the mulTI-million ‘cowboy’ trade in subcontracting
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CMY<br />
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COMMISSIONER<br />
FUNDING<br />
CUTS<br />
F E A T U R I N G<br />
C ATC H I T<br />
NOVEMBER 18 TO 20<br />
I C BIRMINGHAM<br />
A PRENTICESHIPS<br />
E M I LY M A I T L I S R I C H A R D AT K I N S<br />
ENGLISH<br />
AND<br />
MATHS<br />
10 @FEWEEK FE WEEK<br />
MONDAY, APRIL 18, 2016<br />
FE WEEK INVESTIGATES<br />
HUGE SUMS OF SKILLS CASH HIVED O<br />
PAUL OFFORD<br />
@PAULOFFORD<br />
exclusive<br />
FROM FRONT<br />
The government is review<strong>in</strong>g <strong>the</strong> use of subcontract<strong>in</strong>g<br />
brokers after an FE Week <strong>in</strong>vestigation found huge sums<br />
of public cash meant for frontl<strong>in</strong>e learn<strong>in</strong>g is be<strong>in</strong>g hived<br />
off <strong>in</strong> commission.<br />
In what is <strong>the</strong> first exposé of this lucrative but little-known<br />
<strong>in</strong>dustry, we found brokers typically charge subcontractors up<br />
to 5 per cent of <strong>the</strong> government fund<strong>in</strong>g for match<strong>in</strong>g <strong>the</strong>m to a<br />
prime provider.<br />
A number of <strong>the</strong> firms <strong>in</strong>volved do not have official websites<br />
outside of social media and stick to advertis<strong>in</strong>g subcontract<strong>in</strong>g<br />
opportunities through closed groups on L<strong>in</strong>kedIn.<br />
FE Week has found evidence that <strong>the</strong>y are widely used and<br />
potentially be<strong>in</strong>g paid <strong>million</strong>s of pounds <strong>in</strong> commission fees<br />
from <strong>the</strong> public fund<strong>in</strong>g pot.<br />
After be<strong>in</strong>g shown <strong>the</strong> evidence and asked to respond, a<br />
government spokesperson said: “The Skills Fund<strong>in</strong>g Agency<br />
(SFA) is review<strong>in</strong>g to streng<strong>the</strong>n <strong>the</strong>ir fund<strong>in</strong>g agreements to<br />
limit <strong>the</strong> use of brokers.”<br />
She added: “Where <strong>the</strong> SFA has evidence that a lead<br />
provider has <strong>in</strong>effective processes and controls for manag<strong>in</strong>g<br />
<strong>the</strong>ir subcontractors, or <strong>the</strong>ir subcontract<strong>in</strong>g represents poor<br />
value for money which constitutes a breach <strong>in</strong> our fund<strong>in</strong>g<br />
rules, <strong>the</strong>y will take action.”<br />
FE Week found an advert, with Essex-based consultants<br />
EEVT Ltd, attributed to a company called The Fund<strong>in</strong>g<br />
Brokers Ltd, which could not comment before publication.<br />
The advert said: “We have been provid<strong>in</strong>g this service for<br />
over three years, secur<strong>in</strong>g <strong>in</strong> excess of £100m <strong>in</strong> <strong>the</strong> process for<br />
our clients.”<br />
At 5 per cent commission, for example, <strong>the</strong> firm could have<br />
earned up to £5m over this period.<br />
The ad cont<strong>in</strong>ues: “We work on a no-w<strong>in</strong> no-fee basis<br />
whereby we will provide our support free of charge to <strong>the</strong><br />
po<strong>in</strong>t of contract<strong>in</strong>g.”<br />
Broker fees have been criticised as a fur<strong>the</strong>r waste of<br />
skills fund<strong>in</strong>g — <strong>in</strong> addition to lead providers reta<strong>in</strong><strong>in</strong>g<br />
<strong>million</strong>s <strong>in</strong> management fees through a process known<br />
as “topslic<strong>in</strong>g”.<br />
This practice, under <strong>in</strong>vestigation by <strong>the</strong> National<br />
Audit Office, has been <strong>the</strong> focus of an FE Week<br />
campaign s<strong>in</strong>ce its launch <strong>in</strong> 2011, and was <strong>the</strong> subject of<br />
“recent compliance work” by <strong>the</strong> SFA.<br />
It <strong>in</strong>volves lead providers reta<strong>in</strong><strong>in</strong>g government<br />
fund<strong>in</strong>g — usually called management fees — before<br />
f<strong>in</strong>d<strong>in</strong>g a subcontractor to do <strong>the</strong> tra<strong>in</strong><strong>in</strong>g for <strong>the</strong><br />
rema<strong>in</strong><strong>in</strong>g sum.<br />
In one case, as reported by FE Week <strong>in</strong> November,<br />
Learndirect reta<strong>in</strong>ed more than a third of its total<br />
government fund<strong>in</strong>g <strong>in</strong> management fees, pocket<strong>in</strong>g<br />
nearly £50m.<br />
Ian Wood, who accord<strong>in</strong>g to L<strong>in</strong>kedIn worked for<br />
Hull-based broker<strong>in</strong>g firm Purple Hearts Limited before<br />
it went <strong>in</strong>to liquidation last July, was highly critical of<br />
large sums be<strong>in</strong>g diverted from frontl<strong>in</strong>e tra<strong>in</strong><strong>in</strong>g.<br />
He said that broker<strong>in</strong>g amounted to “fur<strong>the</strong>r<br />
topslic<strong>in</strong>g of topslic<strong>in</strong>g”.<br />
“My ma<strong>in</strong> role wasn’t <strong>in</strong>volved with sourc<strong>in</strong>g<br />
brokered fund<strong>in</strong>g myself at Purple Hearts, <strong>the</strong>y had a<br />
dedicated team for this, but I know how it works,” he<br />
added.<br />
“You generally see brokers charg<strong>in</strong>g five per cent<br />
