We move on to item 3, under which we will take evidence on "The 2004/05 Audit of Inverness College". I welcome Philip Rycroft, the accountable officer at the Scottish Executive Enterprise, Transport and Lifelong Learning Department, who joins us today with his team. I thank them for their evidence, which has been circulated to committee members. I will leave it to Philip Rycroft to introduce his team and make a short introductory statement, after which we will move to questions from the committee.
Thank you for your welcome. I will introduce my colleagues. They are Aileen McKechnie, who is the head of the further and adult education division; George Reid, who leads the further education strategy team; and Colin Baird, who leads the review of Scotland's colleges.
Very good. Thank you very much, Mr Rycroft. What sanctions are available to the department when colleges perform poorly, and in what circumstances would those sanctions be used?
That is a fair question. Ministers have the power to remove college boards, but that is very much a sanction of last resort and it has never been used. Ministers also had a power of direction of colleges but, to allow the colleges to retain their charitable status, they recently gave that up. That, too, was a power that ministers had never exercised.
That time is given free of charge, of course.
Yes, indeed.
You say that the use of sanctions would be an absolute last resort for ministers. What information is available to ministers and to your department that might result in such a decision being made?
To some extent, that question takes us into the realm of the hypothetical.
The power has never been used.
It has never been used. At what point would we recommend the use of that power? We are certainly not at that point with Inverness College or any of the other colleges, and it would be difficult to speculate about the circumstances that would take us there. All that I will say is that they would have to be pretty extreme. In using that power, ministers would effectively remove the body of people who are there to implement the solutions that the Executive wants. By removing the board, they would be taking away the instrument that they have at hand to ensure the good and proper running of the college.
The Enterprise, Transport and Lifelong Learning Department and the funding council obviously do not believe that having two section 22 reports issued by the Auditor General is significant enough to merit further sanctions being taken. Is that correct?
It depends on what one is trying to achieve.
We are trying to achieve financial balance.
Sure, and to get the college back on track. Having brought in the FEDD team and provided the support that has followed that, the funding council is working with the college board to help it to take the actions that it is required to take to get the college back on to secure financial ground. I am not sure whether sanctions might be required in that context or whether sanctions as a punitive measure would help the situation.
When we took evidence from members of the board of Inverness College, it was clear that the chairman was unaware of the facility that could be provided to him and other board members by the FEDD team. Does it give you cause for concern that individuals who are charged with the governance of colleges are unaware of the assistance that could be made available to them?
It would be a cause of concern if the chairman was not aware of the support that was available to him. The funding council is addressing the provision of training for members of college boards in the support that they can get as a matter of course, so that they will understand the system in which they operate. Indeed, the leadership programme for college principals is worth mentioning in that context. All that should help to ensure that college boards are better aware of what support is available, of their relationship with the funding council, and so on.
I understand that the funding council cannot impose the FEDD team on a college and that the team can become involved only by agreement. Given that the Scottish Executive is delivering significant funds, are you concerned that colleges could keep the team at arm's length?
In general, no. As I said in my opening remarks, of the 43 colleges in the sector, the vast majority are in good financial circumstances and are well-run institutions. The systems and support structures work pretty well for the colleges and the funding council. We do not need to change the rules as a result of the situation that we are discussing. The FEDD team has worked well with Inverness College. It has produced a good report for the college board that is helping the board to sort out the issues that need to be sorted out. As far as we know, the system works. If issues need to be addressed, the review process can allow that to be done.
The committee is well aware of the improvements that have been made in the sector in recent years. However, the committee has been here before—in its previous life in the first session of Parliament, the committee examined issues to do with Moray College. We are interested in the line of accountability that runs through college management. I understand your point that we must formulate checks and balances that deal with the majority of situations, not just a small minority. Nevertheless, we are once again considering the financial difficulties that a particular college faces and its inability to deal with them, after previously making commitments to do so. We are interested in the lines of accountability, in relation not only to the accountable officer—the principal of the college—but to the board of management, the funding council and the Enterprise, Transport and Lifelong Learning Department.
