The National Audit Office on risks in academies

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)

Clearly audit and assurance are vital to keeping academies on the right track – and spotting problems if they do start to go off the rails.

Can’t get no satisfaction (statistics): reporting performance

One of the most promising developments in public services in recent years has been the increasing attention to customer satisfaction - whether those customers are students, patients, residents, or whoever. Often regulators require the publication of satisfaction statistics. When the results show improvement, public sector organisations do no need much encouragement.

I was therefore interested in the latest newsletter from my local NHS hospital trust. The headline was "Survey reveals patient satisfaction is on the up":

Significant improvements since 2007 included:

- The hospital room or ward was very clean - up 12%
- Always offered a choice of food - up 12%
- Doctors always washed or cleaned their hands between touching patients - up 10%...

But where did that take the Trust? What were the new percentages? (How many doctors had dirty hands?) How do the new percentages compare with last year's? What were the old percentages? What about the average rates for other comparable hospitals?

There were no charts illustrating any of this. Just words.

Perhaps the article was not intended to report performance - only tell of how the Trust was on "on the up". But accountability is about reporting performance.

Foundation Trust governance: Network Rail and NHS Direct

There has been some debate about the effectiveness of the governance of NHS Foundation Trusts – in particular, the poor levels of participation seen in some Trusts. However, it is interesting to see that there is an emerging campaign to reform the governance of Network Rail along the lines of Foundation Trusts. In the aftermath of the new year “Network Fail” engineering works, some stakeholders of Network Rails are frustrated by the lack of accountability seen in the organisation.

On the issue of Foundation Trust governance, there is a big opportunity for everyone to have a say in a widely used NHS service. NHS Direct receives 120,000 calls every week. Now it is seeking Foundation Trust status and, hence, asking members of the public to join as Trust members. Its Foundation Trust zone is here.

Christmas present to Colleges – revised governance documents

The government has presented FE and sixth form colleges with new instrument and articles to go live in 2008.

Some of the amendments to the I&A are housekeeping matters – for example, resulting from the Machinery of Government changes (i.e. the divorce of the pre- and post-19 parts of the old Department for Education and Skills. (Further governance changes may result from this potentially messy divorce.) However, other modifications to the I&A are more significant.

There is the ending of the rigid specification of categories of “external” governors i.e. the requirement for numbers for local authority, community, business and co-opted members. This is a modest but welcome measure of de-regulation. As I have argued here before, colleges should be given more flexibility in determining the size and shape of their governing bodies.

The new I&A also include a strengthening of the “learner voice” with at least two learner governors on each governing body. This will need to be accompanied by action to support learner governors in being able to challenge and contribute in the governance framework. Sometimes this is a problem. (Arguably it would be good to see colleges exploring new ways of enabling learners to hold governing bodies accountable – and this might not require such reliance on learners being on governing bodies.)

Some colleges may struggle with the requirement to post governing body minutes on the internet. However, this is good governance.

If you are a college clerk to governors and can’t find the new I&A, don’t spend all your Christmas and New Year holiday searching for the documents, they are tucked away on the old DFES website so click here.

NHS Foundation Trusts and accountability - some evidence

One of the legacies of Tony Blair will be foundation hospitals (FTs). They appear to be here to stay too.

A key characteristic of FTs is the governance structure which creates accountability to patients, staff and communities. The example of the co-operative movement served as a model. (Its worth adding that FTs remain not-for-profits and are not a form of privatisation - contrary to what their opponents say.)

Recent research suggests that these structures are working. (It’s a pity that my local FT appeared to lose my membership details for best part of a year. Hopefully I am isolated exception.)

The FT model (and the example of the co-operative movement) is worth applying elsewhere in public services.

Social housing - time to give consumers some clout?

It is disappointing to read in Inside Housing that fewer than one in three of social housing residents in a National Consumer Council (NCC) study said their landlords took on board tenant suggestions for service improvements.

It is noteworthy that residents said local authorities were less likely to provide a flexible housing service or foster a sense of community than housing associations. (Something for the "Defend Council Housing" campaigners to ponder. How about campaigning to "Transform Council Housing"?)

