Learndirect top-slices almost £20 million through subcontractors deals

Latest figures have shown that Learndirect top-sliced almost £20 million through its deals with subcontractors last academic year, FE Week can reveal.

The Skills Funding Agency (SFA) has threated to suspend public money for lead providers that fail to publish all of their management fees – the amount of government cash they withhold for themselves, before paying subcontractors to run training for them – on their websites.

Funding rules for last academic year ordered lead providers to make “the actual level of funding paid and retained for each of your subcontractors” publicly available, within 30 days of the October 20 closing date for submission of final 2015/16 individual learner records.

It means that every provider should by now have published full details of how much they are withholding, or topslicing from the original funding pot.

Providers have actually been required to specify their subcontracting management fees since August 2014, and FE Week found four months later that the rules were being ignored by a number of providers — including the country’s then-biggest SFA contractor Learndirect.

We have monitored how the Sheffield-based company has complied ever since, and latest figures available on its website showed it retained £19,831,208 (36 per cent) from its 64 subcontractors – out of £55,321,135 total SFA funding.

This was the same proportion as 2014/15 (see tables below).

funding-table

When asked today by FE Week to justify why its management fees remain so high, a spokesperson said: “We work in partnership with an extensive range of suppliers, each providing contract-specific services, which complement those we provide directly.

“We don’t subcontract the whole delivery to third party suppliers and then charge a fee – we don’t have one size fits all approach.

“The nature of relationship and the associated commercial agreement with a supplier will depend on factors including the contract being delivered, the services provided by the supplier in question and the support a supplier buys from us.”

She also elaborated on what the company’s management fees cover.

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

“We offer a range of added value services to our partners including data management, training, funder management, access to growth opportunities including regional and national employer relationships and inclusion in bids.”

While Learndirect has met the SFA requirement to publish it management fee details, the figure itself is uncomfortably close to the 40 per cent SFA chief executive Peter Lauener has said he would find unjustifiable.

Mr Lauener told FE Week in an exclusive interview two years ago that he “would find it quite hard to see a set of arrangements that would justify a 40 per cent management fee, because it’s kind of obvious that what is taken as a management fee is not going to frontline education or training”.

As well as requesting that management fees information should be published on websites, and include current supply chain fees and charges policy, the SFA called for relevant weblinks to be provided on 2015 to 2016 subcontractor declaration forms.

The crackdown followed a long campaign against excessive top slicing by FE Week that was launched in the paper’s pilot edition in June 2011.

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