Providers ‘must take franchise responsibilities more seriously’

Sector leaders hint at coming regulation at often-chaotic Public Accounts Committee hearing

February 26, 2024
Llantrisant, Wales, UK - 19 July 2023 Overhead view of cars in the drive thru entrance of a branch of McDonald's near Talbot Green in south Wales.
Source: iStock/Ceri Breeze

Some English universities need to do more to ensure franchised provision is the same quality as that delivered directly, senior figures in the Department for Education (DfE) have said, as they hinted that institutions will soon be expected to comply with further regulation in this area.

Guidance on what student attendance and engagement with a franchised course should look like will be published “before the summer” with transparency over the proportion of fees taken by a lead provider another issue that could be subject to further measures, Julia Kinniburgh, the director general for skills at the DfE, told a Public Accounts Committee hearing on 26 February.

MPs are investigating after a National Audit Office report highlighted concerns connected to student loan fraud detected in franchised courses.

In an often-chaotic hearing – in which MPs frequently appeared confused about how franchising and student finance works – sector leaders said they had ramped up scrutiny and regulation in light of recent concerns.

Susan Acland-Hood, permanent secretary at the DfE, said lessons had been learned since a case highlighted in the NAO report involving students at a franchised provider who had been found to have fraudulently claimed student maintenance loans.

Concerns had been reported to the Office for Students (OfS) by the lead provider but were not passed on to the DfE – which has the power to block loan payments going out – for several months, during which time the Student Loans Company continued to release the money.

Half of the £1.8 million lost has since been recovered, the committee heard, and the lead provider has paid back all £6 million in tuition fees, while the three bodies have started to work much more closely on information sharing to prevent future abuses of the system, with fortnightly meetings being held.

Asked why fraud in franchised provision was rising faster than the number of students taking these courses, Ms Acland-Hood said: “We do know that the franchised part of the sector is a place where we are trying to encourage providers to do new and different things, and anywhere where you try to sponsor non-traditional modes of delivery you have a heightened risk of people doing things that aren’t quite what you want them to do.”

But, she said, there had been “some lead providers who have not taken their responsibilities around making sure they are really thinking hard about quality governance and safeguards in their franchised provision as hard – as seriously – as their directly delivered provision”.

Susan Lapworth, the chief executive of the OfS, said continuation rates for franchised courses vary but overall were 10 percentage points lower than non-franchised equivalents.

Asked about the role of recruitment agents in attracting students to the courses, she said they were sometimes used and the regulator had identified “weaknesses in the internal control environment” for lead providers that suggest “they don’t have the grip we would expect over the recruitment activity of delivery partners including where agents are used”.

Ms Kinniburgh said the NAO report had shown the need to establish an overall sector-wide definition of what “meaningful” attendance and engagement may look like – rather than leaving it up to providers as is the case currently – and the DfE was currently drafting guidance. Pushed on when this might appear she said: “Relatively quickly, a month or two, before the summer.”

Summarising the OfS’ latest analysis of the financial health of the sector, Ms Lapworth said more providers were forecasting deficits and weaker cash flow in the coming year and for “a small group, the income from these franchise arrangements is material to their sustainability”.

Lead providers taking a cut of up to 30 per cent of tuition fees was variously described as “interesting”, “questionable” and “quite shocking” by the panel and Ms Kinniburgh said the department was considering whether to take further action to make the terms of these arrangements more transparent.

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