Governors take the punches

June 11, 1999

Public spending watchdogs worried about imbalance between university autonomy and accountability are under pressure to give the Higher Education Funding Council more powers to intervene, writes Phil Baty.

Higher education cases examined by the National Audit Office and the Commons' Public Accounts Committee at Glasgow Caledonian University, Ports-mouth University and Southampton Institute share the same characteristics:

* Former managers who have been accused of abusing their positions or made serious errors

* Former governors who have allegedly failed to exercise their responsibility to ensure proper management of public money

* A Higher Education Funding Council that has been largely powerless to intervene.

Institutions receive Pounds 5.64 billion of public money each year and get millions more direct from students' pockets. HEFCE is required to "ensure the proper use" of the Pounds 3.5 billion of funds that it distributes to institutions each year and to "promote value for money".

But because of institutional autonomy, its role is limited to monitoring financial health and providing support and guidance.

HEFCE's audit service - seven auditors and two support staff with an annual budget of Pounds 500,000 - visits each institution for a week once every three years. But these are more reviews. If problems are uncovered, HEFCE is limited to an advisory role.

The funding council's teeth come only with the threat of withholding funds - an option available only if there is a blatant persistent refusal to meet the conditions of grant set out in the financial memoranda. Using such a sanction is unpopular because of its impact on students.

But HEFCE claims it does not want, or need, further powers. But it would appear that while the DFEE is happy to respect institutional autonomy, the Treasury and Parliament would like to see more accountability for public money. At present, the governing body of the institution, voluntary and unpaid, has final responsibility. But while every NAO higher education investigation, and the follow-up hearings by the PAC, have recommended improving governance, problems remain.

Back in 1995, the PAC said in a report on senior managers' severance payments that it was concerned that funding councils "have no powers to enforce compliance" with good practice.

It recommended that the funding councils "make it a condition of grant" that institutions comply with best practice, establish remuneration committees including governors, and refrain from using confidentiality clauses in severance agreements. But ministers' responses, echoed since, were that they agreed with the principles. None of these points has been made a condition of grant.

A HEFCE spokesman said: "There is a danger that you can make rule after rule in the conditions of grant, and it can get unwieldy. " Six months ago, the NAO published its report into a breakdown of accountability at Southampton Institute. Former managers wasted money and governors failed to exercise proper oversight of spending and strategy, it found.

At a PAC hearing on the report, MPs pressed HEFCE chief executive Brian Fender to explain why it had taken years for funding council auditors to unearth problems. Many of the problems, he said, fell outside HEFCE's remit. DFEE permanent secretary Michael Bichard said the key to improving accountability was to recruit better governors.

It all appeared to seem too familiar to PAC chairman David Davies. The PAC is due to publish its report on Southampton Institute after the recess. Sources suggest it will pull few punches.

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