A bank has pulled a cash-strapped college’s overdraft facility as the clock ticks for its survival – which rests upon a last-ditch merger.

Southampton City College is currently operating on government bailouts but its 2018/19 accounts were signed off on a “non-going concern” basis and warn that it will run out of cash by October.

It is now in secret merger talks, with the help of the FE Commissioner who conducted a local provision area review last summer, following two failed previous attempts.

The “current intention and most likely outcome” would be for a merger on 1 August 2020 whereupon Southampton City College would “dissolve after the transfer of trade, assets and liabilities at carrying value to another FE organisation”, the accounts state.

If the merger attempt fails then the college would “require additional financial assistance” or go bust. The government has made clear there will be no more long-term bailouts available to colleges following the introduction of the insolvency regime, which allows colleges to shut down for the first time.

Southampton City College received £1.97 million in emergency funding from the Education and Skills Funding Agency last year, £770,000 of which is being treated as a grant, to “enable the college to continue to operate during 2019/20”.

To add to its concerns the college lost an agreed £500,000 overdraft after Santander withdrew the facility in August 2019 when loan covenants were breached.

The bank has £5.86 million of loans outstanding with the college. The 2018/19 accounts state that there is “no intention” by Santander to “recall the loan while the college continues to work collaboratively with stakeholders on its future position”.

Southampton City College was re-issued with a financial health notice to improve, which it first received in 2016, by the ESFA last week.

It generated income of £13 million and a deficit of £1.65 million in 2018/19 – a significant increase from £585,000 in the previous financial year and £257,000 the year before.

The college’s financial health is rated as ‘inadequate’.

Southampton City College told FE Week it is currently in talks with a merger partner, but a spokesperson said they would not reveal who this was until plans are finalised and a public consultation is launched.

In September this newspaper reported that the college was in the “very early stages” of a three-way merger discussion, involving Itchen Sixth Form College and Richard Taunton Sixth Form. The spokesperson would not provide an update on this.

It came months after Southampton City College saw its second proposed merger, on that occasion with Eastleigh College, collapse at the eleventh hour after an application for emergency funding was rejected by the ESFA.

The college’s first merger attempt, with Southampton Solent University, fell through in 2018.

A Southampton City College spokesperson said: “The college, ESFA, the FE Commissioner and all interested stakeholders are working together to find a sustainable long term solution for the provision of FE in Southampton.”

They added that the college is “very appreciative of Santander’s continued support” and confirmed they were “managing without” the overdraft facility.

The college teaches around 5,000 students. It received one ‘insufficient progress’ rating out of three in an Ofsted monitoring visit in November 2019 after being awarded ‘requires improvement’ in a full inspection in January 2019.

 

An MP has hit out at the proposed closure of a college in his constituency and is set to meet with FE Commissioner Richard Atkins to demand it stays open.

The RNN Group is planning to shut its “under-utilised” campus in Dinnington by July. At least 40 full-time jobs are expected to be lost and hundreds of students will be affected.

The move would be a “huge blow” to the area and “incredibly disappointing on so many levels”, Conservative MP for Rother Valley, Alexander Stafford, told FE Week.

Public transport is atrocious and it will just really make them struggle

RNN had a notice to improve published by the Education and Skills Funding Agency on Friday due to the FE Commissioner’s “significant” concerns with the “quality and strength of governance oversight”. It has now been “escalated” into formal intervention.

It recorded a £4 million deficit in 2018/19 – almost double the shortfall it had the year before.

RNN chief executive Jason Austin previously said the group has “no alternative” than to cut staff numbers as it battles to cut its deficit, knowing it will “no longer be ‘bailed out’ by the government” following the introduction of the education insolvency regime.

Stafford is disputing the Dinnington closure, and will meet with Atkins this week, as well as Austin, residents groups and trade unions to discuss the issue, which “is going to have a huge impact locally, and across South Yorkshire”.

The MP is concerned about the move’s effect on student and staff commutes as “public transport is atrocious and it will just really make them struggle.”

