“Never have the FE commissioner in your college. That’s absolutely the end of the world.”

This piece of advice, given to a recently appointed interim college principal, gave Richard Atkins pause for thought.

For Atkins, who has held the role of the Department for Education’s college troubleshooter-in-chief since 2016, it was a reminder of the challenge he faces to persuade college leaders that he really is there to help them, not simply to hang them out to dry.

Two years into the job, he has made some progress. In 2017-18, some 29 colleges agreed to undergo a diagnostic assessment of their finances - more than treble the number of colleges subjected to formal intervention from Atkins’ team during the same period. This is in keeping with the commissioner’s ambition to persuade colleges to put their hands up and ask for help, rather than bury their problems until it’s too late. This shift in focus has led to a major expansion of his role with the commissioner now heading up a 15-strong team of deputies and advisers providing advice and support.

And the overall picture, Atkins believes, is looking rosier. By the end of March, he expects 63 mergers to have taken place since the start of the area reviews in September 2015, which were designed to result in a smaller number of more resilient colleges. And the latest Ofsted data reveals that the proportion of general FE colleges rated “good” or “outstanding” during 2017-18 has risen (see graph, above right). “We’re lucky that so many colleges are well run, well governed and well led,” he says.

But for those that are not, the stakes are about to get much higher. A report published this weak by the Institute of Fiscal Studies pointed out that, by 2019-20, per-student funding will be at the same level as in 2006-7 - and barely any higher than it was at in 1989-90. Atkins expects that a new insolvency regime for colleges, coming into effect in the spring, will usher in an altogether more brutal environment for colleges which fail to keep on top of their finances.

“My nervousness is [that] once you run out of cash from now on, you are running the risk of falling into the insolvency regime.”

And, despite the support on offer, the FE commissioner fears that a small number of colleges could well end up going bust.

“I’d be surprised if we didn’t have an insolvency or two, a small number,” Atkins says. “But it will only be if principals or governors behave irresponsibly or in their own interests, rather than in the interests of the colleges they serve.”

So, ahead of what Atkins believes will necessitate a major culture change for FE leaders, what is being done to weed out underperformance? And what are the harbingers of financial crisis to which colleges should start paying attention?

A ‘free consultation’

Diagnostic assessments for colleges were introduced due to Atkins’ growing frustration with too many of the colleges he visited as part of formal interventions; in these places, problems that could have been nipped in the bud had been allowed to take root.

“It’s just far too late,” he explains, “you get there and a college is [basically] insolvent. It has no money, quality is already poor, and however much we might encourage the college to change its leadership and governance, it is a really long road back to recovery. It’s much better to get in a year or two earlier than that and say ‘look, here are all the warning signals’.”

While “four or five” of these assessments last year uncovered serious problems that triggered a formal intervention, in most cases the reports amounted to a free consultation, insists Atkins. He adds: “I want the sector not to see it as some sort of unhelpful meddling in their affairs. I want them to see it as a form of open, constructive help and support from experienced professionals.”

And the challenge that crops up time and time again in colleges, Atkins has found, is balancing quality with finance. “I’ve seen, when it goes wrong - people spending all their money on getting a grade 2 [“good”] from Ofsted and then, a year later, virtually running out of money. I’ve seen teams with £3 million in the bank, but that can’t deliver quality. The balance between the two is the art of being a successful principal.

“In the majority of colleges we go to [that are] in trouble, they are not getting the balance right and, often, [senior leaders] are not talking. There is somebody over here delivering or planning the curriculum, and somebody over there counting the money, and they are not working closely together.”

At the heart of this disconnect between planning and funding are, all too often, unrealistic assumptions. When Atkins visits a struggling college, the first document he asks for is a 24-month cashflow forecast. “I need to be sure,” he explains, “that the college is sure - not with overoptimistic forecasting, but sure in a prudent way - that it won’t run out of cash.”

And predicting future finances is a notoriously complex business. After 21 years as a principal, at Yeovil and Exeter colleges, Atkins knows this all too well. “In colleges, every September is a bit of a cliff edge,” he says. “You’re never quite sure how many [students] will enrol, how many second-years will come back, how many will go and get an apprenticeship. It’s always a bit nerve-wracking, always a bit living-on-the-edge.”

