[SEETLLD AGWG-P18]
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REVIEW OF SCOTLAND'S COLLEGES
WORKING GROUP: ACCOUNTABILITY AND GOVERNANCE
DESIGNATION OF COLLEGE ACCOUNTABLE OFFICERS
Purpose
1. To provide members with information about the designation of college accountable officers with an analysis of the implications of possible changes to current arrangements.
Background
2. When discussing paper 14 (Roles and Responsibilities of College Accountable Officers) at the Group's last meeting, members asked for a paper outlining the issues involved in greater detail along with the implications of any changes.
3. The Audit Committee report of the 2004/05 audit of Inverness College, published in July 2006 [1] recommended that:
" the Scottish Funding Council, in consultation with colleges and the Department, publish an explicit statement of the duties of accountable officers. The Committee further recommends that the way in which accountable officers are designated be examined under the ongoing review."
4. The Executive's response[2]advised that:
"We accept this recommendation. The SFC will shortly propose to colleges and to the Scottish Executive a statement of college Principals' responsibilities, drawing on the existing guidance contained in (a) the Financial Memorandum between the Funding Council and colleges, and (b) the Guide for Board Members produced by the Association of Scotland's Colleges. The Review of Scotland's Colleges will also examine the way in which accountable officers are designated."
Role of Statutory Accountable Officers
5. Accountable Officers are personally answerable to the Scottish Parliament. The essence of their role is a personal responsibility for the propriety and regularity of the public finances for which they are answerable and for the economic, efficient and effective use of all available resources.
Designation of Statutory Accountable Officers
6. Under the terms of the Public Finance and Accountability (Scotland) Act 2000, the Permanent Secretary of the Scottish Executive, as the Principal Accountable Officer (PAO) for the Scottish Administration, may designate a statutory Accountable Officer for a body whose accounts are subject to audit by the Auditor General for Scotland (AGS).
7. Colleges are covered by the accounting and audit provisions of the Act, which means that their accounts are audited by the AGS and must be laid before the Scottish Parliament. It is therefore possible for the PAO to designate statutory Accountable Officers for colleges.
History
8. Before the former Scottish Further Education Funding Council assumed its funding responsibilities on 1 July 1999, colleges were funded directly by the then Scottish Office. Up to 1 October of that year college non-statutory Accounting Officers (as they were known at that time) were appointed by the Scottish Office/Executive Departmental Accounting Officer. (This arrangement of course pre-dates the 2000 Act).
9. Changes were made in the designation arrangements to reflect the change in the relationship between the Department and colleges.
Current Position
10. The PAO does not designate statutory Accountable Officers for colleges. The Scottish Funding Council also does not designate non-statutory accountable officers (such accounting officers would have to be non-statutory because under the 2000 Act only the PAO can designate statutory Accountable Officers).
11. The Scottish Funding Council imposes obligations on the chief executives of the institutions it funds that are analogous to the responsibilities of an accountable officer. (There is provision for these obligations to be transferred to another person if the chief executive is unable to fulfil them for a period).
12. The Council has a financial memorandum which outlines the formal relationship between the Council and the bodies it funds. The financial memorandum sets out expectations of the institution and the requirements which are a condition of the Council's funding. The same arrangements apply to the college and university sectors.
13. The financial memorandum can be found at Annex A.
14. It is evident from the first paragraph of the financial memorandum that the primary line of accountability between the Council and the institution is through its governing body.
15. There are two sections which make specific reference to an institution's chief executive officer that are relevant to this issue. These are:
· paragraph 15, which outlines the duty of the governing body, as a condition of funding, to ensure that proper governance, leadership and management arrangements are in place, including the appointment of the chief executive officer who is also directly accountable to the Council's chief executive officer for the institution's proper use of funds deriving from Scottish Ministers and its compliance with the memorandum; and
· paragraph 17, which requires the chief executive officer, again as a condition of funding, to inform the Council if there are any circumstances which might have an adverse effect on the institution's ability to deliver its activities.
16. As college boards are responsible for the appointment of their chief executive, the boards have the responsibility of ensuring that the principal is capable of discharging properly their analogous responsibilities of accountable officers.
Options
17. There seem to be three options:
a) the PAO could designate statutory college Accountable Officers;
b) the Scottish Funding Council could designate non-statutory college accountable officers; or
c) the current position could remain.
