The Department for Education is reported to have hired seven law firms to provide specialist guidance on insolvency, audit, and fraud cases within further education establishments at a cost said to be around £3.3 million.
Tenders show that the law firms will be advised over the next two years on cases involving “financial distress” among colleges, academy trusts, independent and higher education providers for the department’s provider market oversight (PMO) division.
It was said there could be around 40 of these cases each year, according to FE Week. The tenders are capped in terms of their fees to “ensure greater value for money” for taxpayers.
Julian Gravatt, deputy chief executive of the Association of Colleges, claimed the Department for Education has spent “quite a lot” in recent years on law firms and accountants to provide advice on restructuring and on funding rules. He said there was “under-funding, over-regulation and an environment in which mistakes result in lengthy investigations”.
The Department for Education launched the PMO team in 2017, in part because of a rising number of untested training providers, in particular those connected to apprenticeships. There are also understood to be problems with training providers being non-compliant with data protection rules, in addition to having financial difficulties.
A college insolvency regime was set up in 2019. Hadlow College in Kent became the first to fall under the education administration process in May of that year, followed closely by its sister establishment, West Kent and Ashford College. Investigations into financial irregularities at the colleges are continuing.
Meanwhile, there are understood to be other further education colleges that are now also likely to become insolvent. The tender documents say the lawyers will provide legal services and advice for “restructuring and insolvency, such as in the run-up to and during an education administration” or independent business reviews.
Guidance will also be needed for “counter fraud and investigations”, including in the event of “legal challenge, assessment of relevant potential contractual action and strategic options depending on individual case factors”.