eversheds presentation - aoc
TRANSCRIPT
Further Education Colleges Key Governance Requirements
21 January 2017
Nicola Bennison
Partner
1. Corporate structure
2. Roles and responsibilities
3. Defining governance
4. Charitable status
5. FE Governance Models
6. Amending the Instrument and Articles
Programme
Corporate structure
Eversheds LLP | 24/01/2017 |
−“All FE colleges are independent and autonomous institutions currently categorised as within the private sector. The Education Act 2011 allows Colleges to determine their own mission and programme of activity and gives flexibility; but alongside greater freedoms there is a need for greater accountability and scrutiny of use of public funds.”
(AoC Review of Governance 2013)
What is an FE college? (1)
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−Statutory corporation incorporated under Further and Higher Education Act 1992
−Corporation responsibilities: • Statutory: employment of staff; the offer of various services; and the ownership of assets
• Contractual: College’s staff, learners and suppliers (including compliance with European procurement regulations)
• Common law: loyalty, good faith, care, diligence and skills exercised by governors due to their fiduciary position on the College’s governing body
What is an FE college? (2)
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−Instrument and Articles of Government • Instrument: procedural arrangements and requirements including membership of the governing body, the eligibility of members, conduct of meetings and the appointment of the chair, clerk and a student and staff governors
• Articles: responsibilities of the governing body, the role of its committees, audit arrangements and other matters which the board believe are important to the effective running of the College
−Schedule 4 of the Education Act 2011 allows modification/replacement subject to compliance with certain key responsibilities
Constitution
Corporation (Chair)
Clerk Principal
Roles and responsibilities
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−Determining and periodically reviewing the educational character and mission of the College, and its activities (including the core activity of teaching, learning and assessment) −Approving the College’s quality strategy −Ensuring the College’s solvency and effective and efficient use of resources, and safeguarding College assets −Approving annual estimates of income and expenditure −Responsibility for the conditions of service, appointment, appraisal and dismissal of the principal, senior post-holders and clerk −Setting a framework for the pay and conditions of service for all other staff
Corporation core functions
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−Advising the Corporation with regard to the operation of its powers
−Advising the Corporation with regard to procedural matters
−Advising the Corporation with regard to the conduct of its business
−Advising the Corporation with regard to matters of governance practice.
Clerk core functions
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−Making proposals to the Corporation about the educational character and mission of the College and implementing the decisions of the Corporation
−Determination of academic and other activities
−Preparing annual estimates of income and expenditure for consideration and approval by the Corporation
−Management of budget and resources within estimates approved by the Corporation
−Organisation, direction and management and leadership of the staff
−Student matters
Principal core functions
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−Executive management of the College’s business
−Expert knowledge of institution and its functions
SMT core functions
Defining governance
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−Groups of people acting independently to take collective decisions to enable an institution to cope with change:
• planned change through strategy setting • managing change (i.e. risk) from outside forces and ensuring robust systems for managing risk are in place
• monitoring and constructively challenging management
What is Governance? (1)
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−Checks and balances • Instrument and Articles establish specific lines of responsibility for decision making
−Decisions made by: • majority vote in quorate meeting; or • delegation to committee or individual (if not reserved)
What is Governance? (2)
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−Accountability • held to account for stewardship of public assets and funds and for the effective performance of their legal and regulatory duties
−Lines of accountability • to Parliament via Skills Funding Agency and Secretary of State in respect of financial and regulatory responsibilities; and
• to the Courts in respect of general law
What is Governance? (3)
Openness
Honesty
Leadership
Integrity Selflessness
Accountability
Objectivity
Nolan principles
Keeping on the straight and narrow ...
