“As colleges’ debts rose, their financial competence appears to have fallen.  Almost a quarter of colleges are now classed as ‘financially weak’ and five per cent have long-term loans of more than 40 per cent of their income”.

“Many colleges are now dependent on demand for their courses just as the economy takes a turn for the worse.  Colleges must strengthen their financial management and ensure they can service their debts”.

Mr Bacon was speaking as the National Audit Office published its report into the project to renovate further education colleges in England.  The Further Education Capital Programme is intended to enable England’s 376 colleges to replace poor quality buildings with high quality facilities.  However, the report finds that the funding arrangements for the programme caused college debts to increase from around £200 million in 2001-02 to £731 million in 2006-07, and that these debts will continue to rise rapidly.    

The report also finds that, between 2005-06 and 2006-07, the number of colleges assessed as being ‘financially weak’ increased from 68 to 89, meaning that 24 per cent of colleges are now classed as ‘financially weak’.  Additionally, 19 colleges (five per cent) had long term borrowings of more than 40 per cent of their income in 2006-07.  Colleges with large debts could be more vulnerable to loss of income if they fail to generate the projected demand for courses from employers and learners

11 July 2008

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See also:
NAO REPORT: Renewing colleges’ physical infrastructure

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