Committee of Public Accounts

Press Notice No. 10 of Session 2002-03, dated 4 April 2003


Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, today said that the appalling level of fraud and abuse of Individual Learning Accounts reflected the shortcuts taken by the Department for Education and Skills in designing and managing the scheme.

Mr Leigh was speaking as the Committee published its 10th Report of this Session, which examined the Department for Education and Skills' management of risk in designing and implementing the Individual Learning Accounts scheme, its relationship with its contractor Capita, and actions taken in response to the scale of fraud and abuse which could amount to £97 million.

The Committee found that while the Department undertook extensive piloting to test innovative schemes, these did not provide workable solutions, and the scheme implemented was not well thought through or tested and was implemented in too short a time. While the tight timetable was of the Department's own making, after the pilots did not work it should have re-planned the project and ensured full testing before implementation, rather than over-ride sound project and risk management.

Good risk identification and management is essential in major projects, especially those that involve innovative solutions. However, the Department's risk assessment and risk management were not fit for purpose, and were driven more by concerns that the scheme would not attract sufficient new learners. As a result, the Department did not give enough weight to advice received on the risks of fraud and abuse and about quality of training. Had the Department done so, and drawn on the work of this Committee and experience of counter-fraud strategies elsewhere in the public sector, it would have been able to build counter-fraud measures into the design of the scheme rather than react to events.

To encourage new providers and new learners, the Department decided to minimise bureaucracy, including checks on learners, on providers and on the quality of learning. They should have matched this innovation with more rigorous and incisive monitoring downstream, but failed to do so. As a result, they were slow to identify emerging problems, including substantial fraud and abuse.

The Department contracted the operation of the scheme to Capita. However, the contractual arrangements were weak and the Department and Capita did not develop the partnership arrangements necessary for success. This was a major factor in the problems that arose and also meant that the Department bore more of the key risks than planned.

The Accounting Officer was frank in acknowledging the shortcomings of the scheme, and in regretting that they had occurred. He was however less able to assist the Committee in getting at the specific reasons why they had been allowed to occur. Acceptance of responsibility is important, but so is the need for Accounting Officers to provide convincing assurance that weaknesses have been properly analysed and understood so that the necessary improvements can be identified and implemented.

Mr Leigh said today:

"It is likely that half of the budget for Individual Learning Accounts was siphoned off in fraud and abuse. This reflects the number of shortcuts taken by the Department. The scheme was poorly thought through, put in place too quickly, and the risk assessment and risk management was wholly inadequate. To match innovations designed to reduce bureaucracy for new learners and new providers, the Department should have built counter-fraud measures into the design of the scheme and put in place robust monitoring."

Click here to view the Report