The government has come under fire from successful college leaders after a series of FE Week freedom of information requests revealed exactly how £111 million of bailout funding has been spent.

Four colleges struck secretive Fresh Start deals with the government, the largest of which was for £54 million at Hull College Group.

Each deal, agreed by the ESFA Transaction Unit and funded from a Treasury ‘restructuring fund’, included millions to write-off bank and government loans.

“I knew it was a big figure, but this goes way beyond a bailout.”

Hull College for example, received close to £2.5 million to write off bank loans and a further £24 million to write off the government loan, known as exceptional financial support.

Mike Hopkins, principal at South and City College Birmingham, described the debt-write offs for “failing colleges” as “incredible”.

And we now know the deals also included huge sums of capital funding, for building upgrades as well as IT hardware and software.

In the case of Cornwall College, of the £30 million bailout, close to £7 million has been spent on capital, including IT hardware and software.

Chris Todd, chartered accountant and principal of Derwentside College, described the sums as “staggering” and “handing out almost £4 million to fund IT upgrades and paying off debts of over £20 million does not strike me as a good, or appropriate use of public funds”.

“I know we need to protect the students during a recovery, but when are we going to stand up as a sector and challenge this?” he added.

And a third principal that did not want to be named said: “While I support intervention and financial support to ensure students are looked after, it does seem extraordinary that in a climate where no college has enough money a failing college is made debt free, given millions for IT and money for capital.

“I knew it was a big figure, but this goes way beyond a bailout.”

A Department for Education summary of restructuring fund spend shows in total close to £450 million had been spent on bailouts by the end of the last academic year and ESFA accounts reveal more than £100 million in loans have also been written-off.

The DfE has defended the use of public funds for bailouts, with a spokesperson telling FE Week: “Restructuring facility funding was provided where there was no alternative.

“In cases where the level of debt was assessed as unsustainable, debt was replaced with restructuring facility funding.

“Where the future sustainability of a college has been affected by the postponement of investment in the estate, this funding was provided for essential works, including IT upgrades.”

But it seems the ESFA deals were not so sweet for successful colleges encouraged to merge.

Hopkins said: “It is well known that we were underfunded as the first college through the area review merger process. As a consequence our debt levels, that we were required to begin the merger with, are significantly in excess of the maximums deemed appropriate in the sector and well in excess of the banks requirements.

“This has meant that we are unable to get bank support and has inhibited our investment, despite being a good college. We have been told that despite the original deal being wrong, as accepted by the ESFA, they cannot pay off the £5 million loan we were required to take. Therefore I find it incredible that millions can be found to pay-off the debts for failing colleges.”

“When are we going to stand up as a sector and challenge this?”

And in the case of Hadlow College Group, where debts are still being added up and likely to reach close to £100 million, the government pulled the plug and called in an education administrator for the first and so far only time.

Several other leaders at successful colleges shared their reactions anonymously.

One college principal told FE Week: “I can’t see how such levels of support are offered to some but not others can ever be fair. In what ways can such large bailouts and infrastructure support, be justified to some colleges but not others?”

Another said: “I think in fairness terms it would be good to know how many other deals got this kind of investment. I suppose where it stings is that others of us are running very tightly managed ships, making compromises and costs cuts because of funding constraints and yet learners in Cornwall will be better served as a result of the failure – that’s the bit that doesn’t sit right in terms of public purse.”

Todd concluded that “we need a system that stops this from happening in the first place, and that rewards the best colleges.”

A minister has warned a college that it could go bust next year if learner losses are not reversed and the sale of a campus is “delayed further”.

Lord Agnew wrote to Warrington and Vale Royal College chair Mervyn Ward last month with the concern following intervention from the FE Commissioner Richard Atkins which found it is at “significant risk of insolvency”.

Atkins’ report, published today, said there are “no major concerns” around the governance and leadership of the college, as processes and clerking arrangements “are good”.

But they face “several key challenges”, the most significant of which concerns a “very weak financial position and a need to generate funds through land sales”.

The college controversially closed its campus in Hartford, Cheshire, last year. According to a BBC report from 2018, £10 million was spent on brand new buildings for the site in 2012. More than 75 jobs were put at risk.

It included a construction skills centre, sports facilities and performing arts building with auditorium.

Warrington and Vale Royal College has been trying to sell the site since 2018. FE Week has asked the college for the current state of the sale, and reasons for why it has been delayed.

