Overview of Further Education colleges (PDF | 262 ... - Audit Scotland

Executive summary
Introduction
1. Under the Further and Higher Education (Scotland) Act 1992 (the 1992 Act),
most further education colleges in Scotland were transferred from local
education authority control on 1 April 1993. Forty-three colleges were
incorporated as independent corporate bodies, each governed by a board of
management, and assumed ownership and control of all their assets and
liabilities at the date of transfer. They have a combined income of around
£550 million per annum about three-quarters of which is grant-in-aid
payments provided by the Scottish Executive Enterprise and Lifelong
Learning Department (the Department) via the Scottish Further Education
Funding Council (SFEFC). Roles and responsibilities in the further education
sector in Scotland are shown at Exhibit 1.
2. Under the terms of the Public Finance and Accountability (Scotland) Act
2000 (the 2000 Act) responsibility for securing the audit of the 43
incorporated further education colleges in Scotland transferred from the
college boards to the Auditor General for Scotland with effect from 1 April
2000. Transitional arrangements applied to the audit of 1999/2000 accounts.
The audits of further education colleges, which had been commissioned in
advance by the colleges themselves, and carried out in accordance with
guidance first issued in 1996 by the Scottish Office Education and Industry
Department, were reported to the Auditor General after their completion.
The colleges appointed commercial accountancy firms to conduct the
1999/2000 audits. Auditors also reported to and agreed findings with
individual colleges and provided copies of their management letters to
SFEFC.
3. This report, which I present under section 23 of the 2000 Act, is my first
overview report on the further education sector. The report has been
prepared principally from information contained in reports prepared by the
colleges’ appointed auditors at the conclusion of their audits. Where
appropriate, I have supplemented this with other relevant, contextual
information including SFEFC’s own work in monitoring the financial health
of the sector. My report covers all the significant issues arising out of the
1999/2000 audits of incorporated further education colleges.
4. Overall, auditors’ reports provide assurance of sound financial stewardship in
the FE sector in Scotland. However, my report on governance and financial
management at Moray College shows how a failure to maintain the highest
standards can result in serious difficulties.
5. The audit results also highlight the extent to which colleges are experiencing
severe financial difficulties. Audited accounts for the period to 31 July 2000
showed that a total of 34 colleges reported an operating deficit for the
accounting period and auditors’ opinions on the financial statements of five
colleges noted that the colleges only remained going concerns on the
understanding that financial support from SFEFC or the college’s bankers would
continue. Furthermore SFEFC have required 12 colleges to prepare financial
recovery plans to address deficits accumulated over a number of years. My
report therefore comments on continuing risks to financial health and on
SFEFC’s considerable efforts to improve the financial health of the sector.
FE colleges overview
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