College call for cash rethink

February 7, 1997

A RADICAL overhaul of further education funding could follow Government threats to halt extra payments for growth.

Colleges are contemplating staff cuts and have already turned away students following last month's announcement by the Department for Education and Employment that this cash, including Pounds 84 million planned for this year, may end.

Roger Ward, chief executive of the Association of Colleges, is hopeful that the DFEE will honour commitments for this year. He has written to his counterpart, David Melville, at the Further Education Funding Council suggesting changes to next year's funding allocations to cope with the future withdrawal of growth payments.

He wants baseline funding for colleges redrawn to reflect overshoots in student numbers, until now covered by cash for growth.

Other ideas include lower funding for franchised courses and restricting applications from external institutions, higher education and new providers.

The issue topped the agenda at college principals' annual meeting at the Further Education Funding Council yesterday. They are already having to suspend training agreements with employers and abandon courses in case the funding never materialises.

Bryan Davies, Labour's spokesman on further education, has tabled an early day motion calling on the Government to consult with college representatives "before irreparable damage to college provision and extensive job losses in both the public and private sectors takes place".

Bilston Community College in Wolverhampton estimates it would lose a fifth of its income - about Pounds 5 million - this academic year and have to turn away thousands of prospective students. Lewisham College, London, would lose up to Pounds 300,000 of its Pounds 20 million budget.

Education secretary James Paice is expected to meet college representatives. Mr Paice insists no decisions have yet been taken.

* Colleges' money problems are caused by weak management rather than lack of cash, according to a National Audit Office report published this week. It found that 280 of the 452 colleges were in deficit last year compared with 214 in 1993/94 after incorporation.

Net assets had reduced by Pounds 540,000 on average, or 6 per cent of turnover, while 83 could not cover current liabilities in 1995/96.

But the report could find no statistical relationship between average levels of funding and financial performance. It stated: "Poor financial health at a college appears to be the result of the circumstances applying to individual colleges and their management rather than sector-wide factors."

The report found that the FEFC's audit service, responsible for an independent examination of FEFC activities, had identified big weaknesses in governance and management at 10 per cent of colleges visited in 1995/96.

Poor internal college auditing meant 40 per cent of colleges had been unable to give the FEFC assurance of financial controls.

The NAO said weak forecasting appeared to be a common feature of colleges in difficulty. It advised the FEFC to ensure it received reliable and prompt financial returns. It also warned the council to address further the financial risks involved in franchising.

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