The Further Education Funding Council inspectors had given the college a grade 5 for governance and management - provision that has many weaknesses and very few strengths - the lowest possible mark. No college in the sector had ever received such a grade.
That was September, 1995. Last week, David Melville, chief executive of the FEFC, described the college as a "beacon" for others to follow. It had risen from the ashes, he said, and he could not have been more impressed.
Hereward's turnaround has been remarkable and may hold lessons for other colleges that find themselves beset with problems. The college is the only one of its kind to meet the needs of students with often very severe physical and sensory disabilities from all over Britain, as well as local, non-disabled students.
The FEFC inspection revealed a college that could not cope with incorporation. As well as the grade 5 for governance, it received a grade 4 for students' recruitment, guidance and support, for quality assurance, for accommodation, and for residential education programme. The only top mark it received was for equipment and learning resources.
There were several companies connected with the college and some staff paid by the college worked full-time for the companies. The college had a serious financial deficit, the inspection found, but had only recently discovered that. To cap it all, the fraud squad was called in to investigate the alleged misuse of European Union funds.
The FEFC report was the catalyst for change. Mike Shattock, registrar of Warwick University, came in as the chair of governors with a brief to sort it out. He had handled inquiries at Wilmorton College, Derby, and the University of Cardiff.
Mr Shattock admits he was shocked when he arrived. "You would have thought that here, students with maximum disablement would have had the best facilities," he said. "But I found they were infinitely worse than those for even non-disabled students at the university. Frankly, I thought it was a slum.
"An unheated garage was the only piece of social space, it was quite intolerable. We have set out to radically refurbish the facilities. If we are going to be a national college, we have to look like one."
Mr Shattock worked closely with the new principal, Catherine Cole, with a nursing and health visiting background, who had originally been appointed as an acting principal on a consultancy basis.
She said: "I think that what had happened here is that the management and governors lost sight of the primary function of the college, which is to provide an integrated education for its students. They appear to have got carried away with projects that were spurious and not of benefit to the students."
The two devised a four-year recovery plan. FEFC support was crucial. Mr Shattock said: "They recognised that they either pulled the plug or gave us support, and it was the latter."
The college is in "friendly" negotiation with Coventry City Council about debts and is talking to EU auditors about its financial situation. It is in the process of selling off some land behind the college. This will release funds, which it hopes the FEFC will match, to allow the refurbishment of the residences.
"This is like a teaching hospital: many students have to be turned over in bed at night," said Mr Shattock. "There's been a chronic lack of investment. It should never have been allowed to get into this state."
Other things have been put right. "Two years after incorporation the college did not understand the basics," Ms Cole said. "It had no strategic plan. It did not understand the importance of returns to the FEFC. We introduced an open management style, we hold regular staff meetings.
"There was no student association, so Mike and I encouraged the students to set one up and now they have their own office. We have put in place procedures for ensuring the health and safety of the students.
"There had not been a proper academic board for four years so we were not getting any advice on the curriculum from the staff. Above all there had to be a massive shift in the perception of management. The staff have been very positive."
There was a cost. Seventeen voluntary and compulsory redundancies - 10 per cent of the staff.
What happened last week effectively constituted a re-launch of the college. There was a desperate need for a multi-provision space for fitness, dance and assembly.
Local business people put their company's hands in their pockets, and funds were raised for recreation and studio facilities. They were officially opened last week by Professor Melville, and the college was able to put its past behind it. Students, some acutely disabled, gave two powerful and moving dance performances, and at last the focus of the college was on the benefits it could bring to the students.
Mr Shattock had little real connection with disabled students before he took up his post. Seeing the problems they face and how they cope, and watching the college make its all-important contribution has powerfully affected him. He initially thought his stay would be only for about a year. Despite all the good work that has been done, much more can be achieved. "I cannot walk away until everything it needs is realised," he said. It is well on the way.