ELWa, the controversial post-16 funding agency, is to be brought under the direct control of the Welsh Assembly government.
In a surprise announcement, First Minister Rhodri Morgan said accountability for post-16 education in Wales would fall to the Assembly by April 2006. Two other quangos, the Welsh Development Agency and the Wales Tourist Board, will also be brought under ministerial control. Mr Morgan described the reforms as "the end of the quango state as we have known it".
"Wales is too small a country to have a 60-member Assembly and so many unelected quango boards," he told the last full session of the Assembly before the summer recess this week.
He said the aim was to streamline structures and processes, simplify decision-making and make public services more flexible and responsive to the needs of learners. Consultation measures are to be put in place to try to ensure a smooth transition. All grants and contracts will be honoured.
Mr Morgan denied the move was in response to ELWa's handling of its finances since its creation in 2001. Last year it was found to have mismanaged a pound;4 million project involving a private company. "We all accept that the setting up of ELWa was difficult," said Mr Morgan. "But it is not the case that it is weak or in a situation of being rescued."
Elwa's budget from the Assembly this year is nearly pound;500m and it has 450 staff.
Anna Brychan, director of the National Association of Head Teachers Cymru, said: "We hope it will lead to a far greater degree of accountability with regard to post-16 education funding."
ELWa chairman Sheila Drury said: "Naturally our staff are concerned and we are keen to enter into discussions with the Assembly to determine the implications of this announcement."