30 May 2012 - LSECT | Learning & Skills · SFA funding subcontracting webinar 30 May 2012 ......

30/05/2012

For more webinars visit

www.lsect.co.uk/webinars 1

SFA funding subcontracting webinar

30 May 2012

Nick LinfordManaging Director of LsectManaging Editor of FE Week

Agenda

14.00 Webinar registration

14.05 Latest news on subcontracting policy and rules,

published by the Skills Funding Agency

14.45 Best practice for due diligence and contracting with

subcontractors

15.20 Best practice for audit and performance

management of subcontractors

15.40 Question and answer session

16.00 End

Slides will be emailed to you after the webinar

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The history

Volume of franchising/ sub-contracting

2001/02 2004/05 2007/08 2011/12

Adult part-time courses

Train to Gain

MCLsEnd of 51% ruleUnspent funds

Risk or reward?

Academic year

Franchise ---> Subcontracting --->

The SFA allocations to prime contractors

SFA budget (England) 2011/12 allocations

16-18 Apprenticeships £808,368,199

Adult Skills Budget £2,604,934,310

Additional Learning Support £124,257,023

Adult Safeguard Learning £209,999,996

Total £3,747,559,529

£3.66bn£3.75bn

This year (as at April) Next year

2012/13 allocations Shift £ Shift %

£858,001,828 £49,633,628 6%

£2,476,287,813 -£128,646,498 -5%

£112,648,231 -£11,608,792 -9%

£210,746,999 £747,003 0%

£3,657,684,870 -£89,874,659 -2%

Also, prime SFA contracts fall 90 (8%), from 1115 to 1025

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Funding Rules 2012/13

http://readingroom.skillsfundingagency.bis.gov.uk/sfa

/funding_rules_201213_-_published_3_april_2012.pdf

Published early April (95 pages)

Expect an audit update end May

No comment on what’s changed

Management fees and the contract

Making subcontractor declarations

Rules on subcontracting

Subcontracting (page 62)

“Subcontracting significant levels of provision can increase

levels of risk. The Chief Executive allows subcontracting to

one level. The Chief Executive reserves the right to refuse to

permit a lead Provider to subcontract; at all or to specific

subcontractors.”

“The lead Provider retains ultimate responsibility for all

aspects of the provision it has been contracted to deliver

including subcontracting. The lead Provider must have a

legally binding contract with each of its subcontractors. All

subcontracted provision is subject to the same rules as other

Agency-funded provision.”

“Lead Providers must ensure they retain evidence of these

contracts”

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Declaration of Subcontractors (page 63)

“It is a contractual requirement for lead Providers to complete

their Subcontractor Declaration Form. From 2012/13 it is a

contractual requirement for Providers to update the Agency in

August and April of every year. Failure to return the form will

result in the immediate suspension of payments. Lead Providers

who do not subcontract are required to make a nil return.”

“Lead Providers must ensure that they complete all of the

fields on the Declaration Form.”

“All lead Providers are required to notify the Chief Executive if

there is any change to their subcontractors. Lead Providers need

to advise their Agency Relationship Manager and complete an

updated Subcontractor Declaration form immediately

Subcontractors Declaration Form

Forms found here: http://skillsfundingagency.bis.gov.uk/providers/Subcontracting/

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Subcontractors Declaration Form Guidance

Info found here: http://skillsfundingagency.bis.gov.uk/providers/Subcontracting/

Note the inclusion of:

“What % of the funds that you draw down

from the Agency for this subcontracted

provision do you pass on to the

subcontractor through the contract?”

“Where the percentage of funding is

less than 85% please list the services

delivered on behalf of the

subcontractor”http://tinyurl.com/7mpf6sf

Funding rules 2012/13 (page 63)

“If there is any evidence of current or historic irregular

financial or delivery activity with any of the subcontractors

that a lead Provider is engaged with, the lead Provider must

undertake an investigation at their own cost. Lead Providers

must carry out any follow-up actions and this must be reported

to their Agency Relationship Manager within ten days.”

