The report, which looks at the financial fiasco of the capital programme in further education colleges, says a heinously complicated management structure at the LSC and approaching government department changes bred a lack of responsibility and gave an air of distraction.
The Chairman of the Committee, Phil Willis MP, said:
"It really beggars belief that such an excellent programme which had showed real success in transforming the further education experience for students was mismanaged into virtual extinction.
"Warning signs were missed and, even worse, ignored. LSC didn’t notice as the total value of the projects it was considering began to overshoot the budget and a review which could have prompted action was shunted around committees and policy groups.
"The LSC’s Chairman, Council and management were focused on the Council’s looming abolition and the then DIUS, the Department which was meant to be supervising them, clearly wasn’t doing its oversight job properly. It is vital that the new Department for Business, Innovation and Skills (DBIS) ensures such a situation is never allowed to happen again."
The inquiry and report build on Sir Andrew Foster’s review of the Capital Programme in Further Education, which was published earlier this year.
The Committee’s report says LSC senior management failed to consult regional directors often enough about programme finances and the then Chief Executive and Chairman had no process for regular review of the programme’s future direction.
It is astounding both that the LSC’s risk management process failed to identify such potential major problems and that DIUS did not acknowledge poor risk management at the LSC in its 2008 Annual Report 'risk table'.
Crucial warning signs were not recognised and difficult decisions about how to rank projects were deferred. Both the LSC and DIUS failed to consider the long-term implications of what they were doing. There was a total failure to pick up messages from the sector or apply common sense about the scale of commitments being made.
The LSC disputes individual colleges’ claims that they were encouraged to – using a term a witness told the Committee – "big up" their projects. But the Committee was told by one college principal that a project which had initially been going to cost £8 million was transformed into one costing £175 million through the regional LSC property process.
The Committee concludes that if quangos are going to manage such large amounts of money they must show due diligence and be proactive in flagging up potential major resource problems to the sponsoring government department. The LSC Chairman and the National Council failed in its oversight of the LSC management team during 2008.
The report recommends:
- All national capital programmes should have an agreed in-built mechanism for prioritisation from the start, even if they initially underspend
- A review takes place across the whole of Government of the operation of Non-Departmental Public Bodies
- The LSC must immediately take steps to set out a timetable for the remainder of the evaluation process
- DBIS and the LSC must ensure that the arrangements for compensation for colleges’ sunk costs are settled urgently
- A small amount of government funding must be made available to support colleges who wish to raise alternative finance for their projects, and the potential to involve HEFCE and local authority funding investigated
- Colleges must be assisted to share best practice and contacts or reduce costs through shared use or redesign
- Funding for an innovation fund and for small projects should be set up as soon as possible
- The new BIS committee must maintain scrutiny of how LSC deals with Train to Gain and Adult Apprenticeship funding