A college that is currently investigating an unexpected £6 million deficit is set to be downgraded by Ofsted from ‘outstanding’ to ‘requires improvement’.

It is the latest blow to Gateshead College, which has also seen its high-profile principal and chair quit in recent weeks.

The college announced to staff last Friday that it received a preliminary grade three after a visit from the education watchdog in late January.

A spokesperson said they were unable to comment on Ofsted’s verdict until the findings are made official and its report has been published.

FE Week understands that management and leadership was the key area that brought the college’s rating down. Staff are understood to be angry, as they believe the overall grade is not a fair reflection of student performance or teaching provision.

Ofsted was drafted into Gateshead, which was given a grade one in 2015, after the college discovered a shock £6 million shortfall in September – just weeks after its finance director went on sick leave.

FE Week understands the results of an external forensic investigation into the cause of its current financial position was scheduled to be presented to the executive at the college this week.

Gateshead received a financial notice to improve from the Education and Skills Funding Agency last month after it had “been assessed as experiencing serious cash flow pressures”. The college is now in formal intervention.

The independent audit into the deficit had been commissioned by the college’s ex-chair, John McCabe.

He resigned last month, after just six months in the role, “following discussions with the FE Commissioner about what the college needed right now”.

The former highest-paid principal in the country, Judith Doyle, also retired from Gateshead with immediate effect on December 31.

A spokesperson for the college said the decision to bring forward her intention to retire was “hers, in the belief that it was in the college’s best interests [for her] to step aside now, enabling the new three-year plan to be delivered by the team with the support of the ESFA and FE Commissioner”.

Doyle was the highest-paid principal in the country in 2017/18, when she received a salary of between £340,001 and £350,000.

The college’s financial statement for the year ended July 31, 2018 also showed six other key management staff were paid between £110,001 and £190,000.

Former deputy FE commissioner John Hogg was drafted in as the new chair while deputy principal Chris Toon took over as acting principal.

Toon announced a redundancy consultation was underway in January, with 26 jobs at risk – to help “address some short-term financial pressures the college is facing at the moment”.

He said the job losses would mainly be within business support areas, adding that a voluntary severance scheme had been opened “to mitigate as far as possible the number of compulsory redundancies”.

The college previously told FE Week a “highly experienced interim financial director” was appointed before Christmas, and that it was considering “options for short-term funding loans”.

It was also confirmed that a new three-year financial plan is hoped to return Gateshead College to surplus by 2020-2021.

It recorded a surplus of £748,000 in 2017-18, according to its latest accounts.

The financial objectives for 2018/19 had included achieving a surplus of £535,000 and continuing to improve the college’s financial health score to reach ‘outstanding’.