A Personal Statement
Overview
The publication of the final sets of accounts for Bilston Community College suggest an accumulated deficit for the College of £33.7 m. However, the accounts raise more questions than they answer. Many of these questions have been raised repeatedly with the FEFC and the LSC, but not answered.
The accounts are not a fair and accurate representation of the College's final financial position for at least three reasons.
In my view the accounts have been gerrymandered.
The accounts purport to show a huge deficit of £33.7 million. This 'deficit' has been engineered, mainly by the retrospective reinterpretation of the very complex and constantly changing Funding Council funding rules. The apparent deficit has been created, largely by declaring work previously audited and accepted by the FEFC as eligible for funding, retrospectively ineligible. The work in question covers the period 1995 –1999. This work has been audited and re-audited, in some cases five times by three different sets of auditors. They have come to widely differing conclusions on the eligibility of work for funding.
The new auditors HLB Kidsons acknowledge that the removal of Bilston Community College records by the FEFC or those acting on their behalf, and the consequent unavailability of supporting evidence, means that significant elements of the accounts are based on unsupported estimates.
The auditor's state that they are unable to give an opinion on the accounts. They write;
'… we are unable to form an opinion as to whether the financial statements show a true and fair position of the state of affairs of the College at 31st September 1999 …'
(Bilston Community College Accounts, 1999, Auditors' Report, page 9).
It is significant that the accounts indicate that the current view on eligibility of work for funding arises from criteria agreed with the FEFC / LSC. They have been drawn up by staff working with officers of the FEFC and the LSC. They therefore do not represent an independent view of eligibility under the 1992 Further and Higher Education Act.
The retrospective reinterpretation of funding eligibility
The Members' Report states that in the 1999 accounts the accumulated deficit of £33.7 million arises from a number of factors including;
'recovery of funds for activities subsequently deemed ineligible for support under the terms of the Further and Higher Education Act 1992.'
(Bilston Community College Accounts, 1999, Members' Report, page 2).
Note 2 on FEFC grants in the 1998 accounts states;
'These accounts include a prior year adjustment of £21.5 m in respect of FEFC funding.'
(Bilston Community College Accounts, 1998, Note 2, FEFC Grants, page 16).
In addition £5.3 million of FEFC grant was notionally 'recovered' during 1997-98. (see 1997-98 accounts, Note 2, FEFC Grant, page 16)
Thus a total of £26.8 million of FEFC income has been removed from the accounts following a reinterpretation of funding eligibility.
The questions that arise are;
Pressure on auditors to come to a particular conclusion on funding eligibility
The events set out below illustrate the lengths to which the FEFC was prepared to go to ensure that their interpretation of funding eligibility was applied.
Early in 1998, after Bilston Community College indicated it might seek a judicial review of a 20% FEFC budget cut, the FEFC asked Deloitte and Touche, the College's external auditors, to review 44 questions relating to 10 groups of courses with regard to their eligibility for funding. This work had previously been audited and passed for funding. The special audit resulted in an 18-page report. One small course was found to be ineligible and was removed by the college from the funding claim; most courses were eligible. Deloitte and Touche in their covering letter to the FEFC observed;
"It is clear from our discussions with the college and yourselves that the college had to interpret the rules for 1995-96 and 1996-97 as they then existed with such guidance from the FEFC as was available at the time. Further guidance and clarification has subsequently been forthcoming from the FEFC. Some of the "clarification" has had such an impact as to be more in the nature of a change in the rules. This issue is of paramount importance and must be borne in mind when considering each area of concern."
The Funding Council's response to the Deloitte and Touche report and the covering letter was to write to the firm suggesting that;
"you may care to withdraw it".
The letter went on to question the independence of Deloitte and Touche saying;
"The confidence that the Council places on college external auditors and their ability to undertake independent work in exceptional circumstances is now placed in question. To guarantee the independence of the findings, unless I receive a satisfactory response from you, the Council will have no alternative but to commission another firm to undertake an independent review of the issues raised on behalf of the complainants."
It appears that having requested a special audit of particular points of concern, the report from the auditors did not come up with the conclusions the FEFC expected. Their response was to invite the auditors to withdraw the report and covering letter and to suggest the commissioning of another firm of auditors if Deloitte and Touche did not withdraw.
Deloitte and Touche did not withdraw the letter and a different firm of auditors, who have interpreted the funding rules in a different way, has now audited the final accounts.
It is not clear whether the current auditors have discussed their current view with the former auditors. Attempts to seek this information have met with a refusal to comment. The LSC has not responded to requests to publish in full the letters referred to above.
The absence of reliable documentation
The current auditors, HLB Kidsons, observe that;
… the evidence available to us was limited … the College's activities had ceased, key management for the period were no longer employed … and the books and records of the College had been placed in storage locations; most items that would normally have formed audit evidence could not be located. Consequently the figures for trade debtors, trade creditors and accruals are based on estimates.
