PAPLS/S5/16/9/A

PUBLIC AUDIT AND POST-LEGISLATIVE SCRUTINY COMMITTEE

AGENDA

9th Meeting, 2016 (Session 5)

Thursday 17 November 2016

The Committee will meet at 9.00 am in the David Livingstone Room (CR6). 1. Decision on taking business in private: The Committee will decide whether to

take items 4, 5 and 6 in private. 2. Section 23 report - Scotland's colleges 2016: The Committee will take

evidence on the Auditor General for Scotland's report entitled "Scotland'sColleges 2016" from—

Paul Johnston, Director-General Learning & Justice, and James Boyce,Acting Head of College Policy, Scottish Government; Dr John Kemp, Interim Chief Executive, Scottish Funding Council; Shona Struthers, Chief Executive, Colleges Scotland.

3. Section 22 report - The 2014/15 audit of Edinburgh College: The Committeewill take evidence on the Auditor General for Scotland's report entitled "The2014/15 audit of Edinburgh College" from—

Annette Bruton, Principal and Chief Executive, and Alan Williamson, ChiefOperating Officer, Edinburgh College; Chris Brown, Head of Audit and Assurance, Scott-Moncrieff; Hugh Harvie, Partner, KPMG; Dr John Kemp, Interim Chief Executive, Scottish Funding Council.

4. Section 23 report - Scotland's colleges 2016: The Committee will considerthe evidence received at agenda item 2 and take further evidence from—

Caroline Gardner, Auditor General for Scotland;

PAPLS/S5/16/9/A

Mark MacPherson, Senior Manager, and Stuart Nugent, Audit Manager,Audit Scotland.

5. Section 22 report - The 2014/15 audit of Edinburgh College: The Committeewill consider the evidence received at agenda item 3 and take further evidencefrom—

Caroline Gardner, Auditor General for Scotland; Angela Canning, Assistant Director, and Mark MacPherson, SeniorManager, Audit Scotland.

6. Work programme: The Committee will consider its work programme.

Terry ShevlinClerk to the Public Audit and Post-legislative Scrutiny Committee

Room T3.60The Scottish Parliament

EdinburghTel: 0131 348 5390

Email: papls.committee@parliament.scot

PAPLS/S5/16/9/A

The papers for this meeting are as follows— Agenda item 2

Written submissions PAPLS/S5/16/9/1

PRIVATE PAPER PAPLS/S5/16/9/2 (P)

Agenda item 3

Written submissions PAPLS/S5/16/9/3

PRIVATE PAPER PAPLS/S5/16/9/4 (P)

Agenda item 6

PRIVATE PAPER PAPLS/S5/16/9/5 (P)

PAPLS/S5/16/9/1

Public Audit and Post-legislative Scrutiny Committee

9th Meeting, 2016 (Session 5)

Thursday 17 November 2016

Scotland’s Colleges 2016

1. At its meeting on Thursday 6 October, the Committee took evidence from the

Auditor General for Scotland (AGS) and Audit Scotland on the above report.

The Committee decided to take further oral evidence, as well as to invite

written submissions.

2. At its meeting on Thursday 17 November, the Committee will take further

evidence from the Scottish Government, Scottish Funding Council and

Colleges Scotland.

3. Written submissions have been received from the following organisations—

Scottish Government (attached at Annexe A);

Colleges Scotland (attached at Annexe B);

EIS (attached at Annexe C);

NUS Scotland (attached at Annexe D); and

UNISON (attached at Annexe E);

4. The Committee is invited to consider the report and the submissions.

PAPLS/S5/16/9/1 Annexe A

1

WRITTEN SUBMISSION FROM THE SCOTTISH GOVERNMENT – SCOTLAND’S COLLEGES 2016 Dear Mr Shevlin Thank you for your letter of 12 October inviting me to give evidence on the Auditor General for Scotland’s reports entitled “Scotland’s colleges 2016” and “Audit of higher education in Scottish Universities” at the Public Audit and Post-legislative Scrutiny Committee meeting on Thursday 17 November 2016. I have since been informed that the latter report will now be considered at a meeting on a later date so this response relates only to the report entitled “Scotland’s colleges 2016”. In my letter dated 29 September 2016, I indicated that the Scottish Government would bring together the story of reform, drawing on the benefits we identified in the 2011 consultation paper College Regionalisation: Proposals for Implementing Putting Learners at the Centre and the available published evidence of the progress that has since been made. This is set out in the attached note which I hope the Committee will find helpful. I look forward to discussing the matter further. Yours sincerely PAUL JOHNSTON

PAPLS/S5/16/9/1 Annexe A

2

WRITTEN SUBMISSION FROM THE SCOTTISH GOVERNMENT – SCOTLAND’S COLLEGES 2016 Our colleges provide a modern, responsive and valued part of our education and training system. Merged colleges are now of a scale and influence we have never had – more resilient and sustainable for the future. We are seeing more effective learning pathways for our students - since 2006/07, the average hours of learning per student has increased by 63% and recent figures show 97% of learning hours were delivered on courses that led to a recognised qualification (an 8 percentage point increase over this period). This is resulting in considerably more full-time students leaving college with recognised qualifications than were doing so previously – almost 11,000 more in 2014-15 than in 2008-09 (an increase of 24%). We are also seeing our colleges tackling inequality and improving social mobility especially for those students from communities which face multiple challenges. Over 16% of college provision was delivered to students from Scotland’s 10% most deprived areas in 2014/15 and over 29% of all students came from the 20% most deprived areas. Going forward, the Scottish Government’s Programme for Government 2016-171 has set out a number of key priorities for the college sector which are aimed at accruing both social and economic benefit for Scotland including: reviewing the learner journey for 16-24 year olds; reviewing Further and Higher Education student support; maintaining at least 116,000 full time equivalent college places focussed on purposeful job-focused learning. Our college sector is now better placed than ever before to deliver on these priorities. College Reform College reform has created a landscape which is better suited to the delivery of skills, engagement with employers and universities, better able to implement the Developing the Young Workforce reform programme and further improve provision for the benefit of our students. Colleges now offer more full-time courses, generating a well-trained, highly-skilled workforce to deliver economic growth. Ministers’ commitment to maintain student places has been exceeded and the sector continues to perform well. The programme of college mergers undertaken between 2012-14 were themselves part of wider reforms across the post-16 education system.

Post-16 education system: The Government’s plans for the post-16 education system were set out in September 2011 in Putting Learners at the Centre2. It sets out a vision of a post-16 education sector which plays a central role in improving people's life chances, delivering the best outcomes for learners; which supports and develops a world-class research capability; and which maximises its contribution to sustainable economic growth for Scotland.

College sector: Putting Learners at the Centre identified a need to improve college destinations data. College Leaver Destinations data was first published in December 2015 for 2013-143. College Leaver Destinations 2014-154 was published in September 2016. The focus on learners also led to the development of a national

1 http://www.gov.scot/About/Performance/programme-for-government 2 http://www.gov.scot/Publications/2011/09/15103949/0 3http://www.sfc.ac.uk/web/FILES/Statistical_publications_SFCST072015_CollegeLeaverDestinations201314experime/SFCST072015_College_Leaver_Destinations_2013-14.pdf 4 http://www.sfc.ac.uk/communications/Statisticalpublications/2016/SFCST072016.aspx

PAPLS/S5/16/9/1 Annexe A

3

College Student Satisfaction and Engagement Survey. A pilot was carried out in 2015-16 ahead of national roll-out in 2016-17.

College regionalisation: part of the college reforms involved taking a regional approach. The joint Scottish Funding Council (SFC)/Scottish Government November 2011 consultation paper5 outlined distinct advantages (reproduced at the Annex) of the new approach. This has led to many changes to the college sector, including:

o the development of Outcome Agreements which set out outcomes and

outputs a college region will deliver, mindful of its context, in response to Scottish Government priorities. These are to be expressed consistently to aid regional and national aggregation and include reference to a baseline position, current progress, and a future ambition or target for 2017-18. College Region Outcome Agreements – Summary of Progress and Ambitions (June 2016)6 sets out what the sector has achieved in recent years and includes commitments college regions have made through Outcome Agreements for 2016-17.

o college regions and regional strategic bodies: thirteen college regions, of which ten have a single college. In each of the three multi-college regions there is a regional strategic body. Two are fully operational (i.e. they fund their assigned colleges). As the Committee is aware, the SFC is continuing to support the Glasgow Colleges Regional Board as it establishes the systems and processes to secure operational funding status.

o college mergers: the first mergers as part of the reform programme occurred in October 2012 (involving the creation of Edinburgh College and of SRUC); the last in April 2014 (the joining of Coatbridge College to New College Lanarkshire). Impact and success of the programme of college mergers in Scotland (August 2016)7 provides an overarching view of the impact of the programme and evaluates the success in delivering the intended benefits and outcomes for students and other key stakeholders.

