The Learning and Skills Council's Annual Report and Accounts for ...

Making SkillsMatterThe Learning and Skills Council’sAnnual Report and Accountsfor 2008–092008–09Of interest to people and organisationsinterested in learning and skills

Front cover image: Elliot Campbell,Train to Gain programme, Next Level Coaching (photographer: Chris North)

The Learning and Skills Council’sAnnual Report and Accountsfor 2008–09Report presented to Parliament by the Secretary of State for Business, Innovation and Skills,in accordance with Section 28 of the Learning and Skills Act 2000.Accounts prepared under Schedule 1 to the Learning and Skills Act 2000and presented by the Comptroller and Auditor General.Ordered by the House of Commons to be printed on 21 July 2009HC 876London: The Stationery Office£19.15

©LSC July 2009Extracts from this publication may be reproduced fornon-commercial educational or training purposes onthe condition that the source is acknowledged andthe findings are not misrepresented.ISBN: 978 0 10 296008 2

The Learning andSkills Council existsto make Englandbetter skilled andmore competitive.We have a single goal:to improve the skillsof England’s youngpeople and adultsto drive towardsa workforce ofworld-class standard.Our commitment is threefold:• to deliver an effective and comprehensivelearning offer for young people in everyarea, in partnership with local authorities,schools, colleges and training providers• to support businesses to find the skillsthey require, and• to help adults to train, retrain and securesustainable employment.Our total budgetfor 2008–09 was£12.07 billion.Our Annual Report covers the financial yearup to 31 March 2009. It includes a review ofthe activities we carried out during the yearand our accounts for the same period.Throughout this report, we write financialyears as 2008–09 and academic yearsas 2008/09.

ApprenticeshipsCreating the skilled workers ofEach year we highlight one area of the Learning and SkillsCouncil’s work that has had an impact across the country.This year one of our key campaigns was Apprenticeships.With completionnumbers at an all-timehigh, apprentices havebecome a pivotal part ofthe economy – and arerecognised by employersas improving theirfuture competitiveness.Apprentices make things happen.They increase the skills of the nationand make organisations – in over 180business sectors – more productive.Benefiting from on- and off-the-jobtraining, they have become a pivotalpart of the economy and are a highlyeffective way of helping businessesprepare for the economic upturn.According to research conductedon behalf of the Learning and SkillsCouncil (LSC) over the last year,more than two-thirds of employersbelieve their apprentices have helpedthem to be more competitive in theirbusinesses. As many as 82 per centsay they rely on their Apprenticeshipprogramme to give them the skilledworkers they need for the future.Building onsuccessBased on the success of theApprenticeship programme to date,by 2020 we aim to deliver over250,000 Apprenticeship starts and190,000 successful completions inorder to achieve the ambition set outin Lord Leitch’s Review of Skills. Wehave already achieved a substantialincrease, but demand continues to rise.Over the last year we have focusedparticularly on increasing the numberof employers offering Apprenticeships.In February 2009 we launched ahigh-profile media campaign frontedby Sir Alan Sugar that was designedto appeal to employers. The underlyinggoal was to increase the number ofApprenticeship places on offer, andthe campaign saw employer enquiriesincrease by 38 per cent. In addition,it led to learner enquiries rising by24 per cent and a 10 per cent increasein applicants applying for existingApprenticeship places. ApprenticeshipWeek, also in February, saw ministers,celebrities and influential businessleaders directly promoting the benefitsof the programme to thousands ofbusinesses. Apprenticeships werediscussed extensively in the media,with the regional coverage involvingproviders and colleges acrossthe country.The impact of theeconomic climate2007–08 saw the highest level ofApprenticeship starts, and completionswere at a record level. In 2008–09,however, the economic situation hasmade recruitment of apprentices moredifficult, particularly for the 16–18age group. Nevertheless, demand for19–24 places is up on last year anddemand for 25+ Apprenticeships hasbeen such that the full-year ambitionwas met halfway through the year.During the final months of thisreporting year, some concerns wereraised by providers about the levels offunding available for Apprenticeships.While more money than ever beforehas been invested in Apprenticeships,the current economic climate hasprompted a huge growth in demandfor all types of funding, in particularfor Apprenticeships for those agedover 25. While these demands02 LSC Annual Report and Accounts 2008–09

ContentsOur StoryApprenticeships: Creating theskilled workers of the future02the futureChairman’s Statement 04Chief Executive’s Review 07are encouraging, leaving 25+Apprenticeship activity uncheckedwould exceed the available budget for2009–10 and create further pressuresin future years. We have worked withcolleges and training providers toagree contracts that we will fund thatenable growth in 25+ Apprenticeshipsto continue, but within the levels ofinvestment we have available.We are working with providers,employers and key partners tosignificantly increase the number ofApprenticeship opportunities for 16-to 18-year-olds to reach our targets.develop and deliver the NAS, whichwas launched in April 2009. The NASwill be responsive to changing needs,adopting a flexible approach during theeconomic downturn and exploring howApprenticeships can help businesseswork towards the upturn.In April, the NAS prospectus waspublished. This describes in full the roleof the NAS, including the responsibilityfor keeping ‘the delivery of theApprenticeship system under constantreview to ensure that delivery is asefficient as possible’. This goal sums upthe challenge for the future: makingsure that Apprenticeships continue todeliver the anticipated benefits even aseconomic conditions change.The service also provides a uniqueonline vacancy matching system –through the Apprenticeships website– enabling employers to seek outapplicants across the country andcandidates to search for vacanciesby business, sector or location.About Us 09Our Targets and Achievements 11Our Focus 13Recognising and Respondingto Regional Requirements19Management and Structure 30How We Work 32Our Responsibilities 33How We Take Care ofOur People34Our Working Practices 36Machinery of Government 39Statement on Internal Control 40Risk Management andFinancial ControlsReporting of PersonalData-related Incidents4849Leadership and GovernanceThe NationalApprenticeshipServiceIn January 2008 the Governmentpublished World Class Apprenticeships,a full review of the programme to dateand a vision for the future. The centralpart of this vision was the creation of aNational Apprenticeship Service (NAS).We worked with the Department forUniversities, Innovation and Skills(DIUS) – now the Department forBusiness, Innovation and Skills (BIS)– and the Department for Children,Schools and Families (DCSF) to design,The NAS will raise the profile ofApprenticeships in each sector,developing new approaches andpartnerships to increase the numberof apprentices, and reviewing (withthe sector) the relevant Apprenticeshipframeworks to ensure they meet thesector’s business needs.Focusing onstandardsThe LSC is committed to raisingstandards and ensuring there areconsistently high-quality learningopportunities available to all. InFebruary 2009, a consultation beganfor the Specification of ApprenticeshipStandards for England (SASE). The finaldocument is due for publication inAugust 2009.Remuneration Report 50Financial Commentary 61The Certificate and Report 64of the Comptroller andAuditor General to theHouses of ParliamentNet Expenditure Statement 65Balance Sheet 66Cash Flow Statement 67Notes to the Accounts 68Glossary and Further 92InformationList of Related Documents 95Finance

Chairman’s StatementOver the past few years, we haveseen performance across the learningand skills sector improve significantly.As we enter the last full year of theLSC’s work, it is worth remindingourselves how much has beenachieved so far – while recognisinghow much there is to do in thecoming year.Creating ademand forlearning and skillsLast year, I wrote of our commitmentto creating a culture where youngpeople, adults and employersdemand skills and qualifications. Thatcommitment has paid dividends: wehave seen unexpectedly high demandfor our programmes and services.Our focus in the past year has been onincreasing the number of young peoplewho stay in learning after the ageof 16, and on continuing to increasethose achieving at least a Level 2qualification. This has been achieved.The proportion of young people inlearning and training aged 16–18stands at 79.7 per cent, the highestlevel ever, and the percentage of16- to 18-year-olds in learningwho achieve a Level 2 is greaterthan ever, at 76.7 per cent.The number of young peoplecontinuing in learning is at its highestever level. More people than everbefore are achieving individual success;more employers are improving theskills and the productivity of theirworkforces; and more colleges andproviders are demonstrating just howwell a responsive further education(FE) system can deliver – with successrates up 20 per cent in seven years.Overall, more than 4 million peoplehave benefited from the learningwe fund and we have enabled2.8 million more people in Englandto gain basic skills, hitting the 2010target three years early.But there is absolutely no room forcomplacency. With a global recessionas the backdrop, we need to ensurethat the investments we make onbehalf of the Government are directedto areas where they can have greatestbenefit for young people, adults andemployers. To do this, we have beenworking to introduce greater flexibilityinto the learning and skills sector, tomake it more responsive to real needs,and to improve and develop what ison offer to ensure it remains relevantand attractive.We have focused particularly onaddressing the number of adults whodo not have the basic skills to get a job.Between 2001 and 2008, 2.38 millionadults in the workforce had achieveda Level 2 qualification and 2.8 millionadults had improved their basic skills.These statistics serve to underlinethe trends we have seen over the lastdecade, of significant improvements inthe country’s skills levels as a whole,and we are hugely encouraged bythe burgeoning culture of demandfor skills. The number of better-skilledpeople has increased by more than3 million – an increase of over a04 LSC Annual Report and Accounts 2008–09

Our Storythird – while the number of adultswithout qualifications has fallen by aquarter. The UK is now the third mostsuccessful country in Europe for adultparticipation in lifelong learning.In 2006, Lord Leitch’s Review(Prosperity for all in the global economy– world class skills) predicted anincreasing need for people to reachLevel 3 qualifications (equivalent totwo A-levels or more) if they are tomove forward in their jobs. This is whywe continue to advocate passionatelyfor further improvements in the skillsof the nation through training andworking with businesses.Since national rollout began in April2006, Train to Gain has engagedaround 140,000 employers and hasdelivered almost 1 million peoplestarting training.Responding to the recessionThe economic climate of the last yearhas had a major impact on our work.As the recession began to bite, weresponded quickly to the changingeconomic situation, introducing newflexibilities to help employees updatetheir skills, as well as – with ourpartners in the Department for Workand Pensions and Jobcentre Plus –new measures to help those at risk ofredundancy, or who are unemployed,get the training they need to help themget back into work. By joining up preandpost-employment programmes,we’ve made it easier for learners tocontinue their training after getting ajob. We also appointed an EconomicResponse Director, to co-ordinate ourefforts across the business.For small and medium-sized enterprises,Train to Gain evolved to offer a moreflexible, responsive service. The serviceis now more attuned to businessneeds: leadership and managementtraining was extended, and fullyfunded and part-funded trainingcourses in business-critical areas wereintroduced. Businesses were also able tobenefit from bespoke advice froma skills broker.Transformingfurther educationThis is the first recession we haveencountered since we as a nationhave truly recognised and understoodthe link between skills and globalcompetitiveness. We know that adultskills are essential both for increasingeconomic success and for engenderingsocial inclusion and the role of thefurther education sector during sucha time is pivotal.Over the last few years, the sectorhas worked hard to raise its game, tobetter meet business needs and toincrease the flexibility of its offer. Thiswas put to the test during the lastyear, and the sector responded. Traininghas become increasingly relevant andflexible, particularly for employers,with an ever greater proportion ofcourses taking place on-site to ensureminimal disruption to the running ofthe business.Standards too have continued to rise.Of 113 FE colleges inspected thisyear, 32 per cent were classed asoutstanding, with 7 out of 10 deemedgood or above. Only 7 in 100 weredeemed to be in difficulty.To further encourage investment inhigh-quality education and training,we have introduced the new TrainingQuality Standard to ensure value formoney. Providers holding the Standardcan reassure employers that they aredelivering excellent training that isflexible and can be tailored to theirneeds. Over 100 training providersand colleges have already gained thisbenchmark of quality.The growth and importance of the FEsector is reflected in the restructuringthat will come into place next year.Subject to legislation, the plans willprovide for a new Skills FundingAgency to work with employers,providers and people aged 19 andover to invest in skills developmentand a Young People’s Learning Agency(YPLA). The YPLA will fund and supportlocal authorities in their new duties tosecure enough suitable learning placesfor young people aged 16–19, as wellas their continued duties to supportlearners aged 19–24 who are subjectto a learning difficulty assessment andchildren and young people subject toyouth custody.Our capital funding for collegesprogramme is a commitment toproviding world-class facilities thatwill support the delivery of world-classeducation and training, and our supportfor the programme remains strong.Between 2001–02 and 2008–09,projects with a total cost of£5.8 billion were approved, withthe LSC contributing £2.9 billion.But the programme was one ofhigh expectations and ran into wellpubliciseddifficulties in the last year.Its success led to an increase in demandLSC Annual Report and Accounts 2008–09 05

for funding, as the size and scale of theprojects became more ambitious.We and DIUS (now BIS) instigated anindependent review of the backgroundto these difficulties and how to takeforward the building programme.We have accepted and responded tothe review’s recommendations. Theprogramme is being managed througha new process, with prioritisationof projects based on extensiveconsultation with the sector andindependently assessed criteria. TheChancellor announced in his Budgetan additional £300 million of capitalfunding which will allow the LSC togive approval to a limited number ofprojects starting in 2009–10, and hasalso announced a continuation of theFE capital investment programme infuture years.Better skills,better jobs,better livesMore young people than ever beforewere helped by our EducationMaintenance Allowance (EMA) thisyear. Over 553,000 young peoplewere financially supported throughEMA to help them stay on in, or getback into, learning.EMA is a programme that has made ahuge difference to the lives of youngpeople in low-income households, butwe did have some well-documenteddifficulties in the management of oursub-contractors, which affected servicedelivery to young people and ourpartners. We were unable to respondeffectively to the level of demand,and payments were delayed. We tookdecisive action and the system is nowon track.Apprenticeships continue to be asuccess story for us. Completionrates are at a record high, with64 per cent successfully completingtheir programme, up from 26 percent in 2004–05. In 2007–08, thatequated to some 112,600 people inEngland achieving an Apprenticeship– well above our target of 75,500.To provide further help to those whowant to earn while they learn, wehave strengthened the Apprenticeshipprogramme. We have launched theNational Apprenticeship Service andintroduced the online Apprenticeshipvacancy matching system.Apprenticeships have particularlyexpanded in sectors that are likely tobe hit hard in these difficult economictimes. These investments will ensurethat these sectors are better placedwhen the economy starts to recover,and will ensure that the countryhas the skilled workforce it needsto benefit from the upturn.Focusing onthe futureLooking forward, we need to continueour focus on quality and improvedoperations and build on the firmfoundations we have established.We are working towards reform ofvocational qualifications systems andreducing bureaucracy for providers andlearners. The new adult advancementand careers service will focus onlearner progression.I want to thank all the teams at theLSC for their hard work, dedication andfocus during a busy and occasionallychallenging year. National Council andregional council members continueto play a vital role in leading theorganisation and in responding to thefeedback we receive from the sectorand employers, and I thank themfor their guidance. I would also liketo thank our former Chief ExecutiveMark Haysom CBE for his strong andsuccessful leadership of the LSC beforestanding down from his position earlierthis year.Across the LSC and FE sector thereis real commitment to a culture oflearning and skills for all, and thatcommitment will continue within thetwo new organisations to be set upunder the Machinery of Governmentchanges. As we enter the last fullyear of the LSC’s existence, we aredetermined to leave a legacy whichreflects our commitment, and aboveall the progress we have madetogether.Christopher N Banks CBEChairmanLearning and Skills Council10 July 200906 LSC Annual Report and Accounts 2008–09

Chief Executive’s ReviewOur StoryAs the new Chief Executive ofthe LSC, I take great pleasurein introducing the Learning andSkills Council’s Annual Report andAccounts for 2008–09.My predecessor, Mark Haysom CBE,led the LSC throughout the reportingyear and guided both the organisationand the sector through a time ofgreat change. Under his leadership,the challenging targets set by theGovernment were met and exceeded.A demand-led system for learningand funding was created andimplemented, introducing a new erafor skills development and increasinghigh-quality learning opportunities foreveryone, including those who wererediscovering learning or learningnew skills.Making a differenceThe LSC is a success story and hasdemonstrated that it is a major forcefor change in the wider FE sector. Ourwork with the FE sector has not onlymade a huge difference to the lives ofmillions of young people and adults,but also contributed to the successof many thousands of businesses andorganisations.I will continue Mark’s legacy ofimproving the skills base of thecountry by continuously improvingquality and reducing bureaucracyfor both learners and providers,ensuring that learning is accessibleand progressive.The growth and importance of thesector is reflected in the restructuringthat is due to come into place in2010. Subject to legislation, the planswill provide for a new Skills FundingAgency that will work with employers,providers and learners aged 19 andover to invest in skills development.The YPLA will also be created to takeresponsibility for 16–19 funding andsupport local authorities in their newduties in this area. We have been fullyengaged in this work and will continueto play an active part in ensuringthat, for learners and employers, thetransition is as seamless as possible.LSC Annual Report and Accounts 2008–09 07

Looking aheadIn the coming months we face hugechallenges, in particular strengtheningour skills offer to help those affectedby the economic downturn to get backinto work, or to stay in employment,by equipping them with the skillsthey need to progress in life. We arefocusing our efforts and workingclosely with our partner organisations,developing and implementing packagesof support to deliver over 100,000training places over the next two yearsto help individuals back into work. Weare also introducing flexibilities intoexisting programmes to allow people,especially those at risk of redundancy,to update their skills.Looking further ahead, we are takingsteps towards the Government’sambition for full participationin education and learning for all17-year-olds by 2013. Our progressto date can be found within the pagesof this report, which also detailsour work on making the 14–19entitlement (being introduced in late2010) a reality, ahead of schedule.Recognising oursuccessThis last year has been one of difficultchallenges but many successes for theLSC. Success rates for young peoplein further education continued toimprove – up from 75 per cent in2005/06 to 80 per cent in 2007/08,and more than one in four of allyoung people who have a Level 2qualification at 19 have gained it asa result of LSC investment after theage of 16. Success rates for adults inFE also improved, to 80.7 per cent in2007/08. We have therefore exceededthe target of 76 per cent for FEcolleges in 2007/08.These figures underline the continuedcommitment and professionalism ofthe staff of the LSC in the midst of achanging and challenging economiclandscape. They are also due tothe responsiveness and reliabilityof providers in adapting to theeconomic change that has affectedall organisations in our nation.As we move to a transition phase inthe life of the LSC, I must echo ourChairman’s comments on being proudof the LSC’s legacy. I look forwardto working with him and with themembers of the National Council andregional councils to build on thosestrong foundations to create newstructures that will both carry on oursuccesses and benefit from what wehave learned about things we couldhave done better. This will ensurewe are best placed to rise to thechallenges we face as a nation in theglobal race for skills and innovation.Geoffrey RussellChief ExecutiveLearning and Skills Council10 July 200908 LSC Annual Report and Accounts 2008–09

About UsOur StoryOur national priorities for2008–09 were:•to increase the demandfor learning and skills•to transform the FE systemto meet demand, and•to deliver better skills,leading to better lives.Our targets for 2008–09were:• to raise the educationalachievements of allchildren and youngpeople, and to narrowthe gap in educationalachievement betweenchildren from low-incomeand disadvantagedbackgrounds andtheir peers• to increase the number of17-year-olds participatingin education and training•to improve the skills ofthe adult population,as a step towards ensuringa world-class skills baseby 2020, and•to support the deliverytargets of othergovernment departments.Who we areThe LSC is a publicly-fundedorganisation that exists to makeEngland better skilled and morecompetitive. We work locally,regionally and nationally to ensurethat learning and skills are at theheart of local and regional economicdevelopment and communityregeneration.Our commitment is to deliver aneffective and comprehensive learningoffer for young people in every area,in partnership with local authorities,schools, colleges and providers.Our goal is to improve the skills ofEngland’s young people and adultsto ensure we have a workforce ofworld-class standard.Our focus is on ensuring thatgovernment investment is directedtowards areas of greatest need, for thebenefit of young people, adults andemployers. We work to create a cultureof demand for skills.Our vision is for young people andadults in England to have knowledgeand skills matching the best inthe world and be part of a trulycompetitive workforce.What we doOur task is to improve the FE andtraining sector, raising standardsand making learning provision moreresponsive to the needs of individualsand employers.• We invest in people to give themthe skills they need for success inwork and in life.•We encourage people from allbackgrounds to engage in learningthat helps them to realise their fullpotential.•We help those who are not in workto get the training and support theyneed to get a good job.•We work with employers so thatthey can develop the skills of theirworkforce.•We fund all learning for youngpeople aged 16–19 in colleges,schools and training providersso that they gain the skills andqualifications they need to progressinto further learning, highereducation or employment.•We are passionate advocates of therole of skills in supporting greatersocial mobility and social justice.LSC Annual Report and Accounts 2008–09 09

Why we do itWe know that:•young people are far more likelyto realise their full potential if theycontinue learning beyond the ageof 16•improving skills leads to better jobsand a better quality of life•the best route out of poverty andinto economic security is throughgaining and using skills, and•more investment in trainingand skills helps our countrycompete more successfully ina global economy.How we do itWe work locally, regionally andnationally to:•create demand for learningand skills – we work to create aculture where young people, adultsand employers demand skills andqualifications and where businessesare fully aware of the benefits oflearning and skills, so they are moreprepared to invest their time andmoney in them•transform the further educationsystem – we work on behalf ofindividuals and employers to makesure that schools, colleges andother providers offer a wide rangeof high-quality learning andtraining that meets their needsand aspirations•strengthen the economy bothnow and in the future – we workwith partners to make sure thatthe skills that employers need aredeveloped in the existing and futureworkforce, which in turn helps morepeople into work and so supportssocial justice.Our valuesTrustTrust is at the heart of everything we do.AmbitionOur ambition is tounlock the potentialof every employerand learner in everycommunity thatwe serve.ExpertiseWe fully understandthe needs of thecommunities we serve,including employers andindividuals in educationand training.UrgencyThe country’s economicsuccess affects us all, sowe need to tackle longstandingissues quicklyand professionally, andbe responsive.10 LSC Annual Report and Accounts 2008–09

Our Targets andAchievementsOur StoryIn the last year we have continued tocontribute to a sustained rise in numbers oflearners and overall qualification levels, as wellas maintaining improvements in standardsacross further education. We have investedmore than £11.5 billion of taxpayers’ moneyin education and training.The PSA target is for3.6 millionmore adults in theworkforce to have aLevel 2 qualificationor higher by 2010AreaAge 19 – Level 2achievementAge 19 – Level 3achievementNumber of Apprenticeshipframeworks completedTargetIncrease the percentage of 19-year-oldswho achieve a Level 2 qualification from71.4 per cent (in 2006) to 73.4 per cent(in 2008)*Increase the percentage of 19-year-oldswho achieve a Level 3 qualification*Increase the number of people whocomplete their Apprenticeships by75 per cent by 2007–08 (bringing thetotal number to 75,500)AchievementTarget achieved early74 per cent in 2007 and76.7 per cent in 2008Target achieved48.1 per cent in 2007 and49.8 per cent in 2008Target achievedIn 2007–08, 112,600 peoplecompleted their ApprenticeshipAdults – Level 2achievementFE college successSkills for LifeReduce the number of adults withouta Level 2 qualification by at least40 per cent by 2010. This is equal toan increase of 3.6 million adults*FE college success rates to be 80 per centin 2010/11Improve the basic skills of 2.25 millionadults between 2001 and 2010*In progressBy the end of 2008, 2,378,000adults in work had achieved aLevel 2 qualificationTarget achieved earlyIn 2007/08, FE college successrates were 80.7 per cent – over the2007/08 targetTarget achieved earlyBy the end of 2008, 2,835,000 adultshad improved their basic skills*Public Service Agreement (PSA) target set by the Government.LSC Annual Report and Accounts 2008–09 11

Investing in successWhat we spent in total in 2008–09Youth participation £6,443.5m 53.4%16–18 Learner Support (inc. EMA) £631.5m 5.2%Other youth non-participation£121.0m 1.0%16–18 capital £196.8m 1.6%Adult learner responsive £1,657.6m 13.7%Employer responsive £1,223.6m 10.1%Adult safeguarded learning £214.1m 1.8%Offender Learning £139.0m 1.2%19+ Learner Support £165.4m 1.4%Other adult non-participation £239.5m 2.0%19+ capital £606.9m 5.0%Other programmes £233.1m 1.9%Administration £199.8m 1.7%Total £12,071.8m 100%Note: ‘Other programmes’ includes non-departmental spending. Administration costs are net, and include sundry income.Where we invested our money in 2008–09In 2008–09 we invested the following:• £7.3 billion to allow 1.3 million young people in school, college orwork-based learning to achieve qualifications.•£3.6 billion in adult learning, helping 3.3 million adults to improvetheir skills.• £833.5 million in FE and training facilities.Our planned programme investmentfor 2009–10Participation among young people:Participation among adults:Learner support and development:Capital grants:Total investment£6,923 million £3,356 million £1,109 million £1,008 million £12,396 million12 LSC Annual Report and Accounts 2008–09