There is a real need to give consumers clout in social housing. That can be done in all sorts of ways. Hopefully we will see a national voice for residents as recommended by the Cave Review. But new forms of accountability and governance are needed with a key role for community gateway housing associations and co-operative housing. Interestingly, the NCC has suggested an approach based on “markets and mutuality”.

Cave Report - the single regulator and resident scrutiny panels

The Cave Report on social housing regulation (a pdf is available of the full report as well as an executive summary) has arrived at last! It is a pity that the government appears to be lukewarm on the recommendation of a single regulator for social housing. Surely Cave was right to query the silos in social housing regulation - why should ALMO or council tenants be regulated differently from housing association tenants?

Many of the Cave recommendations were perhaps heralded in advance.

My only initial criticism would be that the idea of resident scrutiny panels as a form of accountability is supported but does not feature very prominently in the report. I would argue that such panels can be more effective forms of voice for tenants than one or two tenant board members - especially for the increasing number of large social landlords.

FE Governance - does size matter?

On yesterday's The Bottom Line on Radio 4 (available on Listen Again for one week), there was a discussion about the optimal size of project teams. One of the business people suggested that six or seven was the best size with the maximum practical size being - with complexity of communication increasing exponentially above that.

That wasn't a revolutionary or unique insight - there has been plenty of research on the size of teams - but it struck me that many governance "teams" are a lot bigger in public services.

In social housing the National Housing Federation is encouraging small boards - urging housing associations to avoid having boards more than 12 members. Things are different in Further Education colleges, where governing bodies are typically about 18 members - normally coming from particular constituencies.

Big boards and governing bodies have to constantly confront the risk of degenerating into talking shops. Sir Walter Puckey could have been talking about FE governing bodies when he commented:

Too many board meetings display verbosity among a few and almost complete silence from the rest.

Its not the fault of FE colleges. The Instrument and Articles constituting governing bodies, creates a one-size-fits-almost-all template with limited flexibility around the edges. (There have been cases of FE colleges seeking even larger governing bodies than required by the Instrument and Articles - often after mergers where there was felt to be a need for 11 a side or whatever on the new governing body.)

While the Department for Education and Skills can reasonably have some rules on how governing bodies are constituted, why can't FE colleges be allowed to try new approaches and constitutions that reflect their specific requirements, culture, history, etc?

If "super-colleges" emerge with large turnovers and varied activities, there will be an even stronger case for allowing colleges to try forms of governance more akin to plcs with small boards - perhaps including executive directors. (This form of governance may emerge happen by the backdoor if the private sector take over the activities of failing colleges through contestability.)

There is certainly a need for the voice of customers, staff, local authorities, local civic society,
etc. But would this be better served through some kind of stakeholder council influencing strategy and holding directors to account? This is the model developed with NHS Foundation Trusts.

Even if such a model isn't considered appropriate for any FE colleges, it would be good see smaller and more effective boards and governing bodies.

College governance and Learner Voice - learning from others

During the session on leadership at yesterday's National Housing Federation board members conference, the Chair and Chief Executive of St Basil’s referred to the homeless charity’s Youth Advisory Board.

Reading about the YAB in the St Basil's Annual Review and elsewhere, it would appear that FE colleges could perhaps learn something.

The recent Personalising Further Education consultation from the Department for Education and Skills stresses voice for learners. In particular:

[The DFES] also expect learners to play a key role in institutional governance with college governing bodies including at least two learner governors.

Student governors are sadly seen as tokens. They are often unsupported, untrained and unmentored. Sometimes they are unrepresentative too. Hopefully this will change with training programmes and other measures.

FE Colleges should look to go further than the two learner governors. They should be considering how they could develop bodies - similar to the St Basil’s YAB - with boards of learners fully integrated into decision-making, considering policies, participating in internal inspections and self-assessment. I know that some colleges do go some way towards this but few have such a radical approach.

Cave Review - HAs, self-regulation, contestability and a daft idea

Yesterday evening I was at the National Housing Federation's (NHF) conference for housing association board members. The evening plenary session was on the future regulation of HAs.

One of the speakers was Julian Ashbury who is a member of the Cave Review team on social housing regulation (covering regulation for HAs, council housing and, potentially, private sector involvement in social housing). He spoke about the issues for the Review in a personal capacity.

