A number of addresses were raided in the West Midlands after the college and the Learning and Skills Council claimed pound;2 million was stolen by training providers which did work on behalf of the college.

It was suspected that other colleges may have been victims of the same companies, which were accused of making bogus claims for tuition which was never carried out.

But West Midlands fraud squad this week told FE Focus that it has informed the LSC that the investigation will go no further.

Detective Inspector David Churchill said: “We have found no evidence of any crime having been committed.”

The investigation relied on records supplied by the college and the LSC, although the paperwork which the police have been given is not detailed enough for their enquiries to make any further progress.

Meanwhile, Sandwell has a pound;12m deficit as a result of the business which was lost after the affected courses were closed. These included English for speakers of other languages.

Natfhe, the lecturers’ union, has been negotiating with the college over its plans to make redundancies. The college intended shedding 147 jobs, but this figure has been reduced to 23.

The union wants a guarantee that there would be no compulsory redundancies and for the LSC to bail the college out financially.

The borough of Sandwell has one of the highest adult illiteracy rates in the country.

Sandwell plans to close four campuses and move from Smethwick to a new West Bromwich site in 2007.

The college, which was praised by Office for Standards in Education inspectors for its handling of franchise agreements, has more than 100 partners which provide “franchise and community provision”. Franchising was encouraged under the Further Education Funding Council, which was replaced by the LSC in 2001 but has since been widely discredited for driving up student numbers at the expense of quality and financial transparency.