A troubled university technical college where auditors raised a string of concerns about finances and governance has received an official financial notice to improve.

Energy Coast UTC, in Workington, Cumbria, has been warned that if it does not comply with the terms of the notice, its funding could be terminated.

The UTC opened in 2014, and aims to provide skills which the local energy sector needs.

In a letter dated 28 March, and published today, Mike Pettifer, acting director, academies and maintained schools at the Education Funding Agency (EFA), said chair of governors Barbara Stephens had strengthened accounting and financial controls since she took over in October 2016.

However, he said he was “concerned about the historic failure in governance and financial management and control” highlighted in a report by EFA Provider Risk Assurance, and an external audit that Ms Stephens had commissioned.

He wrote: “These reports cited a number of material weaknesses in the accounting practice and internal control systems of the trust. The evidence reviewed does not provide the EFA with assurance of good financial management and governance.”

Stripped of delegated authorities

The EFA has stripped the UTC of its delegated authorities, and now all transactions - “regardless of size” - must be approved by the EFA.

In its financial accounts for 2015-16, its auditor highlighted five concerns about the organisation. These included a lack of evidence to show the UTC has obtained value for money; contracts which were agreed “in excess of delegated authority”; a lack of evidence that conflicts of interest were given due consideration; and evidence that an ex gratia payment was made “without appropriate consent”.

The accounts also said that the UTC was in talks with the EFA about it clawing back money the UTC was overpaid because of a failure to recruit the expected number of students.

The financial notice to improve says that any related-party transactions must be “at cost” - and the UTC must provide a statement of assurance where such transactions exist, which may include identifying “any elements that may have previously been charged as profit”.

It also says the trust must have arrangements in place to avoid conflicts of interest, novel and contentious payments, accounting irregularities, and inappropriate use of capital funds on revenue expenses.

Last month, Ofsted gave the UTC a “requires improvement” rating in all categories.

In a statement, the UTC said that its new management team had been working with the EFA since last September to look at how it had been financed and run up to August 2016.

It said it had “responded with swift action to address the concerns raised”.

It added: “Although the UTC accepts the findings, it is disappointed with the conclusions regarding the cost of the teaching facilities provided by some of its partner organisations.

“It was always the intention that much of the teaching and learning of the UTC’s students would be delivered by partner organisations and the capital build of the UTC was reduced to reflect this and this was agreed by the EFA and the Department for Education when the UTC was originally approved.

“This provision has proved very successful for UTC students, 74 per cent of whom go on to gain apprenticeships.”

The notice represents the latest blow to the UTC movement, which has already seen seven institutions announce their closure.

Earlier this month, plans for Guildford UTC, which was due to open in 2018, were cancelled because of a lack of government support.

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