Colleges claw-back warning after audit reveals SFA may have wrongly paid out £50m

Almost £50m of funding may have been wrongly paid out by the Skills Funding Agency last financial year and could be clawed backed from 16 colleges.

A National Audit Office (NAO) report on the SFA’s 2014-15 accounts published this morning has revealed the “irregularity of expenditure”.

It related to payments for capital projects totalling £49.9m made to the 16 FE colleges “in advance of need”, which the SFA may now have to claim back from the colleges following a review.

An NAO spokesperson criticised the SFA for failing to “challenge revised expenditure profiles submitted by colleges sufficiently” before handing out the disputed capital grant payments in February and March, despite “evidence of slippage in the capital programme” in December 2014.

The SFA also failed, according to the NAO spokesperson, to “seek prior approval from HM Treasury for the payments in advance of need, as required by the Treasury’s Managing Public Money.

“The SFA then sought retrospective approval from the Treasury for making the payments which the latter refused on the grounds that it had not sufficiently demonstrated the benefit or value for money from making these payments”.

The SFA’s programme assurance team will now “review the compliance by colleges with the financial programme management arrangements for the College Capital Investment Fund (CCIF),” the NAO spokesperson said.

He added: “If this review identifies that colleges claimed funds in advance inappropriately, the SFA will seek to recover those funds.”

The SFA’s chief executive Peter Lauener will also, the NAO spokesperson said, be commissioning a review by the Government Internal Audit Service into financial management and control arrangements relating to the College Capital Investment Fund (CCIF), following the disputed payments.

The payments were, the NAO spokesperson added, part “of a distribution by the SFA of £143m of remaining capital funds to FE colleges by the end of March 2015”.

Responsibility for public funding of capital projects at FE colleges passed to local enterprise partnerships from the start of the current financial year.

An SFA spokesperson said: “During our year-end audit of expenditure performed by the NAO, it was found that 16 colleges (one with 2 capital schemes) had secured payments in advance of need for capital projects funded by profile through the CCIF, which finished at the end of March 2015.

“This resulted in a qualification of the SFA accounts for the 2014 to 2015 financial year.

She added: “The NAO has said that our accounts have been properly prepared and show a true and fair view, and that except for the capital grant payments, in all material respects the expenditure and income of our accounts has been used for the purposes intended.

“There is no suggestion that these payments were not for agreed capital programmes.

“We will be commissioning reviews of our internal financial management and control arrangements and the compliance by colleges with the financial programme management arrangements for the CCIF.

“If this review identifies that colleges secured funds in advance inappropriately the SFA will, as is our normal process, seek to recover those funds.”

Martin Doel, chief executive of the Association of Colleges, said: “We are confident that all payments were used by the colleges to complete the necessary building work and there is no suggestion from the SFA that this funding has not been used for the purpose intended.

“It is also not surprising that in some colleges such large scale construction projects ran over their original completion dates.”

The 16 colleges which secured pre-payments were Harrow College, Knowsley College, Lewisham and Southwark College, Stoke on Trent College (2 capital schemes), Warwickshire College, Wiltshire College, Bradford, Capel Manor, Colchester Institute, Kendal College, PETROC, Reaseheath College, Sheffield College, Somerset College of A&T, South Thames College and Leeds City College.

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