Colleges that experience “serious” cash flow pressures, breach bank covenants, or have significantly delayed accounts will be placed into formal intervention from now on, according to new Department for Education guidance.

A new “one-stop document” that sets out a “strengthened college oversight” regime has been published by the DfE this morning.

It follows the introduction of the new insolvency regime that will allow colleges to go bust for the first time, which spelt the end for long-term government bailouts that have been available to colleges during the post-16 area review process.

Occasionally we know that some colleges find themselves in difficulty

The oversight regime, which comes into force from today, has listed a number of new “triggers” for early and formal intervention.

If the DfE finds that a college is at “risk of becoming insolvent within two years” or has “significant cash flow pressures” they will now be placed into early intervention.

Formal intervention will follow if a college requests emergency funding at any time, if their cash flow issues become “serious”, and if there are “debt recovery slippages on re-profiling”, which includes failing to pay back government loans on time or breaching of bank covenants where their bank takes action.

Upheld investigations related to college financial management and governance and/or funding audits and/or significant fraud or fraud practice will also lead to formal intervention.

This will “include, but is not limited to, related party transactions and evidence of action taken by an accounting officer and/or governors outside of the college, departmental controls/policies”.

A college will also be placed into formal intervention if there is “evidence of financial practice taken by an accounting officer that is not in the best interests of: value for money, the protection of public funds, the effective delivery of service for learners, does not meet the public benefit test”.

Subcontracting where in the ESFA’s assessment there has been a non-compliance with rules could also lead to formal intervention, as well as failure to submit financial accounts within “30 days of the published deadline or 30 days of any agreed deadline beyond the published date”.

Minister for skills and apprenticeships Anne Milton (pictured) said: “We want to make sure all colleges succeed. Occasionally we know that some colleges find themselves in difficulty. 

“The strengthened college oversight guidance is a new ‘one-stop’ document which sets out how we will work with colleges to identify issues early on, make sure they are aware of the support available and, where problems persist, explains how we will intervene and support them.

“I encourage all college leaders and governors to read this document and to act early if they see problems ahead. We can then do our best to help.”

The policy document also sets out the DfE’s “preventative function” to identify problems at colleges sooner through “financial dashboards for colleges and with additional indicators to alert the ESFA to investigate the college’s position in more detail and take follow up action if required”.

It also details a “strengthened” role for the FE Commissioner to review provision in a local area, use of independent business reviews to “support effective decision making”, and the introduction of the statutory college insolvency regime.

Other minor changes include renaming the ‘satisfactory’ financial health category to ‘requires improvement’, and renaming ‘administered college status’ – which involves “enhanced monitoring, such as ESFA observers attending college board meetings” – to ‘supervised college status’.

A member of the Commons Public Accounts Committee has “serious concerns” about the government allocating one provider up to £40 million in nine months to teach a controversial management consultancy apprenticeship.

Layla Moran, the Lib Dem education spokesperson, was responding to an FE Week analysis that showed the level 7 accountancy/taxation professional standard had 3,250 starts from November 2017, when it was approved for delivery, to July 2018.

As the standard has an upper funding band of £21,000, these starts would have used up to £70 million in 2017-18 from the apprenticeship levy pot.

In total, 88 per cent of the starts between November and July were delivered by four providers – Kaplan, Financial Limited, BPP Professional Education Limited, Ernst & Young LLP, and First Intuition – with Kaplan delivering 59 per cent on its own, which would be worth up to £40 million.

Apprentices on this course can expect to go on to careers as management consultants, financial accountants, management accountants and business and tax advisers, according to the Institute for Apprenticeships and Technical Education (IfATE).

This includes jobs at big financial advisory firms such as Deloitte, Ernst & Young and KPMG, which helped to develop the standard.

Level 6 and 7 apprenticeships have proved controversial after the IfATE estimated the apprenticeship budget could be overspent by £0.5 billion in 2018-19, rising to £1.5 billion by 2020-21.

A National Audit Office apprenticeships progress report earlier this month warned there was “clear risk” that the apprenticeship programme was not financially sustainable after the average cost of training an apprentice hit double what the government predicted.

The problem –despite a dip in the number of starts – is the result of higher per-start funding than first predicted, largely driven by the sharp rise in expensive management apprenticeships, which FE Week was first to warn about in 2016.

Last week the Association of Employment and Learning Providers made the radical proposal that all level 6 and 7 apprenticeships, including those with integrated degrees, should be removed from levy funding to relieve mounting pressure on the budget.

And on Monday, the Department for Education’s permanent secretary admitted to the PAC that “hard choices” would need to be made in the face of the imminent apprenticeship budget
overspend.

Asked whether the government should be limiting the use of the apprenticeship levy, Moran said: “While I cannot pre-empt the committee, my personal view is there are serious concerns about both cost and the subsidising of qualifications, such as level 7 accountancy/taxation
professional, at the expense of lower-level apprenticeships that do actually need taxpayers’ funding.

