Review of further education governance in Scotland

Executive Summary

Context

When the Cabinet Secretary for Education and Lifelong Learning asked me to conduct this review the terms of reference were set out clearly. That remit clearly split the task I was given into two parts

a) How the sector as a whole should be managed across Scotland

b) Having decided that, how each College or entity should be governed.

Subsequent to us starting the review a consultation paper 'Putting Learners at the Centre' was published in September 2011, and as a result of that the Cabinet Secretary amended the focus of the remit slightly.

That consultation paper and the subsequent consultation paper on regionalisation set out a suggested new structure for the FE Sector based on a regional model. Before the publication of 'Putting Learners at the Centre' we had already begun to consider a regional model based on our own thoughts and research. The regions, with one exception, set out in the regionalisation consultation paper are those that we would have recommended.

In effect, therefore, for the purposes of the report we will take our first recommendation of the move to a regional model for the College Sector as being accepted and focus more on what that outcome means.

In all that we have recommended though, and at the centre of all we have discussed, is the learner who has to be at the heart of all that is done in the College.

In conducting the review we have tried to look at not just what is needed today but perhaps more importantly what will be needed in the future. What is recommended in this report should only form the base for the College sector to evolve further. It also tries to, as much as it can, ignore the current fiscal environment we all find ourselves in, and recommends a solution that applies in any fiscal environment.

The benefits we believe this new structure will bring will be significant, but without proper investment and management to match that new structure the task risks being done in a manner that delivers the wrong or an incomplete outcome.

Unusually this Executive Summary lists all the recommendations that we make and that is because we believe that it is the totality of those recommendations that will bring the change that is needed, which will not be achieved by implementing only parts.

Introduction

The structure of governance we have in place today in the College Sector has not really been challenged since 1992.

Governance can only operate within the context and rules which are given. Therefore we need to be absolutely clear that, in all that we write in this report, there is no criticism of current College Boards and Principals implied or indicated. They have operated in the way they felt fitted with what they had been asked to do.

The definition of governance that we have used is

'it is the framework of rules and practices by which a Board of any form ensures accountability, fairness and transparency in an organisations relationship with its stakeholders and shareholders to ensure they are bought into what the organisation does.'

Governance in a sector like FE also needs guiding principles and policies in which to operate and in our opinion those have not been clear at a national level for many years. The 'Putting Learners at the Centre' consultation paper published in September starts to provide that national framework so we have used it also as a basis for our review.

Background

The current structure and governance of the FE Sector in Scotland was set up as a straight Scottish parallel to the Further and Higher Education Act in 1992 in England and Wales. Basically it backed Colleges out of the Local Authorities they were part of, made them independent entities with charitable status, gave them some governance requirements by statute, and then told them to be free, independent and create their own future. Since then we can find nothing that has changed, or sought to change, that situation. Neither, as far as we can ascertain, has anyone re‑examined that basic decision to see if what was created in 1992 was or is fit for purpose today.

What the FE sector looks like today

Currently we have 37 Boards of Management of incorporated Colleges with a further four Colleges which are not incorporated in statute but are publicly funded.

The sector received £693 million in public funding in 2010/2011 which was a real terms increase from that which it received at the turn of the Millennium.

While the sector undoubtedly did produce the innovation which was hoped for post 1992, in recent years it has also given rise to many inequalities. We highlight over 20 in this report, the majority of which we do not believe add value to the learner across Scotland or provide a consistent national approach in areas where perhaps that is desirable. Focus has remained, for the Colleges, on their own geography without any real focus on what is best for the learners across Scotland.

There also has been no real national direction or policy from Government for many years which can provide the overall guidance and principles that the sector needs, and with 41 different College Boards it has been difficult to establish any real cohesive engagement between Government and the sector as a whole.

The funding mechanism that the sector currently uses also does not help either governance or cohesion.

This, along with other issues surrounding the status of Colleges, has diminished the value that the sector should contribute to the Scottish economy.

We highlight other aspects where the current structure and governance do not bring the outcome that we would all want from the sector, and no-one in the sector that we have consulted has stated that the status quo in the sector should be preserved.

