The council, carrying on the responsibilities of the Further Education Funding Council, is seeking to recover “substantial public funds”.

The funding council made its intentions clear to MPs on the public accounts committee in written evidence on December 7, 2000, but this has not been made public until now.

The council told MPs it was “considering action on the grounds of professional negligence on the part of external auditors, failure to exercise a proper duty of care towards the former college’s corporation and chief executive, which gave rise to the substantial loss of public funds.”

Bilston was dissolved in 1999 and taken over by Wulfrun College. It was pound;10 million in debt, but many critics of the FEFC say that the closure cost far more than the amount said to have been owed by Bilston.

Last November David Melville, chief executive of the funding council, told the PAC he could not prejudice maters by making estimates in public of the claim they would make. However, he thought the sums could be made public by March.

The written evidence to the PAC says the National Audit Office and the Department for Education and Employment have been kept closely informed. The legal option had been a lengthy process “largely because of the volume and chaotic nature of the college’s own papers, and the complexity of its financial activities.

“Legal counsel had stressed throughout the need to weigh the strength of the case against the likelihood of recovering public funds and the costs of litigation. It is now his view that it would be proper to proceed against both internal and external auditors with a reasonable prospect of successfully recovering substantial amounts of public funds.”

An LSC spokesperson said the council “intends to conclude its inquiries as soon as possible and seek to recover any funds which might be owed to the council or the former Bilston Community College.” This had been what the PAC had asked it to do.

FE Focus letters, 26