Watchdog Audit Scotland questions college reform
The shake up of Scotland's college sector has been challenged by the country's public spending watchdog.
Audit Scotland wants government ministers to clarify exactly what the major restructuring exercise will achieve and how it will be paid for.
Its report said colleges faced "considerable financial pressures", with reductions in government funding.
The Scottish government said it would provide a full assessment of the costs and benefits of its reforms.
Ministers have announced structural reforms of the sector, including the creation of 13 college regions.
These are expected to result in the number of colleges in Scotland falling from 37 to no more than 23.
Caroline Gardner, Auditor General for Scotland, said: "The overall financial standing of Scotland's colleges was sound in 2010-11.
"But most colleges operate to tight margins and there are major challenges ahead.
Audit Scotland says the college shake-up presents "a number of risks" and is happening at a time of high unemployment and high demand for training places.
It wants the Scottish government to clarify how colleges will pay for mergers with heavy costs such as redundancies, at a time when public funding has been cut by an "unprecedented" amount.
Ministers say they are providing £15m for restructuring but will respond to the watchdog's call for clarity over what reforms they want and how they will be paid for.
Over the three years to 2014-15 public funding will drop by 24% to £471m.
Auditors are also concerned college staff preoccupied with money and mergers may take their eye off another key challenge ahead.
In response to past inquiries ministers have asked college leaders to ensure they run courses which are of a consistently high quality with prospects of work.
The sector has been accused of running courses popular with students but with little chance of eventual employment.
And they have been accused of not offering enough places in fields such as engineering and renewables - sectors in which employers often have to recruit abroad because of staff shortages.
Barbara Hurst, director of Performance Audit said most colleges are currently on a sound financial footing with reserves they can dip into.
But smaller colleges in particular are expected to have a more turbulent time.
The watchdog wants ministers to spell out how colleges will cope financially until savings from mergers start to come through.
"The Scottish government contributes around three-quarters of colleges' combined incomes but this funding is set to reduce by around a quarter over the next three years.
"The planned reforms have the potential to bring a more strategic and co-ordinated approach to the management of Scotland's colleges at a national level, and more robust planning of college provision within regions.
"However, the Scottish government needs to clarify the costs and benefits of regionalisation, including structural reform, how these benefits contribute to its reform objectives, and how the costs will be funded."
More than 300,000 people attended college in 2010-11. The sector spent £771m in that period and reported an overall operating deficit of £29m, or 4%.
However, Audit Scotland said that exceptional circumstances at the City of Glasgow College accounted for much of this, and 24 of the 37 colleges reported operating surpluses for the year.
As part of overall public sector spending reductions, Scottish government revenue grant support to colleges is likely to fall from £545m in 2011-12 to £471m in 2014-15, a 24% reduction in real terms.
John Henderson, chief executive of Scotland's Colleges, said: "The merging of colleges in Scotland has the potential to create savings over time, but will see initial up-front costs. I welcome the report's call for greater clarity on quantifying these costs and benefits.
"It is crucial that colleges receive funds to support these structural changes and that money that should go towards learning and teaching is not affected."
Labour MSP Neil Findlay called for a rethink on cuts to college budgets, while the Conservatives' Liz Smith said the report highlighted the raw deal colleges have received from the SNP.
Alison Johnstone, the Scottish Greens' education spokeswoman, said: "Colleges are often treated like the poor relation of universities and that shouldn't be the case."
And Lib Dem education spokesman, Liam McArthur, said: "Let's hope Audit Scotland has more success in getting clear answers than the rest of us have been."
A Scottish government spokeswoman said: "We are maintaining full-time equivalent student places and teaching activity in spite of the severe budget cuts imposed on us by the UK government.
"We have clearly explained the need for our reforms and their objectives, including through two public consultations.
"However, we accept Audit Scotland's recommendation and will provide a full assessment of the costs and benefits of our reforms in due course."