Thursday, June 18, 2009

The FT on governance and risk management

Today’s Financial Times has a Special Report on Corporate Governance (available for free pdf download on I’ve not yet read the full suite of articles but there is a good piece on risk management in the light of recent corporate failures.

Jeremy Grant notes:

… [T]here is much work to be done to figure out what kinds of risk management systems boards should have in the wake of the financial crisis. That exposed how information flowed far too slowly up to the board level to allow early diagnosis of problems.

While boards have policies and processes for risk, the critical information is not getting though in time. (I’ve certainly seen that in the public and third sectors – the private sector has no monopoly on risk management failure.)

The article also reports he wariness of some experts about whether the issue of risk management is too big for audit committees.

Monday, June 15, 2009

Latest instalment at Glasgow Housing Association

The situation appears to be worsening at the Glasgow Housing Association (GHA). It appears as if the Scottish Housing Regulator (SHR) is about to step in triggering a loan covenant default. (This isn't a good thing when such breaches lead to increased financing costs.)

The GHA with over 100,000 customers was created through a huge stock transfer.

We'll soon now more about what is going on when the SHR issues its new report on the association. One lesson that I think we’ll learn when we look back on this stock transfer is that changing a huge local authority housing department into a housing association in a big bang poses certain problems. Big is not always beautiful.

Thursday, June 11, 2009

The feeling's mutual: building societies in the news

Today is carrying good and bad news about building society mutualism. The government is looking to promote and strengthen the mutual model in finance. Meanwhile, it looks like the West Bromwich Building Society may have to give up its independence and merge.

Saturday, June 06, 2009

College principals’ pay shock!

Sorry. The figures don’t really justify the headline. Last year college sector principals had fairly modest pay rises - especially sixth form college principals. This would appear to contrast with chief executives in the universities sector.

With the data on college accounts published by the Learning and Skills Council, I calculated the median pay for principals in 2006/7 and 2007/8. I also separated general further education (GFE) and tertiary colleges (TC) from sixth form colleges (SFC). (I chose the median as it is less likely to be distorted by, for example, large severance packages or interim principals.)

In 2007/8 the median GFE/TC principal was paid £111k – up 5.7% the previous year. The median SFC principal was paid £87k – up 3.6% on 2006/7. (These figures omit the value of non-pay benefits.) Between August 2007 and July 2008 the RPI fluctuated between about 4% and 5%.

(If anyone would like more details, please get in touch via my website.)

With the public finances being increasingly squeezed, it looks like principals are leading by example.

UPDATE: The Universities and Colleges Union has also looked at the data. UCU have a different perspective. They also use the figure for pay rises given by colleges rather than calculating the rise in pay (which includes bonuses).

Friday, June 05, 2009

DIUS deceased

As was speculated this week the Department for Innovation, Universities and Skills is no more. It is now merged into Lord Mandelson's BERR business department.

When public finances (and hence public services) are under-pressure, the short-lived DIUS cost over £7 million to set-up - around £10,000 per day over its short and unhappy two years.

Thursday, June 04, 2009

Re-shuffling bureaucracies

Today’s Financial Times indicates that Downing Street is thinking about “another Whitehall restructure” – i.e. re-shuffling departments as well as cabinet ministers. Earlier in the week there were suggestions at the Association of Colleges’ Finance Directors’ Conference that the Department for Industry, Universities and Skills might be merged into Department for Business, Enterprise and Regulatory Reform. (What would you call the offspring of such a union?)

It is a sad fact that the government periodically lapses into bureaucratic shuffling as if merging, de-merging or re-naming departments will fix problems. (Readers of this blog will know that I believe that genuine reform is more likely to involve creating customer choice and competing providers in he delivery of public services.)

Sometimes re-arranging bureaucracies is appropriate but it involves time, effort and resources which could be used for other purposes. How often is the cost-benefit analysis done?

DIUS has existed less than two years. It has major issues on its agenda – like the LSC capital funding debacle. Let’s hope the rumours are unfounded and DIUS can get on with its job.

Monday, June 01, 2009

What do you call a group of college finance directors?

Tomorrow I am off to the Association of Colleges’ Finance Directors' conference. The cynics might suggest that a meeting of a few hundred accountants would never be fun but this year there'll be extra despondency thrown in with LSC capital funding crisis and the imminent tightening of the screw in public finances.

This week’s Times Education Supplement quotes the chair of the College Finance Directors’ Group suggesting that half of England’s FE colleges could be categorised as economically vulnerable over the next two years. He also predicts swathes of redundancies across the country.

Governors Needed: effective governance in schools

Today Radio Four broadcast a documentary on the challenges facing school governing bodies. Hopefully Governors Needed will be made available on the BBC’s listen again.

The programme highlighted the obstacles that can hinder effective governance and result in rubber-stamping. Many of the themes will be familiar to those charged with governance in other parts of the public and third sectors.

The documentary featured comments (and concerns) from the National Governors' Association. If you are a school governor, it will probably worth looking at the resources available on the NGA website.