An adult residential college is facing a financial crisis that threatens its survival following a funding audit and government review.
Northern College, rated grade one by Ofsted with ‘outstanding’ financial health, is locked in a legal dispute with the Education and Skills Funding Agency following claims it has made “errors” worth £1.2 million across 2018/19 and 2019/20.
The alleged errors relate to claimed residential uplift support for learners who were not resident, but the college is contesting the agency’s interpretation of the rules which have been in place for more than a decade.
The ESFA is, however, still demanding repayment of the funding and is extending its audit to cover a further two years, which could increase the clawback.
At the same time, the Barnsley-based college faces having to pay back an additional £660,000 following a significant shortfall in enrolments this year owing to Covid-19, which means they won’t hit the ESFA’s controversial 90 per cent tolerance level.
On top of this, the government is conducting a national review of adult residential funding which could remove an uplift which multiplies funding for residential courses by nearly five times as much as the normal rate.
All of these factors are contributing to a “perfect storm” which puts the long-term sustainability of the college at risk.
The FE Commissioner has been asked by the ESFA to conduct a diagnostic assessment and structure and prospect appraisal, which could result in the college being forced to merge.
Supporters of the college have strongly condemned the government for causing its financial woes after years of strong performance.
Writing for FE Week (click here for full opinion article), former DfE director of FE funding Sue Pember, who is now the policy director of adult education network HOLEX, said: “Northern College is not at risk because of anything it could have foreseen but because of the unintended consequences of administrative action DfE may or may not choose to do.”
She described the situation as a “triple whammy” that “could be diverted with joined-up administration and impact assessment”.
MPs are also lobbying to help the college, which was founded in 1977 to train disadvantaged and disengaged adults and operates out of Wentworth Castle, a grade 1 listed building owned by Barnsley Council.
Dan Jarvis, Labour MP for Barnsley Central and mayor of the Sheffield City Region, raised the issue this week with skills minister Gillian Keegan during education questions in the House of Commons.
He later told FE Week that any loss of service from the college would be “devastating” and he will do “everything I can to protect this iconic South Yorkshire institution”.
Miriam Cates, MP for Penistone and Stocksbridge, said she is also working “very closely” with the college to try to secure its future.
There are four residential adult education colleges in England and they were all notified of the government’s funding review in January 2020.
In its subsequent audit, the ESFA told Northern College that it had been applying the 4.7 multiplier uplift for residential funding incorrectly to each course they offer rather than the learner.
FE Week understands the college is claiming that this interpretation of the rule was never clear and is challenging the government for allegedly changing the goalposts retrospectively.
The college’s accounts for 2019/20 are currently being held up by the dispute, which could end up in court.
Northern College is also expecting to deliver 73 per cent of its £3.8 million adult education budget allocation this year after being forced to close for long periods due to the pandemic.
The agency has decided that where colleges deliver less than 90 per cent of their allocation in 2020/21, they will recover the difference between their actual delivery and 90 per cent.
Northern College said it usually meets its enrolment targets year-on-year and claimed that residential provision had been disproportionately impacted by Covid-19 as the disadvantaged adults they train struggled with the move to online learning.
The college has £5 million cash reserves. Another issue facing it is a pension liability which currently stands at more than £6 million.
Commenting on the potential crisis, principal Yultan Mellor said: “The college’s residential adult education programme and wrap-around support have never been so vital to adults.
“We remain committed to continuing to work with our partners to support the economy to recover and grow following the impact of Covid-19, enabling the delivery of our regional jobs-based recovery programmes.”
A spokesperson for the ESFA said the agency “does expect Northern College to repay the funds identified as being at risk following the audit of provision”.
And responding to claims that the college was audited against the wrong set of funding rules, the spokesperson added: “The audit was conducted against the funding rules and ILR specification in place for the years covered by the audit and these formed part of the terms and conditions of the funding agreement with the college.”
The outcome of the national residential funding review will be published “in due course”.