Dinnington is the only general FE college in Stafford’s constituency. Other RNN group sites are at least a 20 minute drive or a 35 to 45 minute bus journey away.

He also questioned why this was slated to take place after a restructure that saw 50 full-time jobs lost in 2019, and claimed many of his constituents are “confused about what is going on”.

The group launched a 45-day staff consultation on the closure on January 29. It detailed how 122 staff will be affected in total. More than 50 of them are expected to be relocated to other RNN Group colleges, but at least 40 full-time jobs are planned to be lost.

Around 575 learners are currently studying at the campus, in courses such as animal care and management, construction, countryside management and horticulture, foundation learning and access to higher education.

The majority, 480, are scheduled to finish this academic year with about 55 full time students and apprentices who were due to progress to 2020/21 and another 40 students studying short courses.

Stafford was critical of the proposal’s impact on local jobs and students.

He said the most important thing was to “make sure jobs are maintained but also to help those people who are studying courses, courses which aren’t available anywhere else in the area, to make sure they are fully catered for”.

“My biggest concern really is those students with complex needs, special educational needs, and to ensure that they have a good quality of education,” he added.

We understand the affection for Dinnington and regret that we are putting jobs at risk

Austin said: “We understand the affection for Dinnington Campus and regret that we are putting jobs at risk. However, further savings need to be made to ensure that RNN Group is on a secure and sustainable footing and well positioned to provide high quality education and technical training to the students, communities and businesses that it serves.

“The proposal to close Dinnington campus is part of a wider review of our estate, which involves plans for new curriculum and improved facilities at our other main college sites. Courses, and the majority of our staff, based at Dinnington would move to those sites.”

The review found the Dinnington Campus building was under-utilised – 30 per cent of the site was “mothballed”, which the group said was “costly to maintain”.

The final decision will be made by the governing body once the staff consultation has concluded in March.

RNN has more than 1,000 staff and around 12,000 learners a year including around 2,000 apprentices, mainly in South Yorkshire and North Nottinghamshire.

The Dinnington campus was formerly known as Rother Valley College, which merged with Rotherham College of Arts and Technology in August 2004.

RNN Group was formed following a merger between Rotherham College of Arts and Technology and North Notts College in 2016 and a further merger with Dearne Valley College in 2017.

Several other colleges have had to sell-off campuses to balance the books in recent years, including Cornwall College Group, Birmingham Metropolitan College and Warrington and Vale Royal College.

The second college to enter education administration has debts and liabilities of more than £100 million to over 60 creditors.

Insolvency practitioners from BDO have today released a statement of proposals for West Kent and Ashford College (WKAC).

It shows the college has outstanding capital grants worth £86 million from the Education and Skills Funding Agency.

WKAC, which went into administration on 16 August 2019, also owes secured loans of £13.2 million to Barclays Bank and £1.1 million to Ashford Borough Council.

Unsecured creditors include:

• £1 million to the ESFA in standard education funding
• £15 million to Kent County Council for the pension scheme
• £5 million to 64 individual organisations, most of which are small businesses

The £86 million was given to WKAC’s forerunner K-College to help with the construction of campuses in Tonbridge and Ashford in Kent. When K-College collapsed in 2014 and Ashford and Tonbridge campuses were taken over by Hadlow College to be reformed as WKAC, the grants were transferred to the new college.

A WKAC spokesperson confirmed the capital grant is a liability, which does not accrue interest and as the grant is written down over the economic life of the property, the college retains the liability until the grant balance has been fully written down, so there is therefore no repayment schedule.

The news comes after BDO’s report for Hadlow College, which trades as the Hadlow Group with West Kent and Ashford College, showed it had debts of £40 million with over 300 organisations.

The pension deficit, BDO stresses, does not have “any impact” on the benefits of past or present staff; but paying off those unsecured creditors is “uncertain” at this stage, as the majority of the college’s assets are designated for educational purposes and education administration carries a “learner protection” responsibility.

