[SEETLLD AGWG-P20]
REVIEW OF SCOTLAND'S COLLEGES
WORKING GROUP: ACCOUNTABILITY AND GOVERNANCE
POWERS OF INTERVENTION
Purpose
1. To invite members to discuss whether any further statutory or non-statutory interventions may be required to assist colleges in severe difficulty.
Background
2. The Audit Committee report of the 2004/05 audit of Inverness College, published in July 2006 [1] recommended that:
"The Committee recommends that the Accountability and Governance Working Group review whether any further statutory or non-statutory interventions may be required to assist colleges in severe difficulty."
3. The Executive's response[2]advised that:
"We accept this recommendation In doing so, however, we should point out that it is not strictly correct to say, as the Report does at paragraph 111, that the sole remaining power of intervention is the power of Ministers to remove members of the Board. There are several other, albeit less direct, means of intervention. These, along with the power to remove the Board, are exercisable by Order of the Parliament. They include the ability to close or merge colleges; to make regulations prescribing requirements with which Boards must comply; or to require the publication of certain information. Ministers also have certain powers in relation to the funding of colleges where there has been mismanagement."
Statutory Powers of Intervention
4. The statutory powers that would enable Ministers, the Scottish Funding Council or the Office of the Scottish Charities Regulator to intervene in the affairs of colleges as set out below.
Further and Higher Education ( Scotland ) Act 1992 - Ministers
Direct Powers of Ministers
Section 12(6) - require information to be provided for the purpose of exercising Ministerial powers under Part I of the Act.
Order Making Powers of Ministers
Section 3(1) - establish a new college; merge colleges; and close colleges.
Section 3(5) - amend the constitution and proceedings of boards of management (Schedule 2 to the Act)
Section 12(8) - amend the powers of colleges
Section 24(1) - remove board members because of mismanagement
Section 25(1) - powers connected with the closure of a college [3]
Regulation Making Powers of Ministers
Section 3(6) - prescribe requirements which boards of management must comply
Section 27(1) - require the publication of certain information
Consent of Ministers Required
Section 3(4) [4] - change of name of college
Section 12(7) - enable a college to borrow money or materially change a college's character. (This power is delegated to the Scottish Funding Council through its Financial Memorandum).
Charities and Trustee Investment ( Scotland ) Act 2005 - Office of the Scottish Charities Regulator (OSCR)
Power of OSCR to obtain documents and information
Under section 22 OSCR may require, by notice, any charity to provide it with documents or information which it requires for the charity register, unless the charity would be entitled to refuse on the grounds of confidentiality in the Court of Session.
Inquiries about charities etc.
Section 28 gives powers to OSCR to make inquiries about charities. Under subsection (3), OSCR may direct a person or body in regard to its inquiries, not to undertake specified activities for a period of up to 6 months. Subsection 6 provides that it is an offence to fail to comply with such a direction without reasonable excuse and subsection (7) sets the level of fine to be level 4 (currently £2500) or imprisonment not exceeding 3 months, or both.
Under section 33, if OSCR takes direct action following inquiries under section 28 it must prepare a report about the inquiry and send a copy to the person in respect of whom the inquiry was made and publish it as it sees fit.
Power of OSCR to obtain information for inquiries
Under section 29, OSCR may require, by notice, any charity to provide it with documents or information which it considers necessary for its inquiries, unless the charity would be entitled to refuse on the grounds of confidentiality in the Court of Session. Subsection (6) provides that it is an offence to fail to comply with a notice without reasonable excuse and sets the level of fine to be level 4 (currently £2500) or imprisonment not exceeding 3 months, or both.
Powers of OSCR where a charity no longer meets charity test
Section 30 requires OSCR to take actions if it appears to OSCR, as a result of inquiries, that a charity no longer meets the charity test. OSCR must either direct the charity to take steps OSCR considers necessary to meet the test (which may include applying to OSCR for approval of a reorganisation scheme to reform the charity's constitution) or remove the charity from the register. If the charity fails to comply with the direction OSCR must remove it from the register.
Other powers of OSCR following inquiries
Section 31 sets out further powers which OSCR may use following inquiries which have been made under section 28. If it appears to OSCR that there has been misconduct (which section 106 defines as including mismanagement) in the administration of a charity or that it is necessary for action to be taken to protect a charity's property or ensure that property is used for charitable purposes, OSCR may ( subsection (4)) suspend a charity trustee, agent or employee. However, subsection (10) prevents OSCR from suspending a person if it considers the person has acted honestly and reasonably in relation to the misconduct concerned and ought fairly to be excused. This is intended to ensure that OSCR only takes proportionate action in relation to any misconduct of which it becomes aware. Alternatively OSCR may ( subsection (6)) give a direction to restrict the transactions or the payments that may be made in the administration of the body without OSCR's consent. This is intended to protect the assets of a charity or a body that was representing itself as a charity. OSCR may also ( subsection (7)) direct a financial institution (i.e. bank) or person holding property for a charity not to part with it without OSCR's consent. This will allow OSCR to ensure that assets raised for charitable purposes are not removed from a charity or body, protecting them for use for those purposes.
