ESFA crack down on poor subcontracting practice – Sector Response

ESFA Chief Executive writes to post-16 education and training providers to underline the strict subcontractor rules

ESFA Chief Executive, Eileen Milner, has today (Thursday, 03 October 2019) written to education and training providers to remind them that the ESFA will take action where there is evidence any provider is not playing by its strict sub-contracted rules.

Under the rules, a sub-contractor can deliver education and training on behalf of a lead provider in receipt of ESFA funds. However, lead providers have a legal duty to make sure public funds are spent according to the ESFA’s sub-contracting rules, so that learners receive the best possible education or training. The majority of subcontracting is done well and in accordance with the rules.

In accepting ESFA or public funds, providers confirm they accept the terms and conditions of their funding agreement, and that they have a process in place to ensure that sub-contracted provision is delivered properly, securely and meets ESFA rules.

Sector Response

Jim Carley, Managing Director, Carley Consult Ltd, said:

“I personally think a review of this kind is welcome. Whilst providers subcontracting over £100K are obligated to have their compliance with ESFA subcontracting rules independently audited, there are no standards set in terms of who an appropriately competent auditor should be. The result is many providers look for the cheapest audit option, rather than the most rigorous, which in the extreme is no more than a rubber stamping exercise.

“Those subcontracting less than £100K are not subject to any type of audit! At the same time, the ESFA need to be clearer in their expectation. In some cases the rules for subcontracting vary between provisions (e.g. AEB and Apprenticeships) which results in a confusing message on compliance. The new requirement for prime providers to provide a full breakdown of their costs in subcontract agreements is also unnecessarily heavy handed. More work is needed on all sides.”

Association of Employment and Learning Providers chief executive Mark Dawe said:

“The ESFA letter correctly sets out that subcontracting can be done well for the right curriculum reasons and in our view underlines why ITPs and colleges must have strong governance and auditing arrangements in place to ensure that either abuse or inefficient use of public money is avoided. 

“However AELP believes that the agency could still go much further in limiting the potential for misuse if it followed the GLA’s example and imposed a 20% cap on management fees under subcontracting arrangements.  We haven’t seen any justification for it not taking this step after the Commons education committee made its recommendations a year ago.”

Matt Garvey, Managing Director of West Berkshire Training Consortium comments:

“At WBTC have successfully subcontracted for many years with praise from Ofsted and auditors on the way we support, manage and risk assess our subcontractors. I welcome the somewhat belated intervention by the ESFA, malpractice has been rife for too long. One intervention, not mentioned in the letter, is that the ESFA could take a more active interest in disputes between main providers and their subcontractors. Sadly, to date, they have viewed these as contractual issues between the two parties and have taken little or no interest. Yet such disputes  can easily lead to learners and employers being disadvantaged.
Through this announcement I hope that the ESFA are starting to realise that they need to be more actively involved in the sector; after recent scandals at AAA and Brooklands we can all understand why.” 

Association of Colleges (AoC) Deputy Chief Executive, Julian Gravatt said:

“It’s clear that this review is necessary, and consulting on changes for 2020 is a useful start to firm up the subcontracting process. We will use this opportunity to submit our response to the consultation.”

Sector bodies recommend 20% cap on management fees for #subcontracting @AELPUK @CollabGrp @SuePemberHOLEX @ESFAgov https://t.co/F2uljePz10

— FE News (@FENews) October 3, 2019

The letter builds on the action the ESFA has already taken this year to tighten its sub-contracting requirements.

This includes launching a review to improve subcontracting arrangements, more robust examination of data and information, holding individuals and organisations to full account, pursuing all avenues available and, where appropriate recovering public money.

Later this year, ESFA will also be seeking views from the sector to inform the ongoing review of sub-contracting.

Letter to all ESFA post-16 funded providers on subcontracting delivery: Subcontracting the delivery of education and training using ESFA post-16 funds Eileen Milner’s letter to subcontractors Dear Chair of the governing body and / or Chief Executive… https://t.co/vpaZ64W6th pic.twitter.com/i3toECKLKp

— FE News (@FENews) October 3, 2019