The National Audit Office has officially launched an investigation into Learndirect and the Department for Education following outcry from the Public Accounts Committee.

The special treatment offered to the nation’s biggest FE provider following its grade four from Ofsted last month has raised eyebrows across the sector, especially at the government’s handling of the situation.

Despite being slapped with the lowest-possible grade from the education watchdog after a failed judicial review, Learndirect has had none of its contracts terminated and was even told it could recruit new learners as long as they complete their qualifications by July 2018.

The provider has repeatedly been branded “too big to fail” by many sceptics in the sector.

But in a move that will place the provider and ministers under the biggest microscope yet, the NAO has confirmed it is going to scrutinise Learndirect.

In a note that appeared on the NAO’s website this afternoon, the country’s national auditor said: “Learndirect is a very large commercial further education provider, whose core business is skills, training and employment services. Learndirect receives funding from the Education and Skills Funding Agency and, in keeping with other further education providers, is subject to inspection by Ofsted. 

“In March 2017, Ofsted carried out an inspection of Learndirect and awarded it a grade four (‘inadequate’) rating. ESFA subsequently made a number of decisions about its ongoing funding of Learndirect. This investigation will set out the key facts relating to those decisions.”

Ofsted sent damning evidence that apprentices were not receiving enough training to the DfE at the end of March. An experienced independent apprenticeship funding auditor previously told FE Week this evidence should have raised significant concerns at the department.

The scandal was subsequently referred to the NAO by the Public Accounts Committee, after its chair Meg Hillier hit out at the situation.

“It does not seem to me that in this case the DfE has been a smart client,” she told FE Week. “It got to a point where … if it had started digging it might have gone in and found its problems – so it does seem that Learndirect has been too big to fail.”

Upon hearing the news that the NAO had taken up her referral, Ms Hiller said she was “pleased” the national auditor was investigating and “looked forward to examining its findings in due course”.

In a statement released last week, Learndirect said it had itself invited the NAO to investigate, claiming it had “nothing to hide”.

The provider’s chief executive, Andy Palmer, today welcomed the investigation.

“Learndirect welcomes the investigation which is clearly not an investigation into Learndirect but into the public bodies and stakeholders that have engaged with Learndirect. We believe that it will vindicate the decisions that they have made with respect to Learndirect.”

The DfE also welcomed the NAO’s inquiry.

“Following the Ofsted report, we have taken swift action to work with learndirect and put safeguards in place to protect learners,” a spokesperson said.

“We welcome the NAO’s investigation and will look at its findings when published.”

The exact dates of investigation are not yet known, but the NAO has said it will be conducted during “winter 2017-18”.

The NAO told FE Week that its investigations, such as the one following the Kids Company scandal in 2015, are “reactive to a situation” and “offer a rapid assessment of service quality, failure and financial management”.

Learndirect Apprenticeships Ltd has been removed from part of the purchasing system used by London hospitals, following a joint FE Week and Financial Times investigation.

Last month, FE Week analysis revealed multiple irregularities in a tender application to deliver apprenticeships at a London hospital that was submitted by LDA, a company owned and operated by the owners of Learndirect Ltd since March 2016.

There were at least six potentially misleading claims in the tender, in which LDA appeared to take credit for activities that happened several years before it was even set up, which are understood to have been undertaken by Learndirect Ltd.

After reviewing our findings, the London Procurement Partnership (LPP), which the NHS uses to manage the capital’s dynamic purchasing system (DPS), launched a review of LDA’s position as a provider.

A spokesperson for the partnership told FE Week today that after investigation, LPP had taken the decision to remove LDA from the “leadership and management apprenticeship” category of the DPS.

“Following an enquiry into Learndirect Apprenticeships Ltd’s original application to join the NHS London Procurement Partnership’s apprenticeship training providers DPS, the company has been removed from the Leadership and Management Apprenticeship category, effective 5pm Friday, September 29,” she said.

“The award criteria for the Leadership and Management Apprenticeship category requires bidders to provide published and verified success rates which, upon audit, Learndirect Apprenticeships Ltd has not been able to provide to LPP’s satisfaction.

“At such time as Learn Direct Apprenticeships Ltd can produce published and verified success rates, the company will be entitled to reapply for a place on the DPS.”

The company still remains as a potential bidder for categories on the DPS including Dental Nurses, Digital Services (IT, data analysis), Healthcare Support Services, Healthcare Science, Healthcare Assistant Practitioner, HR and Recruitment.

According to the LPP spokesperson, these categories currently “do not require applicants to provide published success rates as apprenticeships in these sectors have not been available long enough for there to be any statistics at this time”.

She added that LDA’s application for each of these categories “met the criteria, as confirmed during our audit. Consequently there are no grounds under the OJEU rules to remove the company from these categories.”

