 Good morning and welcome to the 15th meeting of the public audit and post legislative scrutiny committee in 2019. Can I ask everyone in the public gallery to please switch off or turn to silent your mobile devices? We received apologies from Anas Sarwar this morning. Can I welcome David Stewart, who is attending in his place? Item 1 is decision on taking business in private. Do members agree to take items 4, 5, 6 in private this morning? Agree. Thank you. Item number two is another decision on taking business in private. Do members agree to take consideration of a draft report on key audit themes in private at future meetings? I agree. Thank you very much. Item number three is the section 23 report on Scotland's colleges 2019. I'd like to welcome our witnesses to the meeting this morning, Caroline Gardner, Auditor General for Scotland, Mark McPherson, Senior Manager Audit Scotland and Mark McCabe, Audit Manager for Audit Scotland. I'm going to ask the Auditor General to make an opening statement. Thank you, convener. Today's report provides an overview of the college sector in Scotland, in particular college finances and the learning outcomes for college students. There was a small improvement in the overall financial position of Scotland's 20 incorporated colleges in 2017-18. However, colleges are operating in an increasingly tight financial environment. This sector-wide improvement marks significant variations between colleges with several facing particular financial challenges. The gap between colleges' income and expenditure is widening and 12 incorporated colleges are forecasting recurring financial deficits by 2022-23. Only two of these colleges had identified the actions needed to achieve financial sustainability. With the financial pressures on colleges, it's essential that they improve their financial planning. The Scottish Government has been increasing revenue funding for colleges over the past few years, mainly to cover additional staff costs arising from national bargaining. The latest funding allocation for 2019-20 will cover the additional costs of harmonising pay and conditions across the sector. Colleges face additional pressures in paying for cost of living increases and increases in employers pension contributions. The Scottish Government capital funding also falls short of the estimated costs of maintaining the college estate. Despite these financial challenges, the sector continues to exceed targets for learning activity in student places. A high proportion of college leavers go on to other education, employment or training. Colleges are widening access to disabled ethnic minority and care experience students, but after several years of increasing learning delivered to students from deprived areas, the proportion fell slightly in 2017-18. There's considerable variation across colleges and student outcomes. Attainment gaps still exist for students from the most deprived areas, students with disabilities and care experience students. Average attainment rates for students in full-time education have remained relatively static in recent years and remain some distance from the Scottish funding council's targets. We think that achieving some of those targets will be very challenging. Finally, the funding council could do more to work with colleges and their boards to improve financial planning and transparency in the reporting of performance information, including student satisfaction data. As always, convener, we're happy to answer the committee's questions. Thank you very much indeed, Auditor General. I'm going to ask Dave Stewart to open questioning for the committee. Thank you, convener. Good morning and thank you for coming for the committee again. I'm really interested in seeing how we can get more young people and indeed people of any age from disadvantaged areas into colleges. In your report, you make it clear that colleges are not meeting the Scottish funding council target of 17.4 per cent of students from the bottom 10 per cent disadvantaged areas. They failed to meet that target. Why is that? Will they meet the target that is, I think, 20 per cent for 2020-21? It's important to say that we think that colleges are doing a lot to try to meet that target and to widen access. I'll ask the team in a moment to give you more of a sense of what's happening across Scotland and how colleges are learning from it. You're right that we say in our report that we think it will be hard for colleges to meet the target of 20 per cent by 2021. That's for a couple of reasons. First of all, the demographic pattern of Scotland overall means that there are fewer young people in this age group. That's available if you like to fill the college places that are available. At the same time, the Scottish Government has got a wider policy of increasing their participation in higher education. More young people are going on to university with support to do that, which may have previously remained in further education. There's a real contextual picture that makes it harder for them to do it. Mark, do you want to say a bit more about what colleges are doing to help? It's about making sure that there's an appropriate package of support available for students from those more difficult backgrounds or deprived areas. Examples will be given in the report that include things like helping with travel to get to college, which has always been a bit of a barrier for people who've come from low-income backgrounds. It's very practical steps like that. The other question is why this trend was reversed, because in earlier years we were going in the right