of monthly drawdown, which I personally th<strong>in</strong>k is too<br />
high, as <strong>the</strong> money should go directly to <strong>the</strong> learners<br />
tra<strong>in</strong><strong>in</strong>g — especially bear<strong>in</strong>g <strong>in</strong> m<strong>in</strong>d that <strong>the</strong> prime<br />
will have already taken a cut of <strong>the</strong> fund<strong>in</strong>g through<br />
management fees.”<br />
FE Week understands prime providers often turn to brokers<br />
out of desperation <strong>in</strong> order to avoid los<strong>in</strong>g fund<strong>in</strong>g.<br />
Ian Wood, manag<strong>in</strong>g director at Newcastle-based provider<br />
NCT Skills, said he worked as lead consultant for Hullbased<br />
Purple Hearts Limited from April 2013 to September<br />
2014, which offered broker<strong>in</strong>g services, before it went <strong>in</strong>to<br />
liquidation last July.<br />
He expla<strong>in</strong>ed: “You get a situation where a prime college/<br />
provider gets towards <strong>the</strong> end of a fund<strong>in</strong>g w<strong>in</strong>dow,” he said.<br />
“They haven’t spent <strong>the</strong>ir allocation and know that <strong>the</strong> SFA<br />
or Education Fund<strong>in</strong>g Agency (EFA) will take it back off <strong>the</strong>m<br />
unless it is used, so <strong>the</strong>y need to f<strong>in</strong>d subcontractors to take on<br />
provision quickly.<br />
“The primes will often put messages on L<strong>in</strong>kedIn, or o<strong>the</strong>r<br />
social media, <strong>the</strong>mselves to f<strong>in</strong>d subcontractors.<br />
“But a lot do it through brokers because <strong>the</strong>y do all <strong>the</strong> hard<br />
work with due diligence checks on <strong>the</strong> subcontractors before<br />
some sort of agreement is signed.”<br />
BIS warned <strong>the</strong> SFA about this sort of ‘short-term’ trad<strong>in</strong>g<br />
<strong>in</strong> contracts <strong>in</strong> its Skills Fund<strong>in</strong>g Letter last March, say<strong>in</strong>g:<br />
“While we appreciate that you have worked with <strong>the</strong> sector<br />
to enhance <strong>the</strong> controls around subcontract<strong>in</strong>g <strong>in</strong> <strong>the</strong> last<br />
two years, <strong>the</strong>re cont<strong>in</strong>ues to be levels of short term tactical<br />
subcontract<strong>in</strong>g that are caus<strong>in</strong>g concern.”<br />
In its most recent fund<strong>in</strong>g letter to <strong>the</strong> SFA <strong>in</strong> November,<br />
BIS went fur<strong>the</strong>r stat<strong>in</strong>g: “For 2016/17 you will want to ensure<br />
that sub-contract<strong>in</strong>g practices are consistent with <strong>the</strong> need<br />
to achieve value for money <strong>in</strong> <strong>the</strong> sector, and to cont<strong>in</strong>ue<br />
to take action aga<strong>in</strong>st providers who are ei<strong>the</strong>r operat<strong>in</strong>g<br />
unacceptable practices, or fail<strong>in</strong>g to provide clear and timely<br />
<strong>in</strong>formation.<br />
“I would like you to report to me <strong>the</strong> controls <strong>in</strong> place by<br />
<strong>the</strong> end of March 2016 to protect <strong>the</strong> <strong>in</strong>terests of learners and<br />
employers.”<br />
The government spokesperson, who was also represent<strong>in</strong>g<br />
<strong>the</strong> Department for Education and Department for Bus<strong>in</strong>ess<br />
and Skills (BIS), also told FE Week on April 14: “Providers<br />
must not subcontract to meet short-term fund<strong>in</strong>g objectives.<br />
“The SFA’s fund<strong>in</strong>g rules are clear that providers<br />
who decide to use subcontractors should ensure <strong>the</strong>ir<br />
arrangements add value to <strong>the</strong> provision, that public fund<strong>in</strong>g<br />
is used to directly support learners and sub-contractors are<br />
selected fairly and have sufficient capacity, capability, quality<br />
and f<strong>in</strong>ancial stand<strong>in</strong>g to deliver <strong>the</strong> services.”<br />
THIS AMOUNTS TO ‘TOPSLICING OF TOPSLICING’ Response<br />
2015<br />
2014<br />
2012<br />
2011<br />
Award-w<strong>in</strong>n<strong>in</strong>g journalism from <strong>the</strong> only newspaper dedicated to fur<strong>the</strong>r education and skills<br />
Gove orders prison<br />
learn<strong>in</strong>g contracts<br />
review<br />
Sir Bill Taylor,<br />
chair of Blackburn<br />
College Corporation<br />
Board, along with<br />
staff and students<br />
with Elizabeth or<br />
Victoria <strong>in</strong> <strong>the</strong>ir name<br />
celebrate <strong>the</strong> college<br />
build<strong>in</strong>g renam<strong>in</strong>g<br />
Providers that flout rules on reveal<strong>in</strong>g how<br />
much <strong>the</strong>y topslice when subcontract<strong>in</strong>g have<br />
been given a November 23 deadl<strong>in</strong>e to comply<br />
— or face hav<strong>in</strong>g <strong>the</strong>ir fund<strong>in</strong>g suspended.<br />
The Skills Fund<strong>in</strong>g Agency (SFA) has<br />
threated to suspend public money for<br />
lead providers that fail to publish <strong>the</strong>ir<br />
management fee details on <strong>the</strong>ir websites.<br />
It comes around n<strong>in</strong>e months after an FE<br />
Week <strong>in</strong>vestigation uncovered providers were<br />
ignor<strong>in</strong>g rules that <strong>the</strong>y must publish what<br />
