The Scottish Government

[SEETLLD RSCCG/08]

(To download a pdf version of this document click here)

REVIEW OF SCOTLAND'S COLLEGES

CORE GROUP

INTERIM ACCOUNTABILITY & GOVERNANCE REPORT

Purpose

1. To provide the Core Group with an interim report on the work of the Accountability and Governance Working Group. It reports on work of the Group up to and including its meeting on 6 October.

General

2. The remit and membership of the Working Group is at Annex A.

3. The Group has met on nine occasions to date.

4. In September 2005 and January 2006 the Group met in John Wheatley College and Forth Valley College respectively. During the meetings members discussed with student representatives their role on the board. In October 2006 the Group met in Langside College and discussed with staff representatives their role on the board.

5. A meeting was arranged in April 2006 at Central College of Commerce, Glasgow to enable some members of the Group hear from some student representatives reflect on their experiences before the end of their term in office.

6. A presentation was given to the Group in July 2006 on the work of SPARQS - Student Participation in Quality Scotland. This enabled some members of the Group to hear about student representation.

2002/03 Ministerial Review of Accountability and Governance

7. Following the 2002/03 Review the group decided to issue a questionnaire to ascertain what changes had been effected as a result of the Review's recommendations. A questionnaire was therefore sent to chairs of incorporated colleges in 2005. The analysis of the results from this questionnaire helps to build up a picture of how boards have changed over the previous two years.

8. A total of 31 responses were received from Scotland's 41 incorporated colleges. A copy of the analysis is at Annex B.

9. Caution should be exercised when interpreting statistics of the returns. For the following reasons.

• It is important to look at overall trends rather than individual cases. More in depth research is being carried out as part of the current Review (see paragraph 12).
• Some of the questions may have been misinterpreted affecting the accuracy of the answers. For example the terminology used may have determined the response e.g. "Nolan Principles" has been superseded and although still being followed, this is contained within other guidance.
• The questionnaire only captured a snapshot of the current situation of a Board. For example the balance of a Board could be substantially altered if several members leave around the same time.

10. An update on the progress on the recommendations following the 2002/03 review is at Annex B.

Ministerial Powers of Intervention

11. The Group was asked as a matter of urgency to consider whether Ministerial powers of intervention should be removed. This issue arose because of provisions in the Charities and Trustee Investment (Scotland) Act 2005 which generally require charities to be entirely independent of Ministers.

12. The Group was firm that colleges should retain their charitable status. The Group was of the opinion that Ministers' powers would potentially remain useful in extreme circumstances. The Group recommended that Ministers disapply the independence aspect of the charity test [1].

Research

13. The Group commissioned research into accountability and governance arrangements to inform its work. The aims and objectives of the research are outlined in Annex C. A copy of the research report is attached. The final report of the Group will include its consideration of the report.

Designation of College Accountable Officers

14. The Audit Committee report of the 2004/05 audit of Inverness College, published in July 2006 [2] 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."

15. The Executive's response[3]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."

16. The Group discussed whether:

• the Principal Accountable Officer of the Scottish Executive should designate a statutory accountable officer for each college;
• the Scottish Funding Council should designate a non-statutory accountable officer for each college; or
• colleges should appoint principals who duties include responsibilities analogous to those of accountable officers.

17. It was recognised that college principals could be called to give evidence before the Audit Committee whether or not they were statutory accountable officers. Given that statutory designation by the Principal Accountable Officer of the Scottish Executive or non-statutory designation by the Scottish Funding Council would interfere in decisions that should properly be taken by the college board of management (namely the appointment of the principal), The Group considered that principals should not be designated as accountable officers. The Group acknowledged that the Financial Memorandum between the Scottish Funding Council and colleges and universities imposes responsibilities on chief executives that are analogous to those of accountable officers. This was considered appropriate and sufficient. Given that there is confusion about this issue, the position should be clarified.

Board Appointment Issues

18. The Group reached preliminary conclusions on four issues that were explicitly included in its remit within the context of the outcome of the previous review of Governance and Accountability and relevant new factors such as the Charities and Trustee Investment (Scotland) Act 2005. These were:

• Board Appointments

No relevant factors have changed since the 2002/03 Review that would suggest that the Group should reconsider boards' responsibilities for appointing their own membership. This includes appointment of the board chair. The accountability of the chair to the board would be diminished if the board did not appoint the chair.

There have been improvements in 'openness and transparency' in the process of recruitment and appointments since the 2002 Review. This is something that will be considered further in the research project.