(Bilston Community College accounts for 1998 and 1999, Report to Members, page 8)
1400 bankers' boxes of Colleges records were removed. It is not clear why these records were, apparently, not made available to the auditors. Nor is it clear why former college senior staff, some of whom have indicated a willingness to meet with auditors, have not been contacted.
In the absence of the records removed from the college to the auditors, the basis of the estimates in the accounts is not clear.
Independent Accounts?
It is clear that the accounts are not an independent document but have been substantially influenced, if not determined, by the FEFC / LSC.
For example, Note 2, Further Education Funding Council Grants, on page 16 of the 1998 accounts states that;
'… the criteria for [funding] eligibility have been agreed with the FEFC / LSC.'
Note 2, page 17, to the 1999 accounts states;
'Consequently for the years 1995/96, 1996/97 and 1997/98, on the basis of advice from the FEFC / LSC, funding protection has not been applied.
The Principal and Chief Executive of the City of Wolverhampton College in her Statement on page 7 of both the 1998 and 1999 accounts states that;
'My observation is that City of Wolverhampton College staff, working with officers from the FEFC and LSC, have encountered significant difficulty in preparing these accounts… '
Can these accounts, covering a period when Bilston Community College was in dispute with the FEFC over a 20%, £3.5m, cut in funding, be regarded as independent?
Bilston Community College: The unanswered questions
Those associated with Bilston Community College have repeatedly raised questions about the destruction of the College by the FEFC.
FRAUD AT BILSTON?
For over two years the FEFC and LSC have repeatedly tried to suggest that there was fraud at Bilston, including through sending individual letters to senior local figures. The police have unequivocally stated that there was 'no evidence to suggest that any of the activities of the College were of a criminal nature'. They have also pointed out that they did not initiate the enquiry.
Is the LSC, having failed to slur the former Bilston management with the wholly bogus charge of criminal activity, now trying to slur the former management with a gerrymandered set of accounts?
Was a former FEFC director correct when he reported to a meeting of Bilston Community College Governors in February 1999, following an FEFC inspection and audit, that there was 'no evidence of serious malpractice'?
AUDIT MATTERS
If the FEFC / LSC believes that the position outlined in the Bilston Community College accounts is accurate why has it not carried out its undertaking, given to the Public Accounts Committee in December 2000, to commence civil proceedings against the former auditors by March 2001?
Could it be that there is actually no basis whatsoever for these civil proceedings and that that is why the LSC has not initiated them?
Did FEFC auditors examine the College's management arrangements in July 1997 and conclude that they were substantially in accord with statute and the Council's requirements?
COST OF ENQUIRIES?
There have been at least seven sets of investigations into Bilston Community College and a series of special audits. What is the total cost of these investigations?
Would it be accurate to suggest that never has there been so much investigation, by so many, at such cost with so little result?
What Bilston Community College achieved
The sad irony is that the very ideas that Bilston Community College pioneered, including the Weekend College, bite sized courses, courses based in the community and a significant proportion of black and Asian staff at all levels, are the very policies the LSC is now trying to promote.
The FEFC inspection report of 1994, in awarding the College a grade 1 for responsiveness and range of provision, commented that;
'The College's vision is to achieve the highest standards in providing open access courses and equal opportunities through partnership with employers and the community. Many programmes are for those with little or no previous post-school education and training…. Versatile and imaginative policies in course development indicate that this commitment is widely shared throughout the College. Arrangements for courses are highly flexible …
Courses are offered in many local centres that range from churches and temples to schools and local community centres. Community representatives who were met during the inspection were strongly supportive of the College's role and its open and approachable style.
The College has consistently taken action to recruit staff from ethnic minority groups; the equal opportunities programme is thoroughly integrated with its recruitment procedures …'
Many of the courses retrospectively ruled ineligible for funding will be the courses run with black churches, Asian temples, mosques and gurdwaras and local community groups. For example the FEFC has derided the College's promotion of courses for marching bands. This misses a key educational point that all teachers (but few at the LSC / FEFC) understand; that in taking education out into the community and making it inclusive, you have to start where people are, not where you think they should be.
The College put equal opportunities at the heart of its practice in a direct and practical way. For example the College inherited a position in which less than 1% of its staff were from the minority communities. Within five years 30% of staff were from these communities.
Bilston, in trying to pioneer new approaches, also made mistakes. The vain attempt to secure commercially generated income, to fill the £3.5m gap caused by the 1997-98 FEFC budget cut, was probably the most serious mistake.
The actions of the FEFC regime over the last five years has, in practice, promoted traditional examination courses and discouraged the kind of courses that would genuinely promote inclusive learning, notwithstanding a rhetoric of inclusiveness. They have also created an atmosphere of fear and intimidation where colleges are understandably unwilling to risk new or experimental approaches to inclusive learning.
I am proud to have worked at a pioneering College that genuinely promoted practical inclusive learning and equal opportunities and saddened by the continuing blindness of the FEFC to the huge achievements of Bilston Community College so accurately reported in their own 1994 inspection report.
Paul Goddard-Patel
Assistant Principal and Finance Director
Bilston Community College 1993-1999.