EMA offers financial support for16- to 19-year-olds and continues toprove effective in encouraging andsupporting young people to remainin learning. In the past year, 553,480learners benefited from EMA. We havebeen trialling new eligibility criteria forEMA, to help define the scope of anywider provision.Evaluation showsthat, through EMA,participation has risenby 4 per cent andattainment amongeligible learners bybetween 2 and2.5 per centCare to Learn is focused onencouraging young parents back intolearning. Over 20 per cent of youngwomen who are classified as NEET donot participate because of pregnancyor parenthood. Care to Learn payschildcare costs to enable them tolearn. More than 7,000 young peopleare now receiving this funding.Our local partnership teams continueto work closely with local authorities,Connexions services and providers ofeducation and training to achieve theGovernment’s September Guarantee.Together, we achieved considerablesuccess in 2008, with 94.2 per centof 16-year-olds receiving an offer ofa place in learning. We are workingwith our colleagues at DCSF to ensureeven better results for young peoplein September 2009 and to prepare theground for 2010, when funding for16- to 19-year-olds transfers to localauthorities.Through theSeptember Guarantee,94.2 per cent of16-year-olds receivedan offer of a place inlearning in 2008Adultsfocusing on thegreatest needOverview Adult learning andtraining not only contributes tobuilding a skilled workforce, but alsobrings the wider economic benefitsassociated with health, well-being andstronger communities.In addition to a number of specificprogrammes aimed at helping peoplegain the skills needed to get backinto work, we have also begun thework to ensure that we are using ourmainstream programmes to help boththe unemployed and those in work tobe better equipped to gain and sustainemployment.One of our main challenges in adultlearning continues to be the number ofadults who do not have the basic skillsto get a job and are excluded fromthe labour market as a result. We alsoface the increasing cost of trainingmore people to achieve a full Level 2qualification (to meet our targets andthe economic needs of this country).A further challenge is the fact that,as Lord Leitch’s Review predicted,people will increasingly need toreach Level 3 qualifications if theyare to move forward in their jobs.This provision usually involves longerlearning times, and is therefore moreexpensive to deliver than shortercourses. As a result, there has beena reduction in funding for shorterlearning opportunities that falloutside our main priorities.As a balance, we are focusing onproviding information, advice andguidance for people who need newskills. We maintained our commitmentto less formal learning by allocating£210 million to a programme ofinformal adult learning, previouslydescribed as personal and communitydevelopment learning and widerfamily learning. With our partners, wehave made further progress towardsdeveloping a more flexible curriculumbelow Level 2, as well as a frameworkto organise qualifications at theselevels (Progression Pathways).Key risks What we spend ontraining now will not be enough topay for future training needs. Themajor challenge we face is persuadinglearners and employers to invest morein their own learning and training.Strategies and actionsWe are continuing to focus fundingon skills and qualifications thatare economically valuable. We aretherefore working closely with keypartners – the Qualifications andCurriculum Authority, Ofqual, theUK Commission for Employment and14 LSC Annual Report and Accounts 2008–09

Our Story21,000adult learners have benefitedfrom the Adult Learning GrantSkills and the Alliance of Sector SkillsCouncils – to put the Qualificationsand Credit Framework into practice.This will make sure that ourqualifications system for adults isas inclusive, responsive and flexibleas possible.The Adult Learning Grant (ALG)gives adult learners from low-incomehouseholds financial support to helpthem to achieve their first full Level 2or full Level 3 qualifications. The ALGwas available nationally for the firsttime in 2007–08, and more than21,000 adult learners have benefited– far more than the expected take-upof 17,500.We work closely with Jobcentre Plusand have taken responsibility for itsbasic skills programme, designed toimprove the skills of people who needa job. In the future, those learnerswho are supported by public fundswill follow courses that not only leadto nationally recognised qualificationsbut also give individuals the skills theyneed to gain employment and to moveforward in work.Employersincreased flexibilityfor tough timesOverview Adult skills are vital toincreasing national and internationalcompetitiveness for employers. Weneed to raise England’s positionamong other world economies byproviding the skilled workforce thatemployers require. Improving skillsboosts competitiveness, productivityand profitability but it also improvespeople’s career and salary prospects.We want to help everyone – from thelow-skilled to the highly skilled – toimprove their skills and so increasetheir ability to get a job and moveforward in their lives and careers.This is even more important in a timeof downturn, where employers needto raise productivity, encourage staffto take on new responsibilities andsupport those whose jobs may beat risk. As a result, over the last yearour employer-focused support andprovision has become more flexible tosupport emerging needs. The changeshave encouraged employers tocontinue to invest in skills and trainingand enabled individuals to developtheir skills to increase their flexibilityin the labour market.Key risks As learner volumescontinue to increase (predominantlythrough Train to Gain), we must ensurethat future investment is focused onhigh-quality provision that deliversagainst agreed priorities. In particular,this means ensuring that we meettomorrow’s skills needs as wellas today’s.Strategies and actionsOur flagship employer programme isTrain to Gain. Since national rolloutbegan in April 2006, Train to Gain hasengaged over 140,000 employers andhas delivered almost 1 million learnerstarts. These volumes have grownconsiderably during the course of2008–09.Through Train to Gain,some 530,000 learnershave achieved aqualificationFrom August 2008, in response toemployer demand, Train to Gainwas significantly enhanced to ensureit provided a wider range of supportand more help with the cost oftraining. This was followed by theannouncement, in October 2008,of additional flexibility for smallerand medium-sized private sectorbusinesses employing up to 250 staffto respond to the economic recession.This secured further supportfor training.Skills brokers have played a vital rolein driving up demand for training,and throughout the year we workedclosely with the former Departmentfor Business, Enterprise and RegulatoryReform and the Regional DevelopmentAgencies to ensure a smooth transitionto the new integrated brokerageservice which came into place throughBusiness Link from April 2009.While Train to Gain offers flexiblesupport for businesses and learners,the Skills Pledge remains a valuabletool for gaining employer commitmentto learning.Since its inception in June 2007,around 16,000 organisations havemade the Skills Pledge, covering over6 million employees.LSC Annual Report and Accounts 2008–09 15

2008–09 has seen aphenomenal growthof nearly 14,000additional Skills PledgecommitmentsTo ensure we address sector-specificskills needs, we have continued todevelop Sector Compacts. Ten newcompacts have been announced sinceMay 2008, and each has at its heartan agreement between BIS (formerlyDIUS), the LSC and a Sector SkillsCouncil (or sector body) to workcollaboratively to drive up demandfor skills across England. Alongsidethis, 2008–09 saw the approval ofthe 11th National Skills Academy,as well as delivery of a fourth roundof expressions of interest, to take thenumber of Skills Academies to 16.In response to employers’ concernsthat it is hard to identify the bestquality training, May 2008 saw thelaunch of the Training QualityStandard. Developed to recogniseand highlight the best organisationsdelivering training and developmentsolutions to employers, the Standardnot only identifies high-qualitytraining, but also training which isboth flexible and meets employers’needs. So far, 106 organisations haveachieved certification, covering everyEnglish region as well as a wide rangeof industries and specialist areas.Many more organisations are now inthe pipeline, with nearly 300 trainingproviders registered.FE systembetter performanceleading to higherexpectationsOverview Our work with the FEsector over the last few years beganwith a focus on raising standards andreforming the system. As the impact ofthese changes has become increasinglyapparent, our focus has shiftedtowards flexibility and innovation.Key risks While we need tocontinue to focus on performance,it is essential that we maintain themomentum of change and further raiseour expectations of the FE system.Strategies and actionsThe LSC’s commissioning strategy has,over a number of years, prioritisednegotiations with providers whodeliver successful, high-performingprovision. Subject to affordability, wehave therefore encouraged the growthof providers who have the capacity toexpand, and removed restrictions ongrowth funding where providers havethe quality, performance and capacityto deliver. To reduce the burden onproviders and to simplify the process,we have introduced the QualifiedProvider Framework.We held a second round of discussionswith local authority partners onschool sixth form performance.The dialogue this year centred on theuse of data to provide a nationallyconsistent view of learner outcomes,which was supplemented by otherlocal intelligence. This resulted inthe identification of those sixthforms, at local and regional level,which are causing concern and requiresupport to improve.In 2008–09, we did not use ourstatutory powers of intervention underthe Further and Higher EducationAct 1992 as amended by the FurtherEducation and Training Act 2007.However, we did use our statutorypowers under the Learning and SkillsAct 2000 to appoint up to twoadditional members to an incorporatedcollege’s governing body. We tookthis action, under the Act, at thefollowing colleges:• Braintree College• Epping Forest College• Riverside College, Halton, and• Southwark College.During 2008–09, a total of 41Notice to Improve schedules wereissued. The table on page 17 breaksdown the types of providers thatreceived a Notice to Improve andthe triggers for that Notice beingissued. During this period, a total of18 Notice schedules were issued forwhole provider underperformance(as defined in Identifying and ManagingUnderperformance).Two colleges received a Notice toImprove for poor financial healthand for an Ofsted judgement of‘inadequate’ for overall effectiveness.Another college received a Notice to16 LSC Annual Report and Accounts 2008–09

Our StoryImprove as a result of poor financialhealth and as a result of analysis ofsuccess rates compared with minimumlevels of performance. This college metthe conditions of the Notice withinthis financial year.Integratingemploymentand skillsOverview We have been workingclosely with partners, including theDepartment for Work and Pensionsand Jobcentre Plus, to integrateemployment and skills activities sothat the FE sector is better placedto support people into sustainableemployment. In particular, our focus ison ensuring that learners can continuetheir training after getting a job. Ourjoint working is more extensive thanever before as we work with partners,both nationally and regionally, todevelop an effective response to theeconomic downturn.Notices to Improve issued, 2008–09The Government is committedto ensuring that an integratedemployment and skills service will bein place nationally in 2010–11, andtrials of aspects of this new servicebegan in five regions this year. Theproducts and services will continue toevolve as we learn from these trialsand ensure that the service offeredto individuals meets their needsand delivers an improved customerexperience.Key risks The skills response tothe economic downturn has expandedthe number of programmes needed tomeet the requirements of JobcentrePlus customers and employees facingredundancy. This increases the riskof confusion for customers, and ofineffective referral to provision. It alsohas a potential adverse impact on ourwork with providers and the financialresource for continued learningopportunities once individuals enteremployment.Strategies and actionsIn the build-up to the integratedemployment and skills service, we havealready been involved in a wide rangeof joint projects and programmes.For example, we have collaboratedwith Jobcentre Plus to create LocalEmployment Partnerships (LEPs),which aim to ensure that prioritycustomers have the opportunity toacquire the skills needed to get intowork and to continue learning in workthrough Train to Gain to achieve anappropriate qualification.We have expanded the EmployabilitySkills Programme, which offersJobcentre Plus customers with basicskills needs an individualised fullorpart-time learning programme.This includes literacy, numeracy andemployability skills.TriggerAnalysis of success rates compared with minimum levelsof performanceOfsted judgement of ‘inadequate’ for overalleffectivenessNumber ofadult learningprovidersNumber ofcollegesTotal15 6 21N/A 7 7Financial health N/A 13 13Total 15 26 41These numbers reflect the number of Notices to Improve issued in the 2008–09 financial year; as such, this information will be different if reportedagainst the academic year.LSC Annual Report and Accounts 2008–09 17

Funding for theEmployability SkillsProgramme rosefrom £22 million in2007–08 to £40 millionin 2008–09We continued to support Skillsfor Jobs – a targeted programmeof short, bespoke pre-employmenttraining for the economically inactive.Skills for Jobs began in January 2008and discrete funding for it ended inMarch 2009, apart from in London.The provision is currently beingformally evaluated. However, regionsare continuing to support theprogramme in the interim throughfunding from the European Social Fund.One new area of focus this year hasbeen people affected by redundancy.In October 2008, it was announcedthat £100 million in funding would bemade available to help those undernotice of redundancy, those recentlymade redundant and those who areunemployed who could be madeready for work. They can access apackage of support aimed at helpingthem to refresh their skills in a sectoror begin the work of retraining fora new one to aid progression intosustainable employment. This provisionis part-funded by Train to Gain, toencourage the link to training in theworkplace once individuals haveentered employment.In January 2009, the Prime Ministerannounced a package of enhancedsupport for people who have beenout of work for six months or more,which will include joint workingbetween the LSC, the nextstepcareers information and advice servicefor adults and Jobcentre Plus. Thisincludes £83 million of funding toprovide 75,000 additional trainingopportunities. The training, deliveredon a part-time or full-time basis, willbe relevant to the local labour marketand will allow people to undertakea full Level 2 or Level 3 qualificationthen continue their training in theworkplace when they get a job.This offer is now available.Rolling out theFramework forExcellenceThe Framework for Excellence is aunified and simplified structure forassessing the performance of allproviders of education and training foryoung people and adults.It gives an accurate, independentpicture of the quality of performance,validated and supported by publisheddata, including the views of learnersand employers. This information, inturn, helps to inform learner, parentand employer choice.In 2008/09 the Framework was appliedto colleges and independent trainingproviders. From summer 2009, itwill be extended to local authorities,independent specialist providersand piloted in schools with sixthforms. From 2010/11, Framework forExcellence data will be used to informlocal authority and Skills FundingAgency commissioning decisions forpost-16 provision.The Framework, commissioned byDIUS (now BIS) and DCSF, is beingdeveloped through partnershipworking, including close links withOfsted. This partnership approach willensure that the Framework processescomplement those of other qualityinspections and assessments.18 LSC Annual Report and Accounts 2008–09

Recognising and Respondingto Regional RequirementsOur StoryWe know that the skills needs of one region canbe very different to those of another. Our aim isto ensure that what we deliver meets the specificneeds of young people, adults and employers ineach area. We therefore work with our regionaland local partners to help us target resources tomake a real difference to skills levels locally.Regional figuresOverall FE and skills participation by age group and region, 2007/08TotalEast of England103,500 311,800415,300East Midlands86,400281,000367,400London 125,600505,000 630,600North East 63,500197,800261,300North West 173,800438,000 611,800South East 151,900437,500589,400South West 99,600329,700429,300West Midlands 121,300375,200496,500Yorkshire and the Humber 118,400334,800453,200Other 11,500 67,40078,900Total learners 16–18: 1,055,500 19 and over: 3,278,2004,333,700Sources: FE – F05, 2007/08 final; work-based learning – W13, 2007/08 final; Ufi/learndirect – U05, 2007/08, 02/03/2009;adult safeguarded learning – C03, 09/03/09, C02, 2007/08 final.Note:Volumes are rounded to the nearest hundred. These figures include FE (including learndirect), work-based learning (including Apprenticeships andEntry to Employment), Train to Gain and adult safeguarded learning. Region has been based upon learners’ home postcodes; postcodes outside England,missing postcodes and unknown postcodes are included in the ‘Other’ field.LSC Annual Report and Accounts 2008–09 19

Swizzels Matlowestimates that usingTrain to Gain has helpedto boost profits byabout £60,000 a year.20 LSC Annual Report and Accounts 2008–09

Our StoryTrain to Gain proves to be sweetsuccess for Swizzels MatlowKeeping them sweetFor confectionery manufacturerSwizzels Matlow, the benefitsof training are clear: reducedturnover and increasedproductivity. In fact, thecompany estimates that usingTrain to Gain has helped to boostprofits by about £60,000 a year.Majority trainingThe company, which produces cultfavourites including Love Hearts,Rainbow Drops, Drumstick lollies andParma Violets, has now trained 450of its 600 employees on an NVQLevel 2 in Food and Drink through theUniversity of Derby Buxton.‘The course gives staff the chance tolearn about safe working practices andthe specific safety standards for theindustry,’ explains Tony Salt, Trainingand Development Manager at SwizzelsMatlow. ‘Then they get the chance todo optional units relevant to their rolewhich they’ll choose with their tutor.’Immediate impact‘Since our training initiative started, wehave seen a dramatic reduction in thestaff turnover, resulting in an increasein both productivity and efficiency,’Tony confirms.Beverley Riley is one of the employeeswho has achieved her NVQ Level 2.‘It’s great to be able to get trainingfor the job we do on a daily basisand get a qualification for our skills,’she agrees, adding, ‘It really helps toimprove your confidence.’The programme has been so successfulthat, according to Chris Morrison,Business Development Co-ordinatorat the University of Derby Buxton,‘Swizzels Matlow are running out ofpeople to train. That’s great news forthe company, although not necessarilyfor us! It shows that training reallyempowers staff and makes them feelmore knowledgeable and so muchhappier in their roles.’Flexible serviceThe university has gone to somelengths to make the training fit thecompany’s needs. Chris explains: ‘Wehave had monthly meetings withmanagers at Swizzels Matlow – initiallyto tailor the course to the company’sspecific needs and then later, as thecourse has developed, to make trainingwork around the shift patterns, whichcould be in the middle of the night orover weekends.’This flexibility is one of the principlesof the Train to Gain service which aimsto meet employer needs. Tony Salt isimpressed. ‘The training is so flexible –it’s not eaten into our production timeat all, which is essential for a businesslike ours.’There’s a mutual benefit for theprovider too, as Chris acknowledges.‘Tony has acted as an ambassadorfor the NVQ and since we’ve beenworking with Swizzels Matlow we’vesigned up a further six people fromother organisations for the course.’LSC Annual Report and Accounts 2008–09 21

Since September 2005,Tesco has worked withYMCA Training, a thirdsector provider, to offerKey Skills training topotential employees.22 LSC Annual Report and Accounts 2008–09

Our StoryAndrew grabs a second chance with the third sectorThird sectororganisationssuch as charities,social enterprises,mutuals, voluntaryand communitygroups andco-operatives arevitally importantto the work ofthe LSC.The third sector allows us to reachcommunities disengaged fromtraditional forms of learning and skillsdevelopment, as well as people whoare less likely or perhaps unwilling tolearn in further education settings. Ourresearch shows that more than 45 percent of people learning through thethird sector live in the most deprived20 per cent of communities in England.The third sector also has a goodreputation for ensuring that itslearners are successful in achievingqualifications. Figures for the successrates of our providers show that thethird sector, although delivering tofewer learners, has success rates thatare on average 10 per cent higher thanthose of other providers.A partnership for learningAs one of Britain’s biggest employers,Tesco has long realised the importanceof investing in training and takinga broad approach to recruitment.Since September 2005, it has workedwith YMCA Training, a third sectorprovider, to offer Key Skills training topotential employees who missed outon qualifications during compulsoryeducation.Expanding every yearThat partnership is now going fromstrength to strength. After startingto support 91 stores in the firstyear,YMCA Training helped 380Tesco employees across 143 storessuccessfully achieve their Key Skillsand Retail Certificate. This, alongsideTesco’s own in-house NVQ in RetailSkills (Level 2), provides the basis fora full Apprenticeship qualification.A second chance forlearnersAndrew Earthey is one of those whohas benefited. An assistant in the EastDidsbury store in Manchester, Andrewleft school with no qualifications afteryears of ill-health left him needinga kidney transplant. Under YMCATraining’s supervision, however, hehas excelled, comfortably passing histests and, in the words of his trainingadviser, Christine Sterndale, ‘producingtwo excellent portfolios’.Like many of the other learners, thishas also had an immediate impacton Andrew’s work. The personnelmanager at the store has noticed howAndrew’s confidence has soared sincecompleting his Apprenticeship, whichin turn has led to him taking on muchmore responsibility within his role.Recommended by allThat kind of response is why some98 per cent of trainees have said theywould recommend YMCA Training toa friend, while the same percentageof store managers would recommendthe training provider to anotheremployer. But the impact is also clearat head office.‘Over the last four years, our learningneeds have continually grown andYMCA Training has developed with us,’acknowledges Lorna Bryson, Tesco’sHead of UK Resourcing. ‘They continueto deliver the high standard oflearning and teaching we requirefor our programme.’Since the partnership began, almost1,000 learners have benefited fromYMCA Training’s programmes for Tesco,and that number is set to rise evenfaster this year, with over 350 storessigned up. Lorna concludes: ‘We lookforward to working in partnership withYMCA Training again this year with ourbiggest apprentice intake yet.’LSC Annual Report and Accounts 2008–09 23

‘Being an apprentice means I’m notonly developing my skills all the time,I’m also getting nationally recognisedqualifications to show for it.’Karl Dodds, apprentice, Jewsons24 LSC Annual Report and Accounts 2008–09

Our StoryFlexible Apprenticeshipsare just the job for JewsonFaster progress,faster rewardsWith their emphasis onwork-based learning, one of thestrengths of Apprenticeships isthe way they enable learnersto quickly take on moreresponsibilities as they acquiremore skills. That means thepayback for employers is fasterand learners are rewarded fortheir application and learning.Karl Dodds, an apprenticecustomer service representativeat timber and building productssupplier Jewson, is a perfectexample. Just six monthsinto his Apprenticeship, Karlwas already enjoying theresponsibilities of managinga major construction industryclient account. He believes thekey to this is the training he hasreceived and in particular thefact he has made rapid progresstowards an NVQ Level 2qualification. ‘It’s really boostedmy confidence, which hashelped me take on this moreresponsible role.’MotivationKarl explains: ‘The experience I’m nowgaining at work will stand me in goodstead to get more team leadershipand managerial skills. Then I can worktowards an NVQ Level 3 as well.’His employer is equally impressed– both with Karl’s progress and theApprenticeship programme – andrecognises the impact that thecompany’s 14 apprentices have had.‘We’re definitely seeing the benefit,’acknowledges Contracts Manager IanMcFadyen. ‘Through Apprenticeships,we get highly motivated employeesfully engaged in gaining new, up-todateskills and qualifications whichadd value directly to the service weoffer our customers.’Flexible learningCrucially, too, the training fits aroundthe business’s requirements. ‘TheApprenticeship framework is reallyflexible,’ Ian states, ‘so we can adapt itwhere we need to. It’s predominantlywork-based training and assessment,but our apprentices also get offsitetraining in the more theoreticalaspects of the job.’That additional learning is providedby CWT Chamber Training, a whollyowned subsidiary of the Coventry andWarwickshire Chambers of Commerce.‘We’ve formed a really good workingrelationship with CWT,’ Ian says.‘They don’t just provide the off-sitetraining, they also come in and makesure the apprentice is progressing asthey should be, offering them supportand advice.’Profitable partnershipsJan Ryan, Operations Manager at CWT,is equally positive about the waythe two organisations work together.‘The strength of the Apprenticeshipframework is in the partnershipbetween the employer and the trainingprovider. Jewson is a good exampleof how employers big and small cansee measurable increases in efficiency,productivity and profitability fromemploying apprentices.’As for Karl, he’s relishing theopportunities. ‘Of course, earning aliving is important but a job shouldbe about more than that. Beingan apprentice means I’m not onlydeveloping my skills all the time, I’malso getting nationally recognisedqualifications to show for it.’LSC Annual Report and Accounts 2008–09 25

‘The leadership andmanagement trainingI got through Trainto Gain is a fastand effective wayto learn how to runa company moresuccessfully.’Elliot Campbell, founder,Pixel Room26 LSC Annual Report and Accounts 2008–09

Our StoryTrain to Gain puts Pixel Room back on trackInvesting in thefutureFacing up to the economicdownturn has led manycompanies to reconsider theirapproach to training anddevelopment. Leeds-baseddesigners Pixel Room is oneof many small businessesthat have done exactly this– using Train to Gain to fundmanagement training thatis already strengthening thecompany for the future.Challenging timesLike many other smaller companies,Pixel Room has faced substantialchallenges over the last year: businessgrowth was stagnant and there werevery few projects in the pipeline.Founder Elliot Campbell was alsofaced with a personal dilemma: hehad been head-hunted by a leadingcompetitor. The regular income wouldhave provided financial security for hisyoung family and covered the cost ofhis wedding later in the summer.‘It came down to a simple decision:if I wanted to keep my own business,what was I prepared to do?’ heacknowledges. ‘I realised I needed toarm myself with as many tools aspossible to ensure Pixel Room survivedthe economic downturn, and one ofthose tools was management training.’Choosing trainingElliot first considered the idea ofmanagement training at a NatWestseminar in 2008, where he met skillsbroker Ian Hargreaves who told himabout the advice and support availablethrough Train to Gain.Train to Gain offers independent skillsadvice at no cost to the employer.The advice comes from a skills broker,training provider or college whichworks with businesses on a dedicated,one-to-one basis.Ian helped Elliot to identify a suitablecourse – with local training providerNext Level Coaching – and pointed outavailable sources of funding. In mid-December 2008, Elliot embarked on anine-day leadership and managementcourse, which particularly focused onimproving his new business skills.Creating commercialconfidenceWith around 75 per cent of thecoursework now completed, Elliotalready recognises the positive impactof the training on both himself and thecompany. His time management hasvastly improved so he no longer panicsabout meeting deadlines, and he isable to view and manage the businesson a macro level as well as simplytackling day-to-day actions.The new business aspect to the coursehas proved particularly valuable,giving Elliot the confidence not toslash fees when pitching for businessfor fear of frightening off prospectiveclients. Instead, he is operating farmore strategically. ‘Train to Gain hasenabled me to play devil’s advocatewith my own company. I’ve identifiedour strengths and weaknesses andam proactively working with theteam towards improving the areaswhere change is required. The traininghas helped me develop a far morestructured business model to supportour future growth.’Looking aheadWithin that model, there are plansto invest in administrative trainingfor Elliot’s business partner, to makethe daily running of the companyeven smoother.‘For an inexperienced businessleader like myself, the leadership andmanagement training I got throughTrain to Gain is a fast and effective wayto learn how to run a company moresuccessfully,’ Elliot concludes. ‘I spent alot of sleepless nights deciding whetherto carry on, or wind up the companyand accept an external job offer. Thanksto the training, my confidence inmaking the business grow and prosperis renewed. Pixel Room is now goingfrom strength to strength, and I knowI made the right decision.’LSC Annual Report and Accounts 2008–09 27

