Three struggling colleges have had FE Commissioner intervention reports published today.

Among them was one for North Hertfordshire College, which recorded a £5 million deficit last year and received a £2.5 million government bailout, as revealed by FE Week last week.

Easton and Otley College also had its commissioner report published this afternoon after being rated ‘inadequate’ by Ofsted for the second time in a row last year.

A letter from skills minister Anne Milton following the reports on North Herts and Easton and Otley stated that she has now placed both colleges into “administered status”.

Ahead of its report, Easton and Otley this morning reiterated its “determination” to secure its long-term future.

John Ruskin College also had an FE Commissioner report published today. The college had been in early intervention by the Education and Skills Funding Agency following “assessment of the college’s financial plan which indicated a decline in financial health from ‘outstanding’ in 2015/16 to ‘satisfactory’ in 2017/18”.

It saw 16-19 classroom-based student numbers “decline by 12 per cent since 2016/17 with a further decline in 2017/18”.

“The scale of decline in core 16-19 and apprenticeship income has contributed to increasing operating deficits which will steadily erode the college’s cash reserves,” the FE Commissioner’s report said.

John Ruskin has also been “heavily reliant on apprenticeships funding with high levels of sub-contracting and was not successful in securing a non-levy allocation for new starts post-March 2018”, according to its report.

FE Week previously revealed that John Ruskin charged 39 per cent management fees in its subcontracting deals on average in 2016/17.

Richard Atkins (pictured), the FE Commissioner, was called in to visit each of the three colleges following concerns about their finances.

For more analysis of the reports see the next edition of FE Week which will be published tomorrow.

A scheme to provide free functional skills courses online is being launched by The Open University in partnership with three FE colleges.

The scheme is expected to allow tens of thousands of learners to develop level one skills in English and maths, and receive a functional skills qualification from a local college partner.

A pilot, which is being funded by the Department for Education’s flexible learning fund, is being supported by the Bedford College Group, Middlesborough College and West Herts College.

Andrew Law, (pictured), head of propositions at The Open University, said the scheme is hoping to reach up to 30,000 learners a year via the university’s OpenLearn platform, which he said is specifically designed to cater for people with “low confidence or barriers preventing them from getting into education”.

“This is a flexible, low-risk way for people to develop their basic skills, gaining confidence and even a qualification. It could transform their career prospects,” he told FE Week.

“Working in partnership to combine our digital learning expertise with course design and practical, local support from FE colleges is a great offer for anyone that wants to gain functional skills.”

Last month the Education and Skills Funding Agency U-turned on plans to bar 16- to 19-year-olds who have passed GCSE maths and English from following level one study programmes. The planned rule change, originally announced in December, was scrapped after feedback from a “small but significant number of providers”.

The government announced last March that 32 projects will share £11.7 million from its flexible learning fund to help more adults back into the classroom.

Under The Open University scheme, learners will be able to access course materials for free online, and can learn at home or receive support and careers guidance from their local college.

There is an open license on the materials so that others – including colleges and other providers – can copy and re-use the content for their own teaching and learning, and Mr Law said the university was “keen” for others to use them.

The scheme is initially offering two courses, Everyday Maths and Everyday English, and each will take 48 hours study to complete. Learners are being recruited this month and the pilot will run until July 2019, at which point it will be reviewed before being made accessible “for the foreseeable future”.

Mr Law said The Open University intended to roll out level two versions of the courses in the spring, before introducing sector specific functional skills courses tailored towards health and social care and science, technology, engineering, and mathematics.

The scheme will also involve collaborations with organisations and community groups to encourage potential learners to take the “first step” in education. These groups are set to include Local Enterprise Partnerships, the Workers’ Educational Association, Unison and health and welfare charity Leonard Cheshire Disability.

A land-based college that was rated ‘inadequate’ by Ofsted for the second time in a row last year has reiterated its “determination” to secure its long-term future, ahead of an incoming FE Commissioner report.

Easton and Otley College, which has nearly 550 staff and around 5,000 students, was handed a financial health notice and breach of minimum standards warning by the ESFA last June and was told to stop recruiting learners in some areas.

It was also told to not enter into any new subcontracting arrangements until its performance had improved.

The college, based in the east of England, was then rated ‘inadequate’ for the second time since 2017 in November.

The FE Commissioner’s report, which is set to be published in the next 24 hours, will state that a full structural review is to take place at the college over the coming months.

