Providers delivering in the workplace will receive almost 40 per cent less funding when they are forced to switch from Adult Basic Skills (ABS) Certificates to Functional Skills qualifications in August.

The current version of the Learning Aim Reference Application (LARA) shows that while providers receive £505 for each ABS qualification they deliver, under Functional Skills they will receive only £314 (see table).

Trudi Stevens, owner of Green Lantern Training Company said: “Take 20 per cent off for the prime’s cut (and it) leaves me £240 to deliver it.

“Remove £50 for registration and certification, £10 for training materials and 20 per cent for overheads – I’m left (with) £132 to deliver what will be at least 20 hours teaching, which works out at £6.60 an hour.

“I could get more stacking shelves in my local Aldi.”

NIACE is particularly concerned because of the challenging nature of the assessment of Functional Skills and the increased costs of supporting learners to successful achievement.”

Further concerns have been voiced on the “Apprenticeships England” LinkedIn group.

Rachel Squires, a work-based learning co-ordinator at Bicton College said: “With the pressures on training providers to complete, achieve and fund I can unfortunately see the focus being removed from the young person and their career opportunities.

“Functional Skills is becoming the final barrier that is proving just too much for many to get over. So many work-based learners who have a real and positive role to play in the workplace, have drive, enthusiasm and practical skills, yet can’t get through level 1 Functional Skills will be dropped as the resources are not there to get them through.”

The National Institute of Adult Continuing Education (NIACE) say they are also worried about the decision.

Carol Taylor, director of development and research at NIACE said: “If, according to these figures that the funding available for the delivery of functional skills in the workplace (especially for level 1 and 2) is no greater than that which is currently available for literacy and numeracy that would be a cause for concern.  NIACE is particularly concerned because of the challenging nature of the assessment of Functional Skills and the increased costs of supporting learners to successful achievement.”

A spokesman for the Association of Employment and Learning Providers (AELP) said: “We are heavily engaged in discussions about trying to ensure that Functional Skills funding more properly reflects costs of delivery.”

The funding rate for functional skills was added to the LARA on March 24 as part of the Employer Responsive (ER) Other provision.

“The funding rate for Functional Skills has been set at 0.12 Standard SLNs,” the SFA website reads.

“The funding value has been set based on the recommendation of the Funding

External Technical Advisory Group that advises the Agency on funding rates and is based on the average time taken to deliver Functional Skills in ALR.”

ABS qualifications in numeracy and literacy at level 1 and 2 will cease to be funded by the Department for Business, Innovation and Skills (BIS) from August.

However, it is understood that entry level ABS Certificates will continue to be funded into 2013.

The head of a subcontractor has called the high management fees used by some FE colleges a “rip off”.

“The colleges get away with it because they can,” the source, who wished to remain anonymous told FE Week.

“Subcontractors simply don’t have the clout to turn around to their local college and say up yours, I’m not going to pay that, I’m going to go somewhere else.”

City of Bristol College is charging subcontractors a 30 per cent management fee for the delivery of adult apprenticeships at level two and three.

“I downloaded all the documents and after some digging around (found) the management fee was 30 per cent – then I just put the document away because it’s not worth it,” the source said.

City of Bristol College told FE Week the 30 per cent management fee reflected “the high quality support” which they offer to subcontractors.

these outfits that take big management fees won’t allow the subcontractors sufficient funding to be able to deliver a quality service”

“City of Bristol College provides a member of the executive team as the key point of contact to all our subcontractors, in addition we provide a specialist support team headed by  a senior manager who has day to day responsibility for assisting the subcontractor in all matters that relate to  our students,” a spokesperson for the college said.

“Business services, curriculum development and support is provided by this dedicated partnership team along with quality assurance systems.

“Partners have access to common frameworks for online data tools developed and supported by the college and subcontractors who work with the College have access to our specialist team to maximise joint bidding opportunities.”

However, the subcontractor told FE Week that taking on the contract would have affected the quality of the training they delivery.

“Prime contractors want us to deliver a high quality service, which we pride ourselves on doing, but these outfits that take big management fees won’t allow the subcontractors sufficient funding to be able to deliver a quality service.”

The Skills Funding Agency (SFA) told FE Week they are working with prime contractors “to understand the reasons” why they take higher management fees.

A spokesperson for the SFA said: “The amount of funding retained by a prime contractor for programmes and provision delivered in whole, or part, by a subcontractor must represent good value for money and reflect the actual costs incurred by each party in the delivery of that provision.

“Where it is identified that the percentage of Agency funds from the lead provider’s allocation passed to the subcontractors is significantly low, the Agency works with the prime contractor to understand the reasons for this.”

The SFA spokesperson said the amount retained by FE colleges is often “not a management fee at all” and instead used to retain responsibility in areas such as assessor support, collection and procession of data, quality assurance and registration.

“We are working with our External Advisory Group and Stakeholders, including AELP and AoC, to develop criteria around this area so we are confident that the fee charged is representative of the service provided,” the SFA spokesperson told FE Week.

However, the subcontractor said the increase in management fees would only cause the SFA to further reduce funding in the sector.

“If they’re aware it’s widespread practice for the prime contractors to ‘top slice’ 30 per cent or more, then all that will happen is they will just reduce the funding that’s available,” the source said.

