A college is weeks away from becoming insolvent and its position is "terminal", the FE commissioner has warned.
In an intervention report on Cheadle and Marple Sixth Form College, published today, FE commissioner Richard Atkins recommends a change of leadership and questions the ability of the college to remain a standalone institution. Structural change is required, he concludes.
The report says that the underlying trading position of the college is weak and has not been corrected by the college over a number of years.
In June, Tes revealed that the college had approached the Education and Skills Funding Agency for emergency funding because it was unable to pay staff wages.
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College 'close to insolvency'
The commissioner's report states that governors had not understood that the underlying deficit was being masked by asset sales and that this was unsustainable, while the budget planning had been too optimistic. Meanwhile, a lack of regular management accounts and cashflow forecasts resulted in the college "being weeks away from becoming insolvent without the governors or senior leadership team being aware of it".
According to the report, the college currently forecasts to post a deficit "well in excess of the deficit budgeted for", as a result of both income reduction and cost increases.
Strategic leadership and financial oversight have been "seriously lacking for several years", and "while the reporting by the previous finance director is understood to have been deficient of late, continuous annual deficits over a number of years mean that the current cash crisis would have occurred in any event".
The principal and the governing body failed in their fiduciary duties, says the commissioner, and "must take responsibility". The report adds that the current recovery plan is ineffective. "The college’s solvency is in question and it is unlikely that the college can continue on a standalone basis," it says.
"Over a considerable period of time, the governing body has failed to identify the deteriorating position, which is now terminal."
However, Mr Atkins also highlights that, with the exception of apprenticeships, the quality of provision at the college is good and the fact that the leaders and managers, led by the principal, have brought about secure improvements in nearly all aspects of the college curriculum.
The commissioner recommends "escalation to formal intervention", with actions including a change in leadership as soon as possible and training on the insolvency regime for colleges for governors at the institution.
A spokesperson for the college said: "Since the FE Commissioner visit in June the deputy principal Sharon Burton has taken on the role of acting principal and Alison Hewitt is the new chair of governors. We are working closely with the ESFA and FE commissioner team to explore solutions for the college, and the staff will continue as always, to focus on the delivery of high quality educational provision for the local communities that we serve."
