au/01/16/a audit committee agenda · \\hq14fp\group\central distribution office\work\committee...

$: AU/01/16/A AUDIT COMMITTEE AGENDA · \\Hq14fp\group\Central Distribution Office\Work\Committee Papers\Audit\11-13-01\AU.01.16.1 - Letter and Progress Report from SFEFC 24.10.2001.doc$
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David McGillActing Clerk to the Audit Committee

Room G.6, Committee ChambersExt. 0131 348 5215

Email: david.mcgill @scottish.parliament.uk

AUDIT COMMITTEE

AGENDA

16th Meeting, 2001 (Session 1)

Tuesday 13th November 2001

The Committee will meet at 2.00 pm in Committee Room 3, Committee Chambers toconsider the following agenda items:

1. Overview of Further Education Colleges in Scotland 1999/2000: TheCommittee will receive a briefing from the Auditor General for Scotland on hisreport entitled ‘Overview of Further Education Colleges in Scotland1999/2000’ (AGS/2001/8).

2. Scottish Further Education Colleges: Managing Costs: The Committeewill consider a further response from the Scottish Further Education FundingCouncil to its report entitled ‘Scottish Further Education Colleges: ManagingCosts’ (SP Paper 70).

3. Scope of Activities of the Auditor General for Scotland: The Committeewill consider a letter from the Minister for Finance and Local Government onproposed changes to the scope of activities of the Auditor General forScotland.

The papers for this meeting are as follows

Agenda Item 1

Report by the Auditor General for Scotland entitled‘Overview of Further Education Colleges in Scotland1999/2000’.

Briefing Paper

Agenda Item 2

Letter and Memorandum from Prof. John Sizer, ChiefExecutive SFEFC to the Convener - 24 October 2001.

Summary of SFEFC Memorandum

Agenda Item 3

Paper from the Clerk on proposed changes to thescope of activity of the Auditor General for Scotland.

Letter from the Minister for Finance and Local Governmentto the Convener – 24 October 2001.

AGS/2001/8

PRIVATE PAPER

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http://www.audit-scotland.gov.uk/publications/pdf/01pf06ag.pdf

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\\Hq14fp\group\Central Distribution Office\Work\Committee Papers\Audit\11-13-01\AU.01.16.1 - Letter and Progress Report from SFEFC 24.10.2001.doc

24 October 2001

Mr David McGillActing Clerk to the Audit CommitteeThe Scottish ParliamentRoom G.6Committee ChambersEdinburgh EH99 1SP

PROGRESS REPORT TO THE SCOTTISH PARLIAMENT’S AUDIT COMMITTEE –OFFICIAL REPORT ON THE NAO REPORT: SCOTTISH FURTHER EDUCATIONCOLLEGES – MANAGING COSTS

I am pleased to enclose the Council’s latest Progress Report on the aboveOfficial Report by the Audit Committee. This report builds on the progressreported to the Audit Committee in December 2000.

The format of the report is similar in style to the December 2000 report. Thefirst column shows the Committee’s recommendations to the Council, thesecond column records the evidence given to the Committee on 28 October1999 with the third and fourth columns reporting progress by the Council forthe period up to December 2000 and October 2001 respectively.

As this report demonstrates, progress continues to be made across the rangeof strategic reviews undertaken by the Council. All colleges have nowproduced a Management Action Plan (MAP) and the Council has providedsector-level feedback following our analysis of the Plans. A copy of thatreport is attached. We intend to issue individual feedback reports to collegeswithin the next few weeks.

As with the previous report I also attach, at Annex A to the Progress Report, acopy of the Council's Action Plan from the Management Review along with acommentary of progress to date.

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The situation with regard to reporting the financial health of colleges has alsodeveloped considerably. In particular, there is more robust financialinformation available from colleges and that is analysed using the Council’sfinancial health monitoring framework. Accordingly, action with regard torecovery plans has been more focused and targeted on those with greatestneed.

You will be aware that the Auditor General for Scotland is shortly to publish anFE Overview Report. That Report will also incorporate much of theinformation that I now provide. In that context I would hope that, in future,progress will be monitored against the more up-to-date report by the AuditorGeneral for Scotland.

If the Committee requires any further information, then please contact LiamMcCabe (telephone 0131-313-6524/email: [email protected]).

I have copied this letter to Eddie Frizzell, Head of Scottish ExecutiveEnterprise and Lifelong Learning Department.

Professor John SizerChief Executive


OFFICIAL REPORT OF THE SCOTTISH PARLIAMENT’S AUDIT COMMITTEE ON THE NAO REPORT: SCOTTISH FURTHEREDUCATION COLLEGES: MANAGING COSTS - ACTION PLAN: PROGRESS REPORT AT DECEMBER 2000

Audit Committee’srecommendationsto the Council

SFEFC’s comments on progress reported tothe Committee on 28 October 1999

Progress to December 2000 Update on progress to October2001

“The Committeerecommends thatthe Councilcomplete itsvarious reviewsand report to theCommittee by 31December 2000 onthe:

• Root andbranch reviewof the sectorand on theaction plannedto tacklecollege deficits,improve collegemanagement,and torationalisefurthereducationprovision incScotland;

“Root and branch review”

The root and branch review referred to in therecommendation is defined in the OfficialReport (paragraph 50) as the various strategicreview initiatives set in train by the Council.Namely: the review of strategy; of the fundingformula; of management; of the financialmonitoring framework, of standards and quality,of estates; and information andcommunications technology.

Review of Strategy (Supply and Demand)

The review of Supply and Demand in ScottishFurther Education is currently underway. TheCouncil will receive an initial report in May.The review findings will form the basis of adialogue with key stakeholders and willcontribute to the development of informationbases against which the Council and collegescan make strategic judgements.

The Council considered the report onthe review of supply and demand inJuly and September 2000. The reportwas distributed to all colleges and keystakeholders (in CD format) inDecember 2000.

Although the report concluded that ona national basis, provision wasbroadly adequate at meeting demand,the key use of the report is to assessthe relative adequacy of each areaand of the provision of major subjects.This is being taken forward by a majorarea and national mapping exercise.

The Council has now begun acomprehensive mapping of eachgeographical area and of keyindustrial sectors (4 in 2001-02)due to be complete by 31 March2002.





The Executive reviewed the 1999 DevelopmentPlans of all colleges and made follow-up visitsto provide feedback on this process. Thisprocess informed the development of guidanceon strategic plans for 2000-03. The Council iscurrently consulting on planning processes for2001-04 and beyond. Guidance on operationalplans for 2000-01 will be issued in April 2000with plans to be submitted at the end of July.In addition, the Council is to commission thedevelopment and delivery of a programme ofactivity which will assist college seniormanagers and enhance the effectiveness ofplanning in the sector.

The Council has committed at least £3m perannum to its Strategic Development Fund, thepurpose of which is to provide financial supportto promote the strategic development of the FEsector to better meet Scotland’s local andnational educational needs, and to help makesignificant step changes in the nature ofprovision, its delivery, and management.

Review of Funding

After consultation with the sector andmaking relevant amendments,guidance on operational plans wasissued in May 2000 for plans to besubmitted by 31 August 2000. TheCouncil has analysed all the currentyears plans and given feedback tocolleges, including face to face visits,on their strategic and operationalplans. The programme of activity forcollege managers to enhance theeffectiveness of planning will beundertaken once the managementreview action plans identify the scaleand scope necessary.