In practice, the funding council would come to us. That must be the right way round, because the council works with colleges daily. The team that we have centrally is not much bigger than the team that is sitting at this table. The ministers took the decision to devolve the responsibility for the funding of colleges to the funding council. As I said, that model has been proved to work rather well. The funding council ought to hold the day-to-day information about what is going on in the college sector. It has the interchange on grants and ensures that colleges have systems in place to manage the money according to the financial memoranda. The council holds the information, but I assure the committee that regular dialogue takes place between the council and colleagues in the department. Therefore, we should be aware of any issues. The relationship operates on the basis that there should be no surprises. If the funding council has concerns about any institution, we should know about that soon after those concerns arise.
So, from your previous answers, we can surmise that concerns have not been drawn to your attention that might make you lose confidence in the board.
Do you mean specifically in relation to Inverness College?
Yes.
Absolutely not. As I said, we are not at the point of advising ministers that they need to take extreme measures—the nuclear option, as you described it. If we consider the action that has been taken over the piece, it is clear that there was a financial recovery plan that seemed to be moving in the right direction. There has been a step or two back from that, but recent action by the board and the college seems to give much hope that the college will be able to get back on track. If there was a time to intervene, it is not now.
How satisfied are you with the arrangements for appointing board members?
That is a general question about how we manage the sector. If my memory serves me rightly, the matter was considered in the most recent review of governance, which took place two or three years ago. I think that the broad conclusion was that the arrangements are satisfactory, subject to the boards following public appointments procedures.
Our distinct impression is that the board of Inverness College was the passive recipient of papers from management and did not take an active role. Are the current arrangements working because boards work well or because other colleges' management teams perform well and their boards have to do no more than receive satisfactory reports?
In my experience of institutions that have boards and executives, the system works well when there is a combination of an active board and a good management team and when there is good information flow from the executive to the board, which is crucial.
A board that is entirely voluntary will be composed of people who have time on their hands and the lack of remuneration precludes the participation of many people. Is there a danger that the arrangements can become a little cosy when board members sit alongside the college principal, who is also a board member, and that there can be little incentive for board members to challenge what is happening?
There is a risk that any board might get close to the executive and fail to challenge it sufficiently. However, I see no evidence that the risk is great enough in the college sector to be of systemic concern.
Are there instances in which boards have challenged management? In the case that we are discussing, the committee thinks that the board did not do so.
I am sure that there are hundreds of examples from boardrooms in which college principals and executive teams felt well challenged by boards. I am not long enough in the tooth in my job to be able to give you chapter and verse on that off the top of my head, but the team might thicken the broth.
In the main, the college sector is well governed and well managed. We see evidence of that in the fact that the vast majority of colleges have moved out of a position of financial insecurity into one of financial security, as the recent Audit Scotland report confirmed.
I am trying to tease out whether the system works well in the way that is being claimed. If the management is getting along fine and the board has nothing that it needs to challenge, the system will seem to work well. However, we know of an instance in which the board should have challenged something but the system did not cope. Does the system work well because the boards are working well or does it work well because other elements of the system are working so well that the boards are not being tested?
Governance arrangements are audited as part of the annual audit. I assume that any issues with governance would be picked up. I am not aware that external auditors have expressed concerns about governance arrangements in particular colleges.
We have been provided with the official document "Constitution and proceedings of boards of management", which seems slightly out of date. Are there plans to update it? For example, it makes reference to the secretary of state.
Is that in schedule 2 to the Further and Higher Education (Scotland) Act 1992?
Yes.
Certainly, the references to the secretary of state were updated by the Scotland Act 1998 in the same way as references in other legislation. As was mentioned earlier, the current review of Scotland's colleges includes a significant work stream on accountability and governance. Therefore, the constitutional arrangements for colleges, which have been updated since the 1992 act in various ways, will continue to be looked at.
