Sunday, May 13, 2012

The Public Accounts Committee report on the oversight of schools – and changes in the regulation of academies

It has been good to see that Friday’s report on oversight and accountability for the schools sector by the House of Common’s Public Accounts Committee got some media coverage even if it was a little under-analysed.

For those who did not see the reports on the BBC or elsewhere, these were the main findings:

1.  The Department for Education's draft Accountability System Statement (the Statement) describes arrangements for providing assurance on regularity and propriety, but does not provide us with assurances that the systems being established will achieve value for money across the sector.

2.  Much of the Department's assurance on regularity, propriety and value for money comes through oversight by other bodies which are subject to major resource pressures.

3.  The Department is relying on the availability of transparent, comparable information to drive value for money across the schools sector. However, incomplete and inconsistent data currently make it difficult to compare all schools on their academic performance, funding received, and use of resources.

4.  Governing bodies are central to effective oversight of all schools, but the quality of governance varies. We are concerned that weak governance in some schools is leading to inadequate scrutiny of, and challenge to, school leadership.

5.  We are concerned about the Department's ability to pick up warning signs of improper spending or poor value for money for the taxpayer. It is not clear whether existing monitoring and accountability mechanisms do enough to flag up concerns that should be investigated.

6.  The Department has only a limited understanding of why some local authority maintained schools are persistently in deficit or surplus.

It is inevitable after the Priory report that the regulation of academies will draw attention – as seen in BBC coverage.

By 2015 almost all secondaries and many primaries will be academies. Will the DFE have the resources to regulate this sector?

The report noted:

the YPLA [sic] will have to oversee growing numbers of academies in the coming years, and we have early warning signs which raise concerns about whether it has enough capacity and skilled staff to do so effectively.

The DfE is staffing up with accountants. It will need to.

Unless the DfE via the YPLA’s successor, the Education Funding Agency, is able to detect weaknesses in academy chains and individual academies before they fail, there could be a lot of parents and children left in a bad place. This could be a ticking time-bomb under Michael Gove.

On the “major issue” of recruiting and training of governors with relevant financial expertise, the report notes:

The Department and the YPLA consider the main incentive for schools and academies to improve governors' skills to be through their aspiration to score well in the Schools Financial Value Standard and Financial Management and Governance Evaluation assessments.

It is ironic that there is now talk that the requirement of a FMGE self-assessment will be dropped for all academies apart from new ones. (The EFA is proposing that the parallel  Financial Management and Control Evaluation is abolished for sixth form colleges.)

While schools may have suffered in the past from excessive control, the baby of effective regulation should not be thrown out with the bath water of red tape.

Sunday, May 06, 2012

The end is nigh: the internal audit requirement for Sixth Form Colleges

So we finally know what we kind of knew before: the government (via the Education Funding Agency) wants to relieve Sixth Form Colleges (SFCs) of the mandatory requirement to have an internal audit service. This is not a surprise as the SFC sector was on a promise from Lord Hill. A consultation period end in June and then in August it will be up to governors on SFC corporations whether they need internal auditors

As the typical SFC has an annual income of around £10m, the end of the internal audit requirement does make some sense.

Over four years ago, I blogged here:

The re-arrangement of [the LSC into] agencies might, on a brighter note, lead to a re-think of audit for colleges. (But I doubt it.) I would query whether the smallest colleges – particularly the smaller sixth form colleges – need their own internal audit service. These colleges often have a total income of a few million and limited non-core activities. They are quite different from Newcastle College with its £150 million income.

The smaller colleges are little different from the schools that they compete with for staff and students. They are arguably less exposed to risk than small housing associations who are not obliged to have their own internal audit.

While the internal audit requirement is going, the Education Funding Agency nudges SFCs as it:

recognises that in many areas of both the public and private sectors it is accepted good practice to have Internal Audit.

Audit committees at SFC will need some help in determining how to respond post-requirement. What does that nudge mean for them? I am sure that auditors and others will have their own views on what their potential and actual clients should do. More independent support and advice would be welcome too.

While I generally welcome “freedoms and flexibilities” I have some concerns over the end of the Financial Management and Control Evaluation (FMCE) self-assessment. For most SFCs the FMCE was completed in summary form annually and in full triennially. Something less “tick box” was definitely needed. The Education Funding Agency proposes:

Instead, the EFA will take formal assurance from the Corporate Governance Statement included within SFCs’ annual financial statements. Whether or not SFC’s continue to use the return as an aide memoire for their own management purposes is a matter for individual colleges to decide.

How often do SFCs or other organisations depart materially from boiler-plate wording in the Corporate Governance Statements? Not often enough. Maybe  audit committees will now spend more time drafting and considering these Statements.  But I am a little doubtful.

I hope that the Sixth Form Colleges Forum will provide support in this and other areas as SFC respond to this brave new world.