“If the SFA say ‘look, our guideline is a 15 per cent management charge but there are a lot of primes subcontracting at 30 per cent or higher, maybe we’ve got our sums wrong’.

“They’ll say ‘maybe we don’t need to be giving them so much money to be delivering these qualifications, so actually let’s knock 10 per cent off the top’.

“That’s what will happen, and then everybody will suffer.”

Real-Time Training Ltd, which trades under the name RTT Group, has had its £3.3m contract with the Skills Funding Agency (SFA) terminated.

A spokesperson for the SFA told FE Week: “The Agency has taken the decision not to re-contract with RTT for the 2012/13 academic year and has issued notice to terminate the current contract in accordance with our agreed terms and conditions.

“The Agency continues discussions with RTT over the concluding position on its contract including any financial out turn.”

The spokesperson added that the Agency is working with the National Apprenticeship Service (NAS) and RTT to protect public funds and ensure “minimal disruption to learners” while they are placed with local providers and employers.

The Agency has not revealed however why the contract with RTT was terminated.

At the time of publication Mike Barton, executive group chairman at RTT Group, told FE Week he was “99 per cent” sure the company, based in Leicestershire, would be put into administration later that day.

“Since we opened the learners have been – and will be until we’re no longer connected in any way – our main priority,” he said.

“That’s always been our philosophy, and will continue to be so.”

Mr Barton said he had written to all of the FE colleges which RTT works with to inform them of the situation.

The family company, which includes managing director Emma Barton and director James Barton, is understood to have also worked for the Department for Work and Pensions (DWP).

A spokesman for the DWP said: “We have received a call from RTT to say that the offices have closed temporarily. The DWP has not been told anything formally at this stage.”

Christian Gibbs was enrolled on a Security Industry Authority (SIA) course with RTT when it closed last week.

“I received a phone call on Friday and was told not to come in on the following Monday as it was a training day, but to attend on Tuesday as sessions would commence as normal,” he told FE Week.

“I must have waited just over an hour with a group of other students for one of the RTT employees to open the shutters so that we could begin, but that didn’t happen.

“None of the students were notified in any way by the RTT Group and had to find out for ourselves what had happened.”

A former employee told FE Week he was “extremely saddened” to hear that the company might close.

“Most of all I feel sorry for the staff,” he said.

“I know many of them have been so loyal to the family, working long hours and giving their all.”

The Department for Business Innovation and Skills (BIS) have announced that Doug Richard, described as an entrepreneur and founder of School for Startups,  is to lead an independent review into the future of apprenticeships.

Labour MP David Blunkett said it was “unjustifiable” that more than 100,000 students miss out on a free school meal because of where they study in a Westminster Hall debate this morning.

Currently, a 16 to 18 year-old from a disadvantaged background studying in a school sixth form, free school, University Technical College or an academy, is provided with a free school meal, but if the same student chooses to study at a college they lose that entitlement.

A ‘No Free Lunch?’ campaign has been launched by the Association of Colleges (AoC) to address the problem.

In response to the former education secretary and MPs from across the country the schools minister Nick Gibb said: “We do recognise the anomaly, but it is not a new anomaly.”

He said that in the current fiscal climate it would be difficult to increase the budget by £35-70 million, but that he would keep the issue “under review”.

Martin Doel, chief executive of the AoC, said: “The fact that this is not a new funding anomaly does not mean that it’s not something that should be addressed by the government at the earliest opportunity; it is not enough to keep it under review.

“These students and their families are among the most vulnerable in our society – not helping them just because they have chosen to continue their education in a college flies in the face of the government’s oft-professed commitment to social mobility and is unjustifiable.

“AoC estimates that removing this inequality and extending the provision of free lunches to eligible college students will cost the Department for Education £38million out of their £56billion budget – this is equivalent to 1p in every £14 spent – and we consider this a reasonable price to pay for equality for these students. We will continue to make the case for parity of funding in order to get these young people the support they need to stay in education.”

Too many people leaving school and college do not have the literacy and numeracy skills to thrive in the workplace, according to a survey by the Confederation of British Industry (CBI) and Pearson.

The research shows 35 per cent of employers are unhappy with the literacy skills of college leavers, with a further third dissatisfied with their numeracy skills.

The figures, according to the CBI, are “broadly unchanged” from the last time the survey was conducted in 2003.

John Cridland, director-general of CBI, said the development of high-level skills must start at school before continuing in FE.

“With the right start at school our young people can go on to have successful and fulfilling careers and have a strong base from which to learn more at college, university, or in the workplace,” he said.

“But levels of educational attainment are rising fast in many leading and emerging economies, so in the UK we must ensure that our education and skills system can continue to compete at the cutting edge.”

The CBI / Pearson Education & Skills survey, which questioned 542 organisations in the UK, found that 42 per cent of employers had provided remedial training for school and college leavers.

More than half of businesses which responded to the survey also said too many college leavers had not developed the “self-management skills” needed for the workplace.

“It’s not just about literacy and numeracy,” Rod Bristow, UK President of Pearson said.

“Employers still find that some young people lack the initiative, problem-solving and communication skills to succeed at work.”

The survey also covered the links FE colleges have with businesses, the reasons why some employers do not recruit apprentices, as well as the importance of strong science, technology engineering and maths (STEM) skills.