Agnew’s letter said the “importance of this sale to ensuring the future viability of the college cannot be overstated and I advise you to prioritise its successful completion and to continue making robust financial preparations to maintain solvency should the sale be delayed further”.

Several other colleges have had to sell-off campuses to balance the books in recent years, including Cornwall College Group and Birmingham Metropolitan College. All of them were met with opposition from their local MP.

Warrington and Vale Royal was formed from a merger between Warrington Collegiate and Mid Cheshire College (MCC) in 2017 – a task which “proved to be highly challenging”, according to Atkins’ report.

There was a “huge loss of learners from MCC (around 900 students aged 16 to 18) which started prior to 2015/16 but has accelerated since the merger to a position where student numbers across both the former MCC sites are below 400”.

“Falling student numbers and income together with inherited challenges from MCC have put significant cash pressures on the merged college, despite staff restructures seeking to align costs to income,” the report added.

Agnew said the “significant and continuing loss of learners from the former Mid-Cheshire campuses is an extremely concerning trend which the senior leadership team must address with immediate effect”.

He added: “The FE Commissioner’s report confirms that the college is in a very weak financial position and is at significant risk of insolvency by 2020/21 unless appropriate steps are taken to secure the liquidity of the college.”

Atkins’ report said there was a “significant deficit forecast” in 2018/19, the college’s accounts for which are yet to be published. As a result, the FE Commissioner recommended that the governing body “must insist” on a “break even or better” budget for 2020/21.

A spokesperson for the college said: “Like many other FE colleges across the country, Warrington and Vale Royal College has experienced continued financial challenge and the ESFA have issued a financial notice to improve for 2017/18 in the context of a more stringent intervention regime that came into force in April 2019.

“The college has been working closely with the ESFA and the FE Commissioner team to monitor and improve the financial health of the college and will continue to do so until the college is in financial recovery and the notice is lifted.”

The FE Commissioner’s report said the college has suffered from low student recruitment because of “poor quality provision” on offer.

During his visit, staff also highlighted “high levels of sub-contracting with a low contribution from in-house provision” as another reason for the structural deficit.

The chair reported to the FE Commissioner that the governors were “aware of the need to swiftly determine and implement a future strategy that addresses the significant decline in student numbers at the MCC former sites and the inability of the new college to maintain financial stability whilst supporting an estate footprint that far outweighs demand”.

Warrington and Vale Royal College was graded ‘good’ by Ofsted in its first full inspection since the merger in November 2019.

A college that is currently investigating an unexpected £6 million deficit is set to be downgraded by Ofsted from ‘outstanding’ to ‘requires improvement’.

It is the latest blow to Gateshead College, which has also seen its high-profile principal and chair quit in recent weeks.

The college announced to staff last Friday that it received a preliminary grade three after a visit from the education watchdog in late January.

A spokesperson said they were unable to comment on Ofsted’s verdict until the findings are made official and its report has been published.

FE Week understands that management and leadership was the key area that brought the college’s rating down. Staff are understood to be angry, as they believe the overall grade is not a fair reflection of student performance or teaching provision.

Ofsted was drafted into Gateshead, which was given a grade one in 2015, after the college discovered a shock £6 million shortfall in September – just weeks after its finance director went on sick leave.

FE Week understands the results of an external forensic investigation into the cause of its current financial position was scheduled to be presented to the executive at the college this week.

Gateshead received a financial notice to improve from the Education and Skills Funding Agency last month after it had “been assessed as experiencing serious cash flow pressures”. The college is now in formal intervention.

The independent audit into the deficit had been commissioned by the college’s ex-chair, John McCabe.

He resigned last month, after just six months in the role, “following discussions with the FE Commissioner about what the college needed right now”.

The former highest-paid principal in the country, Judith Doyle, also retired from Gateshead with immediate effect on December 31.

A spokesperson for the college said the decision to bring forward her intention to retire was “hers, in the belief that it was in the college’s best interests [for her] to step aside now, enabling the new three-year plan to be delivered by the team with the support of the ESFA and FE Commissioner”.

Doyle was the highest-paid principal in the country in 2017/18, when she received a salary of between £340,001 and £350,000.

The college’s financial statement for the year ended July 31, 2018 also showed six other key management staff were paid between £110,001 and £190,000.

