The Further Education Funding Council has announced a two-stage review of its funding methodology.

A working group with an independent chairman and including representatives from the further education sector, local authorities, grant-maintained schools and training and enterprise councils, will conduct the first stage, which will draw up general principles for the new methodology.

They will produce a consultation document by Christmas and the council will make decisions based on this by next June.

A second group, including a higher proportion of practitioners from institutions, will consult on details.

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Final guidance on funding arrangements for 1998-99 should be issued by Christmas 1997.

The funding council introduced its funding methodology in 1994-95 and promised to review it after three years.

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Key issues under discussion are: * Whether funding should continue to be measured in units rather than measures of full-time equivalent students.

* Whether these units should be funded according to the amount of guidance offered to students, students' achievements and the cost of the particular course or whether other elements should be added.

* Whether the costs of different courses have been estimated correctly.

* Whether the system of offering institutions stability through core funding and flexibility through bidding for additional funding still works.

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* Whether clawing back funds for failure to attract the target amount of students is justified.

Any changes will have to allow for proposals under discussion to make funding for 16 to 19-year-olds more equal between different kinds of institution.

Meanwhile, the Further Education Development Agency is to do its own research into funding.

This will look at the impact of different sources of funding available to colleges, such as training and enterprise councils, Competitiveness Funds, European grants and education authorities.

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