College's financial problems 'caused by poor planning'
- Published
New College Lanarkshire was formed with the merger of Coatbridge (pictured), Motherwell and Cumbernauld colleges
Poor planning and overly optimistic expectations for tuition fees led to financial troubles at a Scottish college, a watchdog has found.
New College Lanarkshire was given a £1.9m advance from the Scottish Funding Council (SFC) in July 2017.
But Scotland's auditor general Caroline Gardner said it is likely to need more money to achieve financial stability.
Ms Gardner's report also highlighted that Edinburgh College had made "good progress" on its financial problems.
New College Lanarkshire was formed with the merger of Motherwell, Cumbernauld and Coatbridge colleges in 2013. It has forecast a deficit of £657,000 in 2017/18.
But Ms Gardner said the amount of extra funding required to achieve a stable position has not yet been finalised.
She attributed the institution's cash-flow problems in part to bringing in £900,000 less than its "ambitious" tuition fee income target of £6.1m.
She also blamed not budgeting any money for pay increases following the reintroduction of national bargaining, which cost £400,000.
Reduce costs
The college's underlying deficit for 2016/17 was £560,000, or 1% of total income.
To tackle the situation, the SFC has agreed to give the college £1.1m for a voluntary redundancy scheme which does not require repayment.
The report highlighted that the college had taken steps to improve its financial reporting and reduce its estate and IT costs, saving about £2m.
The report said: "It received an advance of its 2017/18 allocation from the SFC.
"The college also received additional strategic funding from the SFC in 2017/18 and expects it will require further additional funding to bring it to a stable financial position.
"At the time of this report, the SFC and the college had yet to agree the amount of funding."
Narrow margins
Ms Gardner said: "Colleges operate in narrow margins and relatively small changes in income or expenditure can push a college from a surplus into a deficit position.
"New College's financial problems were caused partly by overly optimistic assumptions around tuition fee income, and partly by poor financial planning around cost pressures such as national pay bargaining.
"The college is continuing to work with the SFC to stabilise its financial position and I will be keeping its position under review."
A plan to reduce cost pressures - a condition of the SFC advance - has yet to be finalised.
Ms Gardner also published a report on Edinburgh College which she said had made good progress regarding its financial difficulties.
It has reduced its deficit from £7m to £2.5m and exceeded its teaching and learning target for the first time since it was formed in 2012 following the merger of Edinburgh's Jewel and Esk, Telford, and Stevenson colleges.
Ms Gardner said: "It is imperative that the college now maintains momentum and continues to closely monitor its financial performance as it moves towards financial sustainability."