REVIEW OF SCOTLAND'S COLLEGES [SEETLLD DCMWG-P12]
WORKING GROUP: THE DIFFERENCE COLLEGES MAKE
COLLEGE EFFICIENCY/COMPETITIVENESS
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1 This paper examines evidence of how colleges are both operating efficiently and are competitive.
Funding
2 During the 1990s colleges achieved significant efficiency gains (17% from 1996-1999) [1]. However, this resulted in colleges facing financial difficulties around the turn of the century. In recognition of this the Scottish Further Education Funding Council (now the Scottish Funding Council (SFC)) concentrated on increasing or maintaining (in real terms) the rate at which it funded colleges and ceased funding any expansions in student activity.
3 SFC also introduced separate additional funding to help colleges achieve financial security. This funding was linked to improving college management which helped colleges operate more efficiently.
4 Colleges have faced other significant above inflation cost pressures over the last few years which they have had to meet by using their existing resources efficiently. Examples of this are:
· increases in pension costs;
· recruiting and attracting high quality staff in an increasingly competitive and fluid market (The McCrone settlement for school teachers has added to this pressure);
· compliance with new legislation and regularity requirements covering areas such as disability, equality and disclosure;
· a drive to improve social inclusion and widen access; and
· despite the considerable investment noted below a continuing need to improve and maintain the college sector estate and keep it relevant to changing demand and technologies;
5 Although SFC has provided additional funds to help with much of the above these funds have contributed towards but not covered the full costs of dealing with all of these issues.
Estates funding
6 At incorporation there was effectively no allowance in the college sector budget for lifecycle maintenance and renewal of the estate despite much of the estate being in poor condition. When schools had been given a new building, often the old one had gone to the college. A survey conducted in 2000 identified £116 million of backlog maintenance. This figure does not allow anything for rationalisation, improvement or modernisation. SFC's best estimate of the cost to replace or upgrade the existing estate and provide 21st century buildings across Scotland is currently between £600 and £700 million.
7 The funding made available by government via SFC to help college improve and maintain their estates has increase significantly over the last few years and now stands as £65.9 million for financial year 2005-06. This additional funding plus investment from colleges and other sources is allowing the college sector estate to improve but the capital investment programme will need to continue if the whole estate is to be brought up to good condition.
8 Modern buildings and equipment are in themselves more efficient to operate and the appeal of a modern and well maintained college building is a significant advantage in attracting commercial activities. A continuing capital funding stream will be required to ensure that the estate is kept in good repair and relevant to rapidly changing curriculum.
Colleges working together
9 Across the sector colleges face differing circumstances in which they deliver their provision. Colleges recognise, though, that there is merit in comparing practice across the sector and adopting or adapting the good practice that exists. This approach of self regulation helps the sector improve efficiency and competitiveness by:
· guarding against unnecessary duplication of effort and allowing sharing of services;
· encouraging colleges in similar circumstances to compare how provision is delivered and how it can be delivered most effectively and efficiently; and
· bringing colleges together to work as one sector which is not competing with itself internally but it still competitive within the market it operates.
10 Examples of this type of practice are:
· Rural College Network: This has been has been looking at good practice comparisons and efficiencies in rural colleges for several years. It has resulted in closer collaborative links between many colleges in areas such as curriculum planning and sharing of teaching materials. These colleges are continuing to work together to develop and implement collaborative approaches to improve provision for students from remote, rural and island areas.
· Sector wide cost benchmarking: This project essentially evolved from the work that the Rural College Network had been doing and was identified as one of the elements of SFC's financial security campaign. The initial purpose of the project was to allow college boards and managers to evaluate and improve college financial performance by sharing and learning from the practices of others. Colleges have put a great deal of effort into this project and the latest development has been the establishment of several benchmarking clubs across the sector where colleges in similar circumstances can discuss in detail how to improve and compare relative performance. This work will help with improvements in the usefulness of the benchmarking information provided and ensure the long term sustainability of this project.
