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Audit Committee

4th Report, 2004 (Session 2)

Scottish Further Education Funding Council -
performance management of the further education sector in Scotland

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SP Paper 108

Session 2 (2004)

 

REMIT AND MEMBERSHIP

THE REPORT

ANNEXE A - EXTRACT FROM THE MINUTES

Extract from the Minutes - 4th Meeting 2003 (Session 2)

Extract from the Minutes - 7th Meeting 2003 (Session 2)

Extract from the Minutes - 3rd Meeting 2004 (Session 2)

Extract from the Minutes - 4th Meeting 2004 (Session 2)

ANNEXE B - ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

7th Meeting 2003 (Session 2), 11 November 2003

ORAL EVIDENCE

Mr Roger McClure, Chief Executive, Scottish Further Education Funding Council

Mr David Wann, Director of Corporate Policy and Services and Deputy Chief Executive, Scottish Further Education Funding Council

Mr Liam McCabe, Director of Governance and Management Appraisal and Policy, Scottish Further Education Funding Council

Mr Graham Donaldson, Senior Chief Inspector, Her Majesty's Inspectorate of Education

Dr Wray Bodys, Chief Inspector, Her Majesty's Inspectorate of Education

SUPPLEMENTARY WRITTEN EVIDENCE

Letter from Roger McClure, Chief Executive, Scottish Further Education Funding Council to the Convener

Audit Committee

Remit and membership

Remit:

1. The remit of the Audit Committee is to consider and report on-

(a) any accounts laid before the Parliament;

(b) any report laid before or made to the Parliament by the Auditor General for Scotland; and

(c) any other document laid before the Parliament concerning financial control, accounting and auditing in relation to public expenditure.

2. No member of the Scottish Executive or junior Scottish Minister may be a member of the Committee and no member who represents a political party which is represented in the Scottish Executive may be convener of the Committee.

(Standing Orders of the Scottish Parliament, Rule 6.7)

Membership:

Mr Brian Monteith (Convener)

Rhona Brankin

Susan Deacon

Robin Harper

Margaret Jamieson

George Lyon

Mr Kenny MacAskill (Deputy Convener)

Committee Clerking Team:

Clerk to the Committee

Shelagh McKinlay

Senior Assistant Clerk

Joanna Hardy

Assistant Clerk

Christine Lambourne

Audit Committee

4th Report, 2004 (Session 2)

Scottish Further Education Funding Council - performance management of the further education sector in Scotland

The Committee reports to the Parliament as follows-

INTRODUCTION

1. In considering the report of the Auditor General for Scotland (AGS) entitled Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7), the Committee took evidence on 11 November 2003 from Mr Roger McClure, Chief Executive, Scottish Further Education Funding Council (SFEFC); Mr David Wann, Director of Corporate Policy and Services and Deputy Chief Executive SFEFC; Mr Liam McCabe, Director of Governance and Management Appraisal and Policy SFEFC; Mr Graham Donaldson, HM Senior Chief Inspector, Her Majesty's Inspectorate of Education (HMIE); Dr Wray Bodys, HM Chief Inspector, HMIE.

2. In taking evidence, the Committee sought to examine:

· The availability of comparative information on colleges across Scotland;

· Performance information available on Ministerial priorities;

· The availability and importance of efficiency information, including unit costs;

· The development of measures of the quality of Further Education (FE) provision; and

· The scope for comparing FE provision elsewhere in the UK and internationally.

3. The Committee's main findings and recommendations are:

ACCOUNTABILITY

Accounting for performance and lines of accountability

· The Committee considers that more transparent performance information, including information about the performance of individual colleges, should be made available to the Parliament and more widely. (para 10)

· While the Committee recognises the role of college principals as accountable officers, it considers that SFEFC's Corporate Plan and Annual Report should be developed to include information about both the sector as a whole and individual colleges. (para 11)

· The Committee therefore recommends that, in discussion with (Scottish Executive Enterprise, Transport and Lifelong Learning Department (SEETLLD) and the sector, SFEFC develops its corporate plan to ensure that it contains objectives, priorities and targets for the sector and for individual colleges. A comprehensive review of performance against these objectives and targets for both the sector and individual colleges should then be set out in SFEFC's Annual Report. (para 12)

