The inquiry into Halton College in Widnes, Cheshire, has sparked an unprecedented examination of 117 other further-education centres amid growing concerns over lax financial controls.
The Further Education Funding Council (FEFC) and the National Audit Office (NAO) reports are due to be published next week. It is understood the council has examined claims that money was used to fund visits to Hong Kong, the United States, China and France by senior members of staff including the principal, Martin Jenkins, and his deputy, Jenny Dolphin.
The FEFC inquiry, details of which will be revealed on Channel 4 News tonight, found that Halton College had claimed funding running into hundreds of thousands of pounds for teaching students over 16-week courses - but the actual tuition lasted just one hour.
The college also lodged claims for teaching students who lived in Scotland - who are ineligible for grants in England - by not submitting details of their addresses.
More than 170 staff, about one-third of the total, will be made redundant to help the college to repay the fees.
Halton College expanded rapidly when, six years ago, further education establishments were taken out of local authority control and turned into free-standing corporations. It touted for training and education business among big companies all over the country.
Clients included hotel chains, supermarkets and caterers, as well as ordinary students. Halton had already achieved notoriety when it introduced a National Vocational Qualification in shelf-stacking for Tesco. A former manager at the college, who did not wish to be identified, told Channel 4: "We had students up and down the country who had never seen tutors. Some students didn't even know they were on the teaching programme."
The manager said he had taught students on a one-hour course, but the college claimed for teaching them over 16 weeks. Asked whether the system of claiming fees was "fiddled", he replied: "It's my view that we or the college did, yes. There's no other excuse for it. To claim 16 weeks for a one-hour course is not misunderstanding the rules." For that indiscretion alone, the college has been ordered to repay the funding council pounds 254,000.
For a time, the college appeared to be awash with money. Mr Jenkins, who, with Mrs Dolphin, is suspended pending a disciplinary inquiry, was drawing a salary of pounds 118,000. Lecturers attended "away days" at luxury hotels, such as the Mottram Hall Hotel in Prestbury, Cheshire, which is favoured by Manchester United and the England national side before important matches. Its facilities including a championship- standard golf course.
The former college manager said: "It was well-known that our expenses were unlimited in the first two years. No one bothered, no one checked, no one was interested. We were making that much money - we were a bit like drunken sailors in port."
The FEFC report is expected to conclude that fees were claimed for "ineligible provision" of courses to students; expenditure on credit cards "was not adequately controlled"; and there was a lack of controls over travel expenses.
On taking trips abroad, which were aimed at recruiting foreign students, the FEFC is expected to say: "The number, duration, expense and geographical range of trips taken is out of all proportion to any of the benefits the college claims to have derived from them."
After the investigation into Halton College began, the NAO sent out a questionnaire to 117 other colleges to establish what sort of financial controls were in place. It is understood more than half did not specify who should authorise travel expenses for the principal or vice- principal. The NAO report is expected to recommend tighter controls on college credit cards, provision for a "whistle-blowers' charter" and advice to boards of governors on controlling the expenditure of principals.
In a statement to Channel 4, authorised by Mrs Dolphin, Mr Jenkins said: " I refute the allegations... Halton College was a pioneer in new forms of work-based training, and the FEFC's funding methodology was not designed to incorporate such work," he said. "We were open and transparent with the FEFC officers, who validated our claim after satisfying themselves that it was valid."
John Bolton, the college's acting principal, who was not present during the relevant period, agreed that the college benefited from the way it had interpreted the rules.
"Perhaps we claimed more than we should have done for some students, and perhaps wrongly added up the numbers of students in other areas. So, yes, the college did make some mistakes."
Asked about the huge amounts the college had over-claimed for courses, he replied: "Students are load-banded and you can claim up to a certain level for each student. And this college claimed at the maximum rather than perhaps the mid-point.
"Perhaps claiming at the mid-point might have been more sensible and, when we went back through the books and the records with the FEFC, quite clearly the college had over-claimed."Reuse content