#163;8 million into the red, reveals a story of descent into chaos and a string of mistakes that led to the college falling massively short of its recruitment targets.

Governors at the troubled college have published their version of the fiasco to coincide with a damning inspection report.

The corporation report, based on an internal inquiry and a study by auditors Coopers amp; Lybrand, says: “A series of independent, but nonetheless inter-related, issues have been identified which contributed not only to the under-achievement itself, but also to the fact that no one was aware of the financial impact of that under-achievement until two months after the year-end.”

Former principal Neil Preston, and to a lesser extent, programme planning director Helen Chandler, who were both sacked after allegations of running a pub while on sick leave, are singled out for much of the blame.

The report says the college’s marketing strategy, led by Ms Chandler, lost students by breaking links with schools and other organisations. Mr Preston’s decision to abandon the college’s main computer system covered up a shortfall in students until it was too late for the college to recover.

The report highlights a number of serious failings in financial controls at the college. Mr Preston’s management style, described as discouraging “openness and challenge of his views”, strained relationships between senior management.

The report also criticises the personal relationship between Mr Preston and Ms Chandler, and the handling of governors’ meetings - in particular Mr Preston’s direction of college business with the former chairman of governors, George Mardle.

Governors found that 34 of the college’s 40 senior and middle managers had been demoted or sacked, left on the grounds of ill health or for jobs at the same or lower level, or taken early retirement.

The governors conclude: “The remaining six managers have survived with great difficulty. There is evidence of stress-related illness, in some instances very severe, in at least eight of these managers.”

The saga hinges on the college’s plans for large-scale growth in its 1993-98 strategic plan.The governors say that Mr Preston’s plans, using a network of community colleges, amounted to a “high risk” strategy.

They had accepted a plan for 25 per cent growth in the 1995-96 academic year, but Ms Chandler’s regime as the college’s head of marketing weakened links with schools and other local partnerships, which in turn hit enrolment.

Problems were compounded by a crisis in the college’s computerised information system which recorded the number of students in the college and calculated whether targets were being hit.

The explosion in information required from colleges from about 1994 fuelled the collapse. With its FEMIS computer system, the college was unable to produce the complex unit calculations needed for its funding.

A new system was chosen, but after problems transferring data, Mr Preston stopped updating the old database and all the student records were re-typed instead, a decision that caused major problems, and which the report condemns as “lacking professional integrity”.

The hidden shortfall in numbers - producing a shortfall in the funding units - plunged the college into financial crisis.

The report says: “The practical result of this decision was that from May to September 1996 the college had no systems-generated data at all. The action taken by the director, whether knowingly or not, delayed public acknowledgement of this shortfall by creating a situation where the college was unable to generate any information at all. Further time to justify the target level of units was generated.” Mr Preston had overall control of the college’s information system.

That year, the college failed to meet the deadlines for submitting budget claims to the Further Education Funding Council. Despite the problems, Mr Preston told the FEFC the 1995-96 data would be available in September 1996 and that the target would be achieved. The report says, “No evidence is available which could have supported this assertion at that time.”

Daily and weekly college enrolment statistics - known as “the pinks” and not connected to the computer system - were available, but the report says,“the director failed to discharge his responsibility to make use of this information, ignoring the fact that by the time the management information system was likely to be capable of producing accurate unit information there would be no flexibility for making savings in the budget if any shortfall in units was revealed”.

The report highlights serious problems with the way the college was governed and managed.

The then chairman of governors George Mardle held weekly meetings with Mr Preston at which they agreed agendas for corporation meetings.

As early as November 1995 some governors had raised concerns about the management of the college, and and had written to Mr Mardle, but their complaints had not been “followed up to their satisfaction”. After December 1995, the report says, “the meetings become difficult to handle because of issues between the director and certain governors”.

A shadowing scheme was established, under which governors were assigned to senior managers. The scheme collapsed. “Members of the senior management team were specifically instructed by the director not to make the arrangements work,” the report concludes.

Criticism is also levelled at the college’s senior management team, which was effectively run by a trio of senior figures.

The report says: “Any dissent from actions by either the marketing and programme planning director, quality projects manager or the director were stifled through open hostility or ridicule of the dissenter in front of the rest of the senior management team.”

Mr Mardle, who was ousted from the board of governors last September, called for the full Coopers and Lybrand report to be published. He said he had not seen the report and could not comment. Mr Preston could not be contacted for comment.

Detailed extracts of both reports can be found in the Further Education section of TES Network.