Independent learning providers are calling for an end to a dual funding system that sees them denied overpayments while colleges get to keep cash despite underdelivering on education.

Graham Hoyle (pictured), chief executive at the Association of Employment and Learning Providers (AELP), said he wanted to see the system changed so that either his members could also keep overpayment or that both colleges and his members couldn’t keep overpayment.

“The big problem is not with colleges getting overpayments, it’s with there being two different systems — one for colleges and one independent learning providers,” he said.

An AELP spokesperson said the issue had come to the fore with recent funding changes meaning AELP members were getting paid more — but thereby reaching their Skills Funding Agency allocation sooner than expected.

The clash of two incompatible funding systems has come to the fore.”

He said a number of AELP members were “having to turn demand away, and even reduce capacity — including making front-line staff redundant — as the otherwise welcome retrospective funding for functional skills, etc, has placed them in an overspend position”.

Mr Hoyle said he wanted college funding, where excess is identified, to also be considered for redistribution among his members.

“The clash of two incompatible funding systems has come to the fore, with employers and the unemployed losing out as the providers have to turn them away, and even contemplate closing their delivery doors for good,” he said.

“Despite their support and goodwill, I do not believe the agency has the tools to get the money quickly to where it is needed. We will be writing to the FE Minister to engage his help.”

It comes just weeks after the agency revealed it had allowed underdelivering colleges to keep around £85m of taxpayers’ money for which no education had been delivered.

Mr Hoyle added: “The agency is totally sympathetic and anxious to do whatever it can to move money around from providers with unused cash.

“This is routinely done between independent providers who have always argued for in-year reconciliations as the only way to make a reality of demand-led responsiveness.

“Sadly the annual grant system used for colleges denies independent learning providers this flexibility — until the next funding year.”

A spokesperson for the agency said: “We published figures for the end-of-year performance position for colleges and training organisations for the academic year 2011/12 in December.

“Where the published data shows that a college or training organisation has funds against which it has not delivered, the agency is in discussions with each provider about the use or return of any funding not delivered.

“The agency continues to ensure funding is used for the direct benefit of learners and employers.”

The agency has said it could be asking for some of the overall overpayment last year to be handed back.

Lord Heseltine’s proposal to hand-over the entire skills budget to Local Enterprise Partnerships (LEPs) could become a reality with the government having launched informal discussions.

The Association of Colleges (AoC) and Association of Employment and Learning Providers (AELP) have both been in talks with the government about LEPs, and both expressed opposition.

A BIS spokesperson declined to comment on government plans for LEPs, but said a statement on the issue would be made in next month’s Budget.

It follows Lord Heseltine’s report last October, No Stone Unturned in pursuit of Growth, in which he said central government should “identify budgets”, including the skills budget worth around £17bn over four years, and “bring them together into a single pot of funding” for LEPs.

Lord Heseltine said the single pot would “be without internal ring-fence” and LEPs would bid for money from the government on a competitive basis, depending on local needs, removing bureaucracy and going along with the government’s “commitment to devolution”.

Martin Doel, chief executive of the AoC, told FE Week that “breaking up college funding” would be a “real mistake” and colleges should be “left to get on with what they were doing already to generate local growth”, working with LEPs and a range of partners.

I’m still naïve enough to believe that sound argument and logic will win the day here”

He said the AoC had been in “constant discussions” with the government, ministers and LEPs themselves about how colleges may be funded by LEPs.

“I think it’s a real mistake to introduce that level of uncertainty rather than sticking with a good plan and letting colleges get on with doing what they’re doing,” said Mr Doel.

“We want to work with LEPs but I don’t think breaking up college funding and giving it to LEPs is a helpful way to do that because it makes it uncoordinated, lacking coherence and won’t be responsive when money is tight.”

The government first responded to Lord Heseltine’s recommendations in December, when it announced LEPs would have responsibility for the Employer Ownership and European Social Fund budget.

Writing at the time for FE Week, LEP Network chair David Frost said: “This country has had a dysfunctional skills system for too long. Despite the billions that have been spent over the past decade, too many employers say that the current structures are not delivering the skills that they need.”

