounts halfway through their academic year, colleges will instead be asked to provide spending data throughout the year to the Department for Education’s group accounts.

In an update on Thursday, DfE officials said the approach would avoid the “undue burden” of making colleges align their financial year, which runs from August to July, with the government’s financial year which runs from April to March.

The move, which has been welcomed by the Association of Colleges, follows disagreements between the Treasury and DfE over “unaligned financial year-ends” following the reclassification of colleges as public sector bodies in 2022.

A “dry run” is now planned for 2026-27 that will require finance teams to submit “more granular actual spend information” throughout the year ahead of “effective implementation” in 2027-28.

It follows a pilot of the approach carried out with 14 FE colleges this year that has now been “endorsed by Parliament”.

Although “work is underway” to decide exactly how the financial information will be collected next year, officials said colleges would need to submit “taut and realistic” spending plans at the start of the government financial year.

They will then be asked to present actual spend during the year that will help create a “consolidated sector position” for the Office for National Statistics and the DfE’s group accounts for the year to March 31, which are subject to audit by the National Audit Office.

The update said the approach was an attempt to develop a “simple and efficient” way to ensure reporting obligations can be met “without introducing undue burden”.

The 2026-27 academic year will now be a “sector-wide test” of the compromise approach, that aims to reduce the risk that FE colleges spend “significantly more or less” than the DfE’s spending plans agreed by Parliament at the start of the year, which could have a “consequential impact” on available funding for the education sector, the update added.

Incorporating college finances into the DfE’s group accounts is seen as a necessary measure for Treasury officials who compile the ‘whole of government accounts’ report each year. The report combines the assets and liabilities of more than 10,000 public sector organisations across the UK.

Association of Colleges chief executive David Hughes welcomed the announcement as a “pragmatic approach” after 18 months of “hard work” between college finance directors and officials.

He said: “The original plan to change the sector’s financial year end would have taken up enormous resource in every college, so this use of adapted but existing data returns will greatly smooth the process.

“There is still extra work from college finance teams at a time when they are already fully stretched, but we welcome the fact that a co-creation and piloting approach was used to test a solution and the results were evaluated in a way that changed some of the decisions.”

The AoC boss previously branded government proposals to force colleges to adopt the public sector financial year as “a disastrous move” that would take them out of line with the academic year cycle.

Sixth Form Colleges Association deputy chief executive James Kewin also previously called the idea “an exercise in futility” that would place an unnecessary burden on colleges.