At best – and a large part of the meeting was very far from this – the Public Accounts Committee (PAC) hearing on franchised provision and student finance gave us little more detail on some of the issues raised by the National Audit Office in January.

I’m focusing here on the key points – you can imagine (or rewatch, if you like) the long and painful passages where questions focused on the basic operation of student finances (stuff that should have been in the committee’s briefing) and the text of the NAO report (my colleague Michael’s piece would have been of help). And that’s even ignoring the late start, long overrun, and the piercing electronic noise that obscured the audio for most of the last third.

It is now clear that the case described in the NAO report (paragraph 2.4 onwards and the timeline in figure 10) was very much a test case, generating “key learning” as to how the Office for Students (represented by Susan Lapworth), the Student Loans Company (Chris Larmer) and the Department for Education (permanent secretary Susan Acland-Hood and director general for skills Julia Kinniburgh) should work together to prevent fraud relating to fee and maintenance loans.

As a result there is now a fortnightly intelligence sharing meeting between SLC, OfS, and DfE. SLC has expanded its “financial crime unit” (now standing at 55 FTE, and reckoned to have prevented some £30m of fraud this year), OfS is focusing future regulatory interventions around quality assurance for franchise provision, where as there are discussions underway between DfE and ministers around potentially requiring all providers involved in a franchise relationship to be registered with SFC.

There’s also a lot of Universities UK work afoot – the revision of codes of practice on agents and recruitment is underway, and this appeared to have active DfE support as a means of addressing this issue. There’s significant crossover with the international foundation issue covered in the press recently – suggesting that UK and international agents will have similar expectations placed on them.

Likewise, Universities UK is playing an active role in DfE-led discussions around common definitions of “attendance” and “engagement” – these underpin the way that the student loans system works but are defined on a by provider basis (as will be familiar to Wonkhe readers) and results should be published “hopefully by the summer”. That, presumably will also need squaring off with the Home Office, which has some expectations here too.

For the case described by the NAO all tuition fee payments have been recovered (at a total value of around £8m), and around half of fraudulent maintenance payments (around £800k of £1.6m) have been clawed back – though this work is ongoing. The Office for Students has also clawed back relevant grant payments it had issued to the providers in question. All parties are clear that they would rather prevent fraud before it occurs – and hope to do more of this in future

As things stand permission to act on a suspicion of fraud needs to be given by DfE. This is slightly easier for tuition fees than for maintenance loans – with the latter there needs to be a balance between suspicion and the need to avoid disadvantaging students by cutting off what turns out to be perfectly legitimate maintenance payments.

It’s worth getting into some definitions – something that may have helped PAC earlier in proceedings. A lead institution, regulated by OfS, is able to contract with a franchise partner (who does not have to be registered with OfS) for the latter to provide higher education courses on behalf of the former. Students on these courses are registered by the lead provider, but taught by the franchise partner and can claim fee and maintenance loans from SLC. There are, as with anything in higher education, many variations in practice – Independent Higher Education has recently published a useful taxonomy alongside indicative statistics as to how much of the various species of this activity is going on.

The PAC members at the meeting were clearly and understandably concerned about the potential for fraud, an apparent lack of oversight, and the risks to students and the taxpayer. This was expressed both by lines of question dealing with collaboration and joint oversight over various aspects of higher education, alongside more fundamental issues – why do we have franchises? Why indeed.

Particular ire was reserved for the practice of lead institutions top-slicing fee payments with respect to students at franchise partners – paragraph 1.7 of the NAO report indicated that this could be up to 30 per cent of the fee, which was described as “interesting” by Susan Acland-Hood.

On the “this must never happen again” side, there’s some asks for the future too – Susan Lapworth is keen to see more primary legislation allowing OfS to preemptively stop payments for instance. But it is difficult not to see the whole regulatory apparatus as having been on the back foot, and now desperately trying to catch up.

The more interesting passage of questions was some way away from the ostensible issue – Susan Lapworth gave an off-the-cuff summary of interim findings from OfS’ analysis of the most recent round of financial returns submitted by providers. It was revealed that

the forecasts are telling us that the sector thinks that financial performance is going to decline further in the current year, so it’s going to get a bit worse. A greater number of providers are forecasting deficits and weaker cash flow – so you can see those risks starting to squeeze. But then the forecasts are suggesting a recovery, albeit a slower recovery than perhaps had been anticipated previously.

Although rising costs, static fee income, and a growing maintenance backlog will affect everyone, clearly there will be variations between providers, linked to the strength of international recruitment, and indeed, to other streams of income like franchise partnerships:

For a small group, and it is a small group, the income from these franchise arrangements is material to their sustainability.

The first three submissions to the inquiry – from UUK, the Office for the Independent Adjudicator, and an Oxbridge academic – have been published. We learn from these that Universities UK is keen in principle on a requirement that all franchise partners need to be registered with OfS, but is also mindful of the disproportionate administrative burden this may cause the providers in question. UUK also thinks that the ongoing update to the QAA Quality Code will clarify expectations around franchise arrangements. And OIAHE is rightly concerned that students at unregistered providers will be unable to access its complaints mechanism.

But, in all, this is not a promising start for an inquiry that has the potential to address an egregious failing in regulation and oversight that has an impact on thousands of students and wastes millions of pounds in public money.