Skills Funding Agency announces transition factors hitting provider funding rates by 25 per cent or more.

Colleges and training providers have been told their Skills Funding Agency earnings rate could fall by a quarter or more, with just two months before the new academic year.

The agency is introducing protection measures for colleges and training providers, to “smooth” the impact of its new funding system.

The measures are intended to stop providers’ earnings rocketing or nosediving.

Jerry White, director of planning and performance at City College Norwich, said: “It is going to be vexing curriculum planners up and down the country to be told, with only around 30 working days to go until the beginning of the new contract year, that funding values need adjustment resulting in the need to change delivery and resource plans.”

The agency said decisions on next year’s funding were still open to review.

Each provider has been given a number — a ‘transition factor’ — that indicates how much of the budget under the new system it can keep.

A provider transition factor of 0.9 would mean its national rates are reduced by 10 per cent, so it would need to do more work for the same money.

Allocations, finalised at the end of March, remain unaffected by the ‘transition factor’.

Worries about providers learning how they would be affected by the protection measures were aired in a Joint Information Systems Committee online forum for college finance directors, where one provider revealed its rates under the new system would be cut by 25 per cent.

“I can’t imagine that colleges are going to take this lying down,” said one forum member.

FE Week has also learned that at least one independent training provider has been given a transition factor below 0.7.

Meanwhile, a number of colleges have already approached the Association of Colleges with concerns about their situations.

Julian Gravatt, the association’s assistant chief executive, told FE Week: “In principle, it’s right for the agency to smooth the introduction of the new formula, but it’s unacceptable that some colleges have only just received this information at a time when they are setting their 2013-14 budgets.

“We are busy taking up college queries with agency staff.”

An agency spokesperson said: “We have worked with the sector over the past 18 months to develop and implement a more streamlined funding system.

“We are helping providers move to the more streamlined system including using a transition factor which will ensure that their total cash earnings remain within three per cent of the current system.

“The transition factor is derived from the latest full year data from 2011/12 to generate an adjustment which maybe positive or negative to earnings of a provider. It has not been designed to be applied at the level of each qualification for planning provision.

“In circumstances where provision has changed dramatically from 2011/12 to 2013/14 we will review each provider’s transition factor to ensure that high quality provision to learners and employers can continue.”


Editorial : The transition factor

The Skills Funding Agency has been helping providers understand its funding reforms since first publishing plans in October 2011.

It has also designed the reforms in partnership with an advisory group made up of provider representatives.

But, as with all funding reforms that have come before, there will be winners and losers.

At the end of March the agency said it would “smooth” out the winning and losing with transitional protection.

Now we learn the extent of smoothing required for some providers — and it’s huge.

Imagine signing off your curriculum plans and then learning a 0.7 transition factor will be applied.

Effectively, this means to earn a £10m allocation you would have to plan £13m-worth of provision, and at a rate of 70p in the pound.

It will also be interesting to see how subcontractors react.

Presumably they will be seeking out prime providers with a transition factors above one, as they will now be earning more than the national rate.

All avoidable of course, had the funding system reform been resisted.

Nick Linford, editor of FE Week