Lax FE audits fuel fraud fears

April 16, 1999

A clampdown has been ordered on colleges' accounting procedures after public spending watchdogs exposed a catalogue of flaws. Ministers have threatened legislation.

Reporting on a multi-million pound scandal at Halton College, Cheshire, this week, the National Audit Office said that it had found that some of the alarming control weaknesses at the crisis-hit Widnes college existed elsewhere in the further education sector.

Halton has been ordered by the NAO and the Further Education Funding Council to repay Pounds 7.3 million of misappropriated public money. Their investigations revealed a series of abuses, ranging from false claims for course funding, flawed procurement practices, widespread junkets and abuse of expenses.

Similar abuses could be happening elsewhere in the sector, the NAO warned. In a comprehensive survey of the sector's management practices, involving a quarter of all colleges, it found numerous problems.

One of the most serious charges levelled against Halton was that it made inaccurate funding claims for students. But the NAO discovered that 43 per cent of colleges did not complete audits of student data on time, which meant that in some cases public funds were awarded on extremely unreliable data. Some 77 per cent of colleges with budgets in excess of Pounds 20 million were late with student data.

Education and employment minister Baroness Blackstone said: "We are considering the need for legislation to strengthen the hand of government by introducing new powers similar to those in the School Standards and Framework Act." The act gave the government powers to send in hit squads and shut schools.

David Davis, chairman of the House of Commons Public Accounts Committee, said: "Proper funding of arm's-length bodies such as further education colleges relies on a detailed system of controls. Colleges must not be allowed to cheat the system. We clearly need greater assurance that the controls in place are working."

The NAO also found that measures to guard against junkets and the abuse of expenses were very patchy. Nearly two-thirds of colleges had no regulations to specify who should authorise travel expenses for the college principal, while 44 per cent of colleges did not specify who should approve senior management travel. Six per cent of college principals signed their own travel claims.

Of colleges examined by the FEFC's Audit Service between 1993 and 1997, 12 per cent had "ineffective" audit committees. In one year alone (1996-97), 19 per cent were found to have "inappropriate membership" of audit committees or "conflicts of interest".

Of the colleges that issued credit cards, 70 per cent did not have regulations covering how they should be used. Almost 5 per cent of colleges said they did not require receipts for their use, and 5 per cent said they did not even check that items of expenditure were reasonable.

While most colleges had general procedures for authorising procurement, more than half allowed expenditure in excess of Pounds 20,000 without competitive tendering, and a quarter allowed expenditure of more than Pounds 30,000 without going to tender. And some 40 per cent of colleges had no strategy for the procurement of information technology.

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