Scrutiny of adult skills subcontracting by colleges is blighted by “gaps and weaknesses” in the West Midlands, an audit review has revealed. A West Midlands Combined Authority (WMCA) internal audit report, published this month, found three colleges out of the 15 grant-funded institutions reviewed planned to subcontract around 95 per cent of their adult skills fund (ASF) allocation in the 2025-26 academic year. The report said subcontracting levels at City of Wolverhampton College, Heart of Worcestershire College and Shrewsbury College broke the WMCA’s 25 per cent cap, introduced the previous year to reduce the risk of fraudulent or inaccurate funding claims. Together, the colleges planned to subcontract about £14.7 million of their £15.5 million in grant allocations. City of Wolverhampton College received the bulk of that funding, about £14.2 million, and planned to subcontract almost all of it. Subcontracting education, apprenticeship training and employment support is common practice by colleges, local authorities and training providers, particularly for specialist provision. But the government has sought to curb it over the last decade following a string of scandals and large government funding clawbacks linked to rule breaches, poor oversight by lead providers and large management fees. Auditors find ‘no oversight’ While auditors found a “generally sound” system in place around ASF subcontracting at the 15 providers reviewed, they also discovered “gaps and weaknesses” in oversight both in the West Midlands authority’s internal skills directorate and at “lead provider” colleges. They flagged out-of-date registers of subcontracting arrangements and “no oversight” of subcontract documentation, or whether Department for Education-mandated external reviews were carried out every three years. Auditors noted high management fees at some lead providers, with one subcontractor subject to different management-fee rates across three lead providers. They also found “a gap in assurance” because the combined authority’s quality monitoring of colleges did not extend to providers in their supply chains. Weak oversight was partly caused by “challenges” in WMCA’s skills team, including a staff restructure in November 2025 and “resourcing pressures” caused by vacancies. They also said WMCA officials were working “proactively” to reduce subcontracting through performance reviews and planning to “address disparities” in management fees to ensure value for money. WMCA refused to confirm with FE Week what college subcontracting arrangements it had agreed with colleges this year, and it has not published a full register of subcontracted providers and amounts subcontracted since 2022-23. WMCA’s internal auditors, which have a rolling programme of assessing governance and financial controls at the authority, chose to focus on adult skills supply chain management at grant-funded colleges and local authorities late last year after identifying it as a “high-risk area”. This year’s audit follows a 2022 investigation into a whistleblowing allegation about “non-compliance of a contractual arrangement” between a provider and WMCA. The investigation made two recommendations about subcontracting and performance reviews of providers, but officials have kept most details secret on the grounds they relate to its “business affairs”. The colleges Subcontracting at City of Wolverhampton College is now likely to end up at less than 50 per cent, a spokesperson told FE Week. Explaining the lower percentage, the college said 2025-26’s subcontracting figures were first set out in a delivery plan submitted in February 2025, six months before the start of the academic year, and that “in the normal course of events a lot can change”. It added: “Our choice of partners is directly informed by sector-specific skills shortages, allowing us to grow genuine partnerships based upon shared delivery, facilities and technical expertise.” The college confirmed that its subcontractors are National Infrastructure Solutions, which specialises in rail industry training, Duplex Business Services, which specialises in electric vehicle technician training, and BlackRook Academy, which delivers digital and essential skills. The college publishes a general subcontracting policy, but its spokesperson did not provide the value of each current arrangement or the management fee retained in each case. Previous WMCA disclosures show the college subcontracted £4.1 million to National Infrastructure Solutions in 2022-23. A spokesperson for Heart of Worcestershire College, which receives a £1.4 million ASF grant, said it was unable to respond to FE Week’s questions because most staff were on annual leave. Shrewsbury Colleges Group only received a small ASF grant of about £73,000 this year. A college spokesperson disputed the accuracy of WMCA’s subcontracting figures. They said: “Shrewsbury College is very proud of its work for WMCA delivering high quality training and education for residents of the West Midlands. “Shrewsbury College directly delivers all of its ASF allocation from WMCA. We have sub-contracted some of our much smaller Free Courses for Jobs Allocation, based on an approved business case.” ‘Threshold’, not ‘prohibition’ WMCA described the 25 per cent figure as a “threshold” rather than a prohibition. Its published rules refer to it as a cap, but allow providers to exceed it where an exception is approved through a business case. The authority said that subcontracting above this level was “permissible” for reasons such as access to specialist expertise, engaging specific learner groups, or to cover locations not reached by the lead provider. “WMCA has worked with providers to reduce reliance on subcontracted provision whilst ensuring continuity of learning for residents and employers of the West Midlands,” it added. “More broadly, the audit did not identify fraud, misuse of funds or the absence of an approval framework.” The Department for Education and eight of the 13 authorities with devolved adult skills have a cap of 25 per cent on subcontracting, although most say providers can breach this level with prior approval. A management fee cap of 20 per cent is also in place at nine authorities.