New advice from the Further Education Funding Council to colleges sets out which diving courses it is prepared to fund, following an acrimonious dispute with a private training company.
The company, Plymouth Ocean Projects, ran courses under franchise agreements with mid-Kent and South Devon colleges, but lost more than Pounds 500,000 because the funding council told the colleges it would not pay for the diving training courses, because they were leisure activities.
The long-running dispute centres on what constitutes a leisure course under the Further and Higher Education Act. The council can fund courses which "give progression" to academic or vocational courses. It argued that this did not apply to the franchised courses run by Plymouth Ocean Projects.
In the new advice to colleges, the council lists three diving qualifications as eligible for funding. But it adds: "In exceptional circumstances, an individual may require a more extensive programme of study. The council will consider these cases on an individual basis.
"The college must discuss the case with the funding team before entering into arrangements to make such provision. Failure to do so may have the result that the provision will not be funded."
Colleges run courses not covered in this advice at their own risk. "If the council concludes that a programme is a device which runs counter to the spirit and intention of the methodology, it may not be funded."
An FEFC spokeswoman said the offer to consider individual cases was made so that the council could not be accused of being unreasonable.
She said: "We have to give advice as the new term begins. Three courses give 'direct progression' and anything below that we will not fund."
Meanwhile Dave Welsh, who runs Plymouth Ocean Projects, is still waiting to hear from the Department for Education and Employment after lodging a complaint.
Education and Employment Secretary David Blunkett can intervene if he thinks the council has acted unreasonably.
Mr Welsh said: "They have told me they think they have found a way of dealing with my complaint, before they have sorted out all the other complications involved. What I want to know is - are they going to pay me?" A spokeswoman for the DFEE said that Mr Welsh would receive a response to his complaint by the end of this week.