 Good morning and welcome to the ninth meeting of the Public Audit and Post-legislative Scrutiny Committee. Can I ask that everyone present switch off their electronic devices or switch them to silent mode so that they do not affect the work of the committee this morning? I'd also like to say that we are missing a couple of members and a witness from the first panel due to terrible weather conditions and train delays coming from the west, but we are going to proceed, but the MSPs who are not here may join us throughout the course of proceedings. Item 1, the committee is invited to agree to take items 4, 5 and 6 in private. Item 4 is consideration of evidence received under item 2 on the audit of Scotland's colleges 2016. Item 5 is consideration of evidence received under item 3 on the 1415 audit of Edinburgh College, and item 6 is for the committee to consider its work programme. Do members agree to take these items in private? Item 2 is an evidence session on the Auditor General for Scotland's report entitled Scotland's colleges 2016. I welcome to the meeting Paul Johnson, director general for learning and justice, and Dr John Kemp, interim chief executive of the Scottish Funding Council. I invite Paul Johnson to make a brief opening statement followed by Dr Kemp before I open up to questions from members. I appreciate the opportunity to provide evidence today in response to the Auditor General's report on Scotland's colleges. As director general for learning and justice, I am the accountable officer for the education and skills portfolio. I have responsibility for ensuring that the Funding Council's strategic direction aligns with the priorities of the Scottish Government and that it has the necessary controls in place to safeguard public funds. The accountable officer for the funding council is Dr Kemp, and the funding council is accountable for the delivery of the Scottish Government's policy objectives and for the deployment of resources to deliver those objectives. The Scottish Government accepts the recommendations in today's report that are for the Scottish Government to implement. We will be working with the funding council to ensure that the recommendations are implemented. We will be seeking to ensure that we learn lessons from the matters that are raised in the report and apply them both to our work on colleges and to other areas of public service reform. Since the Auditor General's report, progress has been made on a number of the recommendations, in particular through the publication of the document impact and success of the programme of college mergers in Scotland, which is a funding council document that I am sure will have the opportunity to discuss. I welcome the fact that this document now sets out further detail about the annual savings that college reform is achieving. It also confirms that the programme of reform has created colleges that are more resilient and sustainable, better suited to the delivery of skills, better suited to engagement with employers and universities, and better able to improve the provision for learners. I am not surprised by that because, in preparing for today, I looked again at Sir Ian Wood's conclusions in his report on developing Scotland's young workforce. Even in 2014, he found that the colleges that he had engaged with had been re-energised and were reinventing themselves as larger units with a regional status and greater potential to develop and influence. In my written submission, you have already seen some of the figures that we have that demonstrate some of the success that we can point to in terms of those newly reinvigorated colleges. We recognise that colleges are still adjusting to substantial changes, and we will use the findings of the Auditor General's report to secure further progress. Good governance is, of course, crucial. I welcome the fact that the Auditor General recognises the likely positive impact of implementing the Good Governance task group's recommendations. The enterprise and skills review also allows us to ensure that the functions of the Scottish funding council are clearly defined and with a focus on securing continued improvements in both the college and university sector. I look forward to discussing those matters further. Thank you very much, Mr Johnson. Dr Kemp. Thank you again for this opportunity to discuss the Auditor General's report. The report covers the latter period of a period of great change in the college sector in Scotland. As well as the merger programme, there was the related regionalisation of funding, including the introduction of outcome agreements, a revised funding method, the inclusion of colleges into the public sector accounting and the introduction of national bargaining. As the Auditor General's report makes clear, the sector has continued to meet activity targets and maintain financial stability through this period. In the summary of the post-merger evaluations that we published in August this year, we concluded that they had largely been a success and had created colleges that are better suited to respond to the needs of their regions and interact with local authorities and universities. This success has been a tribute to the staff and the colleges who have implemented the mergers. We recognise also that there have been challenges. There has been a drop in the success rate for full-time FE courses in some colleges. There were a small number of very significant governance difficulties, which the committee's predecessors have examined. As you will have seen from my organisations letter to the committee of 29 September, we have accepted the recommendations of the Auditor General's report. In some cases, we have already substantially addressed some of the recommendations, such as those on the cost of mergers and on the publication of lever destinations. We will continue to work with the college sector and with the Government to address the other recommendations. I am very happy to answer your questions on how we will do so. Thank you very much, Dr Kemp. Alex Neil. Can I start with a very general question? I recognise that some of that predates your appointment to Dr Kemp. Obviously, if you look at the reports from the Auditor General, the first conclusion that you would reach is that this is not how to go about a major reform programme. There is a lack of baseline information against which future progress can be measured. There is a lack of comprehensive financial planning. Probably one of the single biggest costs is going to be, obviously, the harmonisation of pay rates across the college sector, but that was not included in the original costs. We have had the decline in the attainment rate. At the end of the day, that is primarily about attainment. There was no proper equality impact assessment done. We still do not know what impact the changes have had on inclusiveness and equality. We have seen some of the governance issues. There is a question mark over the added value and competence of the funding council itself. We now have a situation where we will get a funding council looking at a much smaller number of colleges across Scotland, but we have also put a layer of regional management between the national management and the local management. I am not clear what added value that brings to the table. It really has been a bit of a fiasco, has it not? That is a very big question. In response to that last point, has it been a fiasco? No, it has not. I think that there are aspects, as I said in my opening statement, of the merger process that could have been done better. By and large, I think that this merger programme has been a success. It was implemented fairly quickly and fairly effectively by the colleges involved. There were governance issues in some areas. I accept that. The auditor general has pointed out that there are some things. It might have been better to have baselines on, but by and large, the mergers were set out to achieve a purpose, which was to create large regional colleges that could interact with the employers, the local authorities, the universities in their region far better than the colleges that we had before. I think that that has been achieved. That was something that we were clear about at the outset, and that has been achieved. I accept the point that some things could have been done better, but by and large, this has been a good process. Some of the other things that you talk about there that we are going on at the same time, which were not part of the merger process, have made it more complex. National bargaining is something that we do not know the full costs of yet. It is a process that is still going through. Collegy Scotland has been supported through the employers association to help to ensure that that is done effectively and efficiently, but, yes, it is an unknown. I suspect that if we were to wait until all of the unknowns about all the other things that were happening in the sector at the time were out of the way to do a merger process when there were no other complications, we would end up never doing it and we would have lost the benefits of creating these bigger, more effective colleges. You are right that in some areas there is another layer between the funding council and the colleges. I would stress that that is very much the minority of areas. The legislation created the opportunity for some regions to have a regional board, but only where the colleges did not choose to merge to form one regional college. Actually, in the 13 regions, 10 of them are single college regions. They merged to form one regional college. The three exceptions, with the exception of Lanarkshire, which I could have gone either way, Glasgow is a very big city with 20 per cent of the college provision. The idea of one college there was one that was not going to happen immediately, so a regional board there was the outcome. In the Highlands, you are dealing with a very disparate area. There, there is a different layer in the UHI as a regional board, but I would contend it in those areas. We wanted to fund, and the legislation allowed for, to fund a region rather than individual colleges. Those regional bodies, some of which are fully operational, some of which are not yet, will bring together the region so that the region has one voice and there is coherence from within the region on how you allocate money to the colleges. I think that that is a value that was not there before. I accept that there are a lot of complexities about the merger process. I do not accept them, if you ask me. I would also not accept that this is a merger that should be seen as a fiasco to use that language. Indeed, I think that there are many, many aspects of the merger process that have been successful, and we have a lot of figures, some of which were set out in the written note that I provided to the committee, which I think point to that success. There was a lot in the question, which we may perhaps develop further in the course of the session, but I would pick up at this stage on the point about baseline data. In particular, I think that we should be very clear that there was and is a significant amount of baseline data that we can point to that shows an improving trend from both before, during and after the merger process. If, for example, we look at the number of full-time students, the increase in numbers, if we look at the overall trend in relation to attainment, we see real increases. I absolutely accept that in some areas there was not baseline data areas such as college destinations, and that data is now being gathered. I would contend that the college merger process, with a smaller number of larger and more strategic bodies, enables us to now gather a much richer picture of data around the performance of the sector as a whole and enables us to build on and really drive improvement through having that richer picture. You both started off by saying that it has been a success. The measure of success, for somebody like me, is the improvement in attainment, the improvement in educational chances of people at the lower end of the income scale. Obviously, destinations are an important measure as well. If we look at attainment, attainment is actually down. The drop-out rate still is quite significant. The improvement in the ability of people of low income—I recognise the college sector historically—has been far better at achieving that than the university sector. Where is the evidence of linking any improvement that there has been that you have referred to to this process? Is this not the improvement that might have taken place anyway in many of those areas? Where is the added value of the merger process, the reorganisation and the other reforms that you have mentioned? That is where I do not think that it is convincing that the improvements where there have been improvements have been the result of this process. Post-merger evaluations that we did with each of the colleges, we spoke to the colleges, to other stakeholders and so on, about how they interacted with the college. I think that there is a lot of evidence in that report of how the mergers have affected, how colleges can interact with universities on articulation and so on. That is fairly clearly attributable to the mergers. What is an outcome? An outcome is things like achievement, like attainment. The improvements that have been happening in things like the numbers of people articulating from college to university, I think that that is part of what is leading to that. Where is the proof? You said that you think it is, but where is the proof? Where is your evidence? You have just said that that is because of this process. Where is your evidence? If you have got the evidence, fine, but I so far have not seen the evidence where that was due to this process. I would contend that we have published a lot of the evidence that leads us to conclude that in the post-merger evaluations and in the summary of the post-merger evaluations. To turn to your point on attainment, attainment has been on an upward trend. There has been, in every full-time success rate, a drop of 2 per cent. That was not entirely in the merging colleges. Some of the colleges that dropped were merging colleges. Some of the colleges that dropped were not merging colleges. Some of the merging colleges continued the upward trend. I do not think that there is no correlation. It is my point that the correlation between the mergers and the dropping attainment is not made because that happened in some of the colleges that merged and some did not. We looked at the detail with the colleges of what led to that drop in FE. It is worth stressing that each E did not drop. It only went down by 0.1. It was broadly flat. There were a variety of reasons. In some cases, it was related to systems issues related to the mergers. The vast majority was other issues related to concerns about bursaries. It was in one case sustained period of strikes and so on. There was no one single reason. There was a variety of reasons. We have been working with the colleges through the outcome agreements to make sure that those reasons do not reoccur, and the colleges are confident that they are on track to resume the upward trend in success rates in colleges. To say that that is in any way a consequence of the merger programme, I do not think that the link is there. That is an open question, given the evidence that we have seen very much so. Obviously, we need to look to the future and learn the lessons. To be fair, you have said that you will learn the lessons and will implement the Auditor General's recommendations. Can I ask a wider question? Obviously, there is this proposal. Where I am coming from is what is the role of the funding council, what is the level of confidence in the funding council, what is the added value of the funding