Learndirect topslices almost £50m from subcontractors over two years as average management fee rises to 36 per cent

Figures that the Skills Funding Agency (SFA) demanded be published by today have revealed that Learndirect top-sliced almost £50m from deals with its subcontractors in the last two years.

The Sheffield-based provider retained 31 per cent (£24.3m) of total funding (£77.7m) for its 73 subcontractors in 2013/14, as previously reported by FE Week.

But management fee details on the former publicly-owned firm’s website, which the SFA demanded be published by today by all lead contractors, show that last academic year it retained an even higher proportion — 36 per cent of total funding (£68.1m) from 75 subcontractors.

The numbers show that, despite being allocated £9.5m less total funding last year than in 2013/14, it maintained a £24m topslice by increasing the average management fee from 31 per cent in 2013/14 to 36 per cent last year when it earned £24.2m in management fees.

It brought the total retained by Learndirect in management fees over the last two academic years to just over £48.5m from a 33.6 per cent topslice.

A Learndirect spokesperson told FE Week: “We work in partnership with an extensive range of suppliers, each providing contract-specific services. We procure services at a charge from these suppliers. We do not subcontract the whole delivery to third party suppliers and then charge a fee.

“The suppliers deliver Learndirect-branded services using our systems and products in line with the delivery standards laid down by Learndirect. We provide marketing, the content, and the quality, audit and contract management framework within which they sit.

“The level of charges depends on the contract being delivered and the role of the supplier in question. Partners have schedules outlining the fees payable to them for their role in the delivery of each contract, and these rates are published to them prior to contracting and are available on our supplier support portal throughout the year.  The range of charges published on the learndirect website reflects the full year to July 2015.

While Learndirect has met the SFA requirement to publish it management fee details, the figure itself will be uncomfortably close to the 40 per cent SFA chief executive Peter Lauener (pictured below right) has said he would find unjustifiable.

Mr Lauener told FE Week editor Chris Henwood in an exclusive interview last year 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”.

Lauener 245

The SFA threatened in September to suspend public money for lead providers who failed to publish what they charged each of their subcontractors in 2013/14 and 2014/15, as reported by FE Week.

It came after the SFA rule requiring providers to specify how much they charge subcontractors in management fees was introduced in August last year, before FE Week found four months later that it was being ignored by a number of providers.

A notable offender at the time included the country’s biggest SFA contractor and former publicly-owned provider Learndirect — although the firm subsequently uploaded its 2013/14 figures before Christmas, which showed it had retained 31 per cent (£24.3m) of total funding (£77.7m) for its 73 subcontractors.

“The mix of services provided by our suppliers varies year-on-year, dependent on learner needs, which accounts for any variation between 13/14 and 14/15,” said the Learndirect spokesperson.

The SFA wants information on management fees available on websites, and to include current supply chain fees and charges policy. It also wants the relevant weblinks provided on 2015 to 2016 subcontractor declaration forms.

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

The SFA warned providers in September that “we will suspend your payments” if information is not made public by the deadline.

An SFA spokesperson said at the time that “all colleges and other training organisations which 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 SFA isyet to comment on the Learndirect figures for 2014/15.

Click here to see how much Learndirect charged each of its subcontractors in management fees for 2013/14 and 2014/15.

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  1. Our highest management fee is 15% – I’m shocked that primes would top slice 31% I can think of no justification for this other than profit. It would make a great article to list those primes by their management fee percentage so we can identify who is playing ball and who is taking advantage of the sector’s delivery partners.

  2. ‘It had retained 31 per cent (£24.3m) of total funding (£77.7m) for its 73 subcontractors’. The original recommendation for a maximum management fee was 15%. Of course when it came to light that very few prime contractors charged this the SFA pulled the guidance from their website so as not to be embarrassed by their lack of control. So at the moment we also no longer have the requirement for colleges and providers to upload their self-assessment reports annually or for those providing apprenticeships to carry out ‘contractual’ reviews with their apprentices (a sudden omission from last years guidance). Are the latter two omissions so that the sector, and especially those acting as subcontractors, can better manage their ever decreasing funding? The one thing that is very clear is that the SFA is not providing good value in anything that they have influence over.

  3. Peter Cobrin

    Given that somewhere else in this week’s FE Week there is an article about failed providers, I wonder if any of them are on the list of heavily top-sliced Learn Direct sub-contractors. Just asking…………..