“This will become a greater issue when money is tight, and qualifications such as this one should be the first to be excluded.”

In March last year, Anne Milton, the skills minister, told a House of Lords inquiry that fears of a “middle-class grab” on apprenticeships were valid.

The accountancy/taxation professional standard is the most popular level 6 or 7 apprenticeship, with 5,790 total starts to December 2018; about 1,000 more than the second-placed chartered manager degree standard.

But scrutiny of the providers that offer the standard is thin.

Although Kaplan was graded “requires improvement” by Ofsted last year, it would not have been inspected on its level 6 or 7 provision, including the accountancy/taxation professional standard, as the watchdog only inspects up to level 5.

Inspectors criticised Kaplan’s managers for not having “sufficient information about apprentices’ progress so that they can act quickly when apprentices fall behind”.

They also found its “talent coaches do not always set apprentices sufficiently challenging learning targets, and as a result, too many apprentices do not complete on time”.

When FE Week shared the analysis of the standard with Amanda Spielman, Ofsted’s chief inspector, she said she “very much hopes people will see the logic in us doing level 6 and 7
apprenticeship inspections”.

She also discussed her concerns about repackaged graduate programmes now being sold as apprenticeships (see below).

When asked about its provision of the accountancy/taxation professional standard, and for comment on the AELP proposal, a Kaplan spokesperson said: “We continue to support the
government’s strategy on apprentices.”

BPP declined to comment on its provision of the accountancy/taxation professional standard, as did Ernst & Young and First Intuition.

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‘Graduate schemes are completely unscrutinised’

Ofsted’s chief inspector is worried that some level 6 and 7 provision, which includes “repackaged
graduate schemes”, is going “completely unscrutinised” because of government policy.

Speaking at FE Week’s Annual Apprenticeship Conference this week, Amanda Spielman said these “expensive” apprenticeships were “high-cost programmes that soak up a lot of money”.

She referred to how graduate schemes were, in effect, being “repackaged” as apprenticeships, an
issue she raised in her 2017-18 annual report.

She was also concerned that Ofsted could not inspect level 6 and 7 apprenticeships and if the standard did not have a degree element, it would not be regulated by the Office for Students (OfS) if the provider offering it was not on the office’s register, as revealed by FE Week in November.

“There are places that go completely unscrutinised because they don’t come within OfS arrangements and they don’t come within our space.”

Spielman said the first FE inspection she observed found a large accountancy firm had “very clearly” turned its tax graduate trainees into level 4 and 7 apprentices.

But because of a policy decision made by the government and “not us”, Ofsted could only inspect the level 4 provision, while in another room level 7 apprentices were not being reviewed.

“It was very clearly a graduate training programme that existed for many years that had been reframed slightly to make sure it genuinely did meet the requirements, but nevertheless was the kind of training that firm would have always have been providing and paying for,” she told FE Week.

“We were there to look at only one piece of this graduate traineeship programme, which made for an extraordinarily artificial conversation.”

Asked if she would like Ofsted to inspect level 6 and 7 provision, Spielman said: “I very much hope people will see the logic in us doing it.”

Higher level apprenticeships now make up more than a quarter of the number of starts, which the chief inspector said “narrows the options for the third of young people who leave school without a full level 2 qualification”.

Further questions are being asked about the Education and Skills Funding Agency’s recent European Social Fund tender, after FE Week discovered an “unprecedented” amount of tie-breaks in the controversial procurement.

Many providers have alleged that the competition, worth around £282 million in total, was botched after the agency broke tender rules and made “errors”.

One aggrieved provider even threatened legal action, as revealed by FE Week last week, but has since decided to drop this because of the likely cost and a fear of repercussions from the ESFA.

It makes a mockery of the scoring process

Now, however, this newspaper has discovered, via a Freedom of Information request, that 37 of the 95 lots, or 39 per cent, tendered in the three competitive areas of the procurement resulted in a tie-break after the ESFA marked many bids as scoring the maximum.

One college director, who used to work at the ESFA and who wished to remain anonymous, told FE Week that the number is “unprecedented”.

“It makes a mockery of the scoring process, or demonstrates inexperienced scorers,” the director said.

“All the bidders will have scored the maximum 100 for each of the four questions to end up in a tie-break – [which is] unbelievable. And how come all these tie-breaks were resolved in an award? What’s the probability of that?”

In a tie-break, the bidders were asked to “respond to a single tie-break question”. Whoever the agency deemed to have scored the highest in this question would win.

Many of the tie-breaks included multiple organisations, and one lot, for the Sheffield Transition area, comprised five providers. Overall, 87 providers were involved.

FE Week’s FOI also showed that the ESFA employed four temporary staff, at a cost of £43,000 in total, as well as their full-time European Social Fund staff, to mark the bids.

“The use of temporary staff to mark these tenders is an insult to the providers, who spent weeks preparing their responses,” said the chief executive of a provider who bid in the tender but who did not want to be named.

