20July 2012

Name
Title
Address
Address
Address
Address
Address
<Postcode> / Direct Line
E-mail / 0117 931 XXXX

Dear Salutation

Funding agreement between the HEFCE and institutions 2012-13

  1. I enclose the funding agreement between HEFCE and your institution for the academic year 2012-13. This sets out terms and conditions which apply to your grant for 2012-13 and the requirements relating to student numbers that we expect your institution to meet. The funding agreement incorporates the recurrent grant tables, which may have been updated since they were first issued on19March 2012.We recognise that there is a complex process of transition to the new finance arrangements for higher education. Paragraph 30 of this letter explains whether and how the institution’s student number control or any of your funding allocations have changed since March. If you have any questions about this letter please contact your HEFCE higher education policy adviser.
  2. An electronic version of this letter, the funding agreement and the accompanying annex and tables is on the HEFCE extranet in the same place as the letter and tables issued on 19 March 2012. My letter of 2 March 2012explained how to access this information.
  3. I am also writing today to all other colleges that we directly funded in 2011-12 with their funding agreement and details of their recurrent funding allocations. As we are establishing a new funding relationship with your College for 201213, the contents of this letter are different in places to that issued to colleges with existing direct funding arrangements, because their letter explains some changes since last year. However the funding agreement is the same for all colleges.
  4. We will be publishing a generic version of this letter,the letter to other colleges and the funding agreement on our website in the week beginning 23 July. At this time, we will also publish summary data on funding and student numbers, and the grant tables for individual institutions.

Response required

  1. Please acknowledge your receipt of this agreement by signing and returning the enclosed form by Friday 17 August 2012. We do not require any other kind of reply to this letter.

The Funding Agreement

  1. The funding agreement sets out what we require of colleges as a condition of the grant we pay and the terms under which we provide funding. The main areas of content for 2012-13 are:
  • the arrangements for HEFCE paying, recalculating and adjusting grant
  • the requirement to comply with the student number control
  • the requirement not to charge fees in excess of those permitted in legislation
  • the requirement to provide data.
  1. The main public accountability requirements for further education colleges (FECs) however are through the financial memorandum with the Skills Funding Agency

The arrangements for HEFCE paying, recalculating and adjusting grant

  1. For most colleges that we did not fund directly in 2011-12, the initial 2012-13 grant allocations that we first announced in March and which may be updated in this funding agreement have been based on the full-time undergraduate places awarded through the student number control margin exercise. They may also incorporate transfers of funding that have been agreed since March. However, many of the teaching funding allocations for 2012-13 will be recalculated and adjusted, through a new threestage process which will allow us to finalise allocations using more up-to-date data. In essence, this involves re-running our formulaic allocations from first principles but with revised data. The funding agreement explains this process and about the likelihood of changes to the grant announced in this letter.
  1. Institutions will not be able to appeal against changes to their grant arising from this three-stage recalculation process – just as there was no entitlement to appeal against our initial formulaic teaching funding allocations for the year. By appeals, we are referring to arguments from institutions that their allocation should differ from that calculated by the correct application of our funding formulae. If we were to make an arithmetic error in our calculations, we would look to correct it, and would not see the identification by an institution of such an error as an ‘appeal’.

The requirement to comply with the student number control

  1. The main requirement that we place on colleges relating to their 2012-13 student numbers is that they do not exceed their student number control. This applies to students starting HEFCE-fundable full-time (FT) undergraduate (UG) or Postgraduate/Professional Graduate Certificate in Education (PGCE) study in 2012-13. For colleges that we did not fund directly in 2011-12, the student number control applies to students starting full-time study at the institution in 2012-13, and not to those that are continuing in the same mode of study on courses that the college provided (directly, rather than through a franchised-in arrangement) prior to 2012-13.
  1. The funding agreement specifies the student number control limit for 2012-13 and the action we will take if the college recruits above or significantly below it. In summary, grant will be reduced for any recruitment above it and we will also not count such over-recruitment towards our funding for new-regime students in high cost subjects. In the event of significant recruitment below the limit (by which we mean by more than 5 per cent or 25 students), we may reduce the limit that we set for a future year.
  1. The word ‘may’ is chosen deliberately to reserve our position to take action should we consider it right to do so, and institutions should plan on the basis that we ‘will’ reduce future limits in the event of recruitment significantly below the limits set for 201213. We do recognise that there are competing arguments about the extent to which future limits should be reduced, and we will wish to consider how recruitment has gone across the sector as a whole and for individual institutions in 2012-13 before deciding whether and where we take action. In making such decisions, we will be mindful of the interests of prospective students, as well as of institutions, and of Government policy intentions. In particular, we want to minimise the extent to which there might be unmet demand from students on the one hand and unfilled places at institutions on the other.