Jane Townsend, Easton and Otley College principal, said: “We are wholly committed to achieving a positive outcome.

“The support from  our students, parents and staff, together with the wider business community, has been nothing short of exceptional, and we are all working together to secure the college’s long-term future for the benefit of current and future students.

“The latest assessment of the college was completed over three months ago, since when we have been very pleased to see a turnaround in a number of areas. We are focusing on maintaining this momentum in everything we do.”

Over the last 12 months the college has recruited a new principal and senior leadership team, as well as making “significant” changes to its board.

It has also reduced staff costs by £3 million.

The proportion of leavers below the minimum standard threshold for Easton and Otley’s adult education was 49.2 per cent last year.

In June the ESFA said the college should “suspend the recruitment of learners” from a small subset of their adult provision.

Easton and Otley was told to also “withdraw from all 19+ education and training subcontracting arrangements that have reported provision below the ESFA minimum standard” and to not enter into any new subcontracting partnerships.

The suspensions are still in place.

The college’s chair, Mark Pendlington, said: “We are putting every effort into making Easton and Otley a regional and national champion for teaching, and for inspiring those who will serve the employers and fast-developing new technologies on which the future of the food, drink and agriculture sector depends.

“Since taking on the tough challenge of turning things around, we have recruited a new principal and senior team; got a grip of our finances; developed an exciting and innovative business plan; and have won the support of those who depend on us for success.”

He added: “We now need to take a close look at how best to build on these strong foundations, and with an open mind, look at all available options.”

The government is to scrap FE teacher bursaries, in a move that has been described as a “slap in the face” for the sector.

The Department for Education said today that the current FE teacher bursaries, including both subject knowledge enhancement funding and initial teacher education bursaries, will not continue after this academic year.

James Noble-Rogers, executive director of the Universities Council for the Education of Teachers, said: “This is a slap in the face for the FE sector and its students. At a time when the DfE has, quite rightly, developed an ambitious new teacher recruitment and retention strategy for schools, the FE sector is again being left in the cold.  

“Many of the 1,900 graduates that have received bursaries in the past would not have been able to train without them. This will lead to fewer teachers entering the profession. That can only impact negatively on learners.”

Currently, maths trainees can receive a £25,000 initial teacher education bursary if they have a 2:2 degree or above, and English trainees can receive £15,000 if they have a 2:1 or above.

All bursaries that have already been approved for this academic year will be paid out, but no more will be offered.

In a statement, skills minister Anne Milton said the government would be investing up to £20 million in “new programmes designed to recruit and develop FE teachers”.

However, the DfE confirmed that no more money would be going towards bursaries in any subject.

The department said the bursaries were always intended to be time-limited programmes to support growth in subjects with a shortage of FE teachers and that it had now achieved this goal.

When including the 300 graduates who received bursaries to train in teaching learners with additional needs (which were scrapped in 2015/16), the DfE said it invested £28 million to support 2,200 graduates.

Future investment includes £5 million in the Taking Teacher Further programme, to attract industry professionals into the FE sector, and £8 million through T-level Professional Development to make sure providers are ready for T-levels.

Ms Milton said: “We are also exploring new approaches to supporting the recruitment and retention of teachers in FE – in both technical and academic subject areas – to reflect the sector’s changing needs as our transformation of technical education gathers pace.”

Initial teacher education bursaries for FE teachers were first introduced in 2012. At the time, then-skills minister John Hayes said: “Recruiting the best talent is central to making the sector as good as it can be. Further education is at the heart of economic revival; at the core of social renewal.”

The government is encouraging under-performing colleges to reduce their 2018/19 adult education budget now, to avoid cash flow problems as a result of the ESFA clawing-back funding.

A funding claims and reconciliation update was published by the Education and Skills Funding Agency today.

It states that if a provider considers it “may not fully spend your 2018 to 2019 AEB allocation, we can discuss reducing it with you immediately after the mid-year claim in February”.

“It is in your interest to reduce your allocation now so you can manage your cash flow over a number of months rather than having to fund a large recovery in December,” the update adds.

“It is government policy to recover debts, such as AEB under-delivery, as soon as possible after a contract reconciliation but public bodies have discretion where recovering the funding too quickly could put the supplier at risk of insolvency.”

