Select Committee on Education and Skills Minutes of Evidence

Memorandum from the Capita Group plc (ILA 38)


  1.  Capita welcomes the opportunity to present this submission to the Committee and to have the chance to submit oral evidence on 13 February 2002. As the service delivery partner of the Department for Education and Skills, the Scottish Executive and the Northern Ireland Department for Education and Learning, we wish to contribute to learning the lessons from the scheme in order that there could be an early re-launch.

  2.  Capita is a leading partner of central and local government and in submitting the evidence is able to draw upon 15 years experience in partnership working, with over 150 major service contracts currently in operation with public sector bodies. Capita specialises in helping public and private organisations to transform their relationships with customers through improving their support services and customer interfaces. We have developed, implemented and operate major IT and business process systems for a number of central and local government agencies, together with a number of private sector, including financial services, clients.

  3.  We greatly value our partnership with the three clients responsible for the Individual Learning Accounts scheme and thus have been fully supportive of, contributed to and co-operated with the inquires into the scheme.

  4.  Capita has been administering elements of the ILA scheme since June 2000 and throughout the period has maintained good relations with the clients.

  5.  This submission relates primarily to the ILA scheme administered by Capita on behalf of the DfES, as this is the focus of the Committee's Inquiry. Capita has administered the scheme in accordance with the "Business Rules Handbook" that prescribes the requirements of the DfES.

  6.  Although there have been some serious issues, it should be noted that although the original target was to have 1 million learning account holders by March 2001, by the time the scheme was suspended in November 2001 there were in excess of 2.5 million. The scheme also led to the development of the learning provider supply market and to market diversity. This was an indication of the value of the scheme and the importance that people were attaching to learning and training.

  7.  The scheme represented a major change in the delivery of adult learning and training, placing more emphasis on personal needs and choice. The scheme did not prescribe what learning was eligible for public support, although the scheme excluded some courses which were ineligible under the scheme's "Definition of Eligible Learning". The scheme removed financial barriers for adults with an aspiration to participate in further learning.


  8.  Capita's role in the administration of the system and elements of the scheme in England was to:

    —  Process account holder applications and issue membership forms via a call centre based in Coventry

    —  Process learning provider registration applications at an administration centre in Darlington

    —  Produce a "claim for incentive payments" file for each learning provider for approval by the DfES

    —  Issue forms for membership cards and account holder "welcome packs" via a subcontractor called Standard Group under Capita's direction

    —  Develop, implement and operate the computer system to support these processes via Capita Group's Data Centre in West Malling in Kent

    —  Allow access to the computer systems by learning providers approved in accordance with the Business Rules Handbook so that they could register account holder applications for learning and confirm commencement and hence a claim for the appropriate level of incentive payment

    —  Produce management information and audit reports to the DfES to agreed formats and agreed schedules.

  9.  Capita was not responsible for:

    —  Verification or accreditation of learning providers

    —  Verification that account holders have received learning for which provider payments have been claimed and/or made

    —  Evaluating the quality of the learning

    —  Making the payments to the learning providers—this was undertaken by the DfES

    —  Pursuing fraud enquiries directly—however, we passed on any suspicion or evidence of abuse or fraud to the DfES.

  10.  The computer and associated IT systems that Capita implemented were discussed and agreed with the Department to meet its service objectives and to enable access for a closed community of learning providers for legitimate purposes, using an individual User ID and a password.


  11.  One of the Government's principal policy objectives required a rapid roll out of the scheme, requiring a fast development and implementation programme. Capita met the required set up and delivery programme targets and in so doing we were able to ensure that the scheme was able to meet the expectations of the learners and learning providers, as well as meeting the specified requirements of our clients.

  12.  A further Government objective was to minimise the bureaucracy associated with the ILA scheme in order to encourage participation by ensuring a speedier and more responsive scheme for account holders and learning providers.

  13.  Immediately prior to and in the early weeks of the operation of the scheme, the DfES made some changes to the original specification on which we had designed the system. Requirements for validation of learning providers, approved lists of courses, authenticating account applicants and the issuing of statements of account to account holders were removed from the scheme. We explain what these were in the paragraph below.