The requirement not to charge fees in excess of those permitted in legislation

  1. The funding agreement includes a requirement on institutions that we fund not to charge certain categories of students higher tuition fees than those permitted in legislation. This applies to all students subject to the regulated tuition fee regime – including those that colleges may have recruited prior to 2012-13. The level of fee that can be charged depends on whether the college has an access agreement (‘approved plan’) in force that applies to the cohort of students entering the college in a particular year. In 2006, we issued a circular letter (‘New condition of grant about tuition fees and access agreements’, circular letter 15/2006), which sets out the requirements on institutions to comply with regulated fee limits and any access agreement requirements and the action we will take if they do not. That circular letter is still in force and applies to your college. The funding agreement cross-refers to it, but updates some of the fee limits and references to legislation that have been introduced since 2006.
  1. Colleges we did not fund directly in 2011-12 should note that prescribed basic and higher fee caps apply both to new-regime and old-regime students registered at the college (rather than taught under a franchised-in arrangement) as detailed in the funding agreement for 2012-13. Colleges are not permitted to charge more than the prescribed amount in tuition fees to each of their students, irrespective of whether HEFCE is counting these students for funding purposes. If colleges need to submit an access agreement to the Office for Fair Access (OFFA) in relation to fees chargeable in 2012-13 to students that they recruited prior to 2012-13, they should contact OFFA (
  1. Separate from the above, the funding agreement also explains that we will monitor the average tuition fees charged by colleges that have been awarded places from the student number control margin for 2012-13. These places were awarded on the basis that average fees would not exceed £7,500. The funding agreement explains that if we find fees exceed this limit, either for the cohort of students starting in 2012-13 or for those starting in the following two or three years, then we may reduce student number control limits for future years. We will provide further information separately about our monitoring arrangements.

The requirement to provide data

  1. It is a condition of grant that colleges provide the data we require to carry out our functions. These data requirements include:
  • the 2012 Higher Education in Further Education: Students (HEIFES) survey
  • the Individualised Learner Record (ILR) data relating to HE activity collected by the Data Service
  • student contact details to enable the Council or our agents to conduct the National Student Survey and the Destination of Leavers from Higher Education (DLHE) survey
  • data that will allow the Council or our agents to publish a Key Information Set (KIS) for each relevant course. The college is also required to place on each of its relevant course web pages the ‘KIS widget’ which shows a summary of the KIS for the course and incorporates a link to the full KIS published by HEFCE or its agents.

Other conditions of grant

  1. The funding agreement also includes other paragraphs about the relationship between and respective responsibilities of HEFCE and the college.
  1. For colleges that expect to have over 100 full-time equivalent (FTE) directly HEFCE-fundable student numbers in 2012-13, our allocation of funding for widening participation is conditional upon receipt of an interimwidening participation strategic statement for 2012-13. Further information is in ‘Interim widening participation strategic statements for 2012-13, and arrangements for future years’ (circular letter 11/2012).

Changes to recurrent grant since March 2012

  1. As explained in my letter of 19 March 2012, for colleges that we are funding in 2012-13 solely as a result of a successful bid to the student number control margin, we will provide funding for 2012-13 only for full-time undergraduate places, as it is this category of students to which the successful bid applied. This applies to those full-time undergraduates that start their courses in the 2012-13 academic year – generally, those subject to the new fee and funding regime that is being introduced by the Government (‘new-regime’ students). The allocations for 2012-13 that apply to such students are:
  1. Subject-based funding for new-regime students.
  1. A widening participation targeted allocation.
  1. Ateaching enhancement and student success targeted allocation.
  1. An interim allocation for London weighting.
  1. A small number of colleges have a change to their recurrent grant allocation for 2012-13 since March.Any changes for your college are indicated in paragraph 30 of this letter.We consider it desirable to minimise small changes to initial allocations in July and, in particular to avoid making small amendments where these would also be picked up in adjusted allocations for March 2013, as set out in our recurrent grant letter of 19 March. We stated that we would therefore only amendthe teaching grant in July 2012 for those institutions where changes exceed a threshold of £20,000 or 20 per cent of the institution’s total teaching grant, whichever is the higher.
  1. We have since revised our approach so that, whilst the above thresholds still apply in the consideration of changes to total teaching grant, we are implementing all changes to targeted allocations from August 2012. All other teaching grant changes will be implemented when we recalculate the grant fully in March 2013.In total we are announcing a change in 2012-13 recurrent funding of +£1.2 Million.
  1. The reasons for changes across the sector can be summarised as follows:
  1. Changes to high-cost funding reflecting institutional transfers totalling£123,089.
  2. Changes to research allocations for higher education institutions, reflecting amendments to underlying dataof £427,720.
  1. Changes to allocations for widening participation (WP) and improving retention (IR) allocations for 2012-13, reflecting amendments to 2010-11 HESA/ILR data, amendments to HESES11 or HEIFES11 and institutional transfers, totalling £692,765.
  1. Changes to other targeted allocations as a result of institutional transfers and other miscellaneous adjustments to mainstream grant, totalling £4,755
  1. For all institutions where the overall changes to teaching grant do not exceed the threshold of £20,000 or 20 per cent, whichever is the higher, the only changes to grant that will be implemented in August 2012 are those relating to changes in targeted allocations. All other changes will not be implemented until March 2013, when further amendments to grant will be made using funding rates derived from the final 2011-12 individualised student data reported in the ILR; and also updated 2012-13 student FTEs submitted by institutions in HEIFES12.