‘All my life I wanted to learn toread. Having children was theinspiration I needed to finallydo something about it.’Declan Macintyre28 LSC Annual Report and Accounts 2008–09

Our StoryReading puts Declan on a new pathStarting a newchapterDyslexia had led Declan tostruggle at school, and he leftwith few qualifications. Butwhen his wife became pregnant,he realised that unless he tookaction, he wouldn’t be able tohelp his child learn or even readthem bedtime stories.He approached his employer,Brighton and Hove City Council,and signed up for a Get Onliteracy course. Despite somebanter from his fellow refusecollectors, Declan quickly got hisfirst qualification and since thenhe hasn’t looked back.Rewriting his life storyFour years on, Declan has completedseven different qualifications, includingGSCE English. What’s more, he hasbecome a bookworm. ‘I now spend allmy spare time reading for pleasure,’he admits, having discovered poetry,politics, history and social sciences.Above all, though, what Declan loves is‘being able to read to my son Finnianevery night and helping him withhis reading, now that he has startedschool’.Reading has brought with it a numberof other benefits. For example, officialforms and letters are no longer astruggle. But it’s also led to a newjob – and new career plans. Declannow works for ASLEF, the train drivers’union, as an education worker. ‘Itmeans I can help others improvetheir lives, in the same way I havebeen helped.’A happy endingHis long-term goal, meanwhile,is still broader: he has started acorrespondence course at RuskinCollege which will give him thequalifications to get into university,so he can train to become a teacher.That way, he can share his love oflearning and reading with a wholenew generation – as well as with bothFinnian and his second son, Pearce.LSC Annual Report and Accounts 2008–09 29

Chris RobertsChief Operating Officer(formerly RegionalDirector, North East)Sally StewartNational Director,Human ResourcesJill LoweryRegional Director,London (interim)*Mary ConneelyRegional Director,Regeneration LondonSimon WaughNational ApprenticeshipService, Chief ExecutivePaul HolmeEconomic ResponseDirectorDorothy SmithRegional Director,North East (interim)*NationalCouncilThe National Counciloversees policy and decisionmaking,while day-to-daymanagement rests with theChief Executive and theManagement Group.ChairmanChristopher N Banks CBEChairman, Learning andSkills Council and Founder,Big Thoughts LtdMembersGareth CadwalladerExecutive Director,Airas Intersoft LtdShirley Cramer CBE(stepped downNovember 2008)Chief Executive,Dyslexia ActionJohn Cridland CBEDeputy Director-General, CBIIan Ferguson CBEChairman,Data Connection Ltd Margaret Galliers CBE(joined September 2008)Principal, Leicester CollegeBryan GrayChairman,Northwest RegionalDevelopment AgencySir Deian HopkinFormer Vice Chancellor,London South BankUniversitySally Hopson MBE(joined July 2008)Retail and People Director,Pets at HomeDame Mary MarshDirector,Clore Social LeadershipFrances O’GradyDeputy General Secretary,Trades Union CongressEmma Pearson-Winstone(joined July 2008)Learner representativeMark Sanders(joined January 2009)Chief Executive,Bury Metropolitan Borough CouncilJohn Taylor(stepped downSeptember 2008)Principal and ChiefExecutive, Sheffield CollegeMalcolm TrobePresident, Association ofSchool and College LeadersJill Youds(joined July 2008)Director of Talent andLearning, Virgin MediaSpecial advisersJohn Merry CBELeader, Salford City CouncilSir George SweeneyFormer Principal, KnowsleyCommunity CollegeOther committees•• Audit Committee• Capital Committee•Appointments CommitteeRemuneration Committee,and• ReorganisationCommittee.Leadership and GovernanceClaire Ighodaro CBEIndependent DirectorLSC Annual Report and Accounts 2008–09 31

Our ResponsibilitiesOur National Council and committeemembers play a key role at both thenational and regional levels. At eachlevel, they support and challenge whatwe do, provide leadership to the LSCand the FE system, and act asambassadors.Statement of theLearning and SkillsCouncil’s andChief Executive’sresponsibilities1. Under paragraph 14(1) of Schedule 1to the Learning and Skills Act 2000,the LSC is required to prepare astatement of accounts for eachfinancial year in the form andon the basis determined by theSecretary of State, with the consentof HM Treasury. The accounts areprepared on an accruals accountingbasis and must show a true and fairview of the LSC’s state of affairsat the year-end, and of its income,expenditure and cash flows for thefinancial year.2. In preparing the accounts, the LSC isrequired to:•observe the accounts directionissued by the Secretary of State,including the relevant accountingand disclosure requirements, andapply suitable accounting policieson a consistent basis• make judgements and estimateson a reasonable basis•state whether applicableaccounting standards havebeen followed, and disclose andexplain any material departuresin the financial statements, and•prepare the financial statementson a going-concern basis, unlessit is inappropriate to presumethat the body will continue inoperation.3. The Accounting Officer for theformer DIUS designated theChief Executive of the LSC as theAccounting Officer for the LSC.The relevant responsibilities asAccounting Officer are set out morefully in the Framework Documentfor Executive NDPBs at annex7.4 of Managing Public Money, inparticular items 5 and 6 underGovernance and Accountability.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 33

How We Take Careof Our PeopleTo meet our goal of building thenation’s skills base, it is essential thatour own staff have the skills andabilities needed to help us deliver ourambitious plans, as well as supportingthem to prepare for their own future.Development andtrainingIn 2008–09, a key focus was preparingour staff for the forthcomingMachinery of Governmentchanges, which will mean thatmany will need to adapt to newroles and responsibilities. We haveemphasised accredited developmentprogrammes that increase businessand management skills, as well ascontinuing to focus on performanceimprovement.Key programmes over the last yearincluded:•work to develop processes andmaterials to help embed the OracleHR system, which provides staff andmanagers with direct access to theinformation they need•the development and delivery of acorporate learning and developmentprogramme that focuses onperformance•the rollout of a new and successfulDignity at Work programme,which raises awareness of equalityand diversity issues across theorganisation•Enhance, a series of six developmentevents to build and improvepartnership working skills, and•our proactive managementdevelopment programme of 240guided learning hours. This can leadto a Diploma in Management. It issupported by our Introduction toManagement, which can lead to aDiploma in First Line Management.Our Introductionto Managementdevelopmentprogramme won BestPublic Service Initiativein the TJ AwardsWe will continue to introduceprogrammes during 2009–10,reflecting the transition through theMachinery of Government changes.Our aim is to provide a flexibleapproach to development. In additionto workshops and courses across thecountry, we offer a range of more than200 online materials and courses inassociation with Ashridge BusinessSchool and SkillSoft. These allow staffto learn at work or at home and toprogress at their own pace.We continue to demonstrate ourcommitment to up-skilling our staffby monitoring attainment againstthe Skills Pledge and building onexisting good practice to maintainour Investors in People corporateaccreditation, achieved in March 2008.Learning and development managersand union learning representativeswork closely with the business todrive up the performance of ourpeople through a robust performance34 LSC Annual Report and Accounts 2008–09

management and review process. Webelieve in continuous improvement,and have introduced an evaluationand review framework so that wecan measure the success of ourprogrammes.Communicationand consultationEmployee communications arean integral part of our businessplanning. We aim for clear andconsistent messages, make sure thatcommunications are properly targeted,relevant and fit for purpose, and listento feedback and act on it.We use a range of communicationtools, including the weekly staffbulletin, management cascade briefingnotes and face-to-face briefings,as well as a dedicated intranet sitethat contains key information on HRpolicies and procedures. To help dealwith common queries and particularHR or management issues, we havedeveloped a question and answersection which is regularly updated,and online toolkits for managers andemployees to explain key HR areas.We work closely with the Public andCommercial Services union (PCS), therecognised trade union that representsour staff, meeting them regularly todiscuss a range of subjects. We arecommitted to building on the positivepartnership approach with the PCS atboth national and local level.The Open Forum, an employeeinformation and consultative group,is now operating across all regionsand the National Office, with anoverall group at national level. It isdesigned to complement the existingchannels of communication that wehave with the PCS.Our aim is to be open and transparentin all of our communications, and torespond positively to queries.Health and safetyWe are committed to the health,safety and welfare of all of our staff,contractors, agency workers and thelearners we fund.Work-related accident rates remainbelow the national average foroffice-based industries, and we havea proven risk assessment approachfor controlling hazards. For example,we have invested in supporting staffwho have to drive regularly for work:in 2008–09, 443 staff completed theIndividualised Driver Risk Assessment.Our West Midlands, East of Englandand North West regional offices allsuccessfully gained the OccupationalHealth and Safety Assessment Series(OHSAS) 18001 accreditation.We have also taken steps to supportstaff with disabilities and learningdifficulties. Equipment costing£26,234 was purchased centrally for29 colleagues who needed workstationadjustments. These included itemssuch as ergonomic chairs, visual aidsfor those with a sight impairment,equipment for those with a hearingimpairment, IT hardware (mice,keyboards, monitors etc) and voiceactivatedsoftware. Some £12,246 ofthis investment was reclaimed throughAccess to Work, part of Jobcentre Plus.Our quality of life,now and in thefutureIn September 2005 the LSC published itsstrategy for sustainable development,From Here to Sustainability.Our vision is that the learning andskills sector will proactively commitand contribute to sustainabledevelopment through its managementof resources, the learning opportunitiesit delivers and its engagement withemployers and communities. In thisfinal year, the LSC will continue toprovide a lead for the FE system.In 2008–09 we continued to supportand promote sustainable developmentin the learning and skills sector andwithin the LSC, by:•working with the EnvironmentalAssociation of Universities andColleges (EAUC) and the NationalInstitute of Adult and ContinuingEducation (NIACE) to review ouronline sustainable developmentresource, SORTED, to find waysto make it more relevant andaccessible•identifying examples of goodpractice in embedding sustainabledevelopment in the curriculum in FE•again sponsoring the Green GownAwards which celebrate bestpractice in the sector•hosting a Sustainable Skills roundtable event to discuss skills forsustainable development and forworking in a low-carbon economy•establishing with the Learning andSkills Improvement Service (LSIS)the Sustainable DevelopmentAlliance for Learning and Skills,which brings together relevantrepresentatives from across theFE system•launching an internal sustainabledevelopment campaign, calledDoing Our Bit, to support oursustainable development championsand share good practice, and•starting to measure our ownprogress towards a limited set oforganisational targets.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 35

Our Working PracticesStakeholdercommunicationsTo achieve our goals, the LSC dependson working effectively with a largenumber of stakeholders and partners.All our work is based on two-waycommunication and open andtransparent working practices.Colleges and trainingprovidersIn the last year, we have workedalongside LSC-funded trainingproviders and colleges to ensurethat they are informed about – andinvolved in – our programmes andthe policy decisions behind them. Wehave close working relationships, andsupport providers in joint activities.EmployersIn recognition of the importancewe place on our relationships withemployers, we have developed anumber of channels over the years forcommunicating with employers andsharing ideas and approaches.We work with large employers throughour dedicated National EmployerService, and with other employersthrough LSC programmes such asTrain to Gain and the NationalApprenticeship Service. Our staff workwith employers at a national, regionaland local level, and maintain directrelationships with key employersand the organisations that representthem. We have regular meetings withgroups such as the CBI, the Instituteof Directors, the British Chambers ofCommerce and the Federation of SmallBusinesses, and attend and speak atrelevant employer conferences. We alsoensure that employers are regularlyconsulted about decisions concerninglearning and skills delivery.Third sectorWe work closely with a range of thirdsector stakeholders, as providers andemployers and as a source of expertiseand valuable feedback on learningand skills delivery, particularly tounderrepresented and disadvantagedgroups. The LSC also has a Third SectorAdvisory Group to its National Council,chaired by National Council memberDame Mary Marsh.Opinion formersWe have identified a number ofbusiness and education leaders,politicians and representative groupswho we know are particularlyinterested in our work, and wemaintain regular contact with them.This is done through small discussionforums and events, face-to-facemeetings and specialist newsletters.LearnersLearners naturally play a vital role inshaping our work, our policies and ourapproach. The LSC is advised by theNational Learner Panel, which acts asthe voice of the learner. The panel ismade up of independent volunteersinvolved in all aspects of furthereducation as learners, giving learnersa voice at national level.Other partnersWe work with a range of deliverypartners in different sectors. Detailsof our relationships with them can befound in our Statement of Priorities.Equality anddiversityLike many other public sectororganisations, promoting equalopportunities is one of our coreresponsibilities – both in the waywe treat our own staff and in thestandards that we apply to (anddemand of) the learning and skillssector. We have a statutory duty toreport annually on our actions towardsprogressing equality and diversity inaccordance with Section 42 of theLearning and Skills Act 2000. Ourcontribution here discharges that duty.In April 2007 we published our firstthree-year Single Equality Scheme, ourstrategy to place equality and diversityat the heart of everything we do –from the learning we fund to the waywe support our workforce. We havesince commissioned and published ourfirst annual review of the scheme.In 2008, we completed a majorsupport programme for learning andskills providers: 487 provider staffattended seminars which helped themto develop single equality approaches,while 50 engaged in action workingprojects, where they received tailoredsupport to address specific equalityissues.We have made substantial progresstowards assessing all of our policiesfor their impact on equality. Over100 policies have undergone initialscreening, and full impact assessmentshave been published for:• the Framework for Excellence•our Statutory Intervention Policy,and•demand-led funding and the UKVocational Qualifications ReformProgramme – Sub Programme 3.We have trained over 100 membersof staff on how to use our equalityimpact assessment framework.Through this framework, all HR policieshave now had an initial screening, andkey policies have been reviewed.36 LSC Annual Report and Accounts 2008–09

Learners and providersAs part of the Single Equality Scheme,we put in place equality and diversityimpact measures to ensure moreequal outcomes for the learnerswe fund. We have commissioneda review of progress against thesemeasures, which will be published insummer 2009.Our Single Equality Schemecommitted us to going beyondthe requirements of legislation. Inparticular, we set out our intentionto work with the sector and supportproviders in developing their ownequality schemes and in takingpractical steps to tackle inequalities.The LSC workforceAs part of the Single EqualityScheme, we set ourselves a numberof equality goals which aim to makeour workforce more representative.We are making substantial progresstowards achieving these, and havealready surpassed two of our goalsfor 2010: the proportion of womenin middle and senior roles is now at52 per cent and the proportion of allstaff from black and minority ethnicbackgrounds is now at 14 per cent, upfrom 7.2 per cent in 2002.We have now made the first of thesegoals more challenging by focusing onthe most senior roles, 48 per cent ofwhich are filled by women. We haveexceeded our goal of 7.6 per cent ofmiddle and senior roles being filled bystaff from black and minority ethnicbackgrounds. This now stands at10 per cent.To ensure that our workforce practicesare fair, we have established aWorkforce Equality and DiversitySteering Group, made up of staff fromacross the organisation. This group hasalso been involved in consultationssuch as how we meet the MindfulEmployer Charter, which the LSCsigned up to in 2007.We remain committed to increasingthe proportion of staff declaringa disability or limiting illness. Thefigure remains low at 3.4 per centbut has improved. To this end, weare raising awareness among ourstaff, encouraging them to talk abouttheir need for support and makingreasonable adjustments for staff withdisabilities.BenchmarkingachievementsAccording to benchmarking tools fromthe Employers’ Forum on Disability,Race for Opportunity and OpportunityNow, we have already madesubstantial achievements against ourHR action plan.•Monitoring – we now have inplace a comprehensive employeemonitoring system, which enablesthe LSC to report on the diversity ofour workforce in line with the publicduty requirements.•Case management – informationfrom any incidents is now reviewedand used for learning to improvepeople management and reducerisks to the LSC.•Improving personal data – wehave completed a regional eventto encourage more employees –particularly those with disabilities– to declare their personal data.Following the event, there was aclear improvement in the data forthe region.• Mindful Employer Charter –our Chief Executive signed theCharter, which commits the LSC tosupporting the mental health andwell-being of our employees.•Consultation and action plan –we have developed an action planto implement the principles of theCharter, and it has been approvedby our HR leadership team.•Equal pay – we implemented equalpay audits in 2008 and 2009 andare committed to undertaking thisexercise annually, which links toour responsibilities under our SingleEquality Scheme.•Dignity at Work – we havesuccessfully implemented a pilotDignity at Work programme acrossone region and have made theresource available to all employees,which will be supported by ane-learning tool.•Health and well-being – a similarpiece of work has been completedaround managing health andwell-being in the workplace and isavailable regionally.As a result of these achievements,Race for Opportunity ranked the LSCin the top 10 most improved publicsector organisations in 2008. Wehave also been showcased, throughbenchmarking networks, as anexemplar of good practice in the publicsector, particularly in our approach toequality impact assessment and theSingle Equality Scheme.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 37

Our learnerhealth and safetypolicyOur learner health and safety policystates that learners are entitled tolearning and training that takes placein a safe, healthy and supportiveenvironment. This is integral to thequality of the learner’s experience onLSC-funded provision.Following the publication of theLearner Health, Safety and Welfare: SafeLearner Blueprint in September 2007,we have produced, in consultationand in partnership with LSIS, specificguidance on Self-assessment of healthsafety and welfare: Guidance fororganisations funded by the Learningand Skills Council (March 2009).In the light of previous studies on theunder-reporting of learner incidents,we have revised and simplified theLearner Incident Management Systemto improve reporting from providers.We are currently conducting someanalysis of incidents/fatalities andcorrelating it with the learning atthe time of the incident. We are alsoanalysing the performance of all theproviders we fund in order to compareimprovements over specified periods.Finally, we have continued towork with the Health and SafetyExecutive and Sector Skills Councilson specific requirements for youngerlearners in high-risk sectors such asconstruction, and on raising awarenessof occupational health as part ofhealth and safety in the workplace.We have commissioned the Institutefor Employment Studies to researchthe extent to which learners adoptsafe behaviours as a result of differingenvironments and levels of supervision.The interim report was published inautumn 2008, with final researchdata available in 2009. The research, acomparative three-year study, will linklearner experience and perceptions tothe Safe Learner Blueprint.38 LSC Annual Report and Accounts 2008–09

Machineryof GovernmentFrom 2010, the further educationlandscape will change considerably, withtwo new bodies established to drive theextensive agenda that the LSC has beencharged with since 2001.These are the outcomes of theMachinery of Government consultationRaising Expectations: enabling thesystem to deliver, which ended in June2008 and paved the way for a verydifferent configuration of the post-16landscape.Under these changes the LSC willcease to exist and a new nationalnon-departmental public body(NDPB), the Young People’s LearningAgency (YPLA), will be tasked withsupporting local authorities in theirnew responsibilities for commissioningand funding 14–19 provision. The YPLAwill be part of the DCSF.For adults, the Skills Funding Agency –an agency of BIS – will ensure thatpublic money is routed swiftly,efficiently and securely to FE collegesand providers in line with thepurchasing decisions of customersthrough the demand-led mechanismsof Train to Gain and Skills Accounts.The Skills Funding Agency will:•house the new NationalApprenticeship Service•manage Train to Gain, including theNational Employer Service•manage the new adultadvancement and careers service,and•support the FE system to deliver amore responsive service, with SkillsAccounts gradually forming thepublic-facing brand for adults.Since the changes were announced,we have reviewed our managementstructure to make sure it reflects thenew structure and provides the bestpossible platform for working withthe two departments. We are coremembers of the BIS/DCSF ProgrammeBoard that will be overseeing thetransition to the new arrangements.Our structure also enables us to shareinformation effectively with new andexisting partners and stakeholders.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 39

Statement onInternal ControlThe Learning and Skills Council’sAccounting Officer’s Statement onInternal Control 2008–09Scope ofresponsibility1. As Accounting Officer, I haveresponsibility for maintaining asound system of internal controlthat supports the achievementof the LSC’s policies, aims andobjectives. This achievementsafeguards the public fundsand Council assets for whichI am personally responsible,in accordance with theresponsibilities assigned to me inManaging Public Money.2. The LSC is an NDPB established bythe Learning and Skills Act 2000(the Act). The Council can only dothose things that the Act providesit can do. Nine regional councilsfor England were established on10 September 2008 under theFurther Education and TrainingAct 2007, replacing the 47 localLSC councils which were set upas part of the Learning and SkillsAct 2000.3. The National Council itself consistsof between 12 and 16 nonexecutivemembers, one of whomis appointed as the Chairman. Theymeet regularly with me and withmy senior managers to providestrategic guidance to the executive.As Chief Executive I am a memberof the National Council. Schemesof Delegation exist between theNational Council and myself.4. In 2008–09 DIUS sponsored theLSC, working closely with DCSF.From 5 June 2009, the sponsorshipof the LSC transferred to BIS,and appropriate communicationchannels are in place to ensurethat the departments are informedof the business of the LSC, andthat we in turn are informed ofthe departments’ requirements forthe LSC.5. The National Council, through itsAudit Committee, is informed ofthe risks facing the LSC and theLSC’s processes for dealingwith risk.6. The Prime Minister announced inJune 2007 that the Departmentfor Education and Skills wouldbe split into DIUS (now part ofBIS) and DCSF and that, subjectto legislation, the responsibilityfor funding learning provisionfor 16- to19-year-olds wouldpass from the LSC to the localauthorities. The LSC has workedclosely with the two departmentson the consequences of this,culminating in the White Paper,Raising Expectations, published inMarch 2008, which sets out theprocesses by which the changeswill be put into effect by 2010.The LSC has taken action to ensurethe effective delivery of currentbusiness, while absorbing theimpact of this prospective change.7. In March 2009 the previous ChiefExecutive stepped down and I wasappointed. In order to provide thisstatement I have taken assurancefrom my Internal Audit function,Management Group and otherareas of the LSC as identifiedwithin this Statement.The purpose of the system of internal control8. The system of internal controlis designed to manage risk toa reasonable level, rather thanto eliminate all risk of failure,and to achieve policies, aimsand objectives; it can thereforeonly provide reasonable andnot absolute assurance ofeffectiveness. The system ofinternal control is based on anongoing process designed toidentify and prioritise the risksto the achievement of the LSC’spolicies, aims and objectives, toevaluate the likelihood of thoserisks being realised and theimpact should they be realised,and to manage them efficiently,effectively and economically. Thesystem of internal control hasbeen in place in the LSC for thefinancial year ending 31 March2009 and up to the date ofapproval of the Annual Reportand Accounts, and accords withHM Treasury guidance.40 LSC Annual Report and Accounts 2008–09

