Governance structures must evolve for a college to survive

Good governance is essential to the effective running of any business, with an ineffective board being the most likely reason for an organisation to fail.

Boards exist to provide leadership, support and scrutiny to a management team. To do this well, a board must be structured in a way that underpins the organisation’s aims and values – while having the experience and ability to sufficiently challenge and advise.

Having been both a CEO of a large organisation and a chair of others, my experiences have enabled me to develop a real understanding of how effective governance influences an organisation’s success.

FE colleges have undoubtedly had to raise their game in all areas in the face of funding cuts and ever-changing policy. When I took up my position of as chair of London South East Colleges last year, it was clear that the existing governance model, which had been in place for many years, did not fully meet the needs of our rapidly expanding organisation.

Following a three-way merger in 2016, this college had transformed from one entity into a multi-campus college. An overarching group was set up, of which the college was part, alongside a multi-academy trust and an apprenticeship company.

Clearly, this was now a very different organisation, continuing to innovate and offer far more than FE alone. A review of governance structure was needed – and undertaken – to ensure that every organisation within our group could be adequately supported and run.

As a result of this work, we have created a new “golden thread” structure, which effectively links our constituent parts. The “thread” joins up strong board level oversight (providing support and capability to challenge) with three independent boards, representing our colleges, schools and apprenticeship companies.

This new structure has strengthened our governance, with local experts sitting on each of our independent boards, creating better local links. Every member has real experience and understanding of the customers they serve – yet with the oversight of other members who can consider the bigger picture and the organisation’s role within the wider community.

Ultimately it’s courage that’s needed to make change

The over-arching board optimises the integration of strategy, management and resourcing within the wider group, eliminating duplication of process but retaining the institutional integrity of each independent board. Each of the three boards delegate upwards within a legal framework that has been agreed.

The model in which we are operating is that of earned autonomy. Ultimately this is an approach that recognises excellence in regulated businesses – when those with efficient management systems in place and a proven track record of compliance are given greater flexibility in delivering outcomes.

This is not model in which the overarching board is composed of trustees with all the power. It is a bespoke set-up, developed specifically to meet our organisation’s current and future challenges. You wouldn’t just apply it to other colleges – but all colleges would benefit from reviewing their governance structure to ensure it fits their longer-term business objectives.

For the many FE colleges undergoing mergers, getting the right governance fit is essential. Indeed, even a college not going through structural change will still be facing a range of regularly changing pressures and dynamic needs.

The flexibility of the government’s regulatory framework is undoubtedly sympathetic to this. It allows colleges to be innovative with their governance and gives them the ability to create bespoke models that are fit for purpose.

Ultimately it’s courage that’s needed to make change. It’s far easier for a board just to carry on as it is, because change will inevitably create a level of uncertainty.

There is a saying, however: “if you do not grasp change by the hand, it will grasp you by the throat”. Put simply, college boards need to be brave.

Innovation is needed for college survival and for innovation to happen, governance structures simply must move with the times. 

Why colleges should be wary of university mergers

Merging with a peer in further education is now the most sensible option for colleges wanting to cut costs, argues Martin Vincent

At the start of November an investigation by The Independent revealed at least three universities in England are in serious financial distress, relying on bridging loans to stay afloat. The news is clear evidence of a sector under pressure. Difficult economic and political conditions, combined with increased competition for students, are negatively impacting institutions that have traditionally been viewed as financially robust. For college leaders, partnerships or mergers with universities have long been a tempting tactic – but the pressure on higher education institutions means this strategy now carries greater legal and financial risk.

Further education has its own, well-documented financial challenges. Labour’s recent analysis of figures from the Institute for Fiscal Studies found spending on further education and skills has dropped by £3.3 billion in real terms since 2010. Merging with education providers has been an effective way for colleges to combat this. While there are several different routes, mergers let colleges pool resources to cut costs and unlock revenue. However, the merging of two education providers requires the sharing of liabilities as well as assets. With the fresh pressure on higher education, colleges are now more likely to strike the right balance of risk and reward by merging with similarly-shaped organisations – namely, other colleges.

