Background to the report
Since early 2022, the Student Loans Company (SLC) and the Office
for Students (OfS) have detected several instances of potential
fraud and abuse at franchised providers. The Department for
Education (DfE) involved the Government Internal Audit Agency
(GIAA) in reviewing the regulatory landscape. GIAA aimed to
provide independent assurance over the effectiveness of the
system, including assessing whether students existed and attended
courses.
GIAA looked at the interdependencies between OfS, SLC and DfE and
whether systemic fraud risks were being recognised and mitigated.
These bodies have been investigating where they may need to
strengthen governance and oversight of funding associated with
students at franchised providers. GIAA issued its report to DfE
in August 2023, finding there were weaknesses in the control
framework.
Scope of the report
This report sets out where franchised providers sit within the
higher education regulatory framework; outlines the risks to
public funds; and makes recommendations to strengthen assurance.
It does not review any specific cases of potential fraud or
academic misconduct, nor does it seek to assess whether student
loans, or the process through which they are issued, could
provide better value for money.
In the first half of 2022, SLC’s data analysis detected instances
of fraud, potentially associated with organised crime, involving
franchised providers. Routine analysis by SLC detected suspicious
patterns of activity involving franchised provider students
across four lead providers. Further investigation by SLC raised
concerns across a total of 10 lead providers.
Following a request from SLC, DfE instructed SLC to suspend
payment of tuition fees while cases under suspicion were
investigated. This led to SLC identifying and challenging 3,563
suspicious applications associated with £59.8 million of student
funding, with 25% of this money still withheld as at January
2023.
There are potentially fraudulent applications and opaque
recruitment practices in this sector. In July 2023 DfE published
a consultation response, referencing the use of agents to sign up
students, that said providers should establish safeguards to
protect students’ interests when they are applying for courses.
DfE, SLC and OfS do not know the extent to which lead or
franchised providers use agents or financial incentives, and do
not currently prohibit or regulate their use.
The absence of information on these practices, and the lack of
guidance about whether and how providers could use them, creates
significant risks to both taxpayers’ and students’ interests. In
2018, the Committee of Public Accounts recommended that OfS
should have greater oversight over recruitment practices.
Conclusions
In March 2023, we identified nine insights on the steps
government can take to tackle fraud and corruption. Drawing on
these and the findings set out in this report, we have identified
recommendations for how the regulatory framework within which
franchised provision falls could be tightened.
In particular, as a matter of urgency OfS and DfE should jointly
reiterate to the higher education sector its role in preventing
fraud and abuse, and particularly to lead providers that they
bear direct responsibility for the governance and management
practices of franchised providers. They should also consider the
effectiveness of communications across the higher education
sector to develop an ongoing engagement plan to help reinforce
respective responsibilities.
More widely, DfE has started an internal review of the controls
across the higher education system. Building on that, we
recommend DfE should establish a common anti-fraud and corruption
culture and risk tolerance by, for example, encouraging the
reporting of fraud and corruption and embedding discussions in
risk management forums.
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