Learndirect Apprenticeships has been approached for comment.

Funding increases in adult education budget contracts for private providers will be paid from the massive underspend on adult training last year.

The government announced a U-turn on AEB funding for independent training organisations on Friday, just a few hours after FE Week revealed that FE providers had dramatically underspent their allocations for the 2016/17 academic year by £200 million.

This will bring new funding levels for all private providers up to the value of at least 75 per cent of the amount they had in 2016/17, bringing much-needed parity to those that felt aggrieved by the massive funding cuts imposed after their “successful” bids in the recent tender process.

“We cannot confirm the budget at this stage of the procurement as contract talks are still taking place,” a spokesperson for the Department for Education said, though he did clarify that “the amount will be published once all contracts have been signed. This money comes from underspends in the adult education budget”.

Multiple sources confirmed to FE Week that around 13 per cent of the £1.5 billion AEB budget went unspent in 2016/17 – a situation sector leaders described as “worrying” and “frustrating”.

Many ITPs would also have at first been infuriated by news of the unspent £200 million.

This is because, unlike FE colleges and councils, they were forced to tender for part of a pot worth just £110 million.

The tender’s outcome was catastrophic: providers which did not bid, or which failed their tender, were given contracts worth 75 per cent of their previous year’s allocation to spend in 2017/18, but organisations which won contracts typically received a fraction of their old AEB.

The Education and Skills Funding Agency attempted to make amends on Friday, writing to aggrieved ITPs to inform them that extra money had become available for their AEB allocations.

Shadow skills minister Gordon Marsden previously said it would have been a “scandal” if the unspent £200 million had gone back to the Treasury, and not been spent on more FE provision.

AELP boss Mark Dawe added that the underspend was the “final piece of evidence” that proved the government should “start a transitional shift to full procurement of the whole budget, with greater prioritisation to meet the Brexit skills challenge”.

“The fact that the recent tender was six times oversubscribed tells you all you need to know about demand for the programme,” he said, pointing out that the size of underspend could be used to treble allocations to independent providers.

A large community learning provider in Somerset has reopened courses today after the government granted it substantial extra emergency funding, but warned that it has no “long-term solution”.

Somerset Skills & Learning, which teaches around 10,000 students and employs around 200 staff, received the good news it had been hoping for on Friday – that its AEB allocation for 2017/18 had been pumped up to just over £2.4 million.

It was one of many private providers to receive letters from the ESFA, confirming that extra cash had been found to bring private providers’ AEB funding up to the value of 75 per cent of the amount they had last year.

SS&L was forced to put its courses on hold in August after it first received a measly £111,000 allocation despite being successful in the tender – a huge 97 per cent cut from the £3.4 million it had in 2016/17.

While the new cash allows SS&L to continue to deliver courses across Somerset this year, the provider still has a “significant shortfall”, and a gap of almost £1 million it will need to address.

“We’re obviously relieved that the ESFA has been able to find some additional funding outside of the procurement process to support Somerset’s adult education provision, we need to remember this is just a transitional sum for this academic year only,” said SS&L’s chief executive, Susie Simon-Norris.

“As an organisation we will need to not only address the large shortfall in funding this year, but also prepare the organisation for future years under different funding priorities.”

Ms Simon-Norris admitted SS&L would have to change as a result, and a restructure is “possible” – though “we don’t know what the optimum solution will be”.

“Our first priority now is to ensure our learners are able to start their courses and that they receive the high level of tutoring and service for which we are known,” she said.

SS&L won much public support after its catastrophic initial funding cut became known. It later rallied the support of four local MPs to fight its case for more funding, and held emergency meetings with the DfE to reverse the cut.

“We’ve been overwhelmed by the support and messages of goodwill which we’ve received from the Somerset community, our learners and clients and of course Somerset MPs who have acted on our behalf, and for that we are hugely thankful,” Ms Simon-Norris said.

Letters sent on Friday from the ESFA to providers affected by the AEB tender debacle focused on non-priority provision and delivery areas, and brought funding up to the value of 75 per cent of the amount they had last year, and therefore into line with other providers which did not bid or failed in the tender process.

New contracts for priority delivery will continue with opportunities to bid for growth.

A spokesperson for the DfE said it “cannot confirm the budget at this stage of the procurement as contract talks are still taking place. The amount will be published once all contracts have been signed.”

He added that this money “comes from underspends in the adult education budget”.

FE Week had revealed just hours before this announcement that more than £200 million of the AEB in 2016/17 had gone unspent.

UPDATE: HEFCE has now announced details of the 27 projects on its website.  We’ve alerted the DfE

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Justine Greening has announced 27 new degree apprenticeship projects, but the FE sector may have to wait a while to find out what they are.

In her speech to the Conservative Party conference, the education secretary heralded the success of the government’s degree apprenticeships programme.