Former deputy FE commissioner John Hogg was drafted in as the new chair while deputy principal Chris Toon took over as acting principal.

Toon announced a redundancy consultation was underway in January, with 26 jobs at risk – to help “address some short-term financial pressures the college is facing at the moment”.

He said the job losses would mainly be within business support areas, adding that a voluntary severance scheme had been opened “to mitigate as far as possible the number of compulsory redundancies”.

The college previously told FE Week a “highly experienced interim financial director” was appointed before Christmas, and that it was considering “options for short-term funding loans”.

It was also confirmed that a new three-year financial plan is hoped to return Gateshead College to surplus by 2020-2021.

It recorded a surplus of £748,000 in 2017-18, according to its latest accounts.

The financial objectives for 2018/19 had included achieving a surplus of £535,000 and continuing to improve the college’s financial health score to reach ‘outstanding’.

Two sixth form colleges have been declared ‘outstanding’ by Ofsted, with one retaining their top grade after more than a decade without inspection.

Meanwhile, a publicly-owned private provider has dropped to a grade three after nine years as a grade one.

After its last inspection in 2008, Peter Symonds College yet again achieved a grade one in all areas of its provision.

Most of its 4,200 students achieve high grades in their A-levels and are “well-prepared for their aspirational next steps to prestigious universities,” inspectors found.

College leaders and managers place a “very strong” emphasis on maintaining the wellbeing of their staff by allowing them to take part in activities which balance out their working lives like yoga and pilates.

Resultingly, staff feel “very well supported and repay managers by promoting the college’s ambitious culture for all its students”.

Elsewhere, Callywith College earned a grade one in its first inspection since converting to a 16 to 19 academy in September 2017.

It teaches 1,081 students, who were found to be “overwhelmingly positive” about all aspects of college life, despite having to travel a considerable distance to attend.

Inspectors found the college had an environment which was “exceptionally supportive and caring” but also “calm and positive” – which allows students to thrive while focusing intently on their learning and personal development.

Safeguarding was considered to be effective, as it was with Peter Symonds.

Greater Brighton Metropolitan College was found to have made ‘significant progress’ in how leaders and managers have trained teachers, especially those who teach levels 2 and 3, to support students, with high needs.

This was after a grade three full inspection found teachers did not have sufficient skills, knowledge or information to be able to meet those students’ requirements.

But since then, leaders have provided mandatory training for teachers so they know what types of support students with high needs may require and how to go about providing this.

Nottingham College, on the other hand, earned a grade three in its first inspection since being formed from a merger of New College Nottingham and Central College Nottingham in 2017.

Too often, inspectors wrote, its managers and staff aim to meet the minimum requirements of qualifications.

St Helens College has also been hit with a grade three, despite the interim principal having begun to stabilise it following its merger with Knowsley Community College, which an FE Commissioner report last year found had been underfunded.

Governors need to establish a stable leadership team to create an aspirational culture and ambitious curriculum, the report reads.

Hoople Ltd, a publicly-owned private provider created by Herefordshire Council and Wye Valley NHS Trust, went from a grade one to a grade three this week.

The ‘outstanding’ score was awarded in 2011 to Hoople, which holds contracts with the government to deliver apprenticeships and study programmes and does so to 46 apprentices and 22 learners.

The apprentices were studying a curriculum which inspectors did consider to not “consistently challenge them and enable them to reach their potential”: it is often too focused on achieving qualifications, rather than their personal development.

Independent provider Absolute HR Solutions also received a grade three, partly because “too many” apprentices have withdrawn early.

But inspectors complimented leaders and managers on their clear strategic vision and said the 34 apprentices receive good support from staff.

Agincare Group, a care provider with 78 apprentices, was also handed a grade three as trainers and assessors have focused too much on “unchallenging tasks” which apprentices needed to complete, instead of setting work which makes them think hard.

Apprentices, especially those with prior experience, do not always find the work sufficiently demanding, the report reads.

Employer provider Medivet received a grade three also, for its provision to 161 apprentices.

But leaders were found to have a good understanding of the skills required by the industry, and staff enable learners to cumulatively develop knowledge and skills.

Yet too many of them were making slow progress towards qualifying as registered veterinary nurses.

DART Limited and Straight A Training Limited both maintained their ‘good’ grades at a short inspection this week.