council. Obviously, there is a proposal on the table that the funding council will become part of a broader organisation incorporating Scottish Enterprise, Highlands and Islands Enterprise and the Scottish Funding Council. How do you think that that is going to impact on the role, function and efficiency of the Scottish Funding Council? Where are the benefits of that proposed reorganisation? I will pick up the point about the Enterprise and Skills review broadly and then hand over to John for any specific comment about the funding council. We have now completed phase 1 of the Enterprise and Skills review, as the committee will probably be aware. The conclusion of that emphasises the need for close strategic alignment in terms of the funding council, Skills Development Scotland, Scottish Enterprise and Highlands and Islands Enterprise. It recognises the fact that that cannot be delivered without us looking very carefully at the overarching governance arrangements that exist. However, we are now looking in detail at the implementation of the overarching recommendations. That is phase 2 of the Enterprise and Skills review. That has not been concluded. It is part of phase 2 that we will be looking carefully at the role of the Scottish Funding Council. We will be reflecting on the Auditor General's recommendations in her report about the role of the Scottish Funding Council as regards colleges and we will be reporting on that in due course. Can I ask who we is? When I am referring to we, I am referring to the Scottish Government, it is a review that is being led by Government ministers and I and other civil servants are of course supporting ministers in that work. Are there any external independent people involved in that review? Yes, we have been working very closely with a panel that includes a wide range of external participants. I can provide the committee with full details of the membership of that panel, but it certainly includes, for example, representatives from the college and university sector. It is all I have just now. I might come back. I am looking at the submission by colleges Scotland. There is a lot of very positive stuff in there, for example the 10 per cent increase in attainment and the 5 per cent increase in retention over the last six years, but there is one thing that stares at me here, which is something that was discussed at yesterday's education committee, which is about depreciation. I think that it might be—this is on page 2 under reclassification paragraph, second paragraph on that. It might be helpful for this committee if the same document which SFC circulated as a result of Liz Smith and my own visit to the Queen Margaret University, if that could be circulated, which well explains the depreciation process. We would be very happy to do that. That is not a problem. It is highlighted here again that the issue about depreciation causes technical deficits at the colleges, which makes it very difficult, for example, for the Audit Committee to look at the colleges and say whether they are in good financial health because the bottom line looks as if it is a problem. How are we going to address that in the future? As the Auditor General suggests in the reports, it needs to be clearer in the annual accounts of the colleges. Our guidance to the colleges on their annual accounts has asked them to make that far clearer in their published accounts so that it is quite clear when a deficit is a technical deficit caused by the spending of the depreciation cash and when it is an underlying real deficit. That is something that we have put in guidance to the colleges relatively recently and in future accounts that should be far clearer than it has been in the past. Is my memory correct that this is about £27 million, £29 million in that region? It is a bit less than that. From my memory it is just under £20 million in that region. Colleges Scotland is asking for the colleges to have flexibility in using the money arising from this and not having to seek prior permission from the Scottish Government, presumably every year. Is there any prospects of that changing? We recognise that there is an issue around the use of the depreciation cash. I cannot give a definitive answer today to the committee because discussions are still on-going, but I know that those with expertise in this area have been meeting and that includes officials from the Scottish Government, colleagues in the funding council and in colleges Scotland actively working through this issue. It is a relatively new issue that is brought about through reclassification and it is one that we recognise requires to be resolved. What I can say is that we will absolutely keep this committee updated with the progress of those discussions. I particularly take the point around the need for colleges to have certainty as to the use that they can make of the totality of their resource and to have certainty at the outset of the financial year or indeed in advance of the financial year wherever possible. That is what we are working together to seek to achieve. I understand that this treatment of depreciation is in terms of current accounting principles, but I also understand that the college sector accounting is different from the rest of the public sector, which makes it difficult perhaps to draw comparisons. Would that be correct? Yesterday, when you asked that question, I had the benefit of my director of finance next to me who explained that different parts of the public sector have different statements of recommended practice for accounting. There are different ways that accounts are done in different parts of the public sector and that colleges and universities operate in a particular way, and that is what causes this issue. Yes, you are correct. I am just moving on. I am looking at another submission by EIS. I am looking at pages 1 and 2 starting with paragraph 4. It seems to be questioning the accuracy of SFC reporting and indeed they talk about the SFC reports on college mergers being excessively rosy and contrasting unfavourably with Audit Scotland's overview. What would be your thoughts on that criticism? We have discussed with the EIS the issue of their view of mergers being different from ours. When we were doing the post-merger evaluations, we were very careful to speak to groups of staff across the various campuses of merging colleges. We also, on many occasions, spoke to groups organised by the EIS. It is fair to say that there was sometimes a difference in the views between those groups of staff that had been organised by us and those that were organised by the EIS. That is a real issue, but I do not think that we have been excessively rosy in the reports. If you read some of the reports, what we have said is that, by and large, the mergers have worked, but that has not been the case in every single case. In the case of Edinburgh College, which we will discuss later, we went and did a third post-merger evaluation. That third post-merger evaluation is still indicating that there are significant problems. Where there have been very significant problems, I think that we have reported that in the post-merger evaluations, but I would accept that we have discussed it with the EIS. There have been differences of view on how they have felt things have gone and how well we have felt, but we have based it often on what we have heard from staff in the colleges. It is always difficult to get the right balance there. Sticking to that theme, I am looking at Unison's evidence on page 2 under further education. I think that it is the second paragraph. It says, currently we are in a position where the Government and SFC claim not to have responsibility, stroke powers, over how colleges are run. We do not run colleges. The colleges are run by their boards and by their principals. However, we have responsibilities. I am the accountable officer for the funding that goes into colleges for how that money is spent. We have a series of responsibilities relating to governance and how programmes are taken forward. However, where there is often an imbalance is an expectation that everything in a college can be resolved by Government or funding council. There are some things that are the responsibility of the principal and the board. There are some things where, if things are going way off track, it is the responsibility of the funding council of the Government, but it is being clear about what those are. I suggest that, as in any system, there is a balance of roles, responsibility and accountability in the system. It is very clear that the Scottish Government has certain responsibilities in relation to colleges. In particular, the Scottish Government will set the strategic direction and will task the funding council with the delivery of the overarching strategic objectives of Government. It is also important to note that, alongside the process of college mergers, what we have seen is a strengthening of the outcome agreement framework that exists between the funding council and the regional colleges. That is a crucial way in which, through Government's overall strategy and through the detail of the outcome agreements, there can be clarity as to the expectations that exist of colleges. It is also a very clear reporting mechanism as to the outcomes that are being delivered by individual colleges. I am still sticking with the Unison report. It is also saying here that the SFC does not appear to feel that it should look at how colleges are spending money other than round issues like gross misconduct and fraud. In the same light, it is saying that the role of the SFC in monitoring and engagement has not improved, so it is fairly critical. That is what they say. I would contend that we are interested in how colleges spend money not just in areas where it is gross misconduct, because it is public money and we have a fairly extensive system through the outcome agreement, so ensuring that that is spent on the right thing and is achieving the aims for which it was intended. I am not quite sure what they mean by that, but I have only been interested in whether it is gross misconduct or fraud. We quite often claw back money that is not achieving the aims that we want, because there is no hint of gross misconduct or fraud. It is just not achieving the aims that we want. We are happy to engage further with Unison to find out whether that can be taken further. Again, I would stress that colleges are run by their boards and their principals. Our job is to fund them and support them to achieve the aims of the funding council, the Government, the wider Parliament. Our job is not to micromanage colleges, and we need to get that balance. Perhaps referring to the regulatory role that SFC has as well, which does not seem that well-defined at this point. We will take it up with Unison to see exactly what they meant. It could also be intervention and pay and so on. There are periodic calls for us to be more involved in that. I might add that we have recently had the college good governance task group, which seeks to ensure that there is clarity over the governance role that SFC plays. Indeed, it was helpful to see that the Auditor General's view was that the recommendations of that good governance task group were likely to improve the overall governance arrangements and clarify the role of the funding council in those important governance issues. I know that that task group is meeting again to ensure that the recommendations that have been made are indeed on track. Liam Kerr Thank you. I am just looking at page 11 of this report. The Scottish Government expected college mergers to lead to a number of benefits. Last year, the Auditor General reported that the Scottish Government and the SFC had not specified how they would measure the expected benefits of the mergers and have still not publicly set out when the benefits will be achieved and how they will be measured. How will the benefits be measured or demonstrated and when will we know about that? Liam Kerr I think that things have already moved on since the Auditor General reported. As I said, I accept the recommendations in her report. I think that what is a particularly important document is this one, the impact and success of the programme of college mergers in Scotland, published by the funding council. This document sets out the range of evidence. I would emphasise that there is a lot of detailed evidence in the report drawn from individual post-merger evaluations. That individual material has now been brought together in this single document with evidence as to the progress that merger has secured, also with information as to the details of the costs and savings. You mentioned earlier that there was an absence of baseline data in some areas. Given that, is it impossible to measure certain of the outcomes? I acknowledge that we have baseline data in quite a number of areas. We are able to chart the year-on-year progress that colleges have made. I acknowledge that, in two particular areas, positive destinations and student satisfaction, there was not consistent Scotland-wide baseline data when we embarked on the reform process. I think that there is an interesting issue as to whether reform should have been delayed in order to gather that data. I would argue that not. I think that the Scottish Government documentation that set out the case for reform set out the urgent need to undertake college reform in order to secure the greater prevalence of colleges of scale. What is happening now, thanks to the presence of those colleges of scale, is that we are better able to gather a rich picture of data and ensure that future policy decisions are absolutely informed by that data? Over the page, going backwards at page 9—this is one of the outcomes that I want to explore—it was estimated that the sector will deliver efficiency savings of £50 million from reform by 2015-16. The SFC responded in January 2016 that the sector is on track to achieve those savings. How can you be so sure? Post-merger evaluations identified savings of around £52 million. From nine of the mergers, we excluded one college Edinburgh from that, because it was in a deficit position. As is referred to elsewhere in the report, there is some criticism that we hadn't included the full cost of the harmonisation of the pay of the staff and the colleges. Since the publication of that, we now have a figure of £6.2 million of recurrent cost relating to harmonisation, which I would stress is probably largely attributable to merger, but it may not exclusively be attributable to merger because national bargaining is a process that has been happening throughout this period or moving towards it. It is possible that some of the decisions that are made on how to harmonise had an eye on national bargaining as well as on the merger process. However, if you take the £52 million, which are recurrent savings, and then net off that £6.2 million, it takes you to a figure beneath £50 million at £46 million. I might come back to that in a second, if you don't mind. I just want to move on, if I may, to page 17. I'm concerned about part-time courses and female participation in particular. Page 17 is the start of a section about the students and staff. There is a suggestion that, as a result of a funding change in 2009, which resulted from a Scottish Government intervention at the time, there has been a steep decline in part-time courses, which has had a disproportionate negative effect on female students in particular, but also older students. Are you able to give me your thoughts on that? I can just start by saying something about that from the Government perspective, and you're right to identify the fact that there were deliberate policy decisions made in 2009 and, subsequently, to put an increased emphasis on the