direction. So why you've mentioned some possible reasons, but why in the most recent year that you report we've gone backwards? I think the short answer is that the reasons aren't absolutely clear. We show the trend in Exhibit 12 on page 23 of the report, and there had been a slowly increasing trend over the three years before that. It then dipped very slightly last year in 1718, and that leaves quite a big gap three and a half per cent up to the 20 per cent target in three years' time. The funding council is looking at the reasons with colleges, but I think it's not possible for us to give you a clear answer to that picture. My final question is that this is not a zero-sum game in the sense that higher education is good for education bad. Clearly we're not making naive comments about that, but you tend to suggest that there might be a little bit squeezing going on because there's targets for higher education that might be affecting the demand for further. Is there anything in that? And then there's some issues around funding which have been raised before on this issue. I think there's two things I'd say. One, you're absolutely right. It's not that higher education is better than further education or vice versa. The question is what's right for the individual young person, for their own skills and talents and aspirations, and how is that best supported by our wider education and skills system? We say in the report that the funding council should review whether its targets are achievable in the context that we've just been describing. I think there is a bit of a risk of competition between higher education institutions and further education colleges for the same young people that runs the risk that those people's needs aren't what's front and centre of what's being put forward. More joining up is required. Mark might want to add a little bit to that. There's really just a point of clarification that of course colleges will be absolutely clear that they provide both further and higher education. So I think it's a distinction between the institutions as the auditor general highlighted towards the end of our comments about the college versus university that might be detracting some of the passage of people. Of course the general point, convener, is that although we've mentioned young people, clearly we all believe that lifelong learning is important so we're looking at adults, people of any age, we want to encourage them to further education particularly from the bottom 10 per cent of our most disadvantaged areas. We do say in the report that I'm just fumbling through the pages and the team will keep me straight that we've now seen a reversal of the pattern that we saw five years or so ago of many fewer older learners and part-time learners in further education because of the Government's priority to encourage young people to study for qualifications that would lead to employment. So we're now seeing that shift reversing again but you're right, the further education system is very important to older learners particularly as we enter a world of much longer working lives and rapid technological change that means we all need to stay up to date and reskill from time to time. Thank you. Just to follow on question from Dave Stewart, students who have been in care have the lowest attainment rates but they were the only group where attainment has actually fallen. Are you aware of any kind of support that the colleges are providing for these students? You're absolutely right about the figures and Exhibit 16 sets out all of the groups of students with particular characteristics where there is a priority to increase their attainment levels. Students who have been in care have both lower attainment levels on average and that dips like in 2017-18. Mark, are you able to say something about what colleges are doing to close that attainment gap? I think it will be similar to what I said about those from more deprived areas, a package of support but inevitably I think sometimes those packages of support will be much more complex. It's probably worth noting that those students who have been in care do represent a relatively small proportion of the student population although that shouldn't detract from an impetus to try and improve the outcomes for those students. I know that the funding council and colleges are definitely aware of that issue. Do you have any evidence that colleges are finding it more difficult to provide that package of support given the squeeze on their funding? I don't think that we have any specific evidence on that but you're right to say that there is a squeeze on funding and the financial pressures that are coming will require them to make some very difficult decisions about how they provide what they provide. That may be a question for perhaps a session after this. Colin Beattie. General, I've got three main areas that I'd like to run through. I would make a general comment though that this report seems remarkably like the previous one with the same pressures and the same issues arising. Would you agree on that? I think so. The committee will know that for both the college sector and the NHS sector we produce a report every year that pulls together the results of the audits of all of the bodies in that sector. In some ways I think it would be quite surprising if we saw a massive shift from one year to another but we try to give you a sense of the trends that we're seeing. The trends here in broad terms are that the financial pressures are increasing and that colleges are still doing a pretty good job of delivering what they're expected