Steps to eliminate malpractice in collaborative education and training ventures between colleges, schools and industry are spelled out in guidelines released by the Further Education Funding Council.
A 10-page, legally-binding model contract will form the basis for all off-site joint provision - known as franchising - and ensure agreements remain under college control and within the law.
A series of "control tests" covering enrolment, delivery, achievement and accreditation will need to be carried out by colleges to qualify for FEFC funding.
Allegations of widespread abuse of franchising sparked an FEFC inquiry 18 months ago. Critics claimed public cash was misused for private training and that some colleges were paying for non-existent classes.
Under the new rules, colleges must be able to enrol or reject students as if they were being taught on site, while course delivery and student progress will be subject to regular college scrutiny.
Franchising has been broadly welcomed by the FEFC as a means of widening access. Around 100 colleges operate some sort of franchising, accounting for 5 per cent of FE provision and 3 per cent of funding allocations last year. However, the council notes that at present "a number of franchise agreements in place may not display sufficient control to be lawful".
FEFC spokeswoman Patricia Stubbs said that although such courses were eligible for funding their shortness and high student turnover might mean that colleges would fail tests of admissions and course delivery.
"It's not a question of what they are doing but how. Colleges which are fully in control of their franchising arrangements will not need to make significant changes."
The exhaustive list of requirements for franchising approval builds on a 14-point agreement included in franchising guidance to colleges last year and attempts to make legislation watertight after several colleges made over-ambitious and insufficiently regulated excursions into sub contracting (see story below).
The cornerstone of the model is its emphasis on college control of course provision.
The franchisee's responsibilities include maintaining monthly attendance sheets, keeping records of student complaints and providing health, safety and insurance cover.
A scheme initiated by Manchester College of Arts and Technology side-stepped possible legal wrangles by operating as a "sponsorship". The pilot will start at schools in two areas of the city in September and all staff teaching post-16 in the participating schools will be employed by the college. MANCAT's deputy principal Peter Tavernor said the college was creating a decentralised neighbourhood model for tackling low retention rates in the city.
FEFC chief executive Sir William Stubbs said: "Colleges are evolving programmes which are radically different from traditional college-based learning. The sector must be flexible and respond to emerging needs if it is to continue to meet employers' and individuals' training needs."
The FEFC will advise on appropriate charges for franchisees later in the year. In the meantime, a series of regional meetings for franchise-operating colleges are planned for May and June.