provision of full-time courses and courses that would lead to recognised qualifications. I should emphasise that second part. It's not the case that there are no part-time courses far from it. A great deal of part-time education is carried out, but the focus has been on courses that lead to recognised qualifications. Looking overall at this point in time, the figures that I have seen point to around 52 per cent of all college learners being female. I recognise the figures that the Auditor General has set around where the drops have occurred in part-time learning. There are important points made by the Auditor General about getting an overall picture of the demand that exists for college places in Scotland at present. Reform and a smaller number of colleges enable us to do work on what that overarching picture of demand looks like. That is work that we are taking forward with the Funding Council on Colleges Scotland. It's important to preface any discussion of that by recognising that there are still a very substantial number of part-time learners in the college sector, particularly at the FE level. The drop in part-time enrolments was a very deliberate decision by the Funding Council and the Government in 2009 in order to prioritise activity on full-time courses for young people at a time of a fairly severe economic downturn. The courses that were squeezed out then tended to be very short courses, often less than 10 hours and often not leading to a recognised qualification. There has been a squeezing out of that kind of course and that is accounted for at the vast majority of the drop. However, that has not squeezed out part-time entirely. It is still probably the majority of activity or the majority of enrolments at FE level are part-time, less so at HE level, but it tends to be more full-time. However, there is still quite a lot of part-time in the sector. That seems to have flattened out. In the past two or three years, the balance between full-time and part-time has remained broadly static. It has not changed much at all. As Paul said, we need to work with ecologies to understand whether the current balance is right and whether there are other groups that are not getting the provision that they need. We are fairly confident that most of what happened in 2009 was to squeeze out very short courses that did not have the vocational worth of the ones that we replaced them with. Just a quick historical point, there was an equality impact assessment done at the time. In 2009, we did not do an equality impact assessment that we should have. Right. What learning outcome has come from that? Someone has dropped the ball quite significantly there, haven't they? The learning outcome that came from that is that in 2011, when we were putting learners at the centre of what has been implemented, we did do an equality outcome assessment. We do routinely do them now, but we recognise that in 2009 we did not do anything that could be properly described as an equality impact assessment. Just finally, I am grateful to my colleague Gail Ross on this. You talk about restructuring the courses to promote courses that have vocational outcomes and are more likely to lead to employment. From the report, it would appear that there is a reducing percentage of levers going into employment. Does that suggest that policy has not been successful? The college lever destinations are quite complex. In a university, somebody goes in and comes out four years later and then they either go into further levels of education or they go into work. With colleges, people tend to go into college and do a one-year course and then perhaps another one-year course that leads to a different qualification. You are right that the proportion leaving college going to work has dropped slightly, but the positive destinations, including both work and further levels of study, have gone up. I also suggest that we have two years of data on this. I do not think that we should assume that there is necessarily a trend based on two years, but it is an important issue and it is one that we need to look at very carefully. The figures that I have got from the most recent publication are that, overall, the figures for positive destinations increased last year compared to the year before, but what we saw was a move towards more going on to some form of further education and a slightly smaller number going directly into work. We have literally just got those two data sets and we need to build that up year on year, absolutely ensuring or seeking to ensure that the policy outcome of greater positive destinations for those in college, those outcomes are secured. I would like to direct the committee to my register of interests, which states that I am a board member of North Highland College. Good morning. There has been a lot covered and I have had to stroke out question by question, as they have been asked as we have gone on. Colin Beattie touched on the finance and deficits. As we know from the report, eight colleges were forecast in a deficit in 2015-16 and a further 11 in 2016-17. More recent forecasts indicate that 14 colleges now anticipate a deficit in 2016-17. Do we have reasons for those forecast deficits? Are there any common themes or patterns emerging? Given reductions in capital funding to the sector, is the current approach to financing estate improvements sustainable? Some of the deficits that have been forecast at the moment relate to the issue that we were discussing earlier with Colin Beattie, the technical deficits relating to the depreciation cash. Some of them are ones that are related to real deficits. I pray that I do not have the figure in front of me for exactly how many are in each category. On estates, because of the changes of bringing the colleges into the public sector, the ways that colleges used to finance estates development through building up reserves and borrowing money and then having an element of grant as well sometimes, no longer work. That is an area where when a college estate now needs to be something that the Government and the Funding Council has far more interest in, because any changes to the estate will essentially need to be financed externally by us. We are working with the college sector, and it is one of the recommendations in the Auditor General's report to better understand the estate need. The work that we have done previously has not covered the entire estate, because much of the estate is quite new. There are a set of modern buildings that would focus on the part that was not new. We are now doing a wider estate survey covering the whole of the sector. That will be done. There will be an initial quick one this year and then a longer one next year, as we said in the submission to the report. However, it is an area where Government and the Funding Council need to look far more closely at, because colleges, because they are part of the public sector, cannot use some of the tools that they used to in the past. I would just add that, when we look at some of the figures here, the figures that I have for investment in college estates between 2007 and 2015 are a total figure of around £550 million of investment in the estate and on top of that an investment of around £300 million through the non-profit distributing model pipeline. I think that we can see, as we look around certain parts of Scotland, some fantastic new college buildings to clearly being in Glasgow. However, I accept the Auditor General's point about our need to look right across the board at the college estate, so I welcome the work that is now being undertaken between the Funding Council and Colleges Scotland on that matter. Of course, we in Government will be working closely with the Funding Council on the future requirements of the college, both in terms of capital funding and revenue funding. You touched on the issue of reserves. I want to ask about the arms-length foundations. Some of them hold significant sums of public money. Are they working? Can colleges easily access that money for what they actually need it for? Sometimes it could be for the college estate. Are there any alternatives that might work better? On the question of whether they are working, originally there was around £100 million in the Alps that has gone down significantly as money has flowed back into the college sector for estates, developments and so on. By and large, I think that the answer would be yes, that system is working. It is one that we need to constantly keep an eye on, although part of the complication is that they are arms-length and while they are set up with the purpose of assisting colleges, there can be other uses of the money too. We will keep a constant eye on that, and if there are other ways of achieving the ends that the Alps were set up to do by more efficient means, we would be happy with the college sector and the Government to consider whether that would be more appropriate. I am not aware of one at the moment. My understanding is that the Auditor General has confirmed that the arms-length foundations are operating as originally intended, supporting the purposes of each college. On capital funding, you talked about the £300 million that is going in under a PPP initiative, but it is slightly disingenuous, because capital funding has decreased by 77 per cent in the college sector since 2012-11. Is that really acceptable? I acknowledge that there have been significant reductions in the capital funding that has been available to the Scottish Government right across the board. As part of that, it is absolutely the case that colleges have experienced a significant reduction in their core capital funding. However, I think that the £300 million that has been allocated through the non-profit distributing method is significant. We can see the results of that on the ground in Scotland, but it is something that, by no means would I be complacent about the issue, I absolutely agree that work needs to be done and work is being done to look at the overall condition of the college estate in Scotland to be sure that we can provide for the necessary maintenance and indeed improvements and new builds where that is what is required within the overall difficult financial climate that continues to exist. I am reassured that you agree that 77 is a significant reduction in funding, but why does the college sector need to take such a huge hit? What is important is that when there is a particular amount of money available for capital funding, consideration is given as to the particular projects that have to have priority at particular points in time and that will vary. At certain points in time, there will be very significant investment in some areas and we only need to look to the likes of the hospital in Glasgow or the bridge and we can see the amount of capital resource that is going into projects of that nature, but those things will vary from year to year. Hence, the importance of being clear about the requirements that the college sector has for capital funding going forward and the priority that those have alongside other priorities so that ministers can make the appropriate decisions about how to allocate resource. My interpretation of page 26 of the Auditor General report contradicts what you have just said, because it has said that the current method of allocating capital funding does not take account of the college's need. That is due to an absence of a complete and up-to-date national condition survey of the college sector estate. I think that what the Auditor General is saying is that it is not because of the Queen Elizabeth hospital and it is not because of the bridges, but because your Government has not done an audit of the state of the college estate across the country. That is why capital money is not being allocated. Do you agree with that? There are two elements of capital funding that we are talking about here. One is the capital that is allocated out to each college each year as part of the capital maintenance. The issue is whether that should be focused towards colleges that have greater need, i.e. older buildings and so on, or spread equally across the sector to maintain the good estates so that they do not become bad buildings. That is one issue. There is a separate issue about how you focus the major capital projects on new estates. The most recent one that we are working on is in Falkirk, the city of Glasgow College and so on. Those are ones where there is a major capital project costing many tens of millions, and that is different from the capital maintenance that goes across the whole sector. We accept the Auditor General's point that looking at how the capital maintenance is used is an issue as well as looking at how you focus on the biggest estates projects. I would have to emphasise, though, that for many years, and it is continuing even now, there is a process of close engagement between Governments, funding council and colleges around the capital requirements that exist and funding decisions are made accordingly. That is not to detract from the fact that the Auditor General has made a valid and important point about ensuring that there is a comprehensive and very clearly defined national picture of the college estate. I accept that the need for that and work is being done, but I would want to emphasise that there has been a great deal of on-going engagement around the requirements of the sector, as I say, within the difficult overall financial envelope. Are you confident that that overall picture across Scotland is going to improve, so when the future will have a better idea of requirements? I am confident that the work is being done around the overall picture. Clearly, as an official in front of you today, I cannot make any statements about what the capital allocations will be. Ultimately, that will be a matter for this Parliament. The data gathering is being done and should lead to the improvements that the Auditor General recommends. Okay, thank you both. Monica Lennon. Thank you, convener, and apologies for my late arrival. It is probably for the best that we are not scrutinising the train service this morning. Yes, we will leave that for another day. Clearly, I have missed some of the earlier questions and answers, but just to pick up on some of the points that Liam Kerr was asking about in a previous session, I have asked specifically about the impact on part-time courses. Am I right that that reduction in part-time courses was a deliberate course of action? Is that an intended consequence? I can see a little from a Government perspective, and maybe we are going over some of the ground that we covered. However, as far back as 2009, a policy decision was made to focus more on courses that would lead to recognised qualifications. The figures that I have seen indicate that now, around 97 per cent of activity leads to a recognised qualification. There is a deliberate decision in light of the demand that existed for places and the financial context of the time to focus on courses that would lead to a recognised qualification. Aligned to that, there was a decision to place a significant focus on the needs of young people in the 16 to 24 category and to ensure that priority was given to accessing college placements for those young people. Again, in response to a careful consideration of the overall economic picture and a recognition that youth unemployment had to be tackled. From some of the figures that we now see, we can see that those decisions around recognised qualifications and prioritising young people have had a positive impact. However, I emphasise that it remains the case that short courses and learning opportunities for older learners are absolutely something that colleges provide. We are running a little bit short of time. Can I ask both members and witnesses to keep