Smart Educators Limited’s application for registration was refused by the OfS on 4 May 2020.
This was because the Office for Students decided that Smart Educators Limited did not satisfy the following initial conditions of registration:
Initial condition C3: Student protection plan
Summary of reasons:
The OfS has not approved the draft student protection plan submitted by the provider as part of its application for registration. The OfS takes the view that the student protection plan does not provide a credible and evidence-based assessment of the risks to the continuation of study for the provider’s higher education students.
The OfS's findings in relation to the provider’s financial viability and sustainability mean that the OfS is also concerned about how the provider would meet any obligations to students in the event that the plan had to be implemented.
Initial condition D: Financial viability and sustainability
Summary of reasons:
The OfS takes the view that the provider is not financially viable or sustainable.
The provider's financial forecasts are underpinned by significant growth in student numbers (and associated fee income) which the OfS considers to be ambitious because there is not a credible explanation of how the provider has determined the student numbers expected in its first year and there is a lack of clarity about how it plans to achieve substantial growth in each subsequent year.
The provider's strategies and objectives (as outlined in its access and participation document) appear reasonable in order to appeal to students, but it has not performed any sensitivity analysis and the OfS is concerned by the absence of any substantiated evidence to show how these objectives will deliver its recruitment and student number projections.
If the provider is unable to achieve its optimistic recruitment targets, the associated fee income would be less than forecast and could result in material deficits. The provider does not have the financial strength to absorb these.
The loan agreement submitted by the provider is not a legally binding commitment and is repayable if there is an ‘Event of Default’, which has been defined broadly. The provider stated that it could access additional funding but did not submit any evidence to confirm that this would be available or sufficient. The provider currently has more liabilities than assets and while its future cash balance is forecast to be strong, this is based on optimistic student number forecasts which are not judged to be credible.
Initial condition E2: Management and governance
Summary of reasons:
The OfS takes the view that the provider's management and governance arrangements are not adequate or effective. The lack of credibility in the provider's financial forecasts raise concerns about the adequacy and effectiveness of its management and governance arrangements and the extent to which it has sufficiently tested and challenged issues that are material to the provider's financial strategy and performance.
It is the OfS's view that the business plan submitted as part of the application for registration lacks detail and credibility and this suggests a lack of external scrutiny of the provider's plans, projections and arrangements. The OfS concludes that this means that management and governance arrangements are not effective.
The OfS is of the view that the provider does not have sufficient management capacity and capability to ensure it is able to satisfy the conditions of registration and that the provider's governing body does not have effective oversight and scrutiny of the provider's operations.
The OfS did not reach a decision about whether some of the other initial conditions were satisfied. These were:
- Initial conditions B1, B2, B4 and B5: Quality and standards.
A decision about these conditions was not made because the OfS judged that the outcomes from a Quality and Standards Review would be necessary to reach a decision. The OfS took the view that gathering and assessing this evidence would not have been proportionate in circumstances in which three initial conditions were not satisfied and the provider could not therefore be registered.
The fact that the OfS did not reach a decision for these initial conditions is neither a negative nor positive judgement about the provider.