Hadlow College suffered from "corporate failure of leadership, financial management and governance", according to the FE commissioner.
The commissioner today published separate reports into Hadlow College and West Kent and Ashford College, which make up the Hadlow College Group.
Yesterday, Hadlow College became the first institution to be placed into education administration. It will be the first college to go through the insolvency regime, created by the Technical and Further Education Act 2017.
According to a report by FE commissioner Richard Atkins, published this morning, financial management at the college has been poor "with major failings in a number of areas". It added: "The budget-setting process has been poor and the college’s forecast outturn for both 2017-18 and 2018-19 are showing significant deficits compared to the budgeted surpluses."
More on this: Five colleges to bid for Hadlow College provision
'Failed in their duties'
The commissioner's report said that, in his opinion, "the Hadlow College board and group board have failed in their fiduciary duties and in so doing put the sustainability of two colleges and its learners at risk".
It added: "There has been corporate failure of leadership, financial management and governance. Issues of poor communication and lack of transparency have mitigated against good governance and leadership and insufficient steps have been taken to avoid conflicts of interest at board and senior management level."
According to the report, a number of allegations "are currently being investigated by the [Education and Skills Funding Agency] which further call into question fundamental aspects of governance and leadership".
The report into Hadlow College says governance is "complex, lacks transparency and is ineffective", and this had led to "a limited number of individuals having significant sway over decisions affecting the constituent organisations in the group, without a membership that has the financial skills, expertise and breadth to be able to challenge appropriately".
"The executive team members that the [FE commissioner] team met said that they had only very recently become aware of the full seriousness of the financial issues now impacting upon both colleges. They had not been in receipt of management accounts or financial information, other than their own budgets. Some claimed to have made attempts to become more actively involved in understanding the college’s finances, but said that this had not been encouraged."
A report on the other college in the group, West Kent and Ashford College, also concluded that there had been corporate failure, "including a failure to protect West Kent and Ashford College’s interests within the operation of the wider ‘Hadlow Group’" – which also includes Hadlow Rural and Community School, Hadlow Pre School, Produced in Kent; Betteshanger Sustainable Parks Ltd and Betteshanger Country Parks Ltd.
The commissioner report said "issues of poor communication and lack of transparency have prevented good governance and leadership and insufficient steps have been taken to avoid conflicts of interest at board and senior management level".
It explained a number of allegations were currently being investigated "which further call into question fundamental aspects of governance and leadership". Despite having had protected funding for three years, at a substantially higher level than other colleges, West Kent and Ashford College faces significant financial challenges, it added.
Speaking to Tes yesterday, FE commissioner Richard Atkins said this was “the most serious case I’ve dealt with, and I think one of the most serious we’ve ever had in the sector in terms of the complexity and scale of the financial problems, which are huge [and] linked to the very poor levels of leadership and governance at the college”.
He said Hadlow being placed in administration was, “in legal terms, was for me one the most significant moments since 1992 and the incorporation of colleges”. He said he regretted the insolvency regime had to be used, but added “if nobody is ever held to account for these extreme levels of poor behaviour, then we’ll have anarchy”.
Financial health notices to improve were last week published by the Education and Skills Funding Agency for the constituent colleges of the Hadlow College Group: Hadlow College and West Kent and Ashford College.
In February, the group announced that it had suspended group principal Paul Hannan and his deputy Mark Lumsdon-Taylor, with Graham Morley appointed interim principal. The chair of West Kent and Ashford College, part of the group, also resigned.
Mr Atkins said there were five colleges interested in bidding for Hadlow’s provision, and parties had until 3 June to submit their proposals for merger with all or part of the Hadlow College Group. East Kent College has already expressed an interest in Ashford College and the Canterbury Spring Lane Campus.
The commissioner added: “It’s not going to happen overnight, but ideally at the start of, or early in, the next academic year, we would have new governance and structural arrangements. But the curriculum, the provision of education on offer in Ashford, Tonbridge and Hadlow, must, and will, continue and we must do that with the minimum of disruption.”
Skills minister Anne Milton said she was “extremely concerned" by the findings of the report. "Hadlow College has been placed in education administration and our immediate focus is to make sure there is as little disruption as possible for staff and students so they can continue their studies."
She added: “The ESFA will continue to work closely with the FE commissioner, the administrators and with Hadlow College so improvements are made and we can provide the best further education possible for the area.”
'A challenging time'
A spokesman for the colleges said Hadlow College and West Kent and Ashford College had implemented a number of recommendations made by the FE commissioner in his reports and would continue to work to address others.
"We are determined, with the support of government agencies and administrators, to ensure that disruption for teaching staff and students is minimised so that college life and high-quality provision continues normally."
The spokesman added it was "pleasing" that the dedication and commitment of staff, "in what continues to be a challenging time for them", had been duly recognised by the commissioner.
"New chairs of governors have been appointed and the boards of Hadlow College and West Kent and Ashford College separated. Issues of governance, clerking and audit raised in the report are being addressed. An interim CFO has been appointed and a review into the finances of the organisation is underway. The financial expertise on the board of governors has been increased. A new owner for the Betteshanger site is being sought.
"The colleges have conducted and co-operated with investigations into the circumstances which led to the financial challenges. We await the outcome of the Structure and Prospects Appraisal and intend to work productively with all stakeholders to secure a sustainable future for the organisations, including the continuation of specialist land-based provision within Kent."