The ESFA’s encouragement to reduce AEB earlier rather than later in the year comes after the insolvency regime came into play last week, which spelt the end of major government bailouts which many cash-strapped colleges have relied on to sort cash flow problems.

Previous analysis by FE Week showed that hundreds of colleges and training providers between them failed to deliver £73 million of allocated adult education funding in 2016/17, which they had to pay back.

It is expected that the 2017/18 AEB spend has also been under-delivered, although final figures are yet to be revealed.

Numerous new college accounts reveal adult education underspend, including at Highbury College whose financial statements show it will be required to pay back around £200,000 of unspent AEB to the agency.

Today’s update from the agency states that to ensure “effective planning for 2018 to 2019 reconciliation, we will compare mid-year and final claims against data returns, from this year and prior years, to gain assurance into the claims presented”.

“Where we are not fully assured by your mid-year claim, we will contact you in February and March to discuss your plans,” it said, adding that where the agency does “not gain further assurance, we may reduce your 2018 to 2019 allocation from April”.

The update continues: “For the reconciliation of AEB 2018 to 2019 funding in November 2019, it is the ESFA’s intention to recover under-delivery from subsequent payments across AEB, 16-19 programme and apprenticeships from December.

“However, if you believe that you would require longer we will consider repayment within the 2019 to 2020 financial year where this is supported by an acceptable demonstration of need.”

If colleges have concerns over their ability to repay any under-delivery in the 2019 to 2020 financial year they “must discuss this with your territorial team manager immediately after the mid-year claims in February”.

A cash-strapped college’s 2017/18 accounts have revealed a £5 million deficit, on the same day that the insolvency regime came into force.

The massive shortfall at North Hertfordshire College is 20 times higher than was budgeted at the beginning of the year, and twice what was predicted just two months before the end of the year.

As a result, the college received £2.5 million in bailout funding in just three months, and submitted a last-minute application for an unspecified sum from the restructuring facility.

A new approach has been taken to managing our cash position ahead of the implementation of the new insolvency regime

An FE commissioner report, triggered by the college’s request for exceptional financial support in September which also prompted a financial notice to improve from the Education and Skills Funding Agency, is understood to be expected imminently.

The college “generated a deficit in the year of £5.03 million” compared with a £713,000 surplus in 2016/17, while its income fell from a little over £30 million to nearly £24 million in 2017/18.

The deficit includes a £4.3 million overspend compared to income, and a £713,000 loss on the sale of a property.

The college “struggled to meet the budgeted revenue targets set, a situation caused by several factors but most notably the significant nationwide slowdown in apprenticeship starts following the introduction of the apprenticeship levy,” the accounts said.

Education and Skills Funding Agency figures show North Hertfordshire had 890 starts in 2017/18, down 29 per cent on the previous year’s total of 1,260, and down 66 per cent on the 2,590 starts in 2015/16.

The college received £1 million in exceptional financial support in September, and a further £500,000 in November, while “approval for a further £1 million has been granted and is due in December 2018”.

Meanwhile, an application to the restructuring facility in September has been endorsed by the FE commissioner, Richard Atkins, whose team visited the college in the same month.

The college also plans to “secure a significant cash injection” by selling “surplus land”, although it was unable to tell FE Week how much this was expected to raise, citing commercial confidentiality. 

“A new approach has been taken in 2018/19 to managing our cash position ahead of the implementation of the new insolvency regime for colleges,” the accounts said.

Nonetheless, the principal risk facing the college is that “we are not able to maintain our target level of cash reserves in light of the new (sector wide) insolvency regime”, which came into effect on January 31 and which will allow colleges to go bust for the first time.

“We are now looking forwards,” a college spokesperson told FE Week.

In addition to the apprenticeship slowdown, the college’s recent improvements – which saw its Ofsted grade increase to ‘good’ in November 2017 – “required considerable investment”, she said.

“We have robust recovery plan in place, we are making good progress towards implementing all the commissioner’s recommendations and we are confident about our future.”

Minutes from the college’s board meetings show how the deficit spiralled over the course of the year.

In June 2017 “the proposal was for a budget showing a small loss” for the coming year which the senior management team “was confident could be managed”.

We have robust recovery plan in place, we are making good progress

Four months later the minutes reveal there was a “risk that this forecast deficit would increase” as part of a “full reforecast” that was “in hand” after Hart Learning and Development – the college’s apprenticeship arm – “failed to hit the forecast surplus in 2016/17”.

