COLLEGE bosses have dismissed suggestions that millions of pounds held in arms-length foundations could be used to fund a national pay deal for lecturers.

Shona Struthers, chief executive of Colleges Scotland, said the money, which was previously held as college reserves, had already been earmarked for improvements such as new facilities.

The intervention came after unions said the £100 million held in so-called Arms Length Foundations could be used to deliver national pay scales for lecturers.

Read more: Financial crisis for Scottish colleges as more than 75% forecast deficit

Ms Struthers said: "It is frustrating that some people continue to suggest dipping into money in college foundations for revenue costs and important to understand why this is not feasible.

"These foundations are separate charitable bodies, independent of colleges, that were created to ensure that money was not lost to the sector due to colleges being reclassified as public bodies.

"The funds, which colleges must apply for, specifically support special projects to deliver the needs of students, such as new facilities and cannot be used for ongoing costs such as salaries."

She added that using money from the foundations would not be sustainable in the long term adding: "No foundation would be able to fund an on-going wage increase for college staff."

Read more: Financial crisis for Scottish colleges as more than 75% forecast deficit

Talks over a new national deal for lecturers which would harmonise pay across the sector have currently reached deadlock.

Colleges Scotland argues the proposed deal will cost up to £80m to implement and cannot be delivered without additional funds from the Scottish Government.

More than three quarters of Scottish colleges are already forecasting a deficit for the current financial year without taking into account the pay deal.

However, Larry Flanagan, general secretary of the Educational Institute of Scotland (EIS), which represents lecturers, believes the £100m held in foundations could be used.

He said: "It is true that the further education sector has faced financial challenges over a number of years and that the sector needs significant investment if it is to continue to serve effectively the needs of students and communities across Scotland.

Read more: Financial crisis for Scottish colleges as more than 75% forecast deficit

"However, it also cannot be forgotten that many colleges have established foundations in recent years and that approximately a hundred million pounds is sitting, unused and allegedly untouchable, in the accounts of these bodies."

In its manifesto for the 2011 Scottish Parliament elections the SNP pledged to introduce national pay bargaining for colleges as part of wider reforms of the sector, including a host of mergers.

Under the previous system of local bargaining, significant differences have opened up in terms and conditions, with some staff earning as much as £12,000 more for a similar job. An agreement in March established £40,000 as the top of the salary scale for a lecturer, with increases phased in over three years.