She also announced the “next wave of degree apprenticeship projects”. These will help “meet the growing demand for these opportunities from the next generation”, Greening said.

In information published by the Department for Education in the wake of the speech, the projects are not named. And when asked when the names would be published, officials were unable to say.

The government has also confirmed there will be no additional funding to support the next wave of degree apprenticeships.

In her speech, Greening sang the praises of the degree apprenticeship programme, which has attracted 2,000 learners since it launched in 2015.

“We will pursue excellence in FE, as we have in our schools,” Greening said today, as she repeated her pledge to introduce T-levels.

“We will make sure that the technical education ladder is going to reach every bit as high as the academic one.

“In 2015, we introduced degree apprenticeships, so individuals can earn while they learn, and in less than two years, more than 2,000 people have started one.

So today I am announcing the next wave of 27 degree apprenticeship projects, that will help meet the growing demand for these opportunities from the next generation.”

The DfE says the announcement on degree apprenticeships is one of “a number of steps to continue to diversify the training and quality of qualifications on offer and ensure we remain at the forefront of higher education.

The department has also confirmed today that the amount adult learners will have to earn before paying back their tuition fees through the FE loans system will rise from £21,000 to £25,000 a year.

The 27 new degree apprenticeship projects will be tasked with “promoting and increasing this high-quality route into employment”.

This allows apprentices to earn while they learn, while “gaining a full degree that has been developed in partnership with employers and universities”, the DfE said.

However, there will be no new money for the extension of the programme. Instead, the 27 new projects will be funded from the £10 million degree apprenticeships funding allocated in 2016.

The government’s proposed rise in the repayment threshold for student loans will apply to FE loans, it has been confirmed.

At the Conservative Party conference this weekend, Theresa May will announce that the amount people will have to earn before starting to pay back their student loans will increase from £21,000 to £25,000.

The announcement was initially made in relation to loans for higher education courses, but Department for Education sources have today told FE Week that the new threshold will also apply to advanced learner loans.

The increase in the threshold for repayments is part of a wider effort by the Conservatives to appeal to more young voters following their worse-than-expected general election performance. The party has also announced a freeze on university tuition fees and an extension of the Help to Buy scheme.

The news has already been welcomed by Dr Susan Pember, a former senior civil servant who now leads adult learning provider membership body Holex.

Pember, who used to be in charge of FE and skills at the now-defunct Department for Business, Innovation and Skills, said that the announcement was “good news” for the sector.

It follows a tumultuous period for advanced learner loans, which are available to learners aged 24 or over who are taking a level 3 or 4 qualification with an approved college or training provider.

Last month, FE Week revealed that the majority of FE loans funding has gone unspent over the last four years.

According to figures obtained under the freedom of information act, 58 per cent of FE loans funding, amounting to almost £1 billion, has not been spent since 2013.

The Student Loans Company, which processes advanced learner loans on behalf of the Education and Skills Funding Agency, revealed that just £652 million in loan-funded provision had actually been delivered since 2013, against a massive £1.56 billion in allocations.

There has also been a near-40-per-cent fall in the numbers of level three and four learners since the loans were introduced, sparking dire warnings across the sector.

FE providers failed to spend a giant chunk of the adult education budget over the past academic year.

A staggering £200 million remains unspent, which will raise eyebrows among many private training providers, who were forced to tender for a slice of just £110 million in the recent AEB procurement exercise while their competitors like colleges and councils were exempt.

Multiple sources have confirmed to FE Week that around 13 per cent of the £1.5 billion AEB budget went unspent in 2016/17 – a situation sector leaders described as “worrying” and “frustrating”.

Certain individual colleges have underspent by nearly three quarters of a million pounds, further enraging private providers which have been crying out for more cash.

The shadow skills minister Gordon Marsden said our findings formed part of a “systemic set of problems that we are seeing all the way through to the dispersing of adult and higher skills funding” and insisted that the government needs to “urgently review the whole process”.

“There have been enough problems and difficulties already with the recent tender,” he added, calling on his ministerial counterpart Anne Milton to “take action”.

Changes to European Union law meant this was the first year the Education and Skills Funding Agency had to procure the AEB, but only for private providers.

The measly £110 million tender has been catastrophic for many ITPs; one 10,000-learner community learning provider in Somerset had its funding slashed by 97 per cent.

A group of aggrieved private providers have since threatened legal action against the way the government handled the procurement. FE Week understands the ESFA was still working on a way out of the debacle at the time we went to press.

AELP boss Mark Dawe told FE Week that the £200 million underspend was the “final piece of evidence” that proved the government should “start a transitional shift to full procurement of the whole budget, with greater prioritisation to meet the Brexit skills challenge”.