BDO has also been granted access to grant funding to pay for education administration by the secretary of state. The administrators expect to have to draw on the grant funding, which will have to be repaid ahead of all else, making it even less likely the small businesses will be paid back.

The report said no claims had been adjudicated upon yet, but they expect to receive “significant claims soon” and the 64 creditors have been asked to submit a proof of debt form if they want to make a claim.

The administrators had racked up time costs of £223,000 before WKAC even went into administration. Then between administration and January, £472,981 was built up by BDO’s team having worked for 2,580 hours at an average rate of £183 per hour.

The team have also commissioned a property valuation by Savills which cost £33,000, insurance and a health and safety review by AON which cost £75,863, and incurred legal costs totalling around £75,000 to WBD and £21,000 to Branchers.

BDO charged the Department for Education £627,407 for employing their services at Hadlow College between May and October; but estimated this would rise to £1.1 million by this April.

A confidential report on the conduct of “all relevant persons” in the three years preceding education administration also had to be completed by BDO and passed on to the education secretary, which they did by 13 November 2019.

The ESFA handed WKAC £3.79 million in exceptional financial support in the six months after the college applied in February 2019.

Around that time, the college’s principal Paul Hannan and his deputy Mark Lumsdon-Taylor both resigned; followed by several governors, including the chairs of Hadlow and WKAC.

BDO reports that by the time Hadlow College went into administration last May, WKAC “was reliant upon ongoing emergency funding from the ESFA,” without which the college could not pay its debts, and it had net liabilities of £17.5 million.

FE Commissioner Richard Atkins visited both colleges after the application for exceptional funding was made and reported their boards “failed in their fiduciary duty” and Hannan and Lumsdon-Taylor “regularly made decisions themselves outside of executive and any open discussion – and reacted strongly to questioning or challenge”.

Atkins recommended WKAC be split up: with its Ashford campus going to East Kent College Group; and its Tonbridge home going to North Kent. This process will not be completed before March 2020, today’s report said.

A similar process at Hadlow College has already resulted in its campus in Mottingham, London being transferred to Capel Manor College in January.

Following the FE Commissioner’s recommendations, WKAC’s governors decided education administration was the best way to “provide protection to the provision of education to existing learners while also being the most efficient platform to facilitate the implementation of the FE Commissioner recommendations”.

A BDO spokesperson said they have “maintained the stability of the college and minimised disruption for existing students as a whole” and the proposed merger transactions will “ultimately determine the likely outcome for unsecured creditors”.

A college that has been rocked by an unexpected £6 million deficit has appointed an experienced FE leader as its interim principal.

Staff at Gateshead College have been told that Andy Cole (pictured) will take up the position from Monday.

Deputy principal Chris Toon has been the acting principal since January when Judith Doyle, who was the highest paid college leader in 2017/18, retired with immediate effect.

Her decision followed an external forensic investigation into the shock shortfall that was found in September. The FE Commissioner has since intervened and a consultation on job losses has been launched.

John Hogg, a former deputy FE commissioner, replaced John McCabe as chair last month.

Andy Cole was most recently principal of Kensington and Chelsea College and led it to a merger. He joined the college in February 2018 following a turbulent few years that involved investigations and high-profile campaigns in the wake of the Grenfell Tower tragedy.

Before that he was the principal of the College of North West London and previously held roles at the City of Westminster College, Newham Sixth Form College, Newham College and Havering College.

A Gateshead College spokesperson said: “One of the recommendations of the FE Commissioner was to appoint an experienced interim principal to strengthen the existing team and support Chris Toon, who has been acting principal since January this year, as we move forward with the implementation of the recovery plan.

“We’re pleased to confirm that Andy Cole will be joining the college on February 24 and he’s looking forward to working with the team to quickly get the college back on a firm financial footing whilst making sure that excellent standards of teaching and customer experience are maintained.”

The cause of Gateshead College’s £6 million deficit has not been revealed so far.

It 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”.

