Further education colleges face financial meltdown

A report from the government spending watchdog highlighted a “rapid decline” in the finances of the further education sector in England

The number of colleges running a deficit more than doubled between 2010-11 and 2013-14, from 52 to 110.  Meg Hillier, who chairs the Public Accounts Committee, described it as a “deeply alarming report.”

An additional £25 million has been pledged by the Department for Business, Innovation & Skills department (BIS), this financial year to help support the creation of 3 million apprenticeships by 2020.

A spokesperson said: “Only by providing businesses with the skilled workforce they need can we boost economic growth and drive productivity and prosperity for the whole country.”

The Skills Funding Agency (SFA) assessed 29 colleges as being ‘financially inadequate’ meaning that they were at a significant risk of not being able to fulfil their contractual duties. This was up from 12 colleges in 2010/11. However, the figure could rise to 70 by the end of the year.

Amyas Morse, head of the National Audit Office, said: “The further education college sector is experiencing rapidly declining financial health, and lacks a clear process to inform decisions about local provision.

“The Department for Business, Innovation & Skills and the Skills Funding Agency (SFA) have taken steps to improve their analysis of risk in the sector, and to intervene more effectively in the colleges in most difficulty. But there needs to be more than a college-by-college approach. Until then, the oversight and intervention arrangements cannot be regarded as value for money.”

Stewart Segal, chief executive of the Association of Employment and Learning Providers (AELP) commented that training provides could be affected by the outcome of the review and that the reductions in budgets has had a negative impact. 

He added said: “NAO has focussed its paper on the FE colleges, but the financial impact is just as stark on independent providers who deliver a large proportion of the FE provision. 

“It is of some concern that a significant amount of funds have been used to support the FE colleges in difficulty because these are funds that would otherwise support learners. Clearly there needs to be an effective approach to provision that enables the best providers to deliver which will ensure best value for customers and funding agencies.  Both papers recognise the role of the wider sector, but it is clear that the main focus is on FE colleges. Many colleges have complex chains of subcontractors, so we will ensure that these local reviews take into account the full range of organisations involved in local delivery.

“The underlying objective of any such reviews must be to maximise the funding that can be focussed on delivery through the most effective provider. Many independent providers have excellent relationships with colleges and they provide many of the skills that will be needed in this new and customer focussed environment.

“We agree that it is confusing for all providers when several government departments are responsible for funding provision and now we have the complication of the local partnerships to consider. The reviews must have very clear remits and clear governance. The government partners have to understand the local delivery network and AELP will work with its local provider networks to ensure they can contribute to the review process.”


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