their answers a bit more pithy? John Kemp earlier said that it was squeezing out of courses, so was that done in the awareness that it would squeeze out women disproportionately adult learners as we carry responsibilities? Was that done in that full knowledge? The answers that I gave earlier, perhaps before you arrived, we acknowledged, as it is referred to in the auditor general support, that we did not do a full equality impact assessment in 2009. We had done some modelling work internally, but our aim was to squeeze out courses that did not lead to a recognised qualification that were often very short. We were talking a couple of hours. Just to be clear, why wasn't the equality impact assessment undertaken, and who made that decision? It was an error. We should have done it. We should have reported that to our council. Was it considered in the semester? Was it just not considered at all? No, it wasn't considered. It was an error by the executive of the Scottish Funding Council in the council paper. We should have put an equality impact assessment in. We have checked. We did do some analysis, but we haven't reported that to the council. It was simply an error. I want to emphasise, though, that equality impact assessments have subsequently been carried out. I have some in front of me and we could share them with the committee if that would be helpful. They were carried out from 2011 onwards, but absolutely, as John has said, one should also have been carried out in 2009. Is there a retrospective aspect to that, or is that just looking at the impact of future decisions? The retrospective aspect is that we have obviously looked at the data. It has been a very live, it was looked at as part of the 2011 work. It has been looked at many times since then, but at the point that we took the decision in 2009, we accept that there wasn't a full equality impact assessment done. As of now, what is very important is that we get an overarching picture across Scotland of the demand that exists for college places. That is something that the funding council is carrying out with colleges Scotland. In the report that we have from NUS today, they tell us that there is a very real risk of excluding those students who most deserve a college place, but I simply am not able to study full-time, and they say that the auditor general's report has a worrying trend. Are you worried about that? The trend of shifting between full-time and part-time is flattened in the last couple of years, so the trend is not continuing. I would stress that there is still a substantial amount of part-time provision in the college sector. The courses that have been removed were very short and often did not lead to a recognised qualification. Had we been looking back and had a full equality impact assessment, we would have probably reached exactly the conclusion that we did. At the moment, there is provision for part-time courses in colleges for the valuable part-time of the kind that the NUS is talking about. We need to constantly work with colleges to ensure that the balance is right and that the courses are available and that our funding incentives are the right ones, but there is still considerable capacity for part-time in colleges. Computing and health, where places have fallen by almost half, that is in page 9 of the report. These would have been very short courses. The people who would have gone on those courses, how are they acquiring those skills? I would imagine that the drops in those two subjects in the very short courses would have been almost leisure courses in health or they would have been computing for the terrified type courses, often of which continue to exist but are paid for by the students. Can I just pick up one more point in relation to staffing? Unison has also submitted a report and apologies for this being covered by anyone else, but I was quite struck by Unison's report learning the hard way. That tells us that staff are under pressure, morale is very low, trust in management is at rock bottom, and there is a good point made in the report that it says that further education is all about people, education cannot be delivered by robots. It is quite a dark picture being painted about the atmosphere and what it is like for staff. In my opening statement, I did say that one of the reasons the mergers had been successful was down to the very hard work of the staff. I think that we recognise and it has come out of the post-merger evaluations that the period of change in the college sector over the last few years has been demanding for staff. We also talked about how sometimes when we spoke to staff in post-merger evaluations, they were telling us that, but there are different perceptions of how bad it was and whether it has improved. I take your point, we recognise that it is very important that the staff in colleges are well-motivated, well-supported because, as they say, they cannot be done by robots. Is there any doubt that staff are working very hard? Is that a concern that you share? If Colleges Scotland had been available on the panel, they could have talked a bit more about how their perception of the pressures on staff is. From our post-merger evaluations, I do not think that it would be fair to say that we perceived it as bad, as you suggest there, but we do recognise that those pressures are there. I would certainly add that I absolutely recognise that effective leadership is crucial. That is one of the lessons that the funding council brings out in its overarching report on the success of mergers. There are some good case studies about examples of college leadership really engaging well with staff and supporting staff. What I would hope to see is lessons being learned for college leaders to be supporting, developing and equipping their staff to thrive in the future. Of course, those same staff are currently in dispute over pay. Do you have any comment on that? My comment would be that work is on-going in relation to pay. We are working very closely with the funding council and Colleges Scotland in relation to the pay issues. Of course, we will ensure that the Parliament is kept updated as discussions continue. I do not know if John John would want to add anything more specific on that. We have been supporting Colleges Scotland and the Employers Association with some additional funding so that they have the capacity to take forward those negotiations in the best possible way, but that is largely an issue between the employers and their staff. We are supporting that from outside with the capacity so that negotiations proceed smoothly. There is an issue of equality between support staff's pay rise and that of lecturers, so I hope that there is an agreement reached quite swiftly. I turn to a point that Monica Lennon and Liam Kerr raised about equality impact assessments. Mr Johnson, is it not a statutory duty on your Government to carry out an equality impact assessment? The statutory duties that I think you would be referring to were in the Equality Act 2010, and absolutely those duties are very important. As Dr Kemp has recognised, it is important that equality impact assessments are carried out whenever policy changes are made that could have an impact on. What I think we have recognised is that, in 2009, there should have been an equality impact assessment and there was not one done at that point, but I would seek to emphasise the subsequent equality impact assessments that have been carried out and the on-going work that the funding council carries out with individual colleges around equalities. When you look at some of the regular reporting from the funding council, I have been struck by the volume of information that is actually gathered, analysed and reported around the support that colleges are providing to those with a whole variety of protected characteristics. It seems like a huge, insignificant omission on the part of your Government that colleges provide education training and skills for large parts of our population. I think that we have all had people coming to our surgery not able any longer to access college courses because of that decision. For it to be an oversight or an omission seems very serious, given that it is a statutory duty, do not you agree? I emphasise my point about the fact that there was not one available in 2009 and the fact that a number of the duties that we now refer to were in the Equalities Act 2010. That is not to say that I am seeking to gloss over the fact that an equality impact assessment should have been produced in 2009 and that is certainly in the territory of where we need to ensure that in future all of the policy changes that could have an equality impact are fully assessed. I would have to emphasise the on-going work that has been done since then to take full account of the equality impacts of the policies that are being pursued. In 2011, the key policy that led to the reform programme was equality impact assessed. Mr Johnson, do you expect a subsequent legal challenge on the absence of an equality impact assessment in 2009? I do not think that I want to comment on that issue. I think that I have set out our position on the extent to which equality's issues have been considered thoroughly in recent years and will continue to be considered very carefully. I ask about workforce planning, page 25, of the report paragraph 57. The conveners met the First Minister yesterday and I was pointing out to her that so many of the themes across Audit Scotland's report come up time and time again. I think that workforce planning is an issue across the public sector, but it seems to me that it says in this report that there is limited evidence of systematic workforce planning in our colleges. Do you know why that is? My starting point would be to emphasise that I accept the need for that workforce planning to be carried out. I recognise also that that is not a recommendation that is limited only to this sector. I hope that, as a committee, you will see that the evidence of that workforce planning is taking place. I know that that is something that has been carried out between the funding council and colleges Scotland. It is a recommendation that we will take forward with the colleges. It is being taken forward. Before I bring in Alison Harris for our final question about student demand, this is something that greatly concerns me. It was a couple of years ago that I raised this issue in Parliament that, in the autumn, Dundee and Angus College, which is in my region, had more than 800 young people who were not able to get a place to do engineering at the college, and all those students were turned away. As you know, of course, there is no data gathering system to see what those young people have gone on to do if they have taken alternative routes. That concerns me on a number of levels. In terms of our economy and the skills needs of our economy, there is not a system in place across the country that records demand of students. Can you tell me how that is being tackled? We are working with Collegy Scotland and with the Government on a systematic way of understanding the applications to each college by subject, so that we can compare them across Scotland and understand where there are disparities in demand. It is the kind of thing that can be done very easily in universities because there is one application system. It is more complex in colleges because they have different systems. However, we have piloted work with some colleges, including Dundee and Angus, on ways of doing that. What we now need to do is roll that out to all of the other colleges and make sure that it is done sector-wide so that we have an understanding of who is applying for what courses and what the outcomes are. That will tell us something about the level of demand for courses. I would stress that, as well as that, we would be doing work looking at the demography of different areas, the proportions going to universities, the proportions in work and so on, so that we understand which areas and then comparing them with the supply places, so that we understand which areas might have a need for more activity and which might not. We have been moving activity from areas of lower demand to areas of higher demand over the last couple of years, so that, increasingly, our funding is needs-based. However, we do not have the same kind of data that we do have in the university sector, but we hope to move towards something like that. I think that, if I may just add, I think that it is an important point that you have raised and it is one that is being addressed. I think that it is also an area where a smaller number of larger colleges of scale operating with real clarity as to the requirements of a region are able to help to secure real progress. I do not think that there is any timescale on that work. Are you able to put a timescale on that? We would intend to have the system in place of recording all of the students by the time that students are making applications for 2017. 2016 has now passed. Alison Harris, you are just very briefly firstly my apologies for being so late this morning, totally out with my control. I do not hope that this has not been asked, but what concerns me is that I am wondering whether you think that there are potential indicators that the Scottish Government's focus on the courses leading to employment really have not been that successful in light of the fact of low and reducing percentage levers going into employment? I am happy to just to recap very briefly, which is to emphasise that the most recent figures for positive destinations are up. Overall, there is an increase. We only have two years of data and absolutely the most recent years data shows a small drop in those going into employment but an increase in those going on to further courses. As we have discussed, the nature of further education is often the fact that the learner is on a journey, which may involve a number of courses in a pathway leading to employment. However, what we also recognise is our need to keep a really close eye on that positive destination figure. That is data that will now be gathered on a year-on-year basis. Thank you. I apologise for recovering that and missing that. I thank you both very much indeed for your evidence this morning. I am now going to suspend the committee for five minutes for the witnesses to change and for a comfort break. I move on to item 3, which is our evidence session on the Auditor General for Scotland's report entitled the 2014-15 audit of Edinburgh College. I welcome to the meeting Annette Bruton, principal and chief executive, and Allen Williamson, chief operating officer of both Edinburgh College. Good morning. Chris Brown, head of audit and assurance of Scotland grief, the internal auditor for the college. Hugh Harvey, partner, KPMG, who carried out the external audit, and Dr John Kemp, interim chief executive of the Scottish Funding Council. I invite Annette Bruton to make an opening statement followed by Dr Kemp before I open up to questions from members. I understand that no other witnesses wish to make an opening statement. Is that correct? Annette. Thank you very much, convener. Good morning. Thank you for the opportunity to give evidence to the committee on the matter of the Auditor General's report on Edinburgh College. As the committee will have seen from our submission, we accept the report and have been taking action both before and after the report was published to address the problems that led to the failure to deliver the agreed delivery targets and the ensuing serious financial problems faced by the reduction in budget. The Auditor General explained to the committee previously the arrangements for funding both core and additional activity in colleges, but we are very happy to clarify this further if the