Lord Heseltine proposed bids would be for a minimum of five years from 2015/16 and included in this “single pot” would be the Adult Skills Budget — worth around £10bn over four years — plus offender learning and the Department for Education’s (DfE) £3bn apprenticeships budget alongside local transport, rail industry and flood defences funding.

Mr Doel said if these funds were not “ring-fenced” the system would “lack transparency”.

“You’ll get very uneven outcomes across the country and I also think you’ll get a lack of clear accountability about how the money’s been spent and what’s been achieved with it,” he said.

“I’m still naïve enough to believe that sound argument and logic will win the day here against what is most often anecdotal and partial argument by those who are arguing for the alternative approach.”

Graham Hoyle, chief executive of the AELP, said: “We know the government is trying to work out how LEPs can be worked out, but we think they’re fraught with all kinds of problems. It doesn’t sound right at all.

“We are looking to put in some very, very firm arguments within the next fortnight.”

A spokesperson on behalf of DfE and BIS said: “We’ll be responding to the Heseltine Review at the time of the budget, but we can’t give any indication before that.”

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Editorial : Single pot or potty?

This year’s Budget could well include deep cuts to FE.

Nothing new about the risk of public funding cuts, but the consequence of a central funding pot for local employment partnerships (LEPs) to competitively bid for is a particularly high-risk strategy

What if a LEP prioritises an infrastructure project, such as housing, ahead of skills training?

If LEPs do prioritise skills training, would they be any more sensitive to local demand and economic need for particular skills and courses than colleges and training providers?

And with high youth unemployment and declining 16 to 18-year-old apprenticeship starts, is now the time for big structural change to the way provision is funded?

The former Training and Enterprise Councils (TECs) were scrapped for being costly, bureaucratic and lacking transparency.

Their replacement, the Learning and Skills Council, was heavily criticised for the way it planned skills provision locally, before the Skills Funding Agency took over.

Ultimately, will Lord Heseltine’s proposal — to essentially reinvent nearly 40 TECs in the form of LEPs and each with five-year plans — make for a better FE and skills system?

Are there other equally radical, but better funding reforms, such as Doug Richard’s idea of skills tax credits?

So many questions, and I’ll need a lot of convincing the upheaval will be judged any more kindly than previous structural shake-ups.

Nick Linford, editor

Providers underdelivered on 16 to 18 apprenticeships by more than £61m last year, newly-released Skills Funding Agency figures have revealed.

The agency’s final allocation for under 19 apprentices stood at £783m in June — but providers missed the target by almost 8 per cent.

The numbers come just a week after the latest Statistical First Release showed the number of 16 to 18 apprenticeships fell for the first time in three years — and figures indicated the slide could get worse.

There were 1,800 fewer 16 to 18-year-old apprenticeship starts last year than in 2010/11 — a 1.4 per cent fall to 129,900.

And provisional figures for the first quarter of the current year showed a 7.4 per cent decline on last year already.

FE Minister Matthew Hancock told FE Week he was looking at the fall “closely” and said a number of factors could be behind the issue, including the government’s attempt to tackle “poor provision”.

But, with the latest agency figures now showing the financial scale of underdelivery, Jaine Bolton (pictured), chief operating officer at the National Apprenticeship Service (NAS), conceded that raising the number 16 to 18 apprenticeships was proving “a major challenge — particularly when employers are experiencing a difficult economic climate.”

We continue to work hard to raise demand for 16 to 18 apprenticeships.”

She said: “The necessary introduction of more rigorous quality standards — with a 12-month minimum duration for 16-18 apprentices from August 2012 — has also impacted on the number of young apprentices.”

She added: “We have rightly focused on raising standards and improving the quality of apprenticeships as this is crucial to securing success and growth in the longer term.

“We remain absolutely committed to getting more young people into Apprenticeship employment and on the path to a good career.”

The largest underdelivery figure, at more than £10.2m, was from Pearson, which had been allocated £36.2m.

Last month it announced the closure of Pearson in Practice UK — one of a number of its UK adult education interests.

