Financial Forecast Return for Colleges: 2024-25 to 2027-28

4. The financial forecast return (FFR) is an established part of SFC’s financial health monitoring framework. Financial projections are a key source of information in enabling SFC to monitor and assess the medium-term financial planning and health of colleges.
5. SFC’s Financial Memorandum with colleges and RSBs requires colleges to plan and manage their activities to remain sustainable and financially viable. It is therefore critical that colleges take the necessary actions to balance their adjusted operating position, reflect these actions in their FFRs, and provide a full description of their financial plans in the FFR commentary.
6. Colleges should aim to achieve a balanced budget each year. Where a deficit is forecast in any year, colleges must work towards bringing income and expenditure back into balance over the forecast period. Colleges should provide us with a narrative which clearly sets out the actions that will be required to address financial sustainability challenges, and any resulting adverse impact on staff and students. Please also provide copies of relevant Board or Finance Committee papers; if these papers include the narrative requested, a separate commentary is not required.
7. We expect colleges to review their business models/strategic plans in light of the tight financial environment. Please provide a summary of changes made and/or under consideration. If no review has taken place, please provide the reason for this.
8. It is important to note that we have no information on Scottish Government funding beyond Financial Year 2025-26 (year to 31 March 2026) so these assumptions are indicative.
9. This year’s return follows the same format as last year’s FFR and 2023-24 annual accounts return. We have added a sheet to the return to capture the impacts of an alternative funding scenario that we are asking colleges to model.

Arms-length foundations

10. Arms-length foundations (ALFs) were established to mitigate the impact of incorporated colleges’ reclassification as arms-length central government bodies. Colleges are encouraged to maximise ALF funding to support their financial position, where appropriate. Any donations to ALFs should only be made where budget cover is available from net surpluses arising from commercial activity during the Financial Year to 31 March. Government funds cannot be donated in this way. Please contact SFC if your college is considering an ALF donation.

11. Finance Directors will receive an individual spreadsheet which we have
    pre-populated with the 2023-24 annual accounts figures. For assigned colleges in the Highlands and Islands region, we will send the pre-populated return to the RSB.
12. Guidance for completion of the return can be found in Annex B A blank copy of the spreadsheet return template is published on our website along with this Call for Information. The template is unlocked so that it can be used in preparing the figures for the return. We would request that colleges complete the pre-populated return provided for submission to SFC.
13. Colleges are required to complete the forecast figures for the period 2024-25 through to 2027-28. Please note that the guidance in Annex B requests a commentary on the financial forecasts which should cover the context in which the forecasts have been prepared. Your commentary will be as important as the figures you submit, as this will help us better understand the issues facing your college and will support follow-up engagement. Scenario planning is a normal part of financial planning. Please include commentary on any additional scenario planning, working through a range of assumptions and options to show the trade-offs involved, and choices you could make to reach an optimal position for your college.
14. Please enter explanations for significant variances (+/- 5% or over 2% of total expenditure) on the spreadsheet. As with previous forecast exercises, we may come back to colleges with queries and requests for further details following our analysis of the forecast information.

15. Please email an electronic copy of the return in Excel format, and the financial commentary to SFC by 30 June 2025. Please also provide copies of the relevant Committee and/or Board papers. If the schedule of governing body meetings makes it difficult to achieve this deadline, please contact us as soon as possible. In that instance, please provide a draft return including the full commentary by 30 June 2025 with the final approved version to be provided as soon as possible thereafter.
16. Because financial returns are essential for SFC’s institutional financial health monitoring and reporting, it is important that returns are submitted to SFC by the deadline and are completed fully. Colleges should also ensure that the forecasts are as accurate and dependable as possible.
17. Where staff restructuring costs are included in 2025-26, colleges should provide a copy of the proposed voluntary severance scheme and details of planned restructuring (where not already submitted to SFC). Colleges should also outline restructuring plans beyond 2025-26, where applicable, in the financial commentary.
18. Electronic copies of the return and supporting documents should be sent to
    isg-returns@sfc.ac.uk.

1. We have developed income and expenditure assumptions that should be used in preparing the FFR. These assumptions are provided for the purpose of supporting planning consistency across the sector.
2. It is important to note that we have no information on Scottish Government funding beyond Financial Year 2025-26, so these assumptions are indicative. Colleges should therefore also develop any additional planning scenarios they consider appropriate for their operating environment/circumstances.

Credits and teaching income

3. Core funding for 2025-26 should be based on the final college sector funding allocations for AY 2025-26 announced on 29 May 2025.
4. If it is anticipated that core credit thresholds will not be met in any year, funding should be reduced accordingly, after mitigations of 2% tolerance and decoupling of 20% of Teaching Funding credit value permitted to reduce planning volatility. All other SFC funds should also be considered as subject to recovery unless agreed directly with SFC.
5. As in previous years, we are providing colleges with guidance on assumptions in relation to SFC grant funding for 2026-27 and 2027-28 that should be used in preparing the FFR. To be clear, this does not reflect SFC policy and is not an indication of future funding allocations. These assumptions are provided to support sector-wide planning consistency.
6. In preparing the FFR colleges should assume that:

• Total SFC core grant funding for the sector for 2026-27 and 2027-28, including funding for lecturers’ pay, pension costs and National Insurance costs, remains unchanged from those set out in the 2025-26 final funding announcement.
• The mitigations included in 2025-26 funding allocations will be unwound with equal annual adjustments over the three academic years 2026-27 to 2028-29. The 2025-26 mitigations are included in the additional table that was provided to colleges along with the indicative funding announcement.

7. Colleges are also requested to provide an alternative funding scenario, assuming SFC grant funding and related credit thresholds for 2026-27 and 2027-28 remain unchanged from those announced for 2025-26.
8. The Regional Strategic Body for the Highlands and Islands region will need to advise its assigned colleges of their funding assumptions over the forecast period to 2027-28.

Student support funding

9. Colleges should assume that all student support funding requirements will be fully met.

Capital Maintenance

10. SFC Capital Maintenance funding should be based on the final 2025-26 funding allocations announced on 29 May 2025. Colleges should assume that this funding must be used for capital expenditure only. SFC continues to engage with the Scottish Government on this matter.

1. The FFR takes the form of an Excel spreadsheet which has fourteen worksheets. A copy of the spreadsheet is published along with this Call for Information.
2. Thirteen of the sheets require input by the college. We suggest the order of completion is:

(i)           Pension assumptions.

(ii)          Arms-Length Foundation (ALF) funding.

(iii)         Income.

(iv)         Expenditure.

(v)          SoCIE.

(vi)         Adjusted operating result.

(vii)        Balance Sheet.

(viii)       Liquidity analysis.

(ix)         Cashflow.

(x)          Capital expenditure.

(xi)         Efficiencies.

(xii)        Alternative funding scenario.

(xiii)       Declaration.

3. The Summary sheet does not require to be completed. This summarises various key figures from the spreadsheet and is calculated automatically.

Input of financial forecast figures

4. The worksheets in the spreadsheet contain blue highlighted boxes for the input of the actual and forecast figures.
5. Please note that only whole numbers can be input into the return. Please do not link the spreadsheet to another document or change the formatting in the spreadsheet.
6. Please enter explanations for any significant variances (+/- 5% or over 2% of total expenditure) where appropriate.