Governance Compliance
Judicial review
Inspection Regime
SFA
General law
Charitable status
Nolan
Fiduciary duties
Statutory functions
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−Skills Funding Agency Financial Memorandum/Joint Audit Code of Practice
−Ofsted inspection regime
−Procurement rules
−Judicial review
−Competition law - mergers (impact on learner choice), collaborations (fee level, information sharing)
−Employment legislation
−Health and safety legislation
−Public sector equality duty
−Freedom of Information Act
External frameworks
Charitable status
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−College governors must comply with the Charities Act 2011, and:
• Act in accordance with the charity’s powers and its charitable objectives as an educational charity
• Promote the interests of the charity, and ensure that its assets are only used for its charitable purpose of providing education
• Safeguard the charity’s assets
−Principal Regulator: Secretary of State/Department for Education (formerly BIS)
General FE colleges are exempt charities
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−“Persons having general control and management of the administration of the charity” (Charity Commission definition)
−Trustee owns property for benefit of others or for some other purpose other than their own
−Governors not trustees in the strict sense of that word but occupy a similar position
−Governors owe fiduciary duties
Governors’ role as charitable trustees
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−Payment of governors: • Trustees should not profit from their office unless it is specifically authorised by the governing document, statute or by a regulator
• Even where payments are permitted the board must consider whether they are prudent and advantageous
−Expenses may be paid
−Restrictions on transactions
−Duty to keep proper books of account
−No distribution of profits to members
Duties - not to profit
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−According to the standard of the ordinary “prudent” person of business in relation to his or her own affairs
−Not liable for errors of judgement
−Persons with a particular skill or expertise must be careful to avoid giving specialist advice which should be properly commissioned
−If College acts on advice of that member that member may be liable in negligence for any financial loss
Duties - reasonable care and skill
Act in the best interest of beneficiaries
Become familiar with the governing
document
Understand the organisation’s purposes
Control and safeguard assets
Serve without payment and not receive any
benefit
Avoid conflicts of interest
Not to profit from your position
Comply with the governing document
Act with reasonable care and skill and take
professional advice where needed
Take reasonable steps to ensure that the charity has been
properly managed
Act and make decisions collectively
Act personally (fiduciary duties owed
personally)
Duties owed - summary
Three models of Governance
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−Board governance/oversight through committees
−Management functions delegated to the Principal
−Committees deal with information process on behalf f the board and may be authorised to undertake wourk on its behalf (subject to limitations in the Instrument and Articles)
−Committees report detail of work to the board for information and approval
−Principal reports at each meeting of the board
−Chair – on behalf of the board – maintains regular contact with the Principal and Clerk between meetings.
Traditional Stewardship Model
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Board focus on strategic leadership by:
−identifying on whose behalf the board wields its authority (its legal and moral ‘ownership’)
−governing through policies that translate owners’ wishes into:
• ‘Ends’ – specific benefits for specific persons at a specific worth (valued against other results or money; the former constitutes priority, the latter efficiency); and
• ‘Principal Limitations’ – the boundaries of prudence and ethics within which these ends must be accomplished
Policy Governance (Carver)
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−Board concerns itself solely with control through governance
−Rigorous separation of governance from management
−Board effectiveness is considered to be a function of board independence from management
−Board is solely responsible for organisational ‘ends’ (mission), leaving the Chief Executive to concentrate on the ‘means’ of achieving them, with the Chief Executive being robustly held to account
−Board focuses on strategic issues leaving the Chief Executive to implement strategy
Policy Governance (Carver)
Eversheds LLP | 24/01/2017 |
−The Board engages in a detailed and expert interaction with the management over key aspects of the strategic plan, which requires the board to:
• ensure that the plans are realistic and achievable, and derive form the vision;
• provide a clear framework and guidance for departments and sections to write their subsidiary plans;
• establish a pattern of carrying out strategic planning and undertaking financial forecasting processes in tandem;
• agree and clear hierarchy of priorities; and • assign responsibilities for monitoring and reviewing plans
Interactive guidance model
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−A ‘hands on’ board which concerns itself directly with management issues as well as governance
−This model may build in tension between board and management unless relationships are good
−Approach not generally recommended because separation of governance from management is weak
−To work, several conditions typically apply: • Board needs to be small and to meet regularly; • Senior executive are usually fully board members; • non-executives need to have a sound understanding of the business; and
• committee system tends to be weak/non existent
Interactive guidance model
Amending the Constitution
The starting point ...
What changes can be made to assist the Corporation to achieve its objectives?
Are the changes appropriate in the light of our regulatory framework?
What are the strategic objectives?
Common issues
Size of Corporation
Length of agendas
Is committee structure
right?
Amount of detail Board/ committee is
asked to consider
Length/ frequency of meetings
Conduct of urgent business
Quorum
Does Corporation membership
need refreshing?
Is Committee structure leading
to a “siloed” approach being
taken?
Do you have the right mix of
skills and experience on
the Board?
Most common changes Common changes Less common changes
Telephone participation in board meetings
Reducing size of Corporation (by e.g. reducing number of staff and student governors)
Dis-establishment of all committees other than audit
Written resolutions Wider power to remove Chair/ Vice Chair/ governors
Removal of Senior Post-holder designation
Electronic notice of meetings Amendments of some sort to Article 12
Splitting role of Principal/ Chief Executive into two separate roles
Express power to suspend governors
Quoracy changes
Providing for Chair’s action
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