The Department for Education has revealed £6 million was spent on administrators’ fees alone for the two college insolvencies, an amount its most senior civil servant has called “gut-wrenching”.
At a hearing of the House of Commons Public Accounts Committee today, the Education and Skills Funding Agency’s director of provider market oversight Matthew Atkinson told MPs the cost of putting Hadlow College and West Kent and Ashford College through administration “will probably run to over £60 million”.
Of that, he said, £6 million has been spent on the hourly rates of administrators from BDO.
The £6 million figure stunned MPs, with committee chair Meg Hillier commenting: “I can just imagine principals around the country gasping as we are.”
The department’s permanent secretary Susan Acland-Hood replied: “I agree with you, if I’m completely honest, it is a gut-wrenching amount of money.”
Speaking after the hearing, Richard Holden MP, committee member and former special advisor to education secretary Gavin Williamson, called it “mind-boggling that £6 million has already been sprayed on insolvency accountants for one FE group”.
He said the senior leaders which got the colleges into the mess “clearly have very serious questions to answer”.
“While the government is clearly now heading in the right direction on FE, unbelievable failures like Hadlow show that the government’s white paper needs to have management, but mostly, clear oversight and accountability of the FE sector at its core”.
However, Acland-Hood and Atkinson told the committee that using the insolvency regime, which so far just Hadlow and WKAC have been through, saved the taxpayer more than £20 million.
The National Audit Office reported in September the administrations had cost taxpayers £26.6 million, spent on keeping the doors open and “facilitating a long-term solution,” the report read.
Acland-Hood continued: “Having an insolvency regime in place, and I think the NAO has recognised this, is quite an important component in doing exactly what you say, which is to try and make sure we can intervene earlier and more effectively.”
The two colleges, which were jointly managed but with separate boards, collapsed after falling into what FE Commissioner Richard Atkins described as an “extremely serious financial situation,” owing millions of pounds to creditors.
The principal of both, Paul Hannan, and his deputy, Mark Lumsdon-Taylor, both resigned after the colleges’ problems came to light, as did both chairs and several governors.
Hadlow and WKAC were placed in administration in May and August of last year, respectively.
Atkinson said a “large amount” of the £60 million was related to capital costs: “Because of the leadership and management and governance, at Hadlow in particular but also at certain sites at West Kent, the estate was in a very poor condition
“So a large part of that expense is to bring that estate brought up to reasonable standards, so not technically a cost of us doing any merger but a condition of us providing that support.”
Hadlow and WKAC’s provision has now been split up between Capel Manor College, North Kent College and EKC Group (formerly East Kent College).
“These colleges were losing money day by day,” Atkinson said, adding that Hadlow College had 52 “pressing” creditors.
“That’s how badly it had been run”.
Committee member Richard Holden raised FE Week’s story from last week about Lumsdon-Taylor returning to work at auditor MacIntyre Hudson, and asked if the government was looking at taking any action against him.
Atkinson highlighted the administrators’ investigation into the conduct of the directors prior to their appointment, and, while adding he did not want to prejudice that investigation, said: “If there is sufficient evidence of wrongdoing, we will seek whatever sanction is available to us.”