An IT-based programme to manage the centralised payments of student loans was dogged by over-optimism, poor internal communications and not enough internal challenge and expertise.
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In a report published today on the Student Loans Company's "Customer First" programme, the National Audit Office also found that Gateway Reviews of the IT-based programme gave part the scheme "red" traffic light assessments - but went on to give increasingly positive reviews.
In July 2009, as the programme neared the start of term in September 2009 - when a huge backlog of student applications for loans peaked - a Gateway review put the delivery confidence at "amber/green".
This raises questions of whether the OGC Gateway review system had given the Student Loans Company false reasons to be confident.
Today's report by the National Audit Office warns that the Student Loans Company may still be guilty of over-optimism.
It says that the Company has re-launched a problematic scanning system which provides, for internal teams, electronic copies of documents sent in by students as part of their applications.
The new scanning system is due to be operating this month.
But the NAO says: "The Company considers that sufficient contingency planning and testing have been carried out. However, it has been over-optimistic in the past and it remains to be seen whether the system will operate satisfactorily in a live environment in peak months."
The NAO blames some of the failures of the Student Loans Company on the inability of scanning technology to handle the volume of work. The scanning equipment went live in April 2009 "before it had been fully tested", because the Company expected to resolve any teething problems as they arose.
"The Company and its supplier were, however, unable to scan work at the required volumes and after seven weeks' delay the Company decided to introduce a manual process", says the NAO.
By the start of term in 2009 only 46% of new applications for student loans had been fully processed because of technical and mainly managerial problems. By 6 September 2009, there were 241,000 applications not fully processed.
Even by the end of January 2010, the Company had 80,000 provisional and interim assessments for payments to new students which were still awaiting resolution.
In processing the 2009/10 applications, the Company made about twice as many provisional assessments as had been made the previous year.
The NAO said that an application for a loan took an average of 12.4 weeks to be fully processed by the central administrative and IT system, compared with 9.3 weeks in 2008/9 when local authorities were responsible for the assessment process.
By December 2009 only 24% of 17,000 applications for Disabled Students' allowances had been paid.
The NAO report on the Customer First programme shows that few lessons were learned from previous IT failures in government. Bad news on the extent of the scanning problems did not reach the Company's Board of directors until it was too late.
The Company's parent organisation, the Department for Business, Innovation and Skills, was also not told of the problems until too late.
Said the NAO: "Though the Board received monthly reports on the parts of the Programme for which the Company was responsible, and was told in May 2009 of scanning problems, it was not made aware of difficulties with processing applications until late August 2009, by which time it was too late to prevent major problems occurring."