- substantiated non-delivery of training when funds have been paid

- sanctions imposed on the subcontractor by awarding organisations

- inadequate grade for the subcontractor by Ofsted

- serious complaints and/or allegations by individuals working for the subcontractor

and/or learners and/or other relevant parties.”

“Allegations of financial irregularity and fraud, or allegations

associated to delivery activity, could include but are not

restricted to:

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Distribution of Income between Lead

Providers and Subcontractors (page 63)

“The Chief Executive has a statutory duty to make best use of

resources when securing the provision of education and training

and will monitor the management fee charged and payment to

subcontractors to ensure there is sufficient funding being

allocated for the delivery of high-quality education and training”

“The funding provided must be used for the benefit of the

learners in supporting the delivery of the provision.”

“Any funding retained by the lead Provider must reasonably

reflect the actual costs incurred by each party in the delivery

of provision.”

“The Chief Executive reserves the right to move

subcontractors into a direct contractual relationship”

Due Diligence Process for Subcontractors (page 64)

“The lead Provider is responsible for taking suitable steps to

determine that its subcontractors have appropriate capacity and

capability. A subcontractor being on the Register of Providers is by

itself not sufficient to fulfil this responsibility. The lead Provider

must also have the processes and controls in place to enable it to

have proper oversight of its subcontractors’ provision.”

“All subcontractors who hold contracts with an aggregate value of

£500,000 or above per annum are also required to pass the Due

Diligence Assurance Gateway. This will be extended to all

subcontractors by December 2012”

“Lead Providers must satisfy themselves that the subcontractor

has been selected fairly and that they have sufficient capacity,

capability, quality, resource and business standing to deliver the

provision that is being Subcontracted”

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Due Diligence Process for Subcontractors (page 64)

“Engagement of subcontractors must be undertaken openly and

transparently in line with the relevant procurement legislation”

“The Chief Executive reserves the right to ask lead Providers

for evidence in support of their due diligence process.

The Chief Executive reserves the right to assess lead Providers’

arrangements for subcontracting before or after granting

permission to subcontract, or to require the lead Provider to

commission a report on these arrangements from a third party

such as the Provider’s external auditors”

http://www.ojec.com/Threshholds.aspx

Mandatory Contractual Terms for Lead Providers’ (page 64)

“The Chief Executive does not prescribe a recommended contract

template for subcontracts. It is a matter for the lead Provider to

take its own legal advice on the type of contract it issues to its

subcontractors”

“The Chief Executive reserves the right to have access to

subcontractor agreements”

“All lead Providers must ensure their subcontractors’ contracts

include the following clauses:- Subcontractors must comply with the Chief Executive’s Funding Rules

- If there is any evidence of current or historic irregular financial or delivery activity the

subcontractor must inform the lead Provider. Irregular financial activity could include but

is not restricted to:

- substantiated non-delivery of training when funds have been paid

- sanctions imposed on the subcontractor by the awarding organisations

- inadequate grade for the subcontractor by Ofsted

- serious complaints and/or allegations by individuals working for the

subcontractor and/or learners and/or relevant parties

- allegations of fraud

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Subcontractors must allow the Chief Executive, his staff and any other

person nominated by him access to its premises and all documentation

related to the delivery of provision funded by the Chief Executive.

A clause imposing a requirement on the subcontractor to ensure

continuity of learning in the event that the subcontract is terminated

for any reason is required.

All new subcontract contracts must include reference to pay the valid

invoices of their subcontractors within 30 days of the invoice date.

The contract should explicitly state the basis for payment and the

evidence required in order to support those payments.

The lead Provider must ensure that data returns made to the Chief

Executive on the Individualised Learner Record (ILR) include its

subcontractors and accurately reflect their delivery information.


