Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 100 - 114)

MONDAY 16 FEBRUARY 1998

PROFESSOR B FENDER

  100.  Have you had occasion to use any of those types of sanctions? Have you always reached consensus?
  (Professor Fender)  No, we have never had to use the threat of withdrawing funding. We are dealing with institutions all the time. For example, if an institution's financial health gives us concern, then we provide advice, make sure they get advice, but we put in tough requirements. They have to meet those requirements. Advice followed by requirements have always so far been sufficient. We have not said "You have failed. We are going to take your money away".

  101.  The same annex gives us the responsibilities of the Department for Education and Employment. It says it is to monitor the performance of the Funding Council and ensure that the Council comply with the conditions of grant, apply proper controls and distribute funds in line with the policy framework. Have you ever had occasion to be in dispute with the Department over applying proper controls and distributing funds in line with the policy framework?
  (Professor Fender)  No.

  102.  So that is not an issue which has ever been raised with you at any time.
  (Professor Fender)  No.

  103.  I must say that I am somewhat concerned about the way that has functioned and it is maybe something the Committee would want to come back to. You mentioned earlier on when the discussion was taking place about option appraisal, when you were asked whether rather than use the word "may" you should use the word "require" you said that you agreed. I wanted to be absolutely clear that your view in the instance of option appraisal was that there may be occasions where you had to apply some form of sanction in order to have this carried through.
  (Professor Fender)  We would do this through incentives. If institutions were getting funding from us then it would be reasonable for us to require them to have a mechanism for appraising the project. I do not have a difficulty with that. That is not to say that every single institution, wherever the money has come from, must produce an option appraisal. I think most of them would want to do that anyway. You appear to believe that institutions are reluctant to improve.

  104.  I have no direct experience of the institutions. We are told from the information given by the National Audit Office in their report that a number of institutions have not done this. What we are trying to reassure ourselves on is that the changes have been made to ensure that the proper procedures and practices are carried out.
  (Professor Fender)  I think I have given the answers to that. The projects which have been discussed have been delivered broadly in line with budget and time. That is not a negligible achievement.

  105.  It does seem to me that you keep coming back to that comment in the National Audit Office report and I accept that comment is accurate. I am sure you had lots of discussions about the exact wording of that comment. There is, however, just a tinge, if I may say so, of complacency behind you stating that.
  (Professor Fender)  No, none at all. I welcome the report, I welcome the suggestions it makes for improvement. We will do everything in our powers to make sure that those are disseminated and absorbed by the sector. I am trying to keep a sense of proportion. It is quite easy, as you well know, to go back and look at something with hindsight. I am not saying there is anything wrong with the facts the National Audit Office found. You are always going to find some things which you wish had been done better and these institutions have accepted the recommendations of the National Audit Office. They are not fighting those. They see them as helpful and I would use that as evidence that they wish to do better in future, as we all do. What we have been talking about throughout this session is the very considerable influence which the Funding Council has in fact to encourage good practice. It does it because it offers small amounts of money which set the standards. We do put a lot of effort into making sure that the advice is the kind of advice which is going to be absorbed and not just simply put in a bin. That is why we customise the Treasury's documents. We go to that trouble in order to make sure they are as effective as possible and we do have audit procedures.

  106.  I accept that. May I pick you up on one other thing you said earlier on that did give me some concern? You extolled the virtues of debate and discussion, which no politician, certainly no one round this table, would disagree with. We would certainly accept that. The point which we have tried to make from this side of the table this afternoon is that that debate and discussion should take place within a framework. The framework has been set out here by the National Audit Office about option appraisal, about all the other steps which should be taken. What we should like to hear from you is that whilst putting a great deal of faith in debate and discussion, you do accept that there has to be a framework in which that takes place.
  (Professor Fender)  Of course I do and I hope I have been--

  107.  Sometimes it appears that you are perhaps not as convinced as we should like you to be.
  (Professor Fender)  No, no. I do believe there should be a framework but it has to be a framework which is workable and which institutions find helpful.

  108.  May I move on to governance issues? I was rather concerned to discover that in some of the cases that the National Audit Office looked at, governors were not being involved in some of the decisions which were taken, yet you will be aware that governors take ultimate responsibility for those institutions. I should like some reassurance from you that you are doing everything to ensure that since governors take the responsibility they will be involved at each of the individual steps outlined in the report to ensure that they have proper control over the decisions which are taken by their higher education college.
  (Professor Fender)  Yes, we encourage and support the Committee of University Chairmen in putting out good practice and good advice. I gave an indication as far as building projects are concerned what I consider that to be. The governing body would approve a major project, they would make sure there were proper procedures for monitoring that project and so on.

