Examination of Witnesses (Questions 120
- 139)
MONDAY 27 APRIL 1998
Mr Michael Bichard and Mr Frank Martin
120. It is a question of whether or not
action taken is less in situations where there is a clear interest.
We have an obvious interest in that and we would want to have
some sort of assurance that the same sort of criteria are being
applied right across the board whether or not there is a declared
interest. This is not something that has come to your attention?
(Mr Bichard) But you need to be
reassured that the requirements for the declarations of interest
are very clear and again we and Government Offices take that very
seriously.
121. If irregularities are discovered you
have indicated there is a variety of options that can be pursued
and I think we would also want to be sure that the option selected
was not influenced by the declarations of interest that have made
or any possible clashes of interest.
(Mr Bichard) The position that arises
if there is an allegation of fraud, from wherever it comes, is
that it will go to the financial scrutiny unit and it will be
logged in the Department and therefore there is immediately an
independent scrutiny of that allegation. The TEC would effectively
have lost control of that issue. We would look at it. If appropriate,
we would involve the police and it is no longer a matter the TEC
can influence one way or the other.
122. I was interested in the point you made
that in some circumstances the TEC would continue to have a relationship
with a provider even though there had been irregularities. I think
that is understandable in the circumstances if this is a clerical
error or a bit of freelancing, as it were, by particular employees
of the organisation as distinct from the organisation as a whole.
I wonder whether or not you are able to cast any light on this
whole area.
(Mr Bichard) In the case I have
in mind the reason why the TEC was keen to continue to contract
was because the provider was providing something which it was
difficult for that TEC to get anywhere else and we have no evidence
at all that there was some kind of link between the provider and
the TEC. This is a case that now has been looked into in some
detail and the police have as well. I have certainly not had any
evidence bought to me to show that there is a conflict of interest
of that sort. The TEC is there to provide and meet its targets.
123. I understand that. I have moved on
from conflict of interest and I would hope there is not a presumption
that if there were any irregularities with a provider they would
never again be dealt with. It could be incompetence by an individual
member of staff or an individual act of terrorism or enterprise,
depending on how you look at it rather than the organisation itself
is at fault.
(Mr Bichard) On the other hand,
if one becomes aware, as we have at some point, that the directors
of that training provider were aware of the fraud that was being
perpetrated that is a different matter entirely.
124. Quite salutary action is taken in those
circumstances?
(Mr Bichard) Yes.
125. The final point I want to raise is
just on the issue you mentioned about annual contracts with TECs.
Am I right in thinking that these tend to be on-going? How many
in the last year were actually the subject of any serious competition
by an alternative provider?
(Mr Bichard) The contract with the
TEC?
126. Yes.
(Mr Bichard) Having licensed a TEC
for a three-year period then we would expect to continue to contract
with that TEC until we get to the end of that period. We then
have a major review of the licence. If we do not believe that
the TEC is operating efficiently, applying good financial control
systems or locally has lost the confidence of partners then we
will look at alternative arrangements and that may involve saying
to the TEC, "I am sorry, we are not prepared to contract
with you in the future but we would like to approach a new set
of local partners to take your place."
127. There was one firm that you mentioned
to us which you chopped off in the middle of the term. In terms
of the last cycle how many changes were made?
(Mr Bichard) All the other TECs
were relicensed. The last major review because we do this every
three years, as I say, involved about 29 TECs, between 27 and
31, and of those we relicensed all of them but 13 of those TECs
had conditions attached to them, conditional upon certain action.
128. So it is a stringent process?
(Mr Bichard) It is a stringent process.
Now it is even more stringent because we are incorporating in
the re-licensing process the business excellence model which is
about continuous improvement, so we are requiring TECs to involve
themselves in the quality approach. So we are putting some burden
on them to assess their own quality of provision. It is a stringent
process.
Maria Eagle
129. Can I apologise for being late to the
Committee. I did not hear the initial remarks and questions and
you will have to forgive me if I start going over ground that
has already been covered. I apologise for that in advance. It
seems to me that you have had a problem for many years with over-payments
of various kinds and this Committee has reported on it on many
occasions in the past. You have already said, Mr Bichard, that
you are not promising that things are going to have resolved themselves
completely within 12 months but you hope to see further improvements
within two years. That will make a nice round number of almost
a decade between the first report of this Committee and things
getting down to an acceptable level. It is a very long time, is
it not, when we are talking about millions of pounds-worth of
over-payments?
(Mr Bichard) We are talking about
millions of pounds-worth of over-payments, but a half of those
over-payments are clerical errors or administrative errors, they
are not errors which are resulting from the waste of public money
in the sense of the person not receiving appropriate training.
