Staff cuts to the Education and Skills Funding Agency have been a key factor in their failure to spot early signs of college weaknesses, the long-awaited independent report into oversight of college finances has found.

Dame Mary Ney was commissioned by former skills minister Anne Milton in August 2019 to conduct a review after the shock collapse of the Hadlow College Group revealed failings by the funding body to spot warning signs.

The overarching recommendation from her review, published this morning but dated October 2019, is that there needs to be a “new strategic relationship with the sector”.

It states that the nature of the current intervention regime, the “lack of a sector-wide strategy” and the capacity and resources of the ESFA have resulted in a relationship between government and the sector which is “largely focused on financial failure and which inhibits colleges being transparent with government”.

The relationship is “largely contractual”, focused on the funding agreements and therefore government “does not have sufficient line of sight on the wider issues colleges face and early warning signs of difficulty”.

As a consequence, the sector “lacks confidence in seeking support and advice at an early stage”, Ney warns.

She appears to be recommending the return of funding body relationship managers that would frequently meet with all college leaders, which were a feature of the previous Learning and Skills Council.

The report states that whilst each college currently has a named liaison worker from the ESFA Territorial Teams, “in practice capacity only allows this to be a desk-based oversight of college data which in the main relates to financial returns” and this only becomes a more active role for colleges which are on the intervention pathway.

“This means that in the main the ESFA Territorial Teams do not have a relationship with colleges which gives them any regular granularity of understanding of such matters as vision and ambition, leadership strengths and weaknesses, resource planning, governance compliance etc,” Ney said.

“Importantly it does not give them a line of sight to early signs of potential weaknesses nor allow the government to hold colleges to account for compliance with its guidance and expectations.”

Ney said that for colleges not in intervention, the extent of compliance with the governance and financial planning guides is “largely unknown”.

“Generally, there is no line of sight of the functioning of boards and audit committees; there is not an in depth assessment of the quality of management accounts and financial planning; there is no scrutiny of governance or counter fraud policies; and there is no discussion around curriculum planning, trading/commercial activity, estate management, risk management, partnership working and whether the college is supporting the needs of local employers or the economy,” she added.

But Ney acknowledges that there has been a 60 per cent reduction in ESFA capacity for this work which has led to “prioritisation of resources to focus on the most problematic cases”.

As revealed by FE Week in January, the then Skills Funding Agency shed over 1,000 staff when responsible for college financial oversight, before being brought into the Department for Education (DfE) in 2017.

Ney said the development of a “more proactive relationship with all colleges individually would give oversight of all of these issues and allow a stronger culture of prevention to be developed”.

“It would give colleges the confidence to seek timely advice and help, leading to fewer colleges in intervention and fewer demands for financial support.”

This “new relationship” could incorporate “annual conversations, looking holistically at the college as a critical friend but also allowing the college to showcase their achievements and raise their concerns”.

It would require ESFA staff to become “active participants in nurturing college development”.

Ney also appears to be in favour of giving government greater control. Her report states that the power to be “more decisive could lead to shorter periods in intervention for colleges in difficulty who need a structural solution”.

“A new regulatory regime would require an appetite for radical legislative change and therefore is a matter for more long term consideration,” she added.

The review also recommends that those involved in financial oversight contribute to the Ofsted judgement on leadership to “provide an holistic view and avoid disconnect between the judgements of the two bodies”.

Special measures that have led to more than 100 apprenticeship standards gaining permission to carry out end-point assessments remotely during the Covid-19 pandemic will be retained into the new year.

The Institute for Apprenticeships and Technical Education’s chief executive Jennifer Coupland announced today that the flexibilities will continue until at least the start of 2021.

Apprenticeship assessments usually involve an element of face-to-face assessment, which was not possible due to movement and social distancing restrictions during lockdown.

The flexibilities introduced vary for each standard but can include using technology to conduct observations or professional discussions remotely and reordering assessment methods so that written tests or professional discussions can be taken now and the observation delivered later.

Coupland said: “It is fantastic that the assessment flexibilities, which we carefully tailored for different sectors with employer groups, have helped thousands of apprentices to complete in spite of Covid-19.

“We want this to continue as people gradually return to work-places and face-to-face learning and assessment becomes more viable. The institute will start looking from September at where to go next with the flexibilities, but I can confirm we are not planning to make any changes before the new year to give everyone a degree of stability.”

