Colleges operate within a national framework, which is set by legislation and by Government and its agencies. This section sets out the main elements of that framework that apply to all colleges and which all governors should be aware of.
The governing body and its powers
Every college is under the overall direction of a governing body. In more than 95% of cases, the governing body is a further education corporation or sixth form college corporation established under the Further and Higher Education Act 1992. This Act removed colleges from local authority control and set them up as freestanding public bodies. A small number (‘specialist designated institutions’) are independently constituted charities regulated by their own trust deeds.
Corporations are empowered by Section 18 of the Act to provide further and higher education. In recent years, corporations have been given more extensive powers to provide secondary education for young people aged 14 and over. They have a wide range of supplementary powers that they can exercise for the purpose of, or in connection with, their principal powers.
The Act requires every college to have an Instrument and Articles of Government setting out how it will conduct its business. Schedule 4 to the Act (which was substantially revised by the Education Act of 2011, pages 115 and 116) states what the Instrument and Articles must include.
Types of governor
The members of the governing body are usually referred to as governors, or collectively as the Board. It is the Board’s job to decide how many members it has and how they are appointed. The only proviso is that the membership must include staff, students and, for sixth form colleges, parents of students.
A governing body therefore normally comprises:
- one or more members of staff
- one or more students
- in sixth form colleges, one or more parents
- the principal of the college (the principal does not need to be a member of the governing body but almost always is)
- a number of governors who do not fall into any of the above categories (often called external governors) within whatever overall and category-specific limits the Board has set
The Board specifies the arrangements for recruiting governors in each of the above categories, determines the term of office for which each appointment will be made. It also sets limits either on the number of times a governor may be reappointed or on the total number of years which any governor may serve.
Every college has charitable status and so is subject to the requirements of the Charities Act. Further education (FE) corporations and sixth form college (SFC) corporations are classified as 'exempt' charities. This means that they are not regulated by the Charity Commissioners but by a separate regulator. In the case of FE Corporations, this is the Department for Business, Innovation and Skills (BIS). In the case of SFC corporations, this is the Department for Education (DfE).
Governors are, however, trustees, and are therefore required to:
- apply the property and income of the college only for the purposes of the charity
- act only within their legal powers – not ‘ultra vires’
- manage and protect the property of the college
- ‘exercise the same degree of care in dealing with the administration of the charity as a prudent business person would in managing their own affairs or those of someone else for whom they are responsible’
The fundamental requirements of the Charities Act are set out in the Charity Commission’s publication, Registering as a Charity (CC21).
Since colleges are charities, governors are only eligible to serve if they meet the criteria for appointment as charity trustees. They must be fit and able to discharge the duties of a governor and must not be bankrupts or former prisoners.
Financial and audit requirements
Many of the obligations placed on colleges flow from the fact that they receive public funds. The expectations of the principal funding body – for FE colleges, this is the Skills Funding Agency (SFA), even though the largest portion of funding may come from the Education Funding Agency (EFA) – are set out for FE colleges in the SFA’s financial memorandum and for SFCs in the EFA’s funding agreement.
Both documents require the governing body to:
- appoint an accounting officer (normally the principal) who is answerable to Parliament for the use of public funds
- appoint an Audit Committee
- demonstrate value for money
- have an effective risk management policy
- properly manage and develop its property and ensure that its premises are properly equipped
- inform the funding body of any risks to the college’s solvency or viability or of any instances of fraud or irregularity
The financial memorandum or funding agreement also empowers the relevant funding body to specify the form in which each college will prepare its financial statements. It also requires colleges to comply with the two funding bodies’ Joint Audit Code of Practice (JACOP). The JACOP is published in two parts: the part that is directly relevant to Colleges is JACOP Part 2. [Link to document]
The JACOP sets out the funding bodies’ requirements for each college's audit, accountability and assurance arrangements, and provides a broad framework in which colleges should operate. The funding agencies’ Accounts Direction and Accounts Direction Handbook, which are reissued annually, set out the accounting requirements in more detail.
The most important requirements of the JACOP for governors are:
- to ensure that the terms of reference and duties of the Audit Committee meet certain minimum requirements
- to publish annually an evaluation of the college’s corporate governance arrangements
- to maintain an adequate system of internal control, ensure compliance with statutory and regulatory requirements and have policies and procedures in place to deal with suspected cases of fraud or other irregularity
More specifically, the Accounts Direction requires the Board to include within its annual report and accounts an operating and financial review and a statement of corporate governance and internal control.
Code of governance
While there is no legal requirement for a college to adopt a code of governance, the Accounts Direction requires each governing body to publish a Statement of Corporate Governance and Internal Control as part of its annual report and accounts. This must set out or refer to the principles by which the college is governed.
Until 2011, colleges were normally expected to comply with the Financial Reporting Council’s UK Corporate Governance Code, but in that year the AoC published The English Colleges' Foundation Code of Governance, which has been widely adopted. The Foundation Code amplifies the Corporate Governance Code and sets out standards of good governance practice that are specific to the college sector.
In 2013 the AoC published an Audit and Accountability Annex to the Foundation Code. Colleges that have adopted the Annex are no longer required to comply with the UK Corporate Governance Code; for other colleges, the two Codes continue to sit side by side.
Both Codes of Governance are applied on a ‘comply or explain’ basis: if the college does not think it appropriate to comply with any of the provisions of either code, it must explain its reasons for non-compliance.
Inspection and regulation
As well as being regulated by the Department for Business, Innovation and Science (BIS) or Department for Education (DfE), colleges, as providers of education, are subject to inspection by the Office for Standards in Education (Ofsted), an independent inspectorate which is funded by and reports directly to Parliament.
Ofsted inspects all colleges on a cyclical basis. The frequency of inspection depends on the grade awarded at the last inspection but all colleges are subject to an annual risk assessment. Most colleges can expect an inspection every two to three years.
Under its current (2012) Common Inspection Framework for Further Education and Skills, Ofsted can award a college one of four grades:
3 Requires improvement
Ofsted’s judgement of the overall effectiveness of a college is based on inspectors’ judgements of:
- outcomes for students
- the quality of teaching, learning and assessment
- the effectiveness of leadership and management
In Ofsted's last annual report, 77% of colleges inspected were judged good or outstanding.
Colleges that provide courses of higher education are also inspected by the Quality Assurance Agency for Higher Education (QAA). QAA’s review teams judge whether or not colleges have met expectations, require improvement or do not meet expectations in relation to academic standards, the quality of learning opportunities and information provided, and the enhancement of learning opportunities.
Funding bodies also undertake regular audits to satisfy themselves that funds have been properly applied.