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SFA responds to NAO report on financial sustainability of FE sector

Our response to National Audit Office report 'Overseeing financial sustainability in the further education sector' 20 July 2015.


We welcome the NAO’s analysis of the financial sustainability of the FE sector and its proposals for tackling the important challenges identified.

The increasing percentage of colleges with weak financial health leading to intervention is a risk that we identified as growing in significance since 2010 to 11. Working to support colleges who find themselves in difficult financial circumstances continues to be a priority area for us. The SFA continuously reviews the necessary controls and management arrangements to protect the interests of learners and employers. We have recently reformed both our organisational structure and ways of working to increase the size of our intervention team to support the sector.

We remain committed to protecting learner provision and investment of public money. This comes with the expectation that colleges, which are independent statutory corporations responsible for their own financial health, will work with us.

Together with the FE Commissioner and the Education Funding Agency, we will continue to mitigate risks by analysing the financial plans of colleges most at risk at an early stage, to establish whether they are sufficiently robust. We will monitor potential cases of financial weakness through college management accounts, for example, and will intervene early on when there are signs of financial weakness to bring about recovery or structural change, where appropriate. We will also continue to work with our partners, including Ofsted and our sector partner AoC to further implement the recommendations.

We welcome the government announcement today, inviting local areas to participate in the reshaping and re-commissioning of local provision through a series of area-based reviews of provision. As part of this review a joint Area Review Delivery Unit is being set up (involving BIS, DfE, the funding agencies and the FE Commissioner) and will lead on delivering the programme of area reviews.

Note to Editors

Clarifying our role:

The Skills Funding Agency funds skills training for further education (FE) in England. We support over 1,000 colleges, private training organisations, and employers with £3.6 billion of funding each year.

SFA is an executive agency, sponsored by the Department for Business, Innovation & Skills.

We have the power to impose conditions of funding, and can use a Notice of Concern or Breach to apply conditions of funding that in effect make the Notice have financial consequences for the provider. For example:

  • no eligibility for any growth funding that is available
  • no funding of new starts until there is evidence of improvement
  • no new subcontracting or growth in existing subcontracting
  • loss of eligibility to deliver traineeships
  • no invitation to tender for procurement opportunities
  • removal from the Register of Training organisations (terminations and withdrawals of funding)

We have a team of experts who make decisions, adhering to our intervention policy, on actions we take including issuing a Notice of Concern, or imposing conditions of funding. We provide help and support to the sector (which we are praised for in the NAO report) where necessary and work closely with Ofsted.

Colleges are responsible, as independent institutions, for managing the day to day running of their corporation including, managing their business, funding agreements (which are not solely reliant on government funding), staffing and its corporation’s estate.

Published 20 July 2015