Wednesday, June 04, 2014

Are schools doomed to be scammed?

Before the National Fraud Authority ended up on the Coalition’s bonfire of quangos it did a lot of work on raising awareness of fraud. One of its major projects was estimating the total value of fraud in the economy – everything from “blue badge” parking abuse to multi-million VAT fraud. Before the NFA disappeared, it published Annual Fraud Indicators which estimated the loss to the economy of fraud to be £52billion (pdf available).

What has that number got to do with schools? In one month the press reported:

Much detected (and obviously undetected) fraud does not get into the papers. The 2012/13 Department for Education accounts mention a £2m “irregularity” at one academy chain – a Google suggests that the case never got into the press.

The NFA cautioned against its estimates being used for identifying trends. But is fraud getting worse? Quite possibly: while staff will generally be honest and public-spirited, after years of pay freezes and 1% rises, a minority may be demoralised and feel squeezed;  many organisations are struggling to cope with financial pressures so some managers may be tempted to bend rules; greater autonomy for schools creates opportunities but not all are positive.

Are schools doomed to be scammed? In fact, schools can protect themselves through simple steps. But the first step is to recognise that fraud is an issue.
Later this month I am talking at EdExec Live about how schools can protect themselves. Tickets are still available.

Tuesday, May 20, 2014

EFA asks academy principals and boards to think about fraud

Today the chief executive of the Education Funding Agency sent a letter to accounting officers (i.e. principals) at all academies in England. It reminded them of the requirements in relation to fraud, connected parties and special payments.

The letter included an annex setting out questions for principals and trustees to consider in order to minimise the risk of fraud or irregularity:

  • Authority – Do you have a written scheme of delegation, approved by the trustees, so that individuals are clear about their levels of financial authority?
  • Purchasing – Are you confident you are procuring all goods and services in an open, competitive and transparent way?
  • Payroll – Do you have robust controls for payroll including checks that payments are for the right amounts and paid to bona fide employees?
  • Oversight – Do you ensure that financial reports are produced that fairly reflect the activity at the trust, that they are properly reconciled at least monthly and are shared regularly with the trustees for formal review?
  • Cash management – Are your bank accounts reconciled at least monthly?
  • Assets – Is all of the trust’s property under proper control and measures in place to prevent loss or misuse?
  • Segregation – Do you have appropriate separation of responsibility in your finance team? And are you providing proper management support to your finance staff to help them to operate in a role where they are well-placed to provide you with a “first line of defence” in terms of upholding propriety, regularity and value for money in the use of public funds?
  • Records – Do you have robust procedures for recording, documenting, evidencing and monitoring information and especially the reasons for entering into major spending commitments?
  • Scrutiny and audit – Do you have properly constituted arrangements for internal review (such as a responsible officer or internal auditor) to give you and trustees a further safeguard that the trust’s financial systems and controls are operating effectively and efficiently? Does the trust debate, and agree how to act upon, recommendations arising both from these internal reviews and from the work of its external auditors?
  • Risk – Do you have an effective process for identifying and responding to the major risks that the trust faces?
These are all basic and sensible measures.

Next month I will be talking about fraud risk at the EdExec Live conference. I will be explaining what more academies can do to protect themselves from fraudsters both inside and outside their organisations.

Tuesday, April 15, 2014

Job losses in colleges – things did not get much worse last year

The college sector has had a bad few weeks. As a consequence of the funding squeeze, especially the painful reductions in adult skills budgets for 2014/15, there have been redundancy programmes announced at FE colleges across the country: Brighton, Kingston, St Helens, Stratford-upon-Avon.

There was some slightly brighter news tucked away in the Skills Funding Agency release of 2012/13 financial accounts for the college sector. Tucked away in the numbers, the number of teaching staff full-time equivalents in colleges fell by only 1% last year compared with 5% in 2010/11 and 6% in 2011/12.

This is not a good news story. There are still over 100 FE colleges in deficit and the number of sixth form colleges with losses doubled. We are only half way through the Coalition’s austerity programme and things won’t be much easier with a different government. The 2013/14 figures might well see an acceleration in job cuts.

Wednesday, March 05, 2014

EFA tweaks fraud reporting requirements for academies

In the New Year academies may not have noticed a subtle change in the Education Funding Agency’s requirements for fraud reporting.

The Academies Financial Handbook in para 3.9.2 still states:

All instances of fraud or theft committed against the trust, whether by employees or trustees or third parties, above £5,000 must be reported by the trust to the EFA. Any unusual or systematic fraud, regardless of value, must also be reported.

But in January the EFA decided to change the requirements for fraud as they affecting the 16-19 bursary fund and noted on its website:

We have reviewed the advice given to institutions on the threshold for reporting cases of significant fraud to the EFA. The threshold has now been reduced from £5000 to £1200 to reflect the amounts of funds that institutions typically pay to students. Institutions must now report any suspected 16 to 19 bursary frauds of £1200+ to the EFA.

All academies should have fraud policies (as well as whistleblowing policies and fraud response plans). They (and other 16-19 provider) need to make sure their next update of their fraud policies reflects this lower threshold.

