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December 2003/57
Issues paper

This report is for information

Review of indirect funding agreements and arrangements between higher education institutions and further education colleges

Report to HEFCE by the National Institute of Adult Continuing Education and the Universities of Sheffield and Warwick, with City College, Manchester

This report reviews the indirect funding arrangements that exist between higher education institutions and further education colleges. It provides information on the variety and conduct of these arrangements and highlights aspects that work well and those where there is cause for concern. This information will enable HEFCE to give feedback to the sector on the pattern and extent of such partnerships with a view to offering further guidance on good practice.

Table of contents and executive summary (read on-line)

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Contents

      Executive summary

1    Introduction

2    Background

3    Review strategy

4    Content and character of indirect funding agreements

5    Nature and working of partnership arrangements

6    Main findings and conclusions

Annexes

      Review team and advisory group, and acknowledgements

      References

Executive summary

  • This report reviews indirect funding agreements and arrangements between higher education institutions (HEIs) and further education colleges (FECs). This information will enable the HEFCE to give feedback to the sector on the pattern and extent of indirectly funded partnerships with a view to offering further guidance on good practice.

  • In this study commissioned by the HEFCE, a team from the University of Sheffield, the University of Warwick and the National Institute of Adult Continuing Education, plus City College, Manchester, undertook a review of the indirect funding agreements and arrangements currently operated between HEIs and FECs in England. These take two main forms: franchises between a lead HEI and one or more FECs; and HEFCE-recognised funding consortia where an HEI or FEC is identified to receive and distribute HEFCE funds to member institutions. Those institutions seeking recognition as a funding consortium are required to provide the Council with a copy of their agreement. No such requirement is applied to a franchise agreement.

  • During the course of the review the government published its White Paper on The future of higher education (2003). In this document, proposals are made for the expansion of new foundation degrees, with FECs expected to play a significant role in delivering this growth. To ensure that any expanded provision is of high quality, structured partnerships between colleges and universities - franchise or consortium arrangements with colleges funded through partner HEIs - are identified as the primary vehicles to achieve these aims. However, there might be some instances where direct funding is deemed more appropriate.

  • The first part of the review was concerned with collecting copies of indirect funding agreements from HEIs and FECs, to describe their characteristics, and to assess the extent to which they incorporated the principles set down in the HEFCE Codes of Practice for franchise and consortium arrangements (HEFCE 00/54). The second part of the review, based on a questionnaire survey and case studies, provided information on the variety and style of partnership arrangements, including how partner institutions viewed their working.

  • Nearly all HEIs and some two-thirds of FECs responded to a request for information about whether or not they were involved in indirect funding partnerships. This indicated that 75 HEIs were party to 522 agreements involving 289 FECs. The great majority of these related to franchises and the remainder related to HEFCE-recognised consortia.

  • The franchise agreements were wide-ranging in size, composition and scope. The variety of formats indicated a range of understandings, interpretations and decisions by institutions about what constituted a funding agreement, or what was deemed appropriate for the review team to receive. Most were reported as original documents. However, several examples of template agreements were received where only a copy of the template for the standard agreement was submitted. In these and other cases, it was common for the main document to be accompanied by a number of annexes. Most consortium agreements were more recent in origin and more uniform in size, format and coverage.

  • These documents usually served two purposes: as commercial agreements and as statements of partnership. In most, the emphasis was placed on the commercial and legal aspects rather than the principles of partnership underpinning the relationship. In franchise documents, the content, style and language usually reflected the lead role of the HEI. Given that the lead institution in a franchise is fully responsible for the students and accountable for all aspects of finance, administration and quality, this necessarily implied a hierarchical relationship. Consortia agreements, on the other hand, gave more recognition to FECs as key and equal partners.

  • Franchise agreements were generally uneven in their coverage, with the least satisfactory sections relating to funding, collaborative working and the quality of the learning experience. On funding, the missing or least transparent information usually related to the proportion of funding retained by the lead institution. On quality and collaboration, it was not always clear what specific responsibilities and duties were to be performed by the lead institution. Consortia agreements were generally fuller and more transparent, although not without examples where the coverage of some aspects was thin or absent.

  • At a minimal level, most agreements were meeting the formal requirements of the relevant Code of Practice. However, few agreements expressed the 'spirit' of the Code, either in terms of a philosophy of partnership or in relation to joint authorship and ownership of the agreement.

  • Agreements reflected a wide diversity of partnership arrangements. Some were relatively recent; some had been in existence for a considerable time; some involved only an HEI and an FEC; other partnerships were complex and involved a large number of institutions. HEIs operating indirect funding agreements (IFAs) with a number of different partners did not believe this presented any particular difficulties. More surprisingly perhaps, FECs working with a number of HEIs through quite different IFAs also found that operating with several partners was relatively unproblematic.

  • For HEIs the main reasons offered for entering into an indirectly funded relationship were widening participation and increasing access; responding to the local and regional agenda; and increasing their student numbers. For FECs, the most commonly offered reason was that working with an HEI through an IFA was the only way they could increase their higher education (HE) provision.

  • Some FECs, especially those which are part of a HEFCE recognised funding consortium, acknowledged a range of benefits from working through an IFA but the majority of colleges expressed a strong preference for direct funding. These colleges frequently drew attention to the inherently asymmetric nature of an indirectly funded relationship and what they perceived to be a lack of genuine partnership.

  • Most colleges and HEIs found the HEFCE Codes of Practice for franchise and consortia arrangements to be helpful in providing a 'checklist' and as a reminder of what was expected of partners. A minority of HEIs, however, were critical of the codes and believed them to be unhelpful.

  • There was a significant variation in the figures for the amount of funding retained by the HEI in an IFA. HEIs reported figures ranging from 2.75% to 42%; FECs from 8% to 50%. Most of the HEFCE recognised funding consortia operated with a figure below the mean for the system as a whole. Many FECs were unclear as to how the figure was calculated and what was provided by the HEI in return. HEIs admitted to some difficulty in accurately costing the services they provided but, nonetheless, believed that the proportion of the funding retained did not cover their costs.

  • As far as future developments were concerned, many HEIs took the 2003 White Paper on higher education to be a confirmation and endorsement of their existing policies and expected to continue or expand their indirectly funded work. A smaller number indicated they may scale back or withdraw from such activities on grounds of either cost or incompatibility with institutional mission. Colleges welcomed the commitment to the growth of HE in FECs, but many took the opportunity to emphasise again their preference for this expansion to be achieved through direct funding.

  • In conclusion, a number of recommendations are made to the HEFCE: re-writing the Codes of Practice; exploring ways by which indirectly funded relationships could be made more attractive to FECs; recognising the costs of collaborative working; and carrying out further work to identify and communicate examples of good practice in indirect funding relationships.