Foundation Degree Forward: Grant Letter and Funding for

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1 Commercial in Confidence Foundation Degree Forward: Grant Letter and Funding for B10/72e Agenda item July 2010 Issue 1. The annual grant letter for Foundation Degree Forward (fdf). Recommendation(s) 2. The Board is invited to: a. note the efficiency savings that we are asking fdf to make in b. endorse the activities and funding as outlined in the draft fdf Grant Letter attached at Annex A c. approve a maximum total grant of 2,769,215 for for fdf d. note the reductions currently proposed to fdf funding during the period from and that a paper will be brought back to the Board if, as a result of further negotiations, it is recommended that no further funding should be provided. Timing for decisions 3. A decision on funding is needed at this Board meeting in order for fdf to progress its planning for next year. Further information 4. Available from Liz Franco ( , l.franco@hefce.ac.uk); David Sweeney ( , d.sweeney@hefce,ac,uk); or Paul Hazell ( , p.hazell@hefce.ac.uk).

2 Background 5. The 2003 higher education White Paper established fdf as a HEFCE funded organisation with a remit to support and promote high quality foundation degrees (FDs) 1. As a result of an evaluation in 2006, fdf subsequently shifted its role and branding away from an exclusive focus on FDs towards workforce development and employer/he partnerships across all qualifications. 6. HEFCE is the major funder of fdf with an annual grant of 3.2m (73 per cent of fdf s total income). We support fdf via Staffordshire University, which is accountable for its funding and the employment of fdf staff. An annual grant letter and funding agreement from HEFCE are published, setting out priorities for fdf. This is monitored by regular meetings and also by the fdf management board, on which HEFCE has observer status. The current funding agreement is in place until 31 July 2010 and will continue to be in force unless and until either party gives the other not less than 12 months notice of termination. Discussion 7. The Board received a paper on related bodies at its November 2009 meeting (paper B99e). This followed a letter from the then Secretary of State in April 2009 that asked us, against a background of 180 million of efficiency savings in , to review the funding provided to bodies that do not directly deliver teaching or research (such as fdf). The Board noted that discussions had already begun with fdf to refocus its activity and agree revised levels of funding, with changes starting in We formally wrote to fdf in January 2010 setting out the Board s discussion of related bodies and asking for a plan detailing how efficiency savings of 15 per cent could be made in We received a satisfactory plan in March 2010, outlining how 15 per cent savings for would be met (broadly through running costs) and agreed to recommend to the HEFCE Board that fdf s funding would be reduced by 15 per cent compared to its grant. Therefore fdf s grant is set at 2,769,215. The draft grant letter, which is attached as Annex A, reflects fdf s broader role since the 2006 evaluation. 1 Foundation degrees (FDs) are two-year higher education (HE) qualifications that are broadly equivalent to the first two years of a degree. Jointly introduced by HEFCE and Government in , and set against a background of declining numbers of Higher National Certificates and Diplomas (HNC/Ds), FDs were intended to meet future skills needs, particularly at the technical and associate professional level as well as to expand access to HE. 2

3 Recommendation: The Board is invited to: a. note the efficiency savings that we are asking fdf to make in b. approves a maximum total grant of 2,769,215 for for fdf c. endorses the activities and funding as outlined in the draft fdf Grant Letter attached at Annex A. 10. When we wrote to fdf to propose a level of efficiency savings in , we also proposed that HEFCE funding would be phased out and would cease by the end of In this context, we asked fdf to give detailed consideration to the essential services needed by universities and colleges in relation to foundation degrees and workforce development that could not be funded directly by institutions, and how these services could be delivered in a more restricted public funding environment. 11. In response to this letter, fdf indicated that it would seek alternative income streams in order to sustain its activity without HEFCE funding. It has since produced strategic and business plans, which were discussed at its management board meeting on 10 June These documents requested an assured and shorter period of HEFCE funding than we proposed in our January letter to them, but the same level of funding overall: a 25 per cent cut from to and then no further savings in This funding would underpin the transition towards a set of services for which fdf would charge institutions, employers and other organisations, thereby securing a self sustaining income. 12. Our judgement is that the current strategic and business plans provide neither sufficient clarity on the organisation s future focus, nor sufficient assurance that the proposed income streams can be achieved. At this point, therefore, we do not have sufficient assurance to recommend funding beyond We have, however, provided fdf with an opportunity to provide further information and will make recommendations to the Board on future funding in light of this. 13. Therefore in we expect fdf to start to manage this transition by identifying different options including seeking to confirm the essential services that institutions value and need and, by detailed market testing, would be willing to pay for. We would also look to fdf putting in place structures and processes in order to complete projects that are in train and to provide contingency planning in the event that alternative income streams are not found. Recommendation: The Board is invited to: a. note the reductions currently proposed to fdf funding during the period from and that a paper will be brought back to the Board if, as a result of further negotiations, it is recommended that no further funding should be provided. 3

