APPENDIX 1
OVERPAYMENTS TO TRAINING AND ENTERPRISE
COUNCILS (PAC 1997-98/320)
Supplementary Memorandum from the Department
for Education and Employment
Q UESTIONS 58 AND
158
The number of TECs which feature in the log of
alleged fraud cases (106 in total).
Of the eleven TECs currently out of low risk,
seven have one or more provider fraud allegations. Further details
have been submitted to the committee on a confidential basis.
QUESTION 91
The level of fraudulent award of vocational qualifications
for people who have not met the required standard.
The National Council for Vocational Qualifications,
now part of the Qualifications and Curriculum Authority (QCA),
started a register of alleged bad practice, about two years ago.
They now have 115 cases recorded. New cases are being reported
at an average rate of more than one a week. Of the 115 reported
cases, 31 investigations have concluded, a further 39 cases are
currently under investigation and 45 await investigation or require
further evidence to trigger an investigation. All of these cases
involve some allegation of bad practice in relation to NVQ assessments.
In almost all cases which QCA has investigated, it has found evidence
to support the original complaint. The nature of the information
in more recent allegations pending investigation suggests that
QCA will find bad practice in most cases reported to them.
QUESTION 97
Cases of malpractice according to each type of
provider.
Of the 106 fraud log cases recorded, four involve
local authorities and the remainder are private providers, some
of which are registered charities.
QUESTION 119
Declarations of interest.
It is a condition of the TEC Licence that a
TEC takes all reasonable steps to limit any conflict of interest
between its directors and employees and any other person with
whom it has dealings. Directors and employees must declare any
direct or material interest in respect of any contract or other
matter in which they are involved and these will be recorded in
a register of declared interest which is open to inspection by
the Secretary of State. The Government Offices (GOs) monitor compliance
and inspect the registers regularly. The minutes of board meetings
are also checked to ensure that interests are being declared and
that where appropriate directors are not taking part in the decision
making process. Procedures for handling conflicts of interest
are also covered through the "TEC National Council Framework
for the Local Accountability of TECs". GOs investigate any
allegations of potential conflict of interest. We are aware of
no more than a handful of complaints from third parties, none
of which were substantiated upon investigation.
QUESTION 153
Overpayments in the two cases cited.
In the two cases cited the senior management
of the private training providers were involved.
QUESTION 156
Intended actions to prevent problems in the New
Deal programme.
Employment Service (ES) has designed procedures,
including an extensive series of pre and post payment checks on
all elements of New Deal invoices to ensure effective financial
controls are in place. A database of New Deal payments is being
introduced to track payments in respect of each individual to
providers to minimise the risk of overpayments. In addition a
central ES Fraud Policy and Investigation Unit (FPIU) has been
established to give guidance to regional FAM teams and to investigate
provider fraud. FPIU will work with others such as DfEE Fraud
Investigation and Inspection Unit and the Financial Scrutiny Unit
to detect possible fraudulent activity or sharp/unwanted practice.
DfEE's Financial Scrutiny Unit passes information on alleged irregularities
to Employment Service quarterly.
QUESTION 156
Internal targets for Financial Control.
By the end of the 2000-2001 financial year we
intend to reduce errors to no more than 0.75% of the budgets provided
under the DfEE contract with TECs. We have reviewed our procedures
which did not, in 1996-97, deliver acceptable error rates, and
will consider whether our new arrangements need to be further
developed.
QUESTION 156
Summary of the Outcomes of Logged Alleged/Actual
Fraud Cases.
Two cases have been subject to police prosecution.
At Durham Direct Ltd sentences were passed on 20 June 1997. The
Chief Executive/Director was sentenced to 2 years detention and
the office admini- strator was given a 12 months suspended sentence.
At Lancashire Enterprise Training an employee and another individual
were prosecuted and sentenced on 22 September 1995 to 80 hours
community service each.
The table following summarises the outcomes
of cases on the fraud log:
Summary of Action on Logged Fraud Cases
The Financial Scrutiny Unit is in the process
of putting closed and current case information into a standard
format, which will allow statistical information to be more easily
obtained. The categories and numbers below may change as this
work progresses.
