College financial directors have an important role in addressing “optimism bias” from principals, according to a deputy FE commissioner. 

Speaking at the Association of Colleges’ (AoC) annual finance conference, Andrew Tyley said the issue of “optimism bias” is still “definitely there” and too often there is insufficient contingency planning.

He added: “I think as financial directors (FDs) you have got a really important role there - ensuring that you principal has got their feet firmly on the ground - they might have their head in the clouds but their feet are firmly on the ground.

“It is so common when going into an intervention. I think the number of colleges that said they were going to get 15 per cent apprenticeship growth and it just hasn’t worked out like that”.

‘Cash flow is essential’

He also said recognising the increasing importance of cash-flow forecasting was important. “When I joined the sector, it certainly wasn’t the sort of thing people got excited about,” he said. “I think we felt in those days it was very much part of the public sector and the [former] Learning and Skills Council (LSC), as it was then. Nobody would ever let a college psychically run out of cash.

“It feels quite different now. Banks are much less willing to provide overdrafts then before. Cash flow is probably one of the most serious things that can go wrong for you. So having that really well bottomed-out is absolutely essential.”

The picture at colleges is mixed, Mr Tyley said. “There are clearly examples of excellent as well as poor practice. It surprises me in a sense just how variable the quality of financial management within colleges. There are some really, really good, well-run colleges and I think that is an important thing to acknowledge.

“Where people move on there is no doubt that experience and higher calibre strategic finance directors are in quite short supply.”

Mr Tyley added that in some weaker colleges there can be a “feeling sorry for yourselves” culture. “So the college will say, ’Well, it’s all somebody else’s fault, we have done everything. It is only A, Y and Z.’ What they fail to realise is that how come there are colleges down the road who are in exactly the same place but they are doing fine on these things?

“I think recognising and accepting where you’ve got issues and the need for improvement is part of the solution. If you are just in denial then you’re not really going to get very far.”