ACCOUNTABILITY
AND
ARRANGEMENTS
IN
HIGHER
EDUCATION
40. The Committee enquired about the accountability
arrangements in the higher education sector. The Funding Council
stated that they did not tell institutions what to do, and that
they believed that high autonomy and high accountability went
together.[44] They told
us that autonomy was the best way of encouraging institutions
to be independent, resourceful and enterprising, and that it was
the job of the Funding Council to help them to express their accountability.[45]
We questioned the Funding Council further on how accountable institutions
were, how good the decisions being made within them were and about
the Council's own role in relation to the performance of institutions.
They told us that it was their job to help institutions improve
their performance,[46]
and that one of the ways in which they did this was to have a
regular cycle of audit visits, through which they examined management
practice. They were going to introduce a five year cycle of visits
which was dedicated specifically to the estate management function.
They also had an opportunity to assess the performance of institutions
because the Funding Council handed out small amounts of capital
money for specific projects, and they set standards of good practice.[47]
41. The Funding Council distribute funds to institutions
in accordance with financial memoranda specifying the terms and
conditions of funding.[48]
We asked the Funding Council to describe their role further, and
in particular what sanctions they had available where they did
not think that an institution was carrying out its function properly.
The Funding Council replied that they did not think that the sanction
of withdrawing funding as a means of promoting a particular kind
of behaviour was the right route, as the students would suffer.
They maintained that the evidence suggested that institutions
did take their advice, and that their methods of promoting the
accountability of institutions did work. Advice followed by tough
requirements, for example where an institution's financial health
had given them concern, had so far been sufficient, and the Funding
Council had not had to use the threat of withdrawing funding.
Neither had the Funding Council had cause to be in dispute with
the Department for Education and Employment over the Council's
application of proper controls and the distribution of funds in
accordance with the policy framework set by the Department.[49]
42. Since April 1996, revisions to the financial
memorandum between the Funding Council and institutions have given
institutions greater freedom to undertake projects and to seek
loan finance without Funding Council approval.[50]
We asked the Funding Council whether they thought that they exercised
a satisfactory overall policing role to stop some of the things
outlined in the National Audit Office's report happening in future.
They told the Committee that they thought that the arrangements
were satisfactory, and that the financial memorandum had been
one way of encouraging better performance. To look at all building
projects, and to try to follow them through in comprehensive detail,
would in their view have been a mammoth task and almost certainly
inefficient. They wanted to encourage institutions to be resourceful
and innovative, although still with a requirement to undergo quite
a rigorous analysis if they were going to exceed their borrowing
limit or were coming to the Funding Council for funding for a
particular project.[51]
43. The Committee asked the Funding Council whether
they should not be setting down more stringent rules, and whether
their hands-off approach was appropriate.[52]
They replied that universities and colleges were independent bodies,
which have internal and external auditors, and an Audit Committee.[53]
The Funding Council said that they had a deliberate strategy of
maximising the independence and effectiveness of institutions,
which they would not describe as a hands-off approach. Setting
standards through the promotion of good practice and good advice,
following this up with audit, and working to provide data which
allowed institutions to compare one with another, were a deliberate
attempt to maximise the value delivered from the taxpayers' money.[54]
Getting compliance through a series of rules and regulations would
not, in the Funding Council's view, deliver the best value.[55]
44. The Funding Council subsequently told us that
their Estates Service planned to conduct cyclical reviews of all
institutions' estates departments, which would incorporate the
dissemination of good practice and encouragement to adopt appropriate
procedures. The Funding Council's Audit Service would produce
guidance on building projects for institutions' internal auditors,
drawing on both their own and the National Audit Office's work.
This would be drawn to the attention of institutions' independent
Audit Committees, so that they were in a position to confirm that
their institution complied with good practice.[56]
45. We asked the Funding Council whether they accepted
that the institutions could have obtained better value for money
on some of the projects examined by the National Audit Office,
and why their own audit team could not pick up these shortcomings.
They said that the National Audit Office report was valuable in
giving an indication of the way in which institutions could improve,
and that it would be promoted and circulated to the sector, but
that, if you went back and analysed any major project, you would
find things that you wished you had done better.[57]
46. Finally, the Committee asked the Funding Council
whether they thought that debate and discussion by institutions
should take place within a framework. The Funding Council said
that they believed that there should be a framework, but that
it had to be one which was workable and which institutions would
find helpful.[58] They
added that it would be most effective if that framework was one
which was accepted after discussion, and was one which therefore
had the commitment of all involved, particularly the institutions
themselves who were doing the work, and that they put a lot of
effort into ensuring that their advice was the kind of advice
which was going to be absorbed by institutions.[59]
Conclusions
47. We recognise that higher education institutions
have a high degree of autonomy. However, they are funded with
public money, and therefore need to operate within a framework
of controls. Given the weaknesses in the way in which institutions
handled their building projects, we are concerned that adequate
arrangements are not currently in place to ensure that institutions
follow best practice. The Committee note that the Funding Council
distribute funds to institutions in accordance with financial
memoranda specifying the terms and conditions of funding, and
that they are required to monitor compliance with the memoranda.
We recommend that the Funding Council revise the terms of the
financial memoranda between them and the institutions to reflect
the requirement for institutions to comply with the elements of
best practice identified in the National Audit Office report.
48. We note that recent revisions to the financial
memoranda allow institutions greater freedom to undertake building
projects and to seek loan finance without Funding Council approval.
We are concerned that these revisions have reduced the extent
to which the Funding Council will routinely ensure that institutions
are held accountable for their actions. We therefore recommend
that as part of their overall monitoring role the Funding Council
examine whether institutions are obtaining best value for money
in carrying out building projects. The Funding Council's Estate
Service and the internal auditors at institutions have an important
part to play in ensuring the achievement of value for money. We
note the Funding Council's intention to disseminate good practice,
to encourage the adoption of appropriate procedures through cyclical
reviews by their Estates Service, and to produce guidance on building
projects for institutions' internal auditors.
44 Qs 17, 40 Back
45
Qs 41, 44 Back
46
Q31 Back
47
Q33 Back
48
C&AG's report (HC 452 of Session 1997-98), Appendix 1 Back
49
Qs 96, 99-102 Back
50
C&AG's report (HC 452 of Session 1997-98), para 2.3 Back
51
Qs 60, 62, 64 Back
52
Qs 51, 95 Back
53
Q52 Back
54
Q95 Back
55
Q61 Back
56
Evidence, Appendix 1, p16 Back
57 Qs
71-72 Back
58 Qs
106-107 Back
59 Qs
105, 110 Back
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