Capacity to handle risk9. The LSC has an establishedrisk management policy. A RiskManagement Board, consistingof a subset of my ManagementGroup, has been chaired by theDirector of Funding, Planning andPerformance since March 2008.10. A National Risk Manager, through aDirector, supports the managementof risks across the LSC network.Each group and region has anappointed senior manager to actas risk champion; these managersdo not own the risks but act asstewards of the process.11. Internal Audit performed areview of risk managementduring 2007–08, which gave arestricted assurance and resultedin a qualification to the InternalAudit Annual Report. The riskprocess was refreshed in April2008 by the Director of Funding,Planning and Performance andconsiderable progress has beenmade to embed the refreshed riskmanagement process across theLSC. The Risk Management Boardhas met regularly during the yearand risks have been reported tothe Management Group. The LSC’stop risks have been discussedfully at every Management Groupmeeting since November 2008.Risk updates have been providedat each National Audit Committeeand Council throughout 2008–09.Risk management is referred tofurther within the Internal Auditsection of this Statement.The risk controlframework13. The LSC does not encourage a riskaverseculture; it accepts that risksneed to be taken and managedin order to deliver its challengingagenda. I do, however, requirerisks to be properly evaluated andmanaged appropriately. In doingso I expect a balanced response tobe made to risks, whereby the costof control is weighed against thelikely impact of a risk becominga reality and the estimatedconsequence if it did.Review ofeffectiveness14. As Accounting Officer I haveresponsibility for reviewing theeffectiveness of the system ofinternal control. My review of theeffectiveness of the system ofinternal control is informed by thework of the internal auditors andthe executive managers within theLSC, who have responsibility forthe development and maintenanceof the internal control framework,and comments made by theexternal auditors in their otherreports. I have been advised on theimplications of the result of myreview of the effectiveness of thesystem of internal control by theAudit Committee, ManagementGroup and Internal Audit. I havealso evaluated the statementsof internal control from Regionaland National Office Directorsin support of the review ofeffectiveness.Audit Committee15. A duly constituted AuditCommittee has operated throughthe year and its terms of referencereflect best practice. It consistsof National Council members,Regional Audit Committeemembers and co-opted membersrequired for their expertise; allare non-executives. The AuditCommittee has met regularlyand has considered reports fromInternal Audit on the system ofinternal control, risk managementand governance, from the ProviderFinancial Assurance team onproviders’ systems of internalcontrol and from the NationalAudit Office. The committeehas also taken evidence fromsenior managers when deemedappropriate. Within the LSC, eachregion has a duly constitutedRegional Audit Committee whichprovides a scrutiny and challengerole with respect to the regionaloperations. A particular strengthof these arrangements is that allRegional Audit Committees arerequired to review and adviseon each individual RegionalDirector’s personal statementof internal control. The NationalAudit Committee has recentlysought additional members fromRegional Audit Committees toenhance its membership, expertiseand experience.Leadership and Governance12. Risk management is due to beaudited again during 2009–10,to follow up on progress.LSC Annual Report and Accounts 2008–09 41

ManagementGroup16. At the beginning of 2008–09,the Management Group consistedof nine Regional Directors andsix National Directors (Financeand Resources; Human Resources;Funding, Planning andPerformance; Adult Learning, Skillsand Employment;Young People’sLearning and Skills; and NationalApprenticeship Service).17. Owing to Machinery ofGovernment changes and theneed for parallel transitionarrangements, by the end of2008–09 the ManagementGroup consisted of 20 membersconsisting of the Chief Executiveof the LSC, the Chief Executiveof the National ApprenticeshipService, the Chief OperatingOfficer of the LSC, the EconomicResponse Director, the Machineryof Government Transition Director,the National Projects Director andthe Director of Regeneration forLondon, five National Directors(Young People’s Learning and Skills;Finance and Resources; NationalApprenticeship Service; AdultLearning, Skills and Employment;and Funding, Planning andPerformance) and nine Regional orActing Regional Directors.18. The Management Group allowsme to have a focused approachto control. I have also maintaineda requirement upon Group andRegional Directors to provide achain of personal assurance as tothe adequacy of internal control intheir areas of responsibility.Internal Audit19. A professional and independentInternal Audit service wasmaintained throughout the year.On the advice of the NationalAudit Committee, the previousChief Executive agreed the InternalAudit team’s strategy and plansfor the year. I understand that theprevious Chief Executive met withthe Chief Internal Auditor regularlyand received quarterly reports onInternal Audit’s findings. I receivefrom the Chief Internal Auditor anannual report on the findings ofInternal Audit, which includes aprofessional opinion as to the levelof assurance that is applicableto the LSC. For 2008–09 theChief Internal Auditor has, withthe exception of corporate riskmanagement, capital fundingand governance of EducationMaintenance Allowance (EMA),given a substantial assurance overthe operation of the LSC’s systemsof control, risk managementand governance. A substantialassurance indicates that the LSChas operated basically soundsystems, but there were someweaknesses that prevented givinga full assurance.20. Through his report, the ChiefInternal Auditor has alerted meto where improvements arenecessary, and I take a personalinterest in the implementation ofsuch plans. In addition, each GroupDirector receives an annual reporton his or her operations, as doeseach Regional Director. An InternalAudit ‘control health check’ iscarried out annually in each Groupand Region, and is followed upwith an annual report from theInternal Audit team, which informseach of the personal statements ofinternal control received from myDirectors. A spirit of co-operationexists between the LSC staff andInternal Audit and they worktogether to maintain a culture ofcontinuous improvement.21. The assurance provided by InternalAudit has been qualified in regardto corporate risk management,capital funding and governanceof EMA.Risk management22. In the 2007–08 Annual Report,the Internal Audit service reviewof risk management concludedthat appropriate action had notoccurred to fully embed riskmanagement within the LSC, andprovided ‘restricted assurance’.Inevitably, these weaknessescould not be resolved from thestart of the year. Both the FosterReport and the Ighodaro Report(see paragraphs 26 and 30 below)identified that weaknesses in riskmanagement had contributed tocritical reputational and politicalissues arising for the LSC in2008–09.23. During the year, managementresponsibility for risk managementwas moved to the Directorof Funding, Planning andPerformance. Management of riskwas given to a direct report andthe risk manager transferred tothis post to enhance the focusand refresh the risk managementprocess. As part of this refresh,changes were made to the RiskManagement Board membershipand the high-level reporting ofrisk to the Management Group.Significant effort has been takento develop risk managementprocesses throughout the LSC.Work continues to make furtherenhancements to embed riskmanagement in all business42 LSC Annual Report and Accounts 2008–09

decision-making processes.However, risk management is notyet fully embedded in the LSCand further work is still requiredwhich should focus on the earlyidentification and escalationof risks.24. The wider risk managementculture issue is an area I want topersonally concentrate on and so,with immediate effect, our ChiefInternal Auditor will report directlyto me. He will also have a strongerrelationship with the Chair of theAudit Committee.25. In addition, in agreement with theChairman of the Audit Committee,I have decided to directly linkmanagement bonus for the finalyear of the LSC to the status ofthe risk register, as confirmed bythe Regional and the LSC AuditCommittees. Managing risks onthe register as well as makingsure risks get on to the registerwill be considered. In addition, thefindings of Internal Audit reportswill also affect bonuses. A newhorizon-scanning mechanism isin the process of launch that willstrengthen our ability to identifyrisks on a timely basis.Capital funding26. In 2008–09 the pace of demandfor capital funding by collegesincreased significantly, exceedingthe available budget. As aconsequence the LSC decidedto defer decisions on projects inNovember 2008 and suspendedthe building programme inDecember 2008. The then SkillsSecretary John Denham andChristopher Banks CBE, Chairmanof the LSC, appointed Sir AndrewFoster to lead an independentreview into the operation of thebuilding programme. Havingcompleted the review, the FosterReport was published on 1 April2009. The report reviewed thecircumstances that led to theposition on the Building Collegesfor the Future programme asmanaged by the LSC, and whetherlessons could be learned. Thereport also assessed existing LSCprocesses and considered howthey could be enhanced to delivermore effective management ofthe programme in the currenteconomic environment andbeyond.27. The Foster Report concluded thatthe most significant responsibilityfor the problems rested with thegeneral and financial managementof the LSC and its corporategovernance systems. The previousChief Executive accepted thisresponsibility and stepped down.The Foster Report contained anumber of recommendations, allof which the LSC and DIUS (nowBIS) have committed themselvesto implement. The present positionwith the capital budget presents acritical reputational and politicalissue for the LSC.28. In response to the report, anumber of actions are under way,including a review of the financialdata held by the LSC aboutcapital projects; appointmentof a Director to be personallyresponsible for the capitalprogramme; consultation withthe sector on the approach thatshould be used in prioritisingschemes; and the appointmentof an external team of specialiststo assist the LSC in ensuring thatthe information held is accurateand comprehensive and providesa sound basis for taking futuredecisions. National and regionalmanagement are managing therelationships with colleges andassociated risks to them and tothe LSC’s reputation.Learner Supportservices29. From 2002 until 2008 the LSC hadsix separate systems for deliveringLearner Support. In August 2007 acontract was awarded to Liberatafor the delivery of a single systemthat would result in lower costsand an enhanced service for the2008/09 academic year. Theproject suffered progressive delaysand the service suffered manyproblems which resulted in delaysin the issue of entitlement lettersand substantial delays in paymentto many learners. The publicityassociated with this became acritical reputational issue forthe LSC. Delivery issues wereresolved late in 2008. However,the costs of delivery threatenedthe financial viability of Liberata.The LSC disengaged with Liberatain November 2008. The serviceis now delivered by Capita. Therehave been some instances wherethe transfer to Capita has led tomisreporting of the numbers ofEMA recipients, but this has notaffected the actual assessment ofcases or the distribution of funds.30. In December 2008, the Chairmanof the LSC commissionedClaire Ighodaro, a NationalCouncil member, to conduct anindependent internal review ofthe issues, the causes and whatlessons could be learned.A consultant, Tim WaltonAssociates, was engaged toundertake the detailed work. TheIghodaro Report identified criticalshortcomings in the governanceand management of the project.The report contains a number ofrecommendations and, togetherwith management responses, itwill be sent to DCSF’s SchoolsMinister shortly, including thecorrection of the EMA recipientnumbers referred to above.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 43

31. Internal Audit work in theyear has also identified criticalweaknesses in terms of the overallLSC governance arrangementsfor Learner Support. A ProviderFinancial Assurance (PFA) auditundertaken jointly with theInternal Audit work has identifiedfurther critical control weaknesses.The Ighodaro Report hasrecommended that Internal Auditshould use the report’s findingsand recommendations to informthe 2009–10 Internal Audit plan.32. Based on the recommendationswithin the Ighodaro Report, I amaddressing the weaknesses in2009–10 through managementactions across the LSC as wellas within Learner Support. Inparticular, risk managementprocesses will be strengthened,with reviews by the ManagementGroup and reports to the AuditCommittee and National Council;effective and rigorous contingencyplans will be developed at theoutset and regularly reviewedthroughout the delivery ofall programmes; governancearrangements for Learner Supporthave been reviewed and therewill be quarterly reports to theManagement Group and NationalCouncil; the Management Groupwill develop and implement ageneral protocol for escalation ofemerging issues; Learner Supportwill be more integrated into‘mainstream’ LSC, and is beingbuilt into the structures and waysof working of the YPLA and theSkills Funding Agency; definitionsof good vendor relationships andcontract management are beingdeveloped and, where needed,staff training on programme,risk and contract management.The Management Group willreview current major contractsto ensure clarity of definition ofroles; the new SRO is a memberof the Management Group. TheManagement Group will reviewall existing programme boardsand ensure separation of steeringgroups and programme boards;and there will be mitigationaround new technology, withcontingency planning such asphased implementation andparallel running.33. The Internal Audit service willalso provide additional supportand advice where necessary orrequested.Financialmanagement34. As Accounting Officer I haveresponsibility for the financialmanagement of the budgets thatare formally delegated to me inthe LSC’s Grant Letter. With theexception of the points raisedwithin this Statement, I canconfirm that all of the budgets Iam responsible for are managedin line with the financial rulesand procedures applicable to theLSC through its draft FinancialMemorandum with DIUS (nowBIS). Apart from the exceptionsraised, the LSC has effectivefinancial management processes,based on devolved responsibilityfor budgetary control withregular financial reporting andforecasting that is subject to amulti-tier review and challengefunction. The overall currentfinancial position of the LSC(including forecasts from Augustonwards) is reported to senior LSCmanagement monthly throughoutthe financial year. This ensuresthat budgets are monitored andmanaged appropriately across theorganisation at all times. I alsoconfirm that the expenditureincurred by the LSC in the yearhas been consistent with theremit of its Grant Letter and thatappropriate financial records aremaintained across the LSC.Other assurancemechanisms35. As Accounting Officer I amrequired to be satisfied that thoseorganisations that the LSC fundsalso operate in an appropriatelycontrolled environment. TheLSC has established a PFAfunction, with responsibility forco-ordinating and carrying out aprogramme of visits designed togain assurances over the systemsof control operated by providersand providers’ application of LSCfunds. The level of assurance workcarried out by PFA teams or byothers, on which PFA teams rely,is commensurate with the levelof associated risks. I receive fromeach of my Regional Directorstheir personal assurance thatproviders maintain and operateadequate controls. They base thisassurance on a number of things,foremost of which are:• PFA reports•receipt and examination of FEcollege accounts• contract managers’ reports• performance reviews••Audit Committee scrutiny, andthird-party assurance (Ofsted).44 LSC Annual Report and Accounts 2008–09

Informationassurance36. During 2008 the LSC madecommitments to DIUS and theCabinet Office that requiredsignificant changes to howit managed its informationmanagement-relatedrisks.These include:• general and specificrequirements called for by thePermanent Secretary, DIUS,in February 2008 (commonlyreferred to as ‘Watmore’), and• mandatory minimum datahandlingrequirements thatwere set out in the June 2008final report of the CabinetOffice entitled Data HandlingProcedures in Government(commonly referred to as‘Hannigan’).37. Additionally, in February 2009 theCabinet Office replaced the longstandingManual of ProtectiveSecurity with the Security PolicyFramework (SPF). This defines71 mandatory requirements fordepartments and their deliverypartners, with which DIUS (nowBIS) has indicated the LSC will beasked to comply during 2009–10.Considerable effort has beenexpended and much progressmade during 2008–09 towardsmeeting first the Watmore andthen the Hannigan requirements,but achieving full compliance withall SPF requirements by the endof 2009–10 will pose a significantchallenge.38. There is an expectation that wewill fully meet the requirementsof the data-handling review andthe SPF by the end of 2009–10.There is significant risk that wewill fail to meet the requirementfor full compliance by the end ofthe financial year, exacerbated bythe simultaneous transition to thenew organisations. We recognise,especially as information is vitalto our business processes, that wemust manage our informationrelatedrisks more actively and areworking now to do so. There is aneed for DIUS (now BIS) to clarify2009–10 assurance requirements.39. The work due to be undertakenduring 2009–10 will rapidlymove us towards a moreacceptable position. However,we acknowledge that the LSC iscurrently carrying a significant riskof loss of personal information(with the attendant reputationaldamage that would ensue); theLSC is considering whether therehas been any further loss oflearner data during the transitionfrom Liberata to Capita.Internal controlissues40. As Accounting Officer I amsatisfied, with the exception ofrisk management, capital fundingand Learner Support services (asidentified within the Internal Auditsection above), that the LSC’sgovernance and internal controlis compliant with HM Treasuryrequirements and that during2008–09 the continuing concernsdid not undermine the workingof the LSC, but they continue torepresent a threat.Continuingconcernsa. The LSC’s capacity to effectivelymanage the Machinery ofGovernment transition processposes a risk to the achievement ofthe LSC’s objectives. The changes,leading to the dissolution of theLSC in 2010 and the transfer ofits functions to successor bodies,have provided, and will continueto provide, considerable diversionfrom ongoing business. As thetransition progresses over the nextyear, there are significant risksthat the LSC will not be able tomeet its objectives, staff moralewill be affected and systems ofinternal control will break down.To manage this will requireflexibility on the part of the LSCand the sponsoring departmentsas we move from the vision andplans for the new structurestowards the reality of practical,on-the-ground management.We may have to make short-termcompromises on the vision inorder to deliver intact the newstructures while not losing controlof the current operations. I havealso appointed a Chief OperatingOfficer to focus on managing the‘business as usual’ aspects of thebusiness so that we do not losesight of our daily responsibilities.We have also accelerated themove to ‘shadow’ Skills FundingAgency/YPLA running to provideas much time as possible towork out the necessary newbusiness processes well beforethey go live. We have a regularcommunications programme toall staff to keep them informed,and work closely with the unionto understand and mitigate theirconcerns.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 45

. The governance, accountabilityand management arrangementsin place within the NationalApprenticeship Service areimprecise and need to bedeveloped further. Significantprogress was made to ensurethat the National ApprenticeshipService became operationalfrom April 2009. However, thereare many areas that need to beclarified and, where appropriate,processes need to be implementedfor 2009–10. We have beenworking closely with the NationalApprenticeship Service to resolvethe operational issues that arisefrom the arrangements and arein discussions with the NationalApprenticeship Service andsponsor departments to clarify andmitigate matters so that NationalApprenticeship Service delivery isnot compromised.c. Significant progress has beenmade in the development of acontract management frameworkwhich is to be rolled out acrossthe LSC. Bespoke contractmanagement training has notyet been delivered, although acommitment has been made todeliver this in the first six monthsof 2009–10.d. A joint Internal Audit reviewof Train to Gain with DIUSduring 2008–09 concluded thatprocedures within the LSC haveimproved since the previous jointaudit review was conducted.However, Train to Gain itselfcontinues to change. Additionalrisks arise from the transfer ofresponsibility for the provisionof skills brokerage to RegionalDevelopment Agencies in April2009. The risk management ofTrain to Gain has not kept pacewith the changing risks presentedby this funding stream.e. The LSC’s ability to controleffectively a number ofsignificant demand-led budgetsis a serious concern. Expenditureon demand-led programmes is,by its very nature, difficult toforecast or control. After severalyears of under-spending, theLSC has (partly in response tonew flexibilities) experienced anincrease in demand since autumn2008. Action is now being takento control demand but if thisproves inadequate, there will be aserious risk of exceeding budgetsor not meeting real learner andemployer needs. This is a particularrisk in relation to Train to Gain and25+ Adult Apprenticeships wherefurther urgent action is required.In response to this risk and thoseexplained in (d) above, we haveappointed National SROs foreach programme to manage theoverall position and are workingclosely with sector representativesto explain the issues and worktogether to resolve them.f. It is imperative that, during thecurrent period of change, theLSC has an effective businesscontinuity planning process inplace to react quickly to anyissues and to ensure continuityof business. Work continues inthis area and plans are currentlybeing developed prior to theestablishment of a testingmethodology.g. In 2008–09 the Internal AuditInvestigations Unit (IAIU)continued to receive an increasein the number of referrals to anall-time high. This represents a22 per cent increase over theprevious year and a 115 per centincrease in two years. This hasplaced pressure on the IAIU todeal with the allegations andsubsequent investigations in atimely manner. The risks in thisarea are likely to increase in theforthcoming period of changeand with the current economicsituation. I am taking a personalinterest in this area and receivea monthly report. The ongoinginternal investigation which tookup significant resource in 2006–07was passed to the police andthe Serious Fraud Office (SFO),with funds at risk of £2.5 million.Five people appeared in TelfordMagistrates’ Court on 17 March2009 accused of a variety ofoffences of corruption, moneylaundering and gaining a pecuniaryadvantage. The SFO, prosecuting,requested that the case betransferred under the 1987 SFOAct out of the jurisdiction of theMagistrates’ Court. Accordingly,the case is in the process ofbeing transferred to BirminghamCrown Court. The IAIU continuesto provide ongoing assistance asand when required. The significantreputational risk to the LSC arisingfrom this investigation remains.h. There continues to be a risk tothe delivery of LSC businesschange programmes arising frominadequate levels of alignmentand buy-in from the businessteams for the developmentactivity for which they haveownership. Typically this is seen atprogramme/project specificationstages, business-side projectmanagement and sign-off,attendance at governance boardsand user acceptance testing.This risk has been recognised byInformation Management (IM), astypically this has meant that theIT portfolio drives the businessside, rather than the businessleading the programme with ITas the enabler. Mitigation of this46 LSC Annual Report and Accounts 2008–09

isk continues to be managedthrough the business cycle, whichis business-owner driven. Thereare still risks around ensuringappropriate engagement of thebusiness with IM. My priority is toensure that existing systems areoperating properly and to acceptnew commissions only where wehave clear specification by thebusiness and the IM resource todo so safely. This is an area I amalso taking a personal interestin and I have recently asked theChief Information Officer to reportdirectly to me.i. Confirmation of the expectedrequirement to meet the DataHandling Report (DHR) minimumrequirements was received fromDIUS (now BIS) in March 2009.This confirmed that the LSCwas not ‘mandated to followthe Security Policy Framework(SPF) in 2008–09’. The SeniorInformation Risk Owner’s (SIRO)Annual Report on InformationSecurity for 2008–09 has providedassurance on what has beenachieved within the context ofthe risks, issues and challengesaffecting the LSC’s ability toachieve full compliance. It alsodocuments the LSC’s position inrelation to Watmore and Hanniganand the SPF framework. TheInternal Audit division separatelyreported restricted assurance inmeeting the wider demands of theDHR, and recommended that atransition plan be put in place bythe end of May 2009. Reference tothis opinion and recommendationis made in the SIRO’s report. TheLSC is unlikely to meet the in-yearrequirement during 2009–10to achieve full compliance withthe SPF. There is an associatedrisk relating to the potential fordata loss.Other issuesj. During 2008–09 there wereinstances of non-compliancewith LSC systems, including:management of the car scheme;delegated authorities not beingproperly in place; and incorrectuse of charge cards. In addition,proposed updated guidancefor areas such as travel andsubsistence has not yet beenpublished, due to an issuerelating to employees’ permanentworkplaces. Finance has beenworking with HR to resolvethis issue and a final review ofthe policy is under way, withpublication expected shortly.A revised Financial Memorandumis currently being negotiatedwith BIS and DCSF.Geoffrey RussellChief Executive andAccounting OfficerLearning and Skills Council10 July 2009Leadership and GovernanceLSC Annual Report and Accounts 2008–09 47

Risk Management andFinancial ControlsThe Risk Management Board has a key responsibilityto provide an assurance that risks are being effectivelymanaged. Throughout the year, the Board, which is asub-group of and advisory to the Management Group,has been chaired by the Director of Funding, Planningand Performance and has met on three occasions.Verbal reports are made by the Chair of the Board tothe Management Group and all agendas and papersare uploaded to the Risk Management Board team site.The National Audit Committeeis responsible for providing theoverarching challenge function andfor seeking assurance that the toprisks are being managed effectively.Regular reports are made to thecommittee by the Chair of the RiskManagement Board.Concerns raised by the National AuditCommittee in early 2008 resulted ina new approach to risk managementbeing introduced. The ownership of riskmanagement was given to the Directorof Funding, Planning and Performance,who instigated a refreshed processto risk management. As a result, theManagement Group considers risk asthe first agenda item at every monthlymeeting. To inform this discussion, arevised RAG template is commissionedfrom each top risk owner. The RAGtemplates provide information on thecurrent status of the risk and providean assurance that the top risks arebeing effectively mitigated.The revised RAG templates andcomments made by ManagementGroup members are communicatedback to the risk owners, the riskchampions and a wider audience inorder to inform any other risks andto ensure that we retain line of sightacross the LSC on the top risks.Group and regional risk registers havebeen analysed to ensure that the topLSC risks have been identified withinthem and that appropriate controlsare in place to mitigate and managethe risks.All regions have a risk registerin place and risk management isregularly considered by the regionalmanagement team. The Regional AuditCommittee receives regular reportson regional risks and is responsiblefor providing a challenge function tothe risk owner on their stewardship ofthe risk. The main role of the RegionalAudit Committee is to assess andadvise on the scope and effectivenessof the system established by regionalmanagement to identify, assess,manage and monitor risk.All National Office groups have arisk register in place. Group risksare managed through the relevantdecision-making boards, whichconsider the top LSC risks at everymeeting.All National Office groups and regionshave appointed a risk champion toco-ordinate the risk managementprocess. They are the focal point forthe receipt of guidance and paperson risk management matters. Theydo not own the risks. All risks haveassigned risk owners at ManagementGroup level who are responsiblefor ensuring that effective action istaken to mitigate the likelihood ofrisks occurring.The national risk manager supportsthe management of risks, providesadvice and guidance to colleaguesacross the LSC and manages theRisk Management Board team site, avehicle for debate and the sharing ofissues, concerns and good practice.48 LSC Annual Report and Accounts 2008–09

Reporting of Personal Data-related IncidentsThe tables that follow have been prepared in response to Cabinet Office guidance (issued to the LSC via DIUS on2 May 2008) on reporting personal data-related incidents in the management commentary section of departmentalresource accounts.Table 1: Summary of protected personal data-related incidents formally reported to the InformationCommissioner’s Office in 2008–09Date of incident(month)January 2009Further informationon information riskNature of incidentSuspected lossof personal data.All informationrecovered. No datamisuse identified.Nature of datainvolvedNumber of peoplepotentially affectedNotification stepsLearner personal data 60 Notification to DIUSand InformationCommissionerThe LSC will continue to monitor and assess its information risks, in light of events notedabove, in order to identify and address any weaknesses and ensure continuous improvementof its systems.Incidents deemed by the Data Controller not to fall within the criteria for reporting to the Information Commissioner’sOffice but recorded centrally within the department are set out in Table 2. Small, localised incidents are not recordedcentrally and are not cited in these figures.Leadership and GovernanceTable 2: Summary of other protected personal data-related incidents in 2008–09Category Nature of incident TotalILoss of inadequately protected electronic equipment, devices or paperdocuments from secured government premisesNilIIIIILoss of inadequately protected electronic equipment, devices or paperdocuments from outside secured government premisesInsecure disposal of inadequately protected electronic equipment, devices orpaper documentsIV Unauthorised disclosure NilV Other NilNilNilLSC Annual Report and Accounts 2008–09 49

