THE West Midlands Fraud Squad has been called in to investigate the financial affairs of Bilston Community College in Wolverhampton.

The Further Education Funding Council called in the police after the council had carried out its own audit of the college. The college, which has debts exceeding pound;12 million, was dubbed the worst in England by inspectors. Unfettered franchising of courses lay at the heart of its financial problems.

All the governors of the crisis-riven college stood down, including local Labour MP Dennis Turner, who is also chair of the all-party FE parliamentary group. The Department for Education and Employment appointed new governors who met for the first time yesterday. The college is technically closed and the original intention was to merge it with Wulfrun College to form a new millennium college for Wolverhampton. Now it looks set to be taken over by Wulfrun, with a transfer of assets from Bilston.

Meanwhile the Government which is determined to demonstrate that it is tough on failing colleges, is putting pressure on the FEFC. Senior DFEE and FEFC officials last week discussed possible legal action over professional advice. Action could be taken by the DFEE, the FEFC or the college. While the college is in the best position legally, it has no funds.

Alan Birks, who was vice-principal of the college 12 years ago and is now principal of South Birmingham, has been seconded to Bilston by the FEFC.

He said this week: “The old governing body received advice which could have been interpreted as the college being on a sound footing. There is now a view that the financial situation was significantly worse.

“The emphasis of the new governing body is to prepare the college for the future. If, as a result of investigations it seems that anyone was negligent it is possible that that there may be an attempt to recover funds from people or organisations, but it is too early to say.”

He said the college debts were two-fold: money which must be paid back to the FEFC because it was claimed for work which proved to be ineligible for funding; and money owed to third parties, including bank overdrafts.

Mr Birks said that the bank overdrafts would have to be cleared by the FEFC and that the council has a legal duty to recover the funds.

Bilston’s troubles became an issue in yesterday’s local elections after Conservatives used an article in last month’s Daily Mail headlined “Welcome to Corruption College” in an election leaflet. The article carried a photograph of Dennis Turner, a former governor of the college. The leaflet warned people not to vote Labour.

Mr Turner told The TES that he was consulting a barrister on whether he should sue the Daily Mail for libel. “They did not say anything of substance but there was a link between a picture of me and corruption. I am not going to give anyone an indication that I was in any way corrupt.

“All my contribution to Bilston has been to do whatever I can to support it.” He said he has received letters from ministers Baroness Blackstone and George Mudie, and also Lord Davies, chairman of the FEFC, all thanking him for his valuable contribution to the inquiry into Bilston.