Taking a step back, the most common form of collaboration between higher and further education are validation agreements, which let colleges tap into university resources, faculty and facilities to offer degree programmes to students. Manchester College, for example, offers degrees validated by Manchester Metropolitan University and the Universities of Bolton and Salford. Individual arrangements will vary, but ultimately these lucrative collaborations let colleges lean on the offering of more established institutions and generate more revenue through tuition fees.

College-to-college mergers offer a more natural operational fit

However, in the precarious financial position universities are now operating from, validation agreements could increase a college’s legal exposure. With this form of collaboration, students usually have duel registration to give them access to both institution’s facilities. If a university delivering a degree programme on behalf of a college goes under and students affected cannot complete their studies, the college could face a multitude of potentially costly breach of contract claims. So, while course validation undoubtedly gives colleges quick access to revenue, they are far from being a long-term route to financial stability.

By contrast, when a college merges with another, similarly-sized institution that operates in the same locality, both colleges can benefit from estates rationalisation. In practice, this means each institution sells off duplicate, or outdated facilities and combines the best of what’s left into a leaner operation that draws from the same pool of students, uses the same faculty and is generally more financially efficient.

This approach is possible with college-university mergers, too, and has indeed been tried in a number of instances. However, the potential operational synergies that can be achieved just aren’t as beneficial.

Colleges typically offer more vocational courses and need to maintain specialist facilities to deliver them. This is at odds with a university’s set up, which is generally geared to an academic offering and often supported by a portfolio of listed properties that are harder to sell, especially in the case of older institutions. There is also a question of governance. College governors or trustees will usually have little experience within higher education, so taking a leap into the unknown and merging with a university with the stakes higher than ever is short-sighted. The Technical and Further Education Act 2017 extended the Companies Directors Disqualification Act 1986 to further education, meaning college leadership can be found personally liable if their institution enters insolvency due to mismanagement.

Before undertaking a merger, colleges must look carefully at the finances and operations of the institution they intend to partner with. In the current climate, the risks of merging with a university are now too great. Put simply, college-to-college mergers offer a more natural operational fit and deliver synergies that unlock greater revenue for colleges under financial pressure.

DfE: College pension contributions to rise by an extra £142m per year

The government has confirmed colleges will be expected to pay an extra £142 million a year in employer contributions to the teachers’ pension scheme.

The increase comes into force in September 2019, but as this is half way through the financial year the Department for Education has estimated that colleges will have to pay £80 million extra in 2019/20.

This will increase to the full amount of £142 million in 2020/21.     

The latest estimates were revealed by schools minister Nick Gibb in a series of written answers to parliamentary questions asked by shadow education secretary Angela Rayner.

Julian Gravatt, deputy chief executive of the Association of Colleges, said the figure of £142 million amounts to approximately two per cent of college income.

As colleges already spend an average of five per cent of their income (£350 million) on contributions to the teacher pension scheme, this will take costs up to approximately £500 million, or seven per cent of total income, by 2020/21.

As FE Week reported in September, the AoC previously expected that colleges would face paying an extra £140 million as early as 2019/20, a contribution rise of over 40 per cent. At the time, the DfE would not be drawn on a figure.

The Treasury has said the government will “cover the extra costs” for colleges and schools for the “rest of the spending review”, which runs until March 2020.

In an answer to Ms Rayner submitted on October 16, Mr Gibb said the DfE “proposes” to fund schools and colleges for the increased costs relating to the teachers’ pension scheme and would “shortly” run a public consultation to seek views on this and understand the impact of the changes.

FE providers proposed to receive funding include general FE colleges, sixth form colleges, specialist post-16 institutions and adult and community learning providers.

In an answer to Ms Rayner submitted on October 30, Mr Gibb said it was expected that an extra £1.1 billion would be needed in the teachers’ pension scheme for 2019/20. This would take the form of £80 million from FE colleges, £830 million from state funded schools, £110 million from independent schools and £80 million from affected higher education institutes.

