Exclusive: Public Accounts Committee chair says topslicing is ‘outrageous leeching’ of public cash

Exclusive: Public Accounts Committee chair says topslicing is ‘outrageous leeching’ of public cash

The issue of topslicing with lead providers skimming off around 40 per cent of government funding for delivery before dishing out contracts has been branded an “outrageous leeching of taxpayers’ money” by Public Accounts Committee (PAC) chair Meg Hillier (pictured).

The Labour MP (pictured) told FE Week the National Audit Office (NAO) was going to investigate instances such as the country’s biggest Skills Funding Agency (SFA) contractor, and former publicly-owned provider, Learndirect retaining 36 per cent of total funding (£68.1m) from 75 subcontractors in 2014/15.

“It is an outrageous leeching of taxpayers’ money by contractors that aren’t delivering any public service and are just acting as conduits,” she said.
Ms Hillier added: “I am going to ask the NAO to investigate this and we [members of the PAC] will consider what we will do about it as a committee once we have seen the evidence.”

It follows a long campaign against excessive topslicing by FE Week that was launched in the paper’s pilot edition in June 2011.

Lead contractors who retain government funding, through what they usually call management fees, before finding a subcontractor to do the training for the remaining sum, is also a subject currently being looked at by the SFA.

An SFA spokesperson said it was “undertaking compliance work” to determine whether any providers had ignored a ruling that detailed information about management fees they charge subcontractors be published online by November 23.

It is expected to be finished “by the end of the calendar year”.

The SFA warned in September that funding could be suspended where declarations were missing after the deadline.

It requested that information on management fees was available on websites, and included current supply chain fees and charges policy.

It also wanted the relevant weblinks provided on 2015 to 2016 subcontractor declaration forms.

However, FE Week checks on the websites of a number of leads with numerous subcontractors found that a number had missed the deadline.

And while Learndirect met the deadline, its management fees revealed topslicing of around 40 per cent in a number of instances.

It defended the charges saying suppliers delivered “Learndirect-branded services using our systems and products in line with the delivery standards laid down by Learndirect.”

“We provide marketing, the content, and the quality, audit and contract management framework within which they sit,” added a spokesperson.

The SFA has previously said that management fees should be no higher than 15 per cent of the value of the lead provider’s contract.

And Peter Lauener, Education Funding Agency and SFA chief executive, told FE Week last year that he would find a 40 per cent topslice “hard” to justify “because it’s kind of obvious that what is taken as a management fee is not going to frontline education or training”.

It’s a view of high management fees shared Ms Hillier.

“I am very interested in and worried about this issue,” she said.

“We are very worried as a committee about FE funding in general and this is a waste of a large amount of the precious little money available.”

The NAO declined to comment.