Colleges are charging excessive management fees to small companies who need funding for apprenticeship schemes. With charges as high as 39 percent, the practice is undermining the funding arrangemnents.

The Skills Funding Agency introduced minimum contract values in 2011 in a move to streamline funding arrangements. The result was that smaller providers had to choose between forming a consortium or setting up as a subcontractor for larger providers.

The change forced often very good smaller providers to become a subcontractor of a larger provider, often a further education college.

It also resulted in the smaller companies who required funding having to apply through larger colleges. These colleges have been applying for the funding on behalf of smaller providers but have been taking what they call ‘management fees’ of around 15 – 39 % from the overall funding that should go directly to learners. Larger colleges have been acting as middle men and often not even allowing apprentices to use college library and internet facilities.

Another unintended consequences of the policy was that some lead contractors lacked sufficient expertise of work-based learning to quality assure the work of their subcontractors. In one case the contractor was unaware that the subcontractor was not carrying out reviews of learners in the workplace, a contractual obligation.

Ofsted has recommended that the government and other agencies should consider introducing an independent whistleblowing hotline, so concerns and potential problems can be picked up quickly.