The Council has established and ischairing a joint steering group with theGlasgow Colleges Group to examineand analyse available data on needand provision in Glasgow, and tocommission an analysis of thestrategic options for the provision ofFE in Glasgow. The Council isfunding consultancy to assist thisprocess.

This pattern of analysis of plansand feedback to colleges is nowan annual occurrence. Now thatthe Management Review ActionPlans are complete, the Councilwill give individual support tocolleges to improve the effective-ness of planning, with particularfocus to those where the scopefor improvement is greatest.

The analysis was undertaken byexternal consultants, wascompleted in March 2001 and aconsultation phase with collegeBoards and other stakeholderswas completed in September2001, due to be published duringOctober. Joint consideration ofthe outcomes will then takeplace.

Council has offered specificestates funding for a projectmanager to take forwardemerging estates solutions.





Funding year has been aligned with academicyear. A forward looking methodology has beendevised based on a funding agreementwhereby colleges will be offered grant-in-aid inreturn for delivery of a specified volume ofactivity acceptable to the Council. Themethodology includes a fee waiver grant andspecial elements for entry cost, achievementand unavoidable cost factors. The allocationsfor academic year 2000-01 will be announcedon 26 April. The new methodology shouldenable colleges to plan forward with greaterconfidence in future. Some other elements ofthe methodology will be considered in phase 2of the review such as the standard fundingvalues and the weights for different subjectgroups.

The academic year 2000-01allocations were announced on 26April 2000. The Council’s newforward-looking approach to fundingwas welcomed by the colleges asbeing more transparent and morepredictable. The Council has alsostarted to review details such assubject weightings and other aspectsof the funding method. The Councilwill set out the implementation optionsand implications of this work by theend of March 2001 and engage in afull consultation with collegeimmediately after that.

The Scottish Executive has recentlyannounced the likely level ofresources that will be available tocolleges over the next three years.While there is a substantial increase(concentrated in the first year), thesector has also been challenged tocontribute significantly to key policyobjectives (i.e. increase studentnumbers, social inclusion, literacy andnumeracy). In addition to targetingthese issues, the Council will focuselements of its funding on qualityimprovement in terms of thedevelopment of college staff,management and Boards ofManagement members as well asinvestment in estates and information

The Council ran its consultationon its Activity MeasurementMethod over the summer of 2001with final responses due forsubmission by 30 September.(The ‘Activity MeasurementMethod’ is the way in which theCouncil measures funded activityin FE colleges which reflects, forexample, different modes ofdelivery and subjects). Takingaccount of these responses, therelevant Council Committee andthe Council itself are nowconsidering how to take thesematters forward at meetings inNovember and December. TheCouncil will advise colleges ofthe next steps early in calendaryear 2002.





Review of Management

The consultants report on the review along withthe Management Review Steering Group’sdraft report on the review findings, conclusionsand recommendations were endorsed by theCouncil on 30 March 2000. In line with theagreed timetable, the final report from theCouncil will be submitted to Ministers in May2000.

Following consideration by Ministers of theCouncil’s report, the Council will prepare adetailed action plan for implementation of thereview recommendations. This will set out howand when the recommendations directed at theCouncil, Boards of Management and Principalswill be implemented.

Review of Financial Monitoring Framework

A robust financial health monitoring frameworkwas approved by the Council’s AuditCommittee in September 1999. The adequacyand effectiveness of this will be monitored bythe Council’s Audit Committee through thefinancial health monitoring reports it considers

technology.

The Management Review wasendorsed by Ministers in June 2000.Since then the Council has preparedan action plan on how it is to take thiswork forward and issued the reportand challenge questions to collegeBoards of Management andPrincipals. Recognising the scale ofthis task the Scottish Executiveagreed to extend the deadline for thereturn of college Action Plans to 31March 2001.

Attached at Annex A to this progressreport is a copy of the Council’s ActionPlan with a commentary of progress todate. A copy of the full ManagementReview report is also attached.

The Council’s Audit Committee hasmet five times since October 1999 toconsider detailed financial reports,including those on recovery plancolleges.

SFEFC has now provided sector-wide feedback and intends toprovide feedback to individualcolleges on the adequacy ofaction plans in October 2001.

Attached at Annex A to thisprogress report is a copy of theCouncil’s Action Plan with anupdate on progress sinceDecember 2000.

The Council’s Audit Committeemeets at least three times peryear and scrutinises in detailfinancial reports provided to itincluding those on recovery plancolleges.





and may be refined and developed as a result.In addition a formal review of the monitoringframework will be carried out in August 2001,which will consider, in particular, theeffectiveness of the Council’s action in relationto the College Recovery Plans. (See also latertext on Recovery Plans and deficits).

Review of Standards & Quality

The Council undertook a review of qualityassessment in further education colleges inNovember 1999. On the basis of this, theCouncil will focus on two areas in the comingmonths: working with colleges, ScottishEnterprise, Highlands & Islands Enterprise andSQA to reduce the audit burden on colleges inthe short term and on developing a moreunified system of assessment in the longerterm; and revising the quality framework usedby HMI in its reviews. The Council will considerhow to take this work forward at its MayCouncil meeting.

In addition, the Council intends to consider how

The Council agreed a revisedmethodology for quality assessmentwhich will place more emphasis on thestudent experience and disseminationof good practice. The new methodwas launched in September 2000 andthe first of the new reviews are nowunderway.

The Council has developed a strategy

The Council introduced its newmethodology for quality assess-ment in AY 2000-01 and sevenreviews took place during thatsession. A further 13 reviews arescheduled for 2001-02 and all 46colleges will be reviewed by theend of AY 2003-04. The newmethod is working well and hasincreased the emphasis on goodpractice and quality improve-ment. The Council has alsoreached agreement with SE, HEIand SQA on the principle ofcredit transfer as a means ofreducing the burden of multipleaudits. Work is progressing onimplementing a credit transferprocess with the first practicalbenefits in reduction of burdenexpected in 2002.

The Council completed its





to develop an effective link or range of linksbetween quality and funding. To assist this itwill (1) offer improved guidance on currentperformance indicators for 2000-01 and (2) itwill undertake a review of a broad range ofperformance indicators used in its work.

Review of Estates

Review currently underway, to be reported tothe Council in May 2000. Feedback toindividual colleges will be provided after thereview findings have been considered by theCouncil. (See also later text on EstatesStrategy and Backlog Maintenance).

Review of Information and CommunicationTechnology

The Council is to invest £10M in the financialyear 2000-01 and £14M in the financial year2001-02, as part of the CSR funding, in order to

for promoting continuous qualityimprovement in the sector. This willinclude clearer sanctions againstunsatisfactory provision, andmechanisms to fund the spread ofgood practice. The Council alsoconducted a review of performanceindicators, which identified a need toimprove the current PIs and todevelop some new ones, particularlyon Widening Access on TeachingQualifications for FE staff. TheCouncil is currently consulting thesector on both these proposals.

Reports considered by Council in Mayand July 2000. All colleges receivedindividual reports. Council intendsrequesting annual returns, through theoperational plan submissions, whichwill assist in monitoring the impact ofthe Council’s policies in this area.

