LEGAL action has been launched to recover more than pound;25 million from the external auditor of Bilston College, after it closed leaving millions of pounds of debt.

Bilston was known to have owed pound;10m when it was taken over by Wulfrun College in 1999, forming Wolverhampton College. College accounts also suggest millions of pounds was spent on courses which were not eligible for public funding.

Wolverhampton’s accounts showed liabilities of pound;27.2m.

A claim was this week submitted to the High Court in London against Deloitte amp; Touche by the Learning and Skills Council, claiming the company failed to spot the misuse of public funds.

The claim is expected to be served on Deloitte amp; Touche in four months. The action comes 14 months after David Melville, chief executive of the Further Education Funding Council, told Parliament that action would be taken. The case was taken over by the LSC when it replaced the funding council last year.

The intention to sue, reported to the Commons education select committee in confidential written evidence in November 1999, was not made public until April last year, and this week FE Focus is able to report the amount of money involved for the first time.

The FEFC decided to take action “on grounds of professional negligence on the part of external auditors, failure to exercise a proper duty of care towards the former college’s corporation and chief executive, which gave rise to the substantial loss of public funds.”

A spokesman for the LSC confirmed: “The Learning and Skills Council has lodged a legal claim against Deloitte amp; Touche, the external auditors of the former Bilston College, to recover estimated losses in excess of pound;25m.”

David Davis MP, as chairman of the public accounts committee, suggested in March last year that all college accounts should be scrutinised directly by the National Audit Office “if Parliament is to gain assurance that the pound;3m of public money going into the sector is spent properly and effectively”.

This would mean closer scrutiny by Whitehall. At present, the NAO audits the Learning and Skills Council and has access to individual colleges when it is carrying out value-for-money surveys on behalf of the Government.

The Royal Courts of Justice in the Strand provide perhaps the most anti-climactic possible setting for the latest chapter in the Bilston story - one which started with the college being held up as a textbook example of how its peers should do business in the new era following incorporation in 1993.

The college enthusiastically embraced opportunities to provide education through franchising arrangements and off-site provision, until it ran into trouble as the myriad companies which it set up fell foul of changes to funding policy in 1997.

Failing an out-of-court settlement, it will be for the judges to decide whether the auditors should have raised the alarm before millions of pounds of the Further Education Funding Council’s money was pumped into an ultimately doomed institution, never to be recovered.

Deloitte amp; Touche refused to comment.