Section 32 provides details concerning the making and delivery of directions and notices in section 31. The maximum period for which OSCR may make directions is 6 months and if longer term action is considered necessary, OSCR may apply to the Court of Session for it to take action under section 34. Subsection (5) provides that it is an offence to fail to comply with a section 31 direction from OSCR, with the maximum penalty on summary conviction being level 5 on the standard scale (currently £5000) or maximum of 6 months imprisonment, or both.
Powers of Court of Session
After making inquiries, OSCR may (as described in relation to sections 28 to 31) take certain actions directly for a maximum period of 6 months. However, under section 34, following its inquiries OSCR may apply to the Court of Session for certain other or further actions to be taken. If it appears to the court that misconduct has occurred, to protect the property of the charity or to ensure that property is used for the charity's purposes it may interdict the charity from taking prescribed actions, appoint a judicial factor to manage the charity's affairs, appoint a trustee to a charitable trust, suspend or remove a trustee or manager of a charity, freeze its bank account and property. If it appears to the court that a body has been representing itself as a charity when it is not, it may interdict the body from this action, and also take similar actions that it may do against a charity.
Hence, if OSCR considers that action is required to be taken against a charity or body for longer than 6 months or to remove a trustee or appoint a factor, it must apply to the Court of Session.
Further and Higher Education ( Scotland ) Act 2005 - Scottish Funding Council
Section 9 Funding of the Council
This section defines the funding that Scottish Ministers can provide to the Council. Ministers have discretion to impose terms and conditions on funding. Subsections (3) to (9) set out particular matters to which the terms and conditions may relate.
Section 12 Funding of fundable bodies
This section sets out the terms and conditions under which the Council can make grants to fundable bodies, including the conditions that may be imposed in relation to recovery of grant.
Section 13 Quality of fundable further and higher education
This section puts a duty on the Council to secure provision for the assessment and enhancement of quality in the activities it funds. This extends the existing duty to assess quality in higher education institutions to cover colleges and introduces a new statutory duty to enhance quality for both sectors.
Section 16 Council ' s right to address meetings
This section gives the Council a power to attend any meeting of the governing body of a fundable body where the Council has concerns over any aspect relating to funding provided by the Council, and address the meeting on these matters.
Section 25 Directions where financial mismanagement
42. Under this section Ministers are, if it appears to them that the financial affairs of a fundable body have been or are being mismanaged, to give the Council such directions about the provision of financial support for the activities carried on by the fundable body. It requires Scottish Ministers to consult with the Council and the body in question before issuing directions, and covers all fundable bodies.
Governance and Management: Appraisal and Policy (GMAP) Directorate of the Council
5. The Directorate is responsible for supporting the Council's objectives in securing excellence in leadership and management as well as sound financial health for all colleges and universities. In relation to financial health, the Directorate seeks to support colleges and universities through:
- meeting with institutions to best understand their financial strategies and, in relation to current developments, to sign-post experiences in other institutions that could be usefully drawn upon;
- working with institutions, support networks and the FE Development Directorate to help institutions successfully address threats to their sustainability, including support for sector-wide initiatives (for example, costing and pricing in the university sector and the financial benchmarking project in the college sector); and
- receiving strategic and financial plans and reports to monitor sustainability.
6. The external audit of colleges is the statutory responsibility of the Auditor General for Scotland (as described above).
7. All colleges have an internal audit function to provide their boards of management with an objective assessment of the adequacy and effectiveness of internal control systems. The work is undertaken on a cyclical basis and covers financial operations, resources, staff, services and responsibilities to other bodies. Copies of the audit committee's annual report and the internal audit annual report are provided to the SFC.
Other Support Activities
8. The Council also supports several agencies and initiatives that help colleges by identifying and disseminating good practice, including: the College Boards of Management Development Programme; the Coordinating Health and Safety in Tertiary Education (CHASTE) project; Equality Forward; the work of the Joint Information Systems Committee in Scotland; Leading & Learning - College Leadership Continuing Professional Development; the Scottish Further Education Unit;. Student Participation in Quality Scotland (SPARQS); and the four wider access regional forums.
Action
9. Members are invited to discuss whether any further statutory or non-statutory interventions may be required to assist colleges in severe difficulty on the understanding that they will be asked to consider this issue further having received the accountability and governance research findings at the end of the month.
Reviews Team: Scotland 's Colleges
September 2006
[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
[3] These provisions were amended by the Further and Higher Education (Scotland) Act 2005 to require assets to be used for a charitable purpose
[4] As amended by section 30 of the Further and Higher Education (Scotland) Act 2005
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