Analysis
Statutory designation
18. By designating statutory college Accountable Officers, college principals would be personally answerable to the Scottish Parliament. Such personal responsibility would underline to principals the importance of them giving clear advice and warnings to their board if the board is contemplating actions which are irregular, improper or constitute poor value for money. This could be of particular import as principals would be standing up to the body to which they were otherwise accountable. However, we are not aware of any situation having arisen since the establishment of the Scottish Further Education Funding Council whereby a principal has not given the board appropriate and sufficient warnings when the board has been contemplating actions such as those described above, against the advice of the principal.
19. It would mean that the PAO would require to be satisfied that a college principal was capable of discharging properly their Accountable Officer responsibilities. It could conceivably mean that the Executive had a veto over the appointment of college principals or might take some role in the appointments process. At the very least it would require the accountable person to be someone other than the principal in circumstances where the PAO was not satisfied the principal should be an Accountable Officer. Such an action could be problematic as has the potential to undermine the position of the principal/chief executive.
20. As the accounts of higher education institutions are not audited by AGS, if this change occurred, the accountability arrangements of the college and university sectors would be different.
21. The pivotal role of the Funding Council in the current line of accountability and funding is clearly understood by stakeholders. The illustration at Annex B has been used on several occasions by Audit Scotland.
22. Implementation of this option, which would create a direct relationship between the Scottish Executive and colleges, would confuse the current line of accountability as laid down in the Further and Higher Education (Scotland) Act 2005:
· section 4 defines the general duty of Scottish Ministers as being to provide support for the provision of fundable FE and HE by colleges, mainly by making grants to the Council; and
· section 3: defines the general duty of the Funding Council as being to secure high quality further and higher education.
Non-Statutory designation
23. While non-statutory designation of college accountable officers would not make them personally answerable to the Scottish Parliament, it could have the same impact as described in paragraph 18 above.
24. It would mean that the chief executive of the Scottish Funding Council, as the statutory Accountable Officer, would require to be satisfied that a college principal was capable of discharging properly their accountable officer responsibilities. Again, this would have similar advantages and disadvantages to those described in paragraph 19 above.
25. This would also introduce a difference in the accountability arrangements between the college and university sectors.
26. It would not confuse the current line of accountability, nor would it create a direct relationship between the Scottish Executive and the colleges.
Status Quo
27. The current arrangements mean that college principals are not statutory Accountable Officers under the terms of the Public Finance and Accountability (Scotland) Act 2000. Instead they have responsibilities to the chief executive of the Scottish Funding Council that are analogous to the responsibilities of a statutory Accountable Officer, except that they are not personally answerable to the Scottish Parliament. That said, this does not preclude principals being called to give evidence before the Scottish Parliament's Audit Committee. The Parliament could require their attendance, a principal failing to do so in such circumstances would be guilty of an offence and could be fined or imprisoned. There therefore appears to be no difference in practical terms between the current arrangements and the first two options.
Action
28. Members are invited to discuss whether accountable officers (whether statutory or non-statutory) should be designated for Scotland's incorporated colleges.
Reviews Team: Scotland 's Colleges
September 2006
ANNEX A
Financial memorandum between SCOTTISH FUNDING COUNCIL and colleges and universities
The financial memorandum has an effective date of 1 January 2006.
Preamble
1. This memorandum sets out the formal relationship between the Scottish Further & Higher Education Funding Council ('the Council') and 'the institution'. The foundation of the relationship is provision of funding by the Council to the governing body of the institution, according to statute.
2. The constitutional arrangements for the relationship are laid down in the relevant statutes and instruments of governance which establish the autonomy of the institution and the powers and duties of the Council.
3. For these arrangements to be effective the Council and the institution have to work in partnership to assist the delivery of the Scottish Executive's policies for further and higher education and to secure best value from the investment of funds derived from Scottish Ministers. The ultimate purpose of all these partnerships, policies and investments is to secure further and higher education in Scotland which meets the nation's economic, social and cultural needs by providing excellent learning opportunities for students and outstanding research. The Council recognises that the institution may also undertake activities and have to comply with legislation and regulation which fall outside the scope of this partnership.
Purpose of the memorandum
4. Accordingly, this memorandum sets out the expectations of the institution and the requirements which are a condition of the Council's funding. It also sets out the agreed expectations which the institution, in the spirit of constructive partnership, has a right to have of the Council.
What the institution can expect of the Council
5. The Council will conduct its affairs at all times to the highest accepted standards for public sector bodies. It will act reasonably on the basis of the fullest available evidence and objective analysis. Subject to any legal requirement to observe confidentiality, it will be open and transparent with the institutions it funds and other stakeholders, and will give or be prepared to give a public justification of all its decisions.
6. The Council will maintain a policy on openness which sets out the work of the Council, the services it aims to provide and how to complain or appeal if something goes wrong.