Merger Programme In Impact and success of the programme of college mergers in Scotland, SFC reports its evidence and confirms:

The merger programme in Scotland has led to the formation of colleges which are more resilient and sustainable for the future, with a focus on achieving efficient and effective business services while continuing to develop and support the staff who are central to this success.

Through changes to such a substantial proportion of the sector, the mergers have created a landscape better suited to the delivery of skills, engagement with employers and universities, better able to implement the Government’s youth employment strategy, Developing the Young Workforce, and further improve learner journeys.

5http://www.webarchive.org.uk/wayback/archive/20120411222342/http:/www.sfc.ac.uk/news_events_circulars/

Consultations/2011/Consultations_jointconsultation.aspx 6 http://www.sfc.ac.uk/web/FILES/Funding_Outcome_Agreements_2016-

17/College_Outcome_Agreements_Summary_2015-16.pdf 7 http://www.sfc.ac.uk/web/FILES/ReportsandPublications/College_mergers_overarching_report.pdf

PAPLS/S5/16/9/1 Annexe A

4

The larger colleges created are working well and are confident and ambitious with a clear focus on putting the learner at the centre, where the priority is the learning and teaching and the achievements of students in study and in work.

The evidence considered by SFC included:

progress in delivery against key Outcome Agreement measures;

reports relating to governance, financial health and quality, from on-going SFC monitoring;

outcomes of external reviews around one year post-merger, and annual engagement visits undertaken by Education Scotland;

the self-evaluation report and associated evidence presented by the colleges (SFC Outcome Managers working directly with the colleges confirmed the accuracy of the reports, and the additional evidence presented which included copies of Board and Committee papers);

feedback and testimonies from a range of students, staff, senior management, Board members and external stakeholders on the performance and operation of the college.

The SFC analysis as at June 2016 also shows that “overall recurring annual savings across nine of the colleges in the merger programme [was] £52.2 million”. And that “the cost of delivering these mergers, as reported in the post-merger evaluations and including the ring-fenced funding for Students’ Associations was £69.6m”. As the Committee is aware, SFC did not include the costs of harmonisation of salaries for all colleges. The SFC is working to establish these. Performance of the College Sector The current National Performance Measures for the college sector are set out in Table 3 of SFC Guidance for the development of College Outcome Agreements: 2017-18 to 2019-20 (October 2016). They contribute to the Scottish Government National Performance Framework8 and in particular the National Outcomes

We are better educated, more skilled and more successful, renowned for our research and innovation

Our young people are successful learners, confident individuals, effective contributors and responsible citizens.

The SFC measures include, among other things, attainment, articulation, positive destinations and student satisfaction. The SFC measures align with the Scottish Government National Performance Indicators. Indicators in relation to student retention are included in College Performance Indicators 2014-15 (January 2016)9.

8 http://www.gov.scot/Resource/0049/00497339.pdf

9 http://www.sfc.ac.uk/communications/Statisticalpublications/2016/SFCST012016.aspx

PAPLS/S5/16/9/1 Annexe A

5

ANNEX ADVANTAGES OF TAKING A REGIONAL APPROACH 1) College groupings of scale able to plan regionally and deliver locally across Scotland.

Currently, in many areas, planning of provision is fragmented

2) Help every community of a reasonable size - and every young person - access appropriate college education

3) Enhance the capability to plan and deliver part-time learning, particularly for adults in employment

4) A stronger basis further to develop provision for employers

5) Expectation, where major campuses currently exist, they will remain. But in some regions there will be communities that are not currently well served; here, the colleges will be required to consider how they make adequate provision

6) Opportunities for colleges in many regions to work more cost-efficiently (for example, through the sharing of services, mergers or collaboration), freeing resource to redirect towards learners

7) Strengthen the role and contribution of colleges as important partners within regional networks of agencies and services; this is to the benefit of learners, communities, employers and the wider development of regions

8) Provide a framework for joint working between the school, college and university sectors to ensure more coherent provision and – in line with our commitment in Putting Learners at the Centre - improved articulation between college and university.

PAPLS/S5/16/9/1 Annexe B

Colleges Scotland 1 

Colleges Scotland Submission to the Public Audit and Post-legislative Scrutiny Committee on the Audit Scotland ‘Scotland’s colleges 2016’ Report Key Messages It is important that we look forward. Despite regionalisation and mergers, along with all the other changes and challenges that the sector has faced, Scotland’s colleges continue to be at the heart of the education landscape and promote economic growth in Scotland in a variety of ways. They have a fundamental role to play and are a primary source of education to local residents and a supplier of trained skilled workers to industry. Audit Scotland has recognised that colleges performed well over the last year and that they continue to meet their activity targets set by the Scottish Funding Council (SFC). The report highlights the significant changes that the sector has faced, whilst continuing to focus on students and the delivery of high quality courses. Whilst many of the changes have taken place recently and may require time to settle down, it is encouraging that 90% of students surveyed in 2015 were satisfied with their experience at college. It is clear from Audit Scotland’s report that colleges are great places for many people to learn and to develop the necessary technical and professional skills that help bring benefit to the individual, as well as to society and the Scottish economy. Colleges are at the forefront of developing a vision for the learning and skills journey and is in dialogue with key stakeholders around this. The Audit Scotland report, whilst emphasising the overall stability of the sector’s financial health, is clear that the college sector is showing signs that it is facing significant financial pressures. For example, the number of colleges forecasting deficits is increasing. Audit Scotland’s report stated that 11 out of 20 colleges are forecasting a deficit this year however, more recent SFC information suggests this could now be as many as 16 colleges out of 20 forecasting financial deficits. This highlights the importance of sustainable future funding for the sector to ensure that colleges can continue to deliver the skills and training that individuals, employers and the economy needs. Colleges Scotland acknowledges that there are areas where further work is required and are committed to working with the Scottish Government to ensure that colleges as public bodies, are as financially stable and sustainable as possible. Activity is progressing and we are continuing to work with the Scottish Government, SFC and other key stakeholders. Specific Issues Financial Planning The scale and number of changes experienced by the college sector over the last few years has reduced the ability of colleges to look ahead more strategically but they are now in a position to focus more on the future. It should be acknowledged however, that there are key constraints which curtails their ability to plan strategically, including the lack of clarity over future budgets and the fact that colleges can no longer hold reserves, nor borrow. Some areas of spend are also subject to annual variation, such as Student Support Funding, where it is not possible to know the resource requirements until the cohort of students arrive.

PAPLS/S5/16/9/1 Annexe B

Colleges Scotland 2 

Colleges Scotland is working with the Scottish Government, SFC and key stakeholders to address these issues and to develop a greater understanding of the future costs, as well as explore ways to provide for greater flexibility around financial planning. This could include areas such as: A focus on analysing and monitoring multi-year trend data, in order to assist in identifying future

financial pressures. A reduction in the use of in-year redistribution of resource between regions. A suitably flexible mechanism for balancing varying activity levels and associated resources,

between different regions. An appropriate framework to allow colleges to maximise commercial opportunities. Factoring in known or likely variations in EU funding. Reduction in Capital The report also acknowledges that there has been a reduction in capital funding for the sector. Due to the constraints of the Office for National Statistics (ONS) reclassification of colleges, they can no longer borrow and are more or less entirely reliant on public funds for their capital investment needs. Colleges Scotland is working with SFC to set out a 10-year strategy for capital investment which is expected to be finalised in 2016. To inform the strategy, SFC has identified colleges which have major capital investment needs. Adequate capital funding is vital to ensure that colleges can offer their students high quality learning experiences in facilities that allow them to experience the conditions and use of equipment that constitute modern practice. Reclassification One result of ONS reclassification is that colleges are now classed as ‘ public bodies’ and are subject to central Scottish Government accounting rules. The total impact of reclassification is still being worked through however, a large number of the impacts and changes are now better understood by all and these have resulted in a significant change in approach to financial planning and accountability. Colleges have adapted their accounting systems and Audit Scotland acknowledges that it has led to greater accountability for the public purse. One particular area highlighted by the Audit Scotland report, is the use of net depreciation. Whilst this is a complex approach, what is important is that a suitable solution is found that protects the necessary investment levels in the college sector. What would be helpful from a college financial planning point of view is for colleges to have the flexibility to utilise the net depreciation funding without needing to seek prior permission from Scottish Government. A related issue is that the use of net deprecation causes ‘technical deficits’ to be seen in college accounts as a result of accounting rules. Work is ongoing between Colleges Scotland, the Scottish Government and SFC to seek a solution around the presentation of the statutory accounts, so that the ‘bottom-line’ more truly reflects the underlying financial health of the sector. Workforce Planning and National Bargaining The employers and unions are working towards developing a Workforce for the Future. It is envisaged that this work will result in new contracts for all college employees therefore, our long-term financial strategy will have to take account of the costs associated with delivering the Scottish Government’s policy of the re-introduction of National Bargaining to the college sector and the subsequent development of the Workforce for the Future.  In addition, other areas like National Bargaining which is highlighted in the Audit Scotland report, are as yet not progressed sufficiently