In another answer, submitted on November 6, Mr Gibb said the DfE estimates that the cost of increased employer contributions for 2020/21 would be £142 million for FE providers, £191 million for independent schools and £142 million for higher education institutions.

“Funding arrangements for the increased costs will be considered as part of the next spending review,” he added.

The outcome of a valuation of teachers’ pensions was released in August, which the Treasury undertakes every four years, and suggested public sector workers would get improved benefits from 2019.

 

What to do if your college is running into financial problems

Skills minister Anne Milton explains what the government is doing to support colleges in financial difficulty
 
A college is a multi-million pound business and leading a college is a big and important challenge. I’ve been vocal about my belief that further education can change lives, giving people new skills and opening doors to exciting jobs, education and training. 
 
That’s why it is essential that the FE sector is well run and resilient. There are many exceptional governors, clerks and teachers working in FE. Their passion for what they do is clear to me. I want to thank these leaders and teachers for all of their hard work. However I know that some colleges do face challenges and it is vital that their boards are able to take decisive action and provide effective leadership to help improve matters.
 
This column gives me the chance to highlight some of the things all college leaders and boards should be looking out for in the weeks and months ahead.
 
This week we launched the second round of the Strategic College Improvement Fund, a £15m fund which will help those colleges struggling to improve. I’m very pleased that colleges will have the opportunity to apply for this funding. By partnering with top colleges across the country, more people will be able to access high-quality education and training. Those already successful in the first round will be announced shortly. This is great news and will build on the work already underway through the new National Leaders of Governance programme.
 
We also announced a new £8 million professional development programme this week, to help teachers and leaders prepare for the roll-out of new T-levels. Bespoke training will focus on preparing them for this significant change. It will also be an opportunity for teachers to update their subject and industry knowledge so it is relevant to the needs of business.
 
I’d encourage you to tell us early and we can talk about what kind of support might be available
In January, there will be a new insolvency regime in place for FE and sixth-form colleges. This will make sure there is an orderly process in place for managing a college if it hits financial difficulties and becomes insolvent. At the heart of this is our desire to protect learners if something goes wrong.
 
Of course I don’t expect large numbers of colleges to become insolvent. And while I know many of you run your colleges very well, I also know that there are colleges who have run into difficulties and have needed support from government. So if you think you’re heading into financial difficulties, I’d encourage you to tell us early and we can talk about what kind of support might be available.
 
Sometimes even the best of us could use a bit of help and clarity, and this can make a big difference. I’m pleased to say we will be launching practical guidance to help and support governors in their role and to fulfil their responsibilities. It will provide them with helpful examples of good practice to help run their business. The work of the FE commissioner and his team will also continue to help with early diagnostic assessments.
 
One area which needs some good and consistent practice is in the area of executive pay. Colleges are complex businesses but the pay of those at senior management levels should be justifiable. I would urge members of boards to think about how levels of pay will be viewed in your organisation. Does it ultimately represent good value for money for your students?
 
Being a college governor is an important and complex role. I know specific support and training to help carry out your role is crucial and we are about to make a serious investment in leadership and governance training. I believe this will be a very useful resource, whether you are beginning in a governor role or want to develop – good governors are one of the key drivers of good colleges. I will  soon be announcing the details of these prestigious programmes for college chairs, governors and governance professionals.
 
I hope all of these changes demonstrate that we appreciate the significant role colleges play in our education system, as well as the specific challenges they face. Please get involved and use the resources available because we all have an interest in building a strong and successful FE college sector together.

Quality of apprenticeship policy suffers from ‘insufficient progress’

Two years ago FE Week exposed thousands of apprentices on standards without any approved end-point-assessment organisations.

At the time, a former director of the DfE described the situation as “diabolical”.

The chief executive of the ESFA, responsible for recruiting the end-point assessment organisations, was given a ticking off by the education select committee and then sped up processes.

Today, we expose thousands of apprentices on ‘non-degree’ level six and seven standards with no regulator taking responsibility for quality assuring the training.

A former DfE special adviser describes this as falling through the cracks of regulation, which “could be unfair to the students.” and AELP’s Mark Dawe says it’s “appalling”.

