What DfE's new oversight, support and intervention rules mean for colleges

04 Apr 2019

DfE published its updated intervention policy this week. There are several reasons for the update:

  • College insolvency law is now in effect
  • It's a new government financial year and there is no longer a restructuring budget
  • DfE wants to end exceptional financial support
  • The Existing process described in lots of different papers

Everyone in government wants governors and college leaders to act earlier (new “prevention” approach)

Colleges are self-governing and lead their own recoveries. There is nevertheless a risk that underfunding and complex regulation mean lots of colleges will fall into intervention in future. ESFA placed 110 colleges in early intervention in the 2017-18, only 40 of whom left if by year-end

The new process puts ESFA territorial staff in the centre as case-managers with support from the Provider Management Overview team on higher risk and more complex cases. PMO staff (many who come from the Transaction Unit) lead on financial health assessment and are planning an overhaul of the data collected from colleges. ESFA will - if necessary - ask the FE commissioner to carry out reviews. The document describes four different type of FE commissioner reviews:

  • Diagnostic assessment
  • Intervention assessment
  • Commissioner-led structure and prospect appraisal
  • Local provision review

The document updates the list of early and formal intervention triggers. The early triggers are:

  • Weak satisfactory or declining financial health
  • Risk of running out of cash
  • Zero score on a ratio
  • Inspection (2 RI grade, Grade 4 Apprenticeships)
  • Education performance is considered weak

The formal intervention triggers are:

  • Inadequate financial health
  • Cash concerns (emergency cash request, slippage on repaying govt or bank)
  • Audit or investigation issues
  • Poor financial practices
  • Sub-contracting non-compliance)
  • Late accounts (30 days late)
  • Adverse diagnostic assessment

The depth and width of the process raises some big questions for ESFA, DFE and colleges:

  • is it really helpful to have as many as half of all colleges in intervention?
  • will officials be overloaded? If ESFA imposes conditions on colleges requiring prior approval, will they act quickly in response?
  • will the support and the review actually help - what do officials know that 1,000 college leaders and 5,000 governors don't know?
  • what actually works in terms of financial recovery? Some of the advice in the past about income generation from apprenticeships may not be causing problems for colleges now given current budget constraints

The best steps for colleges to take are:

  • Read the new rulebook
  • Think through the areas where there’s more emphasis (cashflow, audit/data quality, education performance)
  • Make realistic plans when setting 2019-20 budgets
  • Consider whether/when to engage with ESFA
  • Don’t avoid difficult decisions about the college’s future
  • Work with AoC to suggest ways in which the policy and process could be improved