Ofsted downgraded the college from ‘outstanding’ to ‘requires improvement’ because of poor leadership in a report published last week.

The Careers and Enterprise Company has released new analysis showing how post-16 providers are faring against the eight Gatsby benchmarks.

It is a follow-up to the quango’s “State of the Nation” report put out in September that showed colleges’ and schools’ progress in meeting the markers of excellence in careers guidance had “accelerated”, after they achieved an average of three in 2018/19, compared to 1.34 when they were first measured in 2014.

Today’s publication details how many of the benchmarks have been achieved, partially achieved or not achieved, specifically by the 262 FE providers using the CEC’s Compass tool, which measures a provider’s progress against the standards.

The report breaks it down by 154 general FE colleges, 85 Sixth form colleges (including 16 to 19 academy converters and free schools) and 23 special post-16 providers.

FE providers were previously warned by the Department for Education they had to meet the benchmarks by the end of this year or risk incurring financial penalties.

Here’s the rundown of how each post-16 provider type is performing against the benchmarks…

Benchmark 1 – A stable careers programme

A greater proportion of sixth form colleges have achieved this standard than either general FE or special providers.

But over 90 per cent of colleges reported they have a careers programme written down that has “explicit backing” from their senior leadership team.

Programmes were published online by 75 per cent of colleges.

And by the end of the 2018/19, 96 per cent of the FE colleges and 99 per cent of sixth form colleges and schools had a careers leader in place.

Benchmark 2 – Learning from career and labour market information

Sixth form colleges were more likely to have positive outcomes than the other provider types, with 66 per cent of them having achieved this benchmark compared to 43 per cent of general FEs.

In 58 per cent of colleges and 71 per cent of sixth form colleges and schools, over three-quarters of learners use “up-to-date labour market information and information about career paths during their programme of study”.

Benchmark 3 – Addressing the needs of each learner

Post-16 providers are trumping secondary schools against this benchmark, which encompasses factors such as whether colleges support learners towards positive career destinations.

Ninety per cent of FE colleges and 97 per cent of sixth forms report they maintain accurate data on learner destinations for three years after they leave college, which is an area the report says secondary schools “struggle with”.

Benchmark 4 – Linking curriculum learning to careers

General FE colleges outpaced sixth forms and special institutions on this benchmark with a 67 per cent achievement rate.

All staff need to link curriculum learning with careers to meet this benchmark, and 81 per cent of colleges reported the majority of their learners learn about the relevance of their subject to future careers through the curriculum.

Benchmark 5 – Encounters with employers and employees

Research quoted in the report shows learners who have regular encounters with working people, at careers fairs or enterprise competitions, have better labour outcomes.

Colleges have improved on this benchmark from last year: 81 per cent ensured all or most learners have at least one encounter in 2018/19, compared to 67 per cent in 2017/18.

But it was specialist colleges that fared best in this standard, where 44 per cent had achieved.

Benchmark 6 – Experiences of workplaces

Special institutions excelled here again, with 74 per cent having achieved the benchmark; which says every learner should have first-hand experience of a workplace.

But there was a marked variation between provider types: 58 per cent of colleges also achieved the benchmark, compared to just 26 per cent of sixth forms.

Benchmark 7 – Encounters with further and higher education

General FE colleges came off poorly here: learners were more likely to have meaningful encounters with other FE, apprenticeships and HE providers if they went to sixth form.

Special post-16 institutions were also lagging behind SFCs: just 13 per cent have achieved the benchmark compared to 38 per cent.

Benchmark 8 – Personal guidance

Over 90 per cent of general FE and sixth form colleges reported they had made interviews with a qualified careers adviser available to learners, as the benchmark demands.

But the report warns not all learners may take up the opportunity, and there may not be enough careers advisers for all learners to receive an interview.

CEC interim chief executive John Yarham’s conclusion

“College leaders and staff are pursuing the careers education agenda with energy and enthusiasm.

“The positive progress they are making is delivering real results for students – broadening opportunity and improving life chances.