to in that context with some exceptions that we've pulled out here. I'd like to look at Alff's page 11 on your report. When that also set up it was accepted that a lot of the money that went into them was already earmarked so it's not surprising that the total value of the Alff's has gone down. What did concern me a little bit and maybe you can help me with this, it looks like the income that colleges are getting from sources other than SFC has actually reduced. Is that so? Is there any indication as to why? Are they taking their focus away from developing that alternative source of funding? Are they becoming more reliant on the SFC? You say there's financial pressures, you think they would be continuing to try to bring in their alternative sources of income? Exhibit 1 in the report gives you a picture of where their income came from in 2017-18. Almost 75% does come from the Scottish Funding Council and that's an increasing proportion. About 16% comes from tuition fees and education contracts that they're bidding for to win and just under 10% comes from a range of other sources. You're right, the other sources are reducing and we think colleges are finding it harder to generate income in those ways, partly as Mark said a moment ago just because the pressure on the resources in general makes it harder to identify and follow up those opportunities and partly because the slow growth of the economy overall means that there are fewer of those opportunities around that are available for colleges to seek. That's obviously a sector-wide pattern but there will be greater variation for individual colleges and it's one of the things we'd like to see the Funding Council taking clear account of as it looks at the long-term forecast for individual colleges and for the sector as a whole. Leaving aside tuition fees, what was the main source of alternative funding for the colleges? Tuition fees and education contracts together are the 16%. Education contracts tend to be where colleges bid for a contract to provide education and training either to a large employer or a group of employers or one of the examples that we're using here to provide education to the prison service which Fife council won last year. So it can be a range of different things but that's the kind of contracts we're talking about. That's the only source of income they've got. Mark, it's looking to come in. They might have other sources through releasing their facilities for, for example, hopefully low-cost community use but for other businesses or services to make use of the facilities when they're not using them. Equally catering contracts within the college could be another source of income. OK. Just to move on. The report, as you've very highlighted, indicates that the college sector has a small but improved underlying financial surface. But you say that colleges are operating within an increasingly tight financial environment and that the sector by position masks certain challenges for some colleges. Can you expand on that statement a little bit about the challenges that are being faced? Certainly. I think that there's two elements I'll pull out and the team may want to add to this. First of all, for the sector as a whole, the Scottish Government has been providing real terms increases in funding over the last three years, since 1617 I think. But their small real terms increase and in the latest budget that's been agreed it's only sufficient to cover the additional costs of harmonising pay and conditions for staff. At the same time, we know colleges are facing additional pressures from the cost of living agreement that's just being finalised at the moment from increased employer contributions to the pension schemes and maintenance costs which aren't fully covered by the capital budget that's available. So those pressures are baked in for the sector as a whole. Beneath that individual colleges face different financial pressures and are in different financial positions. We try to give you a picture of that in Exhibit 6 which summarises a range of financial indicators for all 20 of the colleges. There's a lot of variation in there but we highlight in the report three colleges that are facing particular challenges and I think it's fair to say also that the more remote rural colleges also tend to be finding it harder than those that are in more urban areas. I think that this question of rural colleges has come up before and has been discussed as an issue particularly with the Highlands area. Is there any sign of improvement there? Is there any indication that they've come up with some sort of a magic formula that will fix this? I don't think we've got a magic formula. I think it's probably that the UHI is still working as the region to agree how the work will be carried out and shared across the region. We highlight particular pressures facing North Highland College in the report and I think Mark is looking to give you a bit more flavour of what we're seeing within the region for those colleges overall. I think that the regional body in terms of UHI provides support for those colleges and it's trying to minimise the problems on any individual institution by sharing funding across the various colleges to support their own individual sustainability because they all have very localised challenges and they seem to be making some progress with that and we highlighted that in our report last year. We've neatly moved into the third question that I was going to be asking about, which was about the financial challenges because at the time of the audits of the 12 colleges only two had identified