Funding chiefs to chase pound;4m debt

Audit of government online project reveals massive cash shortfall. Steve Hook reports

Funding chiefs have been left to recover millions of pounds of debt resulting from the underperformance of the Government's flagship online learning programme.

The Learning and Skills Council faces the challenge of extracting pound;4 million - equivalent to the annual budget of a sixth-form college - from a network of organisations which distributed cash to hundreds of training outfits running learndirect courses.

It is not known how many of these companies are in debt, but it is believed most of the money is owed in "clawback" where learndirect provision has fallen short of what was planned at the time LSC funding was given.

This week it emerges that still more debt could be exposed when auditors finish investigating how much training took place under learndirect since its launch four years ago, compared with what the local LSCs have paid for.

So far, the LSC says it is "certain" it is owed pound;2.4m from 2002-3 and a further pound;1.6m from 2003-4. Until changes to learndirect's funding were made in August last year, the courses were funded through 47 area hubs, each run by hub operators, which are private firms, colleges and charities appointed by the University for Industry.

In turn, each hub operator signed contracts with a network of providers - the contractors which actually ran the courses through learndirect centres.

If too few students were recruited, or they dropped out, or failed to do as well as expected, the hubs demanded clawback payments from providers. This money was then passed back up the system in a further clawback to the local LSC.

The LSC's national office says it "will be looking for full recovery" of the cash, stressing "our interest is in getting the taxpayer's money back".

The quango refused to say how it would do this.

The number of area hub operators has been reduced from the 47 which were in place during the two years when the debts were accumulated to just 23 today - and it is not known how many of those owing money are still functioning.

Many of the hub operators are themselves still owed money by the underperforming providers. UFI, while responsible for promoting the learndirect brand and providing learning materials, stresses the funding of courses was entirely the responsibility of local LSCs.

The LSC says it provided pound;164m of funding for learndirect courses in 2003-4. In addition, UFI's just-published accounts show it spent pound;119m in the 16 months up to July 31, 2004. This included the cost of supplying materials for learn-direct courses, a pound;26m marketing budget and Pounds 11m on running advice lines.

UFI stresses it was not responsible for funding the learning centres during this period. A UFI spokesperson said: "We are not saying this is not our concern but you have to be clear about the fact there is a distinction in terms of the contractual relationship."

In August the funding system was changed so that all the money flows from the LSC through UFI's head office in Sheffield. The money now passes through three organisations on its way to the provider - the LSC, UFI and the hub operator - instead of two under the old system.

Earlier this month UFI learned from Barry Gardiner, the direct rule education minister for Northern Ireland, that its funding for learndirect in the province is being discontinued. This is expected to mean the closure of UFI's Belfast office.

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