Covid fraud hit £5m and 6 more ESFA accounts findings

High profile Covid measures, like the apprenticeship incentive payments, were flagged as a high risk for fraud

High profile Covid measures, like the apprenticeship incentive payments, were flagged as a high risk for fraud

7 Nov 2022, 17:15

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The Education and Skills Funding Agency (ESFA) has published its annual report and accounts for the last financial year. 

The organisation, an arms-length body of the Department for Education, was responsible for distributing £65 billion of funding to the education sector in the year to March 31 2022

Here’s what you need to know…

1. Incentive payments flagged for fraud

The government’s own internal audit service served the agency with a “limited assurance” for two of the 17 reviews it conducted. One was for the ESFA’s oversight of its own cyber-security, but the other was for the employer incentive payments for apprenticeships scheme. 

The Government Internal Audit Agency gave this, the lowest achievable, after “highlighting the need for the fraud prevention measures to be appropriate and proportionate”. The recommendations are being “addressed” by the DfE, not the agency, as they now hold responsibility for apprenticeships following the recent arms-length-bodies review. 

2. £5m fraud found in incentive payments and Covid-19 funds

The agency managed two rounds of employer incentive payments for apprenticeships and traineeships during the financial year, with 108,000 claims totalling £315 million. £219 million had been paid by year-end.

Both rounds of the apprenticeships incentives scheme were flagged for in-depth Cabinet Office fraud risk assessments, alongside the traineeships incentive payments and the Covid-19 provider relief scheme. This was because funding was going to providers outside of the usual funding rules. 

The ESFA reports that across those funds, £5 million worth of fraud was detected, with £4.5 million of that recovered in the financial year. A further £2.2 million of fraud was reportedly prevented.

The agency can’t report how much fraud was detected and recovered per fund because the data was “captured as part of consolidated data returns”. 

3. Nearly £1.5m lost to overpaid providers

Three “overpaid grant recoveries” were written off this financial year, totalling nearly £1.5 million. Overpayments which can’t be clawed back, either because the provider fails or the ESFA decides to abandon the claim, are written off. Those amounting to more than £300,000 are recorded in the accounts:

  • CCP Graduate School Ltd: £317,000
  • Ingeus UK Limited: £731,000
  • SCL Security Limited: £429,000

This is much less than the £9.5 million lost last year.

4. Late tax submission cost £2.5m

A late submission of a VAT reclaim for “contracted out services” meant ESFA lost £2.5 million. It “reviewed controls” to prevent this happening again. 

The government will sometimes waive debts owed by providers as part of mergers, or to support closures.

Cheadle and Marple Sixth Form College, which merged with Trafford College in May 2021, had debts of £2.2 million waived, according to the ESFA accounts.

£1.9 million was written off across three University Technical Colleges.

5. Only three colleges in FE Commissioner intervention 

Only three intervention assessment were carried out by the FE commissioner. However alongside these were 33 visits to “a reducing number” of colleges in intervention. 

Intervention reports that were published over the 2021-22 financial year included City College Southampton, Kingston Maurward College and City Lit. 

6. £2.1m paid to wrong recipient

The ESFA admitted that in December 2021, £2.1 million was “erroneously paid to a wrong vendor” in an “unexpected issue”. 

It happened when a new vendor was added to the system using an incorrect reference number.

But the money was full recovered and re-issued to the correct payee and ESFA has made improvements to the process to help prevent errors. 

7. At least £30k in ESFA exec bonuses

Ten executive staff members received a bonus, meaning at least £30,000 was handed out, about half of the total value of payouts in the previous years.

Warwick Sharp, who served as director of academies and maintained schools during the time period, received a bonus of between £10,000 and £15,000. Four others were given between £5,000 to £10,000 each.

John Edwards, the ESFA’s interim chief executive officer, was paid a salary of between £135,000 and £140,000. This is below the salary of previous CEO Eileen Milner who was on £150,000 to £155,000.

David Withey was appointed as permanent CEO in August 2022, so his pay is not in these accounts.

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