“But colleges’ financial health varies and the impact of funding cuts on the quality of provision and outcomes for learners is not yet clear, says Auditor General.”
Despite cuts to grants, the Welsh Government’s funding allocation and oversight arrangements for further education colleges are generally sound, although they would benefit from a more integrated and long-term approach. This is according to a report released today by the Auditor General for Wales.
Today’s report ‘Welsh Government oversight of further-education colleges’ finances and delivery’ highlights a cut in grant funding for the sector of £22 million between 2011/12 and 2016/17, a reduction of 13% in real terms. However, core funding for full-time provision has risen by 3% in real terms, while funding for part-time courses has dropped by 71%, reflecting the Welsh Government’s decision to prioritise its statutory duty to make reasonably sufficient provision for 16-19 year olds.
In response to this pressure on funding, the report points to the Welsh Government’s intention that employers should have a greater influence over skills provision and take a greater share of costs. However, the UK Government’s new Apprenticeship Levy has important implications for this ‘co-investment’ policy.
While financial management in colleges is generally sound and colleges are financially stable in the short term, their financial health varies and medium-term financial planning is not well developed. In addition, a revaluation of colleges’ pension scheme in 2015/16 has had a significant impact on their overall financial position, and colleges now face a potentially significant increase in their future pension contributions.
Colleges have responded to smaller funding settlements by cutting costs, including through large reductions in the workforce. Recent mergers also appear to have improved financial resilience across the sector. However, some colleges are better placed than others to grow other sources of income and colleges believe they will be unable to continue to protect 16 to 19 year olds if further cuts are made. Colleges also see capital investment as a key business risk.
The report finds that while the Welsh Government’s arrangements for funding allocation and oversight of the sector’s finance and performance are generally sound, they would benefit from a more integrated and long-term approach. It highlights some key challenges facing the further education sector as a result of changes in demand for its services, continued financial constraint and wider post-16 education policy. In response, the report makes a number of recommendations, including:
- that the Welsh Government requires colleges to prepare medium-term financial plans, including longer-term financial forecasts;
- that the Welsh Government develop a mechanism that links funding more closely to likely demand for further education in each area; and
- that the Welsh Government evaluate the impact of funding reductions on learners to inform future decision making around both policy and funding.
The Auditor General for Wales, Huw Vaughan Thomas, said today:
“While further education colleges have managed to cope with the cuts to their funding over recent years, it is clear that their finances are coming under increasing strain and that they may struggle to maintain the amount AND quality of provision at current levels. The sector needs some clear direction about its place within the wider policy context for post-16 education. There is also a need for funding arrangements to better reflect local changes in need.”