On the whole the financial health of colleges in the FE sector is improving, according to the report, but it concludes there are a number of factors combining to create problems.
It recommends colleges produce more detailed managment accounts more quickly, introduce clear and consistent costing policies, use systems to more accurately forecast future funding from the Funding Council and explore ways of comparing performance with other colleges.
Sir John Bourn, head of the NAO, said: ‘My report shows that the financial state of the sector is improving but there are still too many colleges in poor financial health.
‘Governors and managers can make a vital contribution to their colleges’ financial condition and the best practice I have identified should help colleges with problems to overcome their difficulties effectively.’
The report finds that agricultural and horticultural colleges tend to have poorer financial health because there courses have higher fixed costs. So too do colleges which take on a high number of full-time adult students becuase they suffer a higher drop-out rate.
The NAO also found that 28% of FE colleges inherited a deficit which were also more likely to be in poor financial health.
More than 400 colleges were examined for the report on a sector with an annual income of around £4bn.
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