Colleges that get into financial difficulty will still need funding to “oil the wheels” once the bailout tap has been turned off, the FE commissioner has said in an exclusive interview with FE Week.
Struggling colleges currently have access to the restructuring facility and exceptional financial support (EFS), but these will each be withdrawn later in the year.
There will be new arrangements for troubled colleges, but it’s not clear if these will be backed with cash.
“I don’t know how the sector will manage without any restructuring funds of any kind,” said Richard Atkins.
Because colleges will “occasionally get into difficulty”, he insisted they will need “some sort of funding to oil the wheels in these situations” to ensure stability and protect learners.
“I would have thought that something will need to be put in place, and I know there are people in the Department for Education looking at that at the moment,” he said.
The DfE will pull the plug on EFS once the insolvency regime is introduced later this year.
It expects “all colleges to be working to make sure they get on a financially sustainable footing by the end of this financial year” while funds from the restructuring facility are still available.
But new arrangements will be put in place, a spokesperson said. These will be “centred round the new insolvency regime”, and full details “will be announced in due course”.
The new regime, which will allow colleges to go bust for the first time, will be introduced later this year, although no firm date has yet been announced.
EFS, which can come in the form of a grant or a loan, is available to colleges that are “encountering financial, or cashflow, difficulties that put the continuation of provision at risk”.
The restructuring facility, administered by the transaction unit, was originally designed to help colleges implement area review changes but is increasingly being used to support colleges in dire financial straits.
The application deadline for the restructuring facility is September – although colleges will have until March next year to spend the cash.
When the restructuring facility was first announced in 2016, the then-skills minister Nick Boles told colleges they would be “basically on your own” once the fund had been used up, without the “same level of ad hoc support” they had previously had access to.
FE Week has reported on a number of high-profile cases of colleges receiving multimillion-pound bailouts from the restructuring facility.
These include Hull College, which reportedly received £54 million from the fund earlier this year.
Lambeth College’s 2016/17 accounts revealed that it expected to receive £25 million from the facility, £8 million of which would go to repaying the exceptional financial support it had received up until that point.
Struggling Telford College of Arts and Technology received £21 million for its merger with New College Telford, which went through in December – a sum that came in the form of a grant, according to its accounts.
And Stoke-on-Trent College’s accounts show it was awaiting the outcome of a £21.9 million application to the fund.
But not every college has been successful in their bids to the facility.
An FE commissioner report into Kirklees College, published in March but based on an intervention last October, revealed the college had pinned its hopes of financial redemption on receiving “substantial” money from the fund.
But this request was turned down, forcing it to request a “substantial” amount of EFS as it battled high levels of long-term debt and minimal cash reserves.
FE Week reported in February that 12 struggling colleges had received a combined total of almost £12 million in EFS payments in one month alone.
This included two payments of £1.5 million each to Bradford College, which is now subject to intervention by Mr Atkins.
His report determined that the college’s dire financial position had come as a surprise to its governors, who were only made aware of management concerns around finance in June last year.