“The FE Week findings prove that this wasn’t an open and competitive procurement process, given that such a high volume of providers with no infrastructure, resources or tangible track records in the specified regions were able to score 100 per cent and enter into tie-breaks in multiple contract package areas.”

He added that since the results were announced, three successful bidders have “approached us to deliver their newly won contracts as they have no capacity to deliver the contracts themselves”.

Each of the bidders had scored 200 out of 200 on their “readiness to deliver” the contract.

The chief executive said his provider understands that the ESFA is currently undertaking “penetration audits” to test the validity of what was written in the bids.

Another provider, who wished to remain anonymous, said they are “alarmed” by the tie-break figures and “think that the procurement has not been designed to capture the best provision locally”.

This wasn’t an open and competitive procurement process

“Over one-third of lots going to tie-break shows that not enough due diligence was carried out in analysing the accuracy of the responses,” this provider added.

“We are seeing this in the results of the awards, with, for example, providers that have no staff, infrastructure, supply chains and stakeholders in region [who] are not ready for the April 1 go-live date.”

The agency has delayed issuing contracts several times, since – as previously reported by FE Week – multiple providers claimed that the government broke tender rules, namely by excluding the “track record” section when marking bids, while the ESFA has admitted to “errors”, such as naming Serco Regional Services Limited as a winner instead of Serco Limited.Contracts are supposed to go live on April 1.

The European Social Fund is funding that the UK received, as a member state of the EU, to increase job opportunities and to help people to improve their skill levels, particularly those individuals who find it difficult to get work.

The three areas of the tender that had tie-breaks were “skills support for the workforce”, “skills support for the unemployed” and “skills support for NEET [Not in Education, Employment or Training]”.

The other part of the tender was for community grants, and it is understood there was only one application for each area, thus none resulted in a tie-break

The chief executive of a grade one college has apologised after an audit exposed data manipulation that resulted in more than £500,000 being paid back to the government.

Lowell Williams (pictured), the boss at Dudley College, told FE Week he even considered resigning over the “blunder”, which has led to the college being excluded from this year’s national achievement rate tables.

Following complaints from a whistleblower last year, the allegations of which are unknown but which have been “dismissed”, the Education and Skills Funding Agency conducted a “review” of the college’s data in December. This found numerous late withdrawals of apprentices and work-placed learners.

There’s no question that the college is at fault in this matter

Once notified of these “concerns”, the college began an internal investigation, which identified the late withdrawals in 2015/16 and 2016/17, which artificially inflated achievement rates.

It also found some learners’ end dates were inaccurate, which resulted in one senior member of staff tendering their resignation.

Dudley College then appointed auditing firm RSM to undertake an “advisory audit”, in agreement with the ESFA, which confirmed the findings this month.

RSM reported that the college had “historically had a poor system for tracking and monitoring the continued activity of apprentices and adult education budget learners where delivery is offsite”.

As a result, “funding has been overclaimed for both adult education budget learners and apprentices as withdrawals have not been actioned in a timely manner to ensure funding was returned in the correct year”.

Williams, who has been at the college for over 10 years and led it to being rated ‘outstanding’ by Ofsted in June 2017, told FE Week he was “mortified” by this “professionally and personally”.

“There’s no question that the college is at fault in this matter,” Williams said.

“The management of large work-based learning programmes, delivered offsite on a national basis, is complex, but it is our responsibility to get it right and we didn’t.

“We have made provision to return £504,000 to the agency, which represents less than 1 per cent of our total funding claim in these years and does not have any material impact on the college’s financial health.

“I recognise the reputational damage caused by these errors to the college, our stakeholders and the wider sector. I apologise for these mistakes.”

Asked if he considered his own position in the course of the investigations, he added: “The truth is absolutely yes. I’m a national leader of further education and I considered that my position was compromised.

“But advice I received from people I’ve worked with over a career is not to let a single mistake wipe out a lot of good work that has been done over a number of years.”

Williams said the college is “extremely disappointed” to be excluded from the national achievement rate dataset for 2017/18, which was published by the ESFA today, after the agency “could not confirm the accuracy of the college’s achievement rate for adult apprentices” in time.

He added that the college’s website has published the unofficial data instead, which show achievement rates for all apprentices at 80.7 per cent in 2016/17 and 77.2 per cent in 2017/18. 

I considered that my position was compromised

Williams was “grateful” that the ESFA brought the dodgy data to the college’s attention, and said it would be “helpful for the sector in the future if there was a more effective system to analyse and report on late withdrawals and an automatic reconciliation of funds between Individualised Learner Record years”.

“I note that we are not the only college to have fallen foul of these complexities, so it is a good time for us all to take stock and learn lessons for the future,” he added.

FE Week revealed last week that Intraining, a provider part of England’s largest college group NCG, was one of several dozen providers hit with recent mystery audits, and faces not only a clawback but also being removed from the official achievement rate tables.

As previously reported by FE Week, this major review of apprenticeship data is expected to result in the sector being officially warned about unacceptable data practices, as was the case nearly a decade ago when the then chief executive of the funding agency published a letter to the sector.