· The Committee considers that in responding to this report, following discussion with SEETLLD as appropriate, SFEFC clarifies the lines of accountability within the sector. The implementation of the Committee's recommendations in regard to enhancing published performance information will ensure that such information more fully reflects the relationship between colleges, SFEFC, the SEETLLD and the Parliament. (para 14)

EFFICIENCY

Unit prices and unit costs

· The Committee considers that without an adequate understanding of inputs, i.e. reliable unit cost measures, SFEFC runs the risk of either asking colleges to do more than they can afford or jeopardising quality of outputs across the sector. Furthermore, unless funding is transparently fair and equitable it will not be possible to identify effectively efficiency savings. (para 23)

· The Committee accepts that the use of unit costs is not straightforward but considers that they would, nevertheless, provide a valuable source of performance information if they were sufficiently developed. The Committee considers that SFEFC is dragging its feet on the commitment it made following the Committee's 2000 report to refine and utilise unit costs. The Committee therefore recommends that SFEFC sets out a timetable by which it envisages that it will have data which are of use in setting funding levels in a fair and equitable manner and in accurately examining relative efficiencies within the sector. (para 24)

Quality and value for money

· The Committee welcomes the introduction of HMIE inspections and stresses the importance of follow-up work following each inspection. The Committee further welcomes the improvements SFEFC has made to its corporate plan to allow information on the quality of further education to be reported to Ministers and the Parliament. (para 27)

· The Committee was struck by the fact that, despite a wide variation in the financial health of individual colleges, HMIE has found that almost all colleges meet acceptable quality standards. What is not clear is how some colleges can meet quality standards and maintain financial balance while others cannot. From the information available it is not possible to determine whether some colleges achieve the quality standards on the back of more generous funding arrangements or as a result of greater efficiency. In addition, information available does not address what it may "cost" - that is in terms of funding or efficiency - to exceed quality standards. (para 28)

· In order to assess economy, efficiency and effectiveness across the sector it is necessary to have an accurate measure of what is provided (i.e. quality) by colleges and what is spent (i.e. accurate unit costs). It is essential therefore that unit costs are quantified so that they can be examined alongside quality measures to assess the value for money provided by individual colleges. (para 29)

THE DEVELOPMENT OF PERFORMANCE INFORMATION

Ministerial priorities

· The Committee considers that SFEFC does not appear to be according Ministerial priorities, as set out in the letter of guidance, sufficient status. The Ministerial priorities set out in this letter should be used as the starting point for setting the performance measure contained in SFEFC's Corporate Plan and, from the evidence considered by the Committee, this does not appear to be the case. (para 32)

· The Committee considers that SFEFC's evidence indicates a lack of urgency in relation to meeting Ministerial objectives and that there is an inadequate fit between SFEFC's performance measures and Ministers' priorities. The Committee recommends that SFEFC reviews its procedures to ensure that Ministerial priorities are seen as the foundation for the corporate planning process. (para 33)

· The Committee is extremely disappointed by the slow pace of work undertaken by SFEFC to address the fourth Ministerial priority and match provision of Further Education with the needs of the Scottish Economy. The Committee notes and agrees with Mr McClure's evidence on the importance of the mapping exercises in understanding the sector's relationship with the wider economy. The Committee is disappointed therefore that SFEFC does not yet appear to have produced tangible results from the various initiatives undertaken. In its report published in December 2002 the Session 1 Audit Committee stated "the time has now come for the current Funding Council initiatives to produce tangible results and when we next consider further education issues we will look for clear evidence that they are doing so." This Committee is disappointed to note that this clear evidence in relation to important initiatives to match skills with jobs has not been provided. (para 38)

· The Committee considers that matching skills to jobs is fundamental in effectively delivering FE in accordance with Ministerial priorities. It therefore recommends that SFEFC produces a timetable setting out how and when they will have robust measures in place that clearly demonstrates whether Ministerial priorities in this area are being met. (para 39)

BENCHMARKING

College preformance indicators

· The Committee first identified scope for SFEFC to improve the way it used performance information to benchmark the delivery of FE across the sector in 2000. It is very disappointing to note therefore that, despite positive responses from SFEFC to the Committee in subsequent years, delays in developing the performance framework means that progress in this area has been very slow. (para 43)

