Four Scottish colleges are facing 'significant cashflow issues'

Graham Simpson MSP called the SFC report "gloomy reading" and asked SFC chief executive Karen Watt to identify these four colleges and clarify whether they are at risk of closing.

Despite admitting she was “not concerned about closure”, Ms Watt withheld the names of the specific colleges because it may impact “sensitive staff issues” in play.

"There are four colleges that we are working with very closely at the minute who do have what we would consider to be fairly significant cashflow issues.

“I feel at this point it might be difficult for those colleges to maintain the kind of relationships they have with us if we put that information in the public domain.”

The SFC report and Ms Watt's comments came as part of a wider scrutinization of Audit Scotland’s recent report “Scotland’s Colleges 2023”.

The audit report highlighted urgent financial risks to the sector tied to rising costs and decreasing funding from the Scottish Government.

Read more: Union and employers lobby support for 'chronically underfunded' college sector

During Thursday’s meeting, Ms Watt added that Scotland’s colleges are working in a “deteriorating” financial situation and struggling to adapt to a “perfect storm” of inconsistent funding and rising costs.

“This is why we are seeing colleges thinking about their future course curriculum provision, and how many staff they will have ultimately.”

Ms Watt added, however, that the SFC has informed college leaders of a need to change their guidance around severance agreements.

In short, she said colleges must clear any severance agreements with the SFC and do more to ensure that they mitigate the impact on the curriculum.

Committee members quizzed representatives from the SFC and the Scottish Government on how colleges are held responsible for ensuring fair treatment of workers and consistent curriculum provision amidst conversations about staff cuts.

Neil Rennick, director-general for education and justice with the Scottish Government said that colleges should have a plan to prioritise their curriculum individually because the provision at each institution should be tied to the needs of its region.

Representatives from the Scottish Government and Funding Council were also asked about an apparent lack of urgency to enact changes that colleges need. 

Read more: James McEnaney: To save Scotland's colleges we have to fund them properly

In particular, committee convener Richard Leonard pointed out that proposed infrastructure changes from as far back as 2018 have still not been implemented, despite growing concerns over the suitability of some college campuses.

“The question of the infrastructure of the college estate has been an issue for quite some time,” he said.

“Why has it taken so long to address this issue?”

The concerns predated the current questions about the presence of at-risk reinforced autoclaved aerated concrete (RAAC) in at least 12 buildings at seven of Scotland’s colleges.

Mr Rennick said that he has been reassured by colleges that they are all following the guidance of engineers.

“As I understand, two buildings have been closed because of RAAC, and three have been partially closed because of RAAC.”

Mitigating measures have been put in place at the others, he said.

Still, Mr Leonard felt that there had been too many delays.

“The infrastructure plan talks about urgent needs.

“I think that sense of urgency was spelt out very clearly to us when we had stakeholders in the sector saying there is a huge maintenance backlog, there are health and safety issues, and there are those Net Zero targets which are an important part of the Scottish Government’s vision for the future.”

Read more: 'There can be no bystanders': Union prepares next stage in college pay dispute

Mr Rennick said that over £800 million has been invested in the college capital estate in the last 15 years.

Still, he accepted that the government needs to reconsider whether the level of investment matches the actual needs of colleges.

Thursday’s meeting followed an earlier summit in November when the audit committee met with union and college leaders about the ongoing financial crisis.

Derek Smeall, principal at Glasgow Kelvin College, told the committee in November that colleges have been forced into repeated cuts, to the point where core services are now at risk.

“When we talk about efficiencies, there is no fat on the bone. We’ve been cutting into muscle now for several years.”

And despite the talk of urgency at Thursday’s meeting, the conversation is not a new one.

Read more: New year, same fight for college sector

In November of 2013, the Public Audit Committee me to scrutinise Audit Scotland’s report “Scotland’s Colleges 2013”.

In that 2013 report, auditors found that college incomes had been falling since 2010, creating a significant financial squeeze on the sector. A new set of factors has created a similar situation today.

Consecutive cuts in funding, first in real terms and now in straight cash cuts, over recent years have put a squeeze on college finances.

Key stakeholders – both employers and staff leaders – have recently told The Herald that colleges need more funding from the government if they are going to survive.