Government commits to build stronger relationships with colleges to upskill the country

Six recommendations for improvement: Dame Mary Ney’s review of financial oversight arrangements for further education and sixth form colleges 

Proposals to strengthen relationships with colleges and promote better planning to make sure communities get the skills they need have been published today (15 July) by the Department for Education.

The bold new strategic vision for the college sector follows Dame Mary Ney’s Independent Review, which was initiated after Hadlow and West Kent & Ashford Colleges were placed in education administration in 2019.

Dame Mary Ney DBE was appointed in August 2019 to review the way government exercises its oversight of college finances and financial management, which was completed in October and is being published today. This included examining the work of the Education and Skills Funding Agency (ESFA) and the Further Education Commissioner’s team.

The Government response sets out a number of actions following the report’s recommendations, including:

• Strengthened alignment between the Further Education Commissioner and ESFA
• A regular strategic dialogue led by the ESFA and Further Education Commissioner’s team with all college boards around priorities, starting from September
• New whistle-blowing requirements for colleges, including publication of policies on college websites
• A review of governance guidance to strengthen transparency
• A new College Collaboration Fund round

Further changes will be announced as part of the FE White Paper after the summer.

The publication of the review, and the Government’s response, follows the Education Secretary’s FE speech where he pledged to publish a White Paper that will set out our plans to build a world-class, German-style further education system in Britain, which will strive toward high quality qualifications based on employer-led standards.

It also follows the significant investment announced by the Chancellor to support young people’s employment prospects – which includes a new ‘kickstart’ scheme to create work placements for young people on Universal Credit, £111 million investment to triple the number of traineeships available across England, supporting employers to create more apprenticeships opportunities, new investment to support an additional quarter of a million people with careers advice, and more.

These reforms build on work already underway to transform technical and vocational education in this country, including the introduction of new T Levels from September, working with employers to create more high quality apprenticeship opportunities and establishing a network of Institutes of Technology, backed by up to £290 million.

This is alongside the new measures announced this week to mark the next step in establishing a system of Higher Technical Education where students and employers can have confidence in high-quality courses that provide the skills they need to succeed.

The report contains a series of recommendations to strengthen current arrangements, including changes:

• to the government’s relationship with colleges
• improving financial stewardship, governance, and intervention

Dame Mary Ney, author of the review said:

“I was pleased to undertake the review. FE colleges play a vital role in building local economic prosperity and in ensuring students develop to their full potential.

“The overarching finding from my review was a need to shift to promoting the strategic role of the sector and to nurturing and supporting all colleges on an individual basis thus reducing the risk of financial problems recurring.

“I am encouraged that the recommendations from the review are now being taken forward by the department, as part of the development of an ambitious strategy for sector. I wish all in the sector well in their endeavours.”

In her forward Dame Mary Ney DBE, said:

“Colleges have a vital role to play in providing high quality education and training opportunities for those over 16 years. They serve some of the most vulnerable groups in society including those with special educational needs and those who have previously struggled in the school system, as well as ensuring the workforce has the skills needed for the local economy to prosper. There has been concern at the degree of financial instability within the sector. This review makes a number of recommendations with a view to improving the support individual colleges and the sector receive, and enhancing oversight and intervention arrangements.

“The Education and Skills Funding Agency (ESFA) and the Department for Education (DfE) have developed a range of tools for dealing with financial failure. However, this review finds that these are unlikely to achieve a step-change in the number of colleges with serious financial issues without a more proactive and preventative approach. This requires the sector to be valued and individual institutions to be nurtured. There should be a new relationship with individual colleges which this review proposes.

“In undertaking this review I am grateful for the assistance and co-operation of staff in DfE, ESFA and the Further Education Commissioner’s office. I am especially grateful to all those from the college sector and wider who gave their time willingly to contribute their expertise and perspective on the issues.

“Finally, I received excellent support from Catherine Hayes from the Higher and Further Education Directorate, DfE who acted as secretary to the review and so willingly shared her knowledge and expertise with me, assisted in examining the information collected and provided a sounding board in developing recommendations.”

Gillian Keegan, Apprenticeships and Skills Minister said:

“Now more than ever, it’s vital that colleges ensure students gain the skills they need to progress and meet the needs of businesses and their local communities.

“I welcome this independent review by Dame Mary Ney and her call for a clear vision for the sector. We have started to put in place changes that address many of the recommendations in the report, including strengthening oversight of the financial health of the sector and increasing the alignment between the Education and Skills Funding Agency and the FE Commissioner.

“I’ve seen first-hand the exceptional work done by colleges across the country, and know what a key role they will play to support our economic recovery. I look forward to working with them and the wider sector to achieve a new vision for FE.”

Julian Gravatt, AoC’s Deputy Chief Executive, said: 

“It’s helpful that DfE have finally published Dame Mary Ney’s review on the financial oversight of colleges. She concluded her work in autumn 2019 at a time when many colleges were on an improving trajectory but she describes a system which is complex, backward-looking and not really focused on the key tasks. The Covid-19 crisis has stopped the financial improvement in its tracks, caused deficits in 2019-20 and opened up large financial problems for colleges in 2020-1.

“Government and colleges should take her recommendations seriously and work out which of them still make sense nine months on. We do not agree with the suggestion that Ofsted should join the long line of regulators assessing college financial health but we do think that the existing arrangements require improvement and will be working with DfE and colleges over the summer to make the best possible opportunity of the white paper”

Professor Ewart Keep, Commissioner, Independent Commission on the College of the Future, and Co-Director of SKOPE and Emeritus Professor in the Department of Education, University of Oxford said:

“This report makes a number of important recommendations, which we will give full consideration to within our work at the Independent Commission on the College of the Future.