• Remuneration

We are currently awaiting legal advice on whether or not the remuneration of Board members for their work on the board is compatible with colleges' charitable status. Given the sector has made clear its wish to retain charitable status, it would then be inappropriate to remunerate board members if this had the potential to create any conflict with the charitable status of colleges. Separately, we are aware that there is no consensus in the sector that this is a particular issue for board members. The issue was examined in detail as part of the Executive's Review of Governance and Accountability which reported in 2003 and it was agreed that no change should be made. It was considered again as part of the deliberations of the Accountability and Governance Working Group and it was again agreed that there had been no change in the view of the sector since the earlier review. Members generally felt that the main issue with Board Members was less about remuneration and more about the issue of "feeling valued", and that other ways of demonstrating that college board members are valued should be pursued. The Scottish Executive and the Funding Council agreed to consider creative ways of recognising work well done and the effort and energy invested voluntary by board members across the sector.

• Length of Board Membership for Chair of Colleges

There may be occasions where it is reasonable to extend the eight year time limit. That said, the Group acknowledged that the issue is currently before Ministers. The Group encourages Ministers to conclude this issue and give flexibility for college chairs to remain longer on boards in that capacity.

The Group considered whether there was a case for extending the time limit for staff representative members on college boards because they are elected by staff. The majority of the Group felt that, on balance, the reasons for the general reduction in the time limit (to encourage fresh thinking) should apply to all board members.

• Current 50% Statutory Requirement

Paragraph 3(3) of Schedule 2 to the Further and Higher Education (Scotland) Act 1992 provides that half of board members have:

"… experience of, and to have shown capacity in, industrial, commercial or employment matters or the practice of any profession; and one such person shall be a person nominated by the local enterprise company for the area in which the college is located".

The Group acknowledged that the statute would probably be worded differently today. However, it was generally felt that the wording in the Act was not unduly prescriptive. While there is no need to change the wording in the Act, the perception by some that it means 50% of the board should be business representatives should be challenged.

The Group was not aware of any evidence that questioned that value of a local enterprise company nominee on a college board.

19. If necessary, the Group will revisit some of the conclusions in the light of the research findings.

Student Representation Report

20. The Group endorsed the report from the Staffing, Learners and Learning Environments Working Group on the Overall College Experience for Learners.

Diversity of Board Membership

21. The Association of Scotland's Colleges conducted on behalf of the Group a survey of colleges to profile the membership of college boards. A copy of the analysis of the survey is at Annex D. The final report of the Group will include its consideration of the survey and the advice it has received from the Secretaries to Board Community of Practice Group on the further measures that could be taken to encourage greater diversity of board membership.

Audit Committee Report on InvernessCollege

22. The Audit Committee published its report on Inverness College on 5 July [4]. In it the Committee recommended that four matters be considered as part of the Review of Scotland's Colleges. These were:

a) the designation of college accountable officers;

b) interventions to assist colleges in severe difficulty;

b) the mix of board member skills and experience; and

c) board member national training;

23. The Executive on behalf of itself, the Scottish Funding Council and Inverness College responded to the Committee on 6 September [5]. All the Committee's recommendations and conclusions were accepted.

24. The final report of the Group will include its consideration of the matters identified by the Audit Committee.

Regulatory Landscape - Evaluating and monitoring of Scottish Colleges

25. The Minister for Finance and Public Service Reform announced a Review of Inspection, Audit and Complaint at the start of June. The Reviews Team within the Executive's Further and Adult Education Division had been asked to provide initial information on the bodies which have a scrutiny role in the college sector.

26. Members of the Accountability and Governance workstream contributed to the paper 'Public Sector Monitoring and Evaluation', which sought to highlight the public agencies with an interest in the sector's regulatory landscape, prior to being submitted as evidence to the Inspection, Audit and Complaint Review team.

Working Group on Accountability and Governance

December 2006

ANNEX A

ACCOUNTABILITY AND GOVERNANCE WORKING GROUP

Remit

The remit of the Accountability and Governance Working Group of the Review of Scotland's Colleges is to:

"provide Scottish Ministers with a robust evidence base, and where appropriate, informed recommendations for change, upon which sound decisions can be taken on how to fund and equip Scotland's colleges to meet future challenges and demands. In particular the review will….