I note that the review will also consider whether boards should be responsible for appointing their own membership, including the chair of the board. Will that be changed?
When ministers reviewed the situation in 2000, they gave a commitment that they would conduct a further review to consider the impact of the measures. Given that, as Philip Rycroft said, ministers concluded then that they would not change the way in which boards were appointed, the review will now consider whether the impact of that decision is such that the issue needs to be reconsidered. However, I should say that the issue has not been raised as part of the review to date. There has been no clamour to suggest that there is something wrong with the current arrangements, but the commitment that was given to reconsider the issue means that it will be picked up in the next few months.
How unique is it in the public sector that a body should be self-perpetuating with no input from elsewhere?
I hope that the team has given the assurance that we are not complacent and that we are constantly looking at the college sector to see whether there are ways in which we can improve it. However, it seems to me that it is incumbent on us to set ourselves a pretty high hurdle for introducing major change in the sector given that the evidence suggests that it is, for the most part, working pretty well. Any change that we introduce should deal with the problems that we and others are aware of—everyone agrees that they need to be addressed—without undermining the value that we get from the many people who give their time to serve so well on college boards. We need to bear in mind the risk that a change might undermine quality when we consider how to address the issues that will inevitably crop up from time to time in any big complex system such as that of the colleges in Scotland.
Would it improve the quality and perhaps the breadth of potential participation in boards if remuneration were to be provided?
I cannot give a view on that today. We can pick up that issue as the review moves forward and listen to people's views. I would not want to say that our view on that should predominate simply because I have the advantage of sitting in front of the committee today. Many other people around Scotland will have views on that issue and we need to listen to those views before reaching a conclusion.
When was the previous governance and accountability review?
It reported in 2003.
Are you confident that the report's recommendations have been delivered?
The review made 14 recommendations, 12 of which have been implemented. Two recommendations are under consideration by ministers: the proposal to cut from three to two the number of four-year terms of office that a board member can serve; and the proposal to remove the current restriction on who can be the chair of a college board of management. Under the 1992 act, an elected member or employee of any local authority may not chair a board. Following on from the 2003 report, ministers consulted on the latter proposal and received a variety of responses. As I said, ministers are considering those two recommendations.
Will those two issues be picked up in the review that is now under way?
Given that the issues are still under consideration by ministers and that we are looking to conclude the review in the spring of next year, it is unlikely that the review will look at them.
How will the present review add to the body of work that has gone before it?
First, it will look at the impact of the measures that have been implemented. We have surveyed colleges to look at the procedures that they have put in place, including the procedures for the independent oversight of board appointments. Secondly, re-examining some of the issues a few years on from the previous review will make a difference. For example, we were asked about remuneration. Under the Charities and Trustee Investment (Scotland) Act 2005, which was passed since the previous review, colleges are no longer charities if all board members are remunerated.
When you review the previous recommendations and look at the way in which the colleges are working, do you do that simply as part of the natural monitoring process or as a result of specific issues in the college sector?
It is unlikely that we would have reviewed the college sector again but for the fact that ministers made a very strong commitment at the end of the 2003 review that they would do so. Since the 2003 review, nothing systemic has happened that would have caused us to undertake another review.
When do you expect the review to be completed?
In the spring of next year.
I note the memberships of the core and working groups that have been set up and I see that Ms McKechnie chairs the group on accountability and governance. I do not want you to give away any secrets, Ms McKechnie, but given the issues around governance, particularly in relation to Inverness College, are there any particular aspects that you will be considering or which have arisen?
The initial stages of the work stream concentrated very much on issues arising out of the Charities and Trustee Investment (Scotland) Act 2005 and the impact that ministerial powers of intervention could have on the sector's ability to retain its charitable status. In the first six or seven months, we concentrated on reaching a conclusion about the need for powers of intervention to be retained; we gave advice to ministers and agreed the position.