PAPLS/S5/16/9/1 Annexe B

Colleges Scotland 3 

to a point where the detailed additional costs are known however, it will be important for expectations to be reasonable to ensure affordability and sustainability. National Bargaining cannot simply be about harmonisation to the best of the best. However, the re-introduction of National Bargaining provides the sector the opportunity to develop and deliver real and progressive change that will bring benefit to our students and employees. Importantly any change will be negotiated with ongoing affordability and sustainability being fundamental aspects of any agreement reached. Governance Good governance must lie at the heart of the college sector to build public trust and deliver vital services to students, employers and communities. There has already been a sea-change in the way that colleges are governed and the sector itself has embraced the need to focus on achieving the highest standards of governance. A Code of Good Governance for Scotland’s Colleges has been developed and the sector’s Good Governance Steering Group (GGSG) continues to meet to oversee its implementation and review. Following a review of the existing Code this Summer, the updated Code was published in September 2016, along with guidance from SFC. Various models of best practice are currently being developed by the GGSG which incorporates the Scottish Government’s Governance Task Group recommendations. Audit Scotland’s report acknowledges this good work, to ensure that we have systems and clear accountability fit for a modern college sector. Decrease in Part-time Student Numbers Colleges Scotland acknowledges that there has been a reduction in student numbers which can primarily be attributed to delivering on the Scottish Government’s policy to focus on young people and courses which are more than 10 hours of study that lead to recognised qualifications. A consequence of this policy is that there are now more full-time students and less part-time students. Those who study part-time tend to be mainly female and over 25 years old. We will continue to make the case to ensure that colleges provide opportunities for adult learners, as they offer a vital lifeline back into education and work. Colleges will continue to offer the best possible options that they can for all students with the resources they have available to them. Decrease in Attainment and Retention Overall, Scotland’s colleges have delivered around a 10% increase in attainment and a 5% increase in retention over the last six years. The impact of the changes and an increased focus on the Scottish Government’s policy on widening access are likely to be contributing factors in the small decrease last year. Colleges Scotland November 2016  

PAPLS/S5/16/9/1 Annexe C

1  

EIS SUBMISSION TO THE PUBLIC AUDIT AND POST-LEGISLATIVE SCRUTINY COMMITTEE RE AUDIT SCOTLAND’S “SCOTLAND’S COLLEGES

2016” REPORT

The EIS welcomes this opportunity to respond to the Public Audit and Post-legislative Scrutiny Committee. The EIS is Scotland’s largest education union representing around 55,000 members employed in Nursery, Primary, Special, Secondary, Further and Higher Education (around 80% of the teaching profession).

1. The EIS values the reports generated by Audit Scotland for the Auditor General on Scotland’s colleges. The EIS acknowledges that a considerable amount of work carried out by Audit Scotland in preparing its annual colleges’ reports and that it has developed a good understanding and expertise of the college sector.

2. The EIS believes that the ‘Scotland’s colleges 2016’ Report (the Report) is a fair and accurate reflection of the sector in 2016. The Report is accessible, detailed and useful to those within the sector. It seems to the EIS that the press release accompanying the Report may have been too balanced, with positive numbers set out first (the 14% increase in full time students under 25 seems more important than the 48% decrease in part-time students) and may not captured the tone of several findings within the main text of the Report.

3. The Report provides authoritative data on key indicators, and how these have changed during recent years – although some of these are not well captured in the summary or press release. For example, the Report’s Summary states; “Student numbers overall have decreased by 41 per cent over the same period, and part-time students by 48 per cent.” Whilst this is softened in the press release, deep in the main report the 48% figure is broken down by gender stating; “The decrease was 53 per cent for women between 2007-08 and 2014-15, compared to 43 per cent for men.”

4. The Report considers the Scottish Funding Council’s (SFC) engagement with the college sector. The EIS accepts that the Report makes some constructive criticisms of the SFC, but the EIS would have welcomed the Auditor General’s views as to the accuracy of SFC reports. For example, the Report has highlighted the grave concern that there was no baseline data collected by the SFC or Scottish Government before the college

PAPLS/S5/16/9/1 Annexe C

2  

mergers programme that now (i.e. post -merger) enables there to be an accurate analysis of whether the college merger programme has delivered on its aim to make annual savings of £50m due to college mergers. However, the Report states: “The SFC responded in January 2016 stating that the sector is on track to achieve the £50 million savings by 2015-16.” The EIS would have hoped that Audit Scotland could have indicated how credible the SFC report was. Secondly, it seems to the EIS that Audit Scotland’s various reports on colleges that have experienced financial or governance problems are more accurate than SFC reports on these matters. It also seems to the EIS that the SFC reports on college mergers (with the exception of the City of Edinburgh College) are excessively rosy, and contrast unfavourably with Audit Scotland’s overview of mergers as expressed in its Report. The views of college staff on mergers are more accurately captured in Audit Scotland’s Report than in recent SFC post-merger reports.

5. The Report suggests that a review be carried out into the SFC’s role, since none has been carried out in the last 10 years. Its seems to the EIS that a close relationship has built up between the Government and its agent, the SFC. The Public Audit Committee asked the Auditor General on 6th October 2016 whether the SFC could carry out the roles of funder and regulator. Given that the funder (SFC) uses its funding to carry out specified government objectives, the EIS wonders whether it is the most appropriate body to measure how well those objectives have been met – for example college mergers.

6. The EIS believes that the role and actions of the Scottish Government should be more transparent within the college sector. The EIS believes that the Government’s role was applied differently by Cabinet Secretary Russell than by Cabinet Secretary Constance, with the former regarded as being more interventionist. The EIS participates in national bargaining for the college sector, and sometimes senses the hidden hand of Government. The extent of the Government’s role in encouraging college mergers, or national bargaining is opaque.

7. The Report highlights that 3 of the 13 FE regions are multi-college regions but “Despite regional bodies being a key feature of recent college reform, none of the three is yet operating as intended.” It would have been helpful to learn the Auditor General’s view as to whose fault this multi-college regional governance failure is – the Government for creating different statutory governance arrangements for each multi college region, or the SFC for failing to implement the Government’s statutory arrangements.

8. The 6th October Public Audit Committee also raised issues around the City of Edinburgh College. The Auditor General identified a £2.5m funding gap at the college, yet the questioning seemed to focus only on the

PAPLS/S5/16/9/1 Annexe C

3  

£800,000 that the college received for “additionality” which could have been clawed back by the SFC, but apparently wasn’t. It should be noted that the EIS raised significant concerns with SFC and Government regarding management at the college years before the “additionality” debacle – and indeed the SFC carried out a review at the EIS’ request at the college in 2013 that identified several issues.

9. The Committee may wish to enquire of the SFC and Government as to who has the responsibility for ensuring that Glasgow has a spread of college campuses that deliver FE throughout Glasgow, (including the city centre) whilst Edinburgh has a handful of campuses on opposing parts of the city’s edges and no provision within almost 4 miles of the city centre.

10.Finally, the EIS would like to draw the Committee’s attention to one factual error within the Report, which has been subsequently privately acknowledged by Audit Scotland. Para 65 states that the national bargaining committee (the NJNC) “…has agreed a one per cent pay offer for 2015-16 (and a further 1.5 per cent in 2016-17 for teaching staff, converted to a flat cash sum of money) with the unions.” Firstly, the 2015-16 settlement for teaching staff was 1% interim plus £100, secondly the 2016-17 settlement was £450 flat cash and not based on any % figure and thirdly the agreement was only made with one trade union, the EIS.

EIS

04 November 2016

PAPLS/S5/16/9/1 Annexe D

1

Public Audit Committee: Scotland’s Colleges 2016

NUS Scotland submission

Introduction Audit Scotland’s report, Scotland’s Colleges 2016, was a welcome and important report, and provided a

valuable insight into the state of Scotland’s college sector. The report showed that, at time of being asked

to do more with less, Scotland’s colleges are continuing to deliver high quality outcomes for those who are

often most at risk of missing out on education, or those looking for a second chance at accessing

education. However, the report also highlighted a number of serious challenges that must be addressed in

the coming years.

