From education to employment

Apprenticeship funding rules are still proving a challenge, but why?

Karl Bentley

There’s a lot to learn from funding assurance reviews, and the examples provided should serve as lessons to providers about what the rules fundamentally mean, and ultimately what issues will end in recovery of funds.

The funding rules are still proving to be a challenge for providers across the sector, but why after four years of operation? Some of the most common issues that come up within funding assurance reviews could be a good place to start.


From 19-20 the assurance programmes were updated to better reflect the eligibility requirements as set out in the funding rules. As a result of this, additional questions are asked that have not been well evidenced or confirmed as part of the evidence pack. These included:

  • No confirmation that the Apprentice was not already on a DfE funded programme;
  • No confirmation that the Apprentice must not contribute financially to the cost of the Apprenticeship; and
  • No confirmation from the employer that they would comply with national minimum wage legislation. There have already been a number of HMRC cases where investigations have identified non-compliance with this legislation resulting in fines and repayments for employers and in some cases the ESFA deeming provision ineligible as the provider had not sought confirmation of compliance. It’s also worth remembering that the Government through the Department for Business, Energy and Industrial Strategy has also restarted the ‘Naming Scheme’ where they publish the names of employers which have failed to comply with national minimum wage regulations, including the amount of under pay and the number of employees affected.

It’s important to review documentation on a regular basis to ensure all eligibility requirements are being covered in full. Where providers fail to confirm all aspects there is a risk that funding could be deemed ineligible and recovered in full.

Negotiated price

Although all apprenticeship frameworks and standards have been allocated into one of fifteen funding bands, there is an expectation that there will be some form of negotiation between the provider and the employer, and that evidence to support the final price is agreed and recorded in both the contract and the individualised learner record (ILR).

It is also a requirement to have a price breakdown available to demonstrate that only eligible activities or items have been included to form the total price. Many providers reviewed still do not have a clear breakdown of the price, which is now a contractual requirement. Without a price breakdown the provider cannot demonstrate that the price is eligible, this could result in provision being deemed ineligible and funding recovered in full. In light of the recent review of eligible costs by the Institute for Apprenticeships and Technical Education, it is now vitally important that these are reviewed inline with the latest eligibility requirements to ensure compliance with the funding rules.

We also identified instances where the negotiated price recorded in the ILR did not agree to the price recorded in the contract. These included:

  • prices where a zero had been missed resulting in an under claim;
  • the price on the contract not reconciling to the price in the ILR, common errors being changes in funding band maximum taking place between the price being agreed and the Apprentice starting;
  • changes between programmes with the original price on the ILR not updated resulting in funding under and over claims; and
  • not making use of the Total Negotiated Price 3 (TNP) and TNP4 where the Apprentice has changed employer seamlessly and a new employer record has been added to the ILR. This is required to reflect the residual price and possible co-investment from the new employer.

In addition, there were some instances where providers had recorded the same negotiated price within the ILR for their own apprenticeship learners. Where the provider is delivering apprenticeship training to its own employees, employer provider rules apply. For these cases the requirement is to claim costs only, with the expectation being that you can’t make a profit from training your own staff.

Initial Assessment

Maybe an unfortunate choice of words from the ESFA as ‘initial assessment’ has traditionally meant maths and English only. For Apprenticeships, this is an all-encompassing assessment of the Apprentice’s prior knowledge, skills and behaviours.

The ESFA has clarified and strengthened rules in this area since 2018/19. In March 2019 it was made clear that initial assessment must take place prior to the programme commencing, but does not mandate how the assessment should be carried out. The assessment is required to ensure two things, the eligibility of the Apprentice and if the price needs to be adjusted to reflect any prior knowledge, skills or behaviours. Where an Apprentice can complete the course in less than the minimum duration or does not need 20per cent off the job training for the minimum duration then the Apprentice would be ineligible for the programme.

As you can imagine, we identify a wide range of issues in this area but common issues in relation to this requirement included:

  • no assessment completed;
  • assessment suggests relevant prior knowledge skills, but funding band maximum has been claimed;
  • providers awaiting evidence to support competence but still claim funding band maximum; and
  • results of review being ‘over ruled’ after discussion with employer and Apprentice, but not evidenced in the assessment document

Off the job training

If there is one single area where we consistently find queries it is within the area of off the job training.