By February 2018 the forecast deficit had increased to £1.5 million.

The original deficit had been £250,000 “but it had become clear towards the end of 2017 that this was optimistic”.

The June minutes show the forecast deficit had gone up yet again, to £2.5 million.

The college claims the final £5 million deficit is not comparable. The £2.5 million was “from the management accounts which covers the operational performance of the college only” while the £5 million includes “subsidiary accounts and several non-operational (and non-cash) balance sheet adjustments such as losses on disposal of assets”.

The fall in apprenticeship numbers and rising deficit are among a number of challenges the college had to deal with in 2017/18.

Its former principal, Matt Hamnett, resigned with immediate effect in November 2017, shortly after the departure of the James Sowray, the managing director of Hart Learning and Development.

Board minutes from the following month report on the outcome of a review into a whistleblowing incident involving Hart, in which they say “income had been forecast which would not now be received” and would lead to a “review of the management structure and culture in the business”.

Mr Hamnett, whose £294,000 salary made him the highest paid principal in 2016/17, received £74,000 payment in lieu of notice in 2017/18 according to the accounts.

Since leaving the college Mr Hamnett has worked as a consultant and authored a study “to understand and offer some reflections on the transformation of FE colleges which are not performing to the level that their students, business customers and communities should expect.”

Commissioned by the Further Education Trust for Leadership and published today, the study is called ‘Beating the odds, and the system’.

The Education and Skills Funding Agency has delayed issuing European Social Fund contracts after multiple providers who lost out in a recent procurement alleged that the government broke tender rules.

Winning bidders from the exercise, which was worth £282 million in total, were supposed to be awarded their contracts on Tuesday following a 10-day standstill period, but this has now been extended to 8 February.

The providers complained that the ESFA’s tender was botched mainly because the agency failed to score the “track record” section of bids, even though they were expecting to get marked for this.

We will take legal action if necessary

Their anger was amplified when they were told they lost out to Serco, which won at least £37 million of European Social Fund cash in the tender.

The training provider made losses of £29.5 million in 2017, according to its latest accounts, and is rated “requires improvement” by Ofsted – although this is just for its apprenticeships provision.

The aggrieved providers were also shocked to find out that Learndirect’s new owner secured more than £20 million worth of ESF contracts, in conjunction with his other company Dimensions Training Solutions, in the tender.

This was despite Learndirect being hit with a grade four Ofsted rating in 2017 and the ESFA terminating all of its skills contracts in July last year.

“We will take legal action if necessary as these contracts could only have been won through the successful organisation misrepresenting components of their business vehicle to the ESFA,” said one chief executive of a provider that lost out to Serco and asked to remain anonymous in fear of repercussions from the agency.

A Department for Education spokesperson confirmed that the ESFA has received “a number of queries from tenders regarding the procurement process” but “no more details can be made public at this time for legal reasons”.

She claimed that all European Social Fund contracts were “awarded in line with the ESFA procurement process”, but also confirmed that the results of the track record section were not included in the final selection.

The spokesperson said this was made clear to all bidders but refused to say when this communication was.

The aggrieved providers said the DfE “didn’t make it clear at all”.

“Everyone I know is totally shocked that it was omitted,” said the anonymous provider.

“The DfE has fundamentally and substantively changed the process between publishing tender documents and the marking stage, which renders the whole procurement process illegitimate.”

A chief executive of another provider that lost out to Serco and also wished to remain anonymous added: “After re-reading the guidance and the published question and answer’s we are unable to find any communication that states that track record is not scored.  

“All of our challenges are based on clear breaches in the process and not on decisions.

“For example, financial standing, Ofsted Grade, misrepresentation of business structure, showing that the ESFA have not carried out clear due diligence on information contained in the winning bidders tenders.”

Everyone I know is totally shocked that it was omitted

The ESF is funding that the UK received, as a member state of the EU, to increase job opportunities and help people to improve their skill levels, particularly those who find it difficult to get work.

The current funding round is worth about €3 billion (£2.3 billion) across England over the period from 2014 to 2020.

England’s fund is administered through the Education and Skills Funding Agency, the Department for Work and Pensions, and the Big Lottery Fund, which each provide match funding.

Documents about the ESF winners, seen by FE Week, shows that Serco won contracts in at least six different regions.