  14.  Originally it was envisaged that existing databases available to the DfES would be used to accredit learning providers and the learning courses they offered. This subsequently proved to be impracticable since only traditional providers of learning were accredited and traditional formal qualification based learning. The Business Rules Handbook therefore had to be amended by the DfES in order to achieve a workable solution that could be implemented in the desired timescale. The scheme proposed that learning providers would be a closed community of accredited providers of learning. Without prior accreditation they were therefore placed in a position of trust with respect to the appropriateness of learning they offered and the way in which they could claim incentive payments for provision of learning. The ILA Scheme operated with a Definition of Eligible Learning (DEL) which gives a list of learning that cannot be funded by the scheme and therefore the onus was left to the learning provider to make decisions on whether the learning they were offering could or should be funded by the scheme. Other changes to the original scheme proposals included removal of requirements to authenticate applications to become account holders and a proposal to issue account holder statements annually and when there was a claim against their account.

  15.  Capita was the service delivery partner of the DfES and thus worked within the policy framework determined by the Department. Capita worked with the Department to develop, implement and operate a scheme based on a specification developed by the Department and its advisors prior to letting a contract. Capita also operated business processes in accordance with the business service requirements of the Department. The system and the processes of the scheme applied were agreed with the Department and its advisors.

  16.  As partners Capita and the Department discussed the operation of the scheme throughout the period of the contract. This enabled changes to be made to the processes but in hindsight Capita believes that it should have been more robust in the manner in which it sought to persuade the Department to make changes to improve effectiveness.


  17.  On 24 October, the Secretary of State for Education and Skills announced the suspension of the ILA scheme in England due to the requirement to assess value for money and concerns about the promotion and sales practices of some learning providers. In her statement she said that:

    "The programme has attracted over 2.5 million account holders and has been a great success in bringing down the financial barriers to learning. The rapid growth of the scheme has exceeded all expectation, causing us to think again about how best to target public funds in this area and secure value for money. I also have some concerns about the way some ILA's have been promoted and sold. There is growing evidence that some companies are abusing the scheme by offering low value, poor quality learning."

  18.  This announcement led to significant increases in activity in applications to the scheme as providers sought to maximise their opportunities prior to the closure.

  19.  On 23 November, the DfES informed Capita that there was an allegation of an incident concerning a breach of the Capita IT system security and that account holders' details were being offered for sale, possibly by a Capita employee. Capita immediately complied with the DfES' instruction to close the system in order to protect the public interest and to allow for the necessary investigations, which focussed on this incident.


  20.  There is no evidence that any Capita employee was involved in any illegitimate access to the system or of supplying any account holder information improperly or illegally to a third party.

  21.  Capita's own intensive investigation and system tests have produced no evidence of any security breach of or "hacking" into the system.

  22.  However some evidence of abnormal activity by a small number of learning providers was identified—these would have been identified in the month end audit—in advance of payments being made by the DfES. It would appear that some of the learning providers may have breached the trust placed in them to have access to the database. This information has been passed to the DfES and to the Police.

  23.  Capita has fully co-operated with the DfES and its Special Investigations Unit, its other clients and the Police in respect of their inquiries and this continues. We have supplied our computer system access tracer logs, audit and investigation reports to the DfES and where appropriate the Police.


  24.  Capita believes that there are several important lessons to be learned from the operation of the ILA scheme and the subsequent abuse of information that has come to light. We would wish to contribute to this learning process in order to enable any re-launch of the scheme.

  25.  There should be:

    —  Prior-accreditation and verification of learning providers, particularly those who wish to be approved for provision of distance learning

    —  Authentication of an individual's existence during membership applications

    —  Guidance and advice for account holders on the type of course available under the scheme and on the quality of the training which they should have expected

    —  Verification and monitoring of the courses and the take up—particularly with regard to differential and targeted take up

    —  Regular account statements issued to account holders when incentive payments are claimed to enable them to check their accounts are not being improperly used

    —  A review of the computer system and business process requirements to balance speed and openness of access with probity and control

    —  Formalised partnership arrangements to ensure regular dialogue at all appropriate levels within the client and provider partner organisations in order to ensure that areas of difficulty and improvement are recognised and addressed jointly including the means for escalating concerns and proposals from the client and the delivery partner.


  26.  Capita recognised the value and importance of the programme and were pleased to have the opportunity to support the Government's policy of Individual Learning Accounts through the development, implementation and operation of the ICT system and the administration of the defined business processes.

  27.  Capita's investigations have produced no evidence of any improper or illegal activity by any Capita employee, or any access to the scheme except by people undertaking administration activities in accordance with the Business Rules.

  28.  We have and we will continue to co-operate with all the investigations and inquiries on the ILA scheme. This activity will be at our own expense and without prejudice. We are willing to contribute to the development of the new scheme.

  29.  We would be pleased to supply any further information that the Committee may require.


February 2002

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