Prime minister Boris Johnson has now advised that people should start returning to work where possible, which sparked enquiries as to whether the institute will continue to support remote assessment and other flexibilities around the delivery of EPA, according to an IfATE spokesperson.

Coupland said: “The EPA flexibilities have played a vital role in supporting the completion of many apprenticeships through these challenging and unprecedented times. We want to clarify now that there are no imminent plans to reverse these.”

The IfATE spokesperson added that they will give 12 weeks notice from when any changes are announced to existing flexibilities before EPA organisations will have to deliver them.

Dame Mary Ney’s report into college financial oversight exposes a “decade of austerity” and a lack of ministerial awareness of the financial crisis “engulfing” the FE sector, Labour’s shadow apprenticeships minister has said.

Toby Perkins added that the failure in oversight has been “exacerbated by the Tory cuts to the civil service”.

He was responding to the long-awaited independent Ney report, which was completed in October 2019 but only published by the Department for Education today.

The review was commissioned after Hadlow and West Kent and Ashford Colleges became the first colleges to be placed in education administration last year – a shock collapse that revealed failings by the funding body to spot warning signs.

Ney’s overarching recommendation was that there needs to be a shift to a new nurturing and “strategic” relationship with the sector. She warned that significant staff cuts to the Education and Skills Funding Agency have been a key factor in their inability to find early signs of weakness (full story here).

Perkins said: “Dame Ney should be thanked for an excellent report which demands government action to address a widespread failure that is allowing our FE sector to drift towards bankruptcy.

“The report exposes in detail the appalling consequences of a decade of austerity, the failure of the government’s FE reforms and the lack of ministerial awareness of the financial crisis engulfing our crucial FE sector.

“The failure in oversight has been exacerbated by the Tory cuts to the civil service and reforms that have weakened the oversight that government provides.”

The shadow minister added that Ney is “correct” that the current mechanisms and reforms are “inadequate to address this failing and for all the government’s rhetoric about the importance of the sector the truth is that colleges are collapsing and young people are being let down by these failings.

“Labour hopes that the Secretary of state will be making a statement to parliament to confirm that he will address the failings identified and confirm if he will adopt the recommendations in full very soon.”

James Kewin, deputy chief executive of the Sixth Form Colleges Association, said that Ney’s report makes some welcome recommendations, such as three year funding settlements, a “more joined up approach” to intervention, and strengthened governance.

However, the “scope of the review did not allow Dame Mary to focus on what actually causes financial instability in the first place – not least the decade of underinvestment in post-16 education,” he added.

“Reconfiguring the departments and agencies involved in intervention or refining the financial information provided by colleges will, in isolation, have a limited impact.

“There is certainly a need to reform financial oversight, but there is a more pressing need to ask if colleges are receiving the funding required to provide students with a high quality education”.

Deputy chief executive of the Association of Colleges, Julian Gravatt, said: “It’s helpful that DfE have finally published Dame Mary Ney’s review on the financial oversight of colleges. She concluded her work in autumn 2019 at a time when many colleges were on an improving trajectory but she describes a system which is complex, backward-looking and not really focused on the key tasks.

“The Covid-19 crisis has stopped the financial improvement in its tracks, caused deficits in 2019-20 and opened up large financial problems for colleges in 2020-21.

“Government and colleges should take her recommendations seriously and work out which of them still make sense nine months on. We do not agree with the suggestion that Ofsted should join the long line of regulators assessing college financial health but we do think that the existing arrangements require improvement.”

You can read the government’s response to the Ney report here.

The apprenticeship funding rules for the 2020/21 academic year have finally been published by the Education and Skills Funding Agency.

They outline eligibility rules for the new employer incentives, which were revealed by the agency yesterday, and include the latest details on temporary flexibilities that are available in response to the Covid-19 outbreak.

You can view all of the changes made since the 2019/20 rules here.

As ever, there are three sets of funding rules – one for employers, another for employer-providers, and another for main providers. Links to the relevant rules are below:

Employers

Employer-providers

Main providers

The government has committed to building “stronger” relationships with colleges, including increased dialogue with all college boards from September.

New whistle-blowing requirements will also be imposed on colleges, and there will be “strengthened” alignment between the FE Commissioner and the Education and Skills Funding Agency, according to skills minister Gillian Keegan.

It comes after Dame Mary Ney’s independent review of college financial oversight, published this morning, concluded there needs to be a shift to “nurturing and supporting” all colleges on an individual basis to spot early signs of weakness.