Remuneration ReportThe Remuneration Committee formsan important part of our governancestructure and process, providinginformed and independent decisionson reward policy and practice.Given our status as a non-departmentalpublic body, the existence of theRemuneration Committee allows usgreater freedom from our sponsoringdepartment (BIS) on reward policyand practice.ChairmanChristopher N Banks CBEChairman, Learning and Skills Council,and Chief Executive, Big Thoughts LtdMembersGareth CadwalladerDirector, Airas Intersoft LtdFrances O’GradyDeputy General Secretary, TradesUnion CongressStephen MarstonDirector General, Further Educationand Skills Group, BISThe Chief Executive and Directorof Human Resources are invited toattend and speak at meetings exceptwhen their own remuneration is beingconsidered. The Head of Reward forthe LSC is also invited to attend,where appropriate.The committee met five times duringthe period April 2008 to March 2009.The committee determines the rewardfor members of the ManagementGroup and other key senior executives.Honorariums for National Councilmembers are determined by theSecretary of State. The rewardpolicy complies with relevantHM Treasury guidance and is basedon the philosophy that remunerationarrangements should support the LSCin the achievement of its businessobjectives. The reward policy isdesigned to attract and retain the rightcalibre of people, to focus individualsto deliver superior performance and toencourage team-based collaborationacross the LSC.In determining the appropriate levelsof reward, the LSC takes into accountlocal market competitiveness, theviews of major stakeholders and theUK regulatory framework. Rewardlevels are compared with those inorganisations of similar size and focusin each of the LSC’s regions.50 LSC Annual Report and Accounts 2008–09

The Remuneration Committee’s termsof reference are as follows:• To review and advise the NationalCouncil on the framework andpolicy for the appointment, payand performance of LSC staff.• Subject to any determinationrelating to the Chief Executive’sappointment made by the Secretaryof State, to review and makerecommendations to the Chairmanon any revisions to the ChiefExecutive’s terms and conditionsof employment, includingremuneration.• To assist the Chairman inmonitoring annually theperformance of the Chief Executiveagainst the annual performance planand, in light of that performanceappraisal, to advise the Chairmanof any performance-related payincrease or bonus to be paid.• To review the performance ofsenior staff within the NationalCouncil who report directly tothe Chief Executive; to reviewthe remuneration of such staffat least annually; and to makerecommendations to the ChiefExecutive on any pay increase orremuneration arrangements thatmay be appropriate.Components ofremunerationThe Chairman of the LSC (who alsochairs the Remuneration Committee)and members of the LSC NationalCouncil receive a salary (Chairman)or an honorarium. There is no bonuspayment attached to any of theseappointments.The Chief Executive and members ofthe Management Group (the Nationaland the Regional Directors) receive atotal reward package made up of basesalary, annual bonus, flexible benefitsand a defined benefit pension. Subjectto the requirements of the role, theremay be a job-need car (or, fromSeptember 2006, a job-need taxablebut non-pensionable car allowance)provided by the LSC. Bonus paymentsare not guaranteed.Since April 2006, the LSC bonus planhas been structured to focus onencouraging and rewarding team-basedachievement at both the nationaland regional level, as assessed againstthe Public Service Agreement targetsset by the former Department forEducation and Skills. For senior staff,a discretionary element recognisesoutstanding individual contributions.Relationshipbetween basesalary andvariable rewardGeneralThe LSC sets base salaries at themarket median and recognisesachievement through the bonusscheme.Salaries for National, Regionaland other senior Directors arebenchmarked using a range ofappropriate data sources includingthe Association of Colleges’ PrincipalSalary survey, Hay Group managementconsultants and Senior Civil Servicepay scales. If an individual’s salaryfalls below 90 per cent of the paybenchmark, an adjustment shouldnormally be made to bring it to thatminimum level.Chief ExecutiveThe reward package for the ChiefExecutive involves two key elements(base salary and bonus), which aredetermined by the Secretary of Stateafter considering proposals from theChairman. The bonus is assessed onachievement against corporate andpersonal targets. During 2008–09, thesalary increase for the former ChiefExecutive, Mark Haysom CBE, was3.3 per cent and his bonus for the yearto March 2008 was £36,242.The Chief Executive’s bonus potentialis now set in the same way as formembers of the Management Group.Achievement of threshold:7.5 per cent of base salaryAchievement of target:15 per cent of base salaryAchievement of maximumabove target:22.5 per cent of base salaryDue to the nature of his role, theChief Executive does not receive anautomatic salary progression award.Base pay changes2008–09Base pay for National and RegionalDirectors rose by an average of3.3 per cent. This included an amountset aside for raising the spot rates (thenormal salary value) for each role by2 per cent. The remainder was usedto move employees from the 90 percent minimum towards that spot rate.The average increase for other seniorDirectors was 3.14 per cent (includingan increase in spot rates of 2 per cent).Leadership and GovernanceLSC Annual Report and Accounts 2008–09 51

Duration ofcontracts,notice periodsand terminationarrangementsMembers of theNational CouncilMembers of the National Council donot have service contracts and wereappointed by the then Secretary ofState for Innovation, Universitiesand Skills.Appointment is for a fixed term,usually four years, and on a parttimebasis. Over the course of a year,members of the National Council areexpected to devote 12–15 days toworking for the LSC, mainly in eitherhalf- or part-days.An honorarium is offered for theseappointments, normally of £4,000.Travel, subsistence and other expensesare payable in line with the currentterms for LSC executive staff. Thereare no bonus payments for theseappointments.Chair of theNational CouncilAppointment is for a fixed term,usually four years, and on a part-timebasis – at least two days a week areexpected to be devoted to the workof the LSC.The salary for the year to March 2009was £51,400. Salary is reviewed inaccordance with guidance providedby the Cabinet Office covering thepay of statutory office holders (theirsalaries are linked to movements in theSenior Civil Service pay bands). Travel,subsistence and other expenses arepayable in line with the current termsfor LSC executive staff. There are nobonus payments for this appointment.Resignation can be at any time bynotice in writing to the Secretary ofState for Business, Innovation andSkills. The Secretary of State may, bygiving written notice, remove the Chairfrom office if he or she is satisfiedthat the member has not attendedNational Council meetings for morethan six consecutive months, or thatthe member is unable or unfit to carryout their role, or by giving six months’notice in writing.LSC Management Groupmembers and othersenior staffAppointment is by service contract,which can be ended by either partygiving 12 weeks’ written notice.The current Chief Executive, GeoffreyRussell, has been appointed on afixed-term contract that ends on31 March 2010. The appointment canbe ended by either party giving threemonths’ written notice. Additionally,the LSC has the option to end thecontract after six months of completedservice by providing one month’snotice. However, if the option is nottaken at that point, the notice periodreverts back to three months for theremainder of the contract.The former Chief Executive, MarkHaysom CBE, had an open-endedcontract with a six-month noticeperiod on either side.There are no specific terminationclauses in Management Group memberservice contracts.The remaining part of theRemuneration Report on pages 53 to60 has been audited by the NationalAudit Office.52 LSC Annual Report and Accounts 2008–09

Board members’ emolumentsThe Chief Executive is appointed by the other members of the National Council with the approval of the Secretary of Statefor Business, Innovation and Skills. The other members of the National Council are appointed by the Secretary of State.The amount of the Chief Executive’s bonus is decided by the Remuneration Committee, which reviews performance againstan annual personal responsibility plan agreed by the Chairman. The bonus is also approved by the Secretary of State.The LSC holds no contracts with a notice period greater than 12 months.Year endedYear ended31 March 2009 31 March 2008£’000 £’000The emoluments of the Chairman (Christopher N Banks CBE, age 49) for theperiod:Salary 51 51Taxable benefit 0 051 51The emoluments of the new Chief Executive (Geoffrey Russell, age 51) for theperiod from 23/03/09:Basic salary and other emoluments* 6 0Taxable benefit in kind 0 0Pension contribution (opted to join nuvos pension scheme) 1 07 0Leadership and Governance221The emoluments of the former Chief Executive (Mark Haysom CBE, age 55)for the period:**Basic salary and other emoluments223Bonus †Taxable benefit in kindPension contribution (opted to join premium pension scheme)00* Full-year equivalent would be £208,000.30362934289 284** Mark Haysom CBE resigned from his post as Chief Executive on 23 March 2009. He will receive payment of sixmonths of his 2008–09 contractual salary and benefits. No bonus is payable.†The bonus payment relates to the previous year and as per above no further bonus will be paid.LSC Annual Report and Accounts 2008–09 53

The non-executive members of the National Council were appointed by the then Secretary of State for Innovation,Universities and Skills.Non-executive membersChristopher N Banks CBEGareth CadwalladerJohn Cridland CBEIan Ferguson CBEMargaret Galliers CBEBryan GraySir Deian HopkinSally Hopson MBEClaire Ighodaro CBEDame Mary MarshFrances O’GradyEmma Pearson-WinstoneMark SandersMalcolm TrobeJill YoudsDate commenced/ Current Emoluments Emolumentsreappointed or term year ended year endedextended (years)* 31 March 2009 31 March 2008£’000 £’00015/06/2008 3 0.0 0.001/06/2008 3 4.04.001/09/2007 3 6.30.001/06/2008 3 0.00.011/09/2008 3 4.10.001/01/2004 Indeterminate 4.04.001/09/2007 3 0.00.001/07/2008 2 3.00.001/03/2009 3 4.04.001/03/2009 3 3.74.001/06/2008 3 4.07.601/07/2008 2 3.00.005/01/2009 2 1.00.001/09/2007 3 6.30.001/07/2008 2 3.0 0.0*Number of years rounded up to nearest whole, but no term will extend beyond April 2010.Date ofcessationFormer membersGiles ClarkeShirley Cramer CBEJohn Merry CBEJohn Taylor01/12/2007 0 0.0 2.730/11/2008 1 2.7 4.031/10/2007 0 0.0 2.330/09/2008 4 3.0 4.054 LSC Annual Report and Accounts 2008–09

Senior employeesSalary and benefits in kindNational DirectorsYear ended Year ended Year ended Year ended31 March 2009 31 March 2009 31 March 2008 31 March 2008Salary Benefits in kind Salary Benefits in kind£’000 (to nearest £100) £’000 (to nearest £100)David WayNational Director, Adult Learning,130–135 0 125–130 0Skills and Employment and Director,National Apprenticeship ServiceRob WyeNational Director, Young People’s Learning 130–135 0 125–130 0and SkillsVerity BulloughNational Director, Funding, Planning and125–130 0 140–145 0PerformanceDavid RussellNational Director, Finance and Resources 145–150 3,900 140–145 3,700Sally StewartNational Director, Human Resources 115–120 0 15–20 1,000Paul HolmeEconomic Response Director (from 24/11/08) 35–40 0 0 0Leadership and GovernanceLSC Annual Report and Accounts 2008–09 55

Year ended31 March 2009Salary£’000Year ended31 March 2009Benefits in kind(to nearest £100)Year ended31 March 2008Salary£’000Year ended31 March 2008Benefits in kind(to nearest £100)Regional DirectorsCaroline NevilleEast of England 130–135 0 125–130 2,000Thomas CromptonEast Midlands 130–135 0 0David HughesLondon 140–145 3,500 135–140 3,300Chris RobertsNorth East 135–140 1,500 120–125 2,600John KorzeniewskiNorth West 135–140 0 125–130 1,500Henry BallSouth East (retired July 2008) 55–60 0 130-135 0Marinos PaphitisSouth East (from 01/06/08) 95–100 600 0 0Malcolm GillespieSouth West 130–135 0 130–135 0David Cragg OBEWest Midlands (Machinery of Government 135–140 0 130–135 0Transition Director from 12/05/08)Margaret ColemanYorkshire and the Humber 120–125 0 120–125 0Mary ConneelyRegeneration London 130–135 0 125–130 1,100056 LSC Annual Report and Accounts 2008–09

Senior employees (continued)Pension entitlementsReal increase inAccrued pensionpensionand relatedand relatedlump sumlump sumat age 60 at age 60 CETV at CETV at Real increaseas at 31/03/09 earned in the year 31/03/09 31/03/08** in CETV£’000 £’000 £’000 £’000 £’000National DirectorsGeoffrey Russell – – – – –Chief Executive (from 23/03/09) †Mark Haysom CBE* 10–12.5 0–2.5 188 145 29Former Chief ExecutiveDavid Way 45–50 0–2.5 1,011 926 13National Director, Adult Learning,Skills and Employment and Director,National Apprenticeship Serviceand lump sum140–145and lump sum0–2.5Rob Wye 40–45 0–2.5 876 786 38National Director, Young People’sLearning and Skillsand lump sum130–135and lump sum5–7.5Verity Bullough 10–15 0–2.5 157 126 21National Director, Funding, Planningand Performanceand lump sum30–35and lump sum5–7.5David Russell 55–60 0–2.5 1,385 1,290 7National Director, Financeand Resourcesand lump sum175–180and lump sum0–2.5Sally Stewart 20–25 2.5–5 330 277 32National Director, Human ResourcesPaul Holme 35–40 0–2.5 745 708 0Economic Response Director and lump sum and lump sum110–115 0–2.5Leadership and Governance*Opted to join premium.** Due to certain factors being incorrect in last year’s CETV calculator, there may be slight differences between lastyear’s reported closing figures and this year’s opening figures.†The pension entitlements for the new Chief Executive were not available at the time of publication and are notexpected to be material as only one week’s service has been completed and there is no brought forward CETV.LSC Annual Report and Accounts 2008–09 57

Regional DirectorsReal increase inAccrued pensionpensionand relatedand relatedlump sumlump sumat age 60 at age 60 CETV at CETV at Real increaseas at 31/03/09 earned in the year 31/03/09 31/03/08** in CETV£’000 £’000 £’000 £’000 £’000Caroline Neville* 10–15 0–2.5 199 160 24East of EnglandThomas Crompton 40–45 7.5–10 849 612 193East Midlandsand lump sum125–130and lump sum27.5–30David Hughes* 15–20 0–2.5 194 160 18LondonChris Roberts 40–45 0–2.5 980 888 32North Eastand lump sum130–135and lump sum2.5–5John Korzeniewski 45–50 0–2.5 1,123 1,035 17North Westand lump sum145–150and lump sum0–2.5Henry Ball* 50–55 0–2.5 1,223 1,218 6South East (retired July 2008)and lump sum125–130and lump sum0–2.5Marinos Paphitis 30–35 5–7.5 568 426 112South East (from 01/06/08)and lump sum90–95and lump sum17.5–20Malcolm Gillespie 20–25 0–2.5 466 437 18South Westand lump sum60–65and lump sum2.5–5David Cragg OBE 25–30 0–2.5 651 617 18West Midlands (Machinery ofGovernment Transition Directorfrom 12/05/08)and lump sum85–90and lump sum2.5–5Margaret Coleman 45–50 0–2.5 1,040 953 20Yorkshire and the Humberand lump sum135–140and lump sum2.5–5Mary Conneely* 15–20 0–2.5 262 209 19Regeneration London*Opted to join premium.** Due to certain factors being incorrect in last year’s CETV calculator, there may be slight differences between last year’s reported closing figures and this year’s opening figures.58 LSC Annual Report and Accounts 2008–09

SalaryFor the purposes of the analysis,‘salary’ includes the following whereapplicable:gross salary payablecompensation or redundancyperformance pay or bonusesother allowances, and• overtime payable.Benefits in kindThe monetary value of benefits in kindcovers any benefits provided by theemployer and treated by HM Revenueand Customs as a taxable emolument.The benefits provided by the LSCto National and Regional Directorsdisclosed on the previous pages relateto lease cars.Civil Service pensionsPension benefits are providedthrough the Civil Service pensionarrangements. From 1 October 2002,civil servants may be in one of threestatutory-based ‘final salary’ definedbenefit schemes (classic, premiumand classic plus). The schemes areunfunded, with the cost of benefitsmet by monies voted by Parliamenteach year. Pensions payable underclassic, premium and classic plusare increased annually in line withchanges in the Retail Prices Index.New entrants after 1 October 2002may choose to join either premiumor a good-quality ‘money purchase’stakeholder arrangement with asignificant employer contribution(partnership pension account).Employee contributions are set at therate of 1.5 per cent of pensionableearnings for classic and 3.5 per centfor premium, nuvos and classic plus.Benefits in classic accrue at the rate of1/80th of pensionable salary for eachyear of service. In addition, a lump sumequivalent to three years’ pension ispayable on retirement. For premium,benefits accrue at the rate of 1/60thof final pensionable earnings for eachyear of service. Unlike classic, there isno automatic lump sum (but membersmay give up (commute) some oftheir pension to provide a lump sum).Classic plus is essentially a variation ofpremium, but with benefits in respectof service before 1 October 2002calculated broadly as per classic.Nuvos is a relatively new definedbenefit scheme where employeecontributions are currently at3.5 per cent of pensionable pay.Pension benefits build up at therate of 2.3 per cent of pensionableearnings per annum and the optionis available at retirement to convertup to 25 per cent of total notionalpension benefits into a lump sum.The partnership pension account is astakeholder pension arrangement. Theemployer makes a basic contributionof between 3 per cent and 12.5 percent (depending on the age of themember) into a stakeholder pensionproduct chosen by the employee. Theemployee does not have to contribute,but where they do make contributions,the employer will match these up toa limit of 3 per cent of pensionablesalary (in addition to the employer’sbasic contribution). Employers alsocontribute a further 0.8 per cent ofpensionable salary to cover the costof centrally provided risk benefitcover (death in service and ill-healthretirement).Further details of the Civil Servicepension arrangements can be found atcivilservice-pensions.gov.uk.Cash equivalenttransfer valuesA cash equivalent transfer value (CETV)is the actuarially assessed capitalisedvalue of the pension scheme benefitsaccrued by a member at a particularpoint in time. The benefits valuedare the member’s accrued benefitsand any contingent spouse’s pensionpayable from the scheme. A CETV is apayment made by a pension schemeor arrangement to secure pensionbenefits in another pension scheme orarrangement when the member leavesa scheme and chooses to transfer thebenefits accrued in their former scheme.The pension figures shown relate tothe benefits that the individual hasaccrued as a consequence of their totalmembership of the pension scheme, notjust their service in a senior capacityto which disclosure applies. The CETVfigures (and, from 2003–04, the otherpension details) include the value ofany pension benefit in another schemeor arrangement that the individualhas transferred to the Civil Servicepension arrangements and for whichthe Civil Service vote has receiveda transfer payment commensuratewith the additional pension liabilitiesbeing assumed. They also include anyadditional pension benefit accruedto the member as a result of theirpurchasing additional years of pensionservice in the scheme at their owncost. CETVs are calculated within theguidelines and framework prescribed bythe Institute and Faculty of Actuariesand do not take account of any actualor potential reductions to benefitsresulting from Lifetime AllowanceTax which may be due when pensionbenefits are drawn.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 59

Please note that the factors used tocalculate the CETV were revised on1 April 2008 on the advice of theScheme Actuary. The CETV figure for31 March 2008 has been restated usingthe new factors so that it is calculatedon the same basis as the CETV figurefor 31 March 2009.Real increase in CETVThis reflects the increase in CETVeffectively funded by the employer.It takes account of the increase inaccrued pension due to inflation,contributions paid by the employee(including the value of any benefitstransferred from another pensionscheme or arrangement) and usescommon market valuation factors forthe start and end of the period.Geoffrey RussellChief Executive andAccounting OfficerLearning and Skills Council10 July 200960 LSC Annual Report and Accounts 2008–09

Financial CommentaryAccounts direction andstatutory background1. These accounts have beenprepared under an accountsdirection issued by DIUS inaccordance with Schedule 1 tothe Learning and Skills Act 2000,and the financial memorandumbetween the Department forEducation and Skills and the LSCdated 8 May 2006, that is nowunder the authority of BIS.Going concern2. The balance sheet at 31 March2009 shows net liabilities of£164.3 million (2007–08:£220.2 million net liabilities).This reflects the inclusion ofliabilities falling due in futureyears which, to the extent thatthey are not to be met from theLSC’s other sources of income,may only be met by future grantin-aidfrom the LSC’s sponsoringdepartments. This is because,under the normal conventionsapplying to Parliamentary controlover income and expenditure, suchgrant-in-aid may not be issued inadvance of need.3. Grant-in-aid for 2009–10, takinginto account the amount requiredto meet the LSC’s liabilities fallingdue in the year, has already beenincluded in the departments’estimates for that year. Theseestimates have been approved byParliament, and there is no reasonto believe that the departments’future sponsorship and futureParliamentary approval will not beforthcoming.4. The Apprenticeships, Skills,Children and Learning Billpublished in February 2009provides for the dissolution of theLSC and the transfer of functions,staff and property to the YPLA, theSkills Funding Agency and localauthorities. The accounts havebeen prepared on the assumptionthat, under the conventionsof Machinery of Governmentchanges, the LSC’s functions willcontinue in operational existencefor the foreseeable future, albeitthrough different delivery bodies.5. Accordingly, despite the currentbalance sheet position of the LSC,it has been considered appropriateto adopt a going-concern basis forthe preparation of these financialstatements.Year-end position6. The net book value of fixed assetsat 31 March 2009 increased from£54.4 million to £80.1 million,reflecting investment in IT and ITsystems. A significant proportionof the increase relates to thedevelopment and implementationof the Apprenticeship vacanciesonline matching system.7. At 31 March 2009, the LSChad debtors of £248.9 million(31 March 2008: £219.1 million).The increase captures a growthin accrued income relating to theEuropean Social Fund (ESF) as thenew 2007–13 programme gatherspace and a growth in otherprepayments.8. At 31 March 2009, the LSC heldcash balances of £111.3 million(31 March 2008: £98.3 million)including funds drawn from theESF as well as grant-in-aid. BIS(formerly DIUS) authorises aworking balance of 1 per centof the annual resource budgetthroughout each financial year.At 31 March 2009 the balanceof BIS and DCSF funds amountedto £47.7 million, or 0.4 per cent(31 March 2008: 0.3 per cent).9. At 31 March 2009, the LSChad creditors of £561.2 million(31 March 2008: £568.2 million).The overall value of creditors isrelatively unchanged, although thecomposition of this year’s balancehas a far greater concentrationof creditors relating to employerresponsiveprogrammes that isconsistent with increased delivery.10. Financial Reporting Standard(FRS) 29 requires organisationsto disclose information onthe significance of financialinstruments to their financialposition and performance, andthis is shown in note 18 tothe accounts.11. The most significant creditrisk to the LSC arises from thenon-payment of debts owed byprivate sector training providersthat are contracted to providetraining services. The likelihood ofsuch an eventuality is mitigatedby monthly reconciliation of aprovider’s entitlement to fundingand subsequent amendment tofuture funding in the demandledsystem. The financial impactof this is largely attributable toprovider insolvency. The overallfinancial impact is currentlynot material – see note 23 tothe accounts.12. Of the £55.7 million establishedto cover the one-off costsof reorganisation under theagenda for change programme,£15.7 million remains to coverexcess property costs andadditional, ongoing pensionliabilities.Leadership and GovernanceLSC Annual Report and Accounts 2008–09 61