specific actions to deal with these financial challenges. Has there been any improvement on that, any update on that or are we still in a position that most of the colleges haven't actually come up with a formula? Our report clearly is a snapshot at a particular point in time. I'm not sure if Mark can give you any more information that we've picked up as the report's been finalised. Certainly the funding council has been working with colleges and they've gone back to colleges and asked them to identify some of the mitigating actions that will help them address the forecasted deficits that they have in place. We've seen at a very high level some of the actions that colleges are starting to think about and put in place. We'll not be until we do annual audits again this year that we'll see exactly how much progress they've made in terms of agreeing them and starting to implement them to make a difference. Are we confident that the remaining 10 colleges are at least taking initial steps towards addressing this? Have they understood their situation and are they actually moving down the road of coming up with some sort of a plan? That would seem to be the case if looking at the reports that the funding council have been producing. They've all identified some mitigating actions as we say. It's not until we do the audits this year that we'll get a clearer sense of just how well developed they are and how much progress is being made against them. Mitigating actions isn't really an action plan to take you through, is it? No, and that's one of the points that we're stressing in the report, is that as well as getting the forecasts from colleges, we're asking the SFC to also get the medium-term financial plans to back them up so that we have greater assurance that, as well as just identifying the position they're going to be in, that they have a much more robust process in terms of addressing those deficits. Has the SFC agreed that recommendation? Yes. You have. Dave Supplemential on this point from Dave Stewart. Thank you, convener. Can I just take you back to Colin Beatt's point about UHI? You'd be aware of UHIs within my region, and I'm a very strong supporter of UHI. Another factor that's perhaps on the risk register is the important reliance on European structural funds within UHI. For example, European social fund has been really important in that area. I'm reluctant to raise the Brexit word today, but clearly as if we exit Europe, we are going to see the ending of this funding probably around 2021. Have you looked at that particular aspect specifically for UHI, since it's an important factor for external financial raising within that network? We say a little bit in the report about the potential impact of Brexit on the college sector as a whole. Clearly, as you know, it will vary across Scotland. You might know that the funding council prepared a paper, I think, at the end of last month, which was looking at the impact on colleges in more detail than we've been able to do. That's something that we'll feed back into next year's audits. From our experience, it's particularly the University of the Highlands and Islands and some of the colleges in the west of Scotland that have benefited from that funding in the past. It's in everybody's interest to know as soon as possible what the impact might be and how far the Scottish Government will be able to replace that funding depending on the agreements with the UK Government. I'm more at a comment rather than at a question. I'm obviously aware that the UK Government is looking at a future shared prosperity fund, which, in theory, would back up the current funding that's there. Much as I'd love to see that happening, I cannot envisage that the total package of structural funds is going to be replaced in the internality by UK funding. If it happens, I'm happy to say that I was wrong, but in terms of the financial aspect of this, I do see this as a major risk for the sector post 2021. I completely recognise the concern. I think that there's not much more that we can say at this stage, but it's something that's on our radar. Thank you. Bill Bowman. Thank you, convener. Good morning. You probably know that we've spoken before about the need for reliable data. Last year, we raised concerns that colleges were using different assumptions when they were preparing their financial forecasts. In their oral evidence to the committee, the Scottish Funding Council said that it was addressing this issue, but your report indicates that although colleges did apply the SFC's common assumptions, they interpreted their accounts directions inconsistently. Did the colleges not know what they were doing, or did they know what they were doing in trying to achieve an outcome? Did the SFC know what was going on, and did they do something about it, and did they think that at the end of the day they would pull the wool over your eyes? I think that there's two different things in that question that I'll try and unpick and then let the team come in from there. The committee's attention, I think, last time was very much on the question of how the forecasts were being prepared with common assumptions, and we think there's been good progress there. All of the colleges used the common assumptions in preparing their forecasts with one difference at the end, which goes back to the answer that Mark McCabe gave a moment ago to Mr Stewart. Some of the colleges prepared their forecasts and included the effect of the mitigating actions that they were planning to take, so it came out with a net position for where they expected to be. Other colleges