Ashbury was clearly lukewarm about the NHF’s core proposal of self-regulation. He likened self-regulation to the weak regulation by the medical profession and the Press Council – unchallenging and too “producer-friendly”. (He didn’t mention how the NHF’s espousal of self-regulation could be perceived by the stakeholders and critics of HAs.)

There was more positive talk of “co-regulation” – allowing a degree of self-regulation that is regulator-approved and externally validated. A bit vague but surely more reassuring for tenants (and voters in stock transfer ballots).

I was interested in Ashbury’s thoughts on “market-style incentives”. In particular, he suggested making poorly-performing HAs (and others) give up the management of stock to those who can manage it better. (I said something similar here the other day.) This is essentially “contestability” (the idea that performance can be improved by the credible threat of competition) although he did not use the term. There is nothing more powerful than the thought of losing “business” to make an organisation raise its game.

Ashbury (and James Tickell advises the NHF) recognised the role for residents in the framework. Interestingly he advocated a national voice for residents with a right to be consulted by the social housing regulator – something similar to Energywatch and Passenger Focus.

I should add Ashbury seemed to float one positively daft idea. Letting HAs charge more (less) rent if they get better (worse) satisfaction rates in tenant surveys. Does he not realise that residents might spot that, claim dissatisfaction and vote for lower rents?

I hope some of these ideas from Ashbury are shared and espoused by his colleague Martin Cave when he writes the Review report. Whatever happens, we are in for an interesting debate as well as potentially more freedom and flexibility for HAs and other social landlords – with greater reliance upon good governance and less on strict regulation.

Housing associations - Is self-regulation by the NHF enough?

This week's Inside Housing reports that National Housing Federation wants housing associations to self-regulate through new codes of conduct.

I believe that the regulatory burden should be eased - with more reliance on (rigorous) self-regulation and with more focus on outcomes (rather than processes). However I have some concerns about the NHF approach.

I doubt that self-regulation and codes of conduct will be enough to satisfy lenders - they place reliance on the current regulatory regime (and the lower perceived risk results in cheaper borrowing for new and improved homes).

I value the NHF as an organisation (and I am looking forward to next week's Board Members' Conference). However, I fear that they will be accused of self-interest. The self-regulation may look like (and be) a closed shop - with new power and resources for the organisation.

To be fair to NHF, the article does not report any of the NHF's thinking about enhanced accountability to residents in self-regulation. (The role of residents' scutiny panels is mentioned in passing in the editorial.) This is a crucial element.

Regulation in housing - HAs, councils and accountability

I would recommend this week’s Inside Housing. In particular, the interview with Professor Martin Cave who is reviewing the regulation of social housing. (PDF available)

I was interested in the comments on regulatory frameworks – especially as its unclear whether the regulatory role of the Housing Corporation will move to Communities England. (I think there is a strong case for keeping regulation independent of this super agency.)

‘I think it is very unlikely that you would want a one-size-fits-all solution for providers of social housing,’ warns Professor Cave. ‘We’re exploring and looking forward to receiving evidence on the appropriateness of having a uniform system of regulation across local authorities, arm’s-length management associations, not-for-profit housing associations and other suppliers, including for profit organisations.

‘Clearly there are major differences in the underlying governance structures of those bodies. In the case of local authorities you have a democratic process that may make it less appropriate for an independent regulator to intervene in the process.’ But since, after all, the business of any landlord is providing services to tenants, there will be some regulatory consistency across the sector. ‘The resident in local authority housing or in housing association housing is basically interested in the same things and that suggests that there should be some degree of commonality in the regulatory arrangements to which those two types of services are subject to.’

While there is a need for flexibility rather a rigid “one-size-fits-all”, I don’t think that reliance on “a democratic process” when council tenants are in an electoral minority is necessarily adequate.

I certainly hope that the Cave review will place strong emphasis on tenant-driven accountability (both voice and choice - and in all the sectors of social housing) in reducing the need for external regulation.

Consumerism in the NHS and other public services

Consumerism and choice in public services have been in the media this week.

On Wednesday David Walker in Guardian Society attacked "the Tesco model" in public services. Essentially his argument was that:

The very basis of social policy is assessment of need, followed by distributive decisions that give relatively more to one group than another.