Development andperformance13. The accounts cover the periodfrom 1 April 2008 to 31 March2009.14. The majority of the LSC’s fundingis grant-in-aid from government.In 2008–09, this amounted to£11,894.9 million (2007–08:£11,167.9 million).15. The largest source of incomewas the ESF, which contributed£159.0 million (2007–08:£292.5 million).16. HM Treasury requires NDPBs todisclose the full costs of theiractivities in their accounts. Wehave therefore included notionalincome of £10.4 million (2007–08:£11.6 million) for the cost ofcapital in our accounts. This isbased on a rate of 3.5 per cent(2007–08: 3.5 per cent). See also‘Cost of capital’ – note 8 to theaccounts.17. The results for 2008–09 show netexpenditure of £11,838.9 million(2007–08: £11,092.3 million). Thisis derived from the comparisonof expenditure against income forthe year. As an NDPB, the LSC isrequired to break even one yearwith another against the resourcebudget, and for 2008–09 thetotal expenditure was within theresource budget set by DIUS of£11,885.4 million. Total reservesin the same period decreased by£56.0 million.18. Capital expenditure in the year(mainly on computer systems)totalled £43.8 million (2007–08:£23.3 million).19. Research and developmentexpenditure during the yearamounted to £5.4 million(2007–08: £4.8 million).20. The Late Payment of CommercialDebts (Interest) Act requiresgovernment bodies, in the absenceof agreement to the contrary, tomake payments to suppliers within30 days of either the provision ofgoods or services or the date onwhich the invoice was received.The target set by HM Treasuryfor payment to supplierswithin 30 days is 95 per cent. In2008–09, the LSC paid 96 per cent(2007–08: 95.3 per cent) of itsinvoices within 30 days and70.2 per cent of its invoices within10 days (since October 2008).It incurred £nil in interest chargesin respect of late payments for2008–09 (2007–08: £18.36).21. During the year, 25,858 days wereattributable to sickness absence.Using the average number of staffemployed over the year (see note5 to the accounts) this equates toapproximately 8.3 days’ sicknessper employee per year.Main trends and factorsunderlying developmentand performance22. In 2008–09 the LSC’s programmeexpenditure increased by5.7 per cent to £11.8 billion.23. Train to Gain expenditureincreased from £355.8 millionin 2007–08 to £876.3 million in2008–09 on the back of increaseddelivery.24. Adult Apprenticeships, aprogramme with similar aims toTrain to Gain, also experiencedsizeable growth during 2007–08.Expenditure grew £118.4 million,a 51.7 per cent increase onthe previous year, reflecting asignificant increase in demandfor delivery of Apprenticeships forthose aged over 25.25. Despite some difficulties,expenditure on capital projectsincreased markedly over theyear. DIUS capital programmesexpenditure increased by£156.0 million, almost 35 per centup on 2007–08, while the DCSFJoint Capital Fund programmesaw expenditure increase byalmost 320 per cent – from£46.9 million to £196.8 million.The LSC will continue to seektransformation of the FE estatethough a needs-based framework,as recommended by Sir AndrewFoster.26. Total administration costs(excluding depreciation) werereduced by £14.7 million(or 7.5 per cent) relative to lastyear, as the LSC continued to meetits challenging budget throughfurther reductions in staff-relatedand other costs chargeable to theadministration budget.62 LSC Annual Report and Accounts 2008–09

Main trends and factorslikely to affect futuredevelopment andperformance27. The Machinery of Governmentchanges will see the LSC’schallenging agenda taken forwardby the Skills Funding Agency, theYPLA and local authorities from2010. Shadow arrangements tofacilitate the implementation ofthese reforms are expected to bein place by summer 2009.28. Apprenticeships will continue toexpand to include greater numbersof young people and adults. TheNational Apprenticeship Service,housed in the Skills FundingAgency, has been fully operationalfrom April 2009 and will be akey driver in the delivery of theentitlement to an Apprenticeshipplace for each suitably qualifiedyoung person from 2013.29. In an increasingly challengingeconomic climate, flexibilities havebeen introduced into the skillssystem so that funding can betargeted quickly and effectivelyat demand. We will continue towork with colleges and providersto explore how their budgets canbe applied flexibly within keypriorities to deliver sustainableemployment outcomes.31. On 5 June 2009, the Governmentannounced the creation of anew Department for Business,Innovation and Skills (BIS) whosekey role will be to build Britain’scapabilities to compete in theglobal economy. The departmentwas created by merging theDepartment for Business,Enterprise and Regulatory Reform(BERR) and DIUS. The sponsorshipresponsibility for the LSC passedto BIS on that date.32. There is no reason to believe thatthe expected government fundingunderlying the LSC’s goingconcernassertion will be affectedby this change.Auditor33. The accounts are audited by theComptroller and Auditor General,who is appointed by statute andwhose Certificate and Reportappears on page 64. Audit feeexpenditure is expected to be£229,750 (2007–08: £184,000),of which £220,000 relates tothe statutory audit of the LSCaccounts, and the increase reflectsthe complexity of auditingdemand-led systems. In addition,an audit fee of £9,750 wasincurred to support conversion toInternational Financial ReportingStandards in 2009–10.(nao.org.uk) under Publications.The National Audit Office iscurrently undertaking a study ofthe Train to Gain programme.35. As Accounting Officer I confirmthat:•there is no relevant auditinformation (as defined) of whichthe auditors are unaware•I have taken all the steps that Iought to in order to ensure thatI am aware of relevant auditinformation, and•I have taken all the steps that Iought to in order to establish thatthe LSC’s auditors are aware ofthe information.Geoffrey RussellChief Executive andAccounting OfficerLearning and Skills Council10 July 2009Leadership and Governance30. The introduction of the SeptemberGuarantee and the downturnin the employment market hasmeant that for 2009/10 there isincreasing demand on 16–18 FE,Entry to Employment and schoolsixth form places. Additionalfunding has been identified in the2009 Budget to provide 54,500extra places in 2009 and 2010.34. The National Audit Office, onbehalf of the Comptroller andAuditor General, also carries outvalue for money studies. During2008–09, the studies completedon areas within the LSC’sresponsibility were: Skills for Life:Progress in Improving Adult Literacyand Numeracy and Renewing thephysical infrastructure of Englishfurther education colleges. Thesedocuments are available on theNational Audit Office websiteLSC Annual Report and Accounts 2008–09 63

The Certificate and Report of the Comptrollerand Auditor General to the Houses of ParliamentI certify that I have audited thefinancial statements of the Learningand Skills Council (LSC) for theyear ended 31 March 2009 underthe Learning and Skills Act 2000.These comprise the Net ExpenditureStatement, the Balance Sheet, the CashFlow Statement and the related notes.These financial statements have beenprepared under the accounting policiesset out within them. I have also auditedthe information in the RemunerationReport that is described in that reportas having been audited.Respectiveresponsibilities of theNational Council, ChiefExecutive and auditorThe National Council and ChiefExecutive as Accounting Officerare responsible for preparing theAnnual Report, which includes theRemuneration Report and the financialstatements in accordance with theLearning and Skills Act 2000 anddirections made thereunder by theSecretary of State for Innovation,Universities and Skills, and for ensuringthe regularity of financial transactions.These responsibilities are set out inthe Statement of the LSC’s and ChiefExecutive’s Responsibilities on page 33.My responsibility is to audit thefinancial statements and the part ofthe Remuneration Report to be auditedin accordance with relevant legal andregulatory requirements, and withInternational Standards on Auditing(UK and Ireland).I report to you my opinion as towhether the financial statements givea true and fair view and whether thefinancial statements and the part of theRemuneration Report to be audited havebeen properly prepared in accordancewith the Learning and Skills Act 2000and directions made thereunder bythe Secretary of State for Innovation,Universities and Skills. I report to youwhether, in my opinion, the information,which comprises the ‘Our Targets andAchievements’, ‘Management andStructure’, ‘How We Take Care of OurPeople’ and ‘Financial Commentary’sections of the Annual Report, isconsistent with the financial statements.I also report whether in all materialrespects the expenditure and incomehave been applied to the purposesintended by Parliament and the financialtransactions conform to the authoritieswhich govern them.64 LSC Annual Report and Accounts 2008–09In addition, I report to you if the LSChas not kept proper accounting records,if I have not received all the informationand explanations I require for my audit,or if information specified by HMTreasury regarding remuneration andother transactions is not disclosed.I review whether the Statement onInternal Control reflects the LSC’scompliance with HM Treasury’sguidance, and I report if it does not.I am not required to consider whetherthis statement covers all risks andcontrols, or form an opinion on theeffectiveness of the LSC’s corporategovernance procedures or its risk andcontrol procedures.I read the other information containedin the Annual Report and considerwhether it is consistent with the auditedfinancial statements. This informationcomprises the other sections withinthe ‘Our Story’ and ‘Leadership andGovernance’ parts of the Annual Reportincluding the unaudited part of theRemuneration Report. I consider theimplications for my report if I becomeaware of any apparent misstatementsor material inconsistencies with thefinancial statements. My responsibilitiesdo not extend to any other information.Basis of audit opinionsI conducted my audit in accordancewith International Standards onAuditing (UK and Ireland) issued bythe Auditing Practices Board. My auditincludes examination, on a test basis,of evidence relevant to the amounts,disclosures and regularity of financialtransactions included in the financialstatements and the part of theRemuneration Report to be audited.It also includes an assessment of thesignificant estimates and judgementsmade by the LSC and AccountingOfficer in the preparation of thefinancial statements, and of whetherthe accounting policies are mostappropriate to the LSC’s circumstances,consistently applied and adequatelydisclosed.I planned and performed my auditso as to obtain all the informationand explanations which I considerednecessary in order to provide me withsufficient evidence to give reasonableassurance that the financial statementsand the part of the RemunerationReport to be audited are free frommaterial misstatement, whethercaused by fraud or error, and that inall material respects the expenditureand income have been applied to thepurposes intended by Parliament andthe financial transactions conform tothe authorities which govern them. Informing my opinion I also evaluated theoverall adequacy of the presentation ofinformation in the financial statementsand the part of the RemunerationReport to be audited.OpinionsAudit opinionIn my opinion:● the financial statements give a trueand fair view, in accordance withthe Learning and Skills Act 2000 anddirections made thereunder by theSecretary of State for Innovation,Universities and Skills, of the state ofthe LSC’s affairs as at 31 March 2009and of its net expenditure, recognisedgains and losses and cash flows forthe year then ended;● the financial statements and the partof the Remuneration Report to beaudited have been properly preparedin accordance with the Learning andSkills Act 2000 and directions madethereunder by the Secretary of Statefor Innovation, Universities and Skills;and● information, which comprises the‘Our Targets and Achievements’,‘Management and Structure’, ‘HowWe Take Care of Our People’ and‘Financial Commentary’ sections ofthe Annual Report, is consistent withthe financial statementsOpinion on regularity● In my opinion, in all materialrespects the expenditure and incomehave been applied to the purposesintended by Parliament and thefinancial transactions conform tothe authorities which govern them.ReportI have no observations to make onthese financial statementsAmyas C E MorseComptroller and Auditor General16 July 2009National Audit Office151 Buckingham Palace RoadVictoria, London SW1W 9SS

Net Expenditure Statementfor the year to 31 March 2009Year endedYear ended31 March 2009 31 March 2008Note £’000 £’000IncomeOther income 2 232,872 348,205Total income 232,872 348,205ExpenditureProgramme expenditureSchool sixth forms16–18 further educationFamily Learning Impact FundingYoung People ApprenticeshipsLearners with learning difficulties and/or disabilitiesLearner Support 16–1814–19 reformDCSF capital19+ further educationOther adult responsiveAdult ApprenticeshipsTrain to GainAdult safeguarded learningOffender LearningLearner Support 19+Adult skills reformQuality reformCapacity and infrastructureDIUS capitalNon-departmental programmesAdministration costsStaff costsOther costsDepreciation, impairment and losses on disposal333333333333333333332,113,280 2,038,7843,298,538 3,164,5698,240 0798,922 778,377224,538 202,802631,485 629,005120,973 177,233196,822 46,8801,468,938 1,874,328188,615 173,986347,288 228,894876,264 355,788214,087 223,378139,045 115,551165,419 124,68780,248 58,99183,772 171,93475,492 65,219606,893 450,979233,086 347,6235a6a6b128,05353,63418,130132,37863,96815,154Total expenditure 12,071,762 11,440,508Net expenditure before interest (11,838,890) (11,092,303)Cost of capital – notional income 8 10,386 11,612Net expenditure after interest (11,828,504) (11,080,691)Reversal of cost of capital (10,386) (11,612)Net expenditure for the year (11,838,890) (11,092,303)FinanceAll activities are continuing.There are no other gains or losses other than net expenditure for the year.The notes on pages 68 to 91 form part of these accounts.LSC Annual Report and Accounts 2008–09 65

Balance Sheetas at 31 March 2009As atAs at31 March 2009 31 March 2008Note £’000 £’000Fixed assetsIntangible assets 9 381 774Tangible assets 10 79,701 53,680Total fixed assets 80,082 54,454Current assetsDebtors 11a 248,916 219,069Cash at bank and in hand 12 111,287 98,346360,203 317,415CreditorsAmounts falling due within one year 13a (561,212) (568,215)Net current liabilities (201,009) (250,800)Total assets less current liabilities (120,927) (196,346)Provisions for liabilities and charges 14 (43,342) (23,899)Total net liabilities (164,269) (220,245)Represented byCapital and reservesGeneral reserve 19 (164,269) (220,245)Total reserves (164,269) (220,245)The notes on pages 68 to 91 form part of these accounts.Geoffrey RussellChief Executive and Accounting OfficerLearning and Skills Council10 July 200966 LSC Annual Report and Accounts 2008–09

Cash Flow Statementfor the year to 31 March 2009NoteYear ended31 March 2009£’000Year ended31 March 2008£’000Net cash outflow from operating activities 20 (11,844,778) (11,096,822)Capital expenditurePayment for the purchase of fixed assetsProceeds from sale of fixed assetsNet cash outflow from capital expenditure(37,157)10(37,147)(22,927)10(22,917)FinancingGrant-in-aid funding from DCSF/DIUS 19 11,894,866 11,167,929Net cash inflow 21 12,941 48,190The notes on pages 68 to 91 form part of these accounts.FinanceLSC Annual Report and Accounts 2008–09 67

Notes to the AccountsAccounting policies1 Statement ofaccounting policiesThe financial statements have beenprepared in line with the AccountsDirection given by the Secretary ofState for Innovation, Universities andSkills, with approval of HM Treasury,in accordance with the Learning andSkills Act 2000. This requires the LSC tocomply with the Government FinancialReporting Manual (FReM) issued byHM Treasury which, in turn, requiresthe LSC to comply with the accountingand disclosure requirements ofthe Companies Act and applicableaccounting standards issued oradopted by companies (UK GenerallyAccepted Accounting Practices) tothe extent that it is meaningful andappropriate to the public sector. Theparticular accounting policies adoptedby the LSC are described below. Theyhave been applied consistently indealing with items considered materialin relation to the accounts.1.1 Going concernThe Apprenticeships, Skills, Childrenand Learning Bill – published inFebruary 2009 – provides for thedissolution of the LSC and the transferof functions, staff and property tothe Young People’s Learning Agency(YPLA), the Skills Funding Agency andlocal authorities. The accounts havebeen prepared on the assumption that,under the conventions of Machineryof Government changes, the LSC’sfunctions will continue in operationalexistence for the foreseeable future,albeit through different delivery bodies.The sponsoring departments’ estimatesand forward plans include provisionfor the continuation of the LSC’sactivities under the Machinery ofGovernment changes so there is noreason to believe that future fundingwill not be forthcoming. Therefore,the accounts have been prepared ona going-concern basis.1.2 Accounting conventionThese accounts are preparedunder the modified historical costconvention, whereby fixed assets,current asset investments and stocks(where material) are reflected atcurrent values.1.3 Intangible fixed assetsIntangible fixed assets mainly compriselicences to use software developedby third parties. However, computersoftware which has been developedexclusively for the LSC and accountedfor as an asset is classified as tangible.Intangible fixed assets are valuedat historical cost (or revalued tomarket value where this is readilyascertainable) and are accounted foras follows:●●Computer software licences arecapitalised as intangible assetswhere they are capable of beingused for more than one year andhave a cost – either individuallyor as a group – equal to or greaterthan £5,000.These licences are amortised on astraight-line basis over the specifiedlife of the software licence – or overthree years where no life is given.1.4 Tangible fixed assetsTangible fixed assets are statedat the lower of replacement costand recoverable amount. Costs ofacquisition comprising only thosecosts that are directly attributableto bringing the asset into workingcondition for its intended use arecapitalised.For the purposes of calculating thecurrent value of tangible fixed assets,revaluation is applied (using indicesprepared by the Office for NationalStatistics) to the closing carryingvalue of assets in use at 31 March.Tangible fixed assets are also subject toimpairment reviews.The minimum level for capitalisation ofa tangible fixed asset is £5,000.All assets falling into the followingcategories are capitalised:a) tangible assets which are capable ofbeing used for more than one year,and have a cost equal to or greaterthan £5,000b) groups of tangible assets thatindividually may be valued at lessthan £5,000 but which togetherform a single collective assetbecause the items fulfil all thefollowing criteria:i) the items are functionallyinterdependent;ii) the items are acquired at aboutthe same date and are plannedfor disposal at about the samedate;iii) the items are under singlemanagerial control; andiv) each individual asset thusgrouped has a value of over£1,000.Tangible fixed assets are depreciatedon a straight-line basis in order towrite off the value of the assets overtheir estimated useful economic lives.These are detailed for each category ofasset in Table 1 on page 69.1.5 LeasesOperating leases and the rentalsare charged to the Net ExpenditureStatement on a straight-line basis overthe lease term, even if the paymentsare not made on such a basis.1.6 Cost of capitalA charge, reflecting the cost of capital,is included in the Net ExpenditureStatement. This charge is calculatedat the Government’s standard rate of3.5 per cent in real terms on all assetsless liabilities, except for bank balancesat the Office of the Paymaster General.When the average capital employedover the year is negative, the cost ofcapital becomes notional income.68 LSC Annual Report and Accounts 2008–09

Table 1: Depreciation of tangible fixed assetsCategory Asset LifeIT Desktop IT 3 yearsOther IT (for example, servers 5 years, or the life of the system – whichever is the lowerand computer software)Plant and machinery Plant and machinery 3 yearsFurniture and fittings Furniture 5 yearsFitting out10 years, or the life of the building lease involved – whicheveris the lower1.7 ProvisionsProvisions are recognised when it isprobable that the LSC will be requiredto settle a present obligation and areliable estimate can be made of thatobligation. The obligation is normallythe amount that the LSC would payto settle the obligation at the balancesheet date or to transfer it to a thirdparty at that time.1.8 Grant-in-aid from the sponsoringdepartmentsAll grant-in-aid has been recorded asfinancing as it is a contribution fromthe LSC’s controlling party giving riseto a financial interest. It is recorded asfinancing in the Cash Flow Statementand credited to the general reserve.1.9 Programme accounting basisLearning participationLearning participation programmeexpenditure is recognised in theaccounts when the grant is paid tocolleges in line with an agreed profilefor the academic year.The LSC sometimes pays advances offunding to colleges that experience cashflow difficulties. These are repayable,usually over a short term, throughprofiled deductions from futurepayments. Where they have not beenrecovered by the year-end, the balancesare included within advances and furthereducation (FE) college debtors.Capital fundingFunding in respect of approvedcapital infrastructure projects in FEcolleges is recognised in accordancewith the LSC Capital Handbook. Thisnormally means that fully verifiedclaims for capital project fundingthat are received between 2 Februaryin the previous financial year and1 February in the current financial yearare recognised as expenditure in thecurrent financial year.Exceptionally, the conditions of thecapital grant funding to colleges allowthe LSC to bring forward approvalsof payments for evidenced capitalexpenditure, but only where it hasthe funds available to do so. Wherethey occur, the approved values arealso recognised as expenditure in thecurrent year.Exceptional funding supportExceptional funding support providedto colleges in difficulty is charged toexpenditure over the life of the agreedrecovery plan, which will typicallycover a period of four years. Where theplan is for a period of greater than oneyear, this element of the funding isshown in FE college prepayments.Youth and adult analysisFor the academic year ending 31 July2008, allocations to FE institutionswere mainly assigned between youthand adult. Only a small element of theallocations required apportionmentinto both youth and adult, and thiswas based on the allocations alreadydetailed in the age bands.ApprenticeshipsApprenticeship programmeexpenditure is accounted for on thebasis of providers’ actual delivery(subject to contract value) in thefinancial year concerned.Train to GainTrain to Gain programme expenditureis accounted for on the basis ofproviders’ actual delivery of trainingand services.Adult safeguarded learningAdult safeguarded learning (ASL)programme expenditure is accountedfor on the basis of the utilisationof funds paid to local authorities.The LSC will recognise a debtor ateach year-end representing amountsof unspent funds, based on use offunds statements submitted by localauthorities for the academic yearthat has ended in the financial yearof account. The LSC may recover anyunspent funds or may allow localauthorities to utilise the unspent fundsin the following year.School sixth formsSchool sixth form programmeexpenditure is accounted for onthe basis of amounts that are dueto local authorities in order to payschool sixth forms in their locality. Theamounts due are based on the LSCformula funding and the Government’sMinimum Funding Guarantee.Education Maintenance AllowanceEducation Maintenance Allowance(EMA) expenditure is recognised in theaccounts when the administrator ofthe scheme is reimbursed by the LSCfor allowance payments to learners.Costs associated with administering thescheme are charged to the accounts onthe basis of activity completed by theend of the financial year.FinanceLSC Annual Report and Accounts 2008–09 69

1.10 Other incomeEuropean Social FundFunding for certain projects is receivedfrom the European Commission. Thisincome is matched to the expenditureprofile for each project concerned andany balance at the end of the financialyear transferred to deferred income(or income may be accrued where theexpenditure exceeds income receivedfor any particular financial year asappropriate). Other income principallycomprises fees and charges for goodsor services provided and is statedafter deducting recoverable ValueAdded Tax (VAT).1.11 Pension and superannuationcostsPresent and past employees arecovered by the provisions of thePrincipal Civil Service Pension Scheme(PCSPS), which is non-contributoryand unfunded. Although the schemeis a defined benefit scheme, liabilityfor payment of future benefits is acharge to the PCSPS and the LSC isunable to identify its share of theunderlying assets and liabilities. Thecost of pension cover provided for thestaff employed by the LSC is met bypayment of charges calculated on anaccruing basis. The accruing cost ofproviding for future benefits for currentemployees is charged to the NetExpenditure Statement so as to spreadthe total cost over the estimatedremaining service lives of employees ineach scheme. For unfunded schemessuch as the PCSPS this is achievedby charging the actuarially calculatedaccruing superannuation liabilitycharges paid by each individual body.There is a separate scheme statementfor the PCSPS as a whole.1.12 Early retirement costsWhere the LSC is required to meet theadditional costs of benefits beyond thenormal PCSPS benefits in respect ofemployees who retire early, provisionis made in full for this cost when theearly retirement programme has beenannounced and is binding. In certaincircumstances, settlement of some orall of the liability may have been madein advance by making a payment tothe Paymaster General’s account atthe Bank of England for the creditof the Civil Superannuation Vote.The prepayment and provision aredisclosed separately.1.13 VATIrrecoverable VAT is charged to therelevant expenditure category orincluded in the capitalised purchasecost of fixed assets. Where output taxis charged or input tax is recoverable,the amounts are stated net of VAT.2 Other incomeOther funding for activitiesEuropean Social Fund (ESF) 2003/06ESF 2007/13Other programme incomeYear endedYear ended31 March 2009 31 March 2008£’000 £’00065,509 292,02793,442 44272,464 55,139231,415 347,608Income from activitiesSub-letting of part of premises 1,408 469Other activities income 49 1281,457 597Total other income 232,872 348,20570 LSC Annual Report and Accounts 2008–09

3a Programme expenditureFundingdepartmentYear ended31 March 2009£’000Year ended31 March 2008£’0003.01 School sixth formsSchool sixth formsTeachers’ pay grant and significant growthTotal school sixth formsDCSFDCSF2,039,15674,1242,113,2801,967,34471,4402,038,7843.02 16–18 further educationParticipationAdditional Learner SupportInternational BaccalaureateTotal 16–18 further educationDCSFDCSFDCSF3,090,690206,8081,0403,298,5382,935,582228,2337543,164,5693.03 Family Learning Impact FundingFamily Learning Impact FundingTotal Family Learning Impact FundingDCSF 8,2408,240003.04 Young People Apprenticeships16–18 ApprenticeshipsEntry to EmploymentTotal Young People ApprenticeshipsDCSFDCSF629,561169,361798,922603,524174,853778,3773.05 Learners with learning difficulties and/ordisabilities (LLDD)Specialist collegesDevelopment FundForensic unitsTotal LLDDDCSFDCSFDCSF207,92513,6572,956224,538185,70214,6942,406202,8023.06 Learner Support16–18 Helpline Assessment and Payment Body (HAPB)administration costs16–18 school sixth form hardship16–18 FE hardshipLocal education authority (LEA) transport partnership16–18 residential bursariesCare to LearnFree Childcare for Training and Learning for WorkDance and Drama AwardsEducation Maintenance Allowance (EMA) student paymentsEMA sector administrationEMA marketingEMA programme maintenanceTotal Learner SupportDCSF 710 0DCSFDCSFDCSFDCSFDCSFDCSFDCSFDCSFDCSFDCSFDCSF3,30122,38512,0784,96133,9138,00914,416490,20334,9725,853684631,4853,85631,32212,0004,74530,003014,178487,27936,2007,6341,788629,005FinanceLSC Annual Report and Accounts 2008–09 71