· Financial performance indicators: SFC publishes figures annually that show a series of financial performance indicators for individual colleges and the college sector as a whole. Coupled with the cost benchmarking this gives colleges access to comprehensive information on financial results. It allows colleges to see how they compare to the rest of the sector, discuss the reasons for any particular differences and whether this might indicate an opportunity for improvement in practice leading to greater efficiency.
· Other college groups: In addition to the benchmarking groups mentioned above other college groups already exist to support collaboration (for examples the Edinburgh and Lothian Colleges group, the Glasgow Colleges Group, Biotechnology group and Microelectronics group). The activity of these groups include practices such as sharing of services and rationalising curricula to ensure that there are no overlaps in provision and that the colleges are providing an efficient and competitive service to their students.
Income
11 The majority of the income of college comes from Government via SFC. However in a competitive and efficient market it is necessary for colleges to explore other income opportunities. Over the last few years colleges have maintained their income from other sources at around 12% of total income. This includes income from European funds (via a bids based process) and commercial income.
Student demand
12 DTZ Pieda conducted an exercise on supply and demand of further education in Scotland and published its finding in April 2005. The report shows demand for college courses remaining buoyant and outstripping supply in all areas. Workshops held with colleges produced clear evidence of waiting lists and classes closed because they were full. This indicates that the customer base for colleges is very strong and there is still room for expansion in the sector to meet demand.
Comparison with other sectors
HEIs in Scotland
13 A study was done by the Scottish Office in the late 1990s to compare the costs of delivery between HEIs and colleges. Its results were inconclusive because the consultants were unable to identify any significant level of activity which was comparable and which could be separately costed.
Schools
14 Comparison of costs between schools and colleges also requires care. School education is compulsory and full-time and demand for it, although subject to demographic trends in the medium to longer term, is relatively stable in the short term. Colleges provide a mixture of full-time and part-time in a variety of patterns, and demand in total, by level and by subject is dynamic. On average, colleges also cover a much wider geographic area than schools.
15 In any cost comparison care would be required to ensure like is being compared with like, for example in relation to central authority overheads, cost of capital, VAT position etc.
16 It is also necessary to convert college activity which is measured in WSUMs to a full-time equivalent. This varies according to the level of provision. The activity most related to school activity is at non-advanced level where the funding for a full-time student would be £182.23 per WSUM in 2005-06 which, at 20 SUMs for a full-time course would give £3,600 SFC gross teaching grant per student.
17 Total cost per student, however, includes additional provision paid for from other sources of income, including commercial income, European funds, capital grants etc. The college sector total expenditure for 2003-04 was £537 million. [2] There were roughly 123,000 fte [3]students in colleges, making the total expenditure per fte student approximately £4,400. The gross expenditure per pupil in secondary schools in 2003-04 (excluding PPP costs and some additional support needs costs) was £5,428 [4]. A more accurate comparison would be with the cost of S4, S5 and S6 in schools (where costs would be higher due to smaller class sizes and broader spread of subjects) but this information is not available.
Other funding bodies
18 In 2001 SFC and its sister funding body in England conducted an exercise to compare funding levels in colleges. It was recognised that this was difficult because of different structures and funding systems in the two countries. However, the analysis performed showed that funding in Scotland was about 13% below England.
The future
19 SFC was created out of the merger of the Scottish Further Education Funding Council and the Scottish Higher Education Funding Council. In his letter of guidance to the new Council the Minister indicated that its creation makes possible greater comparability and transparency in the way that different types of institutions, courses and levels are funded and that he expected funding to be related as closely as possible to the costs of delivery. SFC plan to review their college and HEI funding methodologies. This will inevitably involve further work on efficient use of the funding made available to the sector and will make use of related current work such as benchmarking, supply and demand and financial performance indicators.
Scottish Funding Council
March 2006
[1] Source: ASC key facts 2000 back to document
[2] Source: SFC publication - financial performance indicators for further education colleges in Scotland 2003-04. back to document
[3] Source: SFC infact back to document
[4] Source: Scottish Executive statistics publication - Expenditure on school education in Scotland, 2006. back to document