Ofsted is not to blame, they have been told to only inspect up to level five.

Nor is the Office for Students, they claim, despite the DfE’s Quality Accountability Statement saying they are responsible for regulating the quality of level six and seven standards.

So no organisation is responsible it seems, and the DfE has no answers, literally.

The Ofsted and OfS approach to their regulatory responsibly could not be starker.

Ofsted is ramping up monitoring visits, for all level two to level five provision at all new providers.

OfS on the other hand, has said they have not sent in the QAA to look at any level six or seven courses.

So the solution seems obvious to me.

The DfE should give the responsibility to one organisation, the only one that actually conducts inspections: Ofsted.

And the ESFA is not completely off the hook, as clarity is needed when it comes to their intervention policy.

As our reporting of the BPP University ‘insufficient progress’ monitoring visit shows, it remains unclear if the ESFA will stop the new level six and seven starts that were out of Ofsted’s scope.

Plus, there is nothing to stop BPP from continuing new starts at one of their three other companies on the register of apprenticeship providers.

Now consider a university with a hand-full of level five apprentices given an Ofsted grade four.

Would the ESFA really boot them off the apprenticeship register if hundreds of their degree apprenticeships had not been part of the inspection?

The complexity and uncertainty begs the question as to whether the Institute for Apprenticeships should step in and bang some heads together.

What is clear is that some leadership is needed to sort the policies out.

What is less clear is where this leadership will come from.

ESFA WON’T ban new apprenticeship providers with poor AEB provision found in monitoring visits

The government will not ban new apprenticeship providers from recruiting adult learners if they’re making ‘insufficient progress’ in that theme alone in Ofsted monitoring visits, after FE Week highlighted the grey area last month.

Updated policy guidance was published this afternoon by the Education and Skills Funding Agency which has finally brought some clarification to the issue that has confused providers for months.

In August the agency confirmed that any poor-performing apprenticeship provider with an ‘insufficient’ rating in at least one of the three themes under review in Ofsted’s early monitoring visits will be barred from taking on any new apprentices – either directly or through a subcontracting arrangement.

A fourth category then appeared in some reports – for adult education. But when asked by FE Week if it would ban a provider from taking on new adult learners if they were making ‘insufficient progress’ just for this theme, the ESFA couldn’t provide a clear answer.

Mark Dawe, boss of the AELP, criticised the government’s lack of clarity at the time.

Today’s updated guidance states: “In those new direct funded apprenticeship providers where adult provision is assessed as making insufficient progress we will set additional conditions of funding requiring improvement action particular to that case.

“The approach is different to the approach taken on apprenticeship provision because the nature of adult provision is classroom delivery of a relatively short duration.

“Placing a stop on new starts would effectively wind down the provision before a full inspection could take place. Where we have continuing concerns over quality, we will restrict access to growth through the performance management process.”

Providers deemed to be poor in their apprenticeship provision will continue to be barred unless there is an “exceptional extenuating circumstance”. The ban will remain in place until the provider has received a full inspection and been awarded at least a grade three for its apprenticeship provision.

There have been four early monitoring visit reports published by Ofsted so far that have judged adult education – but all have received ‘reasonable progress’ ratings.

As revealed by FE Week in September, the government has coughed up the full £5.4 million Ofsted requested to visit all new apprenticeship providers as it cracks down on poor provision continues.

Potentially as many as 1,200 providers could now be in scope for a two-day monitoring visit.

FE Week understands that around 30 of those have newly funded adult education funding, which will be in scope for inspection.

DfE plans National Colleges evaluation to avoid repeating mistakes with Institutes of Technology

The government is going to evaluate its troubled National Colleges policy to identify what has gone wrong with the scheme and help avoid the same mistakes in the rollout of Institutes of Technology.

A tender from the Department for Education went live on Monday asking for a research company to take on the in-depth evaluation project.

The government has so far awarded around £80 million to establish four employer-led National Colleges across England – but as revealed by FE Week last month, they’re plagued with inadequate financial health and low student numbers.