Subcontractors must submit the data required by the Chief Executive on a timely

basis. Sub contractors need to supply the lead Provider with sufficient evidence to

allow the lead Provider to adequately assess the performance of their

subcontractors against Ofsted’s Common Inspection Framework. The evidence must

be included in the lead Providers’ self-assessment report and contribute to the

judgements and grades therein.

Subcontractors must have suitably qualified staff to deliver the provision and

subcontractors must comply with the appropriate retention of documentation rules.

The lead Provider must ensure that it has clauses in its subcontracts to

enable it to monitor the activities of the subcontractor, exercising control

over, and making appropriate arrangements for, the quality assurance of

all provision.

For Apprenticeships the lead Provider must ensure the quality of delivery satisfies

the standards of the relevant Apprenticeship framework. The information on

Apprenticeship frameworks can be found on the Apprenticeships website.

30/05/2012



Subcontracting ~ do your homework

~ Allocations spreadsheetshttp://skillsfundingagency.bis.gov.uk/providers/programmes/

~ FE Choiceshttp://fechoices.skillsfundingagency.bis.gov.uk/Pages/home.aspx

~ Ofsted www.ofsted.gov.uk

~ UK Register of Learning Providers www.ukrlp.co.uk

~ Companies Housewww.companieshouse.gov.uk

~ Register of Training Organisations http://skillsfundingagency.bis.gov.uk/providers/programmes/register/

~ Subcontracting registerhttp://skillsfundingagency.bis.gov.uk/providers/Subcontracting/

New subcontractors register

http://readingroom.lsc.gov.uk/SFA/Subcontractors_that_have_been_declared_10_Jan_12_list.pdf

Really helpful to know partners and who to

get references from

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Excellent

for getting

contact

details

www.ukrlp.co.uk

UKPRN website

The contract – example chapters

1. Agreement date and parties

2. Definitions

3. Duration of agreement

4. Payment terms

5. Price (Distribution of Income)

6. Funding compliance

7. Records and information

8. Control of the Programme(s)

9. Enrolment

10. Delivery of provision, assessment

and achievement

11. Equal Opportunities

12. Monitoring and Compliance

13. Health and Safety Liability

14. Insurance

15. Co-operation and reputation

16. Learners with Additional Support

Requirements

17. Termination

18. Employer and learner fees, taxation

and other payments

19. Confidentiality

20. Other

Here is what a leading law firm said at an Lsect conference…

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Managing New Relationships

• The importance of getting it right

• Due diligence

• Formation of the contract:

– contract management and control

– quality

– payment

– information

– disputes, termination and consequences thereof

• Pro-active Contract Management

• Later: Audits & Dealing with Disputes


• Contract Management & Control

– Compliance with instructions:

• Enrolment

• Provision

• Assessment

• Additional Services

– Make it clear who is responsible for contract management

Formation of the Contract: Key Areas (1)

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• Monitoring and Quality

– Clear quality standards & performance levels

• link to published prospectus / information

– Audit & inspection rights

• lead provider, appointed auditors and SFA

– Contract/performance review meetings



• Payment Provisions

– Clear payment amounts (or formulae) and details of payment dates

– Clear invoicing requirements

– How to deal with disputed invoices

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• Information Provisions

– Creation and maintenance of records required

• Enrolment, Attendance, Achievement

– Oblige provision of information

• Avoid simple rights to request

– Provide specific details of the information required (what, when and how frequently)



• Dispute Resolution

– Set out how disputes should be resolved

– Ensure reporting requirements provide enough information to spot areas of concern

– Importance of ADR pre-termination

• follow any escalation procedures first

• More details on disputes later

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• Duration and Termination Provisions

– Duration a critical issue for sub-contractors

– Termination:

• Is it necessary? Can you resolve dispute?

• Significant changes in funding requirements

• “Material breach” & “Persistent breach”

• Right to remedy?

• Insolvency



• Consequences of Termination

– Time of termination

– Continuation of delivery

– Maintaining quality

– Recovery of materials and learner data

• Enrolment, Attendance, Achievement

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Audit

Here is what a leading audit firm said at an Lsect conference…

• Do you have a signed and dated contract in place before

provision commences?