4 Financial implications 14. Fdf s HEFCE funding will reduce by 15 per cent in the academic year to 2,769,215 and this will make a contribution to efficiency savings. We will return to the Board in due course with recommendations for our future recurrent funding of fdf, based on our assessment of their revised business plan. Risk implications 15. Given the progress that has been made in establishing FDs, which will result in achievement of the government s target of 100,000 entrants in , the main risk to HEFCE is that there will not be a managed transition towards the ending of HEFCE funding. We have observer status on the fdf s Management Board, at which its performance is assessed and reported on. We also have an internal project group, which meets on a regular basis, comprising of fdf s relationship manager, assurance colleagues, and members of the skills policy team with responsibility for FDs, and oversees the relationship with fdf and its performance. We also meet regularly with fdf s senior management team to review developments, discuss plans and proposals and plan communications. The Director of Research, Innovation and Skills has also attended fdf management board meetings and he also meets informally with the Chair of fdf (Dick Coldwell, former HEFCE Board member) to stay abreast of developments and future strategy. We are also working closely with Staffordshire University to ensure that any decisions are taken with a full knowledge of its responsibilities as the host institution and employer of fdf staff. Sector impact assessment 16. Equalities and diversity are written through fdf s HEFCE grant letter. Existing administrative data helps us understand the size and shape of FDs and other vocational qualification such as High Nationals (HNCs/Ds); this helps inform our considerable advice to BIS on this matter over the last month or so and also reduces the burden on others. 17. We will ask fdf, via their grant letter from us, to consider the sustainability of any projects and activity they are funding that are dependent on public funding for their delivery. Fdf also need to be sensitive to the considerable strains on public funds, which will impact on consultancy and marketing expenditure. Fdf is aware of this and we may ask to approve any major items of fdf project or consultancy expenditure. We will also ask fdf to plan for their withdrawal from liabilities such as leases and other physical assets/expenditure. Public presentation 4

5 16. Earlier in the year we developed a joint press statement to explain our rationale for reducing HEFCE grant to fdf by 15 per cent in This was never released as this level of cut did not generate any wider public interest or comment. We will update this statement on an ongoing basis to reflect fdf developments and involve, as appropriate, HEFCE corporate communications. Managing communications may need a higher priority later in the academic year if HEFCE, and therefore fdf project funding, is withdrawn from the sector, and those relying on fdf funding for project delivery are affected. While this is a risk borne by those delivering projects that rely on the discretionary funding of others, we may have to manage relationships with those affected. 5

6 Annex A July 2010 Mr Dick Coldwell CBE Chair Foundation Degree Forward Lichfield Centre, The Friary LICHFIELD Staffordshire WS13 6QG Direct Line d.sweeney@hefce.ac.uk Dear Dick Foundation Degree Forward: funding for I am writing to inform you of the funding that HEFCE will provide for Foundation Degree Forward (fdf) from August 2010 to July This letter should be read in conjunction with my letter to you dated 19 January 2010, in the context of my discussion with your Management Board on 10 th June and my subsequent letter to you dated 22 June Context 2. The annual grant letter to HEFCE from the then Secretary of State for Innovation, Universities and Skills on higher education funding for stated that the progress against the targets for employer co-funded places, and Foundation Degree growth, has been very encouraging. As part of these developments, the growth in foundation degrees continues to be important, with a target of 100,000 enrolments by We welcome the commitment that fdf has already given in support of this agenda. 3. As I set out to the fdf Management Board last month the fiscal climate is very tight, with further savings being sought from the HE sector. I am pleased therefore that fdf is meeting the challenge with a 15% cut in HEFCE funding over the academic year. 4. In my letter to you in January it was agreed that fdf would consider what essential services were needed by the HE sector in relation to foundation degrees and workforce development and how these should be delivered in a more restricted public funding environment. I also asked that subsequent plans made by fdf should assume that HEFCE recurrent grant to fdf would be phased out by the end of academic year Therefore in we expect fdf to start to manage this transition by identifying different options including seeking to confirm the essential services that institutions value and need and, by detailed market testing, would be willing to pay for. We would also look to fdf putting in place structures and processes in order to complete projects that are in

7 train and to provide contingency planning in the event that alternative income streams are not found. 6. We will continue to work with you and fdf colleagues over the summer in order to determine if there is a sustainable business model beyond and we will return to our Board with recommendations for the future funding of fdf. In order to inform this, we have sought information on the proposed focus of fdf activities, income sources and the obligations of the University of Staffordshire by the end of July. Funding 7. The HEFCE Board has agreed funding for fdf for in the amount of 2,769,215. The HEFCE Board will expect to decide the level of funding for and beyond later in the year. 8. A saving of 15% ( 488,685) has been proposed by fdf for and this is reflected in the grant figure above. In the event that higher education funding is reduced by even more than can be anticipated at present, we reserve the possibility of having to reduce the grant by a greater amount. 9. Funds channelled through HEFCE for fdf from the Department for Employment and Learning (Northern Ireland) remain separate from and additional to the HEFCE funding announced above, except to the extent that the accountability conditions described in the Funding Agreement also apply to these funds. Efficiency 10. As part of the Government s overall commitment to reduce administrative costs, we shall expect fdf to have proper regard to efficiencies - and sensitivity to the public presentation of its activity - in its working at all times. 11. Throughout its operations, we expect fdf to address the requirements of all relevant legislation, being proactive where needed. Such legislation includes: a. the requirements placed on the English higher education funding council under the Race Relations (Amendment) Act 2000, the Disability Discrimination Act 2005 and the Equality Act 2006, and in line with the requirements placed on the Department for Employment and Learning under Section 75 of the Northern Ireland Act 1998; b. the Data Protection Act; c. the principles of the Freedom of Information Act; d. all other relevant laws as enacted by Parliament and/or the devolved administrations Funding Agreement 12. The funds provided for fdf are subject to the provisions of the Funding Agreement between HEFCE and Staffordshire University. Currently the Agreement is being reviewed and I expect a revised version to be agreed and signed by both parties shortly.

8 Yours sincerely David Sweeney Director (Research, Innovation and Skills) c.c. Derek Longhurst, Chief Executive, Foundation Degree Foward Neil Scott, Financial Director, Staffordshire University