  109.  The National Audit Office could not find any formal regulations in any of the institutions they went to. Do you know how many have formal regulations for the involvement of governors in this area of activity?
  (Professor Fender)  I accept the National Audit Office finding in this respect.

  110.  Do you think it would be a good idea to have formal regulations in this area?
  (Professor Fender)  No doubt the Committee of University Chairmen will pick that up and we can have conversations with them about whether they think it should. The National Audit Office is not saying that; in fact it says something else, it says that the governors were closely involved with these projects. I am sorry to keep on defending informal processes. I said right at the very beginning that I believe we ought to be moving to more explicit processes, more explicit frameworks. I do not have a difficulty with that. It will happen, is happening already, indeed has happened considerably since these projects were started. I believe it will be most effective if that framework is one which is accepted after discussion and therefore earns the commitment of all involved and particularly the institutions themselves who are doing the work.

  111.  May I just say to you that the Committee of Public Accounts is a scrutiny committee? We scrutinise different areas of public sector activity. What we are looking for is where things go wrong. The fact that it is only in five per cent or ten per cent or 20 per cent of cases is really immaterial. What we are here to do is to scrutinise what is going wrong and to try, through the measures we take and the reports we bring forward, to put that right. The fact that you are telling us that in the majority of cases everything is OK, really does not concern us. What does concern us is where it is going wrong. You mentioned earlier in relation to the governance issues that in some cases where governors had declared an interest sometimes they left the room and sometimes they did not. Do you accept that on all occasions they should leave the room and has advice been given on that basis?
  (Professor Fender)  The revised advice from the Committee of University Chairmen will no doubt comment about that. As you well know, the degree of involvement may vary very considerably. Although clearly if there is a major and significant interest the individual should leave the room, I would not wish to say that was necessarily the case in every instance. Some discretion to a chairman is probably desirable.

  112.  That is an interesting answer. I suspect, with the greater scrutiny which is taking place within this building, that we would probably have little sympathy for that. Where someone has declared an interest, that should require them to do the right thing. One of the things which does concern me is that with the increasing commercialisation, and I accept that we are not talking about a commercial world but the increasing involvement of commercialisation, within the higher education sector, there have in some cases, and I accept they may only be very small, had examples of where things have gone rather wrong. I just wanted to ask you whether you were aware of the removal of any directors of higher education institutions in the last five years.
  (Professor Fender)  No, I cannot think of any instance of removal.

  113.  Are you aware of any problems in the governance of the 139 institutions?
  (Professor Fender)  There have been some well publicised cases.

  114.  No, I am not talking about them in particular. I am talking about more generally.
  (Professor Fender)  No. I do not want to sound complacent but I believe institutions are well governed with a high standard of public service. I was not trying to be mealy-mouthed about the question of interest. Of course if there is a clear commercial interest then you would expect someone to leave, but often people wear quite a lot of different hats. I think probably you would well understand that here. Some have a rather peripheral impact on the particular topic which is being considered. In those circumstances I think it not unreasonable that somebody may stay and listen to the debate but not intervene. You have to judge those on individual circumstances. I think a certain amount of discretion for the chairman is advisable.

  Mr Love:  I would accept that, as long as clear advice was given to the clerk to that governing body who could advise the chairman on his duties in this regard. It should not be left to the individual concerned to do that.

  Chairman:  May I say I am a little disturbed by the tenor of some things I have heard this afternoon? We all recognise that your institutions enjoy a degree of autonomy and that a lot of clever people work in them and that just laying down rules is not enough. That is not really in dispute, you will understand from what has been said this afternoon. What this report shows is that in our view there is need for more determinate guidance in a variety of areas, most particularly that formal procedures are a necessity, not capable of substitution by discussion and debate no matter how clever the disputees may be. Quantitative assessment of needs are a necessity, quantitative appraisal techniques are a necessity, competitive procurement procedures are all necessities and certainly in this Committee we always take the view that formal checks on probity are an absolute necessity. Plenty of organisations do these sorts of things irrespective of complexity levels higher than some of those faced by your institutions, irrespective of the fact that they face time and cost constraints as tight as those faced by your institutions. That is particularly true where the expenditures are very large and that is doubly so where the money concerned is public money. I think you will see all of those points, from what I have heard this afternoon, reflected in our report when it comes out and I do hope and expect that you will take that report positively and act on it. Thank you very much.


 
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