The Skills Funding Agency is considering whether a London college should face financial investigation after a shock £4.1m black hole emerged in its books.

Ealing, Hammersmith and West London College confirmed it was involved in “constructive discussions” with the agency after auditors discovered an “unexpected deficit”. A leaked internal report allegedly puts forward the possibility “data falsification” and called for a fraud probe.

An agency spokesperson told FE Week it was working with the college and said it had not ruled out a further investigation.

He said: “We take any allegations of financial irregularity extremely seriously and will act in cases where there is sufficient evidence to do so. In this particular case, we are working with the college to determine if any further investigation is needed.”

The 25,000-learner college, which has been allocated £21.4m from the agency for 2014/15, including more than £18m from the adult skills budget, said the deficit had been identified last year.

A college spokesperson said: “The college suffered an unexpected deficit in its finances in the last financial year, ending July 31, 2013. The audited accounts, as audited by Baker Tilly, the college’s external auditors, show an operating deficit of £4.1m.

“Consequently, the governors commissioned the college’s internal auditors Grant Thornton to undertake an extensive review to understand how this had come about.

“The outcome of this initial review led on to a review of management information systems and processes in the college.
“Changes to financial systems and processes have been made as a result of this review and are continuing to be made.”

The college has ruled out wrong-doing in connection with the deficit, after a draft version of a report by Grant Thornton was apparently leaked to London’s Evening Standard newspaper. It said: “It is critical that concerns around falsification of data and the existence of an additional bank account (that was not known to senior team) are subject to urgent fraud investigation.

“While minor discrepancies could be attributed to human error, and we have not been able to obtain conclusive proof, the number of changes and their magnitude…suggest the possibility of data falsification.”
But the college has claimed the final version of report from Grant Thornton, handed to the college in September last year, ruled out any wrongdoing.

A spokesperson said: “The [Evening Standard] story refers to a leaked document which is a draft internal audit report by Grant Thornton from last summer but not the final audit report which was completed in September 2013. That final report highlighted the auditors ‘had not identified any conclusive evidence of fraud’.

“Led by interim principal Dr Elaine McMahon CBE, the college is working on a viable financial action plan and continues to have constructive discussions with the Skills Funding Agency.”

The college said it would not release the final report, claiming it was a “confidential, internal audit”.

Further evidence has emerged that the government already favours GCSEs, with Skills Minister Matthew Hancock having described Functional Skills as “stepping stone” qualifications.

Functional Skills are set to be dropped as the accompanying qualification for apprenticeships in favour of tougher new maths and English GCSEs from 2017 — but they are still supposed to remain equivalent to GSCEs until then.

However, a parliamentary written response from Mr Hancock referred to Functional Skills as “stepping stones” to GCSEs.
He said: “Students [aged 16 or over] whose initial assessment shows they are not ready to re-take GCSEs may take one of the interim qualifications as a stepping stone to GCSE, which can include Functional Skills and free-standing mathematics qualifications recognised by the funding condition.”

Sue Southwood (pictured), programme manager for the National Institute of Adult Continuing Education, said: “While GCSE is seen as the level two ‘gold standard’ by the government, Functional Skills may be a more appropriate level two qualification for many adults to achieve.

“For instance, while GCSE English requires an appreciation of literature and poetry, some adults will want a syllabus that helps them to, for instance, write emails or read reports.

“It’s terribly important these qualifications retain their value so adults who put so much effort in to achieving them are not faced with still not being good enough.”

Mr Hancock’s comments came just weeks after the DfE said it would not accept Functional Skills as equal to GCSEs for early years’ educator training courses.

The DfE claimed its rejection of Functional Skills would “raise the overall quality of literacy and numeracy skills of those entering the workforce”.

Stewart Segal, chief executive of the Association of Employment and Learning Providers, said: “We have to retain Functional Skills. The DfE’s latest GCSE entry requirements for early years’ educators are a major concern in terms of acting as an unnecessary barrier to young people entering the profession. It could be the thin edge of the wedge and we have already raised our concerns with government.

“Employers consistently tell us that they like Functional Skills because it develops skills that can be applied in the workplace.”

But Joy Mercer, director of policy for the Association of Colleges, said: “We remain concerned that GCSE is seen as a standard for competence in English and maths when Functional Skills does the same.

“Colleges are clear what their obligations are within study programmes. Students should be aiming for a GCSE but must be able to achieve a qualification that meets their needs and their future job ambitions.”

A large London college has had its appeal against an Ofsted inadequate grading thrown out.

LeSoCo, formed through a merger of Lewisham and Southwark colleges in 2012, was warned by inspectors in January about English and maths provision.

However, issuing an appeal, principal Maxine Room argued the criticism had overshadowed the rest of the college’s provision and contributed unfairly to the grade four result. But her appeal was rejected by the education watchdog.

It declined to comment, but a college spokesperson said: “We are disappointed that our appeal was not upheld.

“However, we know that we need to deliver a range of improvements and have been working with pace to deliver on the Post Inspection Quality Action Plan.”

It comes as a re-inspection report by Ofsted this month warned success rates in functional English and maths were still “too low”.

However, it acknowledged the college was working to correct issues.

The college spokesperson said: “We will continue to make improvements to our teaching and learning to ensure that our learners’ success is guaranteed.”

The National Minimum Wage for apprentices is set to rise by 5p an-hour to £2.73, the Department for Business, Innovation and Skills announced today.

The 2 per cent rise will come into force on October 1.

The move was recommended by the Low Pay Commission after the government asked how it could increase the lowest wages without affecting employment.

Business Secretary Vince Cable said: “The recommendations I have accepted today mean that low-paid workers will enjoy the biggest cash increase in their take home pay since 2008.

“This will benefit more than one million workers on National Minimum Wage and marks the start of a welcome new phase in minimum wage policy.

“The independent Low Pay Commission plays a crucial role in advising the government about the minimum wage. This is why I asked them to look at how we could restore the real value of the National Minimum Wage as the economy recovers.

“The LPC’s new forward guidance gives us a much better understanding of how an economic recovery can be translated into faster and significant increases in the National Minimum Wage for low paid workers, without costing jobs.

“The experts will continue to advise government on future wage rises to help the low paid, and in the meantime I urge businesses to consider how all their staff — not just those on the minimum wage — can enjoy the benefits of recovery.”

The LPC also recommended bigger increases in future than have been seen in recent years.

The adult National Minimum Wage is to rise 19p (3 per cent) to £6.50 an-hour; 10p (2 per cent)  for 18 to 20-year-olds to £5.13; and, 7p (2 per cent) for 16 and 17-year-olds to £3.79.

Adult skills funding rates in 2014/15 are to remain the same as this year, despite a 19 per cent reduction to the adult skills budget (ASB) over the next two years.

The Skills Funding Agency has published its Funding rates and formula document for the next academic year.

It shows rates, which are set per academic year, will remain at the same level as this year, in contrast to Department for Education’s full-time education funding rate for 18-year-olds. It is slashing the rate to 17.5 per cent less than that of 16 and 17-year-olds.

The ASB, which is set per financial year, currently stands at £2,467,875 and is expected to fall 11 per cent to £2,258,311 next year, and then by 19 per cent on the current budget in 2015-16 to £2,004,547.

The document also says that details of monthly cap on earnings, announced in the Skills Funding Statement, “will be published in due course”.