How FE and sixth-form college corporations are run, and the responsibilities of governors.
FE and sixth-form college corporations are the legal entities that operate one or more colleges.
The status of your corporation is both:
- a statutory corporation established under the Further and Higher Education Act 1992 (FHEA 1992)
- an exempt charity
Your corporation is established under the FHEA 1992 for the charitable purpose of advancing education.
A FE or sixth-form college is an activity through which your corporation achieves its charitable purpose. Your college is not a separate legal entity from your corporation.
Responsibilities of FE and sixth-form corporation boards and governors
The core functions of your corporation board include:
- setting and communicating your college’s educational character, strategy and goals
- holding executive leaders to account for the educational performance and quality of your college, and for the performance of staff
- exercising effective control to ensure that funds and assets are protected and legal obligations are met
Six main duties
As a member of the board, you are a governor and a charity trustee. You and your co-governors have six main duties under charity law:
1. Ensure your corporation carries out its purpose for the public benefit
You must ensure your corporation carries out the charitable purpose for which it was set up, and no other purpose.
Corporations can operate one or more colleges. Their principal powers include the provision of:
- further and higher education
- secondary education to students aged 14 and over
- goods or services in connection with the above
- ensure you understand your corporation’s purpose and, with your co-governors, plan how this will be achieved
- understand, and be able to explain, how your corporation benefits the public
- be able to explain how your corporation’s activities support its purpose
2. Comply with your corporation’s governing document and the law
- comply with charity law and other laws and regulations that apply to your corporation
- comply with your corporation’s instrument and articles of government
Your board can amend your corporation’s instrument and articles in accordance with the procedure set out in that document. But your board must not make changes that:
- cause the corporation to cease to be a charity
- give a personal benefit to a governor, unless this has Charity Commission approval
- cause the instrument and articles to no longer comply with Schedule 4 of the FHEA 1992
3. Act in your corporation’s best interests
- decide with your co-governors what will best enable your corporation to carry out its purpose
- make balanced and informed decisions with your co-governors
- avoid being in a position where your duty to your corporation conflicts with your personal interests
- not receive any benefit from your corporation, unless this is authorised and is in your corporation’s interests
4. Manage your corporation’s resources responsibly
- make sure your corporation’s assets are used only to support its purpose
- avoid exposing your corporation to undue risk
- not overcommit your corporation
- take care when investing or borrowing
- comply with any restrictions on spending funds or selling land
- ensure effective and efficient use of resources
5. Act with reasonable care and skill
- must take