Finance: Lessons in freedom for colleges grappling with finances

For the past year Britain's institutes of further and higher education have been freed from local authority control and in effect have effectively become separate companies. But the difference with the rest of the commercial sector is that their managers generally have little or no business experience.

Moreover, they are likely to be sceptical of the benefits of receiving their funding directly from the Further Education Funding Council rather than via the local education authorities, and so compound the problems.

In an effort to provide some much-needed help for managers trying to grapple with this tricky area, the Chartered Association of Certified Accountants has just published (6 oct) what it calls 'a comprehensive and practical guide'.

Written by Graham Carr, of North Hampshire (correct) Business School, which is part of Farnborough College and one of the 600-odd organisations affected by a change that came into operation in April 1993, it focuses on internal or management accounting systems. Among the topics covered are unit costing, profit centre financial management, budget development, financial controls, performance indicators and inter-college comparisons.

As Mr Carr points out, all of this is second nature to the average business but largely absent from the education arena. The funding council offers guidance on the presentation of basic accounts.

But, there is such due to the a shortage of material on such matters as costing individual courses, that he says he has had to take a largely prescriptive approach and describe the advantages and disadvantages of different methods and leave it up to individual colleges to pick what was is best for them.

Even colleges that have recruited accountants to deal with their new responsibilities have had trouble as result of the need to develop appropriate systems from scratch and without the aid of suitable models.

Nor is such information of merely theoretical interest. With colleges for the first time having the 'freedom to fail', it is possible for them to develop serious financial problems without knowing why.

This is likely to be because - although the managers can report either a small surplus or a loss over the year - they will not be aware of which aspects of the college are making money. and which are not. In a true business context such an approach would be like a manufacturing company trying to survive without product costing, says Mr Carr says.

However, obvious as is the need to break college costs down to the course level, is, finding an effective way to do it break costs down to the course level is difficult. The typical college - which may be a sixth-form college or a further education institute where less fewer than half the courses are of degree level - will have an annual budget of about (pounds) pounds 15m.

About 60 per cent of that is accounted for by salaries, with teaching staff taking up the biggest share.

But the rest is made up of indirect costs, such as running the building and administration, and it is here that the problems start. 'There is no obvious way to break it down,' says Mr Carr says. , adding that All he has set out to do is to tell colleges of the issues at which they need to look at.

He came to the subject because, besides working at one of the organisations affected, he and his colleagues had previously looked at the transformation in the National Health Service and advised on the development of accounting in the changing economy of Russia. He realised that the situation was broadly similar because it involved people who had not previously been exposed to a financial environment.

Acknowledging that the changes are creating a lot of stress, he hopes the guide will make managers - reluctant or otherwise - better able to make difficult decisions about such matters as closing courses.

(in italics) Effective Financial Management in Colleges of Further and Higher Education, by J G Carr, is available from the Chartered Association of Certified Accountants, PO Box 66, Glasgow G41 1BS. Price (pounds) pounds 15.

(Photograph omitted)

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Graduate Recruitment Resourcer

    £20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

    Recruitment Genius: Telesales Executive - OTE £32,000+

    £18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

    Ashdown Group: Marketing Manager - B2B, Corporate - City, London

    £45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Neil Pavier: Commercial Analyst

    £50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

    Day In a Page

    War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

    War with Isis

    Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
    Scientists develop mechanical spring-loaded leg brace to improve walking

    A spring in your step?

    Scientists develop mechanical leg brace to help take a load off
    Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

    Peter Ackroyd on Alfred Hitchcock

    Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
    Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

    Ryan Reynolds branches out in Woman in Gold

    For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
    Why Robin Williams safeguarded himself against a morbid trend in advertising

    Stars safeguard against morbid advertising

    As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
    The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

    UK horticulture industry facing skills crisis

    Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
    Hack Circus aims to turn the rule-abiding approach of TED talks on its head

    Hack Circus: Technology, art and learning

    Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
    10 best compact cameras

    A look through the lens: 10 best compact cameras

    If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
    Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

    Tracey Neville is just as busy as her brothers, Gary and Phil

    The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
    General Election 2015: The masterminds behind the scenes

    The masterminds behind the election

    How do you get your party leader to embrace a message and then stick to it? By employing these people
    Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

    Machine Gun America

    The amusement park where teenagers go to shoot a huge range of automatic weapons
    The ethics of pet food: Why are we are so selective in how we show animals our love?

    The ethics of pet food

    Why are we are so selective in how we show animals our love?
    How Tansy Davies turned 9/11 into her opera 'Between Worlds'

    How a composer turned 9/11 into her opera 'Between Worlds'

    Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
    11 best bedside tables

    11 best bedside tables

    It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
    Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

    Italy vs England player ratings

    Did Townsend's goal see him beat Kane and Rooney to top marks?