While it is encouraging to see full-time college places being maintained, and increasing – recognising the

valuable role full-time education can play in improving youth employment – that focus on full-time

provision does pose a very real risk of excluding those students who most deserve a college place but

simply aren’t able to study full-time. The report highlighted a worrying trend, with the number of women

students, those with caring responsibilities, and adult learners feeling the brunt of the decline in part time

courses. It is also worth noting that increasing the number of students accessing college is not an end in

itself, and we must also ensure that we’re supporting students to succeed when they get there. Colleges

have far higher dropout and unsuccessful completion rates than any other area of education, and Audit

Scotland are right to highlight that this figure has increased.

Colleges support some of our most disadvantaged communities, and while any student lost from any level

of education is a huge loss of potential, it’s particularly acute among colleges, whose students often face

the greatest barriers in accessing education in the first place. For the purposes of this submission, NUS

Scotland has focused on the three issues of particular concern, and where we believe colleges, SFC and

Government must look again to ensure the greatest outcomes for college students – ensuring the

necessary provision of places, the need to address high withdrawal rates, and the need to investment in

and reform further education student support.

Access and outcomes for college students As has been noted many times before, Scotland’s colleges play a significant role in our ambitions on

widening access, serving some of our most disadvantaged communities and providing the individuals

within them a great opportunity to access education. As the SFC’s Learning for All publication shows, the

proportion of college FTE’s from the 20% most deprived communities is 30.4%, and from the 40% most

deprived communities it is 53.5% - both figures far surpassing the equivalent figures in our universities.

As the Audit Scotland report notes, deprivation is one of the few characteristics that has seen less of an

impact as a result of various policy changes, and particularly a focus on full-time courses, which have

resulted in reductions in student numbers, discussed below. However, while access remains strong, there

are very real concerns about then ensuring equally high outcomes for all students.

PAPLS/S5/16/9/1 Annexe D

2

We know that unsuccessful completion and withdrawal rates are also much higher among college students.

Again, Learning for All shows us that:

College students studying FE level courses: 64% of college complete their course successfully; a

further 10.4% have partial completion (e.g. complete the required units, but fail to achieve a final

qualification); and, 25% withdraw from their course.

College students studying HE level courses: 71.3% of complete their course successful; a further

11.4% have only partial completion; and, 17.3% of college HE students withdraw from their course.

Given that both these figures are far higher than the equivalent figures among university students, we

believe it merits serious consideration and efforts to reduce. NUS Scotland believes that – particularly

given the FE figure is also higher than the HE figure – fairer student support must form a part of that

work, as discussed further below.

Ensuring the right provision of opportunities in our colleges Scotland’s colleges play a vital role in providing an opportunity for students from all backgrounds to access

further and higher education, and for people to return to education to retrain or upskill. For many of these

students—due to their circumstances, responsibilities, and other factors—studying full time will simply not

be an option. As such, while we recognise the focus on full-time courses to boost youth employment, it’s

clear that such a strategy runs the risk of excluding those who need a place most.

As the recent Audit Scotland report showed, there has been a 48% decrease in part-time student

headcount in Scotland. As the SFC’s Baseline Report for Academic Year 2014-15 notes, headcount isn’t

always the best measure of activity, as one student can be enrolled on multiple courses. As such, the

below figures (accessed through the Scottish Funding Council’s infact database) show the

numbers of college students studying part-time, but measured as full-time equivalents. These

are broken down across a number of demographics and show how, since 2011 (when the regionalisation

process started) through to the most recently available year that adult learners, women, and disabled

students are those most likely to lose out as a result of a focus on full-time, longer courses.

Part-time FTE change over time – Age of student

Age - Year 2011-12 2012-13 2013-14 2014-15 % Change

under 16 3380 2592 2420 2571 -24

16-17 6167 7433 6834 7407 20

18-19 6284 7218 7065 7217 15

20-24 7177 7859 8269 8157 14

25 & over 21323 20730 20464 17667 -17

PAPLS/S5/16/9/1 Annexe D

3

Part-time FTE change over time – Disability status

Disability - Year 2011-12 2012-13 2013-14* 2014-15 % Change

No known disability 33278 33814 0 37466 13

Known disability 6045 6119 0 5553 -8

*Data for 2013/14 was undefined

Part-time FTE change over time – Gender status

Gender - Year 2011-12 2012-13 2013-14 2014-15 % Change

Male 23054 24725 24607 23909 4

Female 21276 21107 20445 19094 -10

As noted in the final funding letter to colleges, earlier this year in May, SFC and the Scottish Government

undertook work to investigate demographic changes in college regions, and the appropriate number of

full-time places to meet these. Ultimately, it was decided to maintain FTE targets; however, we believe

more could be done to look at ways to maintain that target while increasing part-time places. Previous

efforts have been made, through the SFC’s budget, to provide additional resource for disabled and women

students and we believe this should be done again, ensuring that funding is used to maintain provision for

a diverse range of learners and we do not risk undermining national ambitions on equalities and access.

Within a context of wider funding, while the commitment to maintain FTE was continued in the most

recent Programme for Government, there was no similar guarantee around funding for colleges to deliver

this. The funding settlement for 2014/15 – which established a minimum funding floor of £522m – was a

welcome one, and we were pleased to see this further increase to £530m, providing some stability for

colleges following a number of years of cuts. However, there has been no guarantee that this floor will be

maintained in the coming Parliament – something we believe must be the case. If funding is reduced while

maintaining a FTE commitment, there are very real risks to the quality of the student experience.

Further education student support

While SAAS (the Student Awards Agency Scotland) maintains responsibility for delivering higher education

student support – including for students studying HE courses in colleges – SFC is responsible for funding

further education support in colleges, which is then delivered locally. That local, college level delivery is

extremely important in FE student support. FE students will quite often have complex circumstances – not

least the interaction between student support and benefits – which means it is vital that they are able to

have a point of contact they can discuss their support with in person, rather than a centralised system.

However, despite that, there are a large number of injustices within the FE student support system, which

require wholesale change and reform. Most pressingly, they ae injustices that must be read against the

very high withdrawal and unsuccessful completion figures in FE, referenced above. Ultimately, many of

these injustices are issues of policy, but ones that require significant resource, not least introducing an

entitlement to bursary support.

PAPLS/S5/16/9/1 Annexe D

4

As the current FE student support budget is cash limited, once it is gone, it’s gone. This means it

doesn’t reflect actual demand for support from students. On top of this, FE bursaries are discretionary

– while students in higher education are guaranteed support if they apply, FE students do not have the

same certainty, even if they meet all the eligibility criteria.

Every year we see, through the ‘in-year redistribution’ – whereby colleges are able to request additional

support funds from the SFC to attempt to cover any perceived shortfall – the same story unfold of colleges

having to request additional money for underfunded and overstretched student support budgets, and the

SFC is unable to respond with the full amount requested. The below shows the outcome of the

IYR over the previous parliamentary term:

Year Requested Allocated Unmet

2011/12 £5,468,834 £2,717,264 £2,751,570

2012/13 £8,196,595 £5,375,691 £2,820,904

2013/14 £11,547,664 £7,487,315 £4,060,349

2014/15 £7,000,000 £3,488,713 £3,511,287

2015/16 4,256,412 1,830,000 2,426,412

Average £7,293,901 £4,179,797 £3,114,104

Further reinforcing this, a freedom of information request from NUS Scotland last year asked Scotland’s

colleges how much of their FE student support budget had been spent since the start of the academic year

in September. The figures showed that less than half-way through the academic year:

67% of colleges had already committed 100% or more of their FE bursary budget

The vast majority of colleges have made up the shortfall by using core college funds.

43% of colleges have topped up their bursary budget by using money from their discretionary budget,

which exists to provide immediate financial help for students in need.

29% have had to close applications or limit awards for hardship funds, as these have also been used

to top up the bursary budget.

One college stopped funding students early, before their course had ended.

It is clear, if we consider these results, and the high level of withdrawal in further education, that the

discretionary budget for FE student support will have a serious impact on FE student success. Equally, the

current system creates a number of financial pressures on college budgets – as the audit highlights, for

two years in a row now colleges have been permitted by SFC to use depreciation funds for other purposes,

and this has included a significant amount spent on plugging FE student support shortfalls.

