A company awarded a pound;26 million contract to carry out college inspections for the next four years is mired in a financial crisis.
The education services group Nord Anglia has confirmed it is to shut its headquarters by the end of the year and sell the building to reduce its debts. Up to 100 staff are expected to be laid off.
Nord Anglia has already been experiencing problems of underperformance in its nursery division, and the move comes after a profits warning issued by the company earlier this year, which saw its share price slump by half.
Now Natfhe, the lecturers union, has expressed concern that a company that is struggling to manage its own affairs will be passing judgement on the performance of colleges.
Barry Lovejoy, the union's head of further education, said: "The company states it is committed to creating shareholder value, and is struggling, it seems, to do even that.
"It raises questions about whether a profit-driven organisation can meet the wider social needs of colleges and education."
Nord Anglia has been given responsibility for conducting the inspection of all 387 further education and sixth form colleges in England during the next cycle of inspections, which begins in September.
It was selected by Ofsted to be "the sole provider of further education inspections" and will have responsibility for organising and training inspections teams, which will continue be led by a full-time HMI appointed by Ofsted.
Ofsted said it remains confident Nord Anglia will be able to fulfil its commitment despite the financial difficulties leading to the sale of the HQ, in Cheadle, Cheshire.
A spokesperson said: "Ofsted are aware of Nord Anglia's decision to consolidate the group's head office operations into one location and we are satisfied that it will not affect their high level of service and commitment to their contracts with Ofsted."
The Association of Colleges, which expressed disappointment at not being consulted when the decision to appoint Nord Anglia was taken, said it would be "closely monitoring the situation". Rosemary Clark, the AoC's quality manager, said: "We are very concerned that inspections are run efficiently.
We will be keeping a close eye on what happens."
Nord Anglia announced last month that it plans to relocate its headquarters to the group's offices in Burton-upon-Trent, Staffordshire, in order to centralise its procedures and systems and eliminate duplicate functions.
The company said it intends to sell its Cheadle offices, valued at pound;2.7 million, and 13 small nursery units, valued at pound;2m to pound;2.5m.
Its shares were trading at pound;2.45 in March but slumped to 93p in April, though they have since recovered to pound;1.45. Profits plummeted from Pounds 4.14m to pound;1.13m in the first half, and the group scrapped its interim dividend.
The group's chairman, Alan Kelsey, who took over from the company's founder, Kevin McNeaney, in January, blamed the underperformance of its nursery division for profits being lower than forecast. He said in a statement: "We are actively reviewing our strategy in order to reach a more acceptable balance between the group's debt burden and its profitability."
The company said this week: "The contracts will commence in September and will not be affected by the company's decision to consolidate its central services functions into one location."