The Young People's Learning Agency (YPLA) has been named as one of the bodies at risk of abolition in the Government's bonfire of the quangos, with ministers split over its survival.
As leaked papers listed the YPLA's future as still in doubt, FE Focus understands that the Department of Business, Innovation and Skills (BIS) and the Department for Education (DfE) are at odds over the continuing role of the 16-19 funding body's role in FE.
Business secretary Vince Cable and FE minister John Hayes are believed to favour handing its FE funding role to their department's Skills Funding Agency (SFA), possibly along the lines of the Conservatives' manifesto proposal for a Further Education Funding Council for England.
Mr Hayes told FE Focus earlier this summer that plans for reforming the funding bodies along these lines were still under consideration, despite the transfer of 16-19 funding from local authorities directly to the YPLA.
Such a move would give them control of more than pound;4 billion of extra cash and advocates of the re-merger of FE funding believe that hundreds of millions of pounds a year from central and college budgets could be saved under a stripped down system.
An option to merge higher education funding in a single post-19 body, as advocated by the Liberal Democrat manifesto, seems unlikely to proceed after the list confirmed the Higher Education Funding Council for England (Hefce) should be retained.
But the YPLA also has a role in directly funding academies at all ages, which is likely to become more important as the Coalition implements its plans to expand their number, making its complete abolition difficult.
Putting the SFA in charge of college 16-19 funding could also lead to inequalities of funding between school sixth forms and colleges, and leave college budgets vulnerable to the more severe cuts expected at BIS rather than the DfE.
The YPLA declined to comment in detail on the possibility of it being abolished, but a spokeswoman said: "We were aware there was a review of public bodies and we await the outcome of the spending review. We don't respond to leaks."
Colleges said there was too much talk about creating a more efficient funding system and too little action, but that either of a number of options could satisfy them.
Martin Doel, chief executive of the Association of Colleges (AoC), said: "AoC and its members would like to see fewer people overseeing the work of colleges and more money being directed to front-line services and there are a number of possible ways of achieving this.
"We have the SFA, the YPLA and Hefce and we're spending a lot of time looking at the architecture and not enough time doing something about it. The future could be a single body for all pre-19 education and one for all post-19 work, or an over-arching funding body. We would like to look at ways of them all working together more efficiently, more effectively and with a properly constituted board to ensure decisions are taken independently on the best advice."