Whilst it is not new within the apprenticeship programme, the mandatory requirement for all learners to undertake a minimum of 20 per cent off the job training is still proving to be a real challenge.

Common issues identified in relation to this requirement included:

  • although learner eligibility had been confirmed in terms of employment status and the number of hours employed had been captured; there was no evidence to confirm that the 20 per cent off the job training requirement had been quantified in hours or, where it had been quantified, it had been calculated on an annual basis rather than equating to 20 per cent over the duration of the apprenticeship;
  • total annual leave allocation being deducted rather than just statutory leave of 28 days per year;
  • there was no evidence of a plan in place to demonstrate how the 20 per cent off the job requirement would be delivered over the duration of the apprenticeship;
  • where off the job training delivery plans were in place, the planned activity would not have met the 20 per cent requirement as it either did not consider issues such as planned college closures over the summer period, or included activity which is ineligible, such as progress reviews;
  • bulk uploads of evidence onto Eportfolio systems or spreadsheets with no narrative to explain when activity took place, for how long and whether the activity was relevant;
  • off the job training activity taking place prior to the programme start date, whilst an Apprentice was on a break in learning or after an actual end date had been recorded on the ILR against the ‘ZPROG’ aim and being included as eligible hours. In all cases the hours concerned would be removed; and
  • Apprentices completing the programme but not having evidence of sufficient hours to meet the off the job training requirement – this would result in the Apprentice being deemed ineligible and all funds recovered, including those claimed in prior years.

Apprenticeship Agreement

In terms of a funding claim the Apprenticeship Agreement is probably the single most important document due to its direct link to eligibility for funding. Where a valid Apprenticeship Agreement is not in place the Apprentice is considered ineligible for funding.

From the recent round of funding assurance visits we identified the following:

  • missing Apprenticeship Agreements – if these are not available there is a risk that all funds will be deemed ineligible;
  • Apprenticeship Agreements signed after start date by one or more parties. Where the second signature was in a following month or later then this would be treated as a funding error for the duration between start date and the date of the second signature; and
  • Apprenticeship Agreement durations not meeting the minimum duration requirements.

Payment of employer contributions

Another major change relates to the mandatory requirement for non-levy employers to pay a 5 per cent or 10 per cent cash contribution towards the cost of the agreed apprenticeship and the total of any negotiated price over the funding band maximum.

Our reviews in this area identified the following common issues:

  • there was no evidence available to confirm that employers had been invoiced for the co-investment, or the value of any negotiated price over the funding band maximum;
  • significant delays in the employer being invoiced for the co-investment element; and
  • co-investment paid by employers to the provider had not been recorded in the ILR in a timely manner.

Where co-investment has not been collected and recorded on the ILR, the funding system will no longer release the completion payment. The system is designed to review funding earned from the ESFA plus the co-investment value and reconcile that to the negotiated price. Where the values do not reconcile then the 20 per cent payment is withheld. It’s also worth remembering that an Apprentice enrolled on a standard cannot technically go through Gateway to the end point assessment where there are any monies outstanding from the employer.

Co-investment fee waiver

Small employers with fewer than 49 full or part-time employees are eligible for a waiver of the employer co-investment, up to the maximum value of the relevant funding band where the Apprentice is eligible (16-18 or 19-24 with EHCP or a recent care leaver). Our reviews identified

  • instances where this waiver was being applied in the ILR but there was no supporting evidence or declaration from the employer to support the waiver; and
  • the declaration had been completed and signed by the employer, but the small employer flag had not been recorded in the ILR.

Final thought

No one will ever say the Apprenticeship funding rules are simple and clear to understand on a first reading. But hopefully by learning the lessons from those that have gone through the process, providers will come to grips with the big issues and ensure that evidence packs contain the accurate and relevant information that will reconcile to the data and support the funding claim.

Karl Bentley, a further education and Apprenticeship funding specialist at RSM

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