• build on the work of previous reviews and examine the arrangements for accountability and governance in incorporated colleges including:
• the broader regulatory landscape in which colleges operate, and the potential overlap of jurisdictions
• whether boards should be responsible for appointing their own membership, including the chair of the board
• strengthening learner participation;
• enhancing the capacity of board members;
• whether the chair and other board members should be remunerated;
• the length of board membership for chairs of colleges and staff representatives;
• the roles of, and relationships between, the chair, board, principal to ensure maximum quality oversight, including the Board's ability to obtain independent advice and the roles, responsibilities and relationships of the Accountable Officer
• whether there is a continuing need for powers of Ministerial intervention
• the composition of the boards, including whether more needs to be done to ensure diversity and the current statutory requirement for 50% of board members to have capacity in "industrial, commercial or employment matters or the practice of any profession."

Membership

Aileen McKechnie, Scottish Executive (Chair)

Margaret McLachlan, Scottish Executive (Secretariat)

James Alexander, National Union of Students (Scotland)

Col Baird, Scottish Executive

John Cassidy, Scottish Trades Union Congress

Neil Cuthbert, Association of Scotland's Colleges

Mary Dignam, Scottish Trades Union Congress (replaced Fiona Farmer)

Martin Fairbairn, Scottish Funding Council (replaced Jennifer McLaren)

Ian Graham, John Wheatley College

Brian Hay, Edinburgh's Telford College (substitute)

Marian Healy, Scottish Trades Union Congress (substitute)

Graham Hyslop, Langside College (substitute)

Jill Little, National Union of Students (Scotland) (replaced James Alexander)

Linda McKay, Forth Valley College

Jennifer McLaren, Scottish Funding Council

Ian Macpherson, South Lanarkshire College (substitute)

George Reid, Scottish Executive

Sandy Watson, Angus College

Suzanne Dawson, Chair of Borders College

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ANNEX B

ANALYSIS OF RESPONSES TO EXECUTIVE'S JULY 2005 QUESTIONNAIRE ON COLLEGE ACCOUNTABILITY AND GOVERNANCE

Background

1. This annex presents the analysis of the responses to the Executive's questionnaire on college governance and accountability which was issued on 29 July 2005. A total of 31 responses to this questionnaire were received.

Analysis

A. "Consider future independent involvement in Board appointment process."

1a) Has your College recruited new board members since April 2003?

Yes: 30/31 97%

No: 1/31 3%

1b) If yes, please say how many, and give the basis for their appointment.

Total number of new board members in Scotlandsince 2003 is 181.

On average there have been 6 new appointments per board.

Breakdown of Appointments:

Academic Staff Rep: 14

Non- Academic Staff Rep: 15

Local Enterprise Company Rep: 10

Student Rep: 15

Other Members: 127

1c) Did you commission external involvement in the appointment process? For how long has this been your Board's practice?

Yes: 7/31 23%

No: 23/31 74%

No recruitments: 1/31 3%

1d) If yes, please describe the role and expertise of the external body or person.

Examples of the use of external experts was on the interview panels.

• Ethnicity Experts
• Legal Practices
• Other College Chairs
• Chambers Of Commerce
• Insurance Assessor
• Trades House
• SQA
• ASC

B. "Encourage college Boards to achieve a more diverse and representative balance of membership, taking account gender, race, age and disability."

2a) To what extent does your Board's appointment process take account of issues of diversity and equality?

Positive : 31/31 100%

All of the replies demonstrated a commitment to the issues of diversity and equality. Some colleges included this in their advertisements for posts whilst others ensured training for all board members.

2b) In broad terms, how would you describe the diversity of your Board in comparison to 2-3 years ago?

Same: 11/31 35%

Similar: 5/31 16%

Change: 15/31 49%

More than 1 of the changes below may have been given by the 15 Respondents acknowledging change:

Greater AgeRange : 8/15 53%

Better Gender Balance: 8/15 53%

Geographical Spread: 1/15 7%

Increase SkillsRange : 2/15 13%

C. "Ensure that the appointments process followed by all college Boards are consistent and follow good practice in public appointments."

3a) How is your Board made aware of what constitutes good practice in public appointments?

Tools used -

Guide for College Board Members: 8/31 26%

SFEFC Circulars: 6/31 20%

Commissioner for Public Appointments: 5/31 16%

Principal: 3/31 10%

Training: 3/31 10%

Nolan: 2/31 6%

Internal HR Procedures: 2/31 6%

No response: 2/31 6%

3b) Please describe each of the main steps in your appointment process.

Typically the main steps involve:

• Vacancy is first considered by the Board of Management;
• Meeting of a Nomination Committee is then arranged, they decide on person specification;
• Recruitment begins, this may involve adverts in the local press, online advertising through college or ASC website, recruitment consultants and recommendations;
• All applications received are considered against the person specification;
• Interviews are then carried out by the Nominations Committee; and finally
• A recommendation of appointment is made to the full Board.

