The truth about The Hadlow Group financial scandal

The Hadlow Group has hit the headlines following allegations of financial irregularities and the departure of several senior leaders and governors. Now, FE Week has learnt further details of issues which brought about the FE Commissioner and Education and Skills Funding Agency investigations, as well as the fallout from the controversy.

Deputy CEO could face police probe over faking ESFA email

The deputy principal of The Hadlow Group could face a police investigation into claims he doctored government emails to claim taxpayer funding on behalf of the group, FE Week understands.

Last year, as part of an Education and Skills Funding Agency audit of West Kent College, the agency asked deputy principal Mark Lumsdon-Taylor why significant sums of funding had been claimed when no activity had taken place.

He is said to have told the agency that the claims for this additional funding had been agreed as part of transitional arrangements during the transfer of K College contracts.

The ESFA asked him for evidence proving that they had given him permission to claim this additional funding, and he allegedly presented them with an email from the ESFA, which he claimed to have received in 2014.

However, when the ESFA checked their own email servers for this email, it was found that it had been altered.

ESFA investigators found no such permission to claim additional funding could be proven – and the audit concluded with a demand for a significant sum of funding to be returned to the ESFA.

Asked whether the Department for Education had contacted the police about a possible criminal investigation into certain employees of The Hadlow Group, a spokesperson said: “We do not routinely comment on investigations ongoing or otherwise.”

In addition to his role as deputy principal, Lumsdon-Taylor is also finance director of The Hadlow Group and a trustee of the Kent Mining Heritage Foundation (which is building a museum at Betteshanger Park, which is part of The Hadlow Group).

His relationship with Hadlow College first began when he worked for chartered accountant Macintyre Hudson as its director of audit, with the college as a client, in the early 2000s.

At the time, Hadlow College was struggling financially and academically, after receiving a grade three from Ofsted.

He became finance director in 2003, before taking on a wider role at The Hadlow Group once it adopted West Kent and Ashford College in 2014.

A spokesperson for The Hadlow Group would not be drawn on the matter of doctored emails, simply stating: “Hadlow College’s board is conducting its own internal investigation and the outcomes of the investigation will determine the next actions to be taken. Until the investigation is concluded, we cannot comment further.”

Lumsdon-Taylor did not respond to multiple requests by FE Week for comment on these allegations.


Former chair was ‘misled and lied to’

The former chair of West Kent and Ashford College’s board and group finance committee has said he was “misled and lied to”, but would not say by whom.

Paul Dubrow stepped down last month, around the same time Hadlow Group principal Paul Hannan and deputy principal Mark Lumsdon-Taylor were suspended.

Dubrow said: “I stepped down as chair of West Kent and Ashford College as it was the honourable thing to do.

“As former US president Harry Truman said: ‘The buck stops here.’

Paul Dubrow

“As chair of governors, ultimate responsibility lies with me, even though the board and I were misled and lied to.

“In spite of this, I felt it the right thing to do to resign my position.”

Dubrow would not be drawn on who misled and lied to the board; but he said that evidence he has provided to the FE Commissioner proved that it had happened.

“It would not be correct of me to give any further details at this point, as the investigation is still ongoing.”

Dubrow was the only representative of West Kent and Ashford College on the Hadlow Group finance committee, which he chaired before he resigned.

He is also a director of a number of businesses based in Hadlow, Kent.

Last week, FE Week reported on how the governance of the Hadlow Group was in meltdown following the departure of a number of leaders, together with the lack of either a chief financial officer and a chartered accountant on the finance committee.

Dubrow’s departure was part of a recent raft of governor resignations from The Hadlow Group, which also included George Jessel, Harvey Guntrip and Chris Hearn.

The role of chief financial officer has now been filled by Anna Fitch, a member of the FE Commissioner’s team.


Betteshanger: £4m failed sale and £1.2m extra cost

The Hadlow Group’s financial situation has been further thrown into doubt by revelations around the sale of a business park that never happened and building cost over-runs of £1.2 million.

Betteshanger visitor centre

According to minutes from a February 2017 meeting of the group’s finance committee, it had “negotiated a sale price of £4,000,000 for the sale of the Betteshanger Business Park to Corinthian Land”. 

The group brought in James W Rae, a real estate consultant, to market the park to potential investors, but did not put the site up for sale on the open market.

The college has confirmed this sale never went ahead and Corinthian Land’s development manager Tom Billings said he had never heard of it when he was contacted by FE Week.

However, it is understood that Simon Wright, still listed as a director at Corinthian Land, had looked into buying it with David Tugwell, a director at Corinthian Living and Corinthian Mountfield, which are also part of the Corinthian Group.

Tugwell said: “It was not something we ever progressed with and we never made an offer.”

The business park is part of the Betteshanger Sustainable Parks scheme, which will include a visitor centre and the Kent Mining Museum, all built on the 121-hectare site of the closed Betteshanger Colliery.

For the project’s former chair, the suspended deputy principal Mark Lumsdon-Taylor, the redevelopment of Betteshanger Colliery was a pet project.

In an article by the Kent Messenger Group, Lumsdon-Taylor was said to have spoken about the redevelopment of the colliery in “personal” terms.

