Robert Black catalogues a series of significant failures in the way the scheme was administered in Scotland. ILAs, which were intended to open up learning to more adults by offering discounts on courses, were shut down in December 2001 after fraudulent activity was discovered throughout the UK.

Mr Black states: “It was a complicated scheme introduced in a hurry and involved several - perhaps too many - public bodies in Scotland.”

The scheme began in Scotland three years ago with a target of 100,000 accounts. This was exceeded within a year and 266,000 accounts were eventually opened, used by 128,000 individuals.

Of the pound;18.8 million paid out, pound;4.5 million may have involved irregular or fraudulent claims. Police are still investigating whether there is sufficient evidence to charge any individual with fraud, which made the Executive cautious in its response to the report. Search warrants have been issued for 10 learning providers.

Iain Gray, Lifelong Learning Minister, has indicated that ILAs will return under supervision by the Student Awards Agency for Scotland and Learndirect Scotland.

Mr Black found that:

* The Executive’s lifelong learning department could have been more involved in the design and implementation of the scheme.

* The department did not fully appreciate the risk of fraud.

* There was an absence of robust systems of control, such as formal accreditation of learning providers.

* There was no clear guidance for the operation and administration of the scheme.

* Responsibilities for monitoring were unclear.

A major part of the confusion that enlarged the scope for fraud is attributed to the scheme’s complexity and to the plethora of public bodies involved. Apart from the lifelong learning department, these were the Department for Education and Skills south of the border, Scottish Enterprise, Highlands and Islands Enterprise, Learndirect Scotland and the learning providers themselves.

The actual scheme was administered by a private company, Capita Business Services. Unscrupulous providers simply pocketed the cash and no training took place.

Mr Black discovered that the Executive’s internal auditors appreciated the risk of fraud because of weak controls. But recommendations that Capita should undertake more checks were not acted on by the lifelong learning department which considered this was a matter for the national enterprise agencies.

“Identifying the risk of fraudulent activity is often difficult when new and innovative programmes are being developed and implemented,” Mr Black states.

MISSING THE MARK

Figures buried in the Auditor-General’s report reveal that a high proportion of those opening accounts were already well-educated. Some 40 per cent had degrees or qualifications beyond that.

The aim of reaching disadvantaged groups was also found wanting - only 13 per cent of account holders were unemployed and 40 per cent were classed as managerial or professional workers.