ESFA fires warning shot to colleges over related party transactions

Colleges have been told to improve their reporting of related party transactions after the Education and Skills Funding Agency found cases where conflicts had not been properly declared.

In a letter to accounting officers today, the ESFA’s interim chief executive John Edwards warned college bosses the issue is “key” to ensuring public confidence in the sector.

He said in a “minority of cases”, it “hasn’t been clear from the disclosure itself that the process for managing potential conflicts of interest had been fully observed”.

For example, “individuals with an interest not always completely stepping aside from the awarding of contracts”.

While Edwards does not name the specific cases, he stated that in some instances the ESFA has had to run “further checks”.

Colleges must disclose any transactions with organisations and individuals they have a close association with in their financial statements every year.

One case of non-disclosure the ESFA might be referring to is Hull College, which partnered with a firm called 8-Bit Symphony to run its first ever music event in 2019. 8-Bit Symphony was co-founded by the college’s executive director for marketing and innovation, who was also the husband of the then-chief executive of the college. The contract was not declared in the college’s 2018/19 accounts.

‘Substantial number’ of OfS non-compliance cases

Edwards’ letter also warned colleges to check their compliance with Office for Students conditions of registration after finding a “substantial number” of issues in 2019/20.

He said: “Colleges that are registered with OfS are required to comply with their conditions of registration, including the requirements of the OfS accounts direction.

“This includes some requirements over and above those required by the ESFA.

“We have found that for the year 2019 to 2020 a substantial number of registered colleges had not fully complied with these requirements. I expect that colleges will fulfil all requirements of the OfS accounts direction for the year 2020 to 2021.”

You can read the letter in full here.