For more information, contact: Philip Whyte, Policy and Public Affairs Manager

Philip.whyte@nus-scotland.org.uk

AuEduUnSco20 The UNISLegislativ

udituca

niveotla16

SON Scotlave Scrutin

t ofatioersiand

and Evideny Comm

f Hion iitied’s

ence to theittee Nove

ighin Ss anCo

e Scottishember 20

her Scond

olleg

h Parliame16

ottis

ges

ent Public

PAPLS

sh

s

c Audit an

S/S5/16/9/1Annexe E

1

nd Post

1 E

1

PAPLS/S5/16/9/1 Annexe E

2

Introduction

UNISON is the largest trade union in Scottish public services. Our members deliver services, pay taxes and also have a wider citizenship interest in how services are provided and paid for. Members have a unique perspective on public service delivery meaning they can make a valuable contribution to the policymaking process. Our members provide essential roles across higher and further education, these roles while often overlooked by policy makers are key to the functioning of education institutions and to the student experience. UNISON Scotland welcomes the opportunity to respond to the call for evidence from the Scottish Parliament Public Audit and Post Legislative Scrutiny Committee November 2016 Evidence Further Education The further education sector has undergone substantial change following the Post 16 Education Act 2013. Funding has been cut severely, colleges have merged and new regional boards put in place. UNISON welcomes the call for better reporting on and measurement of the benefits that were claimed would come from mergers and regionalisation. Reforming education is not done by passing an Act of parliament in itself so effective monitoring and reporting on the process is essential to both driving change and to learning lessons for future reforms of both this service and others. The report recommends, as it did last year that:

Scottish Government and the SFC to specify how they will measure and report on progress on the promised benefits of mergers

And to publish information on the costs and savings achieved through the mergers

process. These recommendations were also endorsed by this committee last year and UNISON is concerned to that to see that these recommendations have not been acted upon in the last year. The failure to respond to these audit recommendations is one of the reasons that UNISON welcome the recommendations in the report that the government to relook at the role of the Scottish Funding Council (SFC) in relation to college governance. Currently we are in a position where the government and the SFC claim not to have responsibility/ powers over how colleges are run. Colleges are public bodies and need to be accountable for how they are run, for achieving outcomes agreed with government and funding bodies and to the wider communities which they serve. This requires openness round outcome agreements an round the data that will measure whether these are being met and clarity about where at to which bodies they are reporting to and who is accountable for achieving the outcomes and finally what will happen when objectives are not achieved. UNISON also supports calls for colleges to develop medium term financial plans particularly round national collective bargaining and a systematic approach to workforce planning. It is only reasonable that any large institution works in this way. This should also involve negotiating with staff and their trade unions not just on wages and terms and conditions but also on how to deliver the service efficiently. Including staff in strategic development is the best way to develop efficient services and also to avoid disputes like the current costly one. It is not just the structures that have changed in further education. While the number of under-25s in full time education has increased by 14% in the last 8 years overall numbers have

PAPLS/S5/16/9/1 Annexe E

3

dropped by 41% and part-time students by 48%. As UNISON warned at the time changing the sector to focus in this way has had a disproportionate impact on women and older students who make up the bulk of the reductions in student numbers. UNISON believes that this is not a positive change; if we are to build our economy then it is vital that those in and out of work are able to continually develop new skills in order to find and keep work in as jobs change. Providing opportunities for people to combine work and caring responsibilities with education should be central to any economic strategy. Not everyone can afford to be full–time students and for those with other responsibilities like parents or carers its more than a financial challenge, they just don’t have time. Cuts in part-time provision are restricting opportunities for individuals and has serious risks for our economic future. Despite the budget cuts and job losses the report indicates that the hard work and commitment of staff has minimised the impact on students. The same cannot be said of the impact on the remaining staff. As our report Learning the Hard Way showed staff are under pressure, morale is very low and trust in management is at rock bottom. The current pay dispute where support staff were offered a substantially worse offer than teaching staff has only served to make this worse. Despite UNISON’s many warnings organisations were set up without resolving the complexities of staffing issues. As the report states harmonisation of terms and conditions is still unresolved. These are not minor issues: people cannot be treated as an afterthought and issues kicked into the long grass indefinitely. Further education is all about people; education cannot be delivered by robots. It requires highly motivated staff with excellent people skills. You cannot expect teams to function and deliver a high quality service in the long term where team members have different working hours, leave entitlements, and wages. Despite going through ACAS the pay dispute remains in place. UNISON was very happy to move to a national joint negotiating body but is now in dispute because our members were not offered the same deal as lecturing staff as had happened the year before. Support staff are crucial to the overall student experience and there is no reason why they should not get the same pay offer as teaching staff. There also still appears to be issues with the relationship between the NJNC and the individual employers, who do not appear to be fully signed up to the national negotiations process. The SFC and the Scottish government have no direct route to take action to resolve the dispute. UNISON is keen to make national bargaining work and would welcome support for the government and SFC to ensure that it does. While UNISON had issues with college mergers and regionalisation we did support the Scottish government’s aim to ensure that colleges were properly governed and accountable. UNISON was positive about setting up new boards that would be able to hold management accountable for they way they run colleges. While we were disappointed that, unlike in higher education, there were no union places on the boards we were positive about the role of staff rep. The report confirms there are still substantial gaps in information about costings and savings from the process and the role if the SFC in monitoring and engagement has not improved. Without the information how are boards, the funding council or the Scottish government able to make judgements about how colleges are delivering on their objectives. UNISON would like to see a wider remit for the SFC in monitoring services currently, like in Higher education, the SFC does not appear to feel it should look at how colleges are spending money other than round issues like gross misconduct and fraud. Academic freedom is an important principle that must be protected but that is not the same as highly paid senior mangers being unaccountable to the government, students or the wider community for the decision that they make or how their institutions meet the outcomes set for them in return for substantial amounts of public money.

PAPLS/S5/16/9/1 Annexe E

4

Higher Education Funding Audit Scotland reports that “Overall the Scottish higher education was in good financial health in 2014.15” but also highlights underlying risks. The Scottish government has made a great deal of its commitment to “free higher education” but university funding is clearly under pressure. Some institutions are less reliant on the Scottish government as they can access substantial research funds from other public, private and charitable sources as well as recruit fee paying students from the rest of the UK or outside the EU. Student fees while raising their overall income is of course used to deliver the courses to those fee paying students. There is very competitive global market for those high paying international students and universities need to invest those fees in the courses and services that attract and retain those students. Those institutions that attract fewer fee paying students are though more at risk from Scottish government budget cuts. The policy of free higher education is aimed at ensuring that those from less well off backgrounds are able to access higher education. This policy therefore need to be adequately funded both to ensure that there are enough places available for non fee paying students at universities and as is increasingly apparent to look at ways of increasing funding support for the living costs of those without well off parents to support them. The policy has not led to the desired outcome of closing the gap and research indicates that while fees are not a barrier the cost of living and debt is still are substantial issue for people from low income backgrounds. All universities receive large amounts of public money and the government is right to set outcomes that they expect in return for that funding. But we need to see more than setting outcomes. There needs to be improved monitoring and reporting on those outcomes and follow up where they are not being met. Outcomes need to cover admissions policies and the work universities to encourage applications from less well of backgrounds and the work they do with schools and colleges to support this. It must be about more than agreeing outcomes, there needs to be an improved mechanism for monitoring the achievement of the outcomes. While universities may not be officially public bodies they provide a public good and receive substantial amounts of public money. Having a wide range of funding sources beyond tax payers does not mean they shouldn’t be accountable to the public. The current mechanism of the Scottish government agreeing outcomes with the SFC and then the SFC with institutions does not appear to be more than a tick box exercise. UNISON therefore welcomes the audit report’s call for a review of the outcome agreement process. It is our experience that other than gross misconduct or fraud the SFC is reluctant to hold universities to account for their performance. This is not about academic freedom but how institutions are managed and governed. Even private companies have boards of directors and financial regulators to whom they have to report and respond to. There needs to be a much clearer and more stringent system in place to ensure that this is happening. Universities require adequate funding to meet the outcomes that the Scottish Government sets for the sector. Teaching Grant is a slight misnomer. Adequate teaching funding is about more than the wages of those who stand up in lecture theatres. It also funds the activities that support teaching for example technicians. Austerity is impacting on all public sector budgets but better planning, management and accountability can at least make things “less bad”. Longer term funding decisions would help with planning and support as would ensuring that institutions focus on the appropriate priorities. Widening access is crucial but it is not currently clear how this will be funded across universities, colleges and schools. Funding cuts mean that students are suffering and it is often