“It is encouraging to see the changes made to shape the system to fit the college context is reaping rewards for the sector and their students. Engagement is growing and execution picking up pace.”

More than 30 colleges based outside London are set to lose millions in funding for delivering training to adults in the capital next year.

Greater London Authority officials have revealed plans to contract with just four colleges that are not located within “reasonable travel-to-learn distances for London learners”.

If approved, it means that 32 fewer organisations, who currently have combined adult education budget allocations of over £13.4 million with the GLA, will be funded from 2021/22.

The proposal was disclosed in the GLA’s agenda for its next AEB mayoral board meeting, which is scheduled for tomorrow.

It comes after mayor Sadiq Khan signed off on a crackdown on funding for training providers based outside of the capital’s “fringe” – typically more than 30 miles away from central London.

Officials say the majority of funding given to these colleges is subcontracted to firms based in London who are then charged a “substantial” management fee – a practice that the GLA wants to limit.

Out-of-area colleges were previously asked to submit a business case for why their funding should continue, based on the type of provision they offer and the groups of learners they support.

The final decision on which out-of-area colleges will continue to gain funding from the GLA is expected to be made at tomorrow’s meeting.

A spokesperson said it would not be appropriate to comment at this stage, or reveal the names of the four colleges that look set to keep their funding.

The GLA previously said it will consult on how best to use the returned £13.4 million as part of its next Skills for Londoners framework consultation, which is expected to launch this month.

Options include running a separate AEB procurement exercise or funding uplifts for certain learners and qualifications.

The AEB for the capital, which tops £300 million annually, was devolved from the Education and Skills Funding Agency to the GLA in August 2019.

The government will only accept proposals from providers in 20 of England’s 38 local enterprise partnership (LEP) areas for its upcoming Institutes of Technology tender.

Education secretary Gavin Williamson announced at the Conservative party conference in September that a further eight IoTs were to be created through a new £120 million competition.

His promise came months after the FE Week revealed cold spots with the first 12 IoTs, which began to open in September 2019. There were none planned for the north west and the east of England.

A ‘wave two prospectus’ was published by the Department for Education today and states that the new 12-month competition will launch “later in the year”.

It adds that only proposals from the 20 LEP areas that are currently not covered by an IoT will be eligible to apply (see map).

All applications must meet the “strict minimum conditions” set out in wave one and be a collaboration involving further education, higher education and employer partners.

The prospectus does not detail the exact criteria, but the first IoTs had to involve colleges with at least a grade two from Ofsted and have good financial health.

The first wave of IoTs are being created through a £170 million pot of capital funding.

They are a collaboration between colleges, universities and employers, and specialise in delivering higher level technical training at level 4 and 5 in STEM subjects, including digital, advanced manufacturing and engineering.

Williamson said: “Institutes of Technology will play a vital role in our plan to transform higher technical education across the country, helping to level up skills and unlock growth and opportunities.

“We are making good progress to establish the first wave of IoTs and I look forward to welcoming the second wave of applicants, completing our high-quality national network.”

A university has been told to repay £119,000 by its funding body after an investigation found a payout to its ex-principal – who now chairs an influential college commission – breached financial rules.

The Scottish Funding Council, which oversees further and higher education funding north of the border, has today published its report into the University of Aberdeen and its former boss Sir Ian Diamond.

Diamond, who is leading the College of the Future commission, triggered his 12-month notice for his role as university principal in July 2018 – the same month he retired from the role.

He originally announced his plans to retire in August 2017.

The former principal’s total remuneration disclosed in the university’s financial statements for 2017-18 was £601,000. This included a salary of £282,000, pension contributions of £30,000 and “contractual notice period payment and related expenses” of £289,000.

After examining over 500 pieces of evidence, today’s report states that in approving the terms of the settlement agreement, there was “no documented assessment of value for money”.

Officials found that the university was paying two principals while Diamond was on gardening leave.

