Scandal not over yet as MPs call for audit overhaul

A powerful committee of MPs has called for a "fundamental overhaul" of auditing arrangements in further education, just weeks after ministers thought they had drawn a line under a catalogue of financial scandal by drawing up new audit rules.

The Public Accounts Committee is to reopen the issue of college sleaze in the new year with a report on college mismanagement and a call for further external controls. A committee member has said that despite a string of scandals, further cases remain to be investigated.

Chairman David Davis, Conservative MP for Haltemprice and Howden, said the committee "has been so exercised by the repeated failure of governance in (colleges) that we have commissioned a special report, pulling out the general lessons arising from our work".

In Scotland a new auditor general is to be responsible for auditing every Scottish college. "Perhaps similar arrangements should apply in England," Mr Davis said in a debate on the work of the PAC and the National Audit Office.

PAC member Maria Eagle, Labour MP for Liverpool Garston, said there was "no doubt" that other colleges with problems similar to Halton, which will have to pay back millions of pounds overclaimed in a franchising scandal, "remain to be investigated".

Last month the Further Education Funding Council for England confirmed ministers' changes to audit arrangements designed to clamp down on financial mismanagement. Colleges may no longer use the same firm for both internal and external audit. Governors' audit committees must also have a member with "relevant financial expertise", and governors must receive a termly financial report.

But college principals have accused funding chiefs of "intimidating tactics" and misrepresenting their positions and the FEFC of bowing to political pressure.

Nine colleges whose financial details were passed by the FEFC to the PAC have held a crisis meeting. The PAC publicly named the colleges as sharing "characteristics" with Halton College, which this week, to add to its woes,was given a damning FEFC inspection report.

The colleges may lose cash through the decision to stop franchising outside catchment areas. Distance franchising was once encouraged as a cheap and entrepreneurial means of expansion and widening participation.

The Association of Colleges chairman David Gibson criticised FEFC chief executive David Melville for passing on sensitive information, some of which is said to be inaccurate, to the PAC without consulting the colleges.

Vince Hall, principal of Dewsbury College, said by the PAC to have "weak financial controls", said that he was concerned about "intimidating tactics" used by the FEFC.

Mike Halle of Salisbury College, named by the PAC because it has a large quantity of franchised provision outside its local area, said the FEFC had created "a climate of insecurity".

Geoff Daniels, a director at the FEFC, said: "Intimidation is a perception in the mind of the beholder ... I think that some colleges have not realised what the government's policy is."