The UK Border Agency and the QAA signed a deed of indemnity in August 2011 that covers legal costs of up to £1 million a year.
Responsibility for carrying out “educational oversight” inspections, which colleges must pass if they wish to sponsor international students, has been given to the QAA and a number of other bodies.
The deed covers any legal action taken either by institutions or by students as a result of “decisions, actions or omissions” by the QAA - a charity funded by subscription fees from institutions and contracts from funding councils - as part of its educational oversight role.
Failing such an inspection could severely damage a college’s business model as it would be prevented from accepting overseas students.
Two months before the indemnity was signed, a QAA risk assessment warned that it was “highly likely” the agency would be “engulfed by appeals and legal cases” if it took on responsibility for the inspections.
This would have a “critical” impact on the QAA in terms of reputational damage and financial loss, it noted. However, it added that there was “good progress in negotiations” to secure an indemnity.
Geoffrey Alderman, professor of history and politics at the University of Buckingham, who obtained the document under the Freedom of Information Act, said it was an “extraordinary arrangement”.
“It’s all of a piece with government policy towards the banks: the taxpayer will bail them out. It’s hardly an incentive to robust management,” he said.
The QAA “can go about their work knowing that if they botch up, the British taxpayer will bail them out”, Professor Alderman added.
He said the arrangement was “clearly approved” by the government as a “sweetener” to encourage the QAA to take on the educational oversight role.
The Independent Schools Inspectorate, another of the bodies licensed to carry out educational oversight, has a similar indemnity from the UKBA, the documents obtained by Professor Alderman show.
Anthony McClaran, the QAA’s chief executive, said in a statement that because there was no public funding for educational oversight, the agency “sought indemnity from UKBA to mitigate QAA’s charitable reserves being used inappropriately in the event of any legal challenges resulting from this activity”.
“To date, we have published 140 educational oversight review reports with no legal challenges,” he added.
The inspections take place every four years, although a “material change in circumstances” such as a sudden increase in student numbers at a college could trigger an earlier visit from the QAA.
The requirement for inspections was introduced in 2011 and led to 172 colleges losing the right to recruit international students after they failed to apply for oversight by the September 2011 deadline.
A spokeswoman for the Home Office, of which the UKBA is part, said that visa policy changes “meant that QAA took on responsibility for reviewing a large number of private colleges”.
“The outcome of such a review has significant consequences for these colleges. This meant QAA, a charitable organisation, was open to potential liabilities,” she said.