3c) Please describe any changes to your Board's recruitment policies and procedures over the last 2-3 years?

No Change: 14/31 45%

Changes: 17/31 55%

Respondents who noted changes may have offered more than one of the following:

Inclusion role descriptions: 2/17 12%

Advertise more widely: 3/17 18%

Skills Based: 5/17 29%

Inclusion of independent assessor: 3/17 18%

Collaboration of adverts: 1/17 9%

Regularly review procedures: 2/17 12%

D. "Make greater use of powers to co-opt individuals with specialised skills and expertise."

4a) What use does your Board make of its ability to co-opt individuals with specialist skills and expertise to committees of the Board?

No Use: 12/31 38%

Use: 19/31 62%

4b) Has your use of this facility increased over the last 2-3 years?

No: 12/31 38%

Yes: 19/31 62%

4c) Can you please provide any examples of where co-option has taken place.

The figures below cover the 19 positive responses.

Estates: 3/19 15%

Finance/Accounting: 3/19 15%

Audit: 4/19 21%

Multi-cultural: 3/19 14%

Mergers: 1/19 5%

HR: 1/19` 5%

IT: 1/19 5%

Academic/Education: 2/19 11%

Business: 1/19 5%

Project Management: 2/19 11%

E. "Better utilise the public spiritedness and expertise of Board applicants by looking at the scope to encourage unsuccessful applicants to offer their skills to another college."

5a) Do you advertise Board vacancies centrally on the ASC web site?

Yes: 7/31 23%

No: 24/31 77%

Five respondents showed an interest in exploring this option in the future.

5b) Do you make unsuccessful applicants aware of Board vacancies in other colleges?

Yes: 5/31 16%

No: 26/31 84%

5c) Do you liaise with other colleges when seeking to recruit Board members?

Yes: 6/31 19%

No: 25/31 81%

5d) Describe any difficulties your Board has faced in attracting applicants of the desired calibre. Have these increased or improved in the last 2-3 years?

No current difficulties: 30/31 97%

Difficulties: 1/31 3%

There was some potential future issues highlighted by respondents:

• increasing competition from remunerated public posts on Health Boards and local government committees;
• ability to attract black minority ethnic applications;
• the consistency of the calibre of applications; and
• the rural location of some Scottish colleges and their resulting pool of willing applicants.

F. "Introduce a national training programme for Board members."

6a) How helpful has the introduction by the ASC of revised Board Member training arrangements been?

High Impact: 13/31 43%

Medium Impact: 13/31 43%

Low Impact: 4/31 14%

Aberdeen College did not answer as they only recently rejoined the ASC and have yet to attend any of the events.

6b) Are there any ways in which you consider training arrangements could be further enhanced?

The following suggestions for enhancing training were offered:

• varied training locations;
• specialised training events on issues such as audit and finance;
• shorter sessions that were part day not full day sessions;
• The preparation of units that could be delivered by the college at a local level to reinforce development; and
• a greater use of online training opportunities to help problem of time commitment.

6c) How many of your Board members have participated in some sort of Board training?

• all Board members have participated in individual college run training events; and
• on average 6 members per board have attended ASC lead training.

G. "Examine the training arrangements for Secretaries to Boards and ensure that the role of the Secretary is defined in guidelines to Boards."

7a) From your point of view, and from your Board's, how successful are current arrangements for the training for Secretaries to the Board?

Fine: 11/31 35%

Require more: 7/31 24%

Referred to

Secretaries Network: 4/31 13%

Unaware opportunities: 3/31 10%

Limited: 2/31 6%

Better Papers: 1/31 3%

Too many cancellations: 1/31 3%

No response: 2/31 6%

7b) As Secretary to the Board, do you consider that your role is sufficiently defined and understood?

Yes: 25/31 81%

No: 3/31 10%

Needs further clarification at Induction: 1/31 3%

No response: 2/31 6%

There was however a concern that the role and seniority of the position of secretary to the board still varies widely from college to college.

Reviews Team: Scotland's Colleges

September 2005

ANNEX B

UPDATE ON GOVERNANCE AND ACCOUNTABILITY RECOMMENDATIONS FROM 2002/03 REVIEW

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Reviews Team: Scotland's Colleges

June 2006

ANNEX C

ACCOUNTABILITY AND GOVERNANCE RESEARCH PROJECT

AIMS AND OBJECTIVES

1. We want the project to explore available evidence and current practice within colleges.

2. We want a report describing and evaluating practice within colleges in the areas identified in Appendix 1 and identify good practice (and how best to disseminate it).