committee wishes us to. I took up my post in the summer of last year, and since that time, we have focused our efforts on understanding the nature of the problems facing Edinburgh College, and in particular in relation to the recruitment and retention of the right number of students. I believe that we have made some good progress to date on this, and we are working hard to ensure that our students experience a high level of support to gain the qualifications that they need for future jobs. We are a large college with over 700 vocational and academic courses. We have good evidence of success that results from the hard work of our staff and students. For example, 99 per cent of our successful full-time students move on to employment or further study within six months of graduating. Alongside that, however, we recognise that there are other areas of our performance that need to significantly improve. There is still much to do in the short and medium term. Those actions include putting in place new courses for the future and critically reducing our budget deficit to achieve a balanced position. Our three-year transformation plan has been shared and shaped by staff, students and our partners. We recognise that the work for this will be difficult, challenging and will require determination and sustained effort to improve the college's position and ensuring that we are financially stable for the future. We have summarised, now, our submission what we believe are the key points that led to the college's past performance difficulties and how we are addressing these. I would be happy, however, to give much more detail as required and answer the committee's questions. Thank you. Thank you very much, Dr Ken. Thank you again for inviting me here with colleagues from Edinburgh College to discuss the Auditor General support. The issues at Edinburgh College are facing are deep-seated, and we are working closely with the net and our team to address them through the business transformation plan. The underlying financial issue that faces Edinburgh College is that the activity target at the college was greater than the college could meet. The college has recognised this over several years and has agreed gradual reductions in activity, which has been moved to areas with higher demand since 2012. However, a year ago, the current principle wrote to us asking that the target be reduced in year by a far larger amount than had been previously agreed around 12,000 credits. We supported that move and have assisted the business transformation plan that will enable the college to be financially sustainable at the lower activity target. The issues regarding additionality and the subsequent clawback are a contributing factor to the financial difficulties, but there are wider issues, too. I am very happy to answer your questions, both about the additionality and about how we are working with the college to address the issues. Thank you very much. Colin Beattie is going to open questioning for us. I would like to have a look at additionality first. Clearly, it is not the only problem that the college has, but I would like to have a look at the timelines here and how it was handled. According to what I have here, SFC issued the funding activity guidance to colleges on 22 July 2014. Who received that in Edinburgh College? That would have gone to the vice principals. There were two vice principals who had responsibility for the curriculum. One was responsible for the curriculum and the other was responsible for the framework on which the curriculum was built. That guidance would have gone to those members of the senior team. What would they do with it? Or what did they do with it? What they should have done was cross-check the current curriculum frameworks against what was now allowed in terms of additionality. That is an audit that I would expect would happen every year that we have done two in-depth audits since I have come into post following that guidance and following what we now know was a problem for the college. I do believe that an exercise was carried out but not in sufficient depth or with enough outcomes to change the curriculum frameworks in time for the recruitment for the year that was about to start. Would not the question of additionality be fairly obvious? It would be quite evident that there was a problem. There were two components to the additionality if memory serves me on that particular guidance which was issued just as I was coming into post. The first word was that there was a percentage figure allowed and then there was an additional amount allowed that could be agreed with your outcome manager. It was not just a fixed amount. Again, looking at the timeline it says that between August 2014 and October 2014 the college monitored and reported on activity to both SFC and the board. You sent reporting to SFC. Would that reporting have indicated that there was a difficulty with additionality? The college reports to SFC four times a year in a formal return that goes in and that return is also reported to the board. You would not pick up the additionality being over the allowed amount unless the curriculum frameworks on which it was based had been properly audited. Assumptions were made that amounts of additionality were allowed within the curriculum frameworks we have. Each curriculum has an amount of points that you are allowed to accumulate on it. Because that had not been done thoroughly for each area, assumptions were made that additionality was allowed and that was reported in good faith. On checking the guidance, when I came into post and checking the guidance, I found that many of our curriculum frameworks were over applying that rule and some were under applying it. Overall, there was an overclaiming on additionality because the curriculum had not been changed. Llyr Gruff, would not SFC have picked up something from those reports? On the FES reports, you would not automatically pick up the additionality from those returns, though you can, if you know what you are looking for. In the case of Edinburgh College, they had been picked up through discussions with the outcome agreement manager and the college aside from looking at the statistics and had been discussed with managers and the college during the period that Annex talked about. When the SFC funding and activity guidance came out, it went to the two vice-principles, would it automatically go to internal audit? Internal audit would be using the same guidance as the college. Which means that they would have received it. Can I ask if internal audit did receive it? Internal audit does not automatically receive all the guidance that goes to colleges. You do not receive the guidance that comes to the college from SFC? No, we do not get it from SFC automatically because the college gives us the guidance or draws our attention to the guidance, to the existence of the guidance. In this case, what we had to do was go on to the funding council's website and download the guidance from the funding council's website. When did you do that? Just before we did the audit or during the course of the planning for the audit. In this case, the audit takes place after the end of the year, shortly before... By the end of 2014, there should have been evidence that there was a problem because you were doing the audit at the end of the year, presumably, or at the end of the age. What is your end of year? So it is the end of the 2014-15 academic year, which would be July 2015. So July 2015, you would have picked this up? Yes. Did you? As part of the audit programme, as part of the guidance of the funding council issues, and the guidance is 45 pages long, and the new requirements around additionality were put in for the first time in 2014-15 into that guidance. It is included in that 45-page document? I think that it is in part 84 and 85 of that document. 45 pages is not exactly a war and peace? No, it is not, but it does not jump out at you as a new requirement. The funding council does include in the guidance suggested audit tests, none of which actually refer to additionality. Would you have expected audit tests to come from SFC? Yes, that is typically what they do. The audit guidance comes from the funding council because it is an audit that the funding council requires us to do. So what they do is they summarise in the guidance the kinds of tests that they want us to carry out as part of that, or actually what they do is they summarise the kinds of tests that they want the colleges to ask their internal auditors to carry out on their behalf. But if you're the internal auditors, are you saying you only look at the position once a year? We do an annual audit of the student activity, which is an audit that happens after the end of the year. But your ongoing internal audit programme is only at the end of the year. So only at the end of the year do you download the directions from the SFC that you're going to be measuring people against? No, the annual internal audit programme happens throughout the course of the year. So how often do you download or check that you've received all the directives that you need? So we do that on an audit-by-audit basis. But you just told me you do it at the end of the year? For that particular audit, because that particular audit happens after the end of the year. So when we're doing the planning for the whole audit programme, we're trying to make ourselves aware of the key guidance changes and the key bits of information that we need to be aware of to allow us to do the audit. So it would not have been possible for you to pick this up in the course of the year? Yes, absolutely, absolutely. So one of the audits that we did include in that year, in 14-15, because the internal audit programme is based on risk, one of the highest risks to the college, actually most colleges, was and still is the risk of them not having enough students, not recruiting enough students. So we did an audit in January 2015, which looked at how the college management were using the student activity data that was coming out of the system to make changes to the curriculum and how they were doing that to take action to recruit enough students if they were underperforming on students. You just told that the college reports four times a year to SFC, which would have included information on additionality. Do you see these returns at all? We are not formally giving those returns. You do not get the returns that go to SFC? No, they are being included in the board papers, which we get access to. And what do you do with the board papers? So typically what we do is review what is going through the board, we will not read every single paper that goes through the board. You do not read them all? Are they so extensive? Well the board packs are long. So what we are doing is we are working with the college and we are working with the audit committee, which is a sub-committee of the board. We attend all of the audit committee meetings throughout the year and we work with them to try to identify the key areas that we want to focus on as part of the internal audit programme. So the audit committee, being a sub-committee of the board, includes board members, the principal, the drive of corporate services, typically attend those audit committee meetings. And that is the forum for us to agree what we should include in the audit programme or any changes that we need to make to the audit programme. Can I ask the SFC? Why was it that no tests were issued against this for internal audit? Were they just saying that it's normal course for that to happen? It didn't happen in this case. I will check the guidance but my recollection is that the guidance was fairly clear on what was allowable activity and what wasn't and the systems around about it. It's worth stressing though that this is not a new issue. This is not something that was introduced in 2014. There have been related study rules as part of the old funding systems and they are now part of the new funding system. All that's changed is the definition of how you define a full time and what is over and above that. So this is something that most colleges have been dealing with for many years. I think that we've understood that the college missed this. It's a question of what are the mechanisms that are in place that should have picked this up and why it wasn't. In this case, the college as well as what was published in the guidance were verbally and through several meetings told about the rule by their outcome manager. They were told about it. As well as the publication of the guidance and so on, there was discussion of the issue. So, who specifically would have been told about this? It was, from our point of view, our outcome manager who was dealing with it. Through you, convener, when I came into post, I looked at this in some detail and I found evidence. This is one of the things that I picked up quite quickly in post that there was a problem with our curriculum frameworks. And we began working on that within a couple of months of me being in post. I wanted to look into this to see what had gone wrong. There was certainly evidence of the outcome agreement manager having had discussions with several different people in the executive team about reducing that additionality over time. And some of that had been done but not sufficient to meet the guidelines that were issued in 2014. So, although we were discussing there what the auditor might pick up at the end of the year, I picked that up through the work of some of the senior team I was directing when I came into post. So it wasn't the auditors that brought it to your attention? I picked it up as part of a review I was having done of the curriculum frameworks because I could see with the recruitment problems we were having with students something was wrong with them. But it wasn't the auditors that brought it to your attention? That wasn't brought to my attention by the auditors at that stage, although the auditors did do some work on it later. But you already knew about it by the time the auditors came to you? I picked it up through two routes. One, a review I had asked for of the curriculum frameworks because there were two issues. One, I wanted to know about how much additionality was in our curriculum frameworks. And secondly, I wanted to know that curriculum frameworks generally were complying with all of the rules that are set because I was worried that we weren't recruiting and I wanted to know what the curriculum frameworks looked like. So that was one of the things that we picked up and one of the reasons that we went to the funding council to ask them to reduce our target in year. I didn't know the full extent of the additionality until further work had been done later in the year and had that verified by the audit team. I'm looking here again at the timeline I've got here. It says 10 October 2015. You're a deadline for returning data for funding purposes to the SSC and that this was accompanied by an audit certificate and report provided by internal audit. What did that audit certificate and report signify? What did it say? Did it agree with the figures? Did it agree it was compliant? Yes, it did. So it said that the college was complying with SFC guidelines. So clearly it was not. No, by that time the college had amended its certificate. Because the funding council had identified the issue about additionality, about the excessive use of additionality. So they'd taken the 5,000 approximately weighted sums out of the claim and they had signed an amended certificate. So when we signed our audit certificate it was accurate and the college's claim was accurate. So all of that is described in our report which accompanies our audit certificate which we submitted to the college. And was that the point really at which SFC were