He also spoke enthusiastically about the 175m visitor centre being “longer than the Gherkin” in London. However, his labour of love was to become another financial headache for The Hadlow Group.

It has had to spend an extra £1.2 million on the project due to the challenges of building the visitor centre on the former colliery site.

Ground tests and the length of the centre meant the group needed to use piles for the foundation, which cost more than the original plans for a raft foundation.

The cost of these changes was brought up at a Hadlow Group audit committee meeting in March 2017, which discussed whether to seek financial compensation for the initial advice the group had received about the visitor centre. According to the minutes: “This advice was not correct, leading to both a significant time delay and additional project costs.”

The committee tasked Lumsdon-Taylor to work with solicitors to find out the likely costs and returns from a settlement.

However, a Hadlow College Group spokesperson said Lumsdon-Taylor did not seek legal advice.

At an audit committee meeting in November 2017, it was agreed to defer the matter to the group board for a final decision.

Then, at an audit committee meeting in June 2018, the committee received a “route of action”, but asked for a further update in the autumn.

The group declined to comment on whether the £1.2 million costs had been written off in the overdue 2017/18 accounts.


The over £20m ESFA transaction unit loan application that failed

A former member of The Hadlow Group finance committee was paid on sabbatical to help the group apply for more than £20 million from the Education and Skills Funding Agency transactions unit.

Originally, in February 2018, the group enlisted the help of consultancy Edscencio, co-founded by Chris Hearn, to help with a loan restructure at West Kent and Ashford College.

Hearn offered to resign from the board, but it was decided he could declare his interest at each meeting, recuse himself from any decisions concerning Edscencio, and stay on.

In July 2018, Hearn offered to resign again, as Hadlow College had requested Edscencio’s help with their application for ESFA funding to facilitate a formal merger.

But the board wanted him to return as governor at a later date, so it was agreed that Hearn would take a sabbatical until Edscencio’s work was completed.

The application was not only rejected by the ESFA, it is understood the need for funding raised significant concern with the Department for Education.

Asked about this arrangement, Hearn said: “Edscencio worked with the governors to assure that the relationship was open, transparent and declared in the register of interests.”

He only resigned as a governor a few weeks ago, and the FE Commissioner has required the group to stop working with Edscencio.


What future for chair of board leading investigation into principal and deputy?

Theresa Bruton

The future of The Hadlow Group’s top governor could be in doubt after the group refused to comment on whether the rest of the board had confidence in her.

Theresa Bruton has been on the Hadlow College board for seven years and has been its chair since 2016.

She took over from Paul Dubrow as interim chair of the board of West Kent and Ashford College, having previously been vice chair, after Dubrow resigned in February.

She is leading the investigation into Paul Hannan and Mark Lumsdon-Taylor and sits on a number of committees, as well as on an advisory group for Betteshanger Business Park, making her one of the key leaders of The Hadlow Group following Paul Hannan’s and Mark Lumsdon-Taylor’s suspension.

Asked whether the boards of both colleges had confidence in her, a group spokesperson did not address that directly.

They would only say Bruton’s term as chair of the Hadlow College will last until July, when an election for the chair and vice chair will take place.

The WKAC board, meanwhile, will decide on a new chair at its next board meeting.

The spokesperson did say: “We anticipate the FE Commissioner intervention and resulting report will involve a review of the role of the governors.”

According to her LinkedIn page, Bruton previously worked as head of regeneration projects for Kent County Council and as a director of Visit Kent.


More bailouts or bust: FE Commissioner expected to advise this week

The ESFA clawback for claiming funds without permission, combined with the £1.2 million extra visitor centre costs and a failed application for more than £20 million in restructuring funds from the ESFA’s Transactions Unit, has left The Hadlow Group in a precarious financial position.

The FE Commissioner will meet the ESFA on Friday, ahead of a decision on whether the education secretary should continue to financially support the colleges, or let either of them go into administration.

The group has this week confirmed that it is receiving Exceptional Financial Support from the ESFA, which has demanded the return of significant amounts of funding it had previously given to Hadlow College and West Kent and Ashford College.

A Hadlow spokesperson said: “We are working closely with the ESFA to ensure we are able to meet all of our liabilities, while not compromising on the quality of the courses currently on offer at any of the Hadlow Group colleges or sites.”

Damian Hinds, the education secretary, could either finance a recovery, by loaning them money and making the college sell some of its 300-plus acres of land, or he could call in the administrators.

This would mean Hadlow College and West Kent and Ashford College could become the first to fall under the new insolvency regime, which came into force on 31 January.


Auditing firms under the microscope in light of allegations

Questions are being asked about the two college auditors for The Hadlow Group, in light of the swirling allegations about financial irregularities.

Macintyre Hudson, the internal auditor, and RSM, the external auditor, were both asked whether either of them were investigating their role at the colleges; whether they believed they had performed their roles as auditors properly; and whether they think their own auditors failed in any way.

A spokesperson for RSM said: “It would be professionally inappropriate for us to comment on this matter.”

Macintyre Hudson declined to comment on those questions and on whether it would be re-employing Mark Lumsdon-Taylor, the deputy principal of The Hadlow Group, who resigned before being suspended last month.

He was brought in as a “troubleshooter” to help balance the books and, according to his LinkedIn page, he stopped working for Macintyre Hudson in February 2003.