The Council announced its ICTstrategy in May 2000, and distributedfunding of £7.5M direct to colleges for

consultation with the sector andhas now published its policies onresponding to unacceptablequality of provision and thepromotion of continuous qualityimprovement. All colleges willnow be required, as a conditionof grant, to develop qualityimprovement strategies as part oftheir overall planning processes.The Council has continued tosupport staff development, withfunding of £2.75m in 2001-02,and in particular has set specifictargets for achievement ofteaching qualifications as part ofthe Council’s corporate plan.

Annual returns due forsubmission at the end of October2001. Assessment of impact offunding will be reported toCouncil at its meeting on 14February 2002.

The Council has continued toimplement its ICT strategy and isinvesting £15m in this area in





develop the FE hub of the National Grid forLearning. The council conducted a survey ofexisting provision in November 99, and usedthis to develop a draft strategy which went outfor consultation in Feb/March. The finalstrategy will be announced in May. It’sexpected that the strategy will address a rangeof parallel strands including networkdevelopment, college infrastructure, staffdevelopment, content development andpromotion of effective college policies. TheCouncil has also decided to join JISC (JointInformation Systems Committee) which willgive all FECs high-bandwidth access to JANET(Joint Academic Network)., All colleges will beconnected to JANET by March 2001.

“Action planned to tackle college deficits”

Through the operation of its financial healthmonitoring framework the Council will continueto monitor financial performance and to workwith colleges on a case by case basis to helpdeliver any necessary improvements. Inaddition, guidance on good practice in variousaspects of financial management will bedeveloped and disseminated to the sector.

A key responsibility of the Council’s AuditCommittee is to monitor the trend in deficits atthe sector and individual college levels, and theimpact, in broad terms, of the Council’sfinancial health monitoring framework on theseresults.

infrastructure and staff development.Colleges were required to producetheir own ICT strategies, and theCouncil has provided feedback onthese. The Council has now setspecific targets for the provision ofcomputers to students, and willmonitor these on an annual basis.Progress continues on connecting allcolleges to JANET and the Councilexpects to meet its deadline of March2001 for completion of this project.

A detailed financial report wasconsidered by the Council and itsAudit Committee in November 2000.This showed a steady improvement inthe sectors financial health withhistoric costs surpluses forecast ineach of the years 2000/01 – 2002/03.Also the number of collegesforecasting historic cost surpluses isexpected to increase from 18 in1998/99 to 37 in 2002/03.

During this year the format of collegefinancial forecasts has been revised toallow more detailed and forward

2001-02. The Council continuesto monitor college progresstowards meeting sector targetson access to computers for staffand students. All colleges havenow been connected to JANETand further enhancements inconnection bandwidth are beingprocured during 2001-02. TheCouncil has also embarked on amajor programme (£2m) toprocure new online content foruse in FE, and has reachedagreement on reciprocal accessfor Scottish colleges to over £5mof content procured by theEnglish FE funding body.

The financial forecasts providedby the colleges to June 2001indicated that 37 colleges werelikely to incur an operating deficitduring the year, six more than in1999-00 and that, consequently,22 colleges are likely to have anaccumulated deficit at 31 July2001, one more than in 1999-00.The overall accumulated deficitacross the sector is expected tohave increased from £15m in1999-00 to £15.6m in 2000-01.SFEFC expects that the numberof colleges recording operating





“Improve college management”

This will be achieved principally through thefollow-up work from the management review(see above), but another important area wherethe Council is already working with the sector isdevelopment of improved strategicdevelopment planning. (See earlier text onReview of Management).

looking analysis and monitoring. Therevised format is also consistent withcolleges’ strategic and operationalplanning processes.

See earlier text on ManagementReview

See earlier text on review of Strategy.

deficits will fall to 24 in 2003-04.

There are 20 Collegesforecasting historic cost deficitsin 2000-01: one more than in1999-00. This is the net result ofsix colleges with historic costsurpluses in 1999-00 havingdeficits in 2000-01, and five withdeficits in 1999-00 improving tosurpluses in 2000-01. Theposition is also forecast toimprove in the next two years,with 8 colleges forecastinghistoric cost deficits in 2001-02and 3 in 2002-03. There is amarginal decline in 2003-04, with5 colleges predicting deficits.

See earlier text on ManagementReviewIn addition, the Council hasrecently established a newdirectorate responsible for FEdevelopment. One of its keyresponsibilities will be to workwith college Boards and seniormanagers to develop manage-ment capability in the sector.





“Rationalise further education provision inScotland”

This issue needs to be considered in thecontext of the other strategic reviews currentlyunderway. Only when equipped with theevidence from these reviews and of financialhealth matters can balanced and robustdecisions about the scope for and benefits ofrationalisation be taken.

The Council is to report to the Minister byDecember 2000 on how it proposes toapproach any rationalisation of the shape andstructure of the sector, to enhance theprovision of further education in a regionalcontext and deliver best value for public funds.

A report will be sent to the Minister forEducation and Lifelong Learning byend December 2000.

The report was sent to theMinister in January 2001 whowelcomed the Council’sapproach. Some colleagues inGlasgow have already indicatedthat they are exploring in moredetail the possibility of mergerfollowing up the external reviewof provision in Glasgow (seeearlier text on review of strategy).

• Review of therecovery plans

“Review of Recovery Plans at the remainingten* colleges”





at the remain-ing 10 collegesin poorfinancial health,and on theprogress madein implementingaction plansand improvingfinancial healthof the collegesconcerned;

*At the time of the earlier evidence, three of the13 colleges had agreed recovery plans inplace.

In accordance with the statement given inwritten evidence, Recovery Plans were either inplace or in the process of being prepared by 31December 1999. At the end of March 2000,agreed Recovery Plans are in place at threecolleges; draft Recovery Plans have beenreviewed by the Council for a further sixcolleges; and two colleges are currently in theprocess of preparing plans which have yet tobe reviewed by the Council. In the case of twocolleges: Aberdeen and James Watt; theCouncil is now satisfied that sufficientimprovement has been made, or is in train, toobviate the requirement for a formal RecoveryPlan.

A formal process of reporting progress onRecovery Plans to the Council’s AuditCommittee has been established. This is a keyissue in the remit for this Committee.

Since October 1999 one furtherrecovery plan has been agreed andimplementation of the associatedaction plans for these four colleges ismonitored quarterly. Draft recoveryplans have been received from theremaining seven colleges and arecurrently being reviewed by theCouncil’s Executive.

Progress in agreeing recovery planshas been slower than originallyestimated. The principal reasons forthe delay are: the essential lead timein validating, fundamental reviews at acurriculum and business level; insome cases major reviews of physicalestates; and the resource input ofCouncil and College staff. It is nowestimated that all recovery plans willbe agreed by the end of July 2001.

Financial recovery plans areeither in place or are at anadvanced stage of preparation at11 of the 19 colleges whosefinancial health SFEFC assessedas being of most concern. Foreach of these colleges SFEFC ismonitoring the achievement ofrecovery plans through regularreports and meetings withcolleges’ Boards and manage-ment.

In the remaining eight collegesno financial recovery plan hasbeen prepared, largely becauseaction is already in hand or thefinancial position is forecast toimprove in future years. In eachof these colleges, SFEFC hasinformed the Board ofManagement of its concerns andis monitoring closely the position.