Identify lessons that can be learnt about how delivery could have been refined or improved

“National Colleges have now reached a pivotal milestone in their delivery timeline,” the DfE’s tender document states.

“Each of the four colleges have officially opened. There are currently around 1,064 students enrolled at the colleges, and this is projected to grow to ~21,000 by 2020/21.

“Expressions of interest are sought to conduct a process evaluation to explore the process of policy implementation and delivery of National College policy to date, and identify factors that have helped or hindered its effectiveness.”

It continues: “As such, the process evaluation should identify any lessons for National Colleges and for potential wider application in the roll out of similar, specialist and employer-led Institutes of Technology (IoTs) from Spring 2019.”

National Colleges were envisioned to deliver classroom-based and apprenticeship training at levels 4 to 6 with learners aged 19 and above.

The DfE believes they are “pivotal to expanding classroom-based higher technical education to meet the shortfall of higher technical skills in key sectors”.

But many have come up against severe recruitment issues, highlighted most significantly at the National College for High Speed Rail which had just 93 students enrolled in its first year, despite receiving more than £55 million in capital funding.

The other National Colleges – creative and cultural, digital skills, and nuclear – have hit similar problems.

A fifth, the National College for Onshore Oil and Gas, was supposed to open in 2017/18, but has yet to get off the ground.

The DfE tender document says the department is in “regular contact” with the boards of the National Colleges who provide “regular updates on general progress and college finances”.

However, this “does not provide an objective and coherent picture of the underlying factors, barriers and enablers that have been driving activities and processes across the programme as a whole”.

It is for this reason the DfE wants to develop its “comprehensive evaluation strategy” for the troubled programme.

READ MORE: Have hopes for the new national colleges been derailed?

The research will “identify lessons that can be learnt about how delivery could have been refined or improved” to assist with the introduction of IoTs.

First proposed back in 2015, IoTs are intended to bring FE and HE providers together with employers to deliver technical skills training, with a particular focus on levels four and five.

According to application guidance from the DfE, they will offer “higher-level technical skills on a par with more academic routes” and will “achieve the same level of prestige as universities”.

Between 10 and 15 of the institutes are expected to be created.

Sixteen providers have made it through to the final stage of the government’s competition to open an IoT – but two of them, NCG and North Warwickshire and South Leicestershire College, are likely to be kicked off. NCG is rated grade three by Ofsted and NWSL is in FE Commissioner intervention.

The successful proposals are expected to be announced in March 2019, with the first one due to open in September 2019.

The DfE’s evaluation report into National Colleges will, however, not be published until June 2019.

Concerns have already been raised about the introduction of IoTs.

Speaking at a House of Lords inquiry in early March, the FE Commissioner Richard Atkins said that the institutes are a “very good idea” but their “modest” £170 million funding pot means he’s “not sure it will transform the system”.

The closing date for the DfE’s National Colleges tender is November 20.

College defends appointment of principal who jumped ship before financial failings exposed

A principal who jumped ship before the financial failings of his former college were uncovered has the backing of the board at the college he moved onto.

The confirmation came in a reply, seen by FE Week, to University and College Union officials at City College Plymouth in response to their letter demanding answers about the appointment of Garry Phillips as principal.

Mr Phillips’ leadership of Ealing, Hammersmith and West London College, where he was principal until taking up his current role in July, was slammed by the FE commissioner in a damning report published last week.

“I can say that the corporation is confident in the recruitment process it followed to appoint its CEO and it continues to have confidence in his ability to lead the college’s executive function,” the letter, from college chair Pauline Odulinksi, said.

FE Week’s own enquiries to the college, asking whether it is backing its beleaguered principal, have remained unanswered since Friday.

As previously reported by FE Week, the UCU’s letter raised a number of concerns about Mr Phillips’ recruitment – including whether the process was “safe and robust” and whether governors had the “full facts regarding his previous position”.

“City College Plymouth is also in a precarious financial position and UCU are under the impression that Garry was recruited by governors on the basis that he had the experience to reverse this and build both income and quality,” it said.

