An Examination of Governance in Higher Education Institutions in England.

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Corporate Governance: Theories and Issues

04 May, 2007                

An Examination of Governance in Higher Education Institutions in England

MSc in Corporate Governance

Word count 2542

(not including references or appendices)

Contents

                                                                        Page

Abstract                                                                3

Introduction                                                                4

University regulation                                                5

The need for ‘good’ governance                                        6

Who governs the governors?                                        7

The role of the audit committee                                        10

Discussion                                                                12

Conclusion                                                                 14

References                                                                15

Appendix 1        Definitions of governance

Appendix 2        Typical responsibilities of the ‘Council’

Appendix 3        Typical responsibilities of the ‘Board of governors’

Appendix 4        Guidance policies and procedures, HEFCE and associated organisations

Appendix 5        Stakeholder diagram, Better Regulation Task Force 2002

Appendix 6        South Bank University decision-making structure

Appendix 7        South Bank University Audit Committee terms of reference

Appendix 8        HEFCE Model Terms of Reference from Audit Code of Practice

Appendix 9        ICSA Terms of reference – Audit Committees

Appendix 10        Definitions of governance Chambers & Committee for Standards on Public Life


Abstract

A recent report by the Council of University Chairmen stated that governing bodies of Higher Education Institutions (HEIs) “should review both their own effectiveness and the Institutions performance at regular intervals” (CUC, 2000a).  A discussion of cases of poor governance in HEIs questions their ability to do this.

This report firstly examines the accountability and statutory reporting requirements of governing bodies within HEIs in England.  A comparison is then made of the governance structures of different types of universities to identify current practice.  The report subsequently identifies internal and external university ‘governors’ and assesses the role of university regulators including the internal and external auditors.  Finally there is a discussion of the findings and conclusions are reached.


Introduction

As with private sector entities, public sector bodies such as HEIs are overseen by a ‘governing body’ which is ‘responsible for the conduct of its institution including … use of public funds’ (HEFCW, 1997). The governance structures within HEIs are determined by the legal origins of the organisation.  HEIs fall into two categories: Pre-1992 and post 1992 universities.  

  • Pre-1992 universities: (or ‘Red-brick’ / ‘Russell Group’ universities) established by a royal charter granted through the Privy Council.  Some by a specific Act of Parliament.
  • Post-1992 universities: formed through Further and Higher Education Act (1992).  These ex-polys were given the option of university status.  

As a result of the 1992 act the funding structure has been streamlined following the establishment of Higher Education Funding Council for England (HEFCE), however, contrasts still continue to exist between governing bodies.  Most Red-brick and Russell Group universities have a Vice-Chancellor who is both chief academic and administrative officer.  They also have a ‘Council’, which operates under statute and is the chief decision-making body of the institution.  The Council has overall responsibility for the control and direction of the institution (appendix 2 illustrates the typical responsibilities of the Council). The structure for governance is laid down in the ‘instruments of its incorporation’ (CUC, 2000a).

The articles of government of ex-polytechnics make provision for the appointment of a Head of Institution, Chairman of the Board of Governors and a clerk to the Board of Governors. Appendix 3 illustrates the typical responsibilities the Board of Governors (similar to the Council).  Within these universities legislation prescribes the membership of the Board of Governors.

University regulation

Following the 1992 Act, the Higher Education Funding Councils (HEFC) were established, with responsibility for the funding of HEIs, which are ‘legally independent corporate institutions’.

The momentum for university regulation comes from funders such as HEFCE.  In 1998-99, 64% of funding within HEI in England was allocated by government sources including 40% from HEFCE (HESA, 1999), which is regulated by The Department of Education and Skills (DfES) (see table 1).

Table 1.  Regulation of HEI’s in England

HEFCE provides a regulatory framework for good governance through specific policies and procedures (appendix 4) and state that …“(the institutions) councils or boards of governors are responsible for the effective management and future development of their affairs. They are ultimately responsible for all affairs of the institution“ (HEFCE, 2002).  Thus HEFCE rely on the institution’s audit committee, internal and external auditors to monitor the university. The implementation and monitoring of effective governance is the responsibility of the actual institutions not the funders.  

All universities have charitable status but are exempt or excepted charities under the Charities Act 1993.  Whilst exempt or excepted charities are not subject to the jurisdiction of the Charity Commissioners, they do have to keep proper books of accounts. They must also comply with the provisions of their governing document regarding accounts or auditing (Charity Commission, 2000).

Other stakeholders such as students, employees, and the general public have influence over the regulation of the university.  They have an interest in the well-being of the organisation and may therefore influence the regulators and the institutions through groups such as the Student Union and employee representation on governance committees.

Appendix 5 shows the links between HEIs and stakeholders who have influence over the regulation of the institution.

The Need for ‘Good’ Governance

Difficulties experienced by Thames Valley University (TVU) in 1997 emphasised the need for good governance.  The University, an ex-polytechnic, was formed in 1992.  An academic quality audit by the Higher Education Quality Council (HEQC, 1994) reported that the organisation struggled to effectively carry out core functions of teaching and assessment.  As a result of this report the vice-chancellor subsequently initiated a series of restructuring exercises including, a review of academic administration in 1995 and the ‘New Learning Environment’ in 1996.  However, the infrastructure was unable to cope with the additional burden of restructuring.  The QAA (1998) reported, “major problems were experienced in the registration, timetabling, validation, student support and assessment systems between 1996 and 1998” and the views of the workforce and the external examiner were seriously disaffected “as a result of poor management and weak communications”.

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This culminated in the complete breakdown of the assessment system in September 1997.  Adverse press ensued and TVU struggled to survive.  If more effective governance structures had been in place, including improved control and direction from senior management, then these long-term effects may have been prevented.

To establish effective governance throughout the organisation there must be strong leadership to avoid difficulties experienced by institutions such as TVU.  Often the head of the institutions “have only limited management experience… and formal training” (Davis, 2002) and lose the academic insight that they once held before becoming an ‘administrator’.  This is ...

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