However, it is not clear whether ESFA staffing, which has suffered from years of cuts and was a key area of concern to Ney, will increase to boost oversight.

Her review was initiated after Hadlow and West Kent and Ashford Colleges were placed in education administration last year.

The overarching recommendation was that there needs to be a “more proactive relationship with all colleges individually”, as opposed to the current regime which is “largely focussed on financial failure”.

In the government’s response, skills minister Gillian Keegan said she endorses the view that government “must have a strategic relationship with FE colleges”.

“This means not just acting as a regulator, or intervening in the event of failure, but ensuring that every college is part of a coherent plan to meet local and regional need.”

She said the FE Commissioner Richard Atkins has played a “critical role” in bringing FE practitioner expertise into government, so she intends to “maintain the role, reporting directly to ministers as a public appointment, but strengthening alignment with the ESFA, and placing its civil service support team there”, as first reported by FE Week in May.

“This change will further empower and develop the ESFA’s territorial teams and enable them to draw upon practitioner expertise,” Keegan added.

“There will be a regular strategic dialogue with each college board around priorities. This will reduce the perception that support is only available to colleges in trouble, and focus not just on prevention but on building success and outstanding practice.”

Ney’s review also recommended further action to improve the effectiveness of the financial data collected from colleges.

Keegan said that in February, the ESFA “took the first step” towards adopting a new integrated single data return, and they have also commissioned a July financial collection to assess the financial impact of Covid-19 on the sector.

“This will enable us to continue to work with governing bodies to mitigate financial risks arising from Covid-19, avoid failure and help reduce intervention, while remaining ready to act decisively when necessary.”

She added that this will be supported through “additional requirements” for colleges to be transparent – including protection for whistle blowers – through the ESFA’s Audit Code of Practice and grant conditions.

Starting from 2020/21, they will require “all colleges to publish their whistleblowing policy externally”.

The ESFA is also “considering” the link between the ESFA’s financial assessments and Ofsted judgements.

Keegan has also committed to reviewing the agency’s governance guidance to “strengthen transparency” after Ney warned that failures of financial stewardship have “at their core weaknesses in leadership and poor adherence to effective governance arrangements”.

In addition, the minister confirmed that there will be a new round of the College Collaboration Fund after the review highlighted how a collaborative rather than competitive approach between colleges has driven improvement.

Further changes are expected to be announced as part of the FE White Paper after the summer.

Keegan concluded: “Fundamentally, Dame Mary Ney’s report demonstrates that government must set out a long-term radical vision which places colleges where they belong – driving the success of regional economies and communities. This could not be more opportune.”

Ney said: “I am encouraged that the recommendations from the review are now being taken forward by the department, as part of the development of an ambitious strategy for sector. I wish all in the sector well in their endeavours.”

But one area Keegan fails to address in her response is a 60 per cent reduction in ESFA staff capacity for oversight of all colleges, which Ney says has led to “prioritisation of resources to focus on the most problematic cases”.

FE Week asked the government if it is considering increasing ESFA staffing in light of Ney’s review but they declined to comment.

The number of apprentices that small employers can start through the digital apprenticeship service will increase from three to 10 from tomorrow, the government has announced.

This cap will be in place for the remainder of the 2020-21 financial year, as from April 2021 the Education and Skills Funding Agency plans for all starts to go through the online apprenticeship system.

The digital service was launched in April 2017 but was only for levy-paying employers to manage and spend their apprenticeship funding.

Since January 2020 employers who do not pay the apprenticeship levy have been able to create accounts on the service and reserve funding for an apprenticeship in advance of recruitment as part of the ESFA’s move away from the use of government-procured contracts. 

However, non-levy payers were capped at just three starts each owing to ongoing affordability issues.

In a new document outlining how apprenticeship funding will work from August 2020, published today, the ESFA said: “For the remainder of the financial year 2020-21, the number of ‘active’ or ‘used’ reservations available to non-levy payers at any given time will increase from three to 10.

“This enables non-levy paying employers to recruit more apprentices for their businesses through the apprenticeship service.

“This policy will come into effect from 15 July and will continue to be kept under review as we further assess how the new system is working.”

The agency reiterated that the transition period to move all employers who do not pay the apprenticeship levy onto the apprenticeship service has been extended from October 2020.

Funds available to providers through non-levy procured contract allocations can be used for new starts until 31 March 2021 and “we plan to fund all starts through the apprenticeship service from 1 April 2021”. 