67 Cases Cleared
These comprise:-
36 Cases-Unable to Substantiate Allegation/No
DfEE Funds at Risk
|
| No of Cases | | Overpayment
|
|
| 1 | Attendance/Trainee Weeks/Starts
| - |
| - | Double Funding |
- |
| 4 | Eligibility |
- |
| 1 | "Ghost Trainees"
| - |
| 4 | Deficiencies in NVQ assessment
| - |
| - | Invalid Jobs |
- |
| - | NVQs (Manufacture of Certificates)
| - |
| 26 | Other | -
|
|
| Total | £nil
|
| | |
|
20 Cases-Poor Administration-Matter Resolved
|
| No of Cases | | Overpayment
|
|
| 2 | Attendance/Trainee Weeks/Starts
| £23,972 |
| 1 | Double Funding |
- |
| 2 | Eligibility |
£4,500 |
| - | "Ghost Trainees"
| - |
| 7 | Deficiencies in NVQ assessment
| £37,948 |
| 2 | Invalid Jobs |
£253,900 |
| 1 | NVQs (Manufacture of Certificates)
| - |
| 5 | Other | £121,100
|
|
| Total | £441,420 21
|
| | |
|
11 Cases-Malpractice Found
|
| No of Cases | | Overpayment
|
|
| - | Attendance/Trainee Weeks/Starts
| - |
| - | Double Funding |
- |
| 1 | Eligibility |
£20,000 |
| - | "Ghost Trainees"
| - |
| 3 | Deficiencies in NVQ assessment
| £493,011 |
| 1 | Invalid Jobs |
£130,211 |
| - | NVQs (Manufacture of Certificates)
| - |
| 6 | Other | £79,666
|
|
| Total | £722,888
|
| | |
|
Police were involved in 20 of the above closed cases, two of
which resulted in successful prosecutions.
N.B. The amounts under overpayment are obtained from
records, which are fragmentary and partly produced before the
Financial Scrutiny Unit was formed so they will not be completely
accurate. It was also not possible to obtain a figure for every
case.
39 Current Cases
These comprise:-
23 Cases-Early Investigation Stage
|
| No of Cases | | At Risk
|
|
| 3 | Attendance/Trainee Weeks/Starts
| £574,050 |
| 1 | Double Funding |
- |
| 10 | Eligibility |
£220,000 |
| 1 | "Ghost Trainees"
| - |
| 3 | Deficiencies in NVQ assessment
| £2,220 |
| 1 | Invalid Jobs |
- |
| - | NVQs (Manufacture of Certificates)
| - |
| 4 | Other | £117,000
|
|
| Total | £913,270
|
| | |
|
16 Cases-Malpractice Indicated
|
| No of Cases | | At Risk
|
|
| 1 | Attendance/Trainee Weeks/Starts
| £465,000 |
| - | Double Funding |
- |
| 3 | Eligibility |
£1,703,775 |
| - | "Ghost Trainees"
| - |
| 8 | Deficiencies in NVQ assessment
| £4,041,986 |
| 3 | Invalid Jobs |
£511,000 |
| - | NVQs (Manufacture of Certificates)
| - |
| 1 | Other | -
|
|
| Total | £6,721,761
|
| | |
|
Police are involved in 12 of the above current cases.
Amounts Recovered by DfEE: The figures given in the
above tables include known overpayments and estimated amounts
at risk. DfEE has to date recovered approximately £6.3 million
from TECs. £5.8 million of this relates to cases recorded
on the "Fraud Log". The remaining £0.5 million
relates to cases investigated prior to the creation of the Log.
N.B. The 'amount at risk' values are made up of provisional
estimates or the value of contracts.
QUESTION 156
The disqualification of directors.
We are not aware of any cases, so far, which have resulted
in the disqualification of directors.
QUESTION 116
Providers in rural areas.
Analysis shows that the main cases investigated have involved
larger urban based providers, although it is not always possible
to determine their exact area of operations. The TEC National
Council has itself established a Consortium of 24 Rural TECs (CORT)
to service the needs of rural TECs with particular concern for
rural training and enterprise activities.
Department for Education & Employment
4th June 1998
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