North Highland College No Plans Yet In Place To Deal With Serious Financial Problems

4th June 2019

Colleges' financial challenges increase.

The Audit Scotland report published today (4th June 2019) shows North Highland college is only one of several colleges not to have any financial plan in place to deal with a growing deficit.

In respect to North Highland College the report specifically points at areas of concern -

The college reported a small underlying surplus of £0.1 million in 2017-18 but faces several key risks to its financial sustainability.

* The college has previously required cash advances from its regional body, the University of the Highlands and Islands (UHI). It is forecasting a cumulative underlying deficit of £2.5 million by 2022-23 (equivalent to around 16 per cent of current costs) and a negative cash-flow position from 2019-20 onwards.

* The college has loans of £1.3 million and in 2017-18 relied on waivers from its bank to avoid breaching loan covenants. At the time of the annual audit, the college did not have an agreed financial plan in place to achieve the required savings in both the short and longer term.

* The auditor highlighted the need for more detailed interaction between the college and UHI as savings plans are developed. The college has once began a curriculum review, with a view to achieving savings for the 2019-20 budget. However, the college anticipates that it may require financial support from UHI, in the form of cash advances, for 2019-20.

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The financial challenges facing Scotland's college sector have increased, says the spending watchdog.

An increase in Scottish Government funding to colleges will cover only the costs of making staff pay and conditions consistent across the sector. Meanwhile, money allocated for buildings and infrastructure will fall short of the estimated costs of maintaining the college estate.

Most colleges are forecasting deficits in the next five years, as the gap between their income and expenditure continues to widen. Only a small number of these colleges were found to have identified specific actions to deal with shortfalls.

Despite these challenges, student numbers have increased, and the sector continues to exceed its learning activity targets. However, there is wide sector variation in measures of student success, such as numbers completing their course or getting a job. And there is room for clearer Scottish Funding Council reporting on colleges' peformance, including around student satisfaction figures.

Caroline Gardner, the Auditor General for Scotland, said:"Colleges are increasingly dependent on public funding to cover their costs, and it is likely that the gap between their income and spending will continue to widen without action.

"Tighter budgets make financial planning even more important. Colleges and the Scottish Funding Council need to do more to ensure they are as well-prepared as possible to deal with ongoing pressures."

Read the full report at https://www.audit-scotland.gov.uk/report/scotlands-colleges-2019