Changes to Student Number Controls since March

  1. Student Number Controls across the sector have changed by +445. The reasons for changes across the sector can be summarised as follows:
  2. To reflect amendments to 2010-11 HESA/ILR data.
  3. As a result of appeals in response to circular letter 15/2012, ‘Early notification of planned changes to HESES and HEIFES and implications for 201213 student number control’.
  4. As a result of institutional transfers.
  5. As a result of recalculation following data audit or reconciliation.
  6. Circular letter 15/2012 announced changes to the definition of HEFCE-fundable and non-fundable students for 2012-13, which would affect which students count towards the student number control. We amended the guidance in the circular letter on 20 June 2012 to add the following category of non-fundable student:

“New-regime students on courses which are provided under a contract with an NHS organisation and which lead on successful completion to professional registration as a dental hygienist/dental therapist, occupational therapist, operating department practitioner, orthoptist, physiotherapist, radiographer or radiotherapist.”

  1. This amendment ensures that(with the exception of those training to become doctors or dentists) students on eligible courses under the ‘NHS bursary scheme new rules’ will be non-fundable and outside the student number control. In response to circular letter 15/2012, institutions also notified us of a number of other courses that are funded by individual NHS commissioning bodies, but which are not covered by the main NHS bursary scheme. We are grateful for the information that institutions have provided about such programmes, as this has enabled us to review further the definition of HEFCE-fundable and non-fundable. Where the tuition costs for students on such courses are being met by an NHS body with the result that they have no, or only limited, access to SLC student support, we do not wish to bring such provision under the definition of HEFCE-fundable or the student number control. We are therefore adding a further category to our definition of non-fundable in HESES12, which is:

“Students on a course commissioned and funded by an NHS organisation, where the tuition fee charged to the student is zero, because that NHS organisation is meeting the tuition costs of the course.”

  1. This further category of non-fundable student means that it has not been necessary to increase student number control limits for 2012-13 in relation to many of the courses detailed in institutions’ responses to circular letter 15/2012.
  2. The accompanying grant tables confirm the student number control limit on students starting HEFCE-fundable FT UG or PGCE study for 2012-13.
  3. For collegeswhich exceeded the 2011-12 student number control limit, or over-recruited in 2010-11 and did not deliver the required shortfall against the 2011-12 student number control limit to avoid a further grant reduction, the tables also specify the required shortfall against the 2012-13 student number control limit necessary to avoid any further grant reduction. This does not apply in 2012-13 to colleges that did not receive direct HEFCE funding in 2011-12, but the principle will apply in future years to colleges that over-recruit in 2012-13.

Changes for your institution

  1. <Changes for individual institutions specified here>. If you have any questions about your grant allocations, please contact your HEFCE Higher Education Policy Adviser.

Further changes for 2012-13

  1. As outlined in myletter of 19 March 2012, we are adopting a three-stage process to calculate and review allocations. This three-stage process comprises:
  1. An initial allocation which was notified to you in March 2012, based on the student places awarded through the margin bidding process and any transfers of funding from a higher education institution that have subsequently been agreed. The rate of funding for price group B in this initial allocation was £1,483 per full-time equivalent student, plus an allowance where appropriate for London weighting.
  1. An adjusted allocation in March 2013, using 2012-13 student FTEs submitted to us in November 2012 by colleges in the HEIFES survey. The rate of funding for price group B may also be revised at this point to ensure our allocations for the sector as a whole remain within the budget we have available, in the light of our grant allocation from the Government and the student numbers reported by institutions.
  1. A final allocation in 2014, using final student numbers from 2012-13 ILR data submitted by colleges to the Data Service. Again, the rate of grant for price group B may also be revised at this point, although we would hope to avoid doing so if at all possible.
  1. The enclosed funding agreement sets out the circumstances under which allocations for 2012-13 will be recalculated and adjusted.

Further information

  1. If you have any questions about your grant allocations, other aspects of the funding agreement or anything in this letter, please contact your HEFCE Higher Education Policy Adviser, <Name>, (direct line: 0117 931<XXXX>, e-mail: <xxx>).

Yours sincerely

Caroline Charlton

Funding Round Manager

Signature of Head of Institution

The Head of <College name> should signify below their receipt of this Funding Agreement, which sets out the terms and conditions for the payment by the Higher Education Funding Council for England of funds to the Governing Body of <College name> out of funds made available by the Secretary of State for Business, Innovation and Skills.

Signed on behalf of <College name>:

Signature ......

Name......

Date ......

Please return by Friday 17 August 2012to:

FEC Returns

HEFCE

Northavon House

Coldharbour Lane

BRISTOL

BS16 1QD

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