The first ILA scheme was closed down in 2001 after it emerged that training providers were making fraudulent claims. Ministers are committed to relaunching the scheme, designed to encourage more people to take up learning, once they are convinced safeguards are "robust".
In one of the hardest-hitting reports on a Government department, published yesterday (Thursday), the Scottish Parliament's audit committee reserved particular criticism for Eddie Frizzell, head of the Executive's Enterprise, Transport and Lifelong Learning Department (ETLLD).
Mr Frizzell caused irritation with his argument that the lack of contact between the private Capita organisation, to which the running of the scheme was contracted out across the UK, and other players was their responsibility.
The report cites Mr Frizzell's own evidence to the committee that "the department is responsible for ensuring that relevant players get things right" and commented acidly: "The committee therefore considers that it is not acceptable for the accountable officer to abdicate responsibility."
While the audit committee found the department took steps to make the scheme less vulnerable to fraud once irregularities began to appear, its report concludes that it "did not act swiftly or decisively enough to protect the public purse".
The committee accepts that the first scheme "piggy-backed" on ILA mark one introduced south of the border, a move it describes as "a critical error".
Mr Frizzell acknowledged when he appeared before the committee that communication between his department, which was not represented on the ILA national programme board, and the Department for Education and Skills in Whitehall could have been better.
This week's report said the scheme was numbers driven with no requirement to provide high-quality training, which MSPs said must be rectified in the new version. The target of 100,000 learning accounts was exceeded and 260,000 accounts were eventually opened in Scotland.
But while the report accepts there were UK-wide problems, the committee says in effect that the lifelong learning department made matters worse.
Its "light touch" approach, which was intended to minimise red tape, led to too few checks or safeguards and to increased risk which was not properly assessed or managed.
The report states: "Even when risks were highlighted by internal auditors and the enterprise organisations, the department failed to respond. In addition, the complex structure of the scheme made the roles and responsibilities of those involved in delivering the scheme overly complex and confused.
"The result of these errors and failings was that an estimated pound;1.2 million of taxpayers' money was paid to cover claims which were either irregular or fraudulent . . . its loss should be deeply regretted".
The Auditor-General for Scotland revealed in his report on the scheme last year that pound;18.8 million in discounts had been claimed by learning providers.
Despite its criticisms, the audit committee says it was particularly regrettable that the first ILA scheme collapsed in the light of evidence it received that "the scheme was popular with genuine learners and offered an excellent opportunity to engage with members of the public who perhaps had not previously been attracted to learning".
Its sudden closure also caused significant problems for legitimate learning providers, and the committee hopes a more effective and efficient replacement scheme can be established as swiftly as possible.
But it adds that Mr Frizzell and the heads of the Student Awards Agency for Scotland and the Scottish University for Industry, which will run the new scheme, should write to the committee giving assurances that they are satisfied proper control and monitoring arrangements are in place.