· SFEFC's Accountable Officer has a clear duty to take an active interest in the economy, efficiency and effectiveness of the funds made available to colleges. To fulfil that duty, it is essential that the best use is made of performance information as it develops. Currently the duty is addressed by making information available to colleges to benchmark themselves. The Committee does not consider the current approach to benchmarking is acceptable and believes that, in order to fulfil the Accountable Officer's duty, SFEFC needs to play a more proactive role in analysing college performance in order to hold poor performers to account and to share best practice associated with good performance. (para 44)

· While it accepts that there are inherent difficulties in making comparisons across different parts of the United Kingdom, the Committee urges SFEFC to adopt a less defeatist attitude to this work and continue to pursue useful comparisons which might point the way to useful improvements in current practice. (para 47)

BACKGROUND

4. The Scottish Further Education Funding Council (SFEFC) was established in 1999 and is responsible for securing the adequate and efficient provision of further education in Scotland, primarily through the distribution of grant-in-aid. In 2001-02, SFEFC paid £409 million in grant-in-aid to Scotland's 46 further education colleges1.

5. The Scottish Parliament Audit Committee published a report in the first session entitled "Audit Committee 1st Report 2000 Scottish Further Education Colleges: Managing Costs". The report contained a number of recommendations to improve the management of further education, including action by SFEFC to develop the benchmarking of performance indicators and to improve college costing systems.

ACCOUNTABILITY

6. Further Education (FE) colleges are independent bodies which serve local communities. Each college has a board of management with statutory responsibility for setting the policies and overall direction of the college and for its control and financial health. Each college has a standard financial memorandum agreed with SFEFC governing the use of SFEFC funds and specifying the general conditions under which funding is provided. Subject to this, and an annual funding agreement between SFEFC and each college, individual boards of management have discretion over the use of funds received and are accountable for proper stewardship of those funds.2

7. SFEFC distributes funds to colleges in accordance with Ministerial priorities but has no specific powers to intervene in the direct running of colleges. As Accountable Officer, SFEFC's Chief Executive has a duty to promote and monitor economy, efficiency and effectiveness in the way resources are used3.

Accounting for performance and lines of accountability

8. A complex arrangement exists whereby SFEFC's Chief Executive is accountable for the economy, efficiency and effectiveness of the use of resources for further education while, at the same time, college principals are also directly accountable to the Parliament for the use of resources at college level. Particular care is therefore needed to ensure that the Parliament is able to gain a comprehensive picture of the performance of both individual colleges and the sector as a whole.

9. SFEFC is required to provide information on its performance to the Parliament through its corporate plan. SFEFC's current corporate plan includes information at sector level, but not at individual college level. Furthermore, colleges are not required to include performance information in the accounts they lay in Parliament.

10. The Committee considers that more transparent performance information, including information about the performance of individual colleges, should be made available to the Parliament and more widely.

11. While the Committee recognises the role of college principals as Accountable Officers, it considers that SFEFC's Corporate Plan and Annual Report should be developed to include information about both the sector as a whole and individual colleges.

12. The Committee therefore recommends that, in discussion with SEETLLD and the sector, SFEFC develops its corporate plan to ensure that it contains objectives, priorities and targets for the sector and for individual colleges. A comprehensive review of performance against these objectives and targets for both the sector and individual colleges should then be set out in SFEFC's Annual Report.

13. The Committee also considers that the Accountable Officer's evidence to the Committee displayed a lack of clarity regarding lines of accountability. In particular Mr McClure failed to set out fully the role of college principals who are statutory Accountable Officers. Mr McClure stated that "the [college] boards of management are accountable to the council [SFEFC] for how they use the funds that it has allocated them". In response to further questioning on the line of accountability between colleges and the Parliament Mr McClure stated "I am the link; I am the accounting officer for the funding council and you call me here to answer questions." (Col 171)

14. The Committee considers that in responding to this report, following discussion with SEETLLD as appropriate, SFEFC clarifies the lines of accountability within the sector. The implementation of the Committee's recommendations in regard to enhancing published performance information will ensure that such information more fully reflects the relationship between colleges, SFEFC, the SEETLLD and the Parliament.

EFFICIENCY

Unit prices and unit costs

15. A unit price is the sum of money allocated to a college to provide each unit of expected activity (known as Student Unit Measurements or SUMs) it delivers. Adjustments are made to this calculation to allow for a college's particular circumstances. SFEFC publishes unit prices but does not include them in the set of indicators it uses in its corporate plan4. Unit prices are used for allocation purposes and are dependent on the baseline funding made available by the Executive each year. (Col 191)

16. It does not follow that a unit price is the actual sum of money it costs a college to deliver a particular unit of activity because other factors, such as income generated by the college, come into play. The actual sum of money it costs to provide a SUM is known as the unit cost. It is the unit cost which could, potentially, be used as an indicator to examine relative efficiencies of individual colleges thereby identifying scope for efficiency improvements across the FE sector5.