You will consider Inverness College.
We are mindful of Inverness College but, as Philip Rycroft mentioned, it is one of 43 colleges. We want to learn lessons from Inverness College. We expect to consider training and development opportunities and the potential for improving the training and development that are offered to board members and chairs, to ensure that they are fully aware of the support, advice and guidance that are on offer from the funding council or from peers in the sector. That is in our thinking and discussions are under way in that regard.
What actions have been taken to improve training and support to board members following the committee's report on Moray College during the previous parliamentary session and the department's previous review of governance and accountability in the sector?
The ASC has set up a programme of training for board members, in which the funding council, the Executive and other bodies engage. The focus is on recognising that audit and finance are significant issues and that training needs could arise in those areas.
I presume that the training programme for board members is voluntary, not compulsory.
Indeed, it is. Board members are volunteers who give their time willingly and freely. We are not able to compel them to do anything. The fact that people volunteer to become members of college boards means that they wish to give of their time and want to perform well in the office that they have taken on. They are, in the main, willing to give up additional time to take up training and development opportunities that are offered to them.
One of the activities on which the Association of Scottish Colleges has placed increasing emphasis is induction events for board members. The association regards it as highly important that, as soon as possible after new board members take up office, they know what is expected of them and the responsibilities that are placed on them. Such events have taken place around the country.
Am I right in thinking that, although the Executive has the last resort of being able to remove board members, it does not have to approve the appointment of new board members? Is that an entirely separate, stand-alone issue for the incorporated colleges?
That is correct, as I understand it.
I just wanted to clarify that you do not have the power to ask new board members to undertake the training.
No.
Do you deliver the training, or who does that?
We get involved in training board members in specific areas where there is a relevance. For example, when the funding councils were going through the merger process, we went out and spoke to board members about the process, our thinking behind the merger and our aspirations for the merger. We also heard board members' views on the merger. Our involvement is with specific issues in which we have a locus. We do not deliver training as such; the training is delivered in the main by the SFEU and private training providers, as appropriate.
You say "we", and you referred earlier to a training team in your section.
We do not have a training team. The training in which we are involved relates specifically to issues in which we are engaged. For example, the team that was involved in the merger of the two funding councils went out and delivered a session on the merger process and our aspirations for the new funding council. Since the merger, we have gone out to say, "Here is the new funding council"—not to board members but to other folk, although we could do it for the boards if we were asked. We have individuals with policy responsibilities who will articulate developments in relation to specific policies.
Are there a lot of those people? Mr Rycroft said earlier that yours is quite a small team.
There are about 18 folk in my division.
What is the current position regarding the management of Inverness College, given the fact that the principal is on extended sick leave?
The management of the college is obviously a matter for the board. There is clearly an issue with the management of the college, but it is for the board to sort that out. It would not be appropriate for me to comment on that at this stage. I am, rightly, not privy to the details of discussions on that.
I am just asking whether someone has been appointed in place of the principal. Education still requires to be delivered.
There is an obligation to ensure that there is an accountable officer in place, and there are time periods that must be respected in that regard. I spoke to the chair of the board on Friday to get an update; dealing with that matter falls within his responsibilities and he is aware of the timetable under which he must operate. I understand that steps will be taken to ensure that there is management in place to enable the college to continue to function properly.
So, at the moment, there is no acting principal.
I cannot say precisely who is doing what at the moment. I understand that arrangements are in place because the current principal is away on sick leave. If that situation continues, an acting principal will be appointed shortly.
Thank you, Mr Rycroft. That has helped to clarify a number of points for us. For the avoidance of doubt, I can tell you that the committee has not yet come to any conclusions on the performance or otherwise of the accountable officer or anybody else who is accountable for the performance or recovery of the college. That is something that we will consider later. The information that you have provided is helpful. I thank you and your team for your time.
Meeting suspended.
On resuming—