The Education and Skills Funding Agency has this afternoon published details of the eligibility rules for the new apprenticeship employer incentives.

Cash “bonuses” for new hires that start an apprenticeship were first announced by the chancellor as part of the summer statement last Wednesday.

From August 2020 until the 31 January 2021, businesses taking on new apprentices will be rewarded with £2,000 for a 16 to 24-year-old and £1,500 for a 25 year-old.

Eligibility for the cash, we now know, requires that the apprentice “must not have been employed by the employer within the six months prior to the [apprenticeship] contract start date”.

The document goes on to say that there is no limit on the number of incentive payments and “the payment will be made directly to employers in two equal instalments, where the apprentice is still in learning at day 90 and day 365”.

This means, unlike the current £1,000 payment to the employer for taking on a 16 to 18-year-old (which remains in place and is passed on to the employer by the provider) the employer will need to claim the incentive payment via the online apprenticeship system from 1 September 2020.

With the 90 day rule, the earliest the first half of the incentive payment would be received for an apprentice starting in August would, it seems, be 30 October.

A new public awareness campaign to boost the popularity of higher technical education is to be launched by government as ministers confirm plans for “major” reform in this area.

As first announced by former education secretary Damian Hinds in 2018, the Department for Education is planning to overhaul qualifications at levels 4 and 5.

Following a consultation, current education secretary Gavin Williamson today confirmed that the Institute for Apprenticeships and Technical Education will be approving new and existing higher technical qualifications, and awarding them a quality mark, starting with the digital sector from 2022.

The idea is to create a “high quality” technical option for students to progress onto after T-levels or an apprenticeship, particularly in skill-shortage sectors like construction, manufacturing and digital.

The DfE said the quality of the existing 4,000 qualifications at levels 4 and 5  – such as higher national certificates and diplomas that sit between A-level and degrees – can be “variable” and it can be “hard for students and employers to find the ones that are right for them”.

New higher technical qualifications will therefore only be approved where they “provide the skills employers need” and meet “employer-led occupational standards”.

To increase uptake, the DfE is developing a “new public awareness campaign” to be launched in autum next year.

The department was unable to say how much their communications strategy would cost or what it would involve, but a spokesperson said it will “showcase the benefits and the wide range of opportunities that studying a higher technical qualification can open up and making sure students get the right information, advice and guidance to make informed choices”.

The campaign will be run in partnership with employers and careers advisers.

The announcement comes days after Williamson pledged that the upcoming White Paper for further education will lead to a reformed “world-class, German-style” system.

Williamson said today: “For too long we have been training people for the jobs of yesterday instead of the jobs of today and tomorrow.

“Employers are struggling to find the computer programmers, engineers, electricians and technicians they need, and students of all ages are missing out on the high skill, high wage jobs that higher technical education can lead to.

“The measures I have announced today will boost the quality and take-up of these qualifications to help plug skill gaps, level up opportunities and support our economic recovery.”

A “national approval scheme” for the new higher technical qualifications will be delivered through the IfATE.

Under the plans, awarding bodies will submit higher technical qualifications to IfATE’s employer-led route panels, which already oversee the approval of standards and T-levels, for approval.

The submissions will be managed through a phased application process, much like was done with T-levels.

In the first year, the focus will be “exclusively” on digital qualifications, leading to occupations like network engineer, cyber-security technologist and software developer.

Qualifications will be compared to new digital standards at level 4 and 5 which have been subject to a recent IfATE route review of quality, and will be available on the institute’s website “shortly”.

The first qualifications will be available from September 2022.

Attention will then turn to qualifications on the construction and health and science routes which will be available from 2023.

The IfATE said it will provide full details of the approval process to interested awarding organisations and universities when the window for submission of qualifications opens in September.

Where level 4 to 5 technical qualifications fail to meet the institute’s kitemark, the DfE said they will “take action” by reducing the funding available to them from 2023.

Jennifer Coupland, chief executive of the Institute for Apprenticeships and Technical Education said: “Covid-19 has really focused public attention on the quality of training at all levels, and the role it can play in economic recovery.

“We are looking forward to starting our work on higher technical qualifications to help provide the skills our economy needs.”

Matthew Percival, the Confederation of British Industry’s director for people and skills, said: “Putting employers in the driving seat will give them confidence that courses on offer meet their needs.

“With four-fifths of employers expecting to increase higher skilled roles in the coming years, offering clear progression routes through higher technical qualifications will be essential to creating a sustainable and inclusive future economy.”