The FE commissioner has criticised “serious corporate failure”, lack of oversight and a “financial crisis” at West Nottinghamshire College in a damning report.
The intervention report, published today but written in back in August, warned the college’s board and then-principal Dame Asha Khemka had “overseen a serious business failure which will impact on the whole college.
“There needs to be an urgent review that ensures that those with ultimate responsibilities are held to account,” it added.
It is understood the college board conducted a review as advised, and Dame Asha (pictured) departed shortly after.
West Notts received a £2.1 million bailout from the Education and Skills Funding Agency in July, which FE Week revealed was requested just 48 hours before it was due to run out of cash. Dame Asha, one of the highest paid FE leaders in the country, stepped down from her post at the start of October.
The college, which has 25,000 full and part-time students, was relying on selling a minority stake in its subsidiary company BKSB to cope with a “significant financial shortfall”, and was forced to request the financial support after the sale fell through in the summer.
The commissioner’s report said the planned sale “was the only strategy the board had to avoid financial instability, and when this plan failed there was no contingency in place”, and criticised the board at West Notts for lacking expertise in finance, auditing and accounting.
FE Week reported earlier this year that West Notts had blamed changes to subcontracting rules for the fact it was having to cut more than 100 jobs in an effort to make £2.7 million in savings.
It was the largest college provider of apprenticeships in 2016/17, and had contracts to deliver apprenticeships and traineeships worth £19.8 million last year, but the overwhelming majority of this was subcontracted. New rules that came into force in May 2017 mean lead contractors can no longer subcontract entire apprenticeship programmes but must “directly deliver” at least some of each programme.
The FE commissioner report highly criticised the college’s attempt to adapt to this change, describing the board’s oversight and challenge as “lacking” and having a “damaging effect”. It said leaders were “slow to implement the change” and had not “adequately prepared” the schools of learning.
“The college’s highly ambitious strategy for the replacement of the majority of its subcontracted apprenticeships with direct delivery has fallen significantly short of target, resulting in an unplanned decline in income and contributing to a substantial operating loss in 2017/18,” the report said.
“The budget plan to treble direct apprenticeship delivery from 2016/17 to 2017/18 was a fundamental risk which clearly materialised with forecast direct delivery for 2017/18 almost 40 per cent short of the budget target.”
A “steady decline” in the college’s cash reserves over recent years meant they were not able to cover the loss, and the report warned that West Notts run the risk that “bankers for the college may now change their attitude to the college’s debts.”
Excluding income from subcontracting, pay costs made up 87 per cent of the college’s turnover in 2016/17, but despite significant redundancies this year the report warned that further cuts of between three and five per cent may still be needed to reach the FE commissioner’s benchmark of 65 per cent.
However, the report also acknowledged that the college had been rated ‘good’ by Ofsted in February 2017. It said approaches to quality assurance and improvement were “very good”, and learners “clearly value the opportunities the college offers them”.
The report recommended that the college reviews “the accountability of the principal/CEO and accounting officer and her capacity to deliver a timely and successful recovery plan” and takes “urgent steps” to improve the effectiveness of governance, including the “suitability of the chair and vice chair and their ability to successfully guide the college through its current corporate crisis”.
It also recommended the college was placed in administered status, and urged it to finalise work on its business recovery plan and two year financial plan.
A spokesperson for West Notts College said they were working closely with the commissioner’s office and the ESFA to “improve our financial situation” and had appointed an interim principal and strengthened the governing body.
“We are not complacent. We deeply regret that the college finds itself in this position and are resolutely determined to secure the improvements needed to regain long-term sustainability and come out of administered college status.
“While the scale of the challenges we face cannot be underestimated, the senior leadership team and governing body are united in their ambition to return the college to a stable financial footing and ensure it has a thriving future.”