Real estate in the secondary vocational education sector
Questions about affordability
Falling student numbers in the secondary vocational education (MBO) sector will exert pressure on college budgets and raise questions about the affordability of their buildings. The Court of Audit warns in a report on real estate management in the MBO sector that the sharp fall in student numbers in the north and east of the Netherlands could have consequences for the continuity of MBO colleges in those regions.
We point out that the MBO sector will have to find appropriate answers to the expected fall in student numbers in the years ahead, especially in the north and east of the country, particularly if the fall is greater than 5%. If the number of students contracts by more than 5%, serious questions will be asked about the affordability of premises. If the trend continues there is a very real risk of a serious problem.
Forecast development of MBO student numbers by region in 2016 - 2031
The figure shows the projected decline in MBO students. Growth is still expected in the regions around Amsterdam and Leiden. The regions around The Hague, Haarlem, Utrecht and the Flevo polders will see a modest contraction (less than 5%. But further towards the north, east and south, MBO student numbers are projected to fall sharply, even by as much as 20%.
What did we audit?
Our audit asked whether lessons could be learnt from audits of real estate scandals at the Amarantis Education Group (2012) and the Leiden Regional Training Centre (2015). The Court of Audit concluded that the MBO sector is on the whole in good financial health and all involved – the Minister of Education, Culture and Science, the Education Inspectorate and the MBO colleges themselves – were working hard to improve real estate management.
How did we carry out our audit?
The Court of Audit investigated the decision-making processes for real estate investments of three secondary vocational colleges. The three colleges were the Zadkine and West Brabant Regional Training Centres and the Wellant agricultural college. These three were selected because they had the most extensive investment plans of all the 64 MBO colleges in the Netherlands. In total, they were planning to invest €191 million, 35% of the total MBO sector’s planned investments as from 2015.
What did we find?
The audit report presents an impression of real estate management in practice and of the differences between the colleges. The picture is not representatives of the MBO sector as a whole because there are too many differences within the sector and between the three selected colleges. The three practical examples show that the colleges recognise the importance of real estate management and are aware that the sector will face a series of challenges in the years ahead. One of the challenges will be the projected decline in student numbers after 2020. There are currently 500,000 MBO students but their number is expected to fall to 430,000 by 2032. This will have consequences for the colleges’ budgets and thus for the affordability of their premises.
What do we recommend?
We recommend that the minister better identify the risks to the colleges’ real estate management. We recommend that the Education Inspectorate analyse the risk of falling MBO student numbers in each sector and look five years ahead in the ‘going concern’ section of its annual reports on the MBO colleges. To the colleges themselves, we recommend that they conduct an active real estate policy, prepare scenarios with different student numbers, personnel costs and accommodation costs, including a worst case scenario. We further recommend that they work with each other and with universities of applied sciences in their regions, keep their supervisory boards and school councils informed of the affordability of real estate, and strengthen the checks and balances within the colleges.
The audit report was published on Monday 25 March 2019.