aware there was a problem? We were aware of the problem over a year before, around a year before that. The year before that? Yes. So you knew about it before internal audit? Yes, our outcome manager would have had discussions that I've got in November 2014. In November 2014 you were aware there was a problem. And internal audit wasn't aware until July or whatever 2015. The incoming principal found it before internal audit picked it up. It does seem odd. The timing doesn't look good. So we do audits at a particular point in time and so we report on what we found in that audit at that point in time. So everything that we reported in our audit in October or November 2015 was absolutely accurate. That doesn't mean to say we weren't aware of the issues before then but we hadn't done the sums audit. The sums audit happens every year. You told me you weren't aware of what it said was. You told me you were only aware when you downloaded at the end of the financial year, when you downloaded the 45 pages from the website. Well, what we weren't aware of was the specific guidance that the funding council had issued to us to allow us to do the sums audit. But we were aware before then of the funding council and the college's discussions around one-plus activity. Weren't that a trigger of thought in your head that you need to look into it a bit more? So we did look into it. So the underlying issue here that the college has is that it's under recruiting students. So it's not recruiting sufficient numbers of students and it's known about that issue for a number of years. It's been in the college's risk register for a number of years. Our audit plan is based on the college's risk register. So we had an audit in that financial year in 2014-15 financial year that we agreed with the audit committee and with management which we carried out in January of 2015, which looked at how the college took action when it identified that it was under recruiting students and what action it took and how it reported that action to the executive and to the board. So we flagged up as part of the audit programme the underlying issues which were causing or which were at least contributing to the college not being able to recruit sufficient students. The outcome of that was that the college recognised, okay, so we're under recruiting. At that point in January, there were something like 43,000 sums below their target. So they had a lot of recruitment to do and the college was able to recruit a large number of students but one of the things that it did to increase its activity was it applied more activity to some of its existing students in breach of some of the funding council's guide. I think there's a bit of a circular argument on timing here but I'll leave it to that just now. Alex Neil. Can I first of all just pick this up with the, I think Mr Williamson used to be the director of finance was your previous title. So here we have this problem, the funding council is aware of it in the college in 2014. The auditors pick it up in mid 2015. The new principal picks it up. You're the director of finance. When did you know about the problem and what did you do about it? Well throughout the year there's generally quite a lot of work that's been undertaken when you're looking at additionality. So any additionality changes that go through would go through the reporting. And there was certainly a belief that the reporting that we were looking at included any agreed additionality with the funding council. And that was from my perspective. So when did you realise this problem existed? Well the problem really came out towards the final Fez return which was around the bit of October time. 15. So that's a final Fez return and became much more apparent that there were difficulties with the additionality claim that we had put in. And when had the guidance come out? Well the guidance came out that was in June in 14. So why did it take all that time for you to highlight that? Well it wasn't a case for me highlighting it. The actual guidance was given to all the executives and the vice principals of curriculum and quality are there to implement the changes to the frameworks through the staff. And using that procedure I'll rely on the reports that I received from that and the information I'm given through reporting. I have to say sitting here it looks like a total failure. The funding council's away to the problem. Did the funding council not go on to UNC? You've got a problem here? Well the funding council were lazing through the outcome agreement manager with the vice principals. So nobody from the funding council got on to you and said you've got a financial problem here? Not to me. I would rely on the information internally. It seems to me there's an awful lot of cooks in this bit of broth and nobody seems to be in charge and looking at the whole system. I think there's fundamental systemic issues that need to be addressed here. I mean how much money does the college spend on audit? On audit probably about 35,000 a year, 40,000. And how much does the funding council spend on audit? I don't have that information. But despite a lot more than 35, seems to me we've got a lot of people and nobody seems to be talking to others. Let's be clear. The funding council was speaking to almost all of the senior management team at various times. The vice principals responded to vice principals who had curriculum responsibility and the deputy principal at that time. It would have been well known to the people in the college responsible for the curriculum framework. You're all set in passing the buck. Who at the end of the day should have picked this up when it should have been picked up and done something about it? You're all passed in the buck. We're fairly clear. We spoke to the college in 2014 towards the latter part of 2014 while the activity was still going on. We indicated it was an issue. And when that came through that that still hadn't been addressed at the time the final feds came in, we clawed back money because we felt they had not abided by the rules on either one-plus or related study. It's in direct response to Mr Neil's question. There were management mistakes made by the college. And I think we need to be clear about that. That actually the college should have picked up that guidance and they should have taken action. And one of the problems I found when I went to the college was that the management structure was getting in the way of somebody taking ultimate responsibility for that. We've changed that since. We now have a clear lead in responsibility on everything to do with credit, application, curriculum and so on. So I took quite quick action supported by the board to make sure that we got that structure into the right shape. Now, never say never that's highly unlikely that that would happen now because it goes to a single person rather than different people. And also we've made the lines of accountability much clearer. But to answer Mr Neil's question there were management errors made in the college because that should have been picked up and dealt with. Can I ask how many full time equivalent permanent lecturers now work at the college and how does that compare to the last couple of years? I'm sorry I don't have that information with me. It's in the region of 547, I think. But I don't have the information in front of me at the moment. Right. And has there been an increase or decrease in the number of lecturing staff recent years given that you've been under recruiting students? You don't know? I don't know because the number of lecturing staff FTE changes year on year. So we have some people in the permanent contract, some people in part-time. Some people only work for two or three days a week. Some people come in for just one semester to deliver short full time. We do have the figure, I just don't have it with me. I'm sorry. You could be led us on the figure. We can make that available. In each of the last two years? Indeed. Indeed. Please. Yep. Can I say, I've, since the last hearing we had in Edinburgh College, quite a number of people have written to me and to members of the committee. Let me just read out some of the comments. Now I don't know if these comments reflect reality or not, but I'm going to give you, since they're circulating widely, I'm going to give you some of the most disturbing ones and give you the opportunity to tell me if they're right or wrong. One, and there's four or five in this, so bear with me just a second. The first allegation, if I can put it that way, is almost all the heads of department took voluntary severance in 2016 and a new set of heads have just been recruited most with no previous experience of further education. Point number one. Point number two, there is no government control over this quote, super inflated pay for the senior management team or principles. Three, the lack of an organisation chart helps obscure the number of staff working on projects. These are hand-picked staff as project opportunities are not advertised. For example, a curriculum head was hand-picked to improve the enrolment system. The result was the worst-ever student recruitment year and a £3 million SFC clawback. And the final one I have here, the principal's response, and I don't know if this is referring to the current principal, yourself and Ed, or the previous one, was to promote the head to a new job title associate principal with no interview and no job advert. Now, are these allegations true? In turn, convener, we did have a change in structure, as I've just explained to the committee, because we had problems with lines of accountability. And I wanted the heads of faculty who are actually running very, very big teams. So, for example, our head of health, well-being and social science runs a part of the organisation that's bigger than Borders College, for example. So, I needed to change the responsibility levels of those heads. The majority of the heads of faculty have changed. Three of those heads were promoted internally to assistant principal posts, so they didn't leave on VS. From recollection, I think, two of the heads left on VS. And that was because their posts had been deleted from the structure. We actually have fewer heads now than we had before, and we've invested that money in front-line staff, in front-line leadership, in creating a new leadership role in front-line staff. In terms of the no control over, the Government has no control over, superinflated salary levels, Dr Kent might want to come back on to that later on. There is an organisational chart for the college, and it's published on our intranet for staff. I don't want to comment on what I think are potentially malicious comments about an individual that's been made there. I certainly recruited someone to help with recruitment and retention because they were already working on a project on that when I arrived in the college and I thought they were making a good job of it. And that person was interviewed by me to see if they would be suitable to do that project. Can I just go back to the lecturers' issue? Because information we have is, in terms of full-time equivalent, in 2011-12, you had a total staffing compliment, obviously you weren't there a net at that time, of 1165.8 people of whom 517 were lecturing staff. That was 44 per cent of staff. In 2015-16, that figure was 1,162 of whom only 504, that's 13 less than previously, were lecturing staff down to... So 41 per cent of staff, as opposed to previously 44 per cent, were lecturing staff. Is that not all going in the wrong direction? I can provide you with the more detailed figures, but there were two or three things where influencers in there. So, for example, again, I'm reporting what I have subsequently known because I wasn't there at the time, so I need to be very careful. But there was a new post created in the college between, after Merger, the Post of Learning and Development tutors who took on some of the roles of lecturing staff where... Which freed lecturing staff up to do teaching in preparation and they did more of the administration and student support work. So the balance between those people who were working directly with students and lecturing staff changed. There were other things that influenced the number of... From my analysis, there are other things that have influenced the number of staff working in the college. So, for example, the college made the decision to bring catering back in-house for a couple of reasons. One, we thought we'd get better value and we'd save money, but also we thought we'd get better quality and that that would provide opportunities for the catering staff to work alongside the students who were learning in hospitality. So, actually, although we were decreasing in some areas of the college in terms of voluntary severance, for example, we were increasing in other areas where we got better value and where a decision was made, that actually it was better to have our catering in-house than out at a private company. So there's a lot of nuances underneath those figures and with your permission, convener, I would write to the committee to give you some of the detail that I have on that. Can I just on the catering thing? My understanding is between February and June, you made, or probably more, but certainly the internal catering seemed to operate a surplus, which is welcome news. But, finally, there was a commitment that that would be reinvested in improving the canteen facilities and the quality of the food and so on, and there's a feeling that that hasn't happened. Is that correct? I think Mr Williamson might be able to say something about it. We've currently got a catering review on going involving the students and staff. Yeah, we do have a catering review on going and we're actually going to be investing in some of the catering equipment coming up as well. But, ultimately, I think that the shops in the colleges were far better stopped. The atrium area is far better than it was before. So there has been investment in it and the actual surplus is very small anyway. Can I just finally come back to the issue of the, I think, is it 50 learner development tutor posts? My understanding is that it says in the information I have, they do not teach, they do not provide academic tutorials. There's no record of how many students they see in any one week and no other job has this job title. Is that all true? And my final question is, how many agency workers have you got? I'm not sure that I know how many agency workers we have, but I'll let Alan give you an indication of the kind of areas where we might need agency staff. He'll say if I'm right or not, usually that's just for cover when someone is off sick, but Alan can make a comment on that. In terms of the learning and development tutors, we have learning and development tutors, we have student support services, and we have specialists who work with students with additional support needs. That's currently under review, but just to give you an idea of what learning and development tutors will do, they will meet with class groups or individuals on a weekly basis. They support pastoral care, they do a similar job to the job that guidance teachers would do in school, but they also support career development for students, but we know that there will be opportunities going forward to look at all of our support services and our new head of services for students is looking at all of that to see how we can get a better fit with all of these services working together. The LDTs work very closely with the curriculum faculties that they work in. Will you write to us on the agency staffer? Do you know it off hand? Give you an indication of where we employ agency staff on the occasion. Last year, for example, I was in the nursery. There were quite a number of