Schools kit scam 'could cost schools millions'
- 8 January 2012
- From the section Education & Family
Schools across the UK are being charged up to 10 times too much for laptops and other IT equipment through mis-sold lease agreements, a BBC Radio 5 live investigation has found.
In some cases, head teachers are being chased for payment by finance companies for equipment they were told was free.
An industry insider says the overcharging could run to hundreds of millions of pounds.
The Department for Education says there is lots of advice available for heads.
But the Leasing Advisory Service, a claims management company which represents victims of mis-sold leases says it has identified a particular problem with schools leasing computer equipment.
Under these such schemes, schools effectively hire equipment from a supplier by taking on a loan from a bank who funds the supplier.
School's massive debt
One of the schools affected is Glemsford Primary in Suffolk, which received a visit from a company called Direct Technology Solutions Ltd which offered to take on the contract for supplying the school's photocopiers.
James Loker-Steele, who is in charge of the school's IT, told 5 live Investigates: "They came to us and said we were going to be a flagship school so we'd get priority on various pieces of kit that came up or any promotions.
"Their sales person phoned us up and said: 'We've managed to source about 1,000 laptops, would you like any?'"
When the school explained it could not afford the equipment, they were told it would not be a problem as the equipment would be free and part of a promotion, Mr Loker-Steele said.
So Glemsford Primary School agreed to take on 100 computers on the basis that it would not cost anything.
The school says they were told they had to sign an agreement to satisfy EU regulations, but were assured that DTS Ltd would cover the cost of the equipment.
In fact they had unwittingly signed long-term leases on the laptops. This meant they were effectively hiring the equipment from a finance company.
Initially, this caused them no difficulties because the first few payments on the lease were covered by Direct Technology Solutions Ltd.
But then the company went administration, leaving Glemsford Primary exposed to thousands of pounds worth of liabilities owed to the bank which they could not afford.
The school owes an estimated £500,000 to Clydesdale Bank after leasing equipment with a value of approximately £700,000.
Thus far, Direct Technology Solutions Ltd has not responded to BBC enquiries, and the company's administrator said, because their investigations were at an early stage, they were unable to comment.
An accountancy firm which is investigating the non-payment of leases by schools on behalf of one of the banks which financed the agreements says Glemsford Primary is just one of dozens of victims.
And not only are they facing huge and unexpected costs but they have also been significantly overcharged.
The accountancy firm said Direct Technology Solutions Ltd had marked up the cost of the equipment it supplied by up to 10 times what the assets are actually worth.
"For example, a laptop that has a price of between £350 and £400 is charged at £3,750," one accountant said, adding: "Some schools were having 100-200 laptops delivered at this price."
In a statement, Clydesdale Bank said: "We can confirm that we have financed the purchase of equipment for a small number of local authority schools through a third party.
"We have acted in good faith and have had no involvement with the supply of the equipment itself, nor have we had any financial relationship with Direct Technology Solutions Ltd, who had been selected by the schools as their preferred supplier.
"We are carrying out our own investigations and have provided information to the police."
Many other schools have knowingly signed up to lease agreements for photocopiers and other equipment but have still been significantly overcharged by their suppliers.
Tip of the iceberg
Martin Tucker, a consultant with the Leasing Advisory Service, says they have identified a particular problem with schools.
"From what we've found we are barely scratching the surface," he told 5 live.
The Leasing Advisory Service says it is helping one local authority which had to pay nearly £500,000 to settle a lease on behalf of one school for photocopiers worth just £45,000.
"A lot of the suppliers either don't exist now or they have phoenixed and evolved into different companies so they might not be around to make a claim against them so you have to go for the finance companies," he explains.
"And the finance companies' stance is basically it's nothing to do with us," says Mr Tucker.
He added that they were also advising schools which have paid for equipment more than once, where leases for old equipment are settled but the debt is rolled into new agreements.
The scale of the debt can have a knock-on effect on pupils, too.
"In some cases it probably could mean some assistant staff can't be taken on because they can't settle a lease," says Mr Tucker.
The Finance and Leasing Association, which represents the banks and other companies financing leases for schools, urged schools to be wary of signing agreements which sound too good to be true.
It has recently issued new guidance on leasing in schools and said it would be monitoring developments.
A Department for Education spokesman said: "Schools need to be absolutely sure of what they sign up to and read the small print because it is usually very difficult to legally challenge or break these type of contracts.
"These issues tend to be a combination of very poor decision making from schools and opportunistic/predatory sales tactics from suppliers - so schools need to be clued up.
"We always help schools as best we can who may be locked into poor deals but many are reluctant to come forward for help."
It added that the department was happy to support individual heads concerned about their existing or potential leasing agreements.
You can hear the full report on 5 live Investigates on Sunday 8 January at 21:00 GMT on BBC Radio 5 live or download the podcast.