17. In evidence, Mr McClure described how SFEFC's funding is based on "a standard formula, the basic principle of which was that colleges should get broadly the same funding for doing broadly the same thing". (Col 191)

18. Following the Audit Committee's report of 20006, SFEFC committed itself to the further development of unit costs as a tool for examining the relative efficiencies of colleges in Scotland.

19. The latest AGS report brings to light significant delays in the development of sound information on unit costs7. SFEFC recognised that there were variations in the way individual colleges were recording their data and therefore delayed the publication of figures for 2000/2001 until January 2003 and figures for 2001/2002 until August 2003.

20. During evidence, Mr McClure outlined the many difficulties with the use of unit cost measures as they stand and acknowledged that more development was needed to improve them (Col 189). He said "The data are getting better all the time... However, for all the reasons that I have mentioned, it is difficult to judge when they are wholly reliable". (Col 190)

21. In a follow-up letter to the Committee, Mr McClure said "the Council does see value in analysing, identifying and publishing unit costs to help colleges improve their management". He also, however, outlined SFEFC's benchmarking exercise which will "give every college, on a consistent basis, a detailed report of their costs with the ability to benchmark these costs against sector and other college benchmarks".

22. SFEFC does not set efficiency targets for colleges but argues that it can enforce efficiency through the funding mechanism. During evidence, Mr McClure informed the committee that "Each college is funded at the same rate for producing the same outcome...each college's production of a unit of tuition, if you like, is funded in the same way" and asked "even if a college wanted to be inefficient, what could it do, especially given that its income is fixed and tied to a given level of output?" (Col 170) He went on to say "the factor which will affect the efficiency of the sector more than anything else is the level of funding per student that the Scottish Executive determines in any one year". (Col 190)

23. The Committee considers that without an adequate understanding of inputs, i.e. reliable unit cost measures, SFEFC runs the risk of either asking colleges to do more than they can afford or jeopardising quality of outputs across the sector. Furthermore, unless funding is transparently fair and equitable it will not be possible to identify effectively efficiency savings.

24. The Committee accepts that the use of unit costs is not straightforward but considers that they would, nevertheless, provide a valuable source of performance information if they were sufficiently developed. The Committee considers that SFEFC is dragging its feet on the commitment it made following the Committee's 2000 report to refine and utilise unit costs. The Committee therefore recommends that SFEFC sets out a timetable by which it envisages that it will have data which are of use in setting funding levels in a fair and equitable manner and in accurately examining relative efficiencies within the sector.

Quality and value for money

25. SFEFC employs HM Inspectors of Education to assess the quality of Further Education provided by colleges. Inspections are carried out on a four year cycle. HMIE publishes reports on individual colleges while SFEFC publishes sector-wide summary results.

26. At the time of the AGS report, SFEFC was not including the data in the performance results in their Corporate Plan. During evidence, Mr McClure described how SFEFC has since improved its corporate plan to incorporate quality measures.

27. The Committee welcomes the introduction of HMIE inspections and stresses the importance of follow-up work following each inspection.The Committee further welcomes the improvements SFEFC has made to its corporate plan to allow information on the quality of further education to be reported to Ministers and the Parliament.

28. The Committee was struck by the fact that, despite a wide variation in the financial health of individual colleges, HMIE has found that almost all colleges meet acceptable quality standards. What is not clear is how some colleges can meet quality standards and maintain financial balance while others cannot. From the information available it is not possible to determine whether some colleges achieve the quality standards on the back of more generous funding arrangements or as a result of greater efficiency. In addition, information available does not address what it may "cost" - that is in terms of funding or efficiency - to exceed quality standards.

29. In order to assess economy, efficiency and effectiveness across the sector it is necessary to have an accurate measure of what is provided (i.e. quality) by colleges and what is spent (i.e. accurate unit costs). It is essential therefore that unit costs are quantified so that they can be examined alongside quality measures to assess the value for money provided by individual colleges.