Philippa Davey, the UCU regional official, said she was “absolutely stunned” by the response.

She told FE Week that the letter didn’t fully answer the union’s questions, which included the opportunity to meet with the chair to discuss their concerns.

“We are not satisfied that the recruitment procedure was robust enough,” she said.

“The governors have said yes it was, but they haven’t answered any of our questions or agreed to meet without Garry being there.”

She said the union would be “polling members to ask if they have any confidence in Garry Phillips and the governors to continue to lead the college”, with voting closing at 11am on Friday

The FE commissioner’s report into EHWLC, published on Friday, revealed a total failure of leadership and governance at the college.

The college is now in such a precarious financial state that it is dependent on government bailouts for its survival.

“The relationship between clerk, chair and principal / CEO, those holding power, was over supportive and referred to it as being ‘cosy’, with little challenge and feeling a difficulty in asking questions,” the report said.

As a consequence of these failing, the college had an “immediate need for external cash flow support” and would be “unable to meet its commitments from early October without support”.

According to the college’s published accounts, it went from a £5.7 million surplus in 2015/16, to an £8 million deficit in 2016/17.

“It is recommended that, given prevailing financial concerns and historic financial performance over a number of years, further consideration be given to conducting an external review to test whether there is a sustainable financial position for the college going forward,” the report said.

 

Broker offered 3aaa staff £200 for apprentice referrals – but admits it was a ‘bad idea’

A broker has admitted it was a “bad idea” to offer cash to former staff of Aspire Achieve Advance in exchange for referrals of apprentices affected by the collapse.

The now-defunct apprenticeship giant, better known as 3aaa, ceased trading on October 11 when the government pulled its skills contracts following a second investigation into success-rate inflation – the findings of which have now been passed to the police.

Shortly after the demise, a recruitment firm called 360 Apprenticeships, based in Manchester, contacted a handful of staff who lost their jobs to offer a payment of up to £200 per apprentice referral.

It was not our proudest hour as a business start-up

“If you know of any learners that need assistance moving to a grade one training provider – please let me know,” one message, seen by FE Week said.

“Let me know if you feel this quick fix would be beneficial?”

However, 360 Apprenticeships, which incorporated in March 2016 and currently has four employees, claimed to quickly realised this was inappropriate.

“That shouldn’t have gone out,” said Aaron Rochford, the firm’s owner.

“It was done in haste really a couple of days after it all came out. We brainstormed it, contacted three people, but then we got our head bitten off by one ex-3aaa guy and realised this was not a bright idea.”

He added that his company didn’t “gain anything” from the offers and admitted it was a “bad idea” and “not our proudest hour as a business start-up”.

360 Apprenticeships is an apprenticeship recruitment firm working with various training providers, but is not regulated by the Education and Skills Funding Agency.

Mr Rochford said the company has “over 10 years of recruitment experience between the team” and with “30 plus five star reviews, the small amount of people who have used the service only have fantastic praise”.

The broker’s website claims it is “not for profit” even though it charges providers for employer and apprentice referrals. When FE Week raised this with Mr Rochford he claimed this was a “mistake” and said the website would be fixed to reflect it is a for profit organisation.

This is the latest example of unscrupulous poaching of 3aaa staff and apprentices that has been found by FE Week.

Last week this newspaper revealed that multiple training providers have been “misrepresenting their position” to people affected by the collapse.

Tactics include alleged false claims that the ESFA and 3aaa have asked the providers to take on hundreds of people affected.

Questions have been raised about how these providers were able to obtain private email addresses of staff, apprentices and employers – leading to concerns that general data protection regulation laws have been breached.

The ESFA’s director of apprenticeships, Keith Smith, is aware of the poaching and warned providers that they could have their own funding pulled because of it.

“There’s no place for people to come in and misrepresent to people who are feeling very vulnerable at this stage, employers and apprentices,” he said.

The 3aaa scandal put around 500 people out of work and left up to 4,500 apprentices without a training provider.

There is said to be £17 million of on-programme payments due for apprentices affected – a huge prize for anyone that can win transfers.