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A simple way to help the FE sector save millions

Streamlined funding system can cut costs further, quango claims

Streamlined funding system can cut costs further, quango claims

Simplifying funding and cutting red tape have become two key mantras of the FE sector under the Coalition. A report published last week by the National Audit Office (NAO) argues that this is not before time, estimating that the admin costs to colleges of managing the current raft of funding, qualification and assurance systems amount to #163;180 million a year, with the figure rising to an astonishing #163;250-300 million for all FE providers.

While welcoming the efforts of the Department for Business, Innovation and Skills (BIS) and the Skills Funding Agency (SFA) thus far as a "good start", the NAO warns that the bodies have failed to grasp the sheer magnitude of the problems they face.

Ministers at BIS, according to the report, have failed to be sufficiently clear on the scale of the potential changes, which accordingly have failed to win the confidence of providers.

"The Department lacks a complete picture of its final operating model ... supported by a detailed plan of how to get there," the report said. "Nor does it know how much the new system will cost or the impact of the reductions proposed. There are initiatives under way, but they are not well co-ordinated and further education colleges and other providers ... do not have confidence that the simplification of the system ... will be sustained."

With their admin costs equating to #163;150 per student, principals at FE colleges could be forgiven for being sceptical. The 12 colleges studied by the report's authors believed they could reduce their admin costs by half. While the NAO considers this target overly ambitious, it believes cutting the bill by a quarter - saving as much as #163;70 million - to be a feasible aim.

"Our estimates show that substantial savings can be made by reducing bureaucracy in FE and demonstrate the need for focused, systematic management of these costs to drive sustained improvements in efficiency," NAO head Amyas Morse said.

"BIS and the SFA have the ambition to make changes, but must get to grips with the issues we have raised to achieve value for money and prevent colleges being embroiled in red tape."

The report calls on BIS to work more closely with the Department for Education, the Young People's Learning Agency (YPLA), Ofqual and Ofsted to create a holistic approach for providers. "The Departments and funding agencies have managed the reform of the sector as a series of individual groups of initiatives in their areas of responsibility rather than as a series of interventions that will impact on the same group of providers," it added.

Ever the optimist, FE and skills minister John Hayes responded by insisting that the report "illustrates the considerable progress the Government has already made in reducing bureaucracy in FE", before acknowledging "the scale of the challenge we inherited" and "the urgency of our task".

"We are moving at pace to cut red tape and empower the sector to respond more flexibly to the needs of learners and businesses, and many of these reforms have been effective since the NAO undertook its research earlier this year," Mr Hayes said.

"I welcome the NAO recommendation that our work should be evaluated to assess the changes we are driving forward. The Government will fast-track the work already begun to measure the overall impact of our reforms on colleges."

The SFA insisted that the increasing amount of freedom given to providers would allow them to reduce costs and that opportunities to reduce burdens are "a result of policy changes rather than their driver, as the NAO approach seems to presume".

The agency also criticised the NAO for failing to differentiate between wasteful admin practices and those that are "essential for good stewardship of public money", describing the NAO's estimates of potential savings as "at best speculative".

In order to "provide more impetus to change", the NAO has called on BIS and the SFA to set clear targets for reductions.

In the notoriously convoluted and complex world of FE funding, achieving clarity would be a good start.


3.6% of Government funding streams from the SFA and the YPLA is spent on administering funding, qualification and assurance systems

#163;180m - annual cost of admin to colleges

#163;300m - annual cost of admin to all FE providers

#163;150 - annual admin cost per student.

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