And East Surrey College, GTG Training, Welcome Skills, Pentland Assessment Centres and Urban Education and Training Group all made ‘reasonable progress’ in every area of a monitoring visit.

GFE Colleges	Inspected	Published	Grade	Previous grade
East Surrey College	23/01/2020	06/02/2020	M	2
Greater Brighton Metropolitan College	23/01/2020	07/02/2020	M	3
Nottingham College	17/01/2020	07/02/2020	3	N/A
St Helens College	17/01/2020	07/02/2020	3	N/A

 

Independent Learning Providers	Inspected	Published	Grade	Previous grade
Absolute HR Solutions Ltd	23/01/2020	06/02/2020	3	M
Agincare Group Limited	17/01/2020	06/02/2020	3	M
DART Limited	14/01/2020	03/02/2020	2	2
GTG Training Limited	22/01/2020	07/02/2020	M	3
Hoople Ltd	23/01/2020	04/02/2020	3	1
N A College Trust	16/01/2020	05/02/2020	2	N/A
Straight A Training Limited	23/01/2020	05/02/2020	2	2
The Apprenticeship College Ltd	10/01/2020	07/02/2020	2	M
Pentland Assessment Centres Ltd	09/01/2020	06/02/2020	M	N/A
Urban Education & Training Group Limited	15/01/2020	03/02/2020	M	N/A
Welcome Skills Limited	17/01/2020	05/02/2020	M	M

 

Sixth Form Colleges (inc 16-19 academies)	Inspected	Published	Grade	Previous grade
Callywith College	14/01/2020	07/02/2020	1	N/A
Peter Symonds College	17/01/2020	04/02/2020	1	1

 

Employer providers	Inspected	Published	Grade	Previous grade
Medivet	10/01/2020	06/02/2020	3	M

 

A college has put £500,000 out to tender in an attempt to achieve funding targets before August – despite rules that ban subcontracting to meet “short-term funding objectives”.

One provider membership organisation said the case has set “alarm bells ringing”, but the Education and Skills Funding Agency has refused to say whether it will take action over what appears to be a clear breach of funding rules.

According to a tender published on the government’s contracts finder website last month, Croydon College is after subcontractors to deliver half of its total ESFA adult education budget funding for five months.

As soon as this tender appeared alarm bells were ringing

The contract, worth £475,000, will run from February 28 to July 31 with “no scope to carry forward any funding to 2020/21”. Bids must be submitted by February 10.

The college, which will charge a 20 per cent management fee, also does not specify what type of provision it is looking for the subcontractor to deliver. It says only that the “delivery target group” is adults who live in non-devolved funding areas of England and within a 50-mile radius of the college’s main site.

This, together with the short duration and last minute nature of the tender, suggests it is a tactical move to use up unspent moneys from the adult education budget.

Funding rules state that providers “must not subcontract for delivery to meet short-term funding objectives” and an ESFA spokesperson said they should have “clear curriculum plans for the delivery of their subcontracted provision”.

The college did not deny that it was embarking on tactical subcontracting, but blamed the move on “unintended consequences of devolution on access to education and training for our local community” (see full response below).

The Greater London Authority took control of the AEB for providers in the capital in August 2019.

Croydon College received £3,350,056 from the GLA to deliver the provision in its local area this academic year, but also received a direct ESFA contract worth £936,000 for delivery of the provision outside London.

The college claims to have used up all of its GLA funding for the AEB, and has even requested more of it for this academic year. It is the out-of-area funding that the college is struggling to use up.

However, the college, which has a history of “distance learning” through subcontracting, would have known about its ESFA allocation since around this time last year. It refused to comment on why the procurement was so last minute.

Association of Employment and Learning Providers boss Mark Dawe told FE Week that as “soon as this tender appeared alarm bells were ringing”.

He said it is “finally time” for the government to “reallocate the tens of millions of grant money directly to those who do the work”.

“Let’s stop avoiding the elephant in the room and from August 2020 fund all subcontractors directly and ensure that all the money reaches the learner rather than brokers and spurious management fees,” Dawe added.

It comes amid a fresh crackdown on subcontracting by the government.

A consultation on radical rule changes was launched this week. It states that “entering into subcontracting arrangements for financial gain” would not be acceptable.

ESFA chief executive Eileen Milner sent a sector-wide letter on October 3 which said: “I am asking that you review your current subcontracting activity and satisfy yourself that it is purposeful, appropriate, and provides added value to learners. We must be confident that you are managing and overseeing it in line with our requirements.”