A DfE communication to one of the aggrieved providers stated: “I’m sure you appreciate that yours is not the only organisation to have submitted queries. Please be assured that we will not be issuing contracts in the lots where you have raised queries until we have responded to your queries.”

Serco, which won 15 European Social Fund contracts valued at £31.6 million in 2017, said it could not reveal the total contracts it has won through this recent tender because the standstill period is ongoing.

But Rob Matts, Serco’s head of skills training, defended the provider’s track record.

“Serco has a strong track record of delivering high-quality ESF training and over the last two years we have successfully trained more than 18,000 people from over 5,500 different businesses and organisations,” he said.

The Education and Skills Funding Agency has suspended starts at an apprenticeship firm with multimillion-pound subcontracting deals while it investigates the provider, following revelations in FE Week about its shady set-up.

SCL Security Ltd, a private provider based in Kent that is run by Andrew Merritt, has taken £16.5 million from Brooklands College in Surrey over the last three years to deliver hundreds of level three IT apprenticeships, for mostly 16- to 18-year-olds.

But, despite the substantial contracts, SCL Security Ltd only employed eight people in 2017, according to its most recent company accounts, and seven the year before.

I understand from speaking with the ESFA that the issue was with regards to apprenticeships and contracts of employment

It is also not known exactly where the provider trains its apprentices, as Mr Merritt has repeatedly refused to share his delivery addresses despite numerous requests from FE Week.

This newspaper reported in November that the government was looking into SCL Security Ltd and it has now been confirmed that a formal investigation has begun.

While the investigation is being carried out, the ESFA has suspended the provider from taking on new apprentices.

Mr Merritt did not provide a comment, despite numerous requests.

A Department for Education spokesperson said: “We do not comment on the details of any investigations, ongoing or otherwise.”

Brooklands College said it was “unable to comment on behalf of the ESFA” and did not respond to questions about whether it still has a working relationship with SCL Security Ltd.

SCL Security Ltd also subcontracted for Ealing, Hammersmith and West London College, with deal worth £1.7 million in 2018/19, which covered basic English, maths and IT skills for learners whose first language is usually not English.

However, the college has now terminated this relationship.

EHWLC’s principal, Karen Redhead, said: “I understand from speaking with the ESFA that the issue was with regards to apprenticeships and contracts of employment.  We do not subcontract to SCL Security Ltd on apprenticeships.

“We did robust due diligence and we have done some really robust quality checks and have found absolutely nothing that causes concern.

“We did have a contract with them for a value of £1.7 million but as a result of FE Week’s probes some while ago we terminated it in relation to new starts.”

SCL Security Ltd secured its first direct ESFA contract this year, which totals £1 million and includes apprenticeships and adult education budget cash, bringing it in scope for Ofsted inspection.

As previously reported by FE Week, one area of interest to the ESFA will be SCL Security’s relationship with a recruitment firm called Workforce Solutions Group Ltd, which is headed up by two brothers who were at the centre of an FE Week investigation in 2016.

Paul and Joe Alekna switched the ownership of a successful provider they ran from one parent company – eResponse – to another, before transferring out £6 million, liquidating it, and leaving learners and creditors on the hook for millions of pounds.

Meanwhile, the brothers continued to run another provider called Options 2 Workplace. But when FE Week exposed the situation, the ESFA cancelled its contract.

SCL Security claims on the government’s Find Apprenticeship Training website to “operate training centres nationwide”, but its own website makes no reference to any training venues – the only address is for a head office in Kent.

As a result of FE Week’s probes some while ago we terminated it in relation to new starts

However, a Google maps search locates one of their training sites as “9 Church Rd, Redditch” – the same building that Workforce Solutions Group operates out of.

Paul Alekna previously told FE Week that Workforce “specialises in temporary and permanent staffing, focusing in the manufacturing, logistics and transport, food manufacturing and office appointments sectors”, and insisted “that’s all we do”.

But he refused to deny that Workforce and SCL Security have a working relationship.

Mr Merritt offered a list of “delivery locations”, which includes Hounslow, Greenwich, Ashford and Nottingham.

He said all are “under short-term rental/lease arrangements responding to demand” and the Redditch location was “one such rented room”, but declined to comment on the relationship between SCL Security and Workforce.

He added that the “exact addresses” of the other locations “are known to all learners, staff, delivery partners and all official bodies” but refused to give them to FE Week.

Brooklands College also refused to release the addresses of where its apprentices were trained with SCL Security.