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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