THREE Scottish colleges have been reported to the Scottish Parliament by watchdogs because of concerns over their financial health.

Audit Scotland has identified Edinburgh College, Lews Castle College, in the Western Isles, and Moray College, in Elgin, as being at risk and called for immediate steps to be taken to secure their financial health.

Caroline Gardner, the Auditor General, said: "These colleges play an important role in their communities delivering education for thousands of students every year and providing hundreds of jobs.

"They are also heavily reliant on public funding which can have major implications for how they manage their finances. Each college faces different issues, but all need to take steps now to get on a firmer financial footing and strengthen their governance arrangements."

The reports show Edinburgh College has improved its performance, but the college's financial position "remains challenging" with a deficit of £7m for 2015/16 and a reliance on additional support from the Scottish Funding Council (SFC) in order to meet its liabilities.

An earlier Audit Scotland report warned the college faced “significant financial challenges” because after failing to meet its targets for student recruitment.

The problems have been exacerbated because the SFC clawed back hundreds of thousands of pounds after the college breached rules on how much extra learning for enrolled students it could claim funding for.

The updated report said: "The college now understands the underlying issues which led to its current financial position and is making progress to address these through its transformation plan.

"It has put in place more robust governance arrangements, which should lead to better and more consistent programme and project management, as well as better monitoring and reporting to both the board and the SFC.

"While there is an overall picture of progress and improvement, the college's financial position remains challenging and continued progress is dependant on the college fully implementing its curriculum review in time for the 2017/18 academic year. The college is also heavily reliant on

voluntary severance to make savings."

The report on the Moray College accounts highlighted "weak financial planning and management arrangements at the college, which is forecasting a funding gap of £472,000 in 2016/17 and shortfalls until 2019".

Audit Scotland said there was a need for the college to "urgently" agree a recovery plan with the SFC adding: "It is also important that the University of Highlands and Islands, which manages the region, ensures the college can deliver on its priorities within the resources available."

In Lews Castle College Audit Scotland said: "Financial risks to the college from its declining performance against student activity targets leaves it open to financial penalties and funding reductions."

The college only achieved 80 per cent of its target on student recruitment for 2015/16 and delays in appointing board members also had a "significant impact" on governance arrangements and committee meetings.

John Kemp, interim chief executive of the Scottish Funding Council, said: "We are working directly with those colleges that need support to put arrangements in place to secure the right outcomes for colleges and the people they serve."