Poor forecasting and management of an £80 million investment in a new building put a college in “crisis mode” and its future at “significant risk”, the FE Commissioner has found.
Richmond upon Thames College has been placed in supervised college status and it might now need to pursue a merger in order to survive.
In January, the college decided to withdraw from delivering T-levels to “prioritise the development” of its campus after being hit with a financial notice to improve.
The FE Commissioner reports that significant failures in the college’s financial management
The £80 million programme includes a dedicated sixth form centre, a theatre, 3D prototyping laboratory and training restaurant.
Since September 2018, the college has gone through a “very turbulent period” in which the principal, vice principal for finance and enterprise, clerk and deputy principal have left and a new chair, head of governance, two vice chairs have joined.
The FE Commissioner’s team, whose report was published today, did find that the leadership team had now been “significantly, albeit temporarily, stabilised” with the appointment of a number of experienced interims, and praised the new members for implementing a series of measures to change the college’s approach.
Governors were said to feel there was a “seismic shift” in governance in the three months before the visit in October 2019, with frankness of communication and greater transparency over finance and capital build.
They spoke of having been “in crisis mode for much of the last year and said they now looked forward to normalising and achieving revised ways of working”.
Due to substantial advance capital grants and receipts from asset sales, the college currently has “exceptionally high levels” of restricted cash, and further short-term transfers from capital funds were anticipated because of the continuing operating losses in 2019/20.
Some of the funding for the campus redevelopment was based on a “substantial” grant from the Greater London Authority, which had only been notified on the college’s financial position at the time of the inspection and triggered “a number of questions and concerns”.
Moreover, accurate timetabling and rooming was also “urgently required” to manage the decant to the new build, according to the report.
It claimed staff were hopeful that the capital project would address long standing problems with the condition of the estate and out-dated IT facilities but said they also expressed “considerable concern” about the overall scheme and the imminent decant – few felt confident that this had been sufficiently planned.
The FE Commissioner’s team found that budgetary control issues had emerged since May 2019, coupled with increasing concerns about the underlying cash position and losses on core college provision.
It was reported that college financial turnover has halved over the last seven years, in part due to a decision to open new school sixth forms in all of the secondary schools in the borough.
Despite not having any commercial loans, the FE Commissioner expects the college’s financial health to decline from satisfactory in 2017/18 to inadequate, though the team also noted “serious shortcomings in financial management and control during 2018/19 have meant that the full extent of financial underperformance is only now being fully identified”.
The original budget and financial plan submitted to ESFA in August 2019 was criticised for falling “well short of acceptable standards” and revisions were requested.
The college’s draft financial statements also indicated a significant operating loss while pay costs and depreciation charges were found to be over budget.
Richmond Upon Thames recorded a £6.2 million deficit in 2018/19.
This presents significant risks to the college’s working capital
Early indications were that student recruitment was significantly higher this autumn, representing an “important reversal of the recent pattern of decline”.
But the FE Commissioner concluded that this the level of increase may not prove “sufficient” to trigger budgeted in-year growth funding.
A structure and prospects appraisal to “identify options for structural change including merger” is now planned, for implementation by December 2020.
In a letter to the college’s chair, Nick Deeming, following the FE Commissioner’s visit, apprenticeships and skills minister Gillian Keegan said: “The FE Commissioner reports that significant failures in the college’s financial management and control have resulted in the college operating under serious financial pressure.
“In the context of the increasing financial commitments required by the ongoing campus redevelopment project, I am greatly concerned that this presents significant risks to the college’s working capital and its future sustainability.”
A spokesperson for the college said: “Richmond upon Thames College has accepted all of the recommendations in the FEC report.
“This report dates back to October last year and good progress has been made in implementing the recommendations across the last five months.
“Since the time of the FE Commissioner report the college has secured the in-year funding and the necessary reductions in staffing are on track for completion.
“Furthermore, the funding of the capital project has been resolved, with a fully funded budget.”
They added that chair Nick Deeming has this week stepped down. He has been replaced by Department for Education civil servant Ian Valvona, who was also the last chair of Kensington and Chelsea College before it merged last month with Morley College.