Poor planning and over-optimism contributed to financial problems at New College Lanarkshire, according to a recent report.
The college received £1.9m from the Scottish Funding Council (SFC) in July 2017 after suffering cash-flow problems which, Auditor General Caroline Gardner said, were attributed to lower than expected fee income and higher than anticipated costs around national pay bargaining, pensions and national insurance.
The report also said issues stemmed from setting an ambitious tuition fee income target of £6.1m but bringing in only £5.2m; not planning effectively for £400,000-worth of pay increases resulting from the reintroduction of national bargaining in the college sector and an underlying deficit in 2016/17 of £560,000.
Ms Gardner said that a plan to reduce cost pressures - a condition of the SFC advance - has yet to be finalised. In the meantime, the college has taken steps to improve its financial reporting and reduce its estate and IT costs. The SFC has also agreed to provide £1.1m for a voluntary redundancy scheme.
Ms Gardner said: “Colleges operate in narrow margins and relatively small changes in income or expenditure can push a college from a surplus into a deficit position. New College’s problems were caused partly by overly optimistic assumptions around tuition fee income, and partly by poor financial planning around cost pressures such as national pay bargaining. The college is continuing to work with the SFC to stabilise its position and I will be keeping its position under review.”