“Progress made in implementing actionplans and improving financial health of thecolleges concerned”

Action plans can only start to be implementedafter agreement is reached on the RecoveryPlan. At this point the Council will use theaction plan as the principal tools for monitoringimplementation. The frequency of monitoringwill be no less than quarterly. It is intended thatRecovery Plans for all of the colleges identifiedwill be in place by the end of the academic year1999/2000.

Staff from the Council are working closely withColleges and this has encouraged colleges toadopt a very positive attitude to the need forand benefits of Recovery Plans.

The Auditor General’s Report onMoray College highlightslimitations on the overallframework. There are limits tothe powers of the ChiefExecutive of SFEFC, in hiscapacity as accountable officer,to ensure propriety and value formoney in the stewardship offunds allocated to individualcolleges. That extends toobtaining Financial RecoveryPlans.The Auditor Generalrecommended that a review ofGovernance and Accountabilityarrangements be undertaken andthis is being considered. ByMinisters. Professor Sizer, in hisevidence to the Committee,stated that SFEFC would wish tocontribute to such a review.

• Review of theestates strategyand the scale ofany backlogmaintenanceand plans toinvest further in

“Review of the estates strategy”

Following on from the previous work by theScottish Executive to develop this area ofstrategic planning, the Council has reviewedand assessed the estates strategies producedas a result of the guidance issued by the SE





this key aspectofinfrastructure;

over several years from 1996. To date [30]colleges have produced estates strategies inaccordance with the guidance.

While there are some examples of goodstrategies, the majority lack a strategic focusand fail to provide an effective means forongoing monitoring by the colleges or theCouncil.

In view of the above, the Council will issuefurther guidance to the sector by Autumn 2000and work with colleges to develop robustestates strategies. The Council agreed at itsmeeting on 30 March 2000 that the delivery ofan estates strategy which complies with theCouncil’s guidance will become a condition ofgrant in the future. The implementation datefor this change has yet to be determined, andwill need to reflect the scale of the task, giventhe other demands being faced by colleges.

“Scale of backlog maintenance”

The sector wide condition survey will becompleted by the end of April 2000 andpresented to Council in May. In addition to thecondition of survey there is a parallel surveyunderway of colleges compliance in terms ofthe requirements set in the Disability

Guidance on the link between collegestrategic plans and estate strategies,and on investment decision making,was issued to colleges in November2000.

The Council distributed approximately£20m as formula funding to collegesin the financial year 2000-01. Havingin place an approved estate strategyis now a condition of grant. All bartwo colleges now have estatestrategies in place (we have agreedtimescales for their production) andthe Council is giving feedback duringsite visits.

The DDA survey was completed andthe results presented to Council inMay and July 2000. Councilsubsequently agreed to make £5mavailable to the sector to addresscompliance with the DDA. The

Council is continuing to providefeedback on all strategies and isdeveloping guidance on spacecapacity indicators – due to bepublished in 2002.

A further £19m has been madeavailable in AY 2001-02 asformula. The impact of this, interms of a reduction in backlogmaintenance, will be reported toCouncil in Autumn 2002.





Discrimination Act 1995 (DDA). The findings ofthe survey will also be reported to Council inMay.

Following the consideration by the Council,colleges’ will receive individual reports on thedetailed findings from both surveys. Thesereports will provide colleges with importantinformation in which they will need to evaluatein light of the development of estates strategies(see above).

“Plans to invest further in this key aspect ofinfrastructure”

The findings and conclusion from the conditionand DDA surveys will provide the Council witha comprehensive assessment of the sector’sbacklog maintenance, health and safety andDDA requirements. However, this informationmust be considered in the context of the othercurrent strategic reviews, in particular of Supplyand Demand and ICT, and financial healthconsiderations to enable the Council to arriveat balanced and informed view of the sector’s

Council will be monitoring impact ofthis investment through theoperational plans.

£15m was made available to collegesto tackle the most pressing estateneeds. The Council’s draft CorporatePlan contains target to decrease thesector’s estate investment needswhich are classified as high priority.

The Council now has a capital fundingmethodology which supports strategicinvestment in capital, including ICT,and is consistent with thedevelopment of regional clusters of FEprovision and the need to improve andstabilise colleges’ financial health.

Council has also approvedfunding totalling £24m towardsthe implementation of strategicestates solutions at threecolleges. Funds will be madeavailable over the next threeacademic years. Impact to beassessed as part of annual returnanalysis referred to earlier andwill be reported to Council inDecember 2001.

Two colleges have acceptedfunds. One more under offer.Assessment process beingrevised to reflect Area Mappingand Management Review ActionPlans and revised circular to beissued in November 2001.





infrastructure needs and priorities for the future.

• Development ofbenchmarking,of performanceindicatorsincluding a“BalancedScorecard”,and plans toimprove collegecostingsystems;

“Development of benchmarking”

As indicated in the evidence given to the AuditCommittee the review of management hasaddressed at the first three stages of theframework for implementing best practice forbenchmarking identified in the NAO report.Specifically, critical success factors and theirunderpinning key processes and these will beused as a basis for ensuring the effectivetargeting of activities to be benchmarked.

The recommendations from the managementreview which are directed at Boards ofManagement and Principals will be expressedin the form of a series of ”challenge questions”which will be answered through a process ofself-assessment against a range of goodpractice benchmarks. The results of the selfassessment exercise will be closely reviewedand, where appropriate, followed-up by theCouncil.

In addition, the Council is currently reviewingthe options for developing other forms ofbenchmarking, including the opportunity todevelop further the current practice in relationto “Unit Costs”.

As already reported, the Action Plansfrom the follow-up to the ManagementReview are to be received by 31March 2001.

As indicated, it is the intention that theAction Plans from the ManagementReview will provide a clearer focus onkey areas to be benchmarked. Inaddition, the Council agreed it inNovember 2000 to further developUnit Costs as a form of benchmarking.

As already reported Collegeshave now produced ManagementAction Plans and are in theprocess of implementing therecommendations arising fromthese reports.

Unit Cost feedback was notprovided in 1999-2000. This wasa 16-month accounting period forwhich there was 12-monthactivity data. This createddifficulties with regard tocalculating meaningful unit costsand undertaking other analysesof colleges’ financial statementsfor the purpose of providingfeedback to colleges. It wasdecided therefore not to publishthe outcome from the 1999-2000unit cost exercise.

Soundings we have taken fromthe Sector indicate a positiveresponse to the Unit Costinformation. It is therefore ourintention that publication willresume following receipt of theaudited financial statements for





“Development of performance indicatorsincluding a ‘Balanced Scorecard’”

The Council has agreed to developperformance indicators (PIs) in two ways.

Short-term, to improve the definitions of theexisting set of PIs, which are narrowly focused.Improved definitions will apply to the generationof PI data for the academic year 2000/01.

Long-term, undertake a wider review of the

This development will see Unit Costsused as a more direct measure ofcolleges relative financialperformance.

The sector will shortly be consulted onthe use of Unit Costs in this way toestablish how able it will be to respondto this development. In particular, theCouncil will seek to assess therobustness of colleges’ costing andmanagement information systems (theManagement Review will also informthe process). Feedback on Unit Costswill be provided to colleges inApril/May 2001.

Revised definitions for PIs wereannounced in June 2000 and anumber of staff developments eventswere organised. The Council expectsthis to improve the robustness of PIdata collected from 2000-01.

The Council conducted a broader

2000-01 in the early part of 2002calendar year.

