eversheds presentation - aoc

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)


−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)


−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


−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


−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


−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


−Executive management of the College’s business

−Expert knowledge of institution and its functions

SMT core functions

Defining governance


−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)


−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)



−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


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


−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


−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


−“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


−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


−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


−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


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)


−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)


−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


−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

eversheds.com ©2016 Eversheds LLP Eversheds LLP is a limited liability partnership

Speaker:

Nicola Bennison

Partner Tel: 0115 931 7602 Mob: 07768 923459 Email: [email protected]

Water Court 116 – 118 Canal Street Nottingham NG1 7HF

eversheds presentation - aoc

Documents