College fraud probe finds 'significant' rule breaches

Former principal at Bournville College Norman Cave claimed £200k in expenses - and signed off £100k more for his wife

Stephen Exley

Bournville College investigated after concerns raised by former FE commissioner Sir David Collins

A college which bought four Manchester United season tickets, and where the former principal promoted his wife and hired his daughter, “repeatedly” committed “significant” breaches of its own financial rules, according to a damning report.

Norman Cave (pictured), the former principal at Bournville College – dissolved in 2017 when it merged with South and City College Birmingham – claimed over £208,000 on expenses over four years, according to the investigation by KPMG for the Education and Skills Funding Agency (ESFA).

The report was referred to West Midlands Police to consider whether the former principal had “operated fraudulently”, but the force will not pursue a criminal prosecution, according to the document published today.

Senior leaders at Bournville College were guilty of "unacceptable practices" and "poor governance", the Association of Colleges said today.

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Bournville College investigation

Bournville College received £26.5 million in exceptional financial support between December 2013 and August 2017, “none of which was repaid to the government”.

From 2011 to 2015, more than £100,000 was spent on credit card expenses by former assistant principal Anjum Cave. Mr Cave – principal from 2002 to 2014 – declared their marriage to the college in 2010. 

The investigation found that he was the “sole signatory for several overseas travel expenses claims from the assistant principal”. This “should have required third party oversight given the nature of the relationship between the former principal and the assistant principal that was declared in the college’s register of interests”, the report states. 

'No evidence' of rationale for pay rise

In 2012, Mrs Cave was promoted to the senior management team. In 2014, she was brought into the executive leadership team, receiving “a substantial pay increase of 22 per cent…but no evidence of changes to responsibilities or rationale for the increase”. 

There was no evidence found by KPMG that a potential conflict of interest was recorded in committee or corporation minutes.

The report also reveals that Mr Cave’s daughter was appointed to the college. While there was “no evidence” he was involved in the recruitment or appointment process, there was “no disclosure identified in the register of interests of his daughter working at the college, and governors were not actively made aware of the relationship”.

Questions over procurement

It also highlights that £899,035 was spent with Smartphone Media and several related companies, for which KPMG “could not identify any evidence of tender or procurement framework processes or signed contracts”, amounting to a breach of the college’s financial regulations.

It also highlights an invoice of £82,406 for which no approval was sought by the relevant college committee, with an additional £196,980 paid through two standing orders “where there was no evidence identified by KPMG of approval by the corporation or its committees”.

The investigators also found a series of invoices for marketing activity, for which there was “a persistent absence of evidence of goods or services supplied”.

'Significant' breaches of financial regulations

“Significant" breaches of financial regulations were also identified in the cases of £132,000 spent on a campus opening party in 2011, and almost £150,000 on a centenary celebration in 2013.

The report also notes that Mr Cave took a personal shareholding in a company called Trans Data Management in 2013-14 – a company which agreed a deal with the college, under which Bournville would “employ staff to support Trans Data Management opportunities locally in return for a revenue percentage from successful consequent operations”. There was no reference found by KPMG in board minutes that this arrangement was approved. 

The report focuses on an overseas trip in October 2014 by Mr Cave – who served as a director of the Association of Colleges from 2010 to 2014 – and other staff. The principal’s credit card charges for it stood at £17,000 – “well in excess of the authorised budget of £10,000, and also disproportionately higher than the budgeted cost of £15,000 in total for all four other members of staff”.

On authorisation forms for overseas travel, the report states that “the rationale for most trips was brief, and there was no evidence of an event or annual reconciliation between estimated costs, authorised budget and actual costs”. It adds that “no attempts were made to ensure value for money” by looking for cheaper flights or accommodation, “contrary to the college’s financial regulations”.

The KPMG investigation was commissioned after concerns over “potential misuse of public funds and potentially fraudulent activity” were raised in 2015 by then FE commissioner Sir David Collins.

'Failure of senior managers'

The report states that the KPMG investigation identified instances where:

  • “There was a failure of senior managers and governors over the four years for which evidence was reviewed to comply with the relevant version of the college’s financial regulations in relation to procurement processes and financial controls.”
  • “Expenditure on key corporate hospitality and marketing events showed breaches of the college’s financial regulations and anti-bribery policy, including failing to update the register of interests in a timely way and to declare potential conflicts of interest.”
  • “The college’s review process for the expenses incurred by the former principal and other senior staff was non-compliant with its financial regulations, and there was little evidence of challenge to the former principal by successive chairs of governors on individual items of expenditure.”
  • “There was limited evidence of any control over costs of overseas travel. Reports provided to the corporation were incomplete and excluded overseas travel expenses from the activity costs presented. There was little evidence that governors challenged the lack of information, or sought justification for time spent and college funds used, on introducing commercial organisations to overseas contacts without formal partnership arrangements in place. There was no entry on the register of interests for the former principal or governors regarding their directorships in a joint company that was set up with another body, Trans Data Management, which is a breach of the Financial Regulations and the college’s Anti-Bribery Policy.”
  • “Relatives of senior managers were appointed without declarations in the register of interests. Pay increases for senior post holders and some senior managers were approved over and above those paid to all college staff during a period of decline in financial performance of the college.” 

ESFA: Identifying 'financial decline'

Responding to the report, ESFA chief executive Eileen Milner said: “Since 2015, we have implemented a number of changes to help governors deliver their statutory responsibilities; these include updated regularity self-assessment for college corporations, governance codes for college corporations and strengthened guidance for external auditors.

“We also introduced an early intervention strategy and extended the role of the FE commissioner, where intervention begins when financial decline is first identified. I have written to the chairs of governors to reiterate their responsibilities for oversight and proper use of public funds in their colleges.

“The Department for Education has provided support for governing bodies with the establishment of the National Leaders for Governance for FE, and the publication of the governance guide for further education and sixth-form college corporations.”

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Stephen Exley

Stephen Exley

Stephen Exley is a freelance writer, director of external affairs at Villiers Park Educational Trust and former FE editor at Tes.

Find me on Twitter @stephenexley

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