Northumberland College has undergone a “cash flow crisis” and could see its finances plummet further, according to an intervention report from the FE Commissioner.
The report, published today, also revealed declining learner recruitment, inadequate apprenticeship delivery, low achievement and “last minute negotiations” to defer loan repayments at the college, and warned that it may yet need to request exceptional financial support.
“After several years of growth, the college faces a substantial shortfall in income for 2017-18, which is forecast to fall short of the budget target,” it said.
“Inflationary pressures coupled with a drop in 16 to 19 classroom-based funding next academic year present a major challenge to get the budget back into balance by 2018-19 and generate sufficient cash to service the college’s debt.
“The best-case scenario for the college’s financial health is to remain satisfactory in 2017-18 and 2018-19. There is real prospect that financial health will fall to inadequate in 2017-18.”
Although the report acknowledged the “significant progress” made by the new and largely interim senior team at the college, after new principal Ian Clinton took up his position in April, it heavily criticised the previous leadership for a “major failing in financial management and oversight” and not “formally or sufficiently” challenging funding deficiencies.
This includes “wholly unrealistic targets” for new levy apprenticeships, “over-optimistic” income targets and a lack of oversight about new educational and commercial initiatives including a career college, recruitment agency, MOT and service centre and leisure learning courses, which it said “compounded an already declining financial position”.
“The college failed to identify a looming cash shortfall until January 2018, which resulted in last minute negotiations with the local authority to defer contractual repayments of loan principal and interest,” it added.
“It is not possible at this stage to rule out a requirement by the college for exceptional financial support, particularly if income forecasts fall short, cost arising from the staff restructure escalate or the college is unable to agree terms with the council and Barclays.”
The report warned that income is set to decline even further at the college in 2018-19, and the best it can hope for is to break-even. In July, the Northumberland Chronicle reported that more than 40 staff had taken voluntary redundancy after the college reduced the number of courses on offer.
The commissioner’s report also noted that the quality of provision at Northumberland College, which is rated ‘good’ by Ofsted, has been “deteriorating” over the past few years, and it is now in a position where “approximately 50 per cent of apprenticeship provision falls below minimum standards.”
The college was said to have “largely ‘rolled over’ the previous year’s curriculum” each year, and the average size of its classes is just 10 learners. One level three engineering class had just one learner.
Money issues were identified as stemming from a shortfall in the adult education budget, apprenticeships, the European Social Fund and trading activities.
Clinton said: “Since 2017-18, the college has set out and implemented a clear strategic vision that delivers significant changes in terms of much improved leadership, quality standards, curriculum, organisational structure and local employer relations. These rigorous and highly positive changes were borne out of historical, less favourable findings, some dating back to 2015, and it is these details that are included in the recent Commissioner’s report to which the news article refers.
“It is a reflection of the past, certainly not the present, nor the future as Northumberland College is 100% committed to providing the very highest standards of learning to our students. We have undertaken a major strategic overhaul in the last year alone and whilst robust in places, the changes, in the short-term, have had an effective and extremely positive impact on learners, staff, the community and local employers.
“This year’s students have got off to the very best start and have improved at all levels and ages in 2017-18 compared with 2016-17. Our Ofsted rating continues to be good and the likely deficit of £2.5m-£2.7m at the time of the FE Commissioners visit has, subject to an external audit later in the year, been reduced to £1.4m. These achievements are testament to the hard work and exceptional commitment of our staff and governors, and allows us to continue providing the best possible teaching standards, modern facilities and industry-driven curriculum provision to our learners.”
Northumberland College was placed in early intervention by the Education and Skills Funding Agency following an assessment of the college’s financial plan in July 2017. The report follows a diagnostic assessment visit to the college in April 2018 and a formal intervention assessment on July 18, and was sent to the college last month.
The report recommended that Northumberland considered the case for a merger, and told it to improve financial forecasts and quality assurance of apprenticeships. In September, it was announced that Northumberland College and Sunderland College would formally merge by March 2019.