Background to the report

Since early 2022, the Student Loans Company (SLC) and the Office for Students (OfS) have detected several instances of potential fraud and abuse at franchised providers. The Department for Education (DfE) involved the Government Internal Audit Agency (GIAA) in reviewing the regulatory landscape. GIAA aimed to provide independent assurance over the effectiveness of the system, including assessing whether students existed and attended courses.

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GIAA looked at the interdependencies between OfS, SLC and DfE and whether systemic fraud risks were being recognised and mitigated. These bodies have been investigating where they may need to strengthen governance and oversight of funding associated with students at franchised providers. GIAA issued its report to DfE in August 2023, finding there were weaknesses in the control framework.

Scope of the report

This report sets out where franchised providers sit within the higher education regulatory framework; outlines the risks to public funds; and makes recommendations to strengthen assurance. It does not review any specific cases of potential fraud or academic misconduct, nor does it seek to assess whether student loans, or the process through which they are issued, could provide better value for money.

In the first half of 2022, SLC’s data analysis detected instances of fraud, potentially associated with organised crime, involving franchised providers. Routine analysis by SLC detected suspicious patterns of activity involving franchised provider students across four lead providers. Further investigation by SLC raised concerns across a total of 10 lead providers.

Following a request from SLC, DfE instructed SLC to suspend payment of tuition fees while cases under suspicion were investigated. This led to SLC identifying and challenging 3,563 suspicious applications associated with £59.8 million of student funding, with 25% of this money still withheld as at January 2023.

There are potentially fraudulent applications and opaque recruitment practices in this sector. In July 2023 DfE published a consultation response, referencing the use of agents to sign up students, that said providers should establish safeguards to protect students’ interests when they are applying for courses. DfE, SLC and OfS do not know the extent to which lead or franchised providers use agents or financial incentives, and do not currently prohibit or regulate their use.

The absence of information on these practices, and the lack of guidance about whether and how providers could use them, creates significant risks to both taxpayers’ and students’ interests. In 2018, the Committee of Public Accounts recommended that OfS should have greater oversight over recruitment practices.

Conclusions

In March 2023, we identified nine insights on the steps government can take to tackle fraud and corruption. Drawing on these and the findings set out in this report, we have identified recommendations for how the regulatory framework within which franchised provision falls could be tightened.

In particular, as a matter of urgency OfS and DfE should jointly reiterate to the higher education sector its role in preventing fraud and abuse, and particularly to lead providers that they bear direct responsibility for the governance and management practices of franchised providers. They should also consider the effectiveness of communications across the higher education sector to develop an ongoing engagement plan to help reinforce respective responsibilities.

More widely, DfE has started an internal review of the controls across the higher education system. Building on that, we recommend DfE should establish a common anti-fraud and corruption culture and risk tolerance by, for example, encouraging the reporting of fraud and corruption and embedding discussions in risk management forums.

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Publication details

Press release

View press release (18 Jan 2024)

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