The Council is, however,currently reviewing itsPerformance Managementinformation. Accordingly theformat and content of the unitcost feedback return for 2000-01is under review. In the mediumterm we anticipate developingwork in this area with AuditScotland.

Improved definitions for PIs havebeen introduced and this hasimproved the robustness of PIdata. Further enhancements inthe definitions of specific PIs arebeing introduced on anincremental basis.

The Council has completed its





potential to develop a range of PIs across allmajor aspects of FE college activity, in otherwords, applying the principles of the “balancedscorecard”. The review process will commencein April 2000 and be reported to Council aroundFebruary 2001. It is proposed that new PIs willbe implemented progressively from theacademic year 2001/02.

“Plans to improve college costing systems”

As indicated in the evidence, the need to helpcolleges improve their costing systems isrecognised. In addition, the application ofmanagement accounting information in thedecision making process is an issue identifiedby the Review of Management as requiringfurther development by colleges. The Councilwill take this forward as part of its overall reporton the Review of Management

review of performance indicators,which identified a need to improve thecurrent PIs and to develop some newones; the Council is consulting thesector on these proposals. TheCouncil also intends to further developa more holistic approach to qualityacross colleges, but believes thisshould not begin until after it hasreviewed the college responses to theManagement Review.

See earlier text on Unit Costsbenchmarks.

consultation with the sector onbroader issues associated withPIs, and has identified a need todevelop improved PIs in anumber of areas. A workinggroup, involving sectorrepresentation and chaired by acollege Principal, has been setup to progress these issues.

• A target forefficiencies thatcan beachievedwithoutharming thequality ofeducation”

Target for Efficiencies

The issue of efficiencies needs to beconsidered at two levels: the sector as awhole; and individual colleges.

At sector level, the target is for a 1% annualefficiency gain. The sector has alreadydelivered significant efficiencies since

As noted above, the introduction ofthe Council’s new forward-lookingapproach to funding has beenwelcomed by the sector in that itprovides colleges with greater fundingpredictability. This is an improvementon the previous situation where

The Scottish Executive’s totalenvelope of funding to theCouncil for 2002-03 and 2003-04is planned to increase onlyslightly. However, the Council isreviewing the content of that totalto re-assess whether certain





incorporation. There is now a funding modelwhich aims to promote planned andsustainable growth, and colleges are no longerable to secure efficiencies through significantgrowth. The Government has set out manychallenges for the sector, all of which have costimplications - for example the relatively highcosts of working with students from excludedcommunities. Provided the sector is funded tocarry out the challenges which Governmenthas set for it, the Council believes that thesector should be able to deliver a 1% efficiencygain without a detrimental effect on quality.The Council has also pointed out that if thesector were permitted to re-invest the expected1% efficiency gain, then more could be done inaddressing the Government’s priority areas.

At individual college level there is evidence, inthe NAO Report and more recently through thework of the Council, to indicate that there isscope to secure efficiencies at certain colleges.Through the work on Recovery Plans andoptions for rationalisation, the Council willexplore the opportunities for efficiency savings.In addition, the Council’s development ofbenchmarks and PIs will provide an effectivemeasure of relative performance and throughthis the scope for further efficiencies.

colleges did not know the plannedlevel of efficiencies. The recent threeyear funding announcement hasprovided significantly increasedresources for the sector which willallow investment in all areas ofcolleges activities. There is alsofunding available for growth in studentnumbers. The Council thereforebelieves that the sector should be ableto deliver some efficiency gains overthe next three years without adetrimental effect on quality.However, these efficiency gains areunlikely to exceed 1% per annum.

Work with individual colleges onfinancial recovery plans has identifiedmany examples where costsreductions and efficiencies can beachieved. In many cases these havebeen driven by curriculum basedreviews.

The good practice identified from thiswork will be fully analysed anddisseminated to the sector in duecourse.

separate elements (which werepreviously necessary to meetCouncil and Scottish Executivestrategic priorities) can now beincorporated into mainstreamfunding. This will possibly easethe extent to which an explicitefficiency gain is required in thevalue of the main unit of fundingfor 2002-03. Nevertheless,colleges will still have to aim towork more efficiently in general ifthey are to meet the greaterdemands placed on them by, forexample, social inclusion.


Annex A

Management Review of Further Education CollegesSFEFC Action Plan-Progress by SFEFC to October 2001

Action Plan Progress by SFEFC

General

n SFEFC will take a proactive role inobtaining Management Action Plansfrom colleges duly approved byBoards of Management andincorporating their response torelevant questions from Principals.These plans will be subject to periodicreview and in the medium term it isenvisaged that critical self-assessmentand continuous improvement willbecome embedded within colleges’governance and managementprocesses.

n SFEFC will prepare an action plan forthe development of PerformanceIndicators adopting the principles of abalanced scorecard approach.

n SFEFC will work with the sector todevelop appropriate benchmarkingprocesses through which colleges maybe made aware of emerging goodpractice with a view to itsimplementation.

n SFEFC will encourage colleges todevelop mechanisms to help facilitatethe production of robust, reliable andrelevant management information.

Management Action Plans havebeen produced by all Colleges.

The Council has completed itsconsultation with the sector onbroader issues associated withPIs, and has identified a need todevelop improved PIs in a numberof areas. A working group,involving sector representationand chaired by a college Principal,has been set up to progress theseissues.

The Council has refined the UnitCost return so that it is moremeaningful.

The Management Reviewidentified good practice and theEmerging Themes Report hasidentified where work still has tobe done to embed good practice.

The Management Action Planshave identified a specific need forthe development of managementinformation systems in Colleges.


Action Plan Progress by SFEFC

n Colleges will be encouraged bySFEFC to consider more activelycollaboration in appropriatepartnership arrangements in order tohelp share and deliver expertise andexperience more cost effectively.

The Council will consider theoptions for how this might betaken forward.

The Council has now begun acomprehensive mapping of eachgeographical area and of keyindustrial sectors (4 in 2001-02)due to be complete by 31 March2002.


Governance

n SFEFC will, in consultation with thesector, seek to identify training needsfor Board members and consider howsuch needs may be addressed by, forexample, the establishment of atraining programme for members ofBoards of Management.

n The Council will issue guidance toBoards on self-assessment.

A Joint Working Group withASC/SFEU is looking to producerevised guidance for BoardMembers in this area. It isenvisaged that the Joint WorkingGroup will complete its work inthis area by the end of the year.

The Joint Working Group willconsider self-assessment as thenext phase. The production of theAction Plans was generally wellreceived as a positive contributiontowards the development of theself-assessment process.

Financial Management

n Good practice in forward lookingfinancial forecasting and reportingsystems will be disseminated, withexamples giving ideas for content andpresentation.

n SFEFC will refine and strengthen theguidance for colleges requiring toprepare recovery plans.

n SFEFC, in consultation with the sector,will prepare guidance to help improvedecision-making in colleges throughmore effective managementaccounting and a more informedapproach to risk management.

The financial model has been wellreceived by the sector and will besubject to refinement.

SFEFC continues to work with anumber of Recovery PlanColleges to facilitate theproduction of robust recoveryplans drawing on its cumulativeexperience. It has beenrecognised that a standardapproach towards preparation ofRecovery Plans is difficult toachieve in practice due to theindividual causes of RecoveryPlan situations. However goodpractice is identified together withother lessons learned and broughtto bear on emerging situations atcolleges where a recovery planmay be needed.