<strong>the</strong>y charge subcontractors. And while <strong>the</strong>re<br />
was compliance with rules on list<strong>in</strong>g <strong>the</strong> range<br />
of fees, <strong>the</strong>se were as high as 40 per cent <strong>in</strong><br />
some <strong>in</strong>stances.<br />
However, <strong>the</strong> SFA has now warned<br />
providers that “we will suspend your<br />
payments” if <strong>in</strong>formation is not made public<br />
by <strong>the</strong> deadl<strong>in</strong>e.<br />
An SFA spokesperson said: “All colleges and<br />
o<strong>the</strong>r tra<strong>in</strong><strong>in</strong>g organisations that subcontract<br />
must publish <strong>the</strong> actual fund<strong>in</strong>g paid and<br />
reta<strong>in</strong>ed for each of <strong>the</strong>ir subcontractors <strong>in</strong> <strong>the</strong><br />
[provider] fund<strong>in</strong>g years 2013 to 2014 and 2014<br />
to 2015.”<br />
The <strong>in</strong>formation should be made available<br />
on websites, and <strong>in</strong>clude current supply cha<strong>in</strong><br />
fees and charges policy. The SFA also wants<br />
<strong>the</strong> relevant webl<strong>in</strong>ks provided on 2015 to 2016<br />
subcontractor declaration forms.<br />
The rule requir<strong>in</strong>g colleges and <strong>in</strong>dependent<br />
learn<strong>in</strong>g providers (ILPS) to specify <strong>the</strong><br />
management fees <strong>the</strong>y charged each of <strong>the</strong>ir<br />
subcontractors over <strong>the</strong> previous academic<br />
year was <strong>in</strong>troduced by <strong>the</strong> SFA <strong>in</strong> August last<br />
year.<br />
But FE Week found four months later that<br />
rules were be<strong>in</strong>g ignored by a number of<br />
providers — <strong>in</strong>clud<strong>in</strong>g <strong>the</strong> country’s biggest<br />
SFA contractor at <strong>the</strong> time Learndirect.<br />
A Learndirect spokesperson said it<br />
published figures show<strong>in</strong>g how much <strong>the</strong><br />
company had paid and reta<strong>in</strong>ed from each of<br />
its 73 subcontractors <strong>in</strong> 2013/14, out of its total<br />
£136.9m SFA allocation, on its website before<br />
Christmas. But <strong>the</strong> Sheffield-based provider<br />
had not published <strong>the</strong> <strong>in</strong>formation for 2014/15<br />
as FE Week went to press.<br />
The company’s ‘supply cha<strong>in</strong> fee policy’<br />
webpage showed on Thursday (September 10)<br />
that it is was charg<strong>in</strong>g management fees up<br />
to 40 per cent of contract values — which was<br />
unchanged from when FE Week reported on<br />
<strong>the</strong> issue <strong>in</strong> early December.<br />
A spokesperson for Learndirect, which was<br />
allocated £117.9m for 2015/16 by <strong>the</strong> SFA as<br />
of last month, said: “The bus<strong>in</strong>ess <strong>in</strong>tends to<br />
FEWEEK.CO.UK | MONDAY, SEPTEMBER 14 2015 | EDITION 146<br />
Blackburn College celebrated Queen Elizabeth II’s<br />
record break<strong>in</strong>g reign by renam<strong>in</strong>g one of its iconic<br />
build<strong>in</strong>gs after her Majesty, writes Rebecca Jones.<br />
Special permission from Buck<strong>in</strong>gham Palace<br />
was sought by <strong>the</strong> chair of <strong>the</strong> college’s corporation<br />
board, Sir Bill Taylor, to change <strong>the</strong> New Victoria<br />
Centre to <strong>the</strong> ‘Elizabeth Build<strong>in</strong>g’ to mark <strong>the</strong><br />
Queen surpass<strong>in</strong>g her great-great-grandmo<strong>the</strong>r<br />
as <strong>the</strong> UK’s longest-reign<strong>in</strong>g monarch.<br />
The college <strong>in</strong>vited staff and students who<br />
have Elizabeth or Victoria <strong>in</strong> <strong>the</strong>ir name to jo<strong>in</strong> <strong>the</strong><br />
festivities with <strong>the</strong> Mayor of Blackburn, Councillor<br />
Faryad Hussa<strong>in</strong>.<br />
Sir Bill said: “We wanted to do someth<strong>in</strong>g<br />
to mark this historic occasion. The nam<strong>in</strong>g<br />
ceremony is a fitt<strong>in</strong>g tribute to <strong>the</strong> Queen’s<br />
great achievement.<br />
“We also felt it showed <strong>the</strong> great affection<br />
shown by Blackburn and its residents for our<br />
longest-serv<strong>in</strong>g monarch.”<br />
TOPSLICE OFFENDERS THREATENED WITH FUNDING SUSPENSION<br />
@paulofford<br />
paul.offord@feweek.co.uk<br />
FrontPageStrip_MB.pdf 1 28/08/2015 15:27:28<br />
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PA<br />
Pr<strong>in</strong>cipals unhappy<br />
with area reviews<br />
RENAME IN QUEEN’S HONOUR<br />
Profile of a WorldSkills<br />
beater beautician<br />
Pages 10 & 11<br />
Dana Press Photos/Press Association Images<br />
Enhance learner engagement<br />
publish its 2014/15 charges <strong>in</strong> advance of <strong>the</strong><br />
November 23 deadl<strong>in</strong>e.”<br />
Stewart Segal, chief executive of <strong>the</strong><br />
Association of Employment and Learn<strong>in</strong>g<br />
Providers (AELP), said that “any withhold<strong>in</strong>g<br />
of funds should be done as a last resort”.<br />
“Some of <strong>the</strong> data is complex and <strong>the</strong> SFA<br />
needs to ensure that providers are very clear<br />
about how a breach has occurred,” he added.<br />
Julian Gravatt, assistant chief executive at<br />
<strong>the</strong> Association of Colleges, said: “Colleges f<strong>in</strong>d<br />