“The fact that the recent tender was six times oversubscribed tells you all you need to know about demand for the programme,” he said, pointing out that the size of underspend could be used to treble allocations to independent providers.

Even as the tender fiasco was in full swing, Canterbury College managed to underspend its £3.2 million AEB allocation by a little over £660,000 in 2016/17. Its principal, Graham Razey, said this was mainly due to the “very competitive educational environment in Canterbury”.

Tresham College in Kettering meanwhile failed to spend £350,000 of its £2.65 million allocation, which it blamed on “fewer referrals from Job Centre Plus than predicted”.

Lowestoft College projects an underspend of £212,000 against its initial £2.3 million allocation, and Hopwood Hall College also admitted to an under delivery of £152,000.

The need is out there, but the restrictions are too severe

David Hughes, the AoC’s chief executive, said he has been discussing the underspend with the ESFA to “help them understand how frustrating this is for colleges”.

He told FE Week there was “no surprise” the underspend was this large and said 2016/17 had been the first year in which new ESFA rules “restricting the types of students, courses and activity that could be funded” took effect.

He insisted that the “need is out there, but the restrictions are too severe”.

Last week, FE Week reported that roughly £1 billion-worth of advanced learner loans had gone unspent since 2013.

In a cagey statement, a Department for Education spokesperson said: “The performance of the AEB is closely monitored by the ESFA, working with the sector.

“The final figures for the AEB funding year performance will be published in the usual way [in June 2018].”

The DfE does not however release the true underdelivery, because it applies a “three per cent tolerance” to its published figures.

This means that if a college, for example, delivers £9.7 million out of a £10 million allocation one year, it would keep the full £10 million.

While £200 million is a huge underspend, it is not as much as the £630 million that went undelivered by providers in 2011/12.

FE Week revealed at the time that nearly 17 per cent of the government’s £3.8 billion AEB allocation, previously known as the adult skills budget, went unused that year.

Mr Marsden said the government should be “worried” about any underspend of this size because it stems “from their own inability to prioritise adult learning in the first place”.

The ESFA has confirmed it has found additional adult education budget funding and sent out letters to relevant independent training providers with their increased allocations, as revealed by FE Week earlier today.

The letter focuses on non-priority provision and delivery areas, bringing funding for everyone up to the value of 75 per cent of the amount they had last year, and therefore into line with existing providers which did not bid or failed in the tender process.

New contracts for priority delivery will continue with opportunities to bid for growth.

“This letter sets out your modified run-down extension contract value and the arrangements that will apply for the period 1 November 2017 to 31 July 2018,” reads one letter, seen by FE Week.

“We have calculated your nine-month run-down extension by taking 75 per cent of your 2016 to 2017 contract value (£) and subtracting the value (£) of the three-month extension you have already received. We have then worked out your non-priority provision as a proportion (%) of your total AEB delivery. We used your final 2015 to 2016 individualised learner records (R14 ILR) and final funding claim to do this. We have then multiplied your nine-month extension value (£) by the proportion (%) of your non-priority provision.

“We have defined non-priority ‘other’ provision as anything that is not 19- to 24-year-old traineeships, English and maths, skills provision for those who are unemployed and live in one of the priority disadvantaged areas and delivery of technical programmes for adults aged 19-23.”

In response to the letters, which were sent out electronically this afternoon, AELP’s chief executive Mark Dawe said: “We really welcome the fact that the government has recognised the importance of transitioning all providers to enable them to move from non-priority to priority provision. All we been asking for is fairness of treatment. Furthermore we hope that the opportunity to bid for further allocations will allow providers to grow priority provision meeting a significant demand around the country.”

The provider very much at the centre of the AEB tender debacle was Somerset Skills & Learning. The 10,000-student community learning provider had its allocation slashed by 97 per cent – from £3.4 million to just £111,000 – and was on the brink of collapse. But it rallied the support of four local MPs to fight its case for more funding and held emergency meetings with the DfE to reverse the cut.

After receiving today’s letter the provider tweeted: “Great news, we’ve been granted transitional funding to start running courses again. More details to come, thanks for supporting us #lovessl.”

Great news, we’ve been granted transitional funding to start running courses again. More details to come, thanks for supporting us #lovessl

— SS&L (@SSLcourses) September 29, 2017

It added: “Some funding has been allocated, although not the full amount we bid for. It does allow us to move forward however! Good news!”

Yes some funding has been allocated, although not the full amount we bid for. It does allow us to move forward however! Good news!

— SS&L (@SSLcourses) September 29, 2017

A Department for Education spokesperson said: “It is vital that we continue to build the skilled workforce that businesses and the country needs to ensure we can compete across the world and adult education is a vital part of this.

“Our priority is always to act in the best interests of learners and that is why we have confirmed additional funds to support providers in delivering quality adult education across the country.”