Finance is colleges' weakness

Management failures of the sort that affected Derby Wilmorton and St Philip's colleges are atypical of the further education sector but there is still room for improvement, a National Audit Office survey has found.

The NAO report, Managing to be Independent: Management and Financial Control at Colleges in the Further Education Sector says: "There were numerous examples of colleges implementing good practice as regards propriety and achieving good value for money." The office noted that colleges' experience of strategic planning and financial management was still limited, but colleges were improving. There was still scope for colleges to tighten procedures, particularly financial.

The NAO was asked to look at planning and decision-making, budget creation and management, financial control, and audit arrangements. It visited 15 colleges and held 170 interviews. The inquiries into Derby Wilmorton and St Philip's, both published last November, informed the survey.

Problems uncovered included: * Payments of Pounds 7,000 to three governors in one college. This has since been repaid; * A department initiating a capital project without senior management or governing body approval. When reappraised by a surveyor, the cost of the project - approved by governors - turned out 50 per cent higher than the initial estimate of Pounds 140,000; * Failure by two institutions to forecast predicted outturns: "At these and two others it was difficult to determine their current financial position."

But these failings are seen against a background of progress in the 457-college sector, which teaches more than three million students and will receive Pounds 2.81 billion from the Further Education Funding Council this year.

The NAO found that the 1994/97 strategic plans were a marked improvement on the 1993/96 plans, the first prepared.

The NAO also found that some colleges were having difficulty attracting qualified governors, and that financial information provided to governors was inadequate in eight institutions.

It recommended the creation of well-defined committee structures, a register of business interests, formal arrangements for planning future membership and a defined relationship with principals.