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Posted on 13/12/2017 in Apprenticeship Sector News Stories

Investigation into the circumstances surrounding the monitoring, inspection and funding of Learndirect Ltd

Investigation into the circumstances surrounding the monitoring, inspection and funding of Learndirect Ltd

The National Audit Office has published an investigation examining the monitoring, inspection and funding of Learndirect Ltd. This follows an Ofsted inspection of Learndirect Ltd in March 2017, which rated its overall effectiveness as ‘inadequate’.

Learndirect Ltd is the UK’s largest commercial further education provider, engaging with around 75,000 learners annually. In 2016/17, the company received £121 million from all of its central government contracts.

The key findings of the NAO investigation are:

  • Ofsted inspected Learndirect Ltd in March 2013, and rated its overall effectiveness as ‘good’.
  • In 2015, Ofsted rated Learndirect Ltd’s risk profile as amber, because of concerns about apprenticeships and other elements of provision that Ofsted regarded as relatively small. In March 2016, it changed the rating to red, because of increased concerns over apprenticeships and other aspects of provision.
  • Ofsted planned a full inspection for early November 2016. In September 2016, Learndirect Ltd informed the Skills Funding Agency (SFA) that it was negotiating the sale of its apprenticeships business (a sale that did not ultimately conclude). Ofsted therefore decided to postpone the inspection to early 2017.
  • Learndirect Ltd’s achievement rates (the proportion of learners who gain their qualification each year) for non-apprenticeships training were reasonably stable over time, but achievement rates for apprenticeships declined from 2012/13 onwards.
  • On 14 March 2017, SFA issued Learndirect Ltd with a Notice of Serious Breach in relation to the standard of its apprenticeships provision.
  • In late 2015, SFA downgraded its financial health rating for Learndirect Ltd from ‘satisfactory’ to ‘inadequate’.
  • On 16 March 2017, Ofsted informed Learndirect Ltd that it intended to carry out an inspection on 20 to 23 March. The company asked for the inspection to be deferred, because it was about to transfer its apprenticeships activity to Learndirect Apprenticeships Ltd, another company in the group. Ofsted rejected the deferral request, and carried out the inspection as planned.
  • On completion of its inspection, Ofsted rated Learndirect Ltd’s overall effectiveness as ‘inadequate’. The company made a complaint about this judgement before Ofsted’s report was published, and on 2 June, Learndirect Ltd began legal proceedings against Ofsted, challenging the conduct of the inspection and publication of the inspection report. Learndirect Ltd’s legal challenge was ultimately unsuccessful, and the inspection report was published on 17 August.
  • In late October 2017, Ofsted carried out a re-inspection monitoring visit. It found that Learndirect Ltd had started to take action in response to the areas of weaknesses identified at the March 2017 inspection.
  • Learndirect Ltd and Ofsted have identified similar reasons for the company’s declining performance. Ofsted identified poor management of subcontractors’ performance, weak oversight of learners’ progress and insufficient focus on apprenticeship training relating to small and medium-sized employers as factors contributing to its rating of Learndirect Ltd as ‘inadequate’.
  • In most cases where Ofsted rates a commercial training provider’s overall effectiveness as ‘inadequate’, the Education and Skills Funding Agency (ESFA) withdraws funding within three months. In this case, ESFA decided that funding Learndirect Ltd for the 2017/18 academic year, after it was rated ‘inadequate’, was in the best interests of learners and the other public services that the company delivers.
  • In 2017/18, Learndirect Ltd is expecting to generate income of around £105 million from its main government contracts, most of which will cease by July 2018.
  • The £45 million of Adult Education Budget (AEB) funding awarded to Learndirect Ltd for 2017/18 was based directly on a proportion of its 2016/17 funding rather than a specific bid made by Learndirect Ltd itself.
  • Learndirect Ltd has withdrawn from any new apprenticeships business. Learndirect Apprenticeships Ltd will continue to build up its apprenticeships activity with large employers.
  • The Home Office and the Standards and Testing Agency plan to re-procure the service currently being provided to them by Learndirect Ltd.


Special considerations'

The NAO report points out that while the standard practice is for providers rated inadequate by Ofsted to have their contract terminated with three months’ notice, the Education and Skills Funding Agency (ESFA) decided that Learndirect was “an unusual case, to which special considerations should apply”.

“Specifically, ESFA concluded that continuing to fund Learndirect Ltd for the 2017-18 academic year would best meet the interests of learners, allowing the company to wind down and let learners complete their courses with minimal disruption,” the report adds.

Meg Hillier, chair of the public accounts committee, said that the government had “backed itself into a corner by letting itself become dependent on Learndirect”.“At a time when many further-education providers are struggling with funding restraint, it is disgraceful that the department should be continuing to spend millions of pounds of taxpayers’ money on an inadequate provider,” she said.Learndirect said it welcomed the NAO report, which it said recognised that the company has been operating “in a challenging funding environment” and that the management team had taken steps to address the “under performance”.It has previously said that, since December 2013, no dividends have been paid out of the group and that £37m has been invested into the operating business.

The company faces the loss of the majority of its DfE funding from next year, but a sister business, Learndirect Apprenticeships, will continue to provide apprenticeships to large companies under the new levy funding system.

At a time when many further education providers are struggling with funding restraint, it is disgraceful that the department should be continuing to spend millions of pounds of taxpayers’ money on an inadequate provider

Meg Hillier, public accounts committee chair

According to the report, the DfE believed the size of Learndirect, which is the largest recipient of government funds for adult learning and apprenticeships, “made it an unusual case, to which special considerations should apply”.The report also states that the DfE’s communications department successfully blocked a notice in April about Learndirect’s flagging performance.“It did not want any information suggesting that the company was not meeting expectations to be in the public domain until Ofsted had made its final rating public,” according to the report .Learndirect had tried to overturn Ofsted’s decision to give it an “inadequate” rating on its performance and went to court to block its publication.

The notice was eventually published in July, and Ofsted’s report was made public in August.The DfE said that the NAO had acknowledged that its “priority throughout has been the protection of learners and ensuring that they do not lose out”.“This process has demonstrated that where providers do not meet the standards we expect, we will not hesitate to take action,” the DfE added.Ofsted, the education inspector, had given Learndirect an “amber” risk rating as early as spring 2015. Ms Hillier said she was “concerned that it took Ofsted so long to investigate.”“It knew Learndirect was a risk from as early as spring 2015, but the inspection took two years to arrive.”Her committee will hold an inquiry that draws on the NAO’s work early next year, according to the agency.Ofsted said it had “no concerns about the management of the inspection of Learndirect, including the timing of the inspection and follow-up monitoring visit”.“We stood firm in the face of legal challenge in order that our findings could be made public at the earliest opportunity,” Ofsted added.

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