“The call for simpler, longer-term funding settlements is particularly important, and must be a key element of any English college system reforms. Alongside insufficient levels of funding, the current system is without question unhelpfully complicated, and in our view drives a focus on institutional survival rather than longer-term systems-wide outcomes.

“The funding approach also drives extremely unhealthy competition between colleges locally at present – and Dame Ney is right to suggest that alongside simpler, longer-term funding settlements we must empower colleges to coordinate strategically within relevant local geographies. This must include closer, more collaborative relationships right across the education and skills system.  

“And lastly, Dame Ney notes that we need a clear and confident strategic role for colleges within the wider education and skills ecosystem. This must capture the role colleges play for people, employers and communities. We are pleased to be launching the Commission’s vision for the future of colleges shortly.”  

Toby Perkins MP, Labour’s Shadow Education Minister, commenting on Dame Ney’s report into financial overight of colleges, said:

Recommendation 1: Strategic role of FE

There needs to be a shift in emphasis to promoting the strategic role of the sector and, crucially, to nurturing all institutions on an individual basis. There should be a shift away from a focus solely on silo programmes and towards a wider concept of support for institutions thus preventing problems arising.

For the sector to succeed, institutions to thrive, and learners to achieve excellent outcomes it is recommended that attention needs to shift to the ingredients outlined above. The recommendations which follow below emanate from this premise.

Recommendation 2: National Strategic Vision and Locality Planning

It is recommended that government sets out a strategic vision for the further education college sector and creates effective mechanisms, and potentially a duty, for “capacity and curriculum” planning at a local geographical level and delivery that includes all post 16 provision.

Recommendation 3: Governance

It is recommended that there is greater clarity and higher expectations of good governance practice for those responsible for the stewardship of public funds and that government achieves this through a combination of:

• Improving the line of sight via a new relationship with colleges which would enable monitoring of governance arrangements.
• Reviewing the governance guide and raising the expectations of standards of governance required particularly in relation to transparency and whistleblowing.
• Ensuring all college websites provide information on whistleblowing outside of the organisation to the ESFA.
• Setting requirements for the governance professional to have sufficient status and credibility to provide independent challenge of standards of governance and conduct.
• Committing to supporting training and development opportunities and learning networks for chairs, board members, audit committee members, senior leaders and governance professionals.

Recommendation 4: Financial Stewardship

The review endorses the ESFA proposals to shift to use of forward financial planning and cash flow data and away from historic analysis.

There should be further consideration and consultation with colleges on ways to make this more effective including, whether:

• Data that is produced routinely should be submitted to the ESFA more frequently;
• Monthly management accounts should be shared with the ESFA; and
• New analysis can be incorporated into the financial dashboard and health score.

It is recommended that the feedback dashboard to colleges on the ESFA analysis is more timely and provides a more tailored narrative for each college individually to assist governing bodies in focusing on areas of concern and in providing challenge.

As part of developing a preventative approach, it is recommended that the ESFA and FEC should adopt a more flexible approach to moving colleges to an intervention categorisation and to the exit criteria. This should take account of local context and levels of confidence in plans and mitigating actions colleges already have in place.

The review recommends that the potential for 3 year funding settlements are explored and the approach to funding is simplified and streamlined. This should include incentivising “capacity and curriculum planning” at a local geographical level.

As the government develops new and existing programmes, more scrutiny should be provided on how and when colleges are paid so that funding rules can be simplified and aligned which will then support better financial stability and cash flow forecasting.

It is recommended that the guidance on the role of audit committees is strengthened to ensure they play a robust role in good stewardship and risk management and articulating risk appetite.

At the next review of the post-16 audit code of practice it is recommended that consideration be given to the effectiveness of the framework for the regulatory opinion. It is recommended there is a requirement for the External Auditor to present their findings to the Chair and Board members either at a Board meeting or by invitation to join the Audit Committee meeting receiving the Auditor’s report.

Recommendation 5: Oversight and Intervention

It is recommended that DfE, the FE Commissioner and the ESFA review the Oversight Guidance to allow greater flexibility to match actions to individual circumstances, to avoid linear progression through the various types of investigations and reviews and to shorten time periods in intervention.

The ESFA should develop the case manager role for colleges in intervention to provide more proactive support and practical advice to college leaders in formulation and delivery of recovery plans, signposting good practice, facilitating coaching and mentoring.

This will require a review of the skills and experience needed by staff in this case management team to ensure it has the capacity and credibility to fulfil this role, and to interact effectively at board and senior executive level. The review recommends that those involved in financial oversight contribute to the Ofsted judgement on leadership to provide an holistic view and avoid disconnect between the judgements of the two bodies.

Without a change in the law, the use of the Secretary of State’s powers to appoint to a college board should be proactively considered at an early stage to support the delivery of an improvement programme.

Recommendation 6: Support and Prevention

It is recommended that the ESFA and FE Commissioner develop a new relationship with colleges.

This new relationship would provide a structural realignment between those fulfilling the liaison arrangements, prevention and support, and those providing intervention so that colleges have confidence to come forward for help at an early stage. This would:

• Enable a stronger relationship and line of sight with all colleges. This could incorporate annual conversations, looking holistically at the college as a critical friend but also allowing the college to showcase their achievements and raise their concerns
• Give the ESFA the ability to deploy a range of advice, practical support and preventative measures and to promote good practice. The National Leaders of Further Education and Governance should be made more widely available to colleges not in intervention and colleges should feel able to approach them without fear of opening the door to an intervention regime
• Require ESFA staff to become active participants in nurturing college development. Teams would need appropriate skills and experience to provide support tailored to the circumstances of each college.

To support the new relationship, the Department should continue to invest in providing training, development and networking opportunities to promote good practice in the sector. The Department should consider a further round of the Strategic College Improvement Fund.