The government this week ordered a crackdown on incompetent and financially mismanaged colleges by announcing strict new powers of intervention for the Further Education Funding Council (see top of page).

This follows highly critical reports on Bilston, Halton and Wirral Colleges. On Wednesday the Government appointed a new governing body for Bilston.

The “disgraceful behaviour” of the principal and vice-principal at Halton, and the financial and management shortcomings at Bilston, were castigated by Department for Education and Employment permanent secretary Michael Bichard before the Public Accounts Committee this week.

Ministers took a very serious view of the misuse of public funds at Halton, he told MPs. There had been pound;6.4 million of excessive spending at the Cheshire college. “This is what happens when you have a strong principalship, a weak auditorship and a governing body which is not on top of the situation,” he said.

Committee members were concerned that the misdeeds at Halton would not have come to light but for a whistle-blower. But David Melville, chief executive of the FEFC, assured them that the financial affairs of the college had been under scrutiny for some time. The FEFC had already held back some pound;3.25m of funding.

Former economics lecturer Alan Williams said this only made matters worse. The MP calculated that once the overspending, the cost of teacher redundancies (pound;1.8m) and the expense of disciplinary proceedings against the principal and vice-principal (pound;500,000) had been added up, some pound;16m of public funds had been lost - all because of the activities of a very few people at the top. Meanwhile, the auditors hadn’t even noticed.

He asked the chairman of governors, David Taylorson, why they had not noticed the former principal and his deputy had been away for 191 days and 163 days respectively in one year.

Mr Taylorson replied that the governors only attended three or four meetings a year and had no reason to believe anything was amiss. With heavy irony, Mr Williams noted that it had taken the pair four days to travel from Australia to Toronto on a round-the-world trip. “Did you not wonder if they had travelled by balloon?” he asked.

Mr Melville insisted that governors’ and senior staff’s travel and hospitality would now be itemised in college annual reports. And the FEFC would take over the external audit for colleges.

Halton MP Derek Twigg demanded to know why it had taken 11 months to get rid of the principal and vice-principal while they were suspended on full pay.

They had been very litigious, Mr Melville said, and had medical notes to say they were unfit to attend disciplinary proceedings. He had advised the governors to wait until the investigations by the National Audit Office and FEFC were complete. Mr Bichard intervened to say that if he spent a night in the Ritz his auditors would be on to him within a week. He urged the college to seek compensation from Deloitte amp; Touche, the auditors who had let it down.

Auditor-general Sir John Bourn told the committee he was satisfied with the aggressive measures being put in place by the DFEE and the FEFC. But he could not guarantee that there weren’t any other Haltons in the pipeline and that whistle-blowers would not surface because of recent publicity.

As for the future, much depended on the ability of the FEFC to inspect and check on its 450 colleges. “Only by getting to know the colleges and the people involved better will the FEFC get sufficient early warning of this kind of problem,” he said.

The committee chairman made Mr Melville promise to send members a list of the other colleges that were causing concern.