Structure and Governance of the FE Sector as a whole

The regional structure, we feel, gives the best platform on which to build for the future. On the one hand a more cohesive and consistent sector, while on the other maintaining its links with the communities it serves. It also allows policy to be more nationally managed where that is appropriate.

'Regional' though does mean just that and while we accept that there could be different models of organising the existing Colleges, under this new structure there should only be one Regional Board with the power and control to both receive the funding from Government, via the SFC, and decide how to manage what it then controls.

To achieve that we have put in place a set of recommendations which we feel will together deliver this outcome. However these need to operate together and piecemeal selection will not achieve the desired outcome.

Recommendations (i)

1. That as soon as is practicable, and if possible by academic year 2013/14, we deliver a new regional structure for the College Sector in Scotland using the regional alignment set out in Annexe J of this report.

2. The Chairs and the Principals/ CEOs and the Student Representatives of all the Colleges, the UHI centre, the Local Authorities, Trade Unions plus any other body that has a key current or potential interest in UHI be given the task, by June 2012, of producing a solution for their area which uses the regional structure and governance proposals from this review as its base.

Governance of the new Regional Boards

We believe that the new Regional Boards should be distinctly different from what exists today as they are being asked to do different things and also have the capacity to do things differently in many areas.

We therefore believe that the way the Chairs and Boards are appointed be changed to align with that seen elsewhere in the public sector, although we are not recommending that Colleges become public bodies themselves.

We believe that part of the reason why the current governance model is not working as well as it should is the lack of clarity and direction given to Boards in terms of what is expected of them.

To achieve that change we believe means moving to a new place in terms of the way Boards operate, and we recommend that Boards should be given outcomes which they have to achieve and then be judged through a new auditing system to ensure they have achieved them. This will mean that the Boards will be clear of 'the what' in terms of what is being asked of them through the individual outcomes, but will encourage different solutions, and we hope innovation, in 'the how' of those outcomes being achieved.

To achieve that we have listed an initial eighteen outcomes that we believe Boards should be responsible for.

To achieve all that, we have made specific recommendations.

Recommendations (ii)

3. New Chairs and Boards are recruited and appointed to manage and govern the new regions.

4. The new regional Chairs and Boards be selected using an outcome based approach to determine the skills necessary to carry out their task and once in post each Board should be audited against that set of agreed outcomes.

5. The Chair is appointed in line with the principles and procedures which apply to the public appointments system, though we do not believe that the new regional bodies need be 'public bodies' in the formal sense. We recommend that the appropriate Minister in charge of this sector endorses the appointment.

6. The Chair of the new regional entity, using the principles and procedures of the public appointments system, leads the process of appointing the Board, as set out on pages 28 and 29. That Board should be a maximum of 12 members and contain within that number one member of staff and the elected President of the Student Association to represent the learner. The latter two would have the same roles and responsibilities as other Board members.

7. Each Regional Chair and Board will be audited annually or at an appropriate time to ensure that they are fulfilling their agreed outcomes. If they are not doing so a programme of action will be put into place to rectify areas of concern or failure. This could ultimately lead to the removal of the Chair and/ or Board if they do not fulfil the required outcomes.

8. Chairs of the individual Regional Boards should be remunerated in the same manner as Chairs of some other public entities.

9. The Principal should attend all Board meetings other than where it would be inappropriate to do so. The Principal though should be involved with the Board on all discussion to do with the creation of the strategy which the Principal and his/her team will have to deliver.

10. By December 2012 Audit Scotland, Education Scotland, and the Scottish Funding Council work together to put in place an auditing framework which will allow the outcomes driven approach pursued by the new Regional Board to be judged and monitored effectively.

11. Repeal of the requirement which remains in the 1992 Act that the Board of Management must contain a nominee of the local enterprise company.

12. Chairs of the Regional Boards should serve one term (4 years), with the option for a further term at the decision of the Minster concerned.

13. Members of a Board of Management should serve for one term, with the option of reappointment for a further term at the decision of the Board. A subsequent term or terms of appointment should thereafter be permissible, but only following open recruitment procedures to fill the vacancy which are consistent with the practice on appointments recommended elsewhere.