But while Atkins’ own reputation on the national stage was cemented by turning Exeter into one of the best-performing FE providers in the country - it was named college of the year at the Tes FE Awards 2012 and rated “outstanding” by Ofsted two years later - he insists he knows all about the stresses of the job and the importance of asking for help.

“At the moment, more principals would not [ask for help] than would,” he believes. “More principals would regard that as showing weakness, or being a predicter of ultimate total failure.”

This is a culture that Atkins is keen to challenge: “I know how hard it is, I know you’ve got your head down. I didn’t spend 21 years running an outstanding college; I ran colleges that were grade 3, grade 2, which had problems at times. It is hard. You’re working really hard, it can totally absorb you. But you’ve got to try to get your head up occasionally and look for help.

“The worst thing to do is be absolutely sure you don’t need any help from anybody, particularly the FE commissioner; to plough on with a strategy or an approach that is leading to problems, and suddenly run out of money. That still goes on, less often than it did, but it still goes on and leads to absolute crisis. That’s not fair on learners and it’s not fair on staff…If you go on and on telling people it’s all alright and suddenly it isn’t, the impact in a local community is huge. We’ve seen a few of those [cases]. My aim is to prevent that. When you run out of money, it’s too late.”

There are several triggers for a formal intervention by the FE commissioner. The team monitors Ofsted reports - “their work is the fundamental basis of any view that we take on quality”, insists Atkins - qualification achievement rates and data from the Education and Skills Funding Agency (ESFA) on financial performance, as well as other interventions.

Once a month, the innocuous-sounding “case-management group”, featuring the ESFA, FE commissioner and Ofsted, meets at the DfE to compare notes on planned diagnostic assessments, interventions and inspections, and to spot any emerging problems. “Any one of the three of us can put you in intervention,” explains Atkins. “We study the data. I also try, as best I can, to use soft intelligence.”

When the commissioner decides a formal intervention is necessary, he is provided with evidence from Ofsted and the ESFA ahead of a visit to the college in question. The final decision on what action to take, though, rests with skills minister Anne Milton.

Atkins - pointing proudly to his “contractor” badge - stresses that he is no DfE employee. This move was considered and rejected last year, to Atkins’ clear relief. “I think that gives us an additional degree of independence,” he says. And it’s an independence that gives him the option of speaking out about issues close to his heart, even when his views may not be strictly in line with government policy.

In January, he told the Commons Education Select Committee that funding levels for FE were “unfair”. And he is also keen to express his concern about another issue afflicting the sector: that of college staff pay.

While the government confirmed in July that school teachers would get a pay rise of between 1.5 per cent and 3.5 per cent for 2017-18, with the DfE funding a portion of that increase, in August it emerged that there were no plans for a similar increase for college staff, meaning any rise will have to be paid for from within colleges’ existing budgets. This news comes despite the average teacher pay in colleges being £7,000 less than the equivalent rate in schools.

Atkins has come across one college that has offered no annual pay rise at all for 10 years. He says: “I’m amazed how long [the pay freeze has lasted] - the level by which some colleges’ staff pay has fallen behind is quite remarkable. It is very concerning in terms of recruiting staff, particularly in shortage areas.”

He continues: “There will be real pressure, and I would support it, that colleges should have a similar, or the same, solution as schools. If schools get help meeting that, then the same has to go to colleges. I would worry about the stability of a number of colleges if they had to absorb all this.”

And, should an institution find itself in a position in which the money has completely run out, there’s little prospect of government hand-outs under the new insolvency regime, says Atkins.

“It’s really important the colleges don’t suddenly run out of money,” he states. “If you’re in financial trouble and you think you might run out of money, you need to talk to your bank and the ESFA much earlier - possibly have a diagnostic assessment. The days of ringing up and saying ‘I need X amount of money’ with two weeks’ notice to make the payroll - I think hereon that will [result in] a fundamental failure.”

Stephen Exley is FE editor for Tes. He tweets @stephenexley