EFA ‘loses’ £20m to private providers

Private training providers were overpaid around £20m last year by the Education Funding Agency (EFA),
FE Week can exclusively reveal.

Around 10 per cent of the EFA’s 2011/12 budget for private sector provision for 16 to 18-year-olds was not returned, even though it wasn’t delivered.

A further 15 per cent — around £25m — was handed back.

An EFA spokesperson said it allowed providers to keep a certain amount of funding for which no provision had been delivered.

But, she said, it was not true that it had paid £20m to independent training providers “for nothing”.

“In 2010/11 and 11/12 we applied a 10 per cent margin for some independent providers where they under-delivered to reflect changes to the funding system in those years. This has been reduced to 5 per cent in 2012/13,” she said.

However, Shadow junior education minister Tristram Hunt called on Education Secretary Michael Gove to account for the £20m overpayment.

It comes just weeks after FE Week reported how the Department for Education (DfE) had cut its projected budget for 16 to 18 apprenticeships by £166m, in part because of “competition” from older applicants — who are funded by the Department for Business, Innovation and Skills (BIS) rather than DfE.

“This is another worrying sign of incompetence at the DfE. In a tough economic environment we simply cannot afford to be losing money like this,” said Mr Hunt.

“Every wasted pound is a pound that could have been spent on improving educational attainment for our young people. Instead, we have £20m that appears to be sitting in the bank accounts of private providers.

“Meanwhile, the government has a £166m under-spend on the young apprenticeships we need to boost our competitiveness, rebalance the economy and provide a high quality vocational pathway for the forgotten 50 per cent.

“Michael Gove needs to explain where this £20m has gone and get a grip on the chaos overwhelming his department’s finances.”

Paul Warner, Association of Employment and Learning Providers director of employment and skills, said: “The period in question relates to a time when the DfE was making changes to Foundation Learning that had some acknowledged issues at the onset.

“Therefore, we were seeing in effect some transition funding to protect the provider infrastructure from a serious shock which might have left provision short for young people in some geographical areas. The margin has now been reduced.”

The overpayment figures are not in the public domain, but have been seen by FE Week.

They provide a stark contrast to private training provider funding for older learners, paid for by the Skills Funding Agency (SFA) and BIS.

The SFA makes the details of its overpayments public, but it pays private training providers strictly on delivery. Its overpayment of £91m last year therefore ended up largely in the coffers of colleges and local authorities, for example.

Kim Thorneywork, the SFA’s chief executive, said the overpayment — revealed in December — meant some providers’ allocations for 2012/13 would be reduced, and she expected “to deliver a balanced budget for the 2012/13 financial year”.

It is not known the extent to which the EFA overpaid non-private training providers, such as colleges and local authorities, for 16 to 18 provision.

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Editorial: Money for nothing?

The EFA did not need to pay private companies £20m more than the value of their 16 to 18 delivery

They refer to ‘changes to the funding system’ as the rationale.

Presumably this relates to ending the ‘entry to employment’ scheme of short employability courses, and replacing them with the larger and longer ‘foundation learning’ programmes that Ofsted recently criticised.

So private providers delivering part-time courses were given an allocation boost in advance of running longer and more expensive courses.

Should the fact that many of these more expensive courses never materialized justify overpayments?

To put it another way: how much of the £20m has left the sector in dividend payments to grateful company bosses?

As reported in FE Week the National Audit Office is conducting a review of the EFA, so the question should be asked.

Before then, the Public Accounts Committee and Education Select Committee might like to question Michael Gove.

Nick Linford, editor