7. The Council will maintain regular and frequent dialogue with institutions and their representative bodies where it seems appropriate to:
(i) promote a shared understanding of the aspirations, needs and concerns of the various stakeholders;
(ii) support the beneficial impact of institutions' collaborative activities; and
(iii) better enable it to provide the information, advice and assistance Scottish Ministers require of it.
8. The Council will not substitute its judgements for those which are properly at the discretion of institutions. In particular, the Council will seek to maximise the discretion of institutions to use grants provided by the Council.
9. In discharging its duty to monitor and publish the performance of the institution generally and on specific projects, the Council will, as far as possible, rely on the data and information used by the institution for its own purposes.
10. The Council will allocate and pay grant to the institution in accordance with current published policies and procedures. The institution will be consulted in advance and given reasonable notice of any significant change to these policies and procedures and of significant changes in overall funding levels.
11. The accountable officer of the Council is required to be satisfied that the institution has put in place the organisation and procedures necessary to ensure compliance with this memorandum, including the achievement of best value from funds derived from Scottish Ministers. The Council will obtain evidence from the institution, which will include undertaking reviews (but only by prior arrangement), to provide the assurances required to discharge this responsibility.
12. Where the Council has concerns or insufficient information to provide the assurance required, the Council will, in the first instance, seek to resolve matters with the chief executive officer of the institution. Where this has not proved possible, the Council's accountable officer will inform the chair of the governing body and the institution's chief executive officer in writing and without delay of any significant concern of the Council about the conduct of the institution. Only after such notification and where the circumstances warrant it, the Council's accountable officer may suspend the payment of any or all grants to the institution. Where the concern relates to the financial support which the institution receives (or might receive) from the Council, the Council may also use its powers to attend and address a meeting of the governing body.
What the Council can expect of the institution
13. The following paragraphs state the expectations of the institution and the requirements which are a condition of the Council's funding.
14. The Council must be able to rely on the whole system of governance, management and conduct of the institution to safeguard all funds of the institution deriving from Scottish Ministers and to achieve the purposes for which those funds are provided. As a recipient of public funds, the governing body of the institution will strive to achieve at all times good practice in the governance, management and conduct of the institution.
15. The governing body will ensure that it has in place and effectively implemented the proper arrangements for governance, leadership and management of the institution as required by statute, its instrument and articles of governance. This includes the appointment of the chief executive officer. As well as being directly accountable to the governing body for the proper conduct of the institution's affairs, the chief executive officer of the institution is also directly accountable to the chief executive officer of the Council for the institution's proper use of funds deriving from Scottish Ministers and its compliance with this memorandum.
16. Respecting the primacy of the institution's own statutory and constitutional obligations, the governing body will ensure that:
(i) there is effective planning and delivery of the institution's education programmes, research and related activities, in accordance with its mission;
(ii) it obtains sufficient data and information of a quality to enable it to determine how well the institution is achieving its goals across the full range of its activities and that the institution is adjusting its strategies as necessary for the delivery of these goals. Such information will be made available to the Council on request as necessary for the exercise of its statutory functions;
(iii) public funds are used in accordance with relevant legislation and only for the purposes for which they are given;
(iv) the institution strives to achieve best value from its use of public funds from all sources;
(v) the institution takes appropriate account of Scottish Ministers' priorities as expressed in the Council's further and higher education policies and drawn to the institution's attention by the Council;
(vi) the institution is actively engaged in seeking continuously to enhance the quality of its programmes and services and to involve students and other stakeholders in these processes;
(vii) there are in place up-to-date and readily accessible procedures for handling complaints by students, staff and others;
(viii) its and the institution's activities are conducted in an appropriately open, transparent and fully accountable manner;
(ix) the institution plans and manages the deployment of its resources in a sustainable way ;
(x) it and the institution adheres to the Council's mandatory requirements (as notified to the institution in circular letters) and that the institution takes account of relevant good practice in the management of all its activities and resources including its:
- staff, human resources and industrial relations practices;
- estates and equipment; and
- finances, and risk and internal control procedures.
17. The chief executive officer of the institution must inform the accountable officer of the Council without delay of any circumstance that is having or is likely to have a significant adverse effect on the ability of the institution to maintain its capacity to deliver relevant education programmes, research and related activities.
ANNEX B - ACCOUNTABILITY IN THE COLLEGE SECTOR
[1] http://www.scottish.parliament.uk/business/committees/audit/reports-06/aur06-04-00.htm
[2] http://www.scottish.parliament.uk/business/committees/audit/reports-06/Audit_4th_Report_ETLLD_Response060906.pdf
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