Michelle Squires, the acting principal, and Ann Oldroyd, the clerk, who is also director of corporate resources, have been suspended on full pay.

Roy Hilton, chair of the corporation, stressed: “This is a routine step to take in these circumstances and does not indicate that the individuals are involved in any malpractice.” He said he was acting in the best interest of both the college and the individuals concerned.

A number of documents relating to the college have been passed on by the chair to South Yorkshire Police CID. A spokeswoman for the police said:

“Certain papers have been passed on to us which we are looking at. Our inquiries are at a preliminary stage.” The National Audit Office is also undertaking its own investigation.

The funding council has had a team of auditors at the college for the past week. Both agree that there should now be a furher phase of the investigation. This will involve a forensic audit.

One allegation being investigated is that the college claimed pound;20,000 for providing student courses, but in fact spent the money on buying 13 paintings by a Yorkshire artist Ashley Jackson. Titles include “Monday Blues in Yorkshire” and “Where no Man Dares to Tread”.

Auditors are also looking at the relationship between the college and a company, Progress Training, which was established to provide franchised courses. The company collapsed last year with debts of pound;350,000. Other companies set up by the college are also being scrutinised.

Barnsley may have to pay back to the FEFC up to pound;6 million because it failed to meet its student targets. This is a result of a college decision to withdraw from all franchising arrangements. It is currently in the process of trying to draw up a recovery plan, which must be produced by next month. The funding council is expected to move in its own acting principal, an additional two governors, an observer and an acting clerk.