Recommendation 15

DfE recognises that the franchising model creates risks, given it encourages providers to do new things, but accepts that some lead providers have not taken their responsibilities for governance and safeguards in their franchised providers as seriously as within their own institutions.33 The regulatory framework relies on lead providers’ controls over franchised providers. They have responsibility for ensuring franchised providers have adequate controls to mitigate the risk of student loan funding being paid out inappropriately.34 DfE emphasised to us that it has told lead providers they have a clear responsibility in respect of fraud or misuse of funds at their franchised providers. DfE added that OfS has written to them and met with the chairs of audit committees and vice-chancellors.35 OfS told us it can strengthen how it expresses its management and governance requirements, making clearer lead providers obligations for good and effective controls over franchises.36 More widely, evidence from the Office of the Independent Adjudicator is that many franchisees are not always fully aware of their responsibilities, and that there needs to be a better understanding of terminology, responsibilities and roles in franchise relationships.37