14. Repeal of the provision which requires, where a Board member leaves before the completion of her/his term, that the successor's first term of appointment should cover only the 'unexpired' term of the departed Board member.

15. Boards should have the flexibility to make appointments for periods of up to four years, rather than for a fixed period of four years as at present.

16. Boards should be free to make an appointment regardless of the age of the candidate.

17. The current inability of a Board to elect a Chair who is a councillor or a council employee should be removed.

18. A central team is formed to manage the process of change across the sector and work with the new Chairs and Boards, once recruited, to deliver their initial outcomes. The ' FE Change Team' would report to the Cabinet Secretary and his senior officials in terms of its work. It would also control the transition funding that will be needed to achieve these changes. It would be disbanded when the new structure is in place.

For all the above to operate as we believe they should, other items impacting on the sector will have to be addressed and other issues, and bodies, will have to be changed as well.

These include

• What national guidelines and policies need to be in place consistently across Scotland
• How the College sector should be strategically managed at a national level
• How the sector should be funded
• How we move to a more national set of terms and conditions for staff

While we believe that all we recommend should be considered as a whole, we understand that there are practical reasons why it may take time to implement and that everyone may not go at the same pace. Therefore we have recommended how a transition to this new way of working could be achieved encompassing all our recommendations.

To achieve all the above we have added the following specific recommendations.

Recommendations (iii)

19. There should be a limit of initially 10% of annual revenue on the surpluses a College is allowed to create for its own use.

20. All reserves held that exceed 10% of annual revenue have to be used for the betterment of the sector overall. That could be either within that region or elsewhere but priority and allocation would be decided by the new FE Strategic Forum at a national level.

21. All current College liquid reserves in excess of 10% of annual revenue are frozen (unless already specifically allocated to projects already underway physically) and central Government uses any excess nationally for the sole purpose of funding the costs of the changes we are recommending and any other changes which may come from the current overall review of post 16 education. This residual sum should be focused on added benefit for the learner in the most appropriate manner.

22. By the end of 2012 decisions on what should be undertaken by Colleges nationally, and consistently across all regions, should be taken. By the end of 2013 further decisions should be taken on how the sector should contribute to national priorities for the coming five years.

23. Student participation and representation become a commitment across the College Sector. Student Associations should be strengthened and become appropriately funded, autonomous and sustainable.

24. A specific sum per learner-head, to mirror the process currently used by some Universities, should be allocated from the regional budget to fund the recommendation above.

25. The FE Strategic Forum [see recommendation 28 below] examines each inequality set out in this report and proposes a solution to each.

26. The regional College becomes a statutory member of the appropriate Community Planning Partnership ( CPP) to allow the contribution of the College, in line with Government policy on lifelong learning, to be a fundamental part of community planning.

27. That either through a 'Partnership Group' as recommended to us by EIS in its submission or through another similar structure put in place by the Regional Board, groups are created to give local communities an input into their strategy.

28. The Scottish Government establishes its own leadership and strategic guidance of the sector through the creation of a new FE Strategic Forum which would drive the sector forward and constantly review and evolve the sector in terms of fitness for purpose in a changing educational and economic world.

29. The FE sector moves to an outcomes based funding model where each College is given a small number of outcomes which will fulfil Government policy and aspirations and is then allocated a sum of money to deliver those.

30. Colleges should not be judged on yearly surpluses but on a longer term sustainable financial model.

31. Government takes total responsibility for funding major capital projects in the FE Sector.

32. A central resource is established within Scottish Government that works with Colleges to deliver major capital projects for the FE Sector.

33. Arrangements as set out in section I of this report are put in place to permit a return to national bargaining within the FE Sector in timescales outlined in that section.

34. A new national MIS system be developed and implemented which satisfies all the changes that this new structure for the College Sector will entail.

At the heart of all we have considered is the learner, and we hope we have tested all that we recommend to ensure that the learner benefits. So the learner needs to play a major part in its formation and continuance in as many ways as appropriate.

Finally, as we state at the outset all we have recommended will only put the sector in a position that is fit for purpose today, and evolution must be a key driver for the sector going forward. In education, like many other parts of life today, change is the only certainty.