The analysis of the ManagementAction Plans has confirmed theneed for development in this area.The Council will consider howbest to progress this recognisingthe potential scale of the task.


Estates Facilities

n Once the planned survey of the furthereducation estate is complete, SFEFCintends to provide guidance tocolleges which would include guidanceon estate strategies and businessplanning.

n In the context of these strategies,estate management performanceindicators, including those for spacemanagement, will be prepared anddisseminated with collegemanagement encouraged tobenchmark their own performance andtake appropriate action to improve theeffective use of their estate.

No further update sinceDecember 2000.

Pilot study completed inSeptember 2001 and first annualreport will be published inNovember 2001. Council agreedin September to roll out the studyacross remaining Scottishcolleges. First sector-wide datacollection will take place in 2002.

EMERGING THEMES FOR SCOTTISHFURTHER EDUCATION COLLEGESFROM ANALYSIS OF MANAGEMENTACTION PLANS

October 2001

For further information contact:

Liam McCabeDirector of Financial Appraisal andMonitoring ServicesSFEFCDonaldson House97 Haymarket TerraceEdinburgh EH12 5HD0131 313 65240131 313 [email protected]

November 13, 2001

Contents

Page

Introduction............................................................................................................ 1

Overview................................................................................................................ 1

Corporate governance ......................................................................................... 2

Strategic and Operational Planning ................................................................... 3

Quality Assurance ................................................................................................ 3

Marketing ............................................................................................................... 4

Human Resource Management ......................................................................... 4

Financial Management ........................................................................................ 5

Estates Management ........................................................................................... 6

Management Information............................................................................ 6

November 13, 2001

1

Introduction

Background

The Scottish Further Education Funding Council (SFEFC) published itsReview of the Management of Scottish Further Education Colleges inSeptember 2000. The report included a series of challenge questions forcolleges, to which colleges were to respond by 31 December 2000, laterextended to 31 March 2001, in the form of Management Action Plans(MAPs). The challenge questions covered seven key areas ofmanagement, Corporate Governance, Strategic and Operational Planning,Quality Assurance (QA), Marketing, Human Resource Management(HRM), Financial Management and Estates and Facilities Management.The MAP is seen as the first step in a process of continual self-improvement throughout the sector.

2. Virtually all colleges from whom a MAP was required providedone. We have now, with the aid of consultants assessed andreviewed the MAPs. It is intended to provide individual feedbackto each college on their MAP. This report draws out a number ofcommon themes that have emerged from the analysis of theMAPs together with an input from the Executive of SFEFC inrelation to certain specific aspects of the seven areas.

Overview

3. The Boards and Principals have generally responded positively to thechallenges of the MAP process. This manifested itself in a clearindication that the Boards of Management of colleges are to take astronger, more proactive role in terms of Governance and Planning.There was evidence to suggest that Financial Management is an areathat requires to be further developed. Marketing, as a strategicfunction, is at a very early stage of development across the sector.Estates showed signs of improvement and Quality Assurance wasgenerally robust across the sector. There were issues to be addressedwith regard to Human Resource Management.

4. A number of good plans were produced but in many cases plans wereweak. Clearly the quality of the plan will impact on the effectiveness ofthe process of continuous improvement envisaged through the MAPprocess.

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Key features of good plans:

5. The key features identified in the better quality MAPs were as follows:

• repeating actions over a longer timeframe in order to embed them fully;

• large actions broken down into manageable stages;

• named individuals and reviewers responsible for delivery of the action;and

• incorporation of the action plan into the strategic plan and the Board’sagenda.

Common features of weak plans:

6. Some of the main areas in which there was room for improvement inMAPs are set out as follows:

• actions referred to in the text but not carried forward into the action;

• vague actions;

• actions which reflected normal operations rather than change;

• too many actions scheduled within the timeframe, which affects theirdeliverability;

• no medium-to-long term actions;

• actions with a vague or no timeframe; and

• too many individuals with responsibility for delivering an action.

Corporate Governance

7. In terms of Corporate Governance, the MAP process has created aclear step-change in the role of the Board. Most plans very stronglyindicated that the Board would take a more proactive role. Thisincreased role indicated a greater commitment by Board Members,which could have an impact on recruitment and would need to besupported by training and development. There were differentperceptions by the Board of their role. Some Boards clearly expressedan understanding of the high-level nature of their inputs, while otherswere more “hands-on”. This is a particular issue with small colleges,where Boards are relied upon to a greater extent.

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Strategic and Operational Planning

8. In terms of Strategic and Operational Planning, most collegesrecognised the need for and importance of integrated planning. This issaid to be, in part due, to the MAP challenge questions on the subject.In practice integrated planning is still at varying degrees ofdevelopment across the sector. Many colleges relied upon cross-membership of Board Committees and circulation of minutes as theprime methodology for promoting integrated planning, but this, in itself,does not guarantee integration. Generally, strategic and operationalplans were linked to some degree. This was usually in respect offinancial and estates issues although this tended to be restricted tonew projects or initiatives, rather than ongoing operations. Similarly,risk management tools were generally used for new projects ratherthan ongoing operations. However most colleges had plans to improvetheir use of such tools.

9. Opportunities for staff to contribute to planning existed to varyingdegrees depending on the culture of the college, some being more top-down and centralist than others. In some cases the Board away-daywas the primary method used for the Board to contribute to thestrategic planning process. The situation with regard to ICT varied,some had strategies and reported that they had taken full account ofthe implications of ICT into their planning, while others did not.

Quality Assurance

10. Quality Assurance was a relatively strong area for most colleges,showing the beneficial impact of the guidance available on the topic. Itwas also the area where collaboration was most advanced and therewere examples of good practice. However, for infrastructural orcapacity reasons the smaller colleges have an issue in achieving andembedding the full spectrum of requirements and might therefore wishto consider whether collaboration with other colleges might help. Quitea few colleges are concerned about the issue of rolling QA processesout to support staff, and guidance in this area would be helpful. Theissue of how quality assurance links with human resource planning wassometimes not well understood or implemented.

11. The ICT dimension to quality assurance was also not always fullyunderstood. The Council is supporting a project to extend self-evaluation to cover ICT services and the effective use of ICT in collegeactivities with the allocation of £250k in AY 2001-02. The need for

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colleges to build upon quality assurance to develop qualityimprovement strategies will be all the more important following theCouncil's decision in April 2001 to introduce a condition of grant. FromAY 2001-02 each college will have to develop and implement asatisfactory quality improvement strategy, to be incorporated into thestrategic and operational plans which the college submits to theCouncil in 2002 and beyond.

Marketing

12. A few colleges had already grasped in a practical sense the strategicimportance of this function. Very few Colleges used the marketingprocess to drive their strategic plan but most gave signs of beginning todo so, possibly as a result of the MAP process. Good practice in thisarea was identified in the SFEFC report The Way Ahead. It was foundthat most colleges could benefit from closer Board involvement andincreased time on this activity, particularly by obtaining and analysingmarket information. In addition many colleges lacked staff withrelevant expertise or specialist staff in this area. There was littleevidence of collaboration although joint initiatives by neighbouringcolleges may achieve better value-for-money than a series of individualcollege initiatives.

