A FUNDING gap of £472,000, along with declining performance against student activity targets are among the problems facing three Scottish colleges, says a report from the Auditor General for Scotland.

Caroline Gardner, in a report to the Scottish Parliament, highlighted problems at Moray College, Elgin, Lews Castle College, Stornoway and Edinburgh College.

She pointed out weak financial planning and management at the Elgin institution, which had forecast a £472,000 funding gap in 2016/17, and shortfalls for a further two years. Gardner said there was a need for the college to “urgently” agree a recovery plan with the Scottish Funding Council (SFC), from which it received 72 per cent of its income in 2015/16. It was also important the University of the Highlands and Islands (UHI), which manages the region, ensured the college could deliver on its priorities within the available resources.

Lews Castle College, which is also part of UHI, faced financial risks from its declining performance against student activity targets, said Gardner, which left it open to financial penalties and funding reductions after achieving only 80.5 per cent of its target in 2015/16. There were also delays appointing board members, which had a significant impact on governance arrangements and committee meetings.

While Edinburgh College had improved its performance in some areas, the auditor general said its financial position “remains challenging”. Continued progress depended on several factors, including a curriculum review and savings from a voluntary severance scheme. Edinburgh received three quarters of its funding from the SFC, while Lews Castle College received 66 per cent.

“These colleges play an important role in their communities, delivering education for thousands of students every year and providing hundreds of jobs,” said Gardner.

“They are also heavily reliant on public funding which can have major implications for how they manage their finances. Each college faces different issues but all need to take steps now to get on a firmer financial footing and strengthen their governance arrangements.”

In a statement, UHI said: “The university is a regional strategic body for the Highlands and Islands. It is working closely with all of the colleges in its area to review and adjust targets during 2016/17 and plans to implement a new allocation approach in 2017/18.

“Lews Castle College is not in immediate financial difficulty but hopes to agree a revised activity target with the university proportional to its operating costs.”

Annette Bruton, principal of Edinburgh College welcomed the auditor general’s recognition that significant progress was setting it “in the right direction”.

She said: “This report is clear that the changes we’ve made, including to governance, monitoring and management structure, have led to major improvements.

“Since we identified the issues outlined in the report, we’ve worked hard on the changes needed to make sure our college is in the correct shape to succeed. The focus of our Transformation Plan has been on delivering the best possible education and college experience to students, and supporting staff to thrive professionally.