PAPLS/S5/16/9/1 Annexe E

5

the most vulnerable who do, it’s not just about direct funding to students but the numbers of support staff who are available to support students through their academic journey whether its direct support to individuals with a disability or welfare roles, careers guidance etc. Promised new governance arrangements for individual universities have also been slow to come into place and senior management have been resistant to these changes. UNISON hopes that the new code of practice will be in place soon. The Scottish Government should do more to ensure that individual universities are responding quickly to its policy commitments. For example Angela Constance wrote to the SFC to say that all universities should be paying the Living Wage and be complying with the Fair Work Agenda but when the living wage is updated some universities do not adjust to meet it but want to wait for following years pay claim leaving low paid staff out of pocket. Conclusion UNISON is the largest trade union in Scottish public services. Our members provide essential roles across higher and further education, these roles while often overlooked by policy makers are crucial to the functioning of education institutions and to the student experience. The Post-16 Education Act (2013) was intended to bring substantial changes to the organisation and governance of the sector. The reports support UNISON calls for much to resolve outstanding staffing issues from mergers and regionalisation. Staff cannot be an afterthought. We welcome the calls for better measuring and reporting on both the costs and savings of the mergers and reporting on the costs and benefits of the mergers process and the new ways of working. UNISON also supports a review of the role of the SFC in relation to the organizations which it funds and the Scottish government. We believe that there needs to be much clearer and stronger accountability from higher and further education institutions for the public money they receive and the vital role they have in Scottish public and economic life. UNISON Scotland welcomes the opportunity to respond to the call for evidence from the Scottish Parliament Public Audit and Post Legislative Scrutiny Committee November 2016

PAPLS/S5/16/9/3

Public Audit and Post-legislative Scrutiny Committee

9th Meeting, 2016 (Session 5)

Thursday 17 November 2016

The 2014/15 audit of Edinburgh College

1. At its meeting on Thursday 6 October, the Committee took evidence from the

Auditor General for Scotland (AGS) and Audit Scotland on the above report.

The Committee decided to take further oral evidence, as well as to invite

written submissions.

2. At its meeting on Thursday 17 November, the Committee will take further

evidence from the Scottish Funding Council, Edinburgh College officials, the

internal auditor and the external auditor.

3. Written submissions have been received from the following organisations and

individuals—

Edinburgh College (attached at Annexe A);

EIS-FELA (Further Education Lecturer’s Association) (attached at

Annexe B); and

Hugh Harvie, the appointed external auditor of Edinburgh College

(attached at Annexe C).

4. The Committee is invited to consider the report and the submissions.

Terry Shevlin Clerk to the Public Audit Committee The Scottish Parliament Room T3.06 EDINBURGH EH99 1SP

By e-mail: pa.committee@parliament.scot 7 November 2016 Dear Mr Shevlin Thank you for your letter of 12 October informing me that the Public Audit Committee will consider the Auditor General’s Section 22 report “The 2014/15 audit of Edinburgh College” at its meetings on 17 November to understand better the circumstances leading to the financial difficulties at Edinburgh College and what action has been taken since to address these difficulties. I can confirm my attendance, and also that I will be supported by Alan Williamson, Chief Operating Officer. I would like to draw to your attention that Edinburgh College does not have a post of Finance Director as this is consumed with the Chief Operating Officer’s remit. Also, you asked that the Colleges internal auditor attends, which I can also confirm will be Chris Brown, Head of Audit and Assurance, Scott-Moncrieff. As per your letter, I have attached written evidence which has further information contained from the previous evidence submitted in September. Finally, at the evidence session on 6 October when Hugh Harvie from KPMG was being questioned by Mr Neil (columns 41 and 42 of the Official Report), Mr Harvie stated that the Director of Finance at Edinburgh College was responsible for following the SFC’s guidance for credits. This is factually incorrect. The responsibility for following guidance relating to the curriculum lay with the staff who led and oversaw the curriculum at that time, not the Director of Finance. Please let me know if you or the Committee wishes any further information in advance. Yours sincerely.

ANNETTE BRUTON Principal and Chief Executive

PAPLS/S5/16/9/3

ANNEXE A

THE 2014/15 AUDIT OF EDINBURGH COLLEGE

The Audit Scotland report on the college, makes our position very clear in terms of the financial difficulties that have arisen because of past under-performance on student recruitment and retention. We do not underestimate the significant challenge that this represents. Like the rest of the public sector in Scotland we are facing the difficulties posed by financial constraint and the impact of the global economy. Furthermore, we fully understand how difficult it will be to not only bear down on the current financial position but also to be able to adapt to the changing financial landscape for the public sector going forward.

In December of last year our recently appointed Principal presented a paper to the Board of Management which reviewed the financial position of the college and the cause and effect of not achieving activity targets for 2014-15, and the current year 2015-16. That paper set out an analysis of the challenges that had faced the college since merger, identified the underlying problems and outlined the previous efforts to take corrective action. The situation facing the college had been caused by a number of factors which were outlined in detail to the Board at that time. Adjusting to new funding rules, not fully recruiting and retaining students to the target number, and the need to revise the curriculum were among these. Subsequent to this analysis the Board agreed the proposal for a new Transformational Plan.

The Scottish Funding Council has a set of rules that determine the levels of funding provided to colleges each year, based on the volume of student activity. These rules are kept under review and adjusted annually as necessary.

Since the merger that led to the new Edinburgh College, there have been two significant policy changes in sector funding:

1. The method used to calculate funding allocation changed from a system called SUMS to credits

2. The amount of additional funding colleges can claim for extra credits (called ‘additionality’ was reduced

In the evidence given by the auditor general to the committee on 6 October 2016, she explained that these additional units are used to enhance learning, skills and employability. The Scottish Funding Council sought to reduce the amount of additional funding being claimed and asked colleges to focus on student places. However, it was still admissible to claim additional credits where these benefit students and up to advised levels. Within Edinburgh College, the actions needed to implement these changes happened too slowly, which resulted in overclaiming credits. At the point of merger, the three legacy college were asked to provide the likely number of students to be recruited for the year. This provided a starting point for assessing the size of the new college. This estimate was based on the curriculum rolling over from the three legacy colleges, without significant changes. The largely unchanged curriculum meant there was overlap between programme areas. The estimate also did not fully take into account the fact that students studied over more than one of the colleges, the reduction of the number of leisure courses and the shift to more full-time places for 16-23 year olds.

The merged college needed to consolidate and develop a new curriculum to meet the needs of the region. Work has been ongoing since merger to create a new curriculum, but this had not happened rapidly enough.

PAPLS/S5/16/9/3

ANNEXE A

In 2014/15, these circumstances contributed to a shortfall in student numbers, reduced class sizes and curriculum frameworks in need of updating.

The shortfall in recruitment, coupled with students who left their courses early, had a significant impact on the college being unable to meet its targets. If targets are not met or look like they are not going to be met, the college has an obligation to inform the Scottish Funding Council to allow reallocation of funding to other colleges. When it was known that targets were not going to be met, and that there was an error in the way the college had been claiming for additionality, the SFC was informed accordingly. However, the cost of delivering classes does not change for a smaller number of students despite the funding reductions.

Having identified these problems, the proposal the Principal put to the Board was that the College would have to be re-based to a lower level of activity to reflect the real demand and immediately begin to grow areas where the curriculum had failed to satisfy demand and where there was existing unmet demand in popular courses. The Principal reported to the Board that she had written to the Chief Executive of the Scottish Funding Council to outline the position of the college and the proposal to rebase then grow from there. It was proposed that this action would begin to create a more sustainable and reliable basis for curriculum and resource planning for Edinburgh College going forward. This proposal, along with a 16 point action plan which formed the basis of a 3 year Transformation Plan, was agreed by the Board in December 2015 and the Executive Team were asked to give immediate effect to this.

At that point the college implemented number of key actions: work related to recruitment of students was accelerated and we brought forward a programme which was designed to review and change the curriculum on offer. Both of these initiatives were fundamental to the effectiveness and sustainability of the college.

During the first quarter of 2016, the outline Transformation Plan was developed including those priority actions already under development. Governance arrangement were put in place by the Board of Management to ensure that the Board and its committees oversaw the rapid development of a detailed plan of action.

Working closely with external partners such as our three community planning partnerships we aligned what we needed to do to improve the college’s position with the needs of our region, the local economy, and the interests of our current and potential students. Then, in April, we published our full Transformation Plan.

Four major programmes of work are now underway as well as the normal college business. These are:

Financial sustainability, priority based budgeting, resource management and an estates strategy;

Curriculum relevance, regional Community Planning Partnership coherence; Workforce development and leadership and management structure; and Student recruitment, retention and productivity.

Student enrolment is at the heart of what we do and is the under-pinning factor in the financial stability of the college. We have now significantly changed the way we recruit students to Edinburgh College. We are currently making good progress towards our target for achieving our student numbers for 2016-17. Like all colleges we will continue to have students enrolling throughout the year.