Human Resource Management

13. In terms of Human Resource Management (HRM), there were clearlysome colleges which retained a Personnel approach, in which staff aredeployed, rather than a HRM approach, in which staff are developed.In particular smaller colleges expressed difficulties in adopting the goodpractice identified. In most cases it was difficult to tell whethermanagers truly received the support they needed solely from theevidence of the responses.

14. Most colleges had identified actions for increased senior managementdevelopment. Some colleges considered that the concept ofsuccession planning restricted the pool of choice while othersinterpreted it as meaning general staff development. The best answersrelated to the use of training programmes and rotational deputising.HRM reporting and management information varied across the sector.Overall, this was a strong area for inter-college collaboration andbenefited accordingly.

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Financial Management

15. In overall terms Financial Management appeared to be a weak area inthe sector as a whole. This is especially the case with regard tofinancial strategy, resource management and decision making.However, it is recognised that some colleges were more expert inthese areas. Financial Management is an area where collaboration,joint provisioning and development of standard approaches may resultin higher standards of performance.

16. A number of colleges identified resource issues. Some colleges haveput forward actions to review the issue of resourcing while others havebeen less proactive. There was little evidence of contingency coverarrangements. For some colleges, particularly those in financialdifficulty, there is a recognition that adequate resourcing of the financefunction is a worthwhile investment. However, other colleges in needof financial expertise, have not made a similar commitment.Resourcing of this area is crucial if colleges are to develop costing forcore activities and commercial operations. Several colleges rejectedthe need for course costing or said it was too difficult to achieve.However, the question here may be one of balancing the degree ofprovision required in relation to the level of decision being considered.

17. There is little evidence across the sector of long-term planning beyondthree years. It was suggested that this was, in part, due to perceiveduncertainties of funding. Scenario planning might allow longerplanning horizons to be achieved.

18. Devolved budgeting is at various levels of development across thesector. However, some colleges particularly those which are financiallyfragile, prefer the security of centralised control for the moment andnote the need for investment in managerial training which would benecessary if budgets were to be devolved in a controlled manner.Some Benchmarking comparison may assist colleges with this issue.

19. Zero-based budgeting is undertaken at a minority of colleges, andsometimes only for new developments or individual aspects ofprovision rather than across the board. There was commonly only onefinancial objective, to balance the budget or some similar goal. A morebroadly based approach is required.

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Estates Management

20. Estates Management showed the beneficial impact of the guidancerecently issued by the Council. Most colleges either had or were aboutto develop estate strategies and costed option appraisals in line withthe guidance, although some intended to apply it only to newdevelopments initially. The extent to which estate strategies wereintegrated with strategic and financial planning and with ICT strategieswas variable across the sector with significant weaknesses evidencedin some colleges.

21. One example of good practice outlined in the Management Review waseffective space utilisation. However, responses to the MAP questionsrarely mentioned how room utilisation, as a fundamental benchmarkagainst which to measure effective and improving performance, wasbeing optimised, although some colleges may have procedures inplace in this regard which their responses did not fully demonstrate.Only some colleges indicated that they used software for timetabling.

22. With regard to facilities management, the responses demonstrated thattendering took place to some extent for most services across thesector, but there was evidence of a varying degree of commitment tothe concept of using private contractors. It is likely that more detailedwork may be required by colleges to ensure that the best value formoney is being achieved in all circumstances. Colleges may wish toconsider external auditors undertaking this as part of their value-for-money programme.

23. The responses presented little evidence of actual or potential sharingof facilities or services management, or evidence, where appropriate,of the shared use of the estate with other colleges.

Management Information

24. Clearly, effective management is dependent on the timeous provisionof accurate and reliable management information presented in anappropriate level of detail and in a user-friendly format. While it wasnot a specific focus of the Management Review and the subsequentreview of MAPs, management information is critically important. Ingeneral terms there is evidence across the sector that managementinformation and administrative systems have scope for significantdevelopment in terms of better meeting the information needs formonitoring and decision making purposes. There is also scope forbetter integration of different aspects of management informationsystems within individual colleges.

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AUDIT COMMITTEE 1st REPORT 2000

Scottish Further Education Colleges: Managing Costs

ANALYSIS OF THE SCOTTISH FURTHER EDUCATION FUNDING COUNCIL’S RESPONSE OF 24 OCTOBER 2001

(The Committee originally requested that by December 2000, the Council should report its progress on a number of fronts. On 22 December 2000, ProfessorSizer wrote to the Committee and informed them that in recognition of the scale of the task the timetable had to be extended. He therefore proposes to reportto the Committee on this again in the summer of 2001. Professor Sizer has now written to the Committee again with an update in each of the areas. )

Audit Committeerecommendation

Summary of the Council’s reported progress toDecember 2000

Summary of Council’s reported progressto October 2001

The Council has considered a report on the review of supplyand demand in the sector. This indicated provision meetingdemand at a national level but further work on mapping supplyin major subjects is being undertaken to assess the relativeadequacy across areas. (Page 1)

The Council expects to complete mapping of supplyand demand for geographical areas and for certainindustrial sectors by March 2002.

The Council has established and is chairing a joint steeringgroup with the Glasgow Colleges Group to analyse availabledata on need and provision in Glasgow and to commission ananalysis of strategic options for Glasgow. (Page 2)

Analysis of the Glasgow position by externalconsultants was completed in March 2001 and hassince been the subject of a consultation exercise.The council expect to publish the results ofconsultation in October 2001.

1. Report from the Council on root andbranch review of the sector and on theaction planned to tackle collegedeficits, improve college management,and to rationalise further educationprovision in Scotland;

The Council’s new forward-looking approach to funding waswelcomed by colleges as being more transparent andpredictable. Coupled with the recent announcement ofincreased funding over the next three years this should easesome of the problems colleges faced. (Page 3)

The Council is further developing the fundingmechanism through the introduction of an ‘ActivityMeasurement Method’ which seeks to measurefunded activity to reflect different modes of deliveryand subjects. Following consultation the Council isto consider how to take forward this development bythe end of 2001.

The Management Review – covering various aspects(financial monitoring, standards and quality, estates,IT/Comms)(Page 4-7)

The Council’s assessment of the progress madeagainst an action plan for taking forwardrecommendations is set out at Annex A.

The Council expects to provide each college withfeedback on the adequacy of their individual actionplans by October 2001.

The Council reports a steady improvement in the forecastfinancial health of the sector, with 37 colleges forecasting ahistoric cost surplus by 2002/2003, up from 18 in 1998/99.(Page 7)

The council forecast that for the financial year 2000-01 37 colleges will incur an operating deficit and 20will incur historic cost deficits. By 2003-04 theCouncil expect that the number incurring operatingdeficits will fall to 20 and the number incurringhistoric cost deficits will have fallen to 5.

A report on the Council’s approach to rationalisation of furthereducation provision in Scotland was going to the Minister forEnterprise and Lifelong learning by the end of December2000. (Page 8)

The Minister welcomed the Council’s approach.

2. Review of the recovery plans at theremaining 10 colleges in poor financialhealth, and on the progress made inimplementing action plans andimproving financial health of thecolleges concerned;

Of the ten colleges from whom the Council had originallyrequested a recovery plan in mid 1999, seven of the plans arestill in draft form only. The date set for the finalisation of allrecovery plans is the end of July 2001. (Pages 8&9)

No commentary has been provided on the extent of anyprogress made at those colleges with a recovery plan.