2 FE Week Monday 4 July 2011 www.feweek.co.uk<br />
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weymouth pr<strong>in</strong>cipal<br />
suspended<br />
page 2<br />
FE Week news<br />
Colleges ‘sell<strong>in</strong>g immigration’<br />
<strong>the</strong>mselves on both sides of <strong>the</strong> contract<strong>in</strong>g<br />
relationship, as ma<strong>in</strong> and subcontractors, <strong>in</strong> a<br />
range of areas <strong>in</strong>clud<strong>in</strong>g both apprenticeships<br />
and higher education. It is right for everyone<br />
to look at subcontract<strong>in</strong>g to ensure <strong>the</strong><br />
maximum amount is spent on education and<br />
tra<strong>in</strong><strong>in</strong>g, but you can’t really judge a price<br />
without know<strong>in</strong>g <strong>the</strong> service it’s buy<strong>in</strong>g.”<br />
Editor’s comment page 8<br />
Morrisons, Elmfield and<br />
<strong>the</strong> over-25 apprentices The award-w<strong>in</strong>n<strong>in</strong>g Daily Mirror Investigations<br />
Holly Welham<br />
@hollywelham<br />
Fur<strong>the</strong>r education colleges have<br />
been accused by <strong>the</strong> UK Border<br />
Agency of “sell<strong>in</strong>g immigration<br />
ra<strong>the</strong>r than education”.<br />
The agency said it had beefed<br />
up its Highly Trusted Status<br />
(HTS) requirements for colleges<br />
because of lower levels of compliance<br />
when compared with higher<br />
education.<br />
“For too long we have seen<br />
educational <strong>in</strong>stitutions sell<strong>in</strong>g<br />
immigration ra<strong>the</strong>r than<br />
education, and too many students<br />
com<strong>in</strong>g here to work ra<strong>the</strong>r than<br />
study,” an agency spokesperson<br />
told FE Week.<br />
“We saw <strong>the</strong> highest levels of<br />
compliance <strong>in</strong> <strong>the</strong> university<br />
Cont<strong>in</strong>ued on page 4<br />
Morrisons boasts that it is <strong>the</strong> UK’s biggest<br />
provider of apprenticeships, although <strong>in</strong><br />
reality <strong>the</strong> fund<strong>in</strong>g is claimed from <strong>the</strong><br />
Skills Fund<strong>in</strong>g Agency by <strong>the</strong> <strong>in</strong>dependent<br />
tra<strong>in</strong><strong>in</strong>g provider Elmfield Tra<strong>in</strong><strong>in</strong>g Ltd.<br />
In <strong>the</strong> context of a national record number<br />
of apprentices (see page 1), what stands<br />
out is <strong>the</strong> rapid <strong>in</strong>crease <strong>in</strong> adults aged 25<br />
and over participat<strong>in</strong>g <strong>in</strong> <strong>the</strong>ir programme.<br />
Figures obta<strong>in</strong>ed by FE Week from <strong>the</strong><br />
Skills Fund<strong>in</strong>g Agency, and confirmed as<br />
correct by Elmfield Tra<strong>in</strong><strong>in</strong>g Ltd, show that<br />
so far <strong>in</strong> 2010/11 <strong>the</strong>re have been nearly<br />
18,000 apprenticeship starts <strong>in</strong> Level 2<br />
Retail. Incredibly, not only does this make<br />
up for 15 per cent of all 25+ apprentice<br />
starts <strong>in</strong> England so far <strong>in</strong> 2010/11, but this<br />
was from a stand<strong>in</strong>g start as no Morrisons<br />
apprentices over <strong>the</strong> age of 25 were started<br />
<strong>in</strong> <strong>the</strong> previous year (see figures below).<br />
Julian Bailey, Head of Media Relations<br />
at Wm Morrison Supermarkets plc, said:<br />
“We th<strong>in</strong>k apprenticeships are important<br />
for new and exist<strong>in</strong>g staff as a way of<br />
develop<strong>in</strong>g and enhanc<strong>in</strong>g skills and work<br />
very closely with Elmfield Tra<strong>in</strong><strong>in</strong>g <strong>in</strong> all<br />
The country’s biggest Skills Fund<strong>in</strong>g Agency<br />
(SFA) contractor is charg<strong>in</strong>g management fees<br />
up to an “extortionate” 40 per cent of contract<br />
values, it has been revealed.<br />
Learndirect, with a current allocation<br />
of £142m and 70 subcontractors <strong>in</strong>clud<strong>in</strong>g<br />
colleges, charities and <strong>in</strong>dependent learn<strong>in</strong>g<br />
providers, was easily <strong>the</strong> biggest SFA provider<br />
this year — and lists <strong>the</strong> range of fees it<br />
charges subcontractors on its website.<br />
A spokesperson for Learndirect, a formerly<br />
public-owned company that reportedly made<br />
a gross profit last year of just over £22m, told<br />
FE Week its fees <strong>in</strong>cluded central services such<br />
as IT and market<strong>in</strong>g along with performance<br />
monitor<strong>in</strong>g, and often fell short of <strong>the</strong> 40 per<br />
Chris Henwood<br />
@chris_henwood<br />
The amount that colleges spend on apprenticeship<br />
subcontractors has more than trebled <strong>in</strong> a<br />
year to £66.7m, FE Week can reveal.<br />
Figures from <strong>the</strong> Skills Fund<strong>in</strong>g Agency also<br />
show a boom <strong>in</strong> <strong>the</strong> number of deals. In <strong>the</strong><br />
2010/11 academic year <strong>the</strong>y averaged 2.4 for<br />
each college, compared with 4.2 <strong>in</strong> <strong>the</strong> first n<strong>in</strong>e<br />
months of last year.<br />
The growth comes despite an agency warn<strong>in</strong>g,<br />
<strong>in</strong> its annual reports and accounts document<br />
for 2011/12, that subcontract<strong>in</strong>g was “expos<strong>in</strong>g<br />
<strong>the</strong> agency to higher levels of operational and<br />
f<strong>in</strong>ancial risk”.<br />
It added: “Recent changes to policy, for example<br />
implement<strong>in</strong>g a m<strong>in</strong>imum contract level, have<br />
<strong>in</strong>creased <strong>the</strong> need for subcontract<strong>in</strong>g throughout<br />
<strong>the</strong> sector.<br />
“However, <strong>the</strong> prime driver has been <strong>the</strong><br />
requirement to ma<strong>in</strong>ta<strong>in</strong> <strong>the</strong> proportion of <strong>the</strong><br />
adult skills budget earmarked for apprenticeships.”<br />
Association of Colleges policy manager Teresa<br />
Frith defended <strong>the</strong> use of subcontractors. She<br />
said it made “sound f<strong>in</strong>ancial and educational<br />
sense to ask focused niche experts to provide a<br />
service for <strong>the</strong> college ra<strong>the</strong>r than to establish<br />
departments from scratch”.<br />
She added: “As a result of changes directed<br />
Morrison apprenticeships claimed by Elmfield Tra<strong>in</strong><strong>in</strong>g Ltd<br />
The planned average length of programme is 56 weeks, although <strong>the</strong> current actual average<br />
length of stay is just 28 weeks (based on <strong>the</strong> start date and actual end date)<br />
Source: Skills Fund<strong>in</strong>g Agency response to an FE Week Freedom of Information request<br />
aspects of apprenticeships”<br />
Simon Shaw from Elmfield Tra<strong>in</strong><strong>in</strong>g Ltd<br />
said: “Morrisons is <strong>the</strong> largest employer we<br />
work with, and supports <strong>the</strong> government’s<br />
skills and employability agendas <strong>in</strong> multiple<br />
ways, <strong>in</strong>clud<strong>in</strong>g 16-18 year olds, 19-24 NEETs<br />
and adults <strong>in</strong> local communities without<br />
prior qualifications.”<br />
As reported <strong>in</strong> <strong>the</strong> last edition of FE Week<br />
Elmfield saw <strong>the</strong>ir total apprenticeship fund<strong>in</strong>g<br />
allocation <strong>in</strong>crease <strong>in</strong> 2010/11 by £21m<br />
(to over £40m) at quarter two (quarter three<br />
figures have yet to be released by <strong>the</strong> Skills<br />
Fund<strong>in</strong>g Agency) and enjoyed pre-tax profits<br />
last year of £12.3m on a £33.8m turnover.<br />
The Skills Fund<strong>in</strong>g Agency has also confirmed<br />
that whilst Elmfield has been plann<strong>in</strong>g<br />
Morrisons apprenticeship programmes<br />
to take just over a year, <strong>in</strong> fact <strong>the</strong> average<br />
actual duration has been just 28 weeks.<br />
At <strong>the</strong> time of go<strong>in</strong>g to press nei<strong>the</strong>r Morrisons<br />
nor Elmfield Tra<strong>in</strong><strong>in</strong>g Ltd were able<br />
to say whe<strong>the</strong>r a cash employer contribution<br />
was be<strong>in</strong>g exchanged.<br />
Elmfield Tra<strong>in</strong><strong>in</strong>g Ltd has yet to be<br />
<strong>in</strong>spected as a lead provider by Ofsted.<br />
99 per cent of <strong>the</strong> apprenticeship<br />
frameworks be<strong>in</strong>g<br />
delivered are Level 2 Retail<br />
Daily Mirror probes<br />
subcontract<strong>in</strong>g<br />
“scandal”<br />
team, Andrew Penman and Nick Sommerlad, this<br />
week launched an <strong>in</strong>-depth probe <strong>in</strong>to <strong>the</strong> activities<br />
of Luis Michael Tra<strong>in</strong><strong>in</strong>g which has run<br />
<strong>in</strong>to trouble as a subcontractor provid<strong>in</strong>g sports<br />
apprentice courses.<br />
Big colleges <strong>in</strong>clud<strong>in</strong>g South Thames and<br />
Sparsholt <strong>in</strong> Hampshire pulled out of contracts<br />
and stopped payments, claim<strong>in</strong>g <strong>the</strong> outfit had<br />
“failed to deliver to our expectations” and report<strong>in</strong>g<br />
o<strong>the</strong>r “irregularities”.<br />
The colleges <strong>in</strong>sist Coalition Government<br />
emphasis on subcontract<strong>in</strong>g was a key factor<br />
<strong>in</strong>fluenc<strong>in</strong>g <strong>the</strong>ir decision to sign contracts.<br />
The collapse, just one year <strong>in</strong>to <strong>the</strong> new government<br />
raises <strong>the</strong> spectre of earlier “franchis<strong>in</strong>g”<br />
scandals that blighted private tra<strong>in</strong><strong>in</strong>g provision<br />
<strong>in</strong> <strong>the</strong> 1990s and led to <strong>the</strong> spectacular collapse of<br />
Bilston College with £9m debts.<br />
Luis Michael Tra<strong>in</strong><strong>in</strong>g claims to be “one of<br />
<strong>the</strong> UK’s largest tra<strong>in</strong><strong>in</strong>g providers to <strong>the</strong> active<br />
leisure sector, earn<strong>in</strong>g a reputation as a leader <strong>in</strong><br />
our field.” But this did not impress angry parents<br />
<strong>in</strong>terviewed at <strong>the</strong> start of <strong>the</strong> Mirror probe.<br />
One furious mo<strong>the</strong>r of a tra<strong>in</strong>ee said: “The<br />
apprentices shovelled snow and cleaned boots and<br />
have been completely let down.” The angry fa<strong>the</strong>r<br />
of ano<strong>the</strong>r tra<strong>in</strong>ee said his son was “completely<br />
exploited”. More than 1,000 Sparsholt apprentices<br />
were left without tra<strong>in</strong><strong>in</strong>g and <strong>the</strong> charity arm<br />
of Barnet FC, North London, is owed £7,500 as<br />
courses for 20 apprentices were scrapped.<br />
Sparsholt College told <strong>the</strong> Mirror it was try<strong>in</strong>g<br />
to help <strong>the</strong> students but wouldn’t comment<br />
fur<strong>the</strong>r because it is “embroiled <strong>in</strong> a legal dispute<br />
with Luis Michael Tra<strong>in</strong><strong>in</strong>g”.<br />
The Skills Fund<strong>in</strong>g Agency says it is work<strong>in</strong>g<br />
to help colleges but has no contractual arrangement<br />
with Luis Michael Tra<strong>in</strong><strong>in</strong>g.<br />
Improve timely completion and success rates<br />
Increase case-load efficiency<br />
Reduce costs<br />
Subcontract<strong>in</strong>g triples<br />
cent maximum.<br />
ensure our subcontractors don’t experience<br />
NOCN The SFA FPS has, Ad s<strong>in</strong>ce For FE August Week last (262x47mm) year, AW_Layout <strong>the</strong> extortionate 1 18/11/2014 service 10:49 charges Page 1 that HIT<br />
required providers to list <strong>the</strong> range of<br />
experienced <strong>in</strong> <strong>the</strong> early days when some<br />
Justif<strong>in</strong>g <strong>the</strong> subcontract<strong>in</strong>g top-slice<br />
Kate Hilpern<br />
KHilpern@aol.com<br />
management fees <strong>the</strong>y charge when tak<strong>in</strong>g<br />
on subcontractors. And s<strong>in</strong>ce Monday last<br />
week (November 24) <strong>the</strong> SFA has also required<br />
providers to specify what <strong>the</strong>y charged each<br />
subcontractor last academic year. Learndirect<br />
failed to meet <strong>the</strong> new duty, but <strong>the</strong> 40 per cent<br />
top-slice was declared <strong>in</strong> its range of fees.<br />
“As this is <strong>the</strong> first year of this requirement<br />
we have had to <strong>in</strong>troduce new systems and<br />
complete checks to ensure <strong>the</strong> <strong>in</strong>formation is<br />
displayed <strong>in</strong> l<strong>in</strong>e with <strong>the</strong> policy. While it’s<br />
yet not available it will be with<strong>in</strong> <strong>the</strong> next two<br />
weeks,” said <strong>the</strong> Learndirect spokesperson.<br />
However, HIT Tra<strong>in</strong><strong>in</strong>g, which had <strong>the</strong> fifth<br />
largest SFA allocation with £25m did meet <strong>the</strong><br />
new duty and did publish specific details of<br />
its management fees to its 15 subcontractors,<br />
which reached 15 per cent. Operations<br />
director Sara Goldie said: “We are keen to<br />
primes were charg<strong>in</strong>g as much as 40 per cent.”<br />
It comes after an Ofsted survey of<br />
subcontractors <strong>in</strong> 2012 uncovered fees of more<br />
than 15 per cent — overcharg<strong>in</strong>g accord<strong>in</strong>g<br />
to SFA guidance. An SFA spokesperson<br />
would not comment on <strong>the</strong> size of <strong>in</strong>dividual<br />
providers’ fees or <strong>the</strong>ir compliance with <strong>the</strong><br />
publication duties, but said a “programme of<br />
compliance work to check that actual supply<br />
cha<strong>in</strong> fees and charges for 2013/14 have been<br />
published” would beg<strong>in</strong> soon.<br />
Newcastle College Group (NCG) and Leeds<br />
City College were also <strong>in</strong> <strong>the</strong> top five biggest<br />
SFA contractors. NCG, which has a current<br />
allocation of £34m, met <strong>the</strong> new duty and<br />
charges up to just over 20 per cent, but Leeds<br />
City College, with an allocation of £26m didn’t.<br />
It charges up to 30 per cent <strong>in</strong> fees accord<strong>in</strong>g to<br />
its published range of fees.<br />
A Leeds City College spokesperson said:<br />
“The college is await<strong>in</strong>g its f<strong>in</strong>al reconciliation<br />
statement from <strong>the</strong> SFA. As one of <strong>the</strong> UK’s<br />
IMPROVED SERVICE AT NO EXTRA COST<br />
Fund<strong>in</strong>g figures expose boom<br />
<strong>in</strong> colleges’ apprenticeship deals<br />
NOCN works with centres, employers and tra<strong>in</strong><strong>in</strong>g providers for <strong>the</strong> benefit of learners across <strong>the</strong> country;<br />
with a mutual <strong>in</strong>terest <strong>in</strong> provid<strong>in</strong>g a cont<strong>in</strong>u<strong>in</strong>g improved service.<br />
NOCN provides a personal, bespoke service to its customers and prides itself on its local presence and<br />
expertise with<strong>in</strong> communities.<br />
courses have changed.”<br />
Just under £22m of agency cash filtered<br />
through 85 colleges to subcontractors last year,<br />
accord<strong>in</strong>g to figures released under <strong>the</strong> Freedom<br />
of Information Act.<br />
But this year, more than £66m went to subcontractors<br />
from 146 colleges. And <strong>the</strong> number<br />
of deals has grown from 208 last year to 607 – an<br />
<strong>in</strong>crease of 192 per cent.<br />
The figures come amid an ongo<strong>in</strong>g Serious<br />
Fraud Office (SFO) <strong>in</strong>vestigation <strong>in</strong>to subcontractor<br />
Luis Michael Tra<strong>in</strong><strong>in</strong>g (LMT). Three men,<br />
aged 29, 51 and 52, were arrested, questioned and<br />
bailed earlier this year. They rema<strong>in</strong> on bail.<br />
Subcontract<strong>in</strong>g for eight FE colleges, LMT did<br />
apprenticeships at football clubs <strong>in</strong>clud<strong>in</strong>g Leeds,<br />
Millwall and Nott<strong>in</strong>gham Forest.<br />
Allegations aga<strong>in</strong>st <strong>the</strong> now-defunct firm,<br />
which was based <strong>in</strong> Newport and run by former<br />
Welsh <strong>in</strong>ternational footballer Mark Aizlewood,<br />
related to work between 2009 and 2011.<br />
An SFO spokesperson said at <strong>the</strong> time of <strong>the</strong><br />
arrests: “It is believed LMT fraudulently overstated<br />
<strong>the</strong> number of students and apprenticeships<br />
that <strong>the</strong>y had placed. The suspected offences<br />
<strong>in</strong>clude fraudulent trad<strong>in</strong>g, false account<strong>in</strong>g and<br />
forgery.”<br />
But <strong>the</strong> threat of similar accusations aga<strong>in</strong>st<br />
contractors has not stopped colleges<br />
NOCN has not <strong>in</strong>creased its prices for 2014/2015. We do not charge a membership/annual fee or<br />
late registration fees, or to add a qualification to an exist<strong>in</strong>g provision.<br />
Colleges are <strong>in</strong>creas<strong>in</strong>gly at risk of be<strong>in</strong>g<br />
percieved to be ripp<strong>in</strong>g off partners by “topslic<strong>in</strong>g”<br />
30 per cent or more <strong>in</strong> subcontract<strong>in</strong>g<br />
agreements.<br />
Although <strong>the</strong> Skills Fund<strong>in</strong>g Agency (SFA)<br />
does not impose a maximum percentage<br />
charged by colleges under subcontract<strong>in</strong>g arrangements<br />
- its guidance states this should not<br />
exceed 15 per cent without a detailed explanation.<br />
Yet colleges <strong>in</strong>clud<strong>in</strong>g Bark<strong>in</strong>g and Dagention<br />
and we have a very good relationship with<br />
our six subcontractors,” says a spokesperson.<br />
O<strong>the</strong>r colleges contacted by FE Week that<br />
are publically listed as charg<strong>in</strong>g 30 per cent -<br />
and <strong>in</strong> some cases over 50 per cent - <strong>in</strong> one or<br />
more of <strong>the</strong>ir subcontract<strong>in</strong>g arrangements<br />
ei<strong>the</strong>r decl<strong>in</strong>ed to comment or even denied <strong>the</strong><br />
percentage. Hull College told FE Week that <strong>the</strong>y<br />
would not release <strong>the</strong> <strong>in</strong>formation unless we<br />
went through <strong>the</strong> Freedom of Information act<br />
process.<br />
Several circumstances have led to <strong>the</strong> recent<br />
<strong>in</strong>crease <strong>in</strong> subcontract<strong>in</strong>g. Most significant is<br />
FEWEEK.CO.UK | MONDAY, DECEMBER 1, 2014 | EDITION 120<br />
apprenticeships fall<br />
prompt flexibility plea under <strong>in</strong>spection<br />
From left: Lisbeth Tucker, vet and tutor, Louise Clapham, animal care technician, Zaeed Mohammed, animal care tutor, Sue<br />
Jamieson, animal care tutor, Claire Harris, animal care technician, and Mhairi Helme, vet and tutor Above: Bonzo’s x-ray Right: Bonzo<br />
page 4 ofsted plans<br />
A O C C O N F E R E N C E 2 0 1 4<br />
D R D AV I D C O L I N S C A R O L E S TO T M A RT I N D O E L<br />
PRODUCED BY IN PARTNERSHIP WITH<br />
This <strong>in</strong>volved colleges subcontract<strong>in</strong>g out <strong>the</strong><br />
teach<strong>in</strong>g, tra<strong>in</strong><strong>in</strong>g and assessment of students,<br />
claim<strong>in</strong>g <strong>the</strong> public fund<strong>in</strong>g and pass<strong>in</strong>g on a<br />
portion to <strong>the</strong> subcontractors.<br />
Whilst <strong>the</strong> trend was justified as a means of<br />
widen<strong>in</strong>g participation and provid<strong>in</strong>g <strong>the</strong>m<br />
with much-needed funds, <strong>the</strong> Serious Fraud Office<br />
was called <strong>in</strong> to <strong>in</strong>vestigate misuse of what<br />
turned out to be <strong>million</strong>s of pounds of public<br />
money. M<strong>in</strong>dful of this scandal – and that (as<br />
stated on <strong>the</strong> front page) £11m was lost to fraud<br />
or misuse <strong>in</strong> 2010-11, of which only £3m is so far<br />
accounted for - <strong>the</strong> SFA currently has plans to<br />
from provider<br />
associations<br />
FE<br />
Week<br />
~ analysis ~ jobs ~ fun<br />
£ 142m contractor top-slic<strong>in</strong>g ‘extortionate’ 40 pc<br />
@fcdwhittaker<br />
fwhittaker@feweek.co.uk<br />
X<br />
X<br />
By Rebecca Jones<br />
free with this issue<br />
largest colleges, this can be a larger task than<br />
it is for smaller general FE colleges. Once <strong>the</strong><br />
ILR is f<strong>in</strong>alised <strong>the</strong> college will publish its<br />
subcontractor data.”<br />
Babcock Tra<strong>in</strong><strong>in</strong>g, which has a current<br />
allocation of £27m and 35 subcontractors made<br />
up mostly of colleges and a few charities, was<br />
also among <strong>the</strong> top five SFA contractors, but<br />
did not meet ei<strong>the</strong>r duty. It claimed it did not<br />
need to under SFA rules because it did not<br />
subcontract entire programmes.<br />
A spokesperson said: “Babcock self-delivers<br />
all programmes as far as possible and has<br />
no learners entirely subcontracted. In a<br />
small number of cases we subcontract part<br />
of a programme to a specialist provider or a<br />
college.”<br />
NCG decl<strong>in</strong>ed to comment on its fees. Leeds<br />
City College was unavailable for comment on<br />
its fees.<br />
See editor’s comment on page 6<br />
Call us 0114 227 0500<br />
Visit us www.nocn.org.uk<br />
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and Twitter @nocn1<br />
page 8<br />
BRAVE BONZO<br />
Kendal College has opened an animal rescue and<br />
rehabilitation centre staffed by tutors and learners<br />
— and one of <strong>the</strong> first patients was Bonzo <strong>the</strong><br />
bearded dragon lizard, who came <strong>in</strong> for an X-ray.<br />
Experienced vets run <strong>the</strong> centre and teach<br />
level two animal care and level three animal<br />
management learners who also work <strong>the</strong>re.<br />
Lisbeth Tucker, resident vet and tutor at <strong>the</strong><br />
Cumbria college, said: “Kendal now f<strong>in</strong>ds itself<br />
<strong>in</strong> <strong>the</strong> unique position of be<strong>in</strong>g able to provide<br />
<strong>the</strong> highest quality care to wildlife, as well<br />
as giv<strong>in</strong>g students a practical animal care<br />
experience.”<br />
The centre has an <strong>in</strong>tensive care<br />
room and facilities to house<br />
animals referred by veter<strong>in</strong>ary<br />
surgeries, <strong>the</strong> RSPCA and<br />
o<strong>the</strong>r charities.<br />
However, vice pr<strong>in</strong>cipal Graham Howe said<br />
safeguards were <strong>in</strong> place.<br />
“Partnerships are a strategic <strong>the</strong>me of our<br />
college and have been part of our long-stand<strong>in</strong>g<br />
approach to employer-responsive provision,” he<br />
said.<br />
“We recognise <strong>the</strong> major contribution <strong>in</strong>dependent<br />
tra<strong>in</strong><strong>in</strong>g providers make with<strong>in</strong> FE<br />
and, as a college, we play an important role as a<br />
conduit of fund<strong>in</strong>g and <strong>in</strong> provid<strong>in</strong>g <strong>the</strong> critical<br />
support that allows <strong>the</strong>se providers to function,<br />
develop and grow.”<br />
He <strong>in</strong>sisted that heavy <strong>in</strong>vestment <strong>in</strong> supply<br />
cha<strong>in</strong> management meant <strong>the</strong> college was<br />
exposed to “less risk, not more”.<br />
He added: “We constantly develop our systems<br />
and processes to manage risk with<strong>in</strong> a disbursed<br />
delivery model. This ensures that our provision,<br />
wherever it is delivered, is of <strong>the</strong> highest quality.”<br />
At Hull College, three apprenticeship subcontractors<br />
last year cost £376,000. Now <strong>the</strong>re are 24<br />
— at a cost of £2.77m.<br />
Pr<strong>in</strong>cipal Dr Ela<strong>in</strong>e McMahon said: “We have<br />
worked with a range of partners as part of our<br />
contribution to deliver<strong>in</strong>g government policy and<br />
to secure apprenticeship growth.<br />
“Alongside our own direct delivery we select<br />
partners who br<strong>in</strong>g complementary capabilities<br />
Association of Employment and Learn<strong>in</strong>g<br />
Providers (AELP) chief executive Mark<br />
Dawe blamed an “imperfect or restrictive<br />
fund<strong>in</strong>g system” for provid<strong>in</strong>g an<br />
opportunity for “<strong>in</strong>termediaries” to thrive.<br />
He expressed concern after be<strong>in</strong>g shown<br />
adverts by FE Week <strong>in</strong>dicat<strong>in</strong>g that <strong>million</strong>s<br />
of pounds allocated for learn<strong>in</strong>g was<br />
potentially go<strong>in</strong>g to brokers and called for an<br />
SFA crackdown.<br />
Mr Dawe said: “In cases like <strong>the</strong>se, where<br />
<strong>in</strong>termediaries appear, it is often reflects an<br />
imperfect or restrictive fund<strong>in</strong>g system.<br />
“It suggests <strong>the</strong> SFA need to review <strong>the</strong>ir<br />
allocation system and <strong>the</strong> need to have a<br />
more flexible system of <strong>in</strong>-year reallocation.”<br />
The Association of Colleges was less<br />
prepared to pass judgement.<br />
When asked for its views on broker<strong>in</strong>g,<br />
a spokesperson told FE Week: “Colleges<br />
have used subcontract<strong>in</strong>g arrangements for<br />
many years to ensure <strong>the</strong>y offer high quality<br />
education and tra<strong>in</strong><strong>in</strong>g.<br />
“The apprenticeship subcontract<strong>in</strong>g rules<br />
have become <strong>in</strong>creas<strong>in</strong>gly str<strong>in</strong>gent and it<br />
is for <strong>in</strong>dividual colleges to decide how <strong>the</strong>y<br />
comply with <strong>the</strong>se rules.”<br />
Monday,<br />
Monday, October<br />
October 1,<br />
1,<br />
1,2012<br />
2012<br />
www.feweek.co.uk<br />
www.feweek.co.uk<br />
Interview with David Igoe<br />
FE Week speaks to <strong>the</strong> chief executive<br />
of <strong>the</strong> Sixth Form Colleges’ Forum<br />
Amarjit Basi goes global<br />
Page 5<br />
New College Nott<strong>in</strong>gham pr<strong>in</strong>cipal<br />
on <strong>in</strong>ternational partnerships<br />
Page 7<br />
Elizabeth Delaney gets legal<br />
Lawyer explores new education laws<br />
and <strong>the</strong>ir impact on colleges<br />
Campus round-up<br />
Page 7<br />
Gloucestershire College students strut<br />
<strong>the</strong>ir stuff on <strong>the</strong> catwalk, and more...<br />
Page 8