The Department for Education is counter-suing a former apprenticeship provider for more than £800,000 after alleging widespread dodgy funding claims – including that public money was unlawfully used to pay apprentices’ wages.
The World of Work Ltd, which focused on the care sector, recently launched a £500,000 High Court claim against the secretary of state for education following a suspension of payments in July 2021 and termination of its skills funding contracts six months later.
But in its defence, the DfE said the “plainly unsustainable” claim was a “misguided attempt” to avoid repaying £825,106 that investigators assert was wrongly claimed between 2017 and 2021.
Ineligible jobs
The dispute centres on apprenticeship contracts The World of Work held from around 2016 that were investigated in June 2021 following whistleblower allegations of wrongdoing.
Payments were suspended and the DfE’s now-closed Education and Skills Funding Agency (ESFA) terminated all of the provider’s contracts in January 2022, citing inaccurate data submissions, missing evidence, apprentices not being in genuine employment, and failures to meet minimum duration requirements.
According to the defence, investigators examined 30 learner files and found 21 apprentices recorded as working more than 30 hours per week for a connected recruitment company, Goodsted Recruitment Ltd, were in fact only engaged for six hours of training per week.
The DfE said this revealed there was “no proper apprenticeship arrangement” in place between apprentice and employer.
The World of Work Ltd’s owner, Myrofora Georgiou, was a director of Goodsted until 2019. Goodsted was also run by a business partner of Georgiou and the pair currently operate a property firm.
DfE officials also allege funding claims were made for learners who never commenced training and were recorded as continuing months after they had exited their programme.
Using a sample audit and its controversial extrapolation method, the DfE calculated an overclaim of £825,106.07 across four academic years, with error rates ranging from 65.7 to 83.8 per cent each year.
The World of Work could have taken the option of a 100 per cent audit of its performance if it “did not wish to accept the use of figures extrapolated from the error rate identified in the sample”.
‘Strong appearance’ of illegal wage payments
One of the most serious findings came after the ESFA reviewed bank statements from both companies.
The DfE said the evidence showed Goodsted was “totally reliant” on funds from The World of Work, leading investigators to conclude that ESFA funding “strongly appeared” to have been used – directly or indirectly – to pay apprentices’ wages.
Using public apprenticeship funding to pay wages is explicitly prohibited under funding rules.
The defence said the conduct of the provider “amounts to a fundamental breach of the contract which is incapable of remedy”.
Provider claim ‘bears no relation’ to reality, says DfE
The World of Work disputes the findings and said it was denied “natural justice”.
In its claim against DfE, the provider argues it was never told the substance of the whistleblower allegations, was not properly allowed to remedy any breaches, and was required to continue training learners after payments were suspended.
It said its delivery model, involving apprentices employed part-time by care providers while also on zero-hours contracts with Goodsted, was known to the ESFA.
The World of Work’s lawyers explained: “For two cohorts of apprentices, from 2019 to 2021, there were some apprentices who already worked part-time in the care sector, but who (with the support of their employer) wished to undertake further qualifications.
“These apprentices continued their part-time work but were also employed on a zero-hours contract by Goodsted Recruitment Limited. Goodsted then arranged for training through the claimant, and seconded these apprentices for work.”
The provider said its individualised learner record data was “incomplete” but only “because the computer architecture did not allow for the provision of the complete data” – that is, the ESFA’s learner entry tool initially only allowed one employer to be nominated for each apprentice.
“All the complete data was submitted to the defendant as part of the investigation. The terse letter, in the same words as the suspension of funding letter, suggests that the defendant did not consider this at all,” The World of Work’s claim added.
The DfE was accused of acting “capriciously”, and its termination of the contracts itself “amounted to a repudiatory breach”.
The DfE countered that the provider’s funding claims were not eligible because “there needed to be a qualifying apprenticeship arrangement between the apprentice and their employer, involving a genuine job allowing for on-the-job training”.
The provider is seeking £500,000 in damages, calculated at £50,000 per month between July 2021 and April 2022, on the basis of “unjust enrichment”.
The DfE strongly disputes the valuation.
Its defence said The World of Work averaged less than £12,500 per month in total funding before the investigation, and had just four apprenticeship learners remaining at termination.
It claimed all eligible training was reconciled and paid in December 2022, and that any unpaid activity was ineligible for funding.
The DfE confirmed it intended to counterclaim for recovery of the £825,106 and is seeking “security for costs” from the court in this legal claim, citing the provider’s negative net assets and minimal ongoing activity.
“The position remains that the claimant has received more than £800,000 in public funding to which it was not entitled,” the department’s defence said. “The claimant’s claim appears to be a misguided attempt to pre-empt a claim by the defendant for the recovery of those funds.”
No hearing date has yet been set.
Both parties were approached for comment.
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