COLLEGES are missing out on hundreds of thousands of pounds of funding because they cannot get to grips with the Further Education Funding Council's notoriously complex methodology.
But the problem has spawned a multi-million pound business in "unit farming" and "unit hunting" as colleges call in specialised consultants to maximise their funding. Units include spending per student or course.
Two companies, Network Training and management consultants KPMG, have built hugely successful operations trading on colleges' inability to produce reliable data returns to support their claims.
Network Training's consultancy service on "optimising FEFC recurrent funding" promises to "identify errors or omissions that artificially depress the unit claim". It has grown so fast that it now generates a seven-figure income every year.
Martin Hill, a partner in the company, said that of the 31 colleges they had worked in over the past year only one had been claiming its full entitlement. He said: "The methodology is very complex but it needs to be to reflect the vast range of FE provision."
He says many problems stem from the fact that the system was introduced at a time of financial constraint, which left information systems underfunded. Small colleges were among those most at risk. "For these colleges an underclaim of 5,000 units represents a significant amount of income," said Mr Hill.
Data returns typically include more than 150 pieces of information on each student - some of which can trigger extra funding - and rely on a database of more than 30,000 qualifications, each with a corresponding unit tariff.
But KPMG estimate that 2 to 3 per cent of the returns will be inaccurate. Peter Marples, a partner in KPMG's education department, said: "It is not because the colleges aren't competent, it is because it is so complicated."
KPMG have worked for 250 colleges on a "no win, no fee" basis, charging pound;3 for every unit they find. At one college they discovered 50,000 unclaimed units - nearly pound;1 million in lost income.
A spokesman for the FEFC said: "It's like filling in a tax return - people employ accountants to do it. But it's not so complex that colleges are forced into using external consultants - the majority don't. "