• Do you know what, where and who is delivering the provision?

• Do you know who is accrediting the provision (indicator of

something going wrong is continual changes in awarding body)

• Have you set out all the documentary requirements e.g.

enrolment forms and registers before provision commences?

Firstly, the basics:

And then there is regular internal audit

What should you be doing

• Spot visits both announced and more importantly unannounced

• Have a timetable set up of when you’re going – ideally each partner

should be visited once a term

• Is the class running as planned?

• Check the register has been completed when you arrive

• Check if the attendance pattern is reflected by what you see e.g.

always 10-12 learners on the register but only 5 when you visit

• Get every learner in the class you attend to provide their name, date

of birth and signature

• Check that the resources in the room are reasonable i.e. enough

chairs in the room for every learner on the register

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Spot visits

• Talk to the tutor, is it the one you were expecting to see, if not why

and is it one covered by your contract?

• Talk to the learners – do they know what course they’re on and that

they are part of your College?

• Get the curriculum involved to check the quality of the provision

• If it’s provision that you don’t offer you need to engage someone to

review it for you (and don’t use the sub-contractors staff – they may

be slightly biased)

• And whatever checks you do make sure you document them

Where and when provision takes place

• Where your partners operate at large distances from the prime contractor then go and visit

• Where it’s delivered on evenings and weekends then go and visit

• Experience has found that provision that is far away or at times outside of the normal working day don’t get looked at

• So if you don’t want to travel or work late don’t allow provision that is geographically remote or at a time you’re not willing to visit – get this in your contract

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Data issues

• Do you check all your enrolment forms carefully?

• Incomplete forms form partners should be returned without processing –don’t try to second guess what the form should say

• How active is MIS/CIS in the set up and monitoring of courses especially where the work is Employer Responsive?

• Once input, does the data make sense? Remember provision can start only once a signed contract is in place

• Do you use DSATs including Employer Responsive?

• We see many strange things from the data5

• Do you check that the location of the learner and the delivery postcode make sense?

• Sample audit your records at least once a month from partners to ensure records are valid but also credible i.e. the story they present makes sense

Lead College Arrangements

• Who else is your sub-contractor working with?

• Do you talk to the other providers?

• Do you exchange data to ensure that no double funding is taking place?

• The provider with the largest contract is the Lead and has a responsibility to work with all the other prime contractors to determine if double funding is taking place

• Does your sub-contractor have a contract of their own?

• What controls have they got to ensure duplication does not take place?

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At the end of the course

• Once a course has finished don’t forget to get all original

documentation in from the sub-contractor

• It is a requirement of the funding guidance that all

relevant documentation is held by the prime contractor

• Where photo copies are retained, funds can be

considered to be ‘at risk’5

Profiling and monthly performance review

£100

£200

£300

£400

£500

£0

Feb Mar Apr May Jun Jul Aug

Monthly instalments

Cumulative instalments

£0

£400

£800

£1,200

£1,600

£2,000

Feb Mar Apr May Jun Jul Aug

Example single qual profile

New academic year

30/05/2012



Sub-contracting resources from LSIS

http://www.excellencegateway.org.uk/node/2945

Sub-contracting toolkit (Dec 2010)

Download at www.lsect.co.uk/toolkit.asp

~ New policy context

~ Implications

~ Risk and Reward

~ Working principles

~ Handy guides(funding, data, performance)

~ Contract contents

30/05/2012



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Next webinars : book via www.lsect.co.uk/webinars

Date: Friday 1st June 2012 : 11am

Topic: Summer funding briefing for governors

Date: Thursday 7th June 2012 : 11am

Topic: Summer funding briefing for governors

Date: Saturday 9th June 2012 : 11am

Topic: Introduction to FE and Funding for governors1

30 May 2012 - LSECT | Learning & Skills · SFA funding subcontracting webinar 30 May 2012 ......

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