Delayed Ney report into financial oversight of colleges still with ministers

The Department for Education said this week the independent report into their own oversight of college finances will be published “as soon as possible”.

The former skills minister, Anne Milton, commissioned Dame Mary Ney to conduct the review after the shock collapse of the Hadlow College Group revealed serious failings by the funding body to spot warning signs.

It is understood Ney submitted the report on time and it was due for publication last December.

But a spokesperson for the DfE told FE Week today: “Ministers are currently considering the report from Dame Mary Ney and we will publish the report and the Government’s response as soon as possible.”

As previously reported, it is understood that Ney will heavily criticise the Education and Skills Funding Agency for the calculations it uses to determine the financial health scoring and grading. She is expected to argues that had it been more robust, it could have intervened in college failures, such as that of Hadlow, much sooner.

Colleges self-grade using the agency’s scoring system by inputting three measures: one based on cash, another on debt and then margin.

These metrics then formulate an overall financial health grade of ‘outstanding’, ‘good’, ‘requires improvement’ or ‘inadequate’.

Hadlow College came under investigation by the government once financial irregularities were uncovered, including submitting partial information to the agency so it would generate a ‘good’ financial health rating.

But the FE Commissioner found that had the ESFA looked at Hadlow’s published accounts, they would have rated the college as ‘inadequate’.

Ahead of Ney’s report being published, the system was also criticised by former Skills Funding Agency deputy director Tony Allen, who said when he ran the SFA’s Large Companies Unit: “We had a much better sense of what was going on.”

“We advised and supported, managed risks and dealt with issues as they were arising. Face-to-face support by individual and group methods headed off many early problems.”

But, owing to DfE funding cuts in 2016, this “supportive” approach was dropped in favour of what Allen summarised as “a service desk approach”, which he said was unusual in the public sector as it allowed organisations to be given millions of pounds and told to “get on with it”.

The ESFA has already made changes to the way in which it oversees college finances, seemingly aware its past approach had proved troublesome.

Last September, it was announced college financial returns, historically submitted at least twice a year, will from then on be consolidated into a single annual return.

This, the agency claimed, would help college governors, as well as the ESFA, “spot signs of declining financial health and ensure preventative action can be taken at an earlier stage”.

And in December, the ESFA published a new integrated financial model for colleges, in place of the agency’s modelling for financial plans, financial record, and cash flow forecast.

The National Audit Office has confirmed to FE Week they remain on track to publish the findings from their own enquiry, which is similar to Ney’s, this summer.