Providers were overpaid £91m in the past academic year, the Skills Funding Agency has revealed.

Kim Thorneywork, the agency’s chief executive, announced the figure in an official letter saying that “the total amount of learning delivered in the academic year 2011/12 was … £2,874m. The agency funded £2,965m.” Click here for the full list.

She added that the overpayment meant some providers’ allocations for 2012/13 would be reduced, and the agency expected “to deliver a balanced budget for the 2012/13 financial year.”

This overpayment of nearly £100m of adult skills funding is particularly alarming”

A relaxation of reconciliation rules allowed providers to keep a greater proportion of the funding allocated for learning that was not delivered.

The overpayment has alarmed Gordon Marsden, the Shadow FE Minister.

“This overpayment of nearly £100m of adult skills funding is particularly alarming, not least given the current pressures that exist on funding across the FE sector,” he said.

Learndirect, Newcastle College and South Thames College top the list of overpaid providers.

Learndirect delivered £117,132,144 of education, but was paid a further £5,333,722.

Adrian Beddow, Learndirect spokesperson, said: “This money [overpayment] will be reinvested in the organisation as part of our long-term commitment to further improve the quality of adult skills provision and outcomes for our learners.”

Newcastle College received £38,197,511 of agency cash, £4,731,682 more than the value of the education it delivered.

A college spokesperson said: “This is a national issue and most FE providers did not fully meet their contracts, mainly due to a late change in the rules by the agency about who was eligible for fully-funded courses.

“We had the largest contract of any FE provider nationally, so naturally we also had one of the largest surpluses. However, when looked at as a proportion of our contract, the overpayment is 14 per cent, which puts us 44th in the table [based on percentage overpaid].

“Funding rules go both ways, of course, and traditionally we have often ended up subsidising those who don’t qualify for free learning at our expense. In the past few years year we have been underpaid more than £7m, providing places even when funding had been exhausted. Just on our 16 to 18 teaching this year, that will cost us around £700,000.

“As a non-profit organisation, any over-provision is invested in new services, support or facilities for our learners, such as the £42m we spent last year on a new campus for West Lancashire College and the new £24m sixth-form college we are opening this year in Newcastle. This enables us to offer the best facilities for our learners.”

South Thames College was paid £19,297,14, £2,447,968 more than the value of education it delivered.

A spokesperson said: “Despite the college delivering 98 per cent of the adult standard learner numbers in 2011/12, it achieved some £2.4m less funding for the same volume of work compared with 2010/11.

“The reduced funding resulted from changes introduced by the agency for 2011/12, in particular the changes regarding benefits categories.”


Editorial: The £91m lesson

Providers were always going to under-deliver in the 2011/12 academic year.

For example, as rightly described by South Thames College, significant changes to fee eligibility policy made achieving funding allocations impossible.

What we now know, and what wasn’t inevitable, is that the SFA has authorised £91m in overpayments

By design or not, this will help the SFA in its aim to balance its budget for the 2012/13 financial year.

No one, perhaps other than those who have received them, should be happy about these overpayments.

How can it be right, for example, that a provider allocation is increased by more than £1m during the year, then they fail to deliver courses to earn the extra funding, and yet it still keeps nearly all of it?

You’ve got to feel for providers who turned down allocation increases for fear of being unable to earn and therefore keep it.

I’m not blaming providers who under-delivered given this was a consequence of poor and under-researched policy-making on the part of government.

If there is anything to be learned from this, it’s not that under-delivery pays, it’s that the government needs to listen to the sector when it warns about how policies will play out.

Nick Linford, editor