3. It should include a commentary on how college accountability and governance arrangements:

(a) compare with common practice in the private sector, other post-school education providers, charities and the wider public sector; and

(b) can be further enhanced within a culture of continuous quality improvement.

4. This work will best be undertaken by a combination of literature review and in-depth analysis of a representative sample of college boards.

5. The work requires to be undertaken by a team with a good track record of examining accountability and governance arrangements in both the public and private sectors.

Reviews Team: Review of Scotland's Colleges

April 2006

APPENDIX 1

PRINCIPLES AND SUPPORTING PRINCIPLES OUTLINED IN 'GOOD GOVERNANCE STANDARD FOR PUBLIC SERVICES [6]', INDEPENDENT COMMISSION ON GOOD GOVERNANCE IN PUBLIC SERVICES, 2004

1. Good governance means focusing on the organisation's purpose and on outcomes for citizens and service users

1.1 Being clear about the organisation's purpose and its intended outcomes for citizens and service users

1.2 Making sure that users receive a high quality service

1.3 Making sure that taxpayers receive value for money

2. Good governance means performing effectively in clearly defined functions and roles

2.1 Being clear about the functions of the governing body

2.2 Being clear about the responsibilities of non-executives and the executive, and

making sure that those responsibilities are carried out

2.3 Being clear about relationships between governors and the public

3. Good governance means promoting values for the whole organisation and demonstrating the values of good governance through behaviour

3.1 Putting organisational values into practice

3.2 Individual governors behaving in ways that uphold and exemplify effective

governance

4. Good governance means taking informed, transparent decisions and managing risk

4.1 Being rigorous and transparent about how decisions are taken

4.2 Having and using good quality information, advice and support

4.3 Making sure that an effective risk management system is in operation

5. Good governance means developing the capacity and capability of the governing body to be effective

5.1 Making sure that appointed and elected governors have the skills, knowledge

and experience they need to perform well

5.2 Developing the capability of people with governance responsibilities and

evaluating their performance, as individuals and as a group

5.3 Striking a balance, in the membership of the governing body, between

continuity and renewal

6. Good governance means engaging stakeholders and making accountability real

6.1 Understanding formal and informal accountability relationships

6.2 Taking an active and planned approach to dialogue with and accountability to

the public

6.3 Taking an active and planned approach to responsibility to staff

6.4 Engaging effectively with institutional stakeholders

7. We also want the project to consider the experience, support and number of student and staff members on college boards [7].

ANNEX D

RESULTS OF SURVEY OF LAY COMPOSITION OF SCOTLAND'S INCORPORATED COLLEGES, JULY 2006 [8]

Return: 39 colleges (100%)

Age

According to the Scottish Councillors 2003 [10] Report :

• less than 1% were under 30 years old;
• 2% were under 50 years old;
• 50% were aged between 45-59 years;
• 30% were over 60 years old.

Ethnicity

Six colleges each have one member of the board from an ethnic minority.

According to the Scottish Councillors 2003 Report just over 1% of councillors were from ethnic minorities, compared to 2% of the Scottish population in 2003.

Disability

Six colleges each have one member of the board with a disability.

According to the Scottish Councillors 2003 Report almost 9% of councillors had a disability or long-term illness.

Gender

While Ministers had the legal powers to disapply the independence aspect of the charity test, when they came to weigh the case for retention of the powers against the general presumption that charities should be independent, they concluded that the case for colleges meeting the usual rules of charities should prevail. An Order was subsequently laid before the Scottish Parliament to remove Ministerial powers in order to safeguard colleges' charitable status of colleges.

http://www.opm.co.uk/ICGGPS/download_upload/Standard.pdf

This is a matter not specifically covered in the Good Governance Standard

The survey did not include college principals, staff members or student members

HEI figures from Committee Of University Chairmen (CUC) Report on Governance Questionnaire issued in January 2006 http://www.shef.ac.uk/cuc/pubs.html

Scottish Councillors 2003 Report - http://www.scotland.gov.uk/News/Releases/2003/12/4697

Comparable figures for HEIs are not available. CUC report from January 2006 states "more than 25% of HEIs have a lay membership which is more than 80% male".

http://www.scotland.gov.uk/Topics/Government/public-bodies/public-appointments

DTI Building better boards ( http://www.dti.gov.uk/files/file19615.pdf)

DTI Building better boards ( http://www.dti.gov.uk/files/file19615.pdf)

http://www.scotland.gov.uk/News/Releases/2003/12/4697

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