The troubled history of Coleg Gwent, which encountered financial problems in the wake of management restructuring and changes in pay and conditions four years ago, represents a sobering lesson for the rest of the sector, according to the National Assembly’s audit committee.

It had showed surpluses in its income and expenditure accounts from incorporation, in 1993, until the 1996-97 year, when it made an operating loss of pound;6.8 million. During this period, the number of management posts increased from 56 to 110.

The committee says the college appears to have repaired its finances under new principal David Mason but, crucially, it believes the underlying structural management weakness were not unique to the college, Wales’s largest FE institution.

It also noted that the Further Education Funding Council for Wales was unable to wield any control over the college apart from by withholding money, a course of action which was considered inappropriate at the time of the crisis.

Blaming incorporation for the lack of controls over the college, it said: “With the benefit of hindsight, the procedures and systems that had been put in place for the establishment of these bodies in 1993 had been inadequate to deal with the sort of events that happened at Coleg Gwent - eiher to prevent them or, once they had happened, to identify them.”

Its report said the Assembly should consider ending the self-managing status of colleges.

“The events at Coleg Gwent have raised fundamental questions about the current administrative framework for the sector. We recommend the Assembly minister for education and lifelong learning should examine whether the model established for the FE sector of colleges as self-governing bodies remains appropriate,” the report said.

Emphasising what it sees as the national significance of Coleg Gwent’s failings, it added: “The funding council should arrange for this report to be considered by every FE college in Wales.”

The report also said governing bodies should carry out skills audits and change their membership according to any deficiencies they find. All institutions, it said, should ensure that they have the “appropriate level of qualified finance staff”.

In the case of Coleg Gwent, the committee recommended that the college should report regularly to consultants Deloitte Touche, which is involved in more than a third of Welsh colleges.

Calling for continued improvements at the college, the report said: “Both the college principal and the funding council admit that it still needs to address a number of key strategic problems. One important factor is the need to produce accurate data on the number of students enrolled.”