prepared their assumptions without the mitigating action, so on the basis that nothing changes from the status quo. The SFC, we understand, is dealing with that for next time round, but it's progress that they're all prepared on a common basis to start with. I think what you were referring to at the end of your question was the comment that we make in paragraph 5 of the report about calculating the underlying financial position at the end of the financial year. You're right in that case, the accounts direction was applied inconsistently across the country. We've made a recommendation this time that in future that process should be completed before the annual audit is done, so that the figures can be adjusted if necessary to make sure they're consistent and the annual outturn will be shown on a consistent basis across Scotland. Do they know what the correct position is now as somebody has gone back and looked at it? We've looked at it and I'll ask Mark to talk you through where it goes from there. This is the second year that the calculation for underlying position has been in the accounts direction. We highlighted last year that there were difficulties, which you would expect when there was a new calculation being introduced. The funding council revised the guidance to make it clearer for completing for 17-18, but we still did see that colleges were interpreting it slightly differently. In some cases, the what's in and what's out can be quite complex, and it's down to how they account for things like depreciation and interest on pensions. The funding council, when they've been validating that, have made some adjustments across a number of colleges. As the auditor general says, what we're suggesting is that next year, before that figure is finalised, the funding council works much more closely with colleges to make sure that issue doesn't arise and that the figure is agreed before the accounts are finalised. No, it's useful, but does the funding council have a compliance approach to make sure that people are doing what they expect them to do? Well, they certainly set the direction and then they validate how that direction has been followed in effect, checking that they are compliant. Liam Kerr. Thank you, convener. Good morning. I'd like to turn to the capital funding, which is something that I recall raising last time. The committee last year raised concerns about the £27 million cost of the very high priority repairs. Are you able to tell me how those repairs—those are the repairs, if I recall—have to be done within one year of the last report? So, £27 million has been allocated. Has £27 million actually been spent on the very high repairs and have they been done? What we can tell you, Mr Kerr, is that the £27 million was allocated for those particular repairs and the funding council is monitoring whether the money was spent as planned. We can't yet give you that assurance that it was spent on exactly the projects and the needs that were agreed, but the SFC is monitoring that and we should have the information for the next year. Someone else is going to speak now? Oh, sorry. Coming out from the very high priority items to the general backlog of repairs, which was quite considerable last year, your report indicates that reduced capital spending creates a risk that the cost of urgently needed backlog maintenance increases, which in turn poses a challenge to the college's ability to deliver their services in a safe environment. How great a risk is that and what happens if it isn't addressed in practice? Just to give you a sense of the scale of the challenge, Exhibit 8 on page 16 aims to capture that in a sort of graphical way that shows it clearly. If you look at the top half of the page, the blue boxes for each year is the amount of capital allocation that's available for general capital funding as opposed to big new projects like the 4th Valley Campus. You can see that it's relatively small, around £20-25 million every year. A jump up last year, as you say, to focus on the very high priority backlog maintenance and then for £1920 back down to £21 million. The bottom half of the page gives a sense of what the estimated costs are of the backlog maintenance, £77 million for backlog maintenance and £22 million for life cycle maintenance. In 1920, about £20 million of that total is covered by the capital that's available, so it's a small element. It's worth noting that that's really only for maintaining the quality of the estate in terms of your question. It doesn't take any account of the need to be investing in particularly digital infrastructure that will be needed to keep college's ability to deliver the learning and teaching that they're responsible for up to date as we move into a world which is much more reliant on digital skills and digital technology. Perhaps sticking with that then, so your report then goes on to say that various bodies, the Scottish Government, the Scottish Futures Trust and the SFC are looking to identify an appropriate revenue funding model to make that investment, presume me to cover that £77 million and the digital transformation or something like that. Can you tell me what stage that work is at and also one of my Daft Ladi questions, why is that a revenue funding and not a capital funding? I'll ask the team in a moment to update you on where they've got to with it, but as you know the Scottish Government's ability to spend capital is limited. It's always had a capital allocation within the block grant from the UK Government which it can spend on capital investment and it's now got new borrowing powers for