National Audit Office report: 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. 

Notes for Editors

1.    Learndirect Ltd is the UK's largest commercial further education provider, engaging with around 75,000 learners annually.

2.    Learndirect Ltd’s core business is skills, training and employment services. Most of its funding comes from the Education and Skills Funding Agency (ESFA), an executive agency of the Department for Education, but Learndirect Ltd also has contracts with other government bodies. In 2016/17, the company received £121 million from all of its central government contracts.

3.    ESFA began operating in April 2017, subsuming two separate bodies: the Skills Funding Agency (SFA), whose role was to provide funding relating to learners aged 19 and over; and the Education Funding Agency, which had a parallel role with regard to learners aged 16 to18.

4.    ESFA monitors Learndirect Ltd's financial health and performance, as it does for all further education providers. Periodically, Ofsted carries out a more detailed inspection of the company. In March 2017, Ofsted carried out an inspection of Learndirect Ltd and rated its overall effectiveness as ‘inadequate’. Government bodies subsequently made decisions about their ongoing funding of the company. In particular, as a result of the inspection, funding from ESFA is due to end in July 2018. 

5.    Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.

6.    The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services. Our work led to audited savings of £734 million in 2016.