Saturday, November 09, 2013
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
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.
Saturday, October 05, 2013
Allegations, fraud, corruption and bad behaviour have been in the news. A knighted Headteacher was convicted of false accounting and narrowly missed a custodial sentence for false accounting. A free school was being investigated after allegations of irregularities. Derby University was forced to strongly deny claims that it falsified official statistics on graduate employment.
Also this week Times Higher Education carried an article about a Transparency International report which warned financial pressures could impact on ethical standards. Global Corruption Report: Education noted:
The very structure and culture of colleges and universities, as well as the current constraints under which many…operate, can create conditions that facilitate fraud.
This makes it timely to look at the recently published guidance from the Department for Education (DfE ) on fraud. Last month the Education Funding Agency at the DfE issued Fraud Indicators: A checklist for academies (download here).
The Fraud Indicators checklist details “generic” indicators including “personal and organisational motives for fraud, possible weakness of internal controls, transactional indicators and possible methods of committing and concealing fraud”. The DfE suggest that the checklist “may be helpful for use as a checklist where concerns exists that fraudulent activity may be taking place”.
It would be easy to mock the section headed Personal Motives – many organisations would show a red flag on fraud indicators such as “personnel believe they receive inadequate compensation and/or rewards”, “disgruntled employee”, “recent failure associated with specific individual” and “personal animosity or professional jealousy”. Nevertheless these soap opera indicators do highlight that in the fraud triangle motivation and rationalisation sit with opportunity.
Under the heading of Organisational Motives, how many of us have known organisations “experiencing financial difficulty”, burdened by “under unusually tight time deadlines to achieve level of outputs” or having “suffered disappointment/reverses/consequences of bad decisions”. Still the checklist is right to point to the problems which arise from an all-powerful head and governance which lacks clarity and direction. How many schools are dominated by Heads with Maxwell-sized egos.
Flippancy aside, this is all useful stuff. However, as with all self-assessments, they are treated most seriously by those who are least in need of reflection and criticism.
The checklist sets out what poor policies, procedures and practices look like. The document is fairly comprehensive. One area where the checklist says little is audit. It notes that critical audit reports and obfuscating auditees are fraud indicators. But what about where managers do not put in place robust internal audit arrangements and/or where governors let weak internal audit arrangements persist. The Principal’s PA or a governor without the time and skills to be an internal auditor is never enough.
Also it is worth noting that the checklist focuses on fraud risks internal to academies. There are plenty of external risks – and organisations tend to pay more attention to them (even if, not enough).
So what is my conclusion? If you are a manager, governor, internal or external auditor, spend some time working through the Fraud Indicators: A checklist for academies. If enough academies do treat fraud risks more seriously, academy assets and public funds will be better safeguarded as will the reputation of the sector.
Wednesday, September 18, 2013
Over the summer the National Audit Office published guidance to the external auditors of academies. The guidance, NAO Communication with academy auditors 2013, has been issued as the academies are consolidated into the “group accounts” of the Department for Education – so academy auditors are auditing parts of the DfE.
The guidance will be fascinating for audit anoraks. It will also be of interest to anyone many others including principals, senior managers, governors and ROs/internal auditors. The short guide highlights what the auditors at the NAO worry about.
We … consider, because of the number and variety of providers, there is an inherent risk that across the academies sector there could be material or systemic irregularity, which may be heightened in newly converted academies. Particular areas of concern include:
- Approval from the Secretary of State not being sought for certain transactions above delegated authorities, outlined in the academies financial handbook;
- Fraud or misappropriation of funds, especially at the Trust level in a multi academy trust; and
- The increasing risk that academies with long standing deficits may become insolvent.
Fraud and insolvency are of wider public interest too.
In terms of regularity (i.e. income and expenditure being applied, in all material respects, for the purposes intended by Parliament), the NAO advise:
- There are a number of themes which the auditor should consider when identifying the risk of irregularity. These themes include:
- Misuse of funds by head teachers (i.e. using academy funds for personal gain);
- Governance at multi academy trusts (i.e. oversight of activities of individual academies, or weak controls at the trust level)
- Weaknesses in procurement (i.e. non-compliance with EU procurement rules, or employment/contracting with related parties)
Friday, September 13, 2013
Social housing regulation: the risks of the HCA putting a hex on the finances of housing associations
This week social housing has been in the news. The government – or at least Conservative component – charged into battle against the UN rapporteur who dared to come from Brazil (where some people live in favelas) to the UK to question the “bedroom tax” – which the Conservatives describe as an end to a “spare room subsidy”. (As entertaining backstory the Daily Mail reported that the Brazilian academic dabbled in witchcraft – even going so far as to making an animal sacrifice to get Karl Marx to leave her alone.) Against this the House of Commons’ Communities and Local Government select committee had little hope of getting much press coverage for its own report on social housing regulation. (Only the BBC and Guardian seem to have given it any profile outside the housing and public finance media.)
The CLG select committee report (pdf available) may not have much witchcraft or sorcery but it is an interesting survey of economic and consumer regulation of social housing by the Housing and Communities Agency.
The committee report was highly critical of how the HCA rates the financial viability of housing associations.
It has now emerged that the Regulator is unable to use his statutory powers or provide a frank assessment of concerns about a provider’s financial viability fearing that it might trigger a re-pricing of the provider's debt and therefore undermine its viability. Instead, rather than use his financial viability ratings to convey his assessment of financial viability, the Regulator uses the governance ratings to signal concerns about financial viability. This approach lacks openness and is confusing.
The committee noted that the social housing regulator had admitted that a “handful” of providers that are of concern to the regulator and a “small but steady flow of problem cases”, no provider has yet been graded as having “financial viability [which] is of concern”. Less than 1% of ratings were V3 or V4 – the two lowest. The only V4 rating was awarded after Cosmopolitan Housing Association was on its last legs.
The committee’s solution was simple and straightforward:
Ratings published by the Regulator should be reliable and capable of being understood at face value. The practice of using governance ratings to signal concerns about financial viability lacks openness and is confusing. It is misleading to the taxpayer and tenants, and potentially also to lenders who, it appears, are expected to understand the coded message from the Regulator. We conclude that the practice should cease. We recommend that the Regulator publish accurate financial viability ratings.
How practical are warts-and-all viability ratings? Might they actually be self-fulfilling in terms of financial weakness?
Transparency is important. But might narrative opinions be better than the pass/fail simplicity of ratings?
Tuesday, August 27, 2013
Today’s Guardian online and tomorrow’s paper carries an article about sixth form colleges: overachieving but underfunded by Harry White. The piece highlighted the funding inequities suffered by SFCs.
The article included a quote from a Department for Education spokesperson:
Colleges are treated differently to schools when it comes to VAT because of their legal status. We are looking into whether funding arrangements should be reviewed to take this into account.
Basically that recognises that SFC bear VAT on their purchases whereas schools do not.
This contrasts with the Treasury minister David Gauke in Parliament in May this year:
There are no plans to allow sixth form colleges to waive VAT on purchases. They ar required to pay VAT on their purchases, in common with everyone else. The basic funding principle for sixth form colleges is that these VAT costs are taken into account as part of the up-front funding allocation.
I am not expecting any U-turn but there is now a more honest appraisal of the situation coming out of the Department for Education.