Britain's fastest-growing college has rejected pay and expenses claims running into tens of thousands of pounds from community education staff because, the staff say, none of them has contracts.
The staff in Bradford say they are part of a novel scheme under which Handsworth College in Birmingham is recruiting community groups nationwide to run courses on its behalf.
The initiative helped the college expand by 60 per cent last year. But the college says it "never authorised payments" to the aggrieved staff.
It is the second franchising controversy to hit Birmingham colleges in the past four weeks. Last month, police were called in by Bournville College to investigate allegedly "phantom" community education courses costing an estimated Pounds 1 million.
Patricia Twyman, the principal at Bournville, terminated community education contracts after spot checks found that nine out of ten classes set up in partnership with four Muslim groups were not running. Just six classes were on at 47 venues including mosques and a Muslim girls' school. Police say they are continuing their investigations.
Handsworth College's clampdown follows a national warning in response to the Bournville scandal by the Further Education Funding Council. Sir William Stubbs, the chief executive, advised all colleges to be "extra cautious" when franchising courses to outside groups.
The controversy involves 32 staff in the Bradford-based network. They say they were offered Pounds 400 a month each last September to recruit students and teach six hours a week. Now, they say, they are having to turn hundreds of students away and foot the bill for teaching materials.
Under the scheme, known as the Handsworth Community College Network, staff were recruited by Handsworth field officers and invited to make bids for community-based education and training programmes ranging from hairdressing to GCSEs and City and Guilds programmes. The college says there was official accreditation and contracts for agreed programmes.
But according to Peter Seazell, the college's marketing manager, there was a list of everyone with a contract and none of those making the claims was on it. He said: "We are confident that this is not another Bournville." But he agreed that the row put the whole franchise system under great strain.
A spokesman for the staff insists that when they made their bids for work, no mention was made of contracts by field officers.
The principal, Chris Webb, said that where work had been carried out by staff in good faith and where there were authenticated records and evidence of work done "then the college may be prepared to come to some financial arrangement.
Colleges trying to meet exacting government expansion targets are exploring ever-more entrepreneurial ways of reaching their goals. By franchising, they can claim FEFC cash for courses run on their behalf. But Sir William has become increasingly concerned over the tactics used by some colleges in pursuit of student numbers.
At the annual meeting of the Association for Colleges last autumn, he warned against practices such as "predatory trading" and "corporate actions which are legal but not acceptable."
He singled out the abuse of the franchise system as a particular area of concern and warned that future cash growth depended on colleges being seen by the Treasury as efficient.