Also key to the success of the college is the quality and appropriateness of the curriculum on offer. A significant amount of work has gone in to identifying and introducing some new

PAPLS/S5/16/9/3

ANNEXE A

provision for the current academic year, and we have focussed here on entry level provision. For this academic year we promised that we would try to ensure that in addition to our normal recruitment that all young people leaving school without a positive destination in our region would be able to find a course at Edinburgh College. Our three year transformation plan will keep the best of our curriculum provision and develop new, innovative and relevant courses to match the current and future economy of the region. We believe this is one of the most exciting developments at the college and is central to our major transformation and change over the next few years.

The Audit Scotland report concluded that Edinburgh College would face extreme financial difficulties without further financial support and referred to a special payment to support delivery of the Transformation Plan. On the basis of the Transformation Plan that was submitted on 31 March 2016, the Funding Council wrote to the Principal in June to confirm that it would make available up to £650,000 for a first phase of voluntary severance in 2016-17 financial year and would review requirements as implementation of the plan progressed. In the use of this funding of £650k we have been successful in saving in excess of £1m on a recurring basis. A facility would also be provided to draw down in academic year 2016-17, as a cash advance against future grant funding, up to circa £3million to ease cash flow pressure. This aspect of the strategy recognises the need to ensure that we have the workforce we need for this future and that our workforce planning is within our financial model for improving our financial position.

To provide both an external view and assurance to the Board of Management of the College and the Scottish Funding Council jointly commissioned an external review of the extent to which the Transformation Plan would be likely to achieve its objective. The subsequent review report concluded that the Transformation Plan presents a comprehensive overview and a sound framework to allow the college to undertake the required improvements. It also concluded that the rationale for the plan for financial sustainability is reasonable and provides a sound approach to addressing the college’s current financial challenges.

The audit also highlights a number of areas where the college can improve its change management processes, and makes recommendations for us to build on the work to date. The college is acting quickly to put these recommendations in place.

Our Board and newly formed Executive Team are focussed on the strands of our transformation plan which we believe will not only create a more sustainable future for the college but which will also support regional economic growth in Edinburgh, Midlothian and East Lothian. We have worked closely with the Scottish Funding Council to ensure that whilst we achieve the right level of recruitment to match regional need, we also have a robust three year plan towards balancing the college’s finances and future financial sustainability.

EDINBURGH COLLEGE

November 2016

PAPLS/S5/16/9/3

ANNEXE A

PAPLS/S5/16/9/3 Annexe B

Edinburgh College EIS FELA submission to 17 November 2016 Public Audit

and Post-legislative Scrutiny Committee meeting Thank you for the opportunity to present evidence to the forthcoming Committee meeting to look at the situation at Edinburgh College. We hope the information below will be helpful, and would be happy to provide additional material on request. A failure to match targets Edinburgh College was formed in 2012. Since then the College has consistently failed to reach performance targets for delivery of courses to students (measured in WSUMs and Credits). By contrast, according to the SFC: ‘The college sector has

exceeded the SFC‐funded activity targets in each of the last 10 academic years.’[1] These figures are based on the College’s own reports and Funding Council data [2] In 2015-16 the College declared in advance that it would not reach its target of 200,238 credits, setting itself a lower target initially of 12,000 fewer credits, then 14,000. However, the College predicts an out-turn for last academic year that is 19,822 credits (10%) short. (Board papers, September 2016) Now the SFC is not even bothering to set Edinburgh College targets comparable to those nationally. It has announced that while ‘in response to the guidance from the Cabinet Secretary we have taken the decision to maintain the sector credit target for academic year 2016-17’, a decision has been taken for Edinburgh College which ‘reduces their core target by 11,424 (5.8%) credits.’[3] When the transfer of some credits to the SRUC is accounted for this still amounts to 4.4% lower than its previous year’s reduced target, and an even wider deviation from the static level of delivery set nationally. Edinburgh’s failure is not due to a lack of funding. Indeed the opposite is true. As the ‘flagship’ for the merger process Edinburgh College has been treated generously. The cost of the merger at Edinburgh was £17m as against a national average of £4.5m. Missing targets should have triggered clawbacks of funding from the SFC of £400,000 in 2013-14 and £800,000 in 2014-15. However, the SFC did not actually take this money from the College. In 2015-16 the College voluntarily gave up £3.5m of potential funding, regarding its target as unachievable. The reduction for 2016-17 will cost at least £2m. The current deficit is over £5m. It is in this context that the unauthorised claiming of funding through ‘additionality’, which the last hearing of the Public Audit and Scrutiny Committee investigated so carefully, should be seen. Reasons for this failure 1. Spending decisions How is it possible that so much has been spent on the College to so little effect? We believe that the cause is poor governance from the start. One reason for the high cost of the merger itself was that the College paid out £1,836,000 in VS to 18 top management individuals (over £100,000 per person). This was noticed elsewhere. In

PAPLS/S5/16/9/3 Annexe B

the recent 'Report on The 2013/14 audit of Coatbridge College: Governance of severance arrangements’ the ‘Edinburgh model' is cited no less than 16 times because it was used as the template. For example, one email to the remuneration committee of Coatbridge College stated: ‘I am very happy to recommend that an arrangement based on 2 years’ gross salary which I would certainly not consider unreasonable in the circumstances as compensation for loss of office. In considering this proposal, I have looked at the Edinburgh model which you already have. This model is now being widely used and it is worth noting that South Lanarkshire are using it as the basis for their voluntary severance scheme.’ The ‘Edinburgh model’ provided for 21 months’ severance pay even though the SFC only funded 12 months’ severance. The difference therefore came from College funds. The examples of Coatbridge and South Lanarkshire received much public attention. However, on 26 November 2015, the Edinburgh Evening News reported as follows: ‘TWO education principals walked away with a combined payoff of £450,000 when their institutions merged to form the Capital’s new super-college – which recorded a £1 million deficit last year. New figures reveal that Brian Lister received a severance payment of £249,000 when he stepped down as principal of Stevenson College and Miles Dibsdall was handed £202,000 when he finished as principal at Telford College. The packages are among the five biggest payouts given to 14 college principals across Scotland…’ VS packages formed the bulk of the £17m cost of merger and reflected a managerial approach which has been pursued ever since - that the problem in the College is staff rather than the way the College is being run. VS packages are again the key element in the College’s proposed Transformation Plan despite the fact that this method has failed repeatedly. There is also mounting evidence that in some cases the funding is misapplied as so-called redundant posts have been filled immediately afterwards. 2. A flawed approach At merger the Edinburgh College Board inherited the workforce of three successful colleges. The academic staff may not have had expertise in administration at top level, but brought a wealth of experience in curriculum matters, recruitment, retention and the delivery of education to a diverse student population. From the start management regarded this know-how as a problem to be overcome in forging a new college identity, rather than a resource to be harnessed. Indeed, the comparatively high cost of the merger was largely down to voluntary severance payments designed to eliminate large numbers of valuable and experienced staff, including the middle management layer who played a key role as a channel between the top of the college structure and ‘the chalk-face’. At the time the EIS warned management that the way to success was not through the large-scale removal of such individuals. (It is notable that four years on the College is considering re-instituting the middle layer that was deleted in 2012 at such high cost to the taxpayer and the functioning of the College.) After each successive wave of voluntary severance those remaining have been sidelined in as many areas as possible. Management’s approach is that lecturers are only equipped to teach classes, and since everything else must be its exclusive

