MSPs were again told that some colleges face "significant cashflow issues" and that four could run out of cash as early as July.

Shona Struthers, chief executive of umbrella body Colleges Scotland, warned members of the Scottish Parliament's Education, Children and Young People's Committee on Wednesday morning that the college sector is facing one of the most difficult situations she has seen, and some institutions are much worse off than others.

"Some colleges are talking about having no cash of their own by July.

It slightly beggars belief that it’s not invested in. Students deserve to get a good education at college, and staff deserve to work in good environments. 

"We have many of our students who are not sure if they’re going to get their qualifications because of industrial action.

"I would like to see a restoration of our funding, and I would like to see colleges promoted more."

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The Scottish Funding Council (SFC), which distributes Scottish Government funds to colleges and universities, declined to name the colleges facing the most severe cashflow concerns.

A spokesperson said: "Disclosing the names of those colleges facing significant cashflow difficulties could result in undue or inappropriate speculation on the financial performance of individual colleges which could impact negatively on learners and staff.

"It could also hamper college boards in their efforts to implement a recovery plan.”

However, a spokesperson confirmed that the colleges mentioned by Ms. Struthers are the same institutions mentioned in the SFC's January report on college finances. 

The report read: "No college reported a cash deficit at the end of July 2022, but four colleges are forecasting a cash deficit by the end of July 2024, increasing to six colleges by the end of July 2026.

"This projected deterioration in liquidity, particularly in the context of continually challenging budget settlements and continued high government savings expectations, will make it increasingly difficult for SFC to manage cash advances and reprofile grant payments to ensure colleges have sufficient cash to manage their liabilities, as we have done in the past.

"It will also become increasingly difficult for colleges to self-fund staff restructuring activity and rebalance their cost base as a pathway to sustainability."

Speaking to the education committee on Wednesday, SFC Chief Executive Karen Watt echoed Ms Struthers's concerns that the college sector is facing an incredibly "difficult" financial situation, given the real terms decline of funding by roughly 3% over the past 10 years.

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"A lot of educators didn't come into education to make the kind of difficult decisions they are making now. And they are trying to balance a range of factors. The fact that almost 75% of their income comes from the SFC, just one source.

"As public bodies, they cannot really generate an increased level of commercial activity.

"So I would say it's an extremely difficult time, and I think the issue is how quickly can some institutions adapt to a change in funding circumstances. Sometimes adaptation requires funding, and we don't have at the minute funding for transformation or change."

Part of the SFC's remit is to help colleges navigate these financial difficulties, but in many ways, institutions and the SFC are facing obstacles, especially when it comes to much-needed infrastructural improvements.

Ms Watt said that the SFC has a budget of about £85 million for college capital projects, although roughly one-third (£52 million) is reserved for the new Dunfermline Learning Campus.

She said that leaves £30 million for college capital projects and £2 million reserved for "emergency" situations.

"It is absolutely true that all colleges will receive less funding currently than they need to completely maintain and improve their estates.

"That being said, we are investing in the maintenance now... and we are in the middle of a very fundamental look at college infrastructure."

She said this review will report later on in the year with a costed infrastructure plan, as well as recommendations for a baseline across the sector.

This will include reviewing the suitability of campus buildings, "futureproofing" them to implement digital infrastructure, and deciding how buildings will be used. 

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However, the capital review is not the only major undertaking on the SFC's plate. Ms Watt said that there are ongoing discussions about proposed changes to the SFC's ability to enforce good financial practices.

"It is always extremely difficult for a funder to put financial penalties into a college where it might affect students and frontline service delivery. We are extremely reluctant to put that kind of funding clawback as a penalty.

"I would say, if we're looking to the future and what a funding body might be – whether the government reforms SFC or looks at it more generally – I think the levers and powers that a funding body might have are around these broader issues."

She said that the SFC's powers date back to a 2005 piece of legislation and, although the SFC has adapted, there is a role for the government to consider what powers might be most useful.

"The last thing Scotland needs at the moment is another standalone regulator, but I do think that a funding council with slightly different levers and slightly different powers of intervention could be extremely powerful."