staff on the maternity leave. Also within the catering, you sometimes have to pool in staff at very short notice to deal with the volume of students buying food. The leisure facilities that we have in place as well, and similarly anybody giving instruction on maybe the gym or the sports, we would use agency staffer up these purposes, and sometimes facilities. You'll send us the detail, won't you? You can send you the detail. Thank you. Thank you, Mr Neil. Liam Kerr. Just to come in to the financial side of things, the college is facing severe financial challenges. Can I just confirm very quickly there's a two and a half million funding gap? Is that correct? The drop in activity that was agreed with the college would equate to roughly that sum, yes. So I just want to look at voluntary severance. It would appear that the cost of the merger was about £17 million, and of that it would appear that voluntary severance has cost about £14.8 million, £15 million. Just looking at Alec Neill's figures from earlier on, there appears to have been a net change in staff of three nearly four. Doesn't that suggest that there's been a cost of about £4 million per individual shed? Can I be clear that the figures that were quoted earlier, the ones circulated yesterday are not ones that we recognise, and there are figures on the numbers of staff that left, but they are different from that, and I think the next said that she will give you those. Let's be clear that the merger, in our post merger evaluation, we did an additional one for Edinburgh because we didn't feel that gone smoothly. Both the current management and the funding council did not feel that the voluntary severance that was done at the time of merger was done as effectively as it could be. So on that issue, I don't think that there is any argument from the senior team or the funding council on that, but we simply don't recognise those figures. Do you then recognise, so some other figures from a different source that suggests that 18 management staff left by voluntary severance at a cost of £1.8 million, an average of £102,000 per person? Do you recognise those figures? So Lina, can I ask Mr Kerr, through you, which year are we talking about? So this is saying, one reason for the high cost of the merger was the college paid out £1.8 million in voluntary severance to 18 top management individuals. So I haven't the year, but it's relating to the merger itself. I don't know if Alan can help with that. We don't recognise that. I have to look into the figures. Let me rephrase it. So do you recognise the 18 management staff have left over the course of the last few years? And if so, how much was paid to them? No, I'm sorry. I don't have first hand information about what happened before 2015 when I came, but I can certainly get that information for the committee. There was certainly a significant reduction in middle managers from my understanding of it at the point of merger, and that was the main area for reduction of posts with the three colleges coming together. I would also say that I think the way the voluntary severance was managed looking back on it, and it's always, you have to be careful with hindsight, could have been done differently, and that any voluntary severance we have now is under completely different arrangements and is far, far more cost effective to the public purse. Is it, though, because, talk to me about this Edinburgh model, if you would, so how you calculate the voluntary severance? By that, I take it you're referring to the fact that Edinburgh College offered a far higher number of months per year worked than many other colleges at the time of merger. Most colleges offered something equivalent to if you'd worked 12 years, you would get a year's salary, a month for a year. Edinburgh's scheme went up to 21 months. The funding council would only fund schemes up to a year's payback, so we'd fund, if you'd worked there 12 years, we would fund up to a year's salary. Roughly. But the Edinburgh scheme was a far more generous one that the element over and above the one-year payback was paid by the college itself. It was not something we could control. In current circumstances, we could control now that colleges are part of the public sector and the current VS schemes that operate in colleges, including Edinburgh College, are at a far lower rate. What rate? The broadly payback one year, so that if somebody has worked for 12 years, they would get one year. But roughly a year for a month, up to a maximum of 12. Right. A month for a year, sorry. So, if one accepts voluntary severance, one will get a month's pay per year of service? Yes, broadly. Usually the schemes have some banding within that that simplifies it, but broadly, yes. Up to 12 months? Yes, up to 12 months. Over and above a notice period? Usually, in the current agreements, we wouldn't be paying payment in lieu of notice, but... We wouldn't pay in lieu of notice... The set notice period is contractual, so people have a contractual notice period. For college reasons, you might want to keep somebody for a longer time or let them go right away. We wouldn't pay for their notice, though, so... So, just that there has been a significant period during which up to 21 months' pay has been paid, around half of which has been funded by the college, who took that decision? The decision to offer 21 months would have been taken by the then principles and boards of the three colleges. That was the deal that was offered at the time of merger. And what happened to them? They left. Under a voluntary service? No, one of them took the post of principal at the college and the others left. Oh, sorry, I hadn't realised you were finished. I'll just move on from that to the... I appreciate that we're running out of time, perhaps. The student numbers... I picked up somewhere that student numbers seem to have dropped rather significantly. I'd just like to confirm that. Is that... At the point of merger, there seem to be 35,000 students? So, I've been at pains to try and get clear in the public domain where that number 35 came from because there were never ever 35,000 students in the three legacy colleges. That figure of 35, I think, is referring to applications. It might have been referring to applications. It might have been referring to individual applicants, but that's not the same as unique students. So last year we had 19,000 unique students. It stayed roughly the same. It went down last year, as you know, because that's one of the reasons it's caused us financial difficulty. The recruitment was lower last year. But it stayed roughly at that level since merger. I think the confusion came about when the figure of 35,000 applications was published. And what students were able to do at that point in time was to make up to five applications to the college. So it was very difficult to tell from the then management information that was around in the college whether that was in fact 35,000 single students and they can only do one course, or that could have been any 35,000 divided by any number up to five because they could have made more than one application. But the numbers of students coming through the door has stayed roughly consistent with the downturn last year since merger. So we need to be really careful with that figure that persists in coming from some quarters that there were 35,000 students. The other thing that I would say that I can't talk about first hand, but which I've seen in my review of what's happened, is that the colleges at the point of merger, the legacy colleges of Edinburgh College at the point of merger, were asked to estimate how many students they thought they would have. And they gave the answer to that in terms of what they expected as applications, which is where I think the 35,000 came from. I don't think, looking back on it, that was a reasonable enough assumption. I think it was over-optimistic. And now that we've done enough with our management information systems in the college to get good data, which I now believe we have got, we can see that student numbers apart from last year, where there was a real problem with recruitment, have roughly stayed the same, which was the basis for me going to Dr Kemp last, earlier in the year, and saying that I thought I had good evidence for the need to rebase Edinburgh College lower, and then, if the region demands it, think about growth from there. So there's a lot of confusion in that figure of 35,000. I can say categorically, there were never 35,000 students in those three colleges. I think the problem is, I don't know. I don't know, because the students were counted differently in the different colleges. They had different ways of counting. They weren't counted. Well, the sums value of them was counted and reported to the funding council. I think it's sometimes easy. If you talk about students, you're talking about individual enrollments and headcounts, and you can end up with a very large number, some of whom are on very short courses and it's quite confusing to compare. The underlying issue is that Edinburgh College, if you count it in credits, which again is slightly confusing because that will start the period and weighted sums and end up in credits. But underlying, the underlying issue that we think has affected some of what's happened at Edinburgh College is that demand is not sufficient for the amount of activity that the college has. Now, that is something we'd recognised some years ago and we had been working through the outcome agreement to reduce the activity at Edinburgh College and move activity to other places where there was higher demand and that had been operating at a relatively slow slope down because we wanted stability in the college as well and we wanted to understand exactly what demand was in Edinburgh. But Annette, when she came into post, did was review all the curriculum and recognised that that gap was a bit bigger than had previously been estimated and asked us to rebase the college. So the numbers of students as defined by credits or FTEs has declined in Edinburgh College and the drop related to the rebasing was about 6% of the total numbers. But that, we think, if I can say this, is in some ways a positive thing and that we now have a better understanding of what demand is in Edinburgh so that we can fund that and use the activity that's freed up elsewhere where there might be greater demand and get a better balance between supply and demand across Scotland. But that leaves us all of the task to support Edinburgh College and through the business transformation plan to get to the right size. But you presumably wouldn't say going back to our discussion earlier that this was a significant fall, whatever it may be, it seems to be a significant fall, in student numbers is a measure of success. No, no, absolutely not. I mean, let's be clear when I was talking earlier about the success of the merger programme, I have been open and honest with the net and heard more on this. Edinburgh is the one college where we think the merger has not been as well implemented as the other and our post merger evaluation is fairly clear on that point. And just one final point just on that, Dr Kemp. So if you accept that the merger has not been as successful, who is responsible? And what has happened to them? The, well, Annette is new in post, much of the senior management team is new in post as well. I mean, there have been changes at the top in Edinburgh College. That all, Mr Kerr? Yes, thank you. Alison Harris. Yes, sorry, just I'm a little confused when you're sitting there, Dr Kemp, telling me you can't actually tell me how many students because some are full-time courses, some are part-time courses and then you go on to talk about demand for courses. We can't tell you the number of students, yes. Well, was that not a question that somebody asked and we didn't get an answer for? Sorry, through you, convener. Through you, convener. The only one that's refused here. Let's take the witness's chance to answer. Annette Burton. Thank you very much, convener. My answer to Mr Kerr was that I can't say with any certainty exactly how many students there were at the point of merger. So just to be clear about that, I'm very clear about how many students we have right now. So, at this point in time, we have a little over 15,000 students enrolled for semester one. At the end of last year, we had 19,000, just over 19,000 students enrolled and we will anticipate having just slightly above that number for this year. Right, so that's a much more specific thing. I totally misunderstood what you were saying. No, no. Throw me off. That's fine. Very important. Thank you. I'm going to ask a couple of questions. Ms Bruton or Mr Williamson, can you tell me how much has been spent on consultants by Edinburgh College? It's a very small spend on consultancy. Which year are you talking about? Is it the year just passed? Yes. It would be a very small figure. I would probably guess maybe around about 50,000, 60,000. How about over the last few years? I would have to check. Okay. And is that spend Dr Kemp more than you would expect in other colleges? Without seeing the figures, we're not aware that there's a high spend. It depends how you define consultants. There was an interim principle for a while. That could be defined as a consultant say. So I'm not aware that there's been an out of line spend at Edinburgh College. Okay. How about spend Mr Williamson on garden leave? On garden leave. You're smiling. Why? Well, I'd have to check that. I would probably say and from recollection probably about 70,000 I would say. But again, I would have to check that. Okay. How many staff you know over the last few years have taken, have been on garden leave? I'd have to check that out as well. Not clear on the number of staff. Are you aware of any staff being on garden leave? Previously. Well, I'm aware of one member of staff. Okay. Is that usual in the college sector, Dr Kemp, for staff to be on garden leave? It would, it would not. I've heard of it in the city but not in colleges. It's not usual in the college sector. It would be quite rare, but as with Mr Williamson, I'm aware of one case in Edinburgh College. There's just one case, not more than one. Well, I'm not aware of any but I'd have to check. Okay, fine. Can I ask about PVG checks? What percentage, Mr Bruton, of your staff have been PVG checked? We're almost up at 100% now. So, and we've improved. It's a question that if you'd asked us this six months ago, it would have been slightly different because we needed to catch up with our PVG checks, but we've put a lot of resources in HR into PVG checking and we now have improved our systems. And so everyone who had direct contact with students where PVG checked on their way into the college and we needed to roll over the programme of the repvg checking of those who had predated PVG checks, but we've recently had a review of our PVG position and we're now in a very good position with regard to PVG checks. So we're now at a stage where I think I had half a dozen people who previously had the right qualifications and needed to update PVG. I need to check the exact figures on that and the PVG system for checking people as they come into post is now well established. So it was behind but you've managed to It was behind and we've caught up with that now. Okay, good. If I can go back to the topic of additionality, it's this committee's job to follow the public pound as best we can. And it's clear to me and to members that there's things have gone wrong in terms of spend with the public pound at Edinburgh College. I wanted just to delve a little deeper on this. In response to the initial questioning from Colin Beattie, it was very unclear and I think Mr Neil said that people were kind of passing the buck