capital under the Scotland Act 2016 powers that came in, but both of those are limited and have to be used for everything the Government's responsible for. Over a long period Governments of all colours have been looking at ways of spreading the cost of capital investment through the revenue budget, originally through the private finance initiative, then later through the Scottish Government's non-profit distributing model and the hubco models that work through the Scottish Futures Trust. There are all variations on the sort of mortgage that you and I might take out where you can make payments over a long period, but you get your capital asset up front. We've seen the NPD used widely in the health service and in schools, the Governments asked the funding council and the Scottish Futures Trust to look at whether they can develop an appropriate model to achieve the same thing for colleges. Mark, are you in a position to update on progress between the funding council and the Futures Trust? I think all I can say is that it's still early stages, it's clearly a difficult topic for them to wrestle with, but they are in discussion. Graham, thank you. Willie Coffey. Good morning. I'd like to ask three questions if I may. This morning one on your broad recommendations, Auditor General, another one on the asset position that the colleges seem to have doubled their assets in the recent period and a third question if I may on the Ayrshire College situation. Firstly, on your recommendations, when I read through them, it's as almost as if I could have read these some time ago. Is there a sense that the colleges aren't delivering on these types of recommendations or are they making some progress? I note that they're about financial planning, they're about data collection for student satisfaction, they're about performance reporting, they're about outcomes for students from the less-favoured areas, let's say. So I could have read these in one of your reports a few years ago, so where are we in the kind of progress with these kinds of issues and recommendations? I think we are seeing progress. I think for most of these, the recommendations this year are about taking the next step or about fine-tuning. So where Mark McCabe was answering Mr Bowman's question a moment ago about the way colleges calculate and publish their underlying financial position, we've now got that information in the accounts, there are common assumptions to be used. The recommendation this year is about doing that earlier so that the accounts are audited after that's been done rather than before or the verification process happens there. The same on the information about satisfaction and college performance. There is information available that wasn't available before and we think there's room to make it more useful and more transparent. So it's about continuing to nudge improvement in that way, I think, over time. Do you get sense from the funding council, the Scottish Government and the colleges themselves that they are positive in their response to these recommendations or do they take a bit of time to digest this stuff and come back to you and hopefully to us? A bit of both, I think. I think we are genuinely seeing progress on this and there are some things that have maybe taken a bit longer than we might have expected in the first place but these are definitely moving in the right direction. OK, thank you. The next question I have is on page 10 of your report. It shows us there that the net asset value has more than doubled in the recent period, I think it will be on the last year, from £230 million to £484 million. I was hoping that you could help us either now or at some later stage to break down an explanation of where that additional money has come from and be able to provide it on a peer college basis. What I can say in headline terms is that it's probably not quite as good news as it might appear in just looking at the graph. It's mainly accounting re-evaluations. So we say in the text on the right hand side that of the increase, the £254 million increase, £240 million as that was a result of re-evaluations of pensions and of buildings, which are simply a sort of paper transaction to put the figure into the accounts. I think that Mark can probably give you a bit more information about the picture behind that and what's happening for individual colleges. As the Audit General said, pension re-evaluations are in the main accounting for that and there was a full re-evaluation done and that's been across the board. There's also a small amount that was due to the re-evaluation of buildings in a couple of colleges that stood out particularly, but as the Audit General said, that is very much an accounting increase in terms of the net asset position. That's only one indicator of the wider financial health and that's why we're presenting a range of different financial health indicators there. So it's not really disposable in the sense that the college is. It's notional. Correct. OK. Thanks. Could I ask the third question please if he doesn't mind on the situation of Ayrshire College? You mentioned in page 14 Auditor General, as you know Ayrshire College still faces this millstone PFI round the neck. I think it's the only college remaining in Scotland that still has this liability and I think from your figures there we're looking at a payment of £1.4 million being required each year until 2024-25. I note also in your commentary there that the college had to introduce a voluntary severance scheme of almost the same value, £1.3 million. My question to you is what is the value in spending