THE DEVELOPMENT OF PERFORMANCE INFORMATION

Ministerial priorities

30. There are currently four Ministerial priorities for further education in Scotland, these are: Skills for tomorrow's jobs; Quality improvement and modernisation; Widening access; and Improving financial health8. SFEFC has a range of internal performance indicators designed to measure colleges' performance against quality improvement, widening access and improving financial health. The AGS report noted that SFEFC has embarked on a number of initiatives which should ultimately improve its performance indicators and result in a more rounded picture of performance and a closer link to ministerial priorities9.

31. When talking about Ministerial Priorities in General, Mr McClure referred to the Ministerial letter of guidance which is issued annually by the Minister to SFEFC and then circulated among colleges. He stated that "we ask ourselves whether our corporate goals adequately cover the ground that the Minister has put in the letter of guidance. We were broadly satisfied that this was the case. In any case, we would take the letter of guidance as a kind of agenda, whether or not it included something that we might not have included specifically in the corporate plan". (Col 175)

32. The Committee considers that SFEFC does not appear to be according Ministerial priorities, as set out in the letter of guidance, sufficient status. The Ministerial priorities set out in this letter should be used as the starting point for setting the performance measure contained in SFEFC's Corporate Plan and, from the evidence considered by the Committee, this does not appear to be the case.

33. The Committee considers that SFEFC's evidence indicates a lack of urgency in relation to meeting Ministerial objectives and that there is an inadequate fit between SFEFC's performance measures and Ministers' priorities. The Committee recommends that SFEFC reviews its procedures to ensure that Ministerial priorities are seen as the foundation for the corporate planning process.

34. The AGS raised a concern in his report that the fourth Ministerial priority, Skills for tomorrow's jobs, is not adequately captured by SFEFC's performance measures10. When asked "how robust is the information that is currently available to you to enable you to assess how effectively colleges are meeting the needs of the Scottish Economy and local economies"? Mr McClure responded "the web is so complex that one can never satisfactorily say whether the sector is doing its bit to support the economy". (Col 178)

35. In relation to this Ministerial priority, SFEFC has carried out work on both area mapping and industry mapping. During evidence, Mr McClure stated that an earlier area mapping exercise was "partially successful" and outlined the failure of an earlier industry mapping exercise during which lessons had been learned but little useful data had been produced. (col 180-181).

36. The Committee heard that SFEFC is planning to fund, along with other partners such as Futureskills Scotland, a supply and demand exercise described as "a longitudinal survey of what happens to people once they pass through HE and FE". (Col 177). Mr McClure also stated that SFEFC regards area mapping as "the single most important way in which we can understand what is happening throughout Scotland". The results of the new supply and demand exercise are expected to be produced in 2005. Mr McClure also referred to an employer satisfaction survey, "which demonstrates that the sector is doing pretty well in meeting employer needs". (Col 177)

37. Mr McClure said that the second mapping exercise had been introduced due to "a statutory requirement on the funding council to secure the provision of adequate and efficient further education in Scotland - whatever that means". (Col 183).

38. The Committee is extremely disappointed by the slow pace of work undertaken by SFEFC to address the fourth Ministerial priority and match provision of Further Education with the needs of the Scottish Economy. The Committee notes and agrees with Mr McClure's evidence on the importance of the mapping exercises in understanding the sector's relationship with the wider economy. The Committee is disappointed therefore that SFEFC does not yet appear to have produced tangible results from the various initiatives undertaken. In its report published in December 2002 the Session 1 Audit Committee stated "the time has now come for the current Funding Council initiatives to produce tangible results and when we next consider further education issues we will look for clear evidence that they are doing so." This Committee is disappointed to note that this clear evidence in relation to important initiatives to match skills with jobs has not been provided.

39. The Committee considers that matching skills to jobs is fundamental in effectively delivering FE in accordance with Ministerial priorities. It therefore recommends that SFEFC produces a timetable setting out how and when it will have robust measures in place that clearly demonstrate whether Ministerial priorities in this area are being met.

BENCHMARKING

College performance indicators

40. In its first report on the Further Education sector in 200011, the Committee raised concerns regarding benchmarking. SFEFC currently publishes figures on the performance of the sector as a whole but robust data do not exist to enable comparisons between individual colleges. Colleges are not required to include performance information in the accounts they lay in Parliament.

41. In his report, the AGS states that "SFEFC makes limited use of benchmarking"12. Colleges are able to access benchmarking data on SFEFC's website and the onus is on them to do so. According to the AGS report, colleges feel that more benchmarking information would assist their own performance management and that the data SFEFC gathers in statistical and other returns is underused13.

