Providers that flout rules on revealing how much they topslice when subcontracting have been given a November 23 deadline to comply — or face having their funding suspended.
The Skills Funding Agency (SFA) has threated to suspend public money for lead providers that fail to publish their management fee details on their websites.
It comes around nine months after an FE Week investigation uncovered providers were ignoring rules that they must publish what they charge subcontractors. And while there was compliance with rules on listing the range of fees, these were as high as 40 per cent in some instances.
However, the SFA has now warned providers that “we will suspend your payments” if information is not made public by the deadline.
An SFA spokesperson said: “All colleges and other training organisations that subcontract must publish the actual funding paid and retained for each of their subcontractors in the [provider] funding years 2013 to 2014 and 2014 to 2015.”
The information should be made available on websites, and include current supply chain fees and charges policy. The SFA also wants the relevant weblinks provided on 2015 to 2016 subcontractor declaration forms.
The rule requiring colleges and independent learning providers (ILPS) to specify the management fees they charged each of their subcontractors over the previous academic year was introduced by the SFA in August last year.
But FE Week found four months later that rules were being ignored by a number of providers — including the country’s biggest SFA contractor at the time Learndirect (see right).
A Learndirect spokesperson said it published figures showing how much the company had paid and retained from each of its 73 subcontractors in 2013/14, out of its total £136.9m SFA allocation, on its website before Christmas.
But the Sheffield-based provider had not published the information for 2014/15 as FE Week went to press.
The company’s ‘supply chain fee policy’ webpage showed on Thursday (September 10) that it is was charging management fees up to 40 per cent of contract values — which was unchanged from when FE Week reported on the issue in early December.
A spokesperson for Learndirect, which was allocated £117.9m for 2015/16 by the SFA as of last month, said: “The business intends to publish its 2014/15 charges in advance of the November 23 deadline.”
Stewart Segal, chief executive of the Association of Employment and Learning Providers (AELP), said that “any withholding of funds should be done as a last resort”.
“Some of the data is complex and the SFA needs to ensure that providers are very clear about how a breach has occurred,” he added.
Julian Gravatt, assistant chief executive at the Association of Colleges, said: “Colleges find themselves on both sides of the contracting relationship, as main and subcontractors, in a range of areas including both apprenticeships and higher education.
“It is right for everyone to look at subcontracting to ensure the maximum amount is spent on education and training, but you can’t really judge a price without knowing the service it’s buying.”
Looking for big top-slicers
The issue of top-slicing, of withholding public funding from the front line of education and training in the form of a ‘management fee’ to subcontractors, has featured in these pages before.
And FE Week has always been supportive of Skills Funding Agency (SFA) efforts to bring some transparency and accountability to this practice.
But, up until this point, and thankfully no further than November 23, these efforts have had no teeth.
It is for this reason that once again FE Week is supportive of the SFA in putting forward the very serious threat of a suspension of funding for non-compliance.
Ultimately, all this will mean is that lead providers are far more likely to comply, to reveal how much they top-slice on each contract — it does not mean they must adopt fair management fee levels.
However, what the SFA’s threat will allow, is for FE Week to watch closely the practices of those who think it’s reasonable to cream off 40 per cent of SFA cash before handing on a contract.
To those providers I would say we’ll be looking for you, and we’ll be looking at you.