Financial recovery plans are either in place or are inan advanced stage of preparation at 11 of the 19colleges whose financial health the Council assessas being of most concern. In the remaining eightcolleges no financial recovery plan has beenprepared largely because other action is at hand toimprove the situation.

3. Review of the estates strategy andthe scale of any backlog maintenanceand plans to invest further in this keyaspect of infrastructure;

The Council completed its consideration of the review ofcollege estates in July 2000 and the Council reports increasedcapital funding to the sector. There is no mention in theresponse of the findings of the estates review or the scale ofbacklog maintenance. (Pages 6, 10, 11 and 12)

Council is continuing to provide feedback on allstrategies and is developing guidance on spacecapacity indicators – due to be published in 2002

The Council agreed in November 2000 to further developUnit Costs as a more direct measure of colleges’ relativefinancial performance. The sector is to be consulted to seehow it will respond to this development and the Council willbe assessing the robustness of college’s costing andmanagement information systems. (Page 12)

Colleges have produced management action plansand are in the process of implementing theserecommendations.

4. Development of benchmarking, ofperformance indicators including a"Balanced Scorecard", and plans toimprove college costing systems;

Revised PI’s have been introduced for 2000/01 and thecouncil is developing a more holistic approach to qualityacross the colleges; but will not tackle this until the colleges’response to the management review has been received.(Page 13)

Improved definitions for PIs have been introducedand this has improved the robustness of Pis.Further enhancements of definitions are beingintroduced.

5. A target for efficiencies that can beachieved without harming the quality ofeducation. “

The council is sticking with the 1 per cent efficiency gainacross the sector in each of the next three years that itreported in 1999. However, the Council recognises that “Workwith individual colleges on financial recovery plans hasidentified many examples where cost reductions andefficiencies can be achieved (Page 15)

Changes to the funding of colleges is leading theCouncil to re-consider its approach to monitoringefficiency gains in the sector.

OverallThe Council’s response records significant initiatives which are being taken to improve management within the FE sector. Many of these initiatives will taketime to bear fruit. The AGS has already produced his first overview of the FE sector and future reports will monitor progress of certain initiatives related tothe financial health of the sector. Other initiatives designed to monitor the performance of colleges will be covered by the AGS plans to report onperformance measurement in the sector.

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Scope of the activities of the Auditor General for Scotland

BackgroundThe Minister for Finance and Local Government has written to the Committeeseeking comments and views on his proposals to use his powers under thePublic Finance and Accountability (Scotland) Act 2000 to extend the powersof the Auditor General for Scotland. The letter is circulated as committeepaper AU/01/16/4.

ProposalThe Minister proposes changes in three areas. Firstly, he signals his intentionto use his powers under section 23(2)(b) to extend the bodies or office-holders that may be the subject of economy, efficiency and effectivenessexaminations. Secondly, he will lay an order under section 24(5) to extend thebodies that the Auditor General or an auditor appointed by him which areobliged to provide access to documents or information in connection withsection 21 or 22 audits. The list of bodies that the Minister intends to includein these two orders are listed in an attachment to his letter.

Finally, the Minister proposes to lay an order under section 26(2) amendinglegislation setting up the Scottish Tourist Board and the Scottish HospitalTrust in order that they are brought into the scope of the PFA Act. TheMinister’s position is that these bodies should have been included in the Actinitially, but were overlooked and this order is to rectify that situation.

By virtue of section 27(2), the order under section 26(2) will be an affirmativeorder. This requires a debate on an Executive motion. It is likely that theMinister who puts down the motion will attend the committee meeting to takepart in the debate and will therefore be available at that time to answer anyquestions that members have. Members should be aware, however, that it willnot be possible at that stage to amend the order, the committee’s role beingonly to decide whether or not to recommend to the Parliament that theinstrument be approved.

Next stepsThe Executive has instructed drafting of the three orders and the Minister’sletter is designed to allow the committee to feed any comments into thatprocess. Members are therefore invited to consider the Minister’s letter and todecide whether any comments should be submitted at this stage. Membersmay wish to welcome the extension of the application of the Auditor General’spowers in ensuring propriety and value for money in the spending of publicmoney.

David McGillNovember 2001

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Minister for Finance & Local GovernmentAngus MacKay MSP

Andrew Welsh Esq MSPConvenorAudit CommitteeThe Scottish ParliamentEdinburghEH99 ISP

Victoria QuayEdinburgh EH6 6QQ

Telephone: 0131-556 [email protected]://www.scotland.gov.uk

October 2001

_____

SCOPE OF ACTIVITIES OF THE AUDITOR GENERAL FOR SCOTLAND

The purpose of this letter is to seek the Committee’s views on proposals to implement theprovisions contained in the Public Finance and Accountability (Scotland) Act 2000 (PFAAct) which relate to the activities of the Auditor General for Scotland (AGS).

As you are aware the PFA Act allows the Scottish Ministers to specify, by Order subject tonegative resolution, bodies and officeholders (other than those whose audit is already underthe control of the Auditor General for Scotland (AGS) such that:

• AGS may conduct value for money examinations into the body or officeholder (section23); and

• AGS may have access to the books and records of the body of the officeholder inconnection with an audit, or value for money study, of a body where he already haspowers (section 24).

Section 26 of the PFA Act also allows the Scottish Ministers to amend, by Order, otherlegislation in consequence of Part 2 of the PFA Act. Such an Order would be affirmative (asopposed to the Orders discussed earlier). We intend making such an Order for two,essentially housekeeping purposes.

The first is that the PFA Act modified the legislation setting up statutory bodies such as someNDPBs and health service bodies to provide for the audit of their accounts under the controlof AGS. This applied to bodies which had previously been audited by C&AG, health servicebodies previously audited by the Accounts Commission, and some bodies whose auditors had

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been appointed by the Department or even, in cases, by the bodies themselves. The ScottishTourist Board and the Scottish Hospital Trust were inadvertently omitted from thesemodifications.

I have attached details of the proposals for inclusion in the Orders under sections 23 and 24of the PFA Act and would be grateful for the Committee’s views and comments. I wouldalso be happy to hear your views on the proposals for the orders to update the auditprovisions of the other bodies mentioned.

I am happy to meet with the Committee to discuss this further if that would be helpful.

ANGUS MacKAY

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ANGUS MACKAY SCOPE OF ACTIVITIES OF AUDITOR GENERAL FORSCOTLAND

PROPOSALS FOR VFM STUDIES AND ACCESS BY AGS

Body AGScommissionVFM studies?

AGS accessunderSection24(2) and(4) of PFAAct?

Careers Scotland Yes YesEdinburgh World Heritage Trust Yes YesGlasgow West Conservation Trust Yes YesHannah Research Institute Yes YesHigher Education Institutions Yes YesScottish Agricultural College Yes YesHousing Associations No YesLocal Enterprise Companies Yes YesMacaulay Land Use Research Institute Yes YesMoredun Research Institute Yes YesPost Qualification Education Board for NHS Pharmacists inScotland

Yes Yes

Rowett Research Institute Yes YesCommunity Learning Scotland Yes YesLearning and Teaching Scotland Yes YesScottish Crop Research Institute Yes YesScottish Screen Yes YesLearndirect Scotland Yes YesRoyal Society of Edinburgh Yes Yes

FCSD: Finance - FS&GOctober 2001

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