Year endedYear endedFunding 31 March 2009 31 March 20083.07 14–19 reformdepartment £’000 £’000Education business links DCSF 24,723 24,597Learning Agreement pilots DCSF 16,429 19,217Young people not in education, employment or training DCSF 4,969 17,857Increasing flexibility for 14- to 16-year-olds DCSF (45) 24,657Young Apprenticeships DCSF 28,249 29,91814–19 fighting funds DCSF 28,532 33,55616–18 structural support DCSF 5,430 0National Apprenticeship Service marketing DCSF 4,708 0Parents-to-be scheme DCSF 3,498 3,44514–19 Apprenticeship improvements DCSF 1,762 420Key Stage 4 engagement programme DCSF 2,347 7,828Area inspections DCSF 371 15,738Total 14–19 reform 120,973 177,2333.08 Joint capital fund16–19 joint capital fund DCSF 196,822 46,880Total joint capital fund 196,822 46,8803.09 19+ further educationParticipation DIUS 1,272,317 1,688,477Additional Learner Support DIUS 147,197 133,256Structural support DIUS 3,816 9,708First Steps provision (via adult safeguarded learningproviders)DIUS 34,629 31,370Capital loan support DIUS 3,067 3,588Isles of Scilly and adult bursaries DIUS 2,554 3,074Access to Music DIUS 5,358 4,855Total 19+ further education 1,468,938 1,874,3283.10 Other adult responsiveEmployability skills programme DIUS 30,310 18,381Ufi programme DIUS 158,305 155,605Total other adult responsive 188,615 173,9863.11 Adult Apprenticeships19+ Apprenticeships DIUS 252,851 223,17525+ Apprenticeships DIUS 94,437 5,719Total Adult Apprenticeships 347,288 228,8943.12 Train to GainDelivery (includes wage compensation) DIUS 769,932 256,034Brokerage DIUS 44,497 38,630Infrastructure DIUS 39,679 42,829Level 3 pilots DIUS 7,849 5,574Higher skills for women DIUS 4,335 2,416Marketing DIUS 8,441 9,652Evaluation DIUS 1,531 653Total Train to Gain 876,264 355,78872 LSC Annual Report and Accounts 2008–09

3.13 Adult safeguarded learningPersonal and community development learning (PDCL)safeguarded (ASL providers)Year endedYear endedFunding 31 March 2009 31 March 2008department £’000 £’000DIUS 123,618 127,085Neighbourhood learning in deprived communities DIUS 20,776 20,243Family literacy, language and numeracy DIUS 25,300 25,721Family learning DIUS 12,455 12,221PCDL safeguarded (further education providers) DIUS 31,938 38,108Total adult safeguarded learning 214,087 223,3783.14 Offender LearningOffender Learning DIUS 139,045 115,551Total Offender Learning 139,045 115,5513.15 Learner Support 19+Administration costs (HAPB) DIUS 1,183 019+ hardship DIUS 43,541 42,076Discretionary Learner Support for English for Speakersfor Other LanguagesDIUS 4,342 4,926FE students in higher education institutions DIUS 792 949Residential bursaries DIUS 2,385 2,928Residential pilots DIUS 1,241 0Childcare DIUS 32,923 34,655Sixth Form Childcare scheme DIUS 1,946 2,202Adult Learning Grant DIUS 29,953 17,519Career Development Loans DIUS 49,702 21,436Career Development Loans – receipts DIUS (2,589) (2,004)Total Learner Support 19+ 165,419 124,6873.16 Adult skills reformCareers Advice Service DIUS 11,647 0Adult Advancement and Careers Service DIUS 2,186 0Level 3 pilot: Removing barriers to training DIUS 4,000 0Adult information, advice and guidance DIUS 31,970 32,496Skills for Jobs DIUS 16,091 2,078Learner Accounts – trials DIUS 3,548 3,739Centres of Vocational Excellence (CoVE) revenue DIUS 1,931 6,732New Standard DIUS 4,281 3,133Skills for Life marketing DIUS 5,041 4,678New Entrepreneur scholarships DIUS (447) 6,135Total adult skills reform 80,248 58,991Finance3.17 Quality reformVocational learning improvement fund DIUS 1,089 399Local initiatives fund DIUS 1,169 71,323Raising disability access DIUS 5,017 2,468Marketing and communications DIUS 18,256 26,316LSC Annual Report and Accounts 2008–09 73

Year endedYear endedFunding 31 March 2009 31 March 2008department £’000 £’000Front-line delivery – Health & Safety DIUS 2,754 2,319ESF match funding DIUS (59) 2,242Research DIUS 5,418 4,787‘Golden hellos’ DIUS 7,836 6,926Framework for Excellence DIUS 7,177 4,705Learning and Development Fund DIUS 3,913 4,914Mathematics in Education and Industry DIUS 2,198 2,191Initial teacher training DIUS (112) 29,985World Skills DIUS 2,800 745National Apprenticeship Service DIUS 7,777 0Managing Information across Partners DIUS 13,632 11,061Qualifications and Credit Framework DIUS 1,901 0Other quality reform DIUS 3,006 1,553Total quality reform 83,772 171,9343.18 Capacity and infrastructureNational Employer Service delivery DIUS 2,149 1,112Skills Pledge DIUS 2,635 0Sector skills pilots DIUS 2,353 13National Skills Academies DIUS 14,328 9,117Leadership and management DIUS 10,594 5,165Skills coaching DIUS 596 4,444Information and learning technology (ILT)Joint Information Systems Committee (JISC) revenueDIUS 24,414 22,484ILT revenue costs DIUS 560 4,102External financial assurance DIUS 3,814 6,619Aimhigher DIUS 9,338 9,338Data services DIUS 2,612 0FE data reform DIUS 0 2,098Other capacity and infrastructure DIUS 2,099 727Total capacity and infrastructure 75,492 65,2193.19 DIUS capital programmesFE capital buildings DIUS 543,475 322,820FE CoVE capital DIUS 212 3,856ASL capital buildings DIUS 4,908 5,754FE/ASL DDA DIUS 664 11,090Neighbourhood learning in deprived communities DIUS 9,306 10,055Systems development DIUS 18,165 21,778FE capital – ILT DIUS 23,087 36,017Colleges in difficulty DIUS 3,031 35,306LEA loan liabilities DIUS 4,045 4,303Total DIUS capital programmes 606,893 450,97974 LSC Annual Report and Accounts 2008–09

Year endedYear ended31 March 2009 31 March 2008£’000 £’0003.20 Non-departmental programmesESF 2003/06 67,384 292,321ESF 2007/13 93,442 465Other 72,260 54,837Total non-departmental programmes 233,086 347,623Total programme expenditure 11,871,945 11,229,008Note: the descriptions and classification of some programmes have been changed in 2008–09 to reflect the Grant Letterand reporting requirements of DIUS and DCSF for the same year. Comparatives for 2007–08 have been amended so as toensure consistency. There is no financial impact as the change represents a re-analysis of the same programmes.Grants to the private sector totalling £2,019,471 (2007–08: £1,771,262) are included in the values above.3b Programme expenditure by regional officeYear endedYear ended31 March 2009 31 March 2008£’000 £’000RegionEast of England 1,142,084 1,068,596East Midlands 982,607 930,280London 1,966,508 1,857,877North East 710,177 666,993North West 1,685,784 1,577,542South East 1,789,005 1,660,131South West 1,073,507 1,038,498West Midlands 1,382,545 1,331,930Yorkshire and the Humber 1,139,728 1,097,161Total programme expenditure by region 11,871,945 11,229,008FinanceLSC Annual Report and Accounts 2008–09 75

4 Assurances onentitlement to, and theproper use of, Learningand Skills Council fundsIn order to gain assurance over theproper use of public funds by learningproviders, the LSC has establishedregional and national office auditteams within the provider financialmanagement function. As set out inthe Accounting Officer’s Statementon Internal Control, the national andregional audit teams are responsiblefor planning, co-ordinating anddelivering a programme of work tosecure this assurance. The outcomes ofaudit work are scrutinised by regionaland national LSC audit committees.The approaches used to obtainassurance depend on the risksassociated with providers and fundingstreams, and are designed to minimisebureaucracy for providers. In broadterms, where grant funding is providedto other public bodies such as FEcolleges, the LSC relies on audit workcarried out by the public bodies’auditors, working to an audit code ofpractice and standards set by the LSC.For private sector and other trainingproviders funded under contract, theLSC’s national and regional auditteams undertake their own auditwork to ensure that funds have beenproperly applied in the delivery ofthose contracts.Assurance on grantsIncluded in these financial statementsare grants to FE learning providersthat the LSC has paid for theacademic years ending 31 July 2008(four months) and 31 July 2009(eight months).The mismatch between the accountingperiods means that certain formalassurances on entitlement and theproper use of the funds will onlybe received from these providers inline with their own annual accountsreporting timetable, which extendsbeyond that for these financialstatements. Alternative arrangementshave therefore been put in placeto provide interim assurance as at31 March 2009. The overall picture isdescribed below.4a. FE colleges and institutionsDuring the financial year 2008–09,the LSC paid grants of £5,379million (2007–08: £5,495 million) tocolleges and other institutions forthe provision of FE on the basis ofagreed development plans. The LSCimplemented plan-led funding for2004–05 and, under this initiative,the majority of colleges and manyother institutions have no longerbeen subject to annual fundingaudit. However, colleges are requiredto return a year-end funding claimcertified by the principal. An enhancedregularity audit has been establishedfor all FE colleges, and these collegesand institutions are also now subjectto cyclical reviews of learner existenceand eligibility. Therefore, for themajority of colleges, the primarysources of assurance for the LSC’s2008–09 financial statements areaudit opinions on their accounts forthe academic year ended 31 July2008. Final funding claims for theeight colleges not eligible for plan-ledfunding in 2007/08 were also requiredto be audited.To provide assurance in respect offunds paid to FE colleges for theperiod 1 August 2008 to 31 March2009, colleges provided to the LSC astatement on regularity, propriety andcompliance, signed by the chair andprincipal on behalf of the governingbody. As at 3 July 2009, 364 collegeshave submitted the requiredstatement.The position in respect of the 2007/08academic year is shown in Tables 2and 3.Table 2: 2007/08 position of FE colleges (£5,656 million) (2006/07: £5,213 million) Due Received OutstandingAudited final funding claims 7 7 –Financial statements 366 364 2Final regularity opinions 366 364 2There are two colleges that have both their financial statements and regularity opinion outstanding. These colleges arebeing pursued by the LSC.Table 3: 2007/08 position of other education institutions (£228 million) (2006/07: £249 million)Due Received OutstandingAudited final funding claims 76 69 776 LSC Annual Report and Accounts 2008–09

Ufi and learndirectThroughout 2008–09 the responsibilityfor the audit of learndirect activityrested with Ufi Ltd. Ufi Ltd hasestablished an adequate assuranceframework that the LSC intends toplace reliance on. The national officeaudit team monitors the outcomesof Ufi Ltd assurance work and alsoundertakes its own programmeof work.4b. Adult safeguarded learningThe LSC paid £249 million (2007–08:£240 million) for ASL to localauthorities in England in the financialyear 2008–09. Four months of thisrelates to the academic year ending31 July 2008 and eight monthsrelates to the academic year ending31 July 2009.The certification of local authorityfunding and expenditure statementsover the use of ASL funding haschanged for 2007/08 academic year.The LSC no longer requires thatstatements are certified by the AuditCommission, only that they are selfcertifiedby the finance director of thelocal authority. For the year ending 31July 2008, all 147 local authorities thatreceived funding in the period havesubmitted their self-certified use ofASL funding statements to the LSC.4c. School sixth formsThe LSC paid local authorities £2,113million (2007–08: £2,039 million) forschool sixth forms in the financial year2008–09. Four months of this relatesto the 12-month period ending31 July 2008. Eight months relates tothe academic year ending 31 July 2009.During 2008–09 all schools wererequired to make two returns to DCSFthrough local authorities in Novemberand May. The LSC calculated fundingfor each school sixth form in theyear ending 31 July 2009 using datafrom the autumn 2007 return andpupil numbers from the autumn 2007census count. Autumn 2007 pupilcensus data was audited in summer2008 at a sample of 347 schools.4d. Education MaintenanceAllowance (EMA)EMA expenditure was £532 million inthe financial year 2008–09 (2007–08:£533 million). The LSC undertakes arolling programme of work to provideassurance on the EMA expenditure ithas incurred over the course of thefinancial year.Assurance is obtained through acombination of direct audit work,through the work of the nine regionalaudit teams, or by placing relianceon the work of externally contractedauditors. With the exception of systemissues at Liberata that delayed EMApayments to students, the resultsof the assurance work completedin financial year 2008–09 raised noconcerns over the use of funds inthat year.Assurance on contractsNote 3a of these financial statementsincludes payments made in respect ofprogrammes including Apprenticeships,Train to Gain and ESF. The LSC’saudit teams deliver assurance overlearning providers’ use of funds basedon audit plans which are approvedby the LSC’s audit committees.Coverage of providers and fundingstreams is dependent on a detailedrisk assessment, and audits take placeon a cyclical basis. Where audit teamsidentify funds at risk, the LSC takesaction to recover funding.FinanceLSC Annual Report and Accounts 2008–09 77

5a Staff costsInformation in respect of board members’ and senior employees’ emoluments and pension entitlements is provided in theRemuneration Report on pages 50 to 60.The aggregate payroll costs for the LSC were as follows:Year endedYear ended31 March 2009 31 March 2008£’000 £’000Salaries 123,179 117,319Social security 10,817 10,597Pension costs 24,179 23,574Redundancies (14) 1,153158,161 152,643Other staff (includes agency/contract/seconded staff) 4,693 4,882162,854 157,525Staff costs related to programmes (34,801) (25,147)Total staff costs 128,053 132,3785b Pension costs – Principal Civil Service Pension Schemeemployer contributionsPension benefits are provided through the Principal Civil Service Pension Scheme (PCSPS). The PCSPS is an unfundedmulti-employer defined benefit scheme. The LSC is unable to identify its share of the underlying assets and liabilities.The Scheme Actuary valued the scheme as at 31 March 2008. Details can be found in the resource accounts of theCabinet Office: Civil Superannuation (www.civilservice-pensions.gov.uk).For 2008–09, employers’ contributions of £23,419,088 were paid to the PCSPS by 31 March 2009 (2007–08: £22,681,830)at one of four rates in the range 17.1 per cent and 25.5 per cent of pensionable pay (2007–08: 17.1 per cent and25.5 per cent), based on salary bands. The Scheme Actuary reviews employer contributions every four years followinga full scheme valuation.The contribution rates are set to meet the cost of the benefits accruing during 2008–09 to be paid when the memberretires, and not the benefits paid during this period to existing pensioners.Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. Employers’contributions of £158,165 (2007–08: £174,126) were paid to one or more of a panel of three appointed stakeholder pensionproviders. Employer contributions are age related and range from 3 per cent to 12.5 per cent of pensionable pay. Employersalso match employee contributions up to 3 per cent of pensionable pay. Employer contributions of £12,844 (2007–08:£13,998) representing 0.8 per cent of pensionable pay were payable to PCSPS to cover the cost of future provision oflump-sum benefits on death in service and ill-health retirement.No contributions were outstanding to the partnership pension providers at the balance sheet dates of 31 March 2009 and31 March 2008.78 LSC Annual Report and Accounts 2008–09

5c Average number of staff employed(i) Year ended March 2009Year endedSenior Inward Agency/ 31 Marchmanagement Payroll seconded temporary 2009staff staff staff staff total staffnumber number number number numberThe average number of staff employed duringthe year, including the Chief Executive, was:GroupAdult Learning, Skills and Employment 1 135 17 153Young People’s Learning and Skills 1 66 4 71Finance and Resources 1 212 17 230Funding, Planning and Performance 2 130 3 8 143Human Resources 1 64 1 2 68Sector Shared Services 36 6 42National Apprenticeship Service 11 1* 2 14Regional and local LSCs 12 2,446 12 38 2,508Total 18 3,100 17 94 3,229*Inward seconded staff member also part of management group.(ii) Year ended March 2008Year endedSenior Inward Agency/ 31 Marchmanagement Payroll seconded temporary 2008staff staff staff staff total staffnumber number number number numberThe average number of staff employed duringthe year, including the Chief Executive, was:GroupLearning 121 18 139Skills 1 92 1 10 104Resources 1 283 2 65 351Strategy and Communications 2 43 7 52Human Resources 1 70 14 85Regional and local LSCs 10 2,553 2 155 2,720Total 15 3,162 5 269 3,451FinanceLSC Annual Report and Accounts 2008–09 79

6a Administration (other costs)Year endedYear ended31 March 2009 31 March 2008£’000 £’000National and regional council members’ emoluments 692 37National and regional council members’ associated travel and subsistence costs 186 58Travel and subsistence – staff 10,189 10,038Recruitment and training 3,943 4,772Furniture and office equipment 119 1,667IT and computer maintenance 11,279 15,984Telecommunications and postage 3,461 3,844Publications, printing and publicity 2,140 2,097General administration expenditure 3,129 3,275Premises 25,149 22,053External audit fee 230* 184Legal fees and other audit fees 18,332 4,32278,849 68,331Non-pay costs related to programmes (25,215) (4,363)Total 53,634 63,968*£220,000 of the 2008–09 value relates to the statutory audit of the LSC’s financial statements and the balance relates toaudit fee work in support of the conversion to International Financial Reporting Standards in 2009–10.6b Depreciation, impairment and losses on disposalYear endedYear ended31 March 2009 31 March 2008Note £’000 £’000Intangible fixed assets 9Depreciation charge for period 466 462Loss on disposal 7 0Tangible fixed assets 10Depreciation charge for period 15,179 12,467Loss on disposal 472 923Loss on impairment 2,006 1,302Total charged for period 18,130 15,15480 LSC Annual Report and Accounts 2008–09

7 Operating lease commitmentsYear endedYear ended31 March 2009 31 March 2008£’000 £’000The LSC had annual commitments under non-cancellable operating leasesat 31 March as detailed below:a) Land and buildingsLeases expiring:Within one year 178 178Between two and five years 4,328 4,191More than five years 12,430 11,437Total 16,936 15,806b) OthersLeases expiring:Within one year 549 1,734Between two and five years 139 768More than five years 0 0Total 688 2,502The annual charge for the above leases is included innote 6a and consists of the following amounts:Land and buildings (rents and service charges) 14,540 13,685Other leases (includes photocopiers and lease cars) 1,254 4,854Total operating lease commitments 15,794 18,5398 Cost of capitalGuidance given by HM Treasury in the Financial Reporting Manual requires non-departmental public bodies (NDPBs) todisclose the full cost of their activities in their accounts. The LSC has therefore included in its accounts charges for the costof capital.The cost of capital has been arrived at by calculating a rate of 3.5 per cent to the average capital employed.Year endedYear ended31 March 2009 31 March 2008£’000 £’000Capital employed as at 1 April (318,411) (345,142)Capital employed as at 31 March (275,092) (318,411)Average capital employed (296,752) (331,777)Interest on capital at 3.5 per cent per annum (10,386) (11,612) FinanceLSC Annual Report and Accounts 2008–09 81

9 Intangible fixed assetsITTotalSoftwarePurchased£’000 £’000Cost or valuationAt 1 April 2008 2,404 2,404Additions 80 80Disposals (93) (93)At 31 March 2009 2,391 2,391DepreciationAt 1 April 2008 (1,630) (1,630)Disposals 86 86Charge for period (466) (466)At 31 March 2009 (2,010) (2,010)Net book value (NBV)At 1 April 2008 774 774Total NBV intangible fixed assets at 31 March 2009 381 38110 Tangible fixed assetsIT assetsunder Furniture Plant and Computers Totalconstruction Vehicles and fittings machinery and other IT purchased£’000 £’000 £’000 £’000 £’000 £’000Cost or valuationAt 1 April 2008 7,000 7 24,411 743 65,195 97,356Reclassification of assetsunder construction (26,320) 0 0 0 26,320 0Additions 27,030 0 (17) 28 16,645 43,686Disposals 0 (7) (773) (77) (3,082) (3,939)Impairment 0 0 0 0 (2,886) (2,886)At 31 March 2009 7,710 0 23,621 694 102,192 134,217DepreciationAt 1 April 2008 0 (7) (10,118) (675) (32,876) (43,676)Disposals 0 7 466 77 2,909 3,459Charge for period 0 0 (2,584) (42) (12,553) (15,179)Impairment 0 0 0 0 880 880At 31 March 2009 0 0 (12,236) (640) (41,640) (54,516)Net book value (NBV)At 1 April 2008 7,000 0 14,293 68 32,319 53,680Total NBV tangible fixed assetsat 31 March 2009 7,710 0 11,385 54 60,552 79,70182 LSC Annual Report and Accounts 2008–09

11a DebtorsAs atAs at31 March 2009 31 March 2008£’000 £’000Due in one yearAdvances and other FE college debtors 42,444 5,284Work-based learning (WBL) debtors 7,943 6,109School sixth form debtors 0 55Trade debtors 536 1,089ESF and other debtors 37,913 61,491Sub-total debtors 88,836 74,028ESF and other accrued income 108,677 89,476FE college prepayments 36,712 41,706WBL prepayments 82 0Administration cost prepayments 6,665 5,500Other prepayments 7,944 8,357Sub-total accrued income and prepayments 160,080 145,039Sub-total debtors, accrued income and prepayments 248,916 219,067Capital debtors (sale proceeds of fixed assets) 0 2Sub-total due in one year 248,916 219,069Due in more than one yearAdvances and other FE college debtors 0 0Total debtors 248,916 219,069Note: debtors include a provision for doubtful debts of £12.6 million at 31 March 2009 (2007–08: £9.4 million).11b Debtors: analysed by type of organisationThe following note provides an analysis of the debtors, accrued income and prepayments detailed above by typeof organisation.As atAs at31 March 2009 31 March 2008£’000 £’000Due in one yearLocal authorities 15,989 17,174NHS trusts 166 28Public corporations and trading funds 785 978Other central government bodies 124,713 87,993Balances with other government bodies 141,653 106,173FinanceBalances with non-governmental bodies 107,263 112,896Sub-total due in one year 248,916 219,069Due in more than one yearBalances with non-governmental bodies 0 0Total debtors by organisation type 248,916 219,069LSC Annual Report and Accounts 2008–09 83

12 Cash at bank and in handCash held at the Office of Paymaster GeneralCash held at other banks and in handTotalAs at31 March 2009£’000110,823464111,287As at31 March 2008£’00098,16618098,346The Department for Business, Innovation and Skills (BIS – formerly DIUS) authorises a working balance at 31 March of1 per cent of the total resource budget agreed for the financial year. This working balance excludes funding for ESF whichis also included in the cash held at the Office of Paymaster General above.The performance against the BIS working balance target is detailed below:As at31 March 2009£’000As at31 March 2008£’000Total resource budget 11,885,371 11,279,3191 per cent thereof 118,854 112,793Paymaster General account balance for BIS funding within the above 47,671 29,89484 LSC Annual Report and Accounts 2008–09

13a Creditors: amounts falling due within one yearTrade creditorsFE college creditorsWBL creditorsSchool sixth form creditorsTax and social securityESF and other creditorsAs atAs at31 March 2009 31 March 2008£’000 £’0004,27636,239189,5923068,60413,706133,53961154 2518,190 37,837Sub-total creditors 248,657 194,322ESF and other deferred income 26,265 64,635WBL accruals 22,791 11,082Other accruals 253,988 295,274Sub-total deferred income and accruals 303,044 370,991Sub-total creditors, deferred income and accruals 551,701 565,313Capital creditors 9,511 2,902Total creditors 561,212 568,21513b Creditors: analysed by type of organisationThe following note provides an analysis of the creditors, deferred income and accruals detailed above by typeof organisation:As atAs at31 March 2009 31 March 2008£’000 £’000Local authoritiesNHS trustsPublic corporations and trading fundsOther central government bodiesBalances with other government bodiesBalances with non-governmental bodiesTotal creditors by organisation type19,935 37,483386 4363,092 11,69443,716 129,37867,129 178,991494,083 389,224561,212 568,215FinanceLSC Annual Report and Accounts 2008–09 85

14 Provisions for liabilities and chargesagenda forCareerEarly change Funding Project Developmentretirement Theme 7 claims Connect Loans Total£’000 £’000 £’000 £’000 £’000 £’000Provision balance at 1 April 2008 294 18,692 1,530 3,383 0 23,899Additional charge in year 0 3,044 0 0 25,344 28,388Provision utilised in year (97) (3,403) 0 (561) 0 (4,061)Provision unused and reversed during the year 0 (2,613) (500) (1,771) 0 (4,884)Balance of provision at 31 March 2009 197 15,720 1,030 1,051 25,344 43,342Early retirementThis covers the LSC’s additional pension contributions that are charged against administration expenditure. These aredefined by and made to the scheme administrator for the period up to normal retirement age for individuals who retiredearly under the LSC’s Reshaping programme.agenda for change: Theme 7This relates to the costs chargeable against administration of reorganising the LSC under the agenda for changeprogramme. The majority of the balance relates to the liabilities associated with aligning our property portfolio to matchour ongoing needs and is based on assumptions from property professionals about the timing of lease re-assignments. Theremaining element covers the LSC’s additional pension contributions to the scheme administrator in relation to individualswho retired early as part of agenda for change.Funding claimsThis relates to entitlement to programme funding. No further disclosure is provided to avoid prejudice in futurenegotiations.Project ConnectThe LSC has recently consolidated the IT services provided to it into a single contract. A consequence of this is a probableoutflow to cover the redundancy costs of some former LSC staff who have transferred into the new supplier organisationwith TUPE rights. £786,550 of the remaining provision relates to administration costs, with the balance charged againstprogramme expenditure.Career Development LoansThe LSC has a liability to cover a proportion of the default payments that occur under this programme. The majorityof this provision reflects the probable outflow of funds in relation to this together with an element of the cost of coveringinterest-driven liabilities while the recipients of the loans complete their course15 Capital commitmentsCommitments for capital expenditure administered by the LSC at the end of the period were as follows:As at31 March 2009£’000As at31 March 2008£’000Payable within one yearAuthorised and contracted for 00Total capital commitments 0 0Payable between two and five yearsAuthorised and contracted for 0 0Total capital commitments 0 086 LSC Annual Report and Accounts 2008–09