money on severance rather than investing in the staff and services for the students at a college? I know a severance scheme is a one-off cost but it has a recurring impact. Where is the real value in doing this kind of thing rather than supporting services at the colleges? I think we can give you a broad answer to that but if you want to explore it further that would clearly be a question for the funding council and the college. But you're right, as we say in the report, the college faces a number of cost pressures but the most significant is the annual cost of its PFI contract. That is £1.4 million a year for the next six years which is a significant element of its budget. It's working closely with the funding council to try and resolve that. The funding council has agreed its two-year financial sustainability plan with additional funding to help address that. Part of that is about funding a voluntary severance scheme. I'm not sure it's possible to make a direct link between the need for voluntary severance and the PFI scheme. We say earlier in the report that of all the colleges with action plans to address their deficits, most of them are considering voluntary severance schemes. Part of that is to do with changes in the way colleges go about delivering learning and teaching and the mix of subjects that they teach and the students that they're serving. They will, from time to time, look to change the make-up of their staff in that way. But you're absolutely right, that's a particular pressure on Ayrshire College which is having to take account of and is working closely with the funding council to do. Can you recall, we mentioned this at one of our previous meetings, convener? I think that the West Lothian College had a PFI business, perhaps the second-last PFI that was bought out by the previous executives. I understand that circumstances may change, but it seems odd to me that that particular one was bought out, presumably with the agreement with the funding council at the time, but this one still sticks as a milestone around Ayrshire's neck. My understanding is that you're right that the West Lothian College contract was bought out with support from the funding council. I don't know the reasons why that's not possible or appropriate for Ayrshire College, but I think that it's something that the committee may want to explore with the funding council. Being ahead Ayrshire College, I've said to me that they're quite confident that they have their financial plans in place and that they'll be able to meet the savings that are identified, but this is a real difficult situation that only Ayrshire are facing and I think that's very, very unfortunate. That's correct, thank you. We covered this last year in your section 23 report that the real-term increase in college funding is only going as far as to cover the staff harmonisation costs. Is the finances of college sustainable, given that the money is only covering that staffing cost? The financial forecasts that colleges produce are five-year forecasts, which is what we would see as being medium-term. Over that period, as we say in the report, 12 are forecasting recurring deficits and only two at the time we reported had firm plans in place to deal with those recurring deficits. Over a longer period, those challenges may well become more difficult depending on what the overall level of Scottish Government funding looks like. We've seen the Government's latest fiscal outlook. That's recognising the pressures there are on the overall Scottish budget and it's not unreasonable to be making a link between that and the finances of the college sector. I think that it's something that you may want to explore with the funding council. Thank you very much. Can I turn to the issue of female representation on the colleges governing boards? We see from your report that the number of female students has increased. I think that we have more female students in our colleges now than we have male. The number of women on boards has fallen. We have lost four female board members across the country. Can you comment on that? You are correct. In paragraph 36, we show that women made up 43 per cent of board members across the country. The number of women fell by four during the year and the number of men increased by 12, which is what accounts for the difference there. The back drop to that is obviously the Government's legislative commitment, the statutory commitment now to have 50-50 by 2022. It's important to note, though, that the make-up of college boards isn't only a matter for colleges themselves, as well as the members who are appointed to the boards. There are also elected representatives, particularly representing staff and students, and that's not something that colleges can control directly. It's a trend that has started to go in the wrong direction rather than the right one. Do you think that colleges are doing enough, or do you think that there needs to be more support from elsewhere to improve the situation? I'm not sure that I'm in a position to give you an answer on that at the moment. I think that it is made more complicated for this sector because of the election of representatives. I think that it's something that reflects society more generally rather than just the college sector. The funding council is aware of it. It has a range of priorities that it's trying to make progress with. Thank you very much. Do members have any further questions for the Auditor General and her team on this report this morning? Thank you very much indeed for your evidence. I now move the committee into private session.