“By defining the former principal’s ‘formal’ notice date as the date immediately preceding both the successor principal taking up his post and the former principal moving to a 12 month period of ‘gardening leave’, the university incurred the cost of two principals over the 2018-19 financial year,” the report said.

“In addition, over the 2017-18 financial year, the principal received his full salary while having significantly fewer duties and responsibilities than those constituting the full role of principal, and we have seen no evidence that the value for money consequences of that arrangement were assessed.”

The report notes that the ‘Heads of Terms’ for the settlement agreement were approved by the remuneration committee, but there is “no evidence that sufficient documented information was supplied so that members could be assured university policies and interests were observed”.

The settlement agreement was “correctly disclosed”, according to today’s review, but “in our view the additional payment of £60,000” for “outplacement support should also have been disclosed”.

The SFC concludes that there was “non-compliance with several financial memorandum requirements”.

Officials have now said it requires £119,000 to be repaid and for the university to undertake an externally-facilitated review of its governance procedures and culture.

Esther Roberton, who was elected in 2019 to the role of senior governor of the University of Aberdeen, said the university accepts the findings and has “already repaid the £119,000 to the Scottish Funding Council”.

“We will address the issues raised in the report and take lessons from it,” she added.

A spokesperson for the university confirmed that Diamond has not had to personally repay any of his settlement agreement.

Diamond, who became the UK’s National Statistician in October, was unveiled as the chair of the College of the Future commission in May 2019.

The commission includes 16 people and aims to set out a “new vision” for colleges in England, Northern Ireland, Scotland and Wales.

It is being supported by nine organisations including the Association of Colleges.

Leaders of colleges in England have previously faced questions over payments they received during their notice periods.

In May, the University and College Union criticised pay rises and 12-month notice period extensions for all the executives at Stephenson College, which came into force in 2015 ahead of a merger consultation.

And Mike Hopkins, the former principal of Sussex Downs College, was paid £80,000 by the college while on gardening leave for five months after his provider merged with Sussex Coast College Hastings last year.

This was despite the fact Sussex Downs was facing a deficit of £1.9 million and planning a wave of staff redundancies. He also received a final payout for leaving, but it is not known how much this was.

Gillian Keegan has been named as the new apprenticeships and skills minister.

She joined the Department for Education as a parliamentary under secretary of state on Friday following Boris Johnson’s reshuffle.

Her title was confirmed this evening along with all ministerial portfolios. It is not clear at this stage, however, if she will be responsible for the whole further education brief, including oversight of colleges.

The DfE told FE Week that more information on portfolio splits will be confirmed at a later date.

The department has been missing a dedicated apprenticeships and skills minister since Anne Milton resigned in July 2019.

Since then Gavin Williamson, who was reappointed as education secretary in last week’s reshuffle, has led on FE and skills personally.

Keegan is the MP for Chichester and is herself a former apprentice. She was elected to parliament for the first time in 2017.

Her website states that she is the “only degree level apprentice in the House of Commons”.

She started work as an apprentice at Delco Electronics aged 16 and whilst learning about she was sponsored to study a degree in business studies at Liverpool John Moores University.

For the next 25 years she worked and lived abroad, working in the manufacturing, banking and IT industries, according to her website.

It adds that her “experience of a comprehensive and wide ranging apprenticeship provided her with a foundation of skills and knowledge that helped continue a 27 year long business career”.

She is the co-chair of the all-party parliamentary group for apprentices, and was made an “apprenticeship ambassador” by Milton in February 2019.

Keegan sat on the influential Public Accounts Committee until she was appointed as the Parliamentary Private Secretary to the Treasury in December 2018.

She has since held posts in the Ministry of Defence, served as the Parliamentary Private Secretary to the Home Secretary and the Department for Health.

The DfE also confirmed tonight that Michelle Donelan is the new universities minister, as revealed by FE Week last week.

Baroness Berridge has been announced as the new academies minister, taking over from Lord Agnew, and Nick Gibb will continue as the schools minister.