130. It is in respect of that because you
may well be able to do something directly more quickly about that.
Would the clerical error be with the Department or with the TEC?
(Mr Bichard) No, it is a clerical
error in terms of the claims that are made by the training provider
and as we make the evidence requirements that TECs need more complex
so there is a greater chance that either the provider or the TEC
is not going to fulfil those evidence requirements.
131. Are you satisfied that your own departmental
officials and the majority of the TECs are quite good at paying
out money which on the face of it appear to be good claims and
that the errors are found later on and it seems to be from the
training providers? Is that a fair assessment of this 42 per cent
of your figure that is clerical error or incompetence?
(Mr Bichard) No, I am not satisfied
with that because if you have got any clerical error at all, irregularities
of that sort, then it is about human viability and we want to
do something about it.
132. Do you have a view as to how much of
it is within your direct control and the Department's control?
You have slightly more direct control over the TECs than you have
over the providers. How much of it comes from the providers?
(Mr Bichard) The errors that we
are talking about are not errors within the Department. I am satisfied
that within the Department we are taking this seriously, that
we do have sufficient staff to scrutinise this and that they are
doing a good job, but I am not satisfied that in the relationship
between TECs and training providers things are yet right, which
is why we are putting in place the framework which I have referred
to once or twice today to try and get it right.
133. Let us look at paragraphs 12 and 13
about the two large frauds. I think you said earlier they were
two large companies in these cases. We are talking about very
large figures providing training over a massive geographical area
to 11 and 22 TECs in those two cases. They are pretty large training
providers, are they not, where those problems have been found?
Do you accept that somehow it seems that a lot of the fraud is
actually perpetrated by large outfits who are just looking to
milk the system? That would be what those two instances would
indicate, would it not?
(Mr Bichard) No, I do not think
it would, with respect. It indicates that there are people within
those companies who wanted to defraud the system, in the first
case in order to make their outputs look more impressive.
134. But you have had instances where you
have got a massive amount of over-payment, in one case covering
11 TECs and in another case 22 TECs and amounting to millions
of pounds. I accept that you have recovered much of it and all
of it in one case, but the point is that it seems to me that you
could be looking at possible risk from large providers.
(Mr Bichard) We could be looking
at possible risk from small providers too. If you have someone
in a company who is prepared to forge evidence, who is prepared
to produce false evidence about attendance then you will have
fraud and it does not matter whether it is a big or small company
and that is what we have had in these cases. It has been discovered
through the Government Offices and we have taken action about
it and we have referred it to the police and we have recovered
the vast majority of the money.
135. But in each instance you had one large
company organising a consistent fraud across a huge number of
TECs and geographical areas, have you not? It suggests that maybe
the system is a bit of a soft touch for somebody who comes along
with a determination to exploit it. Would you agree with that?
(Mr Bichard) I would not agree with
the words soft touch. I have been in the public sector for some
considerable time. I have rarely seen contractual arrangements
as stringent as those which exist between the Department and TECs
and between TECs and training providers.
136. I think you mentioned that you were
developing a database of providers and there are some 4,500 of
them. Is that not a case for you to have a much closer interest
and closer data on some of these outfits so that you could identify
risky providers yourselves rather than leave it to the TECs and
come along later when it is too late and £2 million have
been siphoned off?
(Mr Bichard) In a way that is exactly
what we have done.
137. What sort of information is this database
going to have on it?
(Mr Bichard) I was going to refer
to the databases, but I think the more important issue is the
Training Standards Council and the Training Standards Inspectorate.
The fact is that we are spending from the 1st May £4.8 million
every year to ensure that every training provider receives an
inspection visit once every four years in the same rigorous way
as schools receive a visit from Ofsted. There is a limit as to
how often you can inspect 4,500 providers in the same way as there
is with 24,000 schools.
138. How much money do you think one of
these determined fraudsters could have defrauded in four years
in between visits? Do you think that is frequent enough?
(Mr Bichard) I think coupled with
the contracting process between TECs and Government Offices acting
on behalf of the Department the system is pretty rigorous, but
there is no system that anyone can devise which will be guaranteed
safe against a determined fraudster and in these two cases we
have seen pretty determined fraud. All you can do if you have
a determined fraudster is ensure that you have systems in place
which enable you to pick them up and enable you to recover the
money.
139. You mentioned that one of the companies
in question was now under administration, not surprisingly. Do
you have any lists of directors or people who are connected with
these companies that you can then blacklist and make sure they
do not just go round the corner, set up another training provider
and start again?
(Mr Bichard) They would be subject
to the normal company law provisions --
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