The financial health of Scotland’s colleges has deteriorated, with overall income falling and the colleges’ underlying deficit increasing to £8 million, according to Audit Scotland’s annual review of the college sector.

Colleges held £11 million less cash than in 2014-15, the review said.

It warned that although the Scottish Government’s funding to colleges will increase in 2017-18, the sector still has several financial challenges to address.

“In particular, Colleges Scotland has estimated that implementing national bargaining, to harmonise pay and conditions for all college employees, could cost around £80 million over three years,” said the review.

Student numbers decreased slightly in 2015-16 and when measured by full-time equivalent, the student population is its lowest level since 2006-07.

Student attainment, though, improved in 2015-16.

The percentage of full-time students successfully completing their course increased in 2015-16, and at least 83% of students who achieve a qualification go on to a “positive destination” such as further study or employment.

Caroline Gardner, Auditor General for Scotland, said: “There is a growing risk to colleges’ ability to keep delivering what the Scottish Government requires from the sector, as a result of major financial challenges and a declining student population.

“Colleges need to plan ahead so their future budgets can withstand the impact of cost pressures.

“Demand for college courses and the effects of demographic shifts also need to be assessed so educational provision can be designed around these.”

College Student Numbers 2015-16:

Full-time Student Attainment for 2015-16:

Bottom 5 Subjects and Top 5 Subjects by Attainment: