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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 />

Page 2 Pages 3<br />

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 />

FE<br />

Week<br />

FE Week is a new newspaper distributed<br />

to every fur<strong>the</strong>r education college<br />

<strong>in</strong> England, and made available free of<br />

charge on www.feweek.co.uk One pr<strong>in</strong>ted<br />

copy will be sent to <strong>the</strong> ‘Primary contact<br />

address’ for every college on <strong>the</strong> UK Register<br />

of Learn<strong>in</strong>g Providers (www.ukrlp.<br />

co.uk) This edition is a second pilot to<br />

test <strong>the</strong> market, and see if you like it.<br />

So tell us what you th<strong>in</strong>k at<br />

www.surveymonkey.com/s/feweek<br />

And tweet us your thoughts @feweek or<br />

with <strong>the</strong> hash-tag #feweek<br />

Editor & Design: Nick L<strong>in</strong>ford<br />

Deputy Editor: Ruth Sparkes<br />

Operations: Alex Begley<br />

Sales: Claire Harrison<br />

Analyst: Tashanna Egbochue<br />

Contributors: Ian Nash<br />

Janet Murray<br />

Lee Bigg<strong>in</strong>s<br />

Philip Broomhead<br />

Kate Hilpern<br />

Stephen Parry<br />

Mick Fletcher<br />

Toni Pearce<br />

FE Week agitator<br />

If you are <strong>in</strong>terested <strong>in</strong> plac<strong>in</strong>g an advert<br />

<strong>in</strong> a future edition please complete <strong>the</strong><br />

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E: claire.harrison@lsect.com<br />

T: 020 8123 4778<br />

The only newspaper dedicated to fur<strong>the</strong>r education and skills<br />

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 />

Follow us on Facebook NOCN1<br />

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

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