The Higher Education Funding Council for England has rejected Lord Dearing's recommendation that universities should not be allowed to sub-contract courses to further education colleges.
HEFCE officials decided that universities should continue to be allowed to franchise to colleges, despite Dearing's proposal that colleges that provide higher education courses should receive funds directly.
The funding council made its decision in a meeting late last week. It will now consult the sector.
Plans to continue to allow universities administrative control of funds for courses that are delivered in colleges come despite fears that universities are abusing franchise arrangements by under-funding further education courses and top-slicing the funds for use elsewhere.
More than 13 per cent of all higher education is provided in colleges, which are expected to absorb much of the planned expansion in higher education - estimated at about 80,000 new students within three years.
It was expected after the Dearing report that colleges would be funded directly for this provision. But under the HEFCE plans, which are subject to consultation next month, much will continue to be delivered on a franchised basis from a higher education institution.
HEFCE's plans come in spite of fears that much franchised provision amounts to higher education on the cheap.
It is understood that some universities involved in franchising deals have been withholding a proportion of their direct funds and handing over to the colleges inadequate sums for the provision.
Dearing said that there are "concerns about the quality assurance arrangements in some cases". He said that there were also concerns about "the ability of the parties involved to account adequately for the public funds involved".
To counter these problems, HEFCE's plans will include tough new quality assurance measures to safeguard quality and guard against "sharp practice", it is understood.
HEFCE, as part of its preparation to take over in 1999/2000 responsibility for funding sub-degree provision currently funded by the Further Education Funding Council, has conducted a review of franchised provision. Although Dearing recommended against it, HEFCE has decided that, in most cases, franchised provision is well administered, and of high quality.
HEFCE will argue that franchised courses, usually sub-degree diplomas or certificates, are essential to widening participation and lifelong learning. The moves are also designed to promote better collaborative relationships between universities and colleges to encourage a joint strategic approach to future provision.
It is proposed that all current franchised arrangements will continue. But where a college wants to bid for new higher education student numbers, it can bid for direct funding, or it can opt for a franchise arrangement if it chooses. Where HEFCE opens bidding for new student numbers, it is understood that the criteria will favour colleges.
HEFCE is determined to ensure that a student's experience of higher education in a college is the same as it would be in a university.
Details of the new quality assurance and accountability arrangements will not be specific in the formal consultation document, published next month, but HEFCE is expecting a degree of resistance.
HEFCE intends to propose a new concept of the university as its quality assurance "agent". New measures will be proposed to ensure that the "appropriate amount" of money is handed over to the colleges, and that there is better quality assurance regulation.
What Dearing said
Local requirements for sub-degreehigher education can be met "particularly well byfurther education colleges", whether as a direct provider, or in partnership with universities.
Delivering higher education through colleges, Dearing said, can widen access to "non-traditional" students, who may need to study nearer their homes or who may be put off by thetraditional higher education environment.
Much of the planned expansion of higher education should be insub-degreeprovision.
"There is scope for an immediate growth in sub-degree provision and we see muchof the future of expansion of higher education being at this level ... In general, over time, we see much more of this level of provision being offered incolleges."
But Dearing warned that there can be problems in some cases where higher education provision incolleges is not directly funded,but delivered on a franchised basis from a higher education institution. Quality assurance arrangements caused concern, especially regarding "the ability of the parties involved to account adequately for the public funds involved".
Dearing said:"We are keen to see directly-fundedsub-degree higher education develop as a special mission for further education colleges." There is no casefor expanding degree provision in colleges.
"We recommend to the government and the funding bodies that, in the medium term,priority in growth in sub-degree provision should be accorded to further education colleges, and that highereducation provision in further education colleges should be directly funded."