Schools kit scam 'could cost schools millions'

 
Laptops Glemsford Primary School unwittingly signed up to a lease agreement and now owes around £500,000

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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.

Laptop computers lined up on school desks Glemsford Primary School was initially told the laptops they were given were free of charge

"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.

Find out more

Listen to the full report on 5 live Investigates on Sunday, 8 January at 21:00 GMT on BBC 5 live or download the podcast

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.

£3,705 laptops

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.

Start Quote

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”

End Quote Department for Education

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.

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  • rate this
    +1

    Comment number 112.

    Surely the 'bank' knew what it was financing? The goods are supposed to be the banks' security if the lessee defaults. Where is the security in goods priced 10 x market price? It's too easy to blame the schools. Con men are con men because they excel at conning people. Financing a con strikes me as the worse of all business practice. Bank's again I'm afraid.

  • rate this
    +1

    Comment number 111.

    It would appear poster 93 that that particular supplier is still operating at the same address with a different name (if I give it this post will probably be deleted like yours so I won't) but may be those good people at theBBC will pass the information on to their colleagues in Watchdog to investigate.

  • rate this
    +1

    Comment number 110.

    95.paulmerhaba
    The public sector would be more cost efficient if it wasn't ripped off by the private sector.



    ++ And it makes you wonder who audits and signs off this kind of racketeering.

  • rate this
    +1

    Comment number 109.

    #59 fitgeek ~ "It just goes to show the dangers of giving schools more autonomy..."

    --

    I'd say it demonstrates the current red tape. Free of it they can make their own decisions, look for decent deals as you would personally, and save cash which can be used to improve the education of our kids.

  • rate this
    +3

    Comment number 108.

    @ 2, 15 and 77.

    2.
    "Why couldn't they just go down to Comet? I worked for a university where we were only allowed to procure from "approved" sources, often 2-3 times the price of the local high street shop."

    "Approved" sources are costly as they come with overpriced service contracts. This allowed Schools and Unis to sack the support staff and technicians that we once had. Its "Streamlining".

  • rate this
    +4

    Comment number 107.

    Has anyone checked the background of the Leasing Advisory Service and their ability and credibility? They have submitted dormant accounts and are run by a debt management company!!! BE VERY CAREFUL any schools and don't waste any more money. You can get free advice from your local authority so don't waste any more taxpayers money.

  • rate this
    +3

    Comment number 106.

    I've read some of these comments and some are correct, makes me laugh, teachers are no different to business people.
    In my experince they are highly intelligent in lots of areas and have to do so many different job roles in schools.
    So the last comment about them only being able to teach, that person should have thought about that comment before writing it. It was very unkind.

  • rate this
    +2

    Comment number 105.

    I thought we lived in a 'rip off' society...everybodies at it..... No controls ...No monitoring...Too much 'trust'....plain ignorance.....not asking the right questions.... not 'street wise' enough......and sure you'll get robbed. Sadly typical. You have to think like a 'crook'.
    Part of ALL university courses in this country should include a component on being 'street wise'......very valuable.

  • rate this
    +1

    Comment number 104.

    Unfortunately 'fit geek' I suspect this is a wider problem then just giving schools autonomy and occurs on a wider scale across the public sector. Think about the Millions spent by the NHS and MOD on consultants. Ultimately privatisation and accountability is the answer.

  • rate this
    +1

    Comment number 103.

    This is simply fraud. But the Head ignored the school's financial guidance. Auditors require 3 quotes and heads should refer purchases over a set amount to governors to authorise. I have 25 yrs school finance experience and I often have to stop my Head making stupid purchases. Many have limited IT knowledge too which doesnt help. School bursers are more professional.

  • rate this
    +4

    Comment number 102.

    Pretty obvious from most of these posts that some certain people are making a fair bit on the side at the expense of the taxpayer. Well, it ain't the manufacturers and it ain't the schools unless they're taking bribes so someone's buying cheap and selling on expensively to public agencies or departments.

  • rate this
    +2

    Comment number 101.

    I ran a small wholesale business for twenty years and knew almost to the penny what every item cost. When it is your own survival on the line you have a different mindset. Sadly, when your job is rated solely on ensuring the item is delivered and not on how much was paid for it, there are bound to be serious errors in judgement.

  • rate this
    +6

    Comment number 100.

    You'd think heads would have the intelligence to see through such scams or perhaps they did but didn't care as they weren't paying.

    It's daft to criticise the government for cuts when this sort of waste is so prevalent. The public sector needs to learn the value of money just like private firms have had to do or go under.

  • rate this
    +15

    Comment number 99.

    A similar thing happened in the dept of the Uni where i work. A firm contracted to install a computer network installed dozens of sockets instead of a couple in each room due to and then billed the department for millions of pounds. They got away with it because of a poorly worded contract. Jobs were axed due to resulting financial problems, but strangely only academic staff, no administrators.

  • rate this
    +3

    Comment number 98.

    This is outrageous and it goes on in all the public owned and government depts , how can it possibly be right to pay that sort of money for a computer but add to that toilet rolls paper clips etc etc and now we know where the money goes , its no wonder the country is broke someone is making a real killing on these things ! i wonder how many mps and councillers are on the boards or payroll !!

  • rate this
    +3

    Comment number 97.

    When it isn't 'your' money diligence is the first thing to go. Just think if your were to extrapolate this result to the NHS, the MOD, if fact any government run department. It is about time we started rewarding underspend in conjunction with maintaining standards. Save a million, get a bonus. When money runs like water, who cares how much it costs.

  • rate this
    +4

    Comment number 96.

    77.Monkeyzak . Approved lists work if drawn up by someone who understands what they are buying. I bought IT and ran Support team - I knew how to keep problems down alongside reducing budgets drastically. Disinterested technophobic clerk is not a good person to choose IT specs. Neither, it seems, is primary school teacher.Councils who buy from best mates for mutual back scratching need auditing.

  • rate this
    +10

    Comment number 95.

    The public sector would be more cost efficient if it wasn't ripped off by the private sector.

  • rate this
    +4

    Comment number 94.

    I've been working in education and technology since the 1990s and this theme has been consistent throughout. This week sees the annual immoderate BETT show at Olympia. I expect to see many ill-informed headteachers and IT coordinators playing one-upmanship between each other to the benefit of the suppliers, many of which have dubious motives, and to the detriment of their pupils and the taxpayer.

  • Comment number 93.

    This comment was removed because the moderators found it broke the house rules. Explain.

 

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