ESFA accounts: Major write-off for insolvent training provider

A jump in fraud detection, new loans to colleges and a £5.7m write-off from a training group provider insolvency have all been revealed in this year’s annual report and accounts of the Education and Skills Funding Agency (ESFA).

Its accounts, for the year up to March 31, 2024, break down how the agency paid out £72 billion in more than half a million separate payments to colleges, independent training providers, academies and local authorities.

Here are a few key insights from the report:

Headline budget figures

The FE sector only accounts for a relatively small chunk of the agency’s total annual budget – it distributed £4.8 billion for 16-19 education.

This is slightly larger than the £4 billion spent on early years.

In comparison, pre-16 education funding paid to academies and local authority maintained schools totalled £62.8 billion.

It also oversees £500 million for adult education – although more than twice this budget is devolved to mayoral authorities such as the Greater London Authority.

Fraud increased, largest part is ITPs

The amount of fraud detected or prevented rose by a third to £91 million, with £19 million of this relating to apprenticeships.

In total, £28 million was recovered, including from previous years.

Suspected fraud is flagged through data analytics, in collaboration with other government departments, and by the ESFA’s counter fraud and investigations team.

About half of the 142 new allegations brought to the ESFA were about independent training providers, with 20 FE colleges and 47 academy trusts investigated.

The agency “successfully” petitioned for the closure of one unidentified independent training provider due a failure to repay its debt, and five other directors were disqualified, the report says.

Chief executive David Withey said he hopes the figures send a “very clear message” that the agency works tirelessly to “recognise and remedy” fraudulent activity.

College loans on the increase

The ESFA’s total loan balance to the FE sector was £170 million, a £109 million increase in one year alone through new lending to 19 colleges.

Much of this increased support for FE follows the reclassification of colleges as public sector bodies, which limited their ability to take out new commercial loans.

“The sector will pay considerably less interest for this debt than commercial market alternatives,” the report said.

Financial support from the ESFA, DfE and Further Education Commissioner also included ten colleges “at risk of insolvency,” although these are not identified.

Such loans and support often result in colleges agreeing to restructure by merging, closing or reducing their staff costs, according to FE Week reporting.

Losses

The funding agency’s overall losses rose to £12 million during the financial year.

Although its cash losses fell from £2.3 million to only £192,000, the ESFA was forced to write off £5.7 million due to the insolvency of independent training provider MiddletonMurray.

In March last year, the agency submitted a clawback claim of £10.1 million to liquidators following an investigation into how contracts were used across four skills training companies owned by Angela Middleton, including MiddletonMurray.

Other waived or abandoned claims included £1.2 million owed by City College Southampton, which is now part of South Hampshire College Group, and £327,000 owed by University Technical College Leeds.

The total number of cases increased almost six-fold to 169 during the year, but details are only reported about losses over £300,000.

The accounts also include one mysterious “special payment” of £18,000 to an unknown party.

Pay rise for the boss

The year marked the first full period under chief executive David Withey, whose total cost of salary and pension benefits is £390-395,000 per year.

Withey’s basic salary also rose by about 16 per cent, from £125-130,000 to £145-150,000.

Including benefits and bonus, the chief executive earned four times the median salary of an ESFA employee, which was about £40,000 per year.

Staff

Although staff turnover continues on an upward curve from 4 per cent in 2021/22 to 11 per cent in 2023/24, the ESFA’s average staff size fell by more than 100 to 714 during the year.

This follows a halving of the staff size since the agency was stripped of its policy role in 2022, following a review of its effectiveness by Sir David Bell.

However, spending on consultancy fees has increased from 345,000 to £1.5 million.

According to the report, £400,000 of this was related to FE loan “legal consultancy costs” and £1.2 million to the deployment of school resource management advisors.