Report concludes North Herts College has 'suffered a financial crisis'

PUBLISHED: 06:59 27 February 2019 | UPDATED: 10:21 27 February 2019

North Hertfordshire College, which has campuses in Stevenage, Hitchin and Letchworth, has 'suffered a financial crisis' according to a report carried out by the further education commissioner. Picture: DANNY LOO

North Hertfordshire College, which has campuses in Stevenage, Hitchin and Letchworth, has 'suffered a financial crisis' according to a report carried out by the further education commissioner. Picture: DANNY LOO

©2019 Archant

A report carried out by the further education commissioner has found that North Hertfordshire College has "suffered a financial crisis", after being in early intervention between 2015 and 2018, triggered by its weak financial health.

The college – which has campuses in Stevenage, Hitchin and Letchworth – requested additional ‘exceptional financial support’ in August 2018, after previously receiving £1.485 million in February 2016 to support its cash flow.

This latest support request – which NHC has been reliant upon since September 2018 – saw the college placed into formal intervention by the Education and Skills Funding Agency, and the level of support may rise to £4.6 million.

The report stated: “The cash position has been weak for a long period as the college invested in delivery. ESFA has been vigilant in monitoring and challenging this position.

“The college has often failed to meet its own growth predictions. The ESFA has serious concerns with the college’s forecasting accuracy and the college often made, what was seen as, over-optimistic projections and often circumvented local and regional ESFA officers in requesting additional funding.”

North Herts College had managed to pay back its initial loan taken out in February 2016 by July 2016 and it had met the conditions to emerge from early intervention after that year’s financial record stated it had returned to good financial health.

However, it was agreed locally that early intervention would continue due to ongoing risks such as cash flow vulnerability.

A North Herts College spokeswoman told the Comet: “Like many colleges, we are dealing with some short term financial challenges due to reductions in public funding over recent years and a difficult trading year in 2017/2018.

“We now have new leadership in place and we are making good progress towards achieving long term financial stability.

“Despite our financial challenges, we continue to deliver excellent teaching and results for our students.

“We have the best achievement rates in Hertfordshire and just over a year ago Ofsted rated the college ‘good’, with our supported studies provision and traineeship employability programme judged ‘outstanding’.”

In 2017/18, the college posted a deficit as a result of less than anticipated apprenticeship growth.

The report found that the curriculum planning for 2017/18 “lacked cohesion” and that the forecast for new apprentice starts for that year was “overestimated and unachievable”.

When looking at leadership at the college, the report said: “The current chair and CEO are facing a financial crisis which threatens the future of the college. Currently, the business is viable only with temporary government support via EFS.
“The previous college leadership, supported by the previous board, pursued a growth strategy and when this growth did not yield the expected income, the college ran out of cash. The ESFA had expressed concerns about the situation for a number of years.

“The chair is confident that the current chief executive can deliver the financial recovery.

“The previous chief executive Matt Hamnett – who as accounting officer must take responsibility for the setting of the 17/18 budget – did greatly improve the management information in the college and corrected issues of accuracy and led the college to a very successful outcome in its last Ofsted inspection.”

The report concluded that the college’s current financial forecasts are dependent on estate plans which involve land sales. Should the sale go through, it can repay its latest Exceptional Financial Support loan as well as some other debts, carry out some redevelopments and have some left over. While there are associated risks, indications are that the deal will go through and cash will be available to the college by December 2019, the report states.

“In the meantime, there is a need for bridging finance.” it adds. “The college must work up a plan for recovery other than the land sale and must focus on business right sizing and cost controls. The college may receive a windfall VAT receipt which will assist its current recovery.”

The current principal Kit Davies was appointed in December 2017 and was appointed the role of chief executive in April 2018. The report states: “The staff interviewed at the time of the FEC assessment had noticed positive leadership changes since the current chief executive was appointed.

“They described him as highly visible, giving clear direction, providing stability and, at the same time, being rigorous in holding them to account.

“There is reasonable confidence that the senior team including the chair and chief executive can deliver recovery.”

Click here to read the full report.

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