The inquiry into the Hampshire college will be carried out by the Further Education Funding Council. The Department for Education and Employment this week said there had been concerns for some time "but to have intervened earlier might have compromised other investigations".
The principal Richard Evans was dismissed by governors last month (TES, July 23). He was suspended in March 1998 after a police inquiry into alleged financial irregularities in information technology training projects paid for by the European Social Fund in 1994 and 1995.
The police inquiry ended and no charges were brought. An independent investigation commissioned by the college from consultants PricewaterhouseCooper confirmed that funding regulations had not been adhered to.
Dismissing Mr Evans, governors said they were satisfied that he was acting in what he saw as the best interests of Cricklade but that his actions "brought the college into disrepute".
But the DFEE confirmed that Mr Blunkett was not happy with the board's explanations. A spokesperson said the investigation also related to complaints from Paul Mackney, general secretary of the lecturers' union NATFHE. He was angered by the sacking of the union's senior negotiator, Andrew Murray, and the failure of the college to release the inquiry report into ESF funding.
Mr Blunkett wants more information about the alleged victimisation, an explanation as to why governors took so long to dismiss Mr Evans, clarification of what was going on with the ESF funding and assurances that progress was being made after a poor inspection report last April.
In a statement from the board, the college governors welcomed the inquiry which, they were confident, would lead to a swift resolution of the issues.