in terms of who knew about these guidelines from the SFC and that additionality was no longer claimable. Mr Williamson, can you give me any idea of the number of staff that you think were aware of these guidelines? Well, the senior team would have been aware and the heads of the curriculum areas would have been aware. So you're talking about maybe 30-odd staff. However, I maybe should emphasise that when these guidelines come in then there's a lot of work that's undertaken in looking at course frameworks and subjects on these courses and the attraction of the credits against them and that's all very much within the curriculum end. And there was a view that that work had been undertaken. And you were part of that senior team? Well, I was part of the senior team. That's right. So were you aware of the new guidelines that additionality was no longer claimable? Well, it is allowable to claim in some circumstances for additionality. The issue is when that's not previously been agreed with the funding council. There are courses where it makes sense to offer some credits over and above the full-time equivalent because it suits employers better or better prepares the students. The issue is that we need to control the amount of that so we do require that there are limits on it and that it's previously it's agreed with the funding council so that it's not uncontrolled. So, but there are circumstances in which additionality is perfectly acceptable and is a good thing. Sorry, I probably misphrased that. Sorry. We're talking here around the change in guidelines, aren't we, from the SFC and that that change wasn't properly implemented. So that change, Mr Williams, and were you aware of it? I was aware of the change in the policy. But there was on-going dialogue between the curriculum FPs and the funding council on a regular basis. So, my understanding is that the college continued to overclaim. Is that correct? Well, that's correct. So why was that, Mr Williamson? Why was it? Well, there was a belief in the college from my perspective. There was a belief that what had been agreed with the funding council was being represented through the reports that were being received on the actual weighted sums figures. I'm sorry, I don't understand that. You'll have to tell me that in layman's terms. Okay. Whenever there is additionality above the agreed additionality level, then the courses within the frameworks really have to be changed to bring down the weighted sums attached to those courses and then that brings it down to the level that they ought to have been. So, therefore, the teaching of that we wouldn't attract credits for. Within the reports, when we receive the reports, the reports give the up-to-date position. So there was a view that the up-to-date position included the changes in additionality. But you knew about the change in guidelines. Oh, I knew about it. I knew there was a change in guidelines. Okay, so why did the college continue to overclaim if you were director of finance at the time? Because it's a curriculum that is responsible for the implementation of that guideline. So it wasn't your fault? Well, I rely upon the information that I receive through the reporting and the... Receive from whom? Pardon? Receive from whom? Well, from the system. The system generated reports. The system in the college? Yes. Which presumably people populate. That's right, yeah. Okay, so you're saying to me that you received false information from colleagues that then led you to overclaim on behalf of the college? Well, I don't know if it was false information, but I was taking the information as read and therefore I was basing any of my financial projections on the numbers that they were coming off. So did you... You knew the new guidance from the SFC. Did you think to check it at all to check that this information you were receiving was correct? Well, the responsibility for that lay on the curriculum side and they were having the dialogue with the funding council. So I was off the belief that what was being agreed on additionality was being changed in the system and therefore the reports I was receiving were giving me the accurate picture. Okay, so what you're saying to me is there was a misunderstanding among some staff in the college that were providing you with this information about the new guidelines? I believe. And were those members of your team or other senior managers? I think it was a mixture of both. I think it was within the team and senior managers. Okay. How come this has been such a problem at Edinburgh College and maybe not at other colleges, Dr Kemp? It's something we're actively engaging with quite a lot of colleges on. And the reason is not that there's been a substantial change of policy on it. There's always been rules on related what used to be called related study. The difference is that with the new simplified funding method and I'm sorry if this sounds really boring and technical but there used to be I think of the full-time tariff with the number of sums that went into a full-time place. If you did a particular number you were paid for a slightly different number. So there was less of a clarity between the number of sums a college did and what they were paid for with the removal of that full-time tariff. It becomes more financially advantageous for a college to do additionality. So we need to be quite clear about when it is genuinely good use of public money for that additional course to be done. So we changed the rules a couple of years ago. We clarified them in the context of the new funding system a couple of years ago. So we've been engaging with quite a few colleges to understand why they have a particular level of additionality and whether that's appropriate and sometimes that leads to the amount going down. Sometimes it doesn't because we're quite happy. So this has been something we've been doing across the sector. It's fine that the Scottish Funding Council did enough to appraise and educate staff at Edinburgh College as to the new guidelines. Yes and in the case of Edinburgh College and that's one of the reasons we did apply a clawback but then we used it to help with the business transformation plan was it was a college we had engaged very heavily with through the outcome manager with senior managers on this issue and so that's yes I'm absolutely satisfied. I understand that there's even a workshop held is that correct? Yes I mean the outcome manager engaged several times with the college and with several people in the college on it. Okay so Mr Williams if the Scottish Funding Council went to such lengths with the outcome manager holding a workshop why were so many staff still providing you with wrong information that allowed you to over claim? Well I'm not sure that all members of staff have been provided with wrong information. Sorry I can't hear you. I'm not certain about the wrong information. The information there was a belief that the information that was being agreed on additionality had worked its way through into the system the reporting system and therefore we were using the reports that came off. I can't comment on who attended the funding council events I don't know who attended them. Mr Williams and were there any concerns raised by any of your senior colleagues or members of your team as to what was going on in terms of claims? All that I know there was dialogue with the funding council on additionality. Were there any concerns raised to you personally? There weren't any concerns raised to me hence why I was saying that I was using the reports that were coming off. There was no other concerns raised. So you weren't concerned at all having read the did you attend one of these SFC workshops? Don't think so no. Okay but you you knew the guidelines? I was aware of the guidelines. Okay and you weren't concerned about the information you were receiving and the sums that that was then leading you to claim? No. A place reliance on my colleagues as well that if they are working with the funding council and they are interpreting the guidelines then whatever changes are in the course frameworks that are required then these would be followed through. As director of finance is it not your job being in control of well being appraised of the guidance to be double checking back with colleagues to check that the information you are getting is correct before you submit the claims? Well I'm responsible for the finance estates, HR, IT so I have that responsibility. The reliance on the data then a place reliance on the my colleagues to ensure that whatever has been interpreted through the guidelines and whatever has been agreed with the funding council actually works its way into the reports. With respect Mr Williamson I would expect a director of finance at an institution the size of Edinburgh College commanding such a salary as you do to perhaps being aware that there has been a guideline change to maybe ask questions of colleagues providing you with this information knowing that you were responsible for the claims of this additional money. Well I'm not responsible for the claims it's coming through and the funding through the activity that we produce. You were director of finance? Yeah but the two VPs were responsible for the implementation of the guidance on additionality. If they had raised a concern to say that they were over claiming on additionality then I would have been liaison with the funding council as well to establish the extent of any clawback. Vice principal that's only part of their job Vice principal's perform a number of functions in colleges your role was as director of finance it's your job to keep the finances in order should you not have not been raising questions with them rather than them raising questions with you? I think given the outcome with hindsight perhaps I should have been questioning more. Okay so you feel that looking back you should have questioned more the data you were receiving before before putting the claims into the SFC. Well I think given the outcome with hindsight I should have done yeah. Okay but Mr Williams I mean you've since been promoted haven't you? No. No I understand your titles now chief operating officer. The title's changed but I've not been promoted. So what would you put I mean this has been a financial mess I can't think of any other way of describing it at Edinburgh College what would you put that down to? Since Merger Edinburgh College has had quite a lot of difficulty achieving its income targets and that's probably been compounded by the austerity measures as well but following the austerity measures we've also had real difficulty with commercial and international and tuition fees and a supplementary aspect that when you're not achieving credits particularly on the HE side you also don't attract the SAS fee on top so it's predominantly been the income side where we've had a lot of the big challenges. Mr Williams and you said looking back that you probably should have been questioning colleagues more on the information they were giving you regarding additionality. Do you take some personal responsibility for this situation that has emerged at Edinburgh College? Not to do with additionality. Do you take personal responsibility for it to do with something else? No. But you said that you should have asked questions of colleagues. What I said was with hindsight I perhaps should have asked. So does that suggest that you should have taken that you are taking some personal responsibility for not asking those questions? Well had the additionality come in and we were fine with additionality then I would have been using the same types of reports and I would have been using the same numbers because the additionality wasn't completed in accordance with the agreed figures then perhaps with hindsight I maybe should have been asking more. But then we weren't working on the basis that we weren't going to achieve the additionality figure that was agreed. Okay and you can confirm to me today that no colleagues either in your team or senior colleagues raised concerns with you about this at all? No, nobody raised concerns. Seems quite an unsatisfactory situation but unless members have any other questions Colin Beattie. Thank you very much. Just got one other question. We've heard nothing from Mr Harvey and I wonder if he might want to make a comment about the efficiency and the results that came from internal audit? In terms of my role and giving my opinion on the financial statements I would look to both the confirmations that come from the funding council and the work that had been done by internal audit in providing me with the evidence around the additionality and indeed all the other credits that are claimed as she had pointed out herself in terms of the sequence of events I wasn't aware of there being an issue until October when Mr Williamson had made me aware of it and I believed- October 2015? Yes, sorry, October 2015 when I was looking at the July 15 results and understood at that stage he also told Mr Brown about the potential issue from- So that's when the SFC came back? That's correct. I told the college that was a problem. Yes, that was when you became aware. That's the first time I was made aware of it. Yes, and at that stage the focus of my work was then to understand what the funding council's position would be in relation to that clawback so that I could ensure that it was then correctly reflected in the accounts. Now Mr Brown has already said that he was aware of this problem some time before. Would you expect it to be alerted to that at any point? I was surprised that people were aware of it in advance and I wasn't made aware. As I said, I wait until I've got the best available evidence in order to form my opinion and that would be confirmations from the funding council. So I wouldn't necessarily expect to be told about it in advance of those confirmations. However, as I did say, there was some surprise when I heard that today. Okay, thank you. Final question. Ms Britton, at what point did you become aware that Mr Williamson was in receipt of money that the college was not entitled to claim? Well, we aren't in receipt of it because we claim it as we go through the year. There were two elements to this. One, I could see when I came into post that there was something wrong with student recruitment and I was aware that from the funding council that we needed to drive down the amount of additionality that we were claiming. And so within weeks of being in post I asked for a review of the curriculum frameworks which was undertaken by the senior curriculum staff. Then when it got to the point of FES4, so we'd reduced the amount of claim that we made at that point in time and I went to the funding council to ask them to reduce our overall targets. Then when we were coming up to the fourth quarter of the year, the FES4 report, I asked further questions about whether it was the case that would driven out all the additionality that we needed to do and sought further assurance on that. And I asked for that to be done again and I asked a member of staff from outside the executive team whose own department was quite expert in doing this work on additionality to take another look at it with the management information team and they uncovered at that point in time that there was still additionality that was over and above what we had agreed for that year and we spoke to the funding council about that again. And so the figures that went in finally we were uncovering those facts as the final figures were going in. I'm not sure if I answered your question. Thank you, have. Okay. We're going to draw to a close. Can I thank the panel of witnesses very much indeed for your evidence this morning. I'm going to suspend now for two minutes while we move into private session. Thank you.