42. SFEFC is planning to improve the information available. During evidence Mr McClure outlined new work on benchmarking which is underway and stated that "we are making good progress". (Col 174).

43. The Committee first identified scope for SFEFC to improve the way it used performance information to benchmark the delivery of FE across the sector in 2000. It is very disappointing to note therefore that, despite positive responses from SFEFC to the Committee in subsequent years, delays in developing the performance framework means that progress in this area has been very slow.

44. SFEFC's Accountable Officer has a clear duty to take an active interest in the economy, efficiency and effectiveness of the funds made available to colleges. To fulfil that duty, it is essential that the best use is made of performance information as it develops. Currently the duty is addressed by making information available to colleges to benchmark themselves. The Committee does not consider the current approach to benchmarking is acceptable and believes that, in order to fulfil the Accountable Officer's duty, SFEFC needs to play a more proactive role in analysing college performance in order to hold poor performers to account and to share best practice associated with good performance.

External comparisons

45. There is currently insufficient information to allow the comparison of relative performance of the Further Education sector across the UK.14 There are inherent difficulties in the capture of useful data and SFEFC has therefore decided not to attempt to compile comparative performance indicators for the time being.

46. The committee heard "that it is not done is really because of a cost-benefit analysis, rather than a lack of willingness". (Col 195)

47. While it accepts that there are inherent difficulties in making comparisons across different parts of the United Kingdom, the Committee urges SFEFC to adopt a less defeatist attitude to this work and continue to pursue useful comparisons which might point the way to useful improvements in current practice.

SUMMARY

48. The Committee considers that progress on a number of commitments made by SFEFC following previous reports by the Session 1 Audit Committee has been subject to an unacceptable degree of drift. Specifically, the Committee is disappointed and concerned by the slow rate of progress in relation to:

o refining and utilising Unit Costs;

o demonstrating that the sector is matching provision with need; and

o enabling useful benchmarking within the sector.

49. The Committee considers that too many SFEFC initiatives are taking too long to come to fruition. The Council appears to be struggling to drive the performance agenda and ensure that Ministerial priorities are being met. It is essential that SFEFC acts more purposefully on commitments made following earlier AGS examinations and Committee reports to ensure that more robust performance information is developed.

50. The Committee is concerned about the principles on which SFEFC's funding mechanism rests. Better data are needed to examine the possibility that some colleges are faced with producing outputs under extremely stringent financial conditions while others may be performing inefficiently.

51. The Committee therefore recommends that SFEFC supplies a plan of action with a timetable which will set out how and when it intends to address the concerns set out in this report.

52. The Committee requests that the AGS revisits SFEFC in Autumn of 2005 to assess progress.

ANNEXE A

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

4th Meeting, Session 2 (2003)

Tuesday 16 September 2003

Members Present:

Rhona Brankin Susan Deacon

Margaret Jamieson Robin Harper

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

The meeting opened in private at 9.32am

Scottish Further Education Funding Council: The Committee received a briefing from the Auditor General for Scotland on his report entitled `Scottish Further Education Funding Council - Performance management of the further education sector in Scotland' (AGS/2003/7).

Scottish Further Education Funding Council (in private): The Committee considered its approach to the report by the Auditor General for Scotland entitled `Scottish Further Education Funding Council - Performance management of the further education sector in Scotland' (AGS/2003/7). The Committee agreed to proceed with an inquiry into the report and to invite Mr Roger McClure, Chief Executive, Scottish Further Education Funding Council to give evidence.

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

7th Meeting, Session 2 (2003)

Tuesday 11 November 2003

Members Present:

Rhona Brankin Susan Deacon

Robin Harper Margaret Jamieson

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

The meeting opened in private at 9.35am

Inquiry into the AGS Report on the SFEFC (AGS/2003/7): The Committee took evidence from -

SFEFC: Mr Roger McClure, Chief Executive, Mr David Wann, Director of Corporate Policy and Services and Deputy Chief Executive, Mr Liam McCabe, Director of Governance and Management Appraisal and Policy; HMIE: Mr Graham Donaldson, HM Senior Chief Inspector, Dr Wray Bodys, HM Chief Inspector

Rhona Brankin declared that Mr Donaldson is her brother in law.

