Funding Assurance Subcontracting – Assurance and Controls

What is the ESFA subcontracting standard?

Following consultation on subcontracting reforms in 2020, the ESFA introduced an externally assured subcontracting standard to replace the audit certification process that was formerly required from the 2022 to 2023 funding year. The subcontracting standard sets out the requirements for all providers who subcontract £100,000 or more of their delivery across all ESFA funding streams. 

The aim of the subcontracting standard is to provide a consistent and robust approach to the management of subcontractors, protecting the use of public funds and maximizing those funds to benefit the learners. It is intended that this will reduce inadequate contract management, non-compliance with ESFA funding rules and incorrect funding claims.

It is the provider's responsibility to establish appropriate arrangements for the oversight of subcontractors in accordance with the subcontracting standard and relevant funding rules, and to engage with a reporting accountant to carry out an assurance review to evidence their compliance with the Subcontracting Standard and funding rules. Upon receipt of the finalised report, the ESFA will review the report’s findings to determine whether the standard has been achieved or, if not, the relevant action needed. Once it has been determined that the provider has achieved the standard, this achievement will remain in place for three years unless there are material changes in the volume of delivery, operation staff, senior leadership or if any other significant concerns are brought to the ESFA’s attention.

Subcontracting for the first time

For the ESFA to approve your use of subcontractors for the first time, you must write to the ESFA at least 12 weeks before any learner’s planned start date to seek written approval before entering into a subcontracting arrangement, regardless of the planned value of your subcontracting. You must also obtain a report written by an external auditor that provides assurance on the systems and controls you have in place for subcontracting which confirms that you have effective processes and controls in place for carrying out the effective management of subcontractors.

MCA Subcontracting

MCAs will use the judgment of an external reporting accountant to make their own decision on a provider’s subcontracting controls, and whether they will continue to allow the subcontracting of their funded provision. MCA’s have established their own assurance requirements for providers who use subcontractors for delivery of MCA funded provision. These requirements can sometimes differ from the ESFA requirements, so it is important for providers who are subcontracting delivery of MCAs funded provision to ensure they are adhering to the relevant funding rule requirements.

How can we help?

Our approach to subcontracting

The basis of our approach is primarily derived from the ESFAs framework and guide for reporting accountants entitled ‘Assurance reviews of the subcontracting standard for post-16 providers’ which is tailored to incorporate the funding rules of the relevant funding body. We also tailor this approach to comply with the requirements for each MCA in providing assurance over their subcontracting controls and where the ESFA require Subcontracting post-16 education and training for the first time alongside our own insights and experience from conducting many such reviews across the sector.  

Self-assessment

Initially, you will complete a self-assessment and provide supporting evidence to give us an insight into your approach to subcontracting, including adherence to the relevant funding rules, any other guidance issued by the ESFA and/or MCA and your signed funding agreement(s). We will use your self-assessment and supporting evidence to undertake rigorous controls and compliance testing to inform our professional judgment. This includes the use of the ILR and PDSATs in respect of relevant subcontracting fields and data providing assurance over compliance with funding rules.  Any queries we have will be communicated to you during the fieldwork to allow you ample time to provide responses and further evidence if required.

Testing and feedback

Once our testing is concluded, we will hold a formal feedback meeting to discuss our findings and agree on any required actions. We will then issue a report that is compliant with ESFA and MCA requirements detailing, in a clear and understandable manner, our opinions of where the requirements are being met and where improvements are needed.

We would also expect the results to be shared with senior management and governance groups such as the Audit and Risk Committee (or equivalent) and the Board for which we have attended and presented at.   

Our approach gives providers a comprehensive overview of the effectiveness of their subcontracting controls and assurance of their compliance with the subcontracting standard and both ESFA and MCA funding rules.

For more information please contact us using the button below, and a member of our Funding Assurance team will be in touch.

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