ILA scheme may have lost millions to fraudsters

Tens of millions of pounds could have been lost to fraud because the government bungled the introduction of individual learning accounts, the public spending watchdog reports today.

The National Audit Office said that 133 training providers, paid a total of £67 million, were still being investigated, but the final fraud figure would not be known for at least two years because monitoring and controls were so weak.

In a damning report published today, the NAO says the Department for Education and Skills, under David Blunkett, rushed through the ILA initiative "too quickly", with "inadequate planning". The DFES had no detailed business model or quality assurance system, failed to monitor the demand for ILAs and signed an inadequate contract with its private-sector partner, Capita.

The NAO says the scheme was open to fraud, abuse, mis-selling and was poor value for money.

ILAs were launched in September 2000 to widen access to learning by offering potential students £150 to pay for training courses if they invested £25 of their own money. Expenditure quickly hit £3 million, 35 per cent more than the planned £199 million, as 2.6 million accounts were opened.

The scheme was shut overnight last November when evidence of fraud emerged.

The NAO says that unscrupulous training providers could register people legitimately for training, but then falsely register them on courses they had not undertaken and empty their accounts. Inadequate security meant they could access the ILA database and clean out unused accounts.

Inadequate quality control also meant that some providers could claim money for providing completely inadequate or bogus courses, with bizarre titles such as "Chronic Cats 2001" or "Summer Glastonbury 2001".

The NAO says that 700 out of 9,000 training providers were being checked in August 2002. The department's special investigation unit is still scrutinising 133 providers, 98 of which have been referred to the police.

The NAO report also suggests that the scheme, although an "innovative" and promising idea, may have been failing to attract the key target groups.

Only 9 per cent of learners had no prior qualifications, while a majority already had A levels and a quarter were university graduates.