And, therefore, unlike shopping. (Isn't social policy about more than need assessment and distributive decisions - shouldn't it be about empowerment?)

Then on Thursday BBC4's Analysis programme explored how ideas and expectations of choice are affecting everything from personal relationships to public services. It was a more balanced survey than David Walker's polemic. (The second half of the programme on Listen Again focuses on education and health.)

One of the academics suggested that market forces of choice and competition in public services eventually dissolves the state.

I would ask - is this a problem? As long as the state facilitates, funds and regulates provision - does it matter if its not the provider?

What is important is that the state develops the role of society with social enterprises and mutual organisations like co-ops - so that we are more than individualistic consumers.

Resident involvement - and exclusion

The Housing Corporation's "Delivering change through involvement" consultation paper should be welcomed. It generally chimes with the talk in the housing sector and through out public services of changing the emphasis from regulation towards accountability to and participation by customers/patients/users/residents

I fear that the requirement for housing associations with over 250 properties to have at least one resident/tenant board member will attract the most attention and debate – with other issues overshadowed. (I believe that housing associations should have resident board members but feel uncomfortable with yet another regulatory requirement being imposed on housing associations when we are meant to be heading towards lighter-touch better regulation.)

The consultation paper notes examples of good practice in involving residents. Several of these are seen in organisations shaped by a co-operative or mutual (member owned and controlled) approach - Preston's Community Gateway Association, Redditch Co-operative Homes. (More generally, these kinds of organisations may well be the key to making stock transfer attractive and winning the trust of council tenants wary of housing associations.)

One depressing note is hit by the consultation paper when it refers to benefit rules and board members:

The Elton Review [on regulation in housing] recommended that the tax and benefit rules for resident board members in housing associations that pay their board members should be revisited. The Department for Communities and Local Government/Housing Corporation joint action plan for delivering the Elton recommendations confirms that this matter has been raised with the Department for Work and Pensions. Regrettably, there are no plans to change the tax and benefit system at this time.

Currently if a board member is paid (or even if they decline payment when board remuneration is adopted by a housing association), they can on occasions lose all their means tested benefits - which could be well in excess of any payment. When many housing association residents are in receipt of such benefits, this puts actual and potential resident board members in a difficult position. They can be excluded from involvement on housing association boards - never mind the mandatory one resident board member!

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McKinsey and public sector reform

A brief but interesting article on public sector reform can be found on the McKinsey Quarterly website. (You'll need to register but its free and painless.)

It concludes:

Reform in the UK public sector is heading in the right direction, but unless government departments and public services have the necessary leadership and capabilities, the results will be disappointing.

One omission from the article is any mention of how mutual forms of organisation can improve public services. There are ideas out there from people like the think tank Mutuo.

We are seeing this in the UK - some tenant-led housing associations taking over council housing; new forms accountability in the NHS with Foundation Trusts.

The article does seem to think of public services and reform in terms of government, officials and managers.

To empower people and renew trust, reform need to put the customers of public services centre stage.

Democracy in the NHS - participation in Foundation Trusts

The Daily Telegraph isn’t the most objective and non-partisan observer of the recent Foundation Trust (FT) elections – does anyone seriously calculate turnout in terms of total population (including under 18s)? does anyone really believe that everyone will join and participate in FTs, particularly the specialist hospitals?

Nevertheless, there are grounds for concern. FT elections choose the governing bodies that ensure that the FT boards are held accountable so they are important.

Membership figures are low. Public awareness is even lower. The FTs were created as mutual institutions using models found in the co-operative movement – yet, many in the co-operative movements don’t appreciate or understand this.

OK. I confess. I am only now joining my local FT.

The regulator of FTs, Monitor, keeps a register so you can find the contact details of your local FT. I would urge everyone to join and get involved – especially if you care about the NHS and believe that public services should be accountable to their users and communities.

Are the FTs nurturing their memberships and developing their accountability frameworks? There is guidance out there. Are the FTs applying it?

While giving users a choice is vital to ensuring that public services are responsive and effective, it is important that users have a voice and use it so they can be heard alongside professionals, managers and other interests. Voice is especially important in rural areas where the extent of choice is inevitably less wide.