Charity's 'death by a thousand cuts' is laid bare

20th January 2012 at 00:00
LSN faces debts of #163;30m, but its assets may raise just #163;4.4m

At a conference hall in Blackfriars, London, the administrators of the Learning and Skills Network last week laid bare to creditors the extent of the financial failure. According to documents obtained by TES, the charity for FE quality improvement faces debts and liabilities of about #163;30 million - while its assets are expected to raise just #163;4.4 million.

It was a precipitous fall for an organisation that in 2009 reported having #163;31 million in cash. Creditors include colleges and training providers, some of which are owed tens of thousands of pounds. The National Science Learning Centre at the University of York, which provides professional development to science teachers in schools and FE, is owed more than #163;100,000.

After the preferred creditors are paid, the administrators said that they had hoped the rest could receive 50p in the pound, but in the light of the local government pension scheme's claim rising to #163;20 million, they feared that creditors may see as little as 10p in the pound. "It has not been possible to rescue the business as a going concern," the administrators, PricewaterhouseCoopers (PwC), said.

LSN's head office was shut after a two-week search made it apparent that there were no likely buyers. PwC also told the meeting that it had "bent over backwards" to find a buyer for the Learning and Skills Development Agency Northern Ireland, which supported quality improvement from Belfast head-quarters, but to no avail - that too has closed.

There were buyers, however, for parts of the business, saving more than a third of the 117 jobs. Learning Resources International sold for #163;235,000, avoiding 15 redundancies. The National Extension College sale for over #163;173,000 avoided 26 job losses and further claims by students for refunds on course fees of at least #163;3 million.

The development services division was sold to a new consultancy business set up by its former director, Cilla Mckay, at a cost of #163;126,000, avoiding another 12 redundancies. The charity also faces a dispute with the Specialist Schools and Academies Trust, now the Schools Network, which claims it was wrongly charged #163;2.9 million in VAT. LSN denies the claim, and the administrators said they would pursue a refund from the tax office if they were forced to repay the trust.

PwC was required to explain how LSN's insolvency had come about: it was blamed on "structural weaknesses and a hasty acquisition programme". Cashflow problems began in early 2011 as government funding dwindled, administrators said, prompting the sale of assets such as the Michael Young Centre, where the National Extension College was based.

LSN denied that it was in financial difficulty, however, until after it lost a major contract in September 2011.

Some staff at the meeting, listed as being owed #163;144,000, angrily criticised the running of LSN prior to its insolvency, saying that "everybody knew that money was being wasted".

But one former LSN staff member, on condition of anonymity, said: "There was some anger, but mainly resignation. It was a long, slow death by a thousand cuts that no one was particularly surprised by at the end.

"The rationale for its existence had effectively gone through no fault of its own - its core rationale, to provide quality improvement services. The rug had been pulled out by the economic and political situation." He said the acquisition strategy was LSN's last chance, and even without the "strategic mistakes" its long-term future would have been in doubt.

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