Scotland's colleges play a vital role in helping people learn new skills and fulfil their potential. Colleges also make significant contributions in supporting the country’s social and economic recovery from Covid-19 - but college audits for 2019-20 show that many continue to face significant financial challenges.
As we reported pre-pandemic, colleges were facing rising cost pressures - particularly around staffing and maintaining their buildings. Most institutions were forecasting future deficits while also trying to increase the proportion of students completing their courses.
Then Covid-19 changed the way learning is delivered. Teaching moved largely online and campuses closed - hitting revenue streams further.
Students have had to adapt to a new way of learning, which has been particularly difficult for those suffering financial hardship and digital poverty. The Scottish Government responded by providing additional funding to support students. And Education Scotland HM Inspectors will publish a report shortly on how colleges have adapted to digital learning. Covid-19 has also increased the need for colleges to determine what buildings and equipment are needed to deliver future learning.
Overall, the sector has responded well to the challenges of the pandemic so far, with governance and financial management arrangements continuing to operate effectively.
Significantly, the full financial effects of Covid-19 were not felt during academic year 2019-20. Management teams have been able to furlough staff, which has resulted in some colleges delaying difficult decisions around severance.
Scottish Government funding continues to rise - the sector received over £615 million of revenue funding in financial year 2019/20, a 2% real terms increase. But pre-Covid increases in funding have primarily covered additional costs from harmonising staff terms and conditions.
The gap between colleges' total income and expenditure has grown to £54 million. And it's forecast to continue because of costs outwith the sector's immediate control, such as pensions and depreciation of assets. After stripping out these costs, the sector’s underlying financial position (adjusted operating position) was a surplus of over £3 million in 2019-20 (see here for more detail for each college). This was a far healthier position than the £9 million deficit colleges had forecasted in June 2020. Colleges will provide the Scottish Funding Council (SFC) with updated medium-term financial forecasts in June 2021.
The Scottish Government provided the sector with £70 million more revenue funding in 2020/21. This included money to support students and boost skills through training in response to the economic impact of Covid-19. The SFC website includes details of how the funding was distributed.
Robust long-term financial planning by colleges will be critical to achieving financial sustainability. Auditors have highlighted a significant number of colleges that need increased funding, cost cutting - or both – to deliver balanced budgets in the future.
Significant changes to the wider sector are also likely. The SFC is currently carrying out a review of the college and university sectors in response to Covid-19, including the role colleges can play in supporting Scotland’s economic recovery. Work to review and revise arrangements for the regional strategic college bodies in Glasgow, the Highlands and Islands, and Lanarkshire is also ongoing.
The effects of the Covid-19 pandemic are likely to be felt in colleges for years to come. This includes longer-term implications for colleges’ financial sustainability, the experience of students and staff, the college estate and the role of the sector in supporting Scotland’s recovery and renewal. Responding to this will be challenging, but also offers opportunities to learn from what is working well to enable future change.
I will continue to monitor and report on the financial health, governance and performance of Scotland’s colleges each year through annual audit reports. And over the coming year I will be watching closely the outcome of the SFC’s review, and how colleges respond.
This data presents colleges' financial position for 2019-20 (the year ending 31 July 2020), based on individual colleges' audited accounts. It includes 20 incorporated colleges and Glasgow Colleges' Regional Board (GCRB) which we audit. The GCRB oversees three assigned colleges (City of Glasgow, Glasgow Kelvin and Glasgow Clyde), allocating funding and monitoring performance. For more details on incorporated colleges and college regional structures, please refer to the Appendix of our Scotland's colleges 2019 report.
Figures are adjusted for inflation. The base year for the data is 2019/20. The GDP deflator from March 2021 was used to calculate the real-term figures for other years.
This data may be viewed full screen by clicking the 'Full screen' icon at the bottom right of the Tableau.