Who guards the coffers?

July 5, 1996

Last Friday was the deadline for English universities to file financial forecasts with the funding council. Not all met the deadline. With a cash crisis looming, THES reporters look at the sums and who carries the can when they do not add up

Vice chancellors are the accounting officers for public funds, but financial responsibility for universities rests with governing bodies.

The accounting officer system was devised after University College, Cardiff ran into financial trouble in the 1980s.

Michael Shattock, registrar of Warwick University and the man chiefly responsible for disentangling Cardiff's problems, said: "It was not clear who was accountable, and a whole range of audit, reporting and other responsibilities were developed as a consequence."

The vice chancellors' obligations under the 1992 Further and Higher Education Acts include informing the funding council if they believe the governing body is acting improperly.

But governors' liabilities in the case of an institution becoming insolvent are a classic legal grey area. Dennis Farrington, registrar of Stirling University and author of The Law of Higher Education, said: "In principle there is no personal liability, but the issue has not finally been resolved. There is no clear statute or case law on this -and institutions are understandably not keen to start providing it."

John Hall, higher education specialist at law firm Evershed's, points to the difficulty of having different types of institution - with old universities operating under Royal Charter, most new ones as higher education corporations and some, such as the London School of Economics and the former Inner London Education Authority polytechnics, as limited companies.

"The ultra vires rules are more relaxed in the case of companies, and directors are given the express right to apply for relief from the court if they have acted honestly and reasonably. There is no similar statutory right given to board members of higher education corporations, " said Mr Hall.

Institutions like Warwick play safe by providing indemnity insurance for governors.

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