16 Commitments to make grants to colleges and schoolsAt 31 March the LSC had commitments for FE participation and school sixth form funding relating to the remaining periodof the academic year from April to July, together with capital commitments in respect of FE capital project support.The LSC operates two levels of approval for all capital projects, an initial approval in principle and full approval in detail.Large infrastructure projects therefore undergo two levels of approval. The commitment for FE capital project supportdisclosed below reflects the total value of agreed LSC funding for infrastructure projects that have full approval in detail.As atAs at31 March 2009 31 March 2008£’000 £’000Payable within one yearFE participation 2,052,921 1,835,310School sixth forms 682,727 659,626FE capital project support 835,979 582,106Other capital grants (accessibility and CoVE) 31,084 15,8803,602,711 3,092,922Payable between two to five yearsFE capital project support 770,201 399,097Other capital grants (accessibility and CoVE) 0 0770,201 399,09717 Contingent liabilitiesThe LSC had no material contingent liabilities at 31 March 2009 (2008: none).Capital programmeIn addition to the commitments outlined in the note above, the LSC has an obligation, subject to a needs-basedprioritisation assessment, to fund some of the FE capital projects that were in development before the review of the capitalprogramme by Sir Andrew Foster was announced. As the assessment process is still ongoing, no sufficiently reliable estimateof the extent of this liability is available for inclusion in these accounts.Through its normal financial intervention process, the LSC will ensure that no college is unable to meet its financialobligations as a result of decisions on capital projects.18 Financial instrumentsFinancial Reporting Standard (FRS) 29 requires the LSC to disclose information on the significance of financial instrumentsto its financial position and performance.FinanceThe LSC is exposed to credit risk resulting from the non-payment of debts relating to private sector provision of trainingservices and this is most usually attributable to insolvency. Private sector training providers are subject to quality andfinancial status reviews prior to being awarded contracts. Provision of funding is reconciled to earned values on a monthlybasis with future payments adjusted to ensure that the risk of building up debt is minimised. The overall financial impact ofsuch instances is not material, as shown in notes 11 and 23.As an NDPB almost wholly funded by BIS (formerly DIUS) and DCSF, and with no borrowings, the LSC is not exposed to anymarket or liquidity risk.The LSC has no material deposits in interest-bearing accounts and all material assets and liabilities are denominated insterling; it is not exposed to any significant interest rate or currency risk.LSC Annual Report and Accounts 2008–09 87

19 General reserveAs atAs at31 March 2009 31 March 2008£’000 £’000Balance at 1 April (220,245) (295,871)Deficit before interest (11,838,890) (11,092,303)Grant-in-aid funding 11,894,866 11,167,929Balance at 31 March (164,269) (220,245)20 Reconciliation of net expenditure before interest to net cash flow from operatingactivitiesYear endedYear ended31 March 2009 31 March 2008Note £’000 £’000Net expenditure before interest (11,838,890) (11,092,303)Depreciation charges 6b 15,645 12,929Loss on disposal of fixed assets 6b 479 923Loss on impairment 6b 2,006 1,302(Increase)/decrease in debtors – excludes capital debtors 11a (29,849) 29,901Decrease in creditors – excludes capital creditors 13a (13,612) (39,139)Increase/(decrease) in provisions for liabilities and charges 14 19,443 (10,435)Net cash outflow from operating activities (11,844,778) (11,096,822)21 Reconciliation of net cash flow to movement in cash balance heldYear endedYear endedNote 31 March 2009 31 March 2008£’000 £’000Cash at bank and in hand at 1 April 12 98,346 50,156Increase in cash for the year – per Cash Flow Statement 12,941 48,190Cash at bank and in hand at 31 March 111,287 98,34688 LSC Annual Report and Accounts 2008–09

22 Related party transactionsThe LSC is an NDPB sponsored by BIS (formerly DIUS) and DCSF, all of whom are regarded as related parties.During the year, the LSC entered into transactions with organisations that can be considered as related because of thenature of the involvement of LSC National Council members and Management Group directors, or their close familymembers. The table below details the most material transactions and the relationship of the organisations to the LSC.All transactions were in the normal course of business and were conducted at arm’s length.LSC CouncilRelatedmember/director/ LSC role/ organisation Relatedclose family member relationship role/relationship organisation Transaction(s) Value (£ million)Partner of Rob Wye Partner of Vice Principal Warwickshire LSC provided 28.3National Director College fundingallocationsSpouse of Spouse of Principal City College LSC provided 22.4Malcolm Gillespie Regional Director Plymouth fundingallocationsMargaret Galliers CBE National Council Principal Leicester LSC provided 21.6member College fundingallocationsGareth National Council Governor Thames Valley LSC provided 1.2Cadwallader member University fundingallocationsIan Ferguson CBE National Council Board member UK Skills LSC provided 1.1memberfundingallocationsIan Ferguson CBE National Council Chairman Rathbone LSC provided 5.4memberfundingallocationsFinanceLSC Annual Report and Accounts 2008–09 89

23 Losses statementThe LSC incurred the following losses in the period to 31 March 2009. The losses have been charged to the relevantprogramme in Note 3a.Year endedYear ended31 March 2009 31 March 2008Description £’000 £’000WBL and Train to Gain2008–09 – cases above £250,000 individually 3392008–09 – cases below £250,000 individually 7482007–08 – cases below £250,000 individually 9061,087 906ESF provision2008–09 – cases above £250,000 individually 1,0342007–08 – cases above £250,000 individually 5972008–09 – cases below £250,000 individually 1,3202007–08 – cases below £250,000 individually 7622,354 1,359Other programme provision2008–09 – cases above £250,000 individually 3752008–09 – cases below £250,000 individually 372007–08 – cases below £250,000 individually 211412 211Total cash losses 3,853 2,476At 31 March 2009 there were 58 cases (20 WBL and Train to Gain provision, 33 ESF provision and 5 other programmeprovision) of which 3 were above the reporting threshold of £250,000 individually. The majority of these losses relate toprofiled payments to providers who have gone into liquidation before automatic recovery against future payments and aresubject to approval from the relevant authority below.The Chief Executive of the LSC has delegated authority to approve the write-off of cash losses with an item value of up to£10,000 and subject to an overall limit of £250,000 in any one year. The LSC has requested BIS and HM Treasury approvalto write off the cases above, within their respective delegated authorities, as summarised below:31 March 2009NumberLossAuthority Item value of cases £’000LSC Up to £10,000 25 89BIS £10,000 to £100,000 24 1,075HM Treasury Over £100,000 9 2,689Total losses 58 3,85390 LSC Annual Report and Accounts 2008–09

24 Special paymentsDuring the course of the financial year, Liberata encountered some difficulties delivering EMA payments to students thatled the LSC to terminate their contract and re-engage the previous service provider, Capita. In the course of securingongoing service provision with minimum disruption to learners, while also acting in the wider public interest and with theapproval of HM Treasury, the LSC incurred some additional costs as described below.A one-off disengagement payment of £4 million was made to the outgoing service provider to secure the transfer of theexisting systems to the new service provider.The LSC also waived its right to demand £3 million of penalty payments from the outgoing service provider.Some additional administration and other costs directly related to securing ongoing provision were also incurred by theincoming service provider.25 Post-balance sheet eventsOn 5 June 2009, the Government announced the creation of a new Department for Business, Innovation and Skills (BIS)whose key role will be to build Britain’s capabilities to compete in the global economy. The department was created bymerging the Department for Business, Enterprise and Regulatory Reform and DIUS. The sponsorship responsibility for theLSC passed to BIS on that date.There is no reason to believe that the expected government funding underlying the LSC’s going-concern assertion will beaffected by this change.There have been no events after the balance sheet date that have had a material impact on the financial statements.The financial statements were authorised for issue by Geoffrey Russell (Accounting Officer) on 16 July 2009.FinanceLSC Annual Report and Accounts 2008–09 91

Glossary and Further InformationThis is a brief guide to the mainstrategies, initiatives, partners andprogrammes with which the LSC isinvolved and that are mentioned inthis Annual Report.More information about all our policiesand activities can be accessed onlineat lsc.gov.uk. Alternatively, call 0870900 6800 for information about yournearest LSC office.14–19 reformsThe 14–19 reforms will give all youngpeople the opportunity to choosea mix of learning that motivates,interests and challenges them, andthat gives them the knowledge, skillsand attitude they need in order tosucceed in education, work and life.Adult Learning Grant (ALG)An allowance of up to £30 per weekgiven to adults on low incomesstudying full time for their first fullLevel 2 qualification and to youngadults on low incomes studyingfull time for their first full Level 3qualification.Adult safeguarded learning (ASL)We maintain a national programme ofleisure and occupational courses foradults through local further educationcolleges. We also provide extra fundingfor other projects such as family andneighbourhood learning.ApprenticeshipsApprenticeships offer training in theworkplace.Young Apprenticeships allow14- to 16-year-olds to spend twodays a week learning a trade, whileApprenticeships (equivalent to GCSElevel) give people aged 16 and overon-the-job training to NVQ Level 2while they receive a wage. Somemay also gain a technical certificate.Advanced Apprenticeships (equivalentto A-levels) give people aged 16 andover training to NVQ Level 3, as wellas a technical certificate. The LSCfunds Apprenticeship training andassessment costs.apprenticeships.org.ukCareer Development Loan (CDL)A CDL is a bank loan designed tohelp people pay for work-relatedlearning. It can help people gain theexperience, training and qualificationsneeded to improve their job skills oreven launch a new career. It can beused to fund a variety of vocational(work-related) courses with a widerange of organisations, and is availableto people who are employed, selfemployedor unemployed.Careers Advice ServiceThe Careers Advice Service is agovernment-funded service that offerspractical advice to help individualsmake the right career choices whetherthey want to learn new skills, changecareer or return to work.Care to LearnCare to Learn offers support forchildcare and travel costs to individualsunder the age of 20 who want toreturn to learning. Learners can applyfor and receive payments through theLearner Support Service.ConnexionsAn information and advice servicefor young people aged between 13and 19. It covers career and learningoptions as well as issues relatingto health, housing, relationshipswith family and friends, and money.connexions.gov.ukDemand-led fundingThis is a move towards more fundingbeing driven directly by employerand learner choice and making surethe FE system is as responsive aspossible to their needs. Lord Leitch’sreport (December 2006) endorsedthis direction of travel. The LSC hasintroduced three new funding modelsfor adult skills, employer skills and14–19 learning, all of which aim to putpurchasing power into the hands ofthe customer – whether employer orindividual learner.Department for Business, Innovationand Skills (BIS)bis.gov.ukDepartment for Children, Schoolsand Families (DCSF)dcsf.gov.ukDepartment for Innovation,Universities and Skills (DIUS)See Department for Business,Innovation and Skills.Department for Work and Pensions(DWP)dwp.gov.ukEducation Maintenance Allowance(EMA)EMA is a form of financial help foryoung people aged 16 to 18 tosupport them to continue in learning.It offers up to £30 a week.ema.direct.gov.ukEntry to Employment (e2e)A targeted programme for peopleaged 16 to 18 who are currently notin education, employment or training(NEET). It helps them to move intoan Apprenticeship, education at NVQLevel 2 or a job.Framework for Excellence (FfE)FfE is an approach to managingperformance. It is a single frameworkthat will help increase the quality ofFE provision and the way in which thatprovision meets the needs of users. Itwill also help employers and learnersto choose the provider best suited totheir needs.Further education (FE)There are two streams of education forpeople over 16: further education andhigher education. Further educationcovers learning opportunities up toA-level and NVQ Level 3 standard.Higher educationHigher education includes coursesabove A-level or NVQ Level 3standard. Examples include degree92 LSC Annual Report and Accounts 2008–09

courses, postgraduate courses andHigher National Diplomas (HNDs).The Higher Education Funding Councilfor England (HEFCE) distributes publicmoney for teaching and research touniversities and colleges and aims topromote high-quality education andresearch that meets the needs ofstudents, the economy and society.Investors in PeopleThe national standard of goodpractice for workplace trainingand development.investorsinpeople.co.ukJobcentre PlusA government agency supportingpeople of working age from welfareinto work, and helping employers tofill their vacancies.Learning and Skills ImprovementService (LSIS)The LSIS is a new sector-ownedbody formed from the QualityImprovement Agency and the Centrefor Excellence in Leadership. Focusingon learners, it aims to developexcellent and sustainable FE provisionacross the sector, implementing theGovernment’s reforms for learningand skills.lsis.gov.uk/LSISHome.aspxLocal authoritiesLocal authorities are responsible formeeting the learning needs of allyoung people up to the age of 18.They develop strategic commissioningplans for their area, working withneighbouring authorities, assessingdemand for and required supplyof 16–18 provision, includingthe academic route, Diplomas,Apprenticeships and the FoundationLearning Tier.Local Employment Partnerships (LEPs)LEPs aim to give 250,000 peoplethe skills that local employers needby 2010. They will also give peoplefrom local communities genuineopportunities to come off benefitsand really change their lives. The LEPsthat exist between Jobcentre Plus andemployers are supported by DWP, BISand the LSC.Managing Information acrossPartners (MIAP)MIAP aims to streamline howinformation on learning andachievement is collected, handled andshared across the education sectorso that excellent services are madeavailable to individuals, employersand communities. MIAP, delivered bythe LSC, will introduce an internetbasedLearner Registration Service anda unique learner number for everyperson in education and training –allowing individuals to build a lifelongrecord of their learning participationand achievements.National Apprenticeship Service(NAS)A new body, launched in April 2009,that is responsible for the delivery ofthe Apprenticeship programme and forworking with employers and learners.apprenticeships.org.ukNational Skills AcademiesA network of employer-led, world-classcentres of excellence delivering theskills required by each sector of theeconomy.nationalskillsacademy.gov.ukNational Vocational Qualifications(NVQs)NVQs are work-related qualifications,at the following levels:•Level 1 – equal to five GCSEs atgrades D to G•Level 2 – equal to five GCSEs atgrades A* to C•Level 3 – equal to two A-levels orone vocational A-level•Level 4/5 – equal to Higher NationalCertificate, Higher NationalDiploma or degree level.nextstepnextstep is a free service that offersface-to-face help and support abouttraining, learning and the worldof work.Not in education, employment ortraining (NEET)The Government has set a PSA targetfor reducing the numbers of youngpeople who are NEET by 8 per centby 2010. The LSC has an importantrole and contribution to make – alongwith local authorities – in ensuringthat suitable provision is available,accessible, well understood by youngpeople and of high quality.OfqualOfqual – the new regulator ofqualifications, exams and tests inEngland – began its interim workin April 2008. The Governmentwill be bringing in legislation toestablish Ofqual as the regulator ofqualifications. Until this legislationis passed, it will operate as part ofthe Qualifications and CurriculumAuthority.ofqual.gov.ukPublic Service Agreement (PSA)PSAs are a series of cross-governmentgoals. Each government organisation isset a number of key indicators duringeach Comprehensive Spending Reviewperiod that contribute to achieving thebigger goals. These are known as PSAtargets. The LSC’s PSA targets, and ourprogress towards them, are set out onpage 11 of this Annual Report.Qualifications and CurriculumAgency (QCA)The QCA is responsible for developingthe national curriculum, whichdefines the knowledge, understandingand skills to which children andyoung people are entitled. It reviewsthe curriculum and evaluates itsappropriateness and relevance to thechanging needs of learners and society.qca.org.ukFinanceLSC Annual Report and Accounts 2008–09 93

Regional Development Agencies(RDAs)These bodies are responsiblefor economic development andregeneration in the nine regions ofEngland.School sixth formsThe LSC became responsible forfunding school sixth forms inApril 2002 and funds 1,760 schoolsixth forms in 138 local educationauthorities (LEAs). In the remaining 12LEAs, the education of over-16s takesplace mainly in FE colleges and sixthformcolleges.Sector Skills Councils (SSCs)Independent UK-wide organisationsrepresenting groups of employers, SSCsexist to improve skills and productivityin their sector.September GuaranteeThe guarantee ensures that all youngpeople have an opportunity to receivea suitable offer of a place in learningfor at least two years after they leavecompulsory education. In 2008, theguarantee was extended for the firsttime to cover all 17-year-olds, withspecific monitoring arrangements forthose who were enrolled on one-yearor short courses or who had left theactivity they chose on leaving school.The agreed start date can be afterthe end of September, but should beno later than the beginning of thefollowing January term.Skills CampaignAn ambitious skills communicationsinitiative to raise the aspirations ofmillions of people.lsc.gov.uk/inourhandsSkills for LifeThe Government’s strategy to helpadults who have missed out oneducational achievement. It aims toimprove the literacy, language andnumeracy skills of 1.5 million adults.Skills Funding AgencyThis agency will oversee thedistribution of funds to the sectorand manage the performance ofFE colleges. It will also house theNational Apprenticeship Service(NAS), the National Employer Serviceand the adult advancement andcareers service.Skills PledgeThe Skills Pledge is a publiccommitment by businesses to traintheir employees. The Skills Pledgeis voluntary and is supported byimpartial advice from the Train toGain service.inourhands.lsc.gov.uk/employersskillspledge.htmlSkills StrategyThe Government launched its SkillsStrategy in July 2003, promising toimprove support for businesses thatdevelop their workforces.Training Quality StandardAn assessment framework designedto recognise and celebrate the bestorganisations delivering training anddevelopment solutions to employers.trainingqualitystandard.co.ukTrain to GainTrain to Gain is a service, managedand funded by the LSC, that helpsemployers to find the training theyneed for their staff. A dedicated skillsbroker analyses individual businessneeds and works with each employerto help them to plan a tailoredtraining programme. Train to Gain skillsbrokers do not work for any trainingorganisation, so the advice that theygive to employers is impartial.traintogain.gov.ukUK Commission for Employmentand Skills (CFES)Led by Sir Michael Rake, the CFESstrengthens the pivotal role thatemployers have in ensuring thatthe UK’s employment and skillssystem responds well to the needsof business and the public services.It also promotes increased investmentin workforce skills by employers fora more highly skilled and productiveeconomy.Young People’s Learning Agency(YPLA)This new national non-departmentalpublic body will support localauthorities in their new role incommissioning and funding 14–19provision. Local capacity on 14–19 willtherefore be with local authorities.94 LSC Annual Report and Accounts 2008–09

List of Related Documents14–19 Education and Skills White Paper (publishedFebruary 2005) dfes.gov.uk/publications/14-19educationandskills/index.shtmlData Handling Procedures in Government: Final Report(published June 2008) cabinetoffice.gov.uk/media/65948/dhr080625.pdfDelivering World-class Skills in a Demand-led System(published January 2007) readingroom.lsc.gov.uk/lsc/national/nat-deliveringworldclassskills-jan07.pdfFramework for Excellence: How the Framework Will Work(published June 2007) ffe.lsc.gov.uk/Framework+for+Excellence+How+the+Framework+will+work++June+2007.htmFrom Here to Sustainability (published September2005) readingroom.lsc.gov.uk/lsc/2005/ourbusiness/strategy/from-here-to-sustainabilitylsc-strategyforsustainabledevelopment.pdfFurther Education: Raising Skills, Improving Life Chances(published March 2006) dfes.gov.uk/publications/furthereducation/docs/6514-FE%20White%20Paper.pdfGovernment Investment Strategy 2009–10, LSC GrantLetter and LSC Statement of Priorities (publishedNovember 2008) readingroom.lsc.gov.uk/lsc/National/nat-statementofpriorities200910-nov08.pdfIdentifying and Managing Underperformance (publishedJanuary 2008) readingroom.lsc.gov.uk/lsc/National/nat-identifyingmanagingunderperformance_yr2_pt1-jan08.pdfLearner Health, Safety and Welfare: Safe Learner Blueprint(published September 2007) safelearner.info/downloads/LSCHealthSafety%204-10-07.pdfThe Learning and Skills Council’s Proposed StatutoryIntervention Policy: Consultation Document (publishedJanuary 2008) readingroom.lsc.gov.uk/Lsc/National/nat-LSCproposedinterventionpolicy-jan2008.pdfLSC Grant Letter 2008–09 dius.gov.uk/publications/LSC-Grant-Letter-2008-09.pdfLSC Single Equality Scheme: Our strategy for Equality andDiversity (published April 2007) readingroom.lsc.gov.uk/lsc/National/nat-singleequalityscheme-30apr07.pdfNational Employer Skills Survey 2007 (publishedMay 2008) readingroom.lsc.gov.uk/lsc/National/natnessurvey2007mainreport-may08.pdfNational Learner Satisfaction Survey 2007 (publishedJuly 2008) research.lsc.gov.uk/lsc+research/published/learner-satisfactionProsperity for all in the global economy – world classskills (published December 2006) hm-treasury.gov.uk/media/6/4/leitch_finalreport051206.pdfRaising Expectations: enabling the system to deliver(published March 2008) dfes.gov.uk/consultations/downloadableDocs/Raising%20Expectations%20pdf.pdfRenewing the physical infrastructure of English furthereducation colleges (published July 2008) nao.org.uk/publications/0708/renewing_the_physical_infrastr.aspxA Review of the Capital Programme in Further Education(The Foster Report) (published March 2009) dius.gov.uk/news_and_speeches/announcements/~/media/publications/L/LSC_Capital_Review_accSelf-assessment of health, safety and welfare: Guidancefor organisations funded by the Learning and Skills Council(published March 2009) nationalemployerservice.org.uk/uploads/files/Self-Assessment_March_2009_v4.pdfSkills for Life: Progress in Improving Adult Literacyand Numeracy (published June 2008) nao.org.uk/publications/0708/skills_for_life_progress_in_i.aspxSkills in England 2007 (published September 2007)readingroom.lsc.gov.uk/lsc/National/SiE_Volume1final_12Sept07.pdfTrain to Gain: A Plan for Growth (published November2007) dius.gov.uk/publications/Train-to-Gain-Executive­Summary.pdfWorld-class Apprenticeships: Unlocking Talent, BuildingSkills for All (published January 2008) dius.gov.uk/news_and_speeches/press_releases/~/media/publications/W/world_class_apprenticeshipsWorld Class Skills: Implementing the Leitch Review ofSkills in England (published July 2007) dius.gov.uk/publications/worldclassskills.pdfFinanceLSC Annual Report and Accounts 2008–09 95

Figures in this report are based on the latest information available at the time of going to print.Printed in the UK for The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery OfficeID 6149388 07/09Printed on paper containing 75% recycled fibre content minimum.96 LSC Annual Report and Accounts 2008–09

Learning and Skills CouncilNational OfficePublished by TSO (The Stationery Office)and available from:Onlinewww.tsoshop.co.ukCheylesmore HouseQuinton RoadCoventry CV1 2WTT 0845 019 4170F 024 7682 3675lsc.gov.ukMail,Telephone, Fax & EmailTSOPO Box 29, Norwich NR3 1GNTelephone orders/General enquiries: 0870 600 5522Order through the Parliamentary Hotline:Lo-call 0845 7 023474Fax orders: 0870 600 5533Email: customer.services@tso.co.ukTextphone: 0870 240 3701The Parliamentary Bookshop12 Bridge Street, Parliament Square,London SW1A 2JXTelephone orders/General enquiries: 020 7219 3890Fax orders: 020 7219 3866Email: bookshop@parliament.ukInternet: www.bookshop.parliament.ukTSO@Blackwell and other accredited agentsCustomers can also order publications fromTSO Ireland16 Arthur Street, Belfast BT1 4GD028 9023 8451 Fax 028 9023 5401Making Skills Matter is the LSC’s Annual Reportand Accounts for 2008–09.Extracts from this publication may be reproducedfor non-commercial educational or trainingpurposes on the condition that the sourceis acknowledged and the findings arenot misrepresented.This publication is available in electronic formon the Learning and Skills Council website:lsc.gov.ukIf you require this publication in an alternativeformat or language, please contact the LSC HelpDesk: 0870 900 6800Publication reference: LSC-P-NAT-090125©LSC July 2009