It also owes £13.2million to the bank.
The further education provider in Brook Street is part of West Kent and Ashford College (WKAC), the second college to enter education administration in this country last August, after Hadlow College. West Kent itself has 2,736 students and 343 members of staff.
All three are run by the Hadlow Group, which is in the process of selling all three institutions after sustaining huge financial difficulties.
Accountants BDO released its statement of proposals last week which showed that WKAC also owes £13.2million to Barclays Bank and £1.1million to Ashford Borough Council.
The £4.9million in unsecured claims includes £437,500 to Salix Finance, which provides interest-free Government loans to the public sector for improving energy efficiency, and £230,563 to BAM Construction Limited.
BDO’s report for Hadlow College in November showed it had run up debts of £40million to more than 300 organisations – again with small businesses bearing the brunt.
The report also shows that WKAC received capital grants worth £86million from the Education and Skills Funding Agency (ESFA), which is also owed £1million of standard education funding.
The grants were given to K College, which ran WKAC before it collapsed in 2014 – when the Hadlow Group rescued both colleges. It was provided to help with the construction of campuses in both towns.
The capital grant is a liability over the economic life of the property, and according to the Hadlow Group it was ‘included in the report due to accounting rules, rather than because it will need to be repaid’.
There is also a £15.4million debt in pension schemes with Kent County Council but this does not affect past or present employees.
BDO said repayment of unsecured creditors is ‘uncertain’ because a safeguard means that only assets which do not affect the courses will be sold off.
The purpose of educational administration is to ensure that there is no adverse impact on the student provision – called ‘learner protection’.
The accountants’ own Government funding will have to be paid before local businesses can receive any money.
They had accumulated costs of £223,000 before administration began, and up to last month a further bill of £473,000 had been accrued at £183 an hour – while the figure for Hadlow College is set to reach £1.1million.
Other administrative fees for estate agents, insurers and lawyers comes to more than £200,000.
WKAC was given £3.79million in exceptional financial support by the ESFA for six months from last February and by June it had become clear that it was ‘reliant upon ongoing emergency funding’ to pay its bills.
It was then that the Hadlow Group’s chief executive, Paul Hannan, and his deputy Mark Lumsdon-Taylor both resigned followed by several Governors, including the Chairs of Hadlow and WKAC Board of Governors, amid allegations of financial irregularities and a ‘lack of transparency regarding certain transactions’.
A confidential report on the conduct of ‘all relevant persons’ in the three years preceding education administration was handed over to the Education Secretary Gavin Williamson by BDO last November.
A BDO spokesperson said they have ‘maintained the stability of the college and minimised disruption for existing students as a whole’ and the proposed merger transactions will ‘ultimately determine the likely outcome for unsecured creditors’.
