Source · National Audit Office

Financial sustainability of colleges in England

Published: 16 Sep 2020 Recommendations: 5 Type: Value for Money NAO confirmed: 5 Department: Department for Education

This report focuses on the financial sustainability of further education and sixth-form colleges.

Dept: Department for Education Topics: Commercial and financial managementEducation, training and skillsFinancial sustainabilityFurther and higher education nao.org.uk →

Recommendations

5 items

4 accepted 1 partially accepted 4 implemented 1 in progress

Rec	Recommendation	Addressee	Acceptance	Implementation
1	In light of our findings and the fact that more colleges are expected to face financial difficulties following the COVID-19 pandemic, we recommend that the Department and the ESFA should take the following actions: a) Set out a clear vision for the role, structure and funding of the college sector as part of the long-term reform programme. The Department and the ESFA have spent considerable sums helping colleges in financial difficulty to survive. But colleges now need a better understanding of government’s strategy for them, and confidence that funding arrangements will support them to fulfil that role. Ref Page 12, paragraph 24, point a · Implemented 01/2021	Department for Education	Accepted	Implemented ✓ NAO
2	b) Assess systematically how far colleges are responding to financial pressures by narrowing their provision and reducing student support services. This work should include identifying colleges that have made efficiency savings without curtailing provision, and sharing this good practice across the sector. Ref Page 12, paragraph 24, point b · Implemented 01/2023	Department for Education	Accepted	Implemented ✓ NAO
3	c) Reduce the complexity and uncertainty of the college funding arrangements. Dealing with complex funding rules takes up college staff time, and amplifies the risk of mistakes which may result in the ESFA recovering funding that colleges have claimed incorrectly. The lagged nature of funding for students aged 16 to 19 may add to uncertainty and financial pressures, if the number of young people studying in colleges rises in line with demographic trends. Ref Page 13, paragraph 24, point c · Implemented 12/2026	Department for Education	Partially accepted	In progress ✓ NAO
4	d) Evaluate, and take action to improve, the effectiveness of the early and formal intervention regimes in improving colleges’ financial sustainability. At a time of significant funding and cost pressures, intervening successfully is particularly challenging. However, it is important for the ESFA to identify the factors that make intervention more likely to lead to sustained improvements in colleges’ financial health. Ref Page 13, paragraph 24, point d · Implemented 09/2021	Department for Education	Accepted	Implemented ✓ NAO
5	e) Learn lessons from the first two college insolvency cases. This work should include evaluating the cost, timeliness and impact of the education administration process and identifying improvements for future cases. Ref Page 13, paragraph 24, point e · Implemented 09/2024	Department for Education	Accepted	Implemented ✓ NAO

Public Accounts Committee follow-up

1 report

The Public Accounts Committee examined this NAO report and published its own recommendations. The government responds to PAC recommendations via Treasury Minutes.

27 Jan 2021 Public Accounts C… Thirty-Eighth Report - Managing colleges’ financial sustainability — 13 recommendations · parliament.uk