The FE Commissioner reflects on college governance

After his first six interventions, the Further Education Commissioner has written to colleges with some reflections. The whole letter is worth a read but below are some extracts with particular relevance to college governance. Governors and clerks should dwell on his thoughts:

  • College governors must take greater ownership of their college, driving the strategic direction forward and challenging the Principal and senior leadership team on the quality of teaching and learning and the institution’s financial position. 
  • College governors must satisfy themselves that they have a complete picture of how the college is operating by triangulating the information they receive with other sources of information, for example the new Data Dashboard being produced by Ofsted and which is due to be published in the Spring. 
  • It is essential to undertake effective succession planning of the governing body; bringing in new and diverse skills and fresh thinking regularly.  I especially see the case for more business people on boards.
  • Clerks are vital to the success of colleges.  Clerks ensure that good governance practice is followed and that the Principal/senior leadership team are not exceeding their authority.  Clerks should be independent, supported and have the skills and experiences necessary to fulfil their role.  
  • If you’re not already doing so, it is very important that you conduct an annual professional appraisal of your Principal, which examines and reports on their performance to date and sets clear SMART targets for the year to come. 
  • College governors should have regular and purposeful training and development. …  They often are working in something of a vacuum with little or no contact with Board members from other colleges and hence are unable to benchmark their performance against their peers. 
  • There is some evidence that college governors can be reluctant to take the difficult decisions when there is evidence of poor performance.

Now that I am resuming blogging, I will be writing on some of these governance themes as well as some not mentioned.

Saturday, November 09, 2013

Lies, damned lies and incomplete statistics: teaching staff numbers in Further Education

These are difficult times for all those working in post-16 education. Across the United Kingdom there have been funding cuts – and there will be more before and after the 2015 election. This week the usually excellent Guardian Datablog added to the anxiety. It ran an article warning “The number of staff in further education dropped by 35% last year”.

Is that really so? I doubt it. Where did the numbers come from? It is not clear. What went wrong? My guess is that the article relied in part on data from the Staff Individualised Record. The SIR is soon to cease. The SIR 2011/12 suffered disinterest with a 22% non-response rate.

So what has happened to staffing? For English FE we have the college finance records which include staffing numbers.

We have seen a contraction in teaching Full Time Equivalent numbers since 2009/10. In English colleges teaching FTEs peaked at 80,674. Numbers fell 6% to 75,999 in 2010/11 and then 4% to 72,755. Painful job losses but not the one year apocalyptic drop shown by the Guardian.

Thursday, November 07, 2013

Paying the college governors - the debate in the Guardian and elsewhere

This week Guardian Further Education carries a debate about whether college governors should be paid or not. The three contributions clearly set out some of the issues at the heart of the issue.

The article reminds me of the debate in the social housing sector a decade ago.

In 2003 the Housing Corporation allowed housing associations to pay board members who had previously been volunteers – like college governors are now. As a board member in the Midlands and opposed to board remuneration. I am now less sceptical.

Across the housing association sector, board remuneration was tied to governance improvement plans which saw good practices being introduced including board member appraisal and term limits on appointments. (Essential good practices not seen on too many college governing bodies.) Moreover, remuneration often ended board recruitment problems and promoted a professionalisation of governance.

So should college governors be paid? Maybe – it depends on the balance of costs and benefits being thoroughly and objectively analysed. Scarce resources spent on governors won’t be available for teaching and learning. On the other hand, if paying governors is used to improve governance we should end up with a better governed and stronger FE sector. The arguments for paying governors are likely to be particularly strong for the larger colleges.

In the Guardian FE piece, all three contributions came from the sixth form college sector rather than the general FE sector. The largest of the three sixth form colleges has an income of £14 million. Could board remuneration be justified for colleges of that size? I doubt it.

In 2011/12 (the latest year for which we have published figures) 17 colleges had income over £50 million. For such large and complex organisations, board remuneration may be appropriate and, perhaps, essential. A debate over board remuneration has a particular relevance for this sub-sector of further education – rather than for sixth form colleges.

Tuesday, October 29, 2013

More than invoices: the investigation report at the King’s Science Academy should raise more questions

The free schools programme was again in the news on Friday with the Newsnight report into the Kings Science Academy in Bradford. Likewise Saturday’s newspapers asked whether there had been a “cover-up” of the findings of an Education Funding Agency audit report (pdf of the report available here).

While most of the media coverage was about allegedly misclaimed funding (so-called “false invoices”) and the repayment of about £70,000 by the project to the Department for Education, the Education Funding Agency audit report was far more wide-ranging in its scrutiny of governance and financial management at the free school.

The report identified that business interests did not appear to be declared when they should have been:
  •  [redacted] (a Director) is the brother of the Principal, [redacted] ;
  •  [redacted] and [redacted], the former FD, have links with the company [redacted] , used by the Academy to engage [redacted];
  • [redacted] has a number of family members working for the Academy and a brother who is a member of the GB;
  • The links with the [redacted] – who leased the land and [redacted]  role as [redacted].

Maybe these connections were not evidence of cronyism. But transparency becomes especially vital when situations are complicated.

There were also significant blurring of roles. A former Chair was acting as a “benefactor/advisor” which had no legal standing and effectively duplicated the Chair’s role of overseeing governance. The Companies House entries for the company were out-of-date with year old changes in directorships not being shown.

In the fields of personnel and procurement, there appeared to be weaknesses.

The report goes beyond matters of compliance and procedure. More generally, it found that the directors were failing to perform key elements of their governance role:

The lack of understanding of responsibilities and the experience of running a school resulted in an acceptance of the way the GB was being run (e.g. no notice of meetings, lack of adequate minutes etc. already raised by the [redacted] review and the FMGE validation). In relation to the finance area in particular there was no challenge where the lack of expected reports such as management accounts and balance sheets was not being presented to the GB, which are important for understanding the Academy’s finances and for monitoring financial health.

These are serious failings. Let us hope that this was a unique failure of governance at an academy. Perhaps it isn’t.