It went on to warn: “I want to make it clear that where poor subcontracting practice is evident to us we will act decisively.”

The ESFA said Croydon College had responded to Milner’s letter to state that they were complying with the rules.

The Department for Education told FE Week that it will take action against providers who are not compliant with funding rules, but stopped short of commenting directly on Croydon College’s case.

A spokesperson said: “We expect any college making subcontracting decisions to be able to evidence that the subcontracting is primarily for the benefit of students.

“All providers should have clear curriculum plans for the delivery of their subcontracted provision and these should fit with their overall curriculum strategy – we would expect to see this feature in their declarations to us. If there is a significant deviation from their declaration we would explore the reasons for that with the college.”

 

Croydon College’s response in full

“In January 2020 Croydon College commenced a procurement exercise for delivery of up to £475,000 of activity to learners who are not resident in any of the devolved areas of adult education budget funding within a 50-mile radius of the college.

The devolution of the AEB from 1 August 2019 used geographical delivery from the 2017/18 academic year as a basis for funding allocations. In the 2017/18 academic year, prior to the arrival of the new executive team at Croydon College, approximately 25 per cent of the AEB to the college was subcontracted.

In the 2018/19 academic year under the new leadership a key priority for the college was educating and training our community in Croydon where there is clear levels of demand and need. We were very successful in delivering this priority with an extra c£600,000 of education and training provided to our local community in Croydon. It is greatly disappointing to us that this change in delivery pattern has not been recognised in our 2019/20 GLA allocation, as the methodology for deciding the level of devolved allocation to the College was based on the 2017/18 academic year.

The college has written to the ESFA, the GLA, Croydon Council and its MP about the unintended consequences of devolution on access to education and training for our local community. In order to try and deliver the volume of education and training that we were able to for our local, close community the college has applied for and will hear at the end of February whether it has been successful in its bid for increased GLA funding for 2019/20 (maximum 10 per cent).

The college has commenced its own provision of distance learning and short courses during 2019/20 in order to deliver its non-GLA grant and is working hard to develop our capacity in nearby areas of Surrey, Sussex and Kent alongside high quality partners. This will be used to support our apprenticeship delivery. The college expects to be in a position meet the full level of our non-devolved GLA funding directly in future years once it has built its own capacity.”

Skills advisory panels have been handed another £2.7 million to identify local skills gaps and tackle them, education secretary Gavin Williamson has announced.

The 36 panels (SAPs) will receive £75,000 each and use the money to produce action plans and reports, highlighting how they have supported local providers and employers to address local skills priorities.

They will also provide evidence to support Williamson’s Skills and Productivity Board, an expert panel led by an industry leader which is set to be established later this year.

The new cash comes after FE Week reported in January the Department for Education was working on secondary legislation, an FE Bill, which could include a bigger role for SAPs in influencing which courses will be prioritised and funded in their area.

It could mean colleges and providers lose their deciding power over which courses are run, with SAPs providing advising national and local government on the sectors to prioritise in their region.

Announcing the funding today, Williamson said: “SAPs will play a key role in our drive to make sure every community can access the skills they need.

“That’s why we are providing an additional £75,000 so each SAP can go further in identifying local skills gaps, take action to address them as well as providing evidence to support the Skills and Productivity Board when it is established later this year.”

SAPs – groups of 15 to 20 made up of employers, providers and local authorities based in each mayoral authority and local enterprise partnership – were initially handed £75,000 each last year to undertake labour market analysis.

The money, £2.7 million in total, had to be spent by next month on hiring additional analysts, training existing ones and undertaking more analysis to establish employers’ needs – most mayoral combined authorities FE Week spoke to in January had done this.

The Department for Education told FE Week the new grants would be funded from the Skills Advisory Panels Programme budget, and would be for the April 2020 to March 2021 financial year.

The prospect of an enhanced role for SAPs was welcomed by the LEP Network last month, with a spokesperson saying connecting them to apprenticeships is “smart thinking and a natural development of exploiting labour market insight to help focus on areas of employer need – and that can only be a benefit to local communities”.

The news of this latest funding boost marks an upturn in SAPs fortunes, which were heralded in the Conservative Party’s 2017 manifesto and featured in the government’s ensuing Industrial Strategy, but absent from the party’s manifesto for last year’s election.