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Ombudsman’s report on ILAs – a victim of their own success?


The parliamentary ombudsman has published the results of its report into the Individual Learning Account scheme fiasco and finds there was "serious maladministration" by the Department for Education and Skills (DfES) in setting up and managing the scheme, and a failure by DfES and administrators Capita to work effectively together to make sure that there were adequate safeguards built into the scheme.

The report backs up an earlier National Audit report published last October which found the scheme was implemented too quickly and inadequately planned; the Department for Education and Skills had no detailed business model or quality assurance for courses; there were weaknesses in security arrangements and the Department failed to monitor closely enough the escalating demand for accounts.

Here, we look again at some of the key issues surrounding the collapse of the scheme, and look at some of the outcomes of this latest report.

Fraudulent activities from providers

The main problem associated with the failure and eventual closure of the scheme was suspected widespread fraud, with some unscrupulous providers adding learners to their roll to claim funds without the learners' knowledge. The report documents how Capita, responsible for the administration of the scheme, considered the probable risks during the run-up to, the launch of and the running of the scheme. At the outset, Capita said that their processes and information systems would be designed to help prevent fraud, and that they would implement a reporting and monitoring procedure to enable DfES to be made aware of fraud.

The report reveals that early estimates by the administrators that there was a low probability of providers conducting fraudulent activities such as registering 'ghost' learners were re-evaluated a month after the scheme became operational in September 2000, with one provider apparently using "dubious trainee data" and another eight causing concern. By May 2001, there were reports that deliberate fraud by learning providers had worsened, with the police involved over 2 cases another large learning provider asked to provide comments on DfES’s concerns over the way that they were operating the scheme, and by June of that year one provider had been warned and a further 40 were under investigation. On 21 November 2001, shortly before the scheme was closed down, DfES received a complaint from a learning provider that he had been offered a large number of account numbers for sale.

Scheme popularity caused administrative problems

On top of the increasing fraudulent activity apparently taking place, the report finds Capita found it more and more difficult to cope with demand caused by the success of the scheme, with learners having to wait several months in some cases for their application to be processed. On 2 May 2001 the target of one million account holders was reached, almost a year early. The report found the success of the scheme was far greater than expected in terms of the number of new learners attracted, leading to a significant cost overrun which Ministers judged to be unsustainable.

Checks on providers credentials

In terms of monitoring the credentials of learning providers, prospective learning providers were required to confirm that they held a United Kingdom bank account, that they complied with current health and safety requirements and that they held valid public liability insurance. There appears to have been some confusion as to whether learning providers were expected to be registered with Further Education Funding Council and approved by Training and Enterprise Councils, and in May 2001, a learning provider agreement was introduced which all providers were asked to enter into, although no plans were made to introduce further vetting of providers.

Although Capita had agreed to carry out checks to try to identify any potential irregularities in the claims made by providers, the Ombudsman found no evidence these checks had been carried out. In February 2001, Capita company executives accused the government of removing some of the original safeguards after the system had been designed, in order to reduce bureacracy and persuade new training providers into the market - the following June, officials stated that registration of learning providers operated on the basis of a "light touch" and was designed to place minimal burdens on providers while offering adequate protection for public funds.

The collapse of the scheme

By September 2001, there was a considerable delay in learners accounts being processed due to demand, leading to students starting courses before the discount could be processed. The Parliamentary Under Secretary of State instructed officials to take forward an urgent programme of work to develop an action plan to identify the scheme’s weaknesses and rebuild the scheme, adding that there was a prospect of the budget for the scheme being overrun by between £20 million and £90 million. That month, all learning providers were contacted by the DfES and told saying that, with immediate effect, the service centre would no longer accept applications to open accounts unless they had been made personally and directly by individuals via the scheme’s website or by telephone. The registration of new learning providers was also suspended for a period of three months.

The following month, the Parliamentary Under Secretary of State wrote to all Members of Parliament saying that that he had decided that, with effect from 7 December, the scheme would cease to operate, largely because the scheme had exceeded expectations. On 23 November 2001 - we reported that the ILA scheme had been shut down early for criminal investigation.


The report states that the Permanent Secretary acknowledged that DfES had much to learn from the scheme’s successes and mistakes and said that a programme was underway within DfES to ensure that those lessons were learned. A significant minority of learning providers had apparently engaged in aggressive marketing and mis-selling in order to maximise their income from the scheme, and many complaints were received in respect of poor quality provision of learning. The Education and Skills Select Committee published its recommendations last May, so the department has at least had a while to contemplate the issue.

In the light of the Ombudsman's findings, the Permanent Secretary said that he had decided to offer appropriate reimbursement, but not a consolatory payment, to other learning providers who may have experienced particular difficulties as a result of the administration of the scheme, subject to the provision and validation of satisfactory evidence, and that the DfES planned to write before Easter to some 200 learning providers who had complained directly to DfES, Capita or the Ombudsman. This marks a turnaround by the government from last July, when government ruled out compensation to training providers.

TrainingZONE says: This should mark the end of the official reports into this excellent idea turned bad. The Ombudsman was asked to investigate two specific cases, one of an individual learner, and one of a learning provider, who both lost out as a result of the failure of Capita and the DfES to both administer the scheme and maintain proper checks on the way it was being run - and, it has to be said, a failure to anticipate some of the problems involved in what turned out to be wildly more successful a scheme than was anticiated. With the scheme unlikely to be replaced in terms of its scope, it will be interesting to see what the 'lessons learned' from the ILA scheme will mean in terms of future plans for adult learning.


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