PAPLS/S5/16/9/3 Annexe B

domain, any advice or comment from academic staff is an unwelcome intrusion. Subsequently, ignoring all the doubts expressed and any appeals for piloting of systems, numerous long-established and well-functioning administrative mechanisms were ripped up and replaced by a ‘one-size-fits-all’ approach delivered by fiat from above. In less than a year this created so many difficulties that the EIS felt compelled to write directly to the then Cabinet Secretary, Mike Russell, with a dossier of problems. He accepted they were serious enough for the SFC to investigate. The Funding Council investigation found: ‘There are significant difficulties for staff and students in: accessing bursaries, full enrolment of students, populating the website with accurate information, and in some administrative systems.’ However, it concluded: ‘The management is aware of and is acting on the issues that have been identified by staff and students. This is being done effectively…’ (‘Edinburgh College EIS FELA letter to Cabinet Secretary: SFC response’) It is clear that this confidence was misplaced. The 2015 Audit Scotland report also refers to numerous problems. The SFC broadly recognised the validity of our concerns but did not understand their source. It concluded that the management would be able to overcome them without altering the fundamental approach. So, for example, radical changes to curriculum delivery which the staff predicted would reduce uptake were implemented without any consultation whatsoever. When the inevitable happened, and student numbers fell, the automatic response was a further round of voluntary severance. Now that additionality can no longer be claimed and the deficit has grown there are still more rounds of VS in prospect. Symptomatic of management’s attitude to staff, and its refusal to admit responsibility for the difficulties, was this email (5 February 2016) from the Depute Principal objecting to our having reported failure to reach targets to Lothian MSPs: ‘The statement that Edinburgh College had failed to meet its activity targets for 3 out of the 4 years of merger – this is factually untrue – the college has achieved its wsum targets for 12/13, 13/14 and 14/15. It is unacceptable to have false information provided to either members of staff or to mislead, however unintentionally, members of the Scottish Parliament.’ 3) Impact on recruitment and retention The key change, which lies behind the deficit, additionality, and the failure to reach targets has been the substantial drop in student numbers. It has been claimed that the initial figure of 35,000 students for Edinburgh College at merger in 2012 cannot be compared to the 15,000 current students. If true this reflects a lack of transparency either in 2012 or today. Whichever statistic is correct the failure to match SFC targets is undeniable, and can be traced to the changes above - deletion of middle managers, and effective removal of lecturing staff from the recruitment process. Before 2012/13 the system was centred on some 500 lecturers and overseen by senior lecturers. When the latter post was deleted at merger no adequate replacement mechanism was provided. Not only has recruitment fallen, retention of those that are recruited is poorer as applicants are not necessarily placed into the correct courses. As the College’s self-evaluation report states, retention rates in

PAPLS/S5/16/9/3 Annexe B

2015-16 for FE and HE programmes are ‘down from last year by 4.4% and 0.2% respectively.’ Changes have reduced academic input, with the burden falling on around 44 student records staff. MSPs visiting the College earlier this year were told by management that lecturing staff had not been sidelined from recruitment. Thus the 5 February email quoted above says: ‘No interviews – it was made absolutely clear that interviews were at the discretion of the CM and indeed we have been auditioning for Creative arts places since November last year. This has been reinforced at all of the eleven staff meetings we held around campuses in the last few weeks. It’s difficult to understand why you insist on giving out information which is not correct…Lecturing staff are not ‘side-lined’ they are involved in the interview process.’ However, the actual recruitment plan (leaked to us as our request for it was refused) states: ‘Default position is to have NO interviews (sic)’, and ‘Auditions/interviews will only be allowed in exceptional circumstances’. On behalf of lecturers the EIS made a plea to management that they be allowed to take up the recruitment role that had been so successfully performed in the period before merger. At a stroke that would multiply the numbers of staff focussing on this key area more than tenfold. The offer was refused. Conclusion We believe that Edinburgh College has the potential to serve its local community as well as any other College in Scotland. There is no demographic reason for its poor performance. That lies with governance and management. The solution depends on working with staff, seeing them as the key to attracting and retaining students rather than as a burden to be removed through VS. Until management is held accountable for its past failures and thus encouraged to adopt a new approach, the financial difficulties the College faces are likely to remain intractable, to the cost of Edinburgh’s young people, the college sector as a whole and the public purse. NOTES 1. ‘http://www.sfc.ac.uk/web/FILES/Funding_Outcome_Agreements_2016-17/College_Outcome_Agreements_Summary_2015-16.pdf 2. http://doc.edinburghcollege.ac.uk/welcome/publication%20scheme/college%20performance%20indicators%202014%20-%2015.pdf and http://www.sfc.ac.uk/web/FILES/Statistical_publications_SFCST012016_CollegePerformanceIndicators201415/SFCST012016_College_Performance_Indicators_2014-15.pdf 3. http://www.sfc.ac.uk/web/FILES/Announcements_SFCAN072016_Outcomeagreementfundingforcollegesfina/SFC_AN_07_2016.pdf

PAPLS/S5/16/9/3

ANNEXE C

WRITTEN SUBMISSION FROM KPMG, APPOINTED EXTERNAL AUDITOR OF EDINBURGH COLLEGE Section 22 report on the 2014/15 audit of Edinburgh College

I refer to the meeting of the Public Audit and Post-legislative Scrutiny Committee (“the Committee”) which was held on 6 October and further to your letter of 14 October 2016 set out below a submission to the Committee in relation to a number of matters which were discussed in that meeting.

The role of external audit The Committee explored the role of the internal and external audit and I thought it would be helpful to clarify the role of external audit.

The external audit of Edinburgh College for the period ended 31 July 2015 was undertaken in accordance with the Further and Higher Education (Scotland) Act 1992 and section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act 2005 and its purpose was to provide an independent audit opinion on an entity’s financial statements. An external audit does not monitor performance of an entity on an ongoing basis over the course of a financial year.

The Independent auditor’s report to the members of the Board of Management of Edinburgh College, the Auditor General for Scotland and the Scottish Parliament is contained on page 25 to 26 of its Annual report and financial statements for the year ended 31 July 2015 which can be found at the following link: http://doc.edinburghcollege.ac.uk/welcome/governance/financial%20statements%20july%202015.pdf. The report includes:

the purpose for which it was prepared;

the respective responsibilities of the Board of Management and auditor;

the generic scope of the audit of the financial statements (see below);

the opinions on the financial statements, regularity, and other prescribed matters;

matters on which the auditor is required to report by exception.

The opinion on the financial statements is as follows: “In our opinion the financial statements:

give a true and fair view in accordance with the Further and Higher Education (Scotland) Act 1992 and directions made thereunder by the Scottish Funding Council of the state of the college's affairs as at 31 July 2015 and of its deficit for the period then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of the Further and Higher Education (Scotland) Act 1992 and directions made thereunder by the Scottish Funding Council, the Charities and Trustee Investment (Scotland) Act 2005, and regulation 14 of The Charities Accounts (Scotland) Regulations 2006 (as amended).”

The “Generic scope of the audit of the financial statements” notes: “An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether cause by fraud or error.” Our audit effort is therefore directed by our assessment of the risk of significant misstatement within the financial statements. Our risk assessment procedures include meeting with management several times during the year to discuss financial performance and business developments and attendance at all meetings of the Audit and Risk Assurance Committee. We design and perform procedures to address these significant risk areas and all other material items within the financial statement.

The majority of our audit fieldwork is performed, following the 31 July year end, in late September and early October when we assess whether controls that we seek to rely upon have operated throughout the year and gather substantive evidence to support transactions and balances recorded in the financial statements. The external audit does not conduct audit procedures throughout the year and

PAPLS/S5/16/9/3

ANNEXE C

has no monitoring role. We reported on matters arising from the audit of the financial statements in accordance with the responsibilities set out with Audit Scotland’s Code of Audit Practice and International Audit Standards by providing “the Annual audit report to the Board of Management of Edinburgh College and the Auditor General for Scotland (“the Annual audit report”) for the period ended 31 July 2015. This report is published by Audit Scotland and can be found at the following link http://www.audit-scotland.gov.uk/uploads/docs/report/2015/fa_1415_edinburgh_college.pdf. On page 5 of that report its purpose and scope is set out, along with the accountable officer and auditor responsibilities.

Scottish Funding Council recovery of £800,000 We were made aware of the potential for the recovery by the Scottish Funding Council (“SFC”) of £800,000 in relation to additionality towards the end of October 2015 as we were nearing the end of our audit work on Edinburgh College’s financial statements for the year ended 31 July 2015. We were informed of the matter by the Director of Finance immediately following internal notification of the matter to him. Prior to this date we understand the Director of Finance had believed that all amounts claimed were appropriate based on an understanding that the curriculum had been designed to meet the requirements of the SFC and that final claim returns made to the SFC had been subject to control procedures carried out by the curriculum department. In addition, the final claim had been subject to scrutiny by the internal auditor of Edinburgh College during October 2015 with no issues having been raised. The focus of our external audit work in this area was to understand the position of the SFC in relation to the matter and ensure that the potential recovery of this amount was correctly reflected in the financial statements.

During consideration of this matter on 6 October 2016 some members of the Committee were keen to understand where responsibility for understanding the revised rules surrounding additionality lay. This was raised specifically by Mr Neil (column 42 of the Official Report). For the record the question of responsibility is a matter for the whole Board of Management of Edinburgh College and ultimately for them to consider and decide upon. An investigation into the matter was carried out by the Principal of Edinburgh College the findings of which were reported to the Committee in her letter to the Committee of 27 September 2016.

I would be happy to discuss the above maters further with the Committee during the meeting on 17 November 2016. Yours sincerely Hugh Harvie Partner, KPMG