Officials ‘shocked’ by Hadlow College – ‘It had completely run out of money’
by Andy Tong | 29th May 2019
THE Further Education Commissioner [FEC] said he was ‘genuinely shocked’ by what he found when he went into Hadlow College earlier this year.
The agricultural college, which has 2,089 students, was the first college to go into educational administration last week amid concerns about its finances.
It has emerged that the college had to be bailed out by the Department for Education to the tune of £2.8million because ‘it would not be able to make the payroll in February’.
The principal Paul Hannan and vice-principal Mark Lumsdon-Taylor have both resigned amid allegations of ‘financial irregularities’.
They were also respectively the chief executive and deputy CEO of the Hadlow Group, which runs the college along with West Kent and Ashford and the Hadlow Rural Community School.
Hadlow College had ‘completely run out of money’ and required ‘exceptional financial support’ in order to pay staff including teachers.
FEC Richard Atkins revealed that he was about to visit its sister college, West Kent on Brook Street, when he received a tip-off that Hadlow College was in ‘extremely serious’ trouble.
He told FE Week: “When we walked through the door the vice-principal, Mark Lumsdon-Taylor, had already resigned and was on gardening leave. He still lived on the premises.
‘It became really obvious very quickly that the governors had been failing in their duty’
“The principal, Paul Hannan, was not well and he left the college at midday to see a doctor.
“He did not return, and I do not think he ever came back from that moment.
“I was also told the vice-principal was suffering from ill-health. So when I arrived, I was confronted with both the vice-principal and principal saying they were suffering from ill health.
“But I was able to meet with key governors and other senior leaders, and it became really obvious to us very quickly the governors had been failing in their fiduciary duty.”
Mr Atkins said senior administrators were opaque in their dealings with him, claiming: “There was a real determin- ation not to receive difficult feedback.”
He added: “There was very poor communication and lack of transparency and we had serious concerns about clerking and about audits.
“We could see mission drift, very overly complex subsidiary company arrangements, over-complex relations between the two colleges and governance.”
He was referring to the connection between Hadlow College and West Kent in Tonbridge which, while they were separate entities, shared governors on their respective boards.
And he ‘struggled to understand’ other strands of the business included a visitor centre and business park in Betteshanger, east Kent, which Hadlow Group is trying to sell for £40million.
Mr Lumsdon-Taylor planned to open a Kent Mining Museum on the site, which used to be a colliery, in March but it has been put on hold.
Other areas of concern centred on the Cookery School run by chef Rosemary Shrager in The Pantiles in Tunbridge Wells, which opened in 2013 but has suffered financial difficulties.
At the High Court it also emerged that the college has received material financial claims from Heritage Funding and the National Lottery.
'Given the combination of running out of money and the very poor governance and leadership at the college in previous years, it was inevitable this college would end up in administration'
The latter is calling for the return of £526,000 after it gave the college £1.3million to help develop the mining museum in 2016.
Mr Atkins added: “There were also irregularities in additional learning support funding, which we had first begun to identify at the end of area review.”
The Education and Skills Funding Agency [ESFA] had already investigated money that was paid to the group to fund apprenticeships, which the ESFA dispute it was entitled to.
He also discovered that the college was still claiming to be ‘outstanding’ for overall effectiveness and leadership based on an Ofsted report from nine years before.
He concluded: “Given the combination of running out of money and the very poor governance and leadership at the college in previous years, it was inevitable this college would end up in administration.”
West Kent and Ashford College [WKAC] is not affected by the ruling – though the FEC included them in his report – but it has received a ‘financial health notice of concern’.
The Skills Minister, Anne Milton, described both as being in a ‘perilous’ state’ and they have been handed ‘supervised college status’.
The administrators at Hadlow College have been asked to oversee a possible sale of parts of the Hadlow Group to other educational providers in a 30-mile radius.
They will also prepare a report on the conduct of all college governors for the last three years for the business secretary.
The Insolvency Service will then decide whether to seek to disqualify any of them – and even impose prison sentences if it is found they have committed a statutory offence.
Six key findings
The commissioner’s reports into Hadlow and West Kent Colleges found that:
1 Both boards failed in their fiduciary duty, putting the ‘sustainability of both colleges and learners at risk’.
Several of the colleges’ functions are governed by joint-committees, with members drawn from both colleges’ boards.
A few individuals had ‘significant sway’ over decisions affecting every organisation. A clerk, Jonathan Allen, was singled out for trenchant criticism.
There was no qualified accountant on the board, and ‘insufficient’ financial skills.
2 Although the two colleges have shared governance and leadership since Hadlow adopted WKAC from K College, they never merged.
In March 2018, the FE commissioner recommending they did so. This was due to happen in January 2019, and the college asked for £24million from the restructuring fund.
This request was rejected, partly due to the lack of transparency over inter-company transactions.
3 The principal and deputy principal, Paul Hannan and Mark Lumsdon-Taylor, ‘regularly made decisions themselves outside of executive and any open discussion – and reacted strongly to questioning or challenge’.
Executives were not given access to important financial information and not consulted on business partnerships like Rosemary Shrager Cookery School at West Kent.
4 There had been a ‘breakdown of trust’ among staff after reports of ‘inappropriate behaviours’ by ‘one key individual’ were not followed up.
5 Hadlow College produced an automated financial health score of ‘good’ in 2016-17; this did not take into account information about loans.
The loans would have led to an ‘inadequate’ rating, meaning the FEC and ESFA would have intervened earlier.
6 Hadlow College was graded ‘outstanding’ nine years ago but has not been inspected since then; yet it has graded itself as ‘outstanding’ for the past three years.
Given its leadership, management and governance, it is ‘unlikely’ a grade one could be justified now.
Hadlow College’s response: Dedication and Commitment
“Hadlow College and West Kent and Ashford College have implemented a number of recommendations made by the FE Commissioner in his reports and will continue to work to address others.
We are determined, with the support of government agencies and administrators, to ensure that disruption for teaching staff and students is minimised so that college life and high-quality provision continues normally.
It is pleasing that the dedication and commitment of our staff, in what continues to be a challenging time for them, has been duly recognised by the Commissioner.
'An interim CFO has been appointed and a review into the finances of the organisation is underway'
New chairs of governors have been appointed and the boards of Hadlow College and West Kent and Ashford College separated. Issues of governance, clerking and audit raised in the report are being addressed.
An interim CFO [Chief Financial Officer] has been appointed and a review into the finances of the organisation is underway. The financial expertise on the Board of Governors has been increased.
A new owner for the Betteshanger site is being sought.
The colleges have conducted and co-operated with investigations into the circumstances which led to the financial challenges.
We await the outcome of the Structure and Prospects Appraisal and intend to work productively with all stakeholders to secure a sustainable future for the organisations, including the continuation of specialist land-based provision within Kent.”