A spokesperson for the firm said: “In light of funding policy changes for apprenticeships, Pearson made adjustments to its programme during the funding year that resulted in lower levels of recruitment, so while the training was of the highest quality, Pearson did not take up its maximum allocation.”

The college with the greatest underdelivery was Newcastle College. It was allocated nearly £5.5m, but delivered almost £1.3m less.

With all under 19 apprenticeship funding paid ‘on-delivery,’ this means the college received nearly £4.2m. It declined to comment.

However, Mrs Bolton said NAS was employing a host of measures to arrest the decline in under 19 apprenticeship uptake.

“We continue to work hard to raise demand for 16 to 18 apprenticeships and we have introduced measures to support employers to recruit younger apprentices, including the £1,500 Apprenticeship Grants for Smaller Employers,” she said.

She also referred to the Apprenticeship Application Support Fund, or ‘Bootcamps’ project, as providing “17,000 places to support 16 to 20-year-olds who want an apprenticeship to improve their application skills and develop the skills and attitudes expected by employers”.

She added: “We are enhancing the support provided by the Apprenticeship Vacancy service. There is a dedicated marketing campaign targeting employers who want to recruit 16, 17 and 18-year-olds, and we are also strengthening our information, advice and guidance to schools, parents and teachers.”

The agency declined to comment.

A Liverpool-based provider that trained around 700 learners has gone into administration, putting 70 jobs at risk.

Scientiam appointed administrators from Mazars LLP on Monday, February 4.

It held a £2.5m contract with the Skills Funding Agency and had up to five subcontractors.

A statement issued by Mazars, which is looking for organisations to take on any part of Scientiam operations, said: “Our appointment reluctantly followed an internal review supported by advice from the external auditors which concluded Scientiam had become insolvent and could not continue its operations.

“Learner numbers not reaching targets coupled with clawbacks of previously advanced funding combined to drain Scientiam of its cash resources.

Our priority is to work with Scientiam and the administrator to transfer learners and apprentices to appropriate provider.”

“Although the administrators have had to announce cessation of all activity, and commenced redundancy consultations with all staff, it is nevertheless the administrators’ primary concern to facilitate as orderly a handover of these learners to a successor organisation as rapidly as possible.”

A spokesperson for the agency and the National Apprenticeship Service said: “Our priority is to work with Scientiam and the administrator to transfer learners and apprentices to appropriate providers, as quickly as possible, with minimal disruption, so they can continue their learning and apprenticeships.

Scientiam’s most recent set of accounts, filed in January last year and covering 12 months up to August 2011, showed a pre-tax loss of £29,641 from a turnover of just over £3m.

This followed losses of more than £306,000 in the previous year.

Wirral Metropolitan College is listed as Scientiam’s parent company in a 2012 Ofsted report. However, college spokesperson Sally Wysocki denied the college was the parent company.

She said: “Scientiam is not owned by Wirral Metropolitan College. It is a company limited by guarantee and is managed and operated independently of the college.

“A number of Scientiam’s non-executive directors have been college staff and, along with a number of other providers, the college has been a subcontractor for Scientiam.

“Scientiam has been experiencing financial difficulties for some time and since December 2012, additional non-executive directors from college staff were appointed to Scientiam’s board as ways were sought to assist the company with making its business more sustainable.”

She added: “The management and directors of Scientiam has done everything possible to try to assure the sustainability of Scientiam and avert the possibility of administration, however, it was with great regret that Scientiam had to be placed into administration.”

One of the company’s subcontractors was Absolute Training Solutions, a specialist glass industry training provider that has delivered NVQs and apprenticeships with Scientiam since 2009.

Sean Monaghan, director of Absolute Training Solutions, said: “It is really sad news that Scientiam has collapsed.

“We are proud of the work we have completed in partnership with Scientiam over the years.

“Our main priority now is to ensure the 111 live learners we have registered with Scientiam continue their training with us.”

An agency spokesperson said it would be writing to all learners and apprentices and a mailbox, scientiam@skillsfundingagency.bis.gov.uk, had been set up for concerned learners and their families. It directed any enquiries about payments due to local job centres.

For details on taking up Scientiam operations, phone Mazars on 0161 831 1100.