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

3rd Meeting, 2004 (Session 2)

Tuesday 3 February 2004

Members Present:

Rhona Brankin Susan Deacon

Robin Harper Margaret Jamieson

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

The meeting opened at 10.31 am

Scottish Further Education Funding Council (in private): The Committee considered a draft report on its inquiry into the report by the Auditor General for Scotland entitled `Scottish Further Education Funding Council - performance management of the further education sector in Scotland' (AGS/2003/7). The Committee agreed a number of amendments and to consider a further draft at a future meeting.

AUDIT COMMITTEE

EXTRACT FROM THE MINUTES

4th Meeting, 2004 (Session 2)

Tuesday 2 March 2004

Members Present:

Rhona Brankin Susan Deacon

Robin Harper Margaret Jamieson

George Lyon Mr Kenny MacAskill (Deputy Convener)

Mr Brian Monteith (Convener)

The meeting opened in private at 9.36 am

Scottish Further Education Funding Council (in private): The Committee considered a draft report on its inquiry into the report by the Auditor General for Scotland entitled `Scottish Further Education Funding Council - performance management of the further education sector in Scotland' (AGS/2003/7) and arrangements for its publication. The report, as amended, was agreed to.

ANNEXE B

SUPPLEMENTARY WRITTEN EVIDENCE

LETTER FROM ROGER MCCLURE, CHIEF EXECUTIVE, SCOTTISH FURTHER EDUCATION FUNDING COUNCIL TO THE CONVENER

On reflection, there was one matter which I felt was left hanging somewhat inconclusively. That was my discussion with George Lyon about unit costs and the particular unit cost indicator that has been traditionally published. I would like to be very clear in stating that the Council does see value in analysing, identifying, and publishing unit costs to help colleges improve their management. It has responded to the encouragement from the former Audit Committee by improving the existing indicator and, more importantly, launching a major benchmarking exercise that will give every college, on a consistent basis, a detailed report of their costs with the ability to benchmark these costs against sector and other college benchmarks. Furthermore, the consultants are contracted to establish the infrastructure to embed the process within sector management practice so that it is not simply a one-off exercise which gradually loses its currency.

The doubts I was expressing yesterday were about the existing indicator which identifies costs per weighted SUM for staff costs and non-staff costs. It takes a great deal of effort each year to produce these figures which I do not consider to be particularly reliable and, as I explained yesterday, they are not directly comparable among colleges. I suspect that where colleges say that this particular indicator is useful to them, it is where they use it to defend their position rather than a spur to any action. A typical case of statistics being used for `support' rather than `illumination'!

I am confident that the Auditor General considers that the benchmarking exercise will be much more useful to colleges than the existing indicator. We will, nevertheless, continue to publish the existing indicator and its close relative, the number of weighted SUMs generated per full-time equivalent member of staff, which in some ways is more useful to colleges than the cost indicator. Unfortunately, it too has its definitional problems!

Finally, our discussion on unit costs spilled over into the Council's main funding methodology because Mr Lyon thought that the unit cost indicator must be part of our allocation process. I tried to explain why it is not and, indeed, why it should not be. But the hearing was not really about our funding methodology which is, of course, the Council's main statutory function. If there are concerns in the Committee about the way the Council allocates funding to colleges then I would be grateful if we could have the opportunity to set out this large-scale and very important set of procedures properly.

In that vein, I was wondering whether you would find it helpful for you personally or with your colleagues to have occasional briefings from me on a more informal basis, to give you and the Committee a better opportunity to keep up to speed with developments in the sector and in the Council. I would be very willing to do this either on an overview basis, covering the main current items, or, perhaps, on a particular theme such as the funding methodology.

Please let me know if this would be helpful.

Roger McClure

Chief Executive

12 November 2003


FOOTNOTES

1 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 13, para 1.1

2 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 14, para 1.4

3 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 15, para 1.5

4 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 26, para 2.16

5 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 25, para 2.13

6 Audit Committee 1st Report 2000 Scottish Further Education Colleges: Managing Costs

7 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 5, para 10

8 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 6, Exhibit 1

9 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 9, para 14

10 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 33, Exhibit 11

11 Audit Committee 1st Report 2000 Scottish Further Education Colleges: Managing Costs

12 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 9, para 17

13 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 43, para 4.10

14 Scottish Further Education Funding Council - Performance management of the further education sector in Scotland (AGS/2003/7) page 10, para 18

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