A two-year investigation into allegations that Liverpool Community College claimed public money using faked student records has ended in one case being referred to the police.

The Skills Funding Agency (SFA) said the college has now paid back a total of nearly pound;80,000 that had either been wrongly claimed or the records for which had been lost.

The SFA referred one incident to Merseyside Police after discovering that two employer references had been falsified to show students were eligible for funding on a European Social Fund IT skills project in 200304.

Grant Thornton, a forensic auditor appointed by the college to investigate the allegations in 2008, said the falsified details were created using the login of a member of college staff, although the login owner denies responsibility.

Further inquiries found three more faked references, and evidence that one student for whom funding was claimed never attended the course.

The SFA also criticised the way the college recruited its own staff to courses as students.

In one instance, a tutor was enrolled on the same course as the one he taught, although the college disputed this, saying it was only a related course.

Three members of staff achieved an IT qualification where “the evidence to support their attendance on the course was incomplete and created retrospectively”, and they did not appear on the class register.

The investigation found that the college had recruited students to courses they had already studied, and that in other cases students were recruited to subjects in which they already had a very similar NVQ.

“This form of activity can be viewed as poor value for money, and therefore bad practice,” the SFA report said.

Other claims by whistleblower Tom Hanson, a former IT lecturer at the college, were not upheld due to lack of evidence.

These included an allegation that staff engaged in the mass fabrication of student portfolios in the summer holidays, that learner numbers were exaggerated, and that in one year the college claimed funding for a course that never ran.

The agency also dismissed an account by former student Michael Clarkson contesting the college’s records that he had completed a list of 28 units and modules.

He said he recalled only about six of them, and added that a claimed English qualification was unlikely since he has dyslexia.

Elaine Bowker, who became college principal last month, said the money returned was just 0.04 per cent of its turnover during the period under investigation, from 2000 to 2007.

The bulk of the sum repaid - pound;60,165 - was due to lost records.

Ms Bowker said: “We have more than 2 million records in storage and there were just 45 that couldn’t be found. You would have found something like this at any college if they had come under the scrutiny that we put ourselves under.”

The college said its appointment of Grant Thornton as forensic auditor showed how seriously it took the allegations.

But the SFA report makes it clear that many of the problems that prompted the repayment of a total of pound;79,910 were uncovered in the 2008 Grant Thornton report, which the college refused to publish.

At the time, chair of governors Vivienne Tyler said: “The governors were satisfied that all regulatory obligations had been met, including bringing to the attention of (SFA predecessor) the LSC the possibility that there had been a small, isolated over-claim of pound;750 of funding in 200405.”