Hadlow Group colleges scandal: The FE Commissioner’s 6 key findings

The FE Commissioner reports into a college group that has been engulfed in a financial scandal have been published this morning.

It comes a day after one of them, Hadlow College, was placed into education administration by a High Court judge.

The sister college, West Kent and Ashford (WKAC), is not affected by the ruling, although it is also under a financial health notice of concern.

A letter from the skills minister Anne Milton was published alongside today’s reports and says both colleges are in a “perilous” position, and they have been placed in “supervised college status”.

Here are six key findings from the commissioner’s reports into the two colleges:

 

  1. Both boards failed in their fiduciary duty, putting the ‘sustainability of both colleges and learners at risk’

Governance failures across the board put learners at risk, the commissioner found.

Several of the colleges’ functions are governed by joint-committees, with members drawn from both colleges’ boards.

The boards only found out shortly before the commissioner visited about the “extremely serious” financial situation the colleges and the other Hadlow Group organisations were in.

However, the report found this interconnectedness of membership led to a few individuals having “significant sway” over decisions affecting every organisation.

In addition to that, there was no qualified accountant on the board, and “insufficient” financial and accountancy skills.

The report pours scorn on the “peripatetic” clerk, Jonathan Allen, who works across both colleges’ boards and the group and college committees. This is on top of his work with a number of other large FE colleges and a MAT.

Allen was found to have “failed to address matters of good governance”, leading to “poor and inappropriate decision-making” and inappropriate governance.

 

  1. How the Hadlow Group ran out of money

Although the two colleges have shared governance and leadership since Hadlow adopted WKAC from K College, they never merged and the overall body for the two colleges and subsidiary companies, the Hadlow Group, is not a legal entity.

The FE Commissioner’s area review in 2017 recommended Hadlow remain standalone, but this was later revised to recommend it merge with WKAC, which they refused to do.

A subsequent area review-related joint audit between the commissioner and the ESFA found the college had made exceptionally high claims for Additional Learner Support, which formed the basis of an ESFA audit in March 2018 and June 2018.

In March 2018, the commissioner met with the chairs of both colleges to confirm he would be recommending they merge. They accepted, with a target date of January 2019, and requested £24 million from the restructuring fund.

This request was rejected, partly due to the lack of transparency over intercompany transactions at the colleges.

Hadlow’s deputy principal Mark Lumsdon-Taylor then alerted the ESFA that both colleges would need exceptional financial support.

 

  1. Senior post holders cut the executive teams out of decision-making

The executive team members that the FE Commissioner’s team met when they visited in February complained they had been cut out of key decision-making, and had only recently become aware of the financial issues plaguing the college.

The principal and deputy principal, Paul Hannan and Lumsdon-Taylor (both of whom have resigned) “regularly made decisions themselves outside of executive and any open discussion – and reacted strongly to questioning or challenge”.

Executive team members had not been given access to important financial information other than their own budgets; and had not been consulted on business partnerships, which had been made by senior post holders, and where curriculum and learner implications had not been properly considered.

One such partnership is the Rosemary Shrager Cookery School at WKAC, which the FE Commissioner’s report gives as an example of a partnership “crafted in isolation by senior leaders”.

 

  1. There had been a ‘breakdown of trust’ between staff

Executive team members also displayed a lack of trust in senior leaders, and there was reports of “inappropriate behaviours” from “one key individual” had not been followed up.

Union representatives the commissioner’s team met also made a number of serious allegations, which, the report says, indicated a breakdown of trust has taken place.

 

  1. Hadlow College could have been in intervention a lot sooner

Hadlow College evaded intervention by the ESFA for 2016/17, when it produced an automated financial health score of good, which did not take into account information about loans.

Had the loans been taken into account, the college would have been scored as ‘inadequate’, meaning they would have been in scope for an FE Commissioner intervention and an ESFA Notice of Concern, both of which did not happen until the end of 2019.

If an ‘inadequate’ had score been generated, governors would have been informed about the “extremely serious” financial situation much sooner.

The “significant and longstanding” concerns regarding the reliability of data could have impacted upon the college’s outcomes and their funding, and meant the report has to include an aside in the ‘outcomes’ section.

 

  1. ‘Unlikely’ Hadlow’s grade one status could be justified now

Hadlow College was graded ‘outstanding’ in an inspection nine years ago, and has not been inspected since, apart from several curriculum and development visits – the last of which took place in 2012.

The college has self-graded as ‘outstanding’ for the past three years.

However, the report argues that given the issues that have emerged about the college’s leadership, management and governance, it is “unlikely” a grade one could be justified for those areas; which brings the college’s self-assessed grade one into question.


HOW FE WEEK EXPOSED IT ALL – A FULL TIMELINE OF THE SAGA:

11 Feb: FE Week broke the news the FE Commissioner had intervened at the Hadlow Group, likely because of its finances; and deputy principal Mark Lumsdon-Taylor had resigned.

14 Feb: We later reported Hadlow College and WKAC principal Paul Hannan had gone on sick leave.

15 Feb: Graham Morley was announced as the interim principal of Hadlow College and WKAC. It was also reported the commissioner’s investigation had been triggered by the group’s application for restructuring funds to the Department for Education’s Transactions Unit.

18 Feb: Hannan and Lumsdon-Taylor were reported as having been suspended, and WKAC chair Paul Dubrow having stood down, with Hadlow chair Theresa Bruton taking over from Dubrow.

1 Mar: Hadlow Group colleges’ boards in “meltdown” as governors step down, the commissioner loans one of his deputies to stand-in as chief financial officer, and it was found Hadlow had not had an accountant on its board.

8 Mar: FE Week revealed the truth behind the investigation into Hadlow College, which told how Lumsdon-Taylor had been caught altering emails from the ESFA to justify claiming taxpayer funding, and the college had failed in a bid for £20 million from the ESFA. It was also revealed the college had failed to sell Betteshanger Park, an organisation within the Hadlow Group, for £4 million and had to spend £1.2 million on new foundations.

11 Mar: Theresa Bruton resigns, as did two other governors. The ESFA and commissioner’s team met the Friday before, ahead of a decision on whether the education secretary should continue to financially support the colleges, or let either of them go into administration.

15 Mar: FE Week exposes how the DfE bailed out WKAC was ordered by the High Court to pay £1 million that was owed to BAM Construction for the construction of a state-of-the-art teaching building in November.

18 Mar: Paul Hannan resigns.

19 Mar: Ex-Association of Colleges boss Martin Doel and mergers and acquisitions expert Andrew Baird are announced as the new chairs of WKAC and Hadlow, respectively.

26 Apr: ESFA takes control of investigation into Lumsdon-Taylor, who is also being evicted from his on-campus flat. But the college admits to paying for the first year of a Master’s degree course he is on at Manchester Metropolitan University.

15 May: Hadlow and WKAC are handed notices to improve by the government after being found to have ‘inadequate’ financial health.

17 May: FE Week broke the news Hadlow College had asked the education secretary, Damian Hinds, to apply to put it into education administration. A financial advisory firm was contracted to shop around for buyers of the group’s assets, including Hadlow and WKAC.

20 May: Hadlow College confirmed it was looking to sell Betteshanger Park, and intends to find a buyer by 31 July.

22 May: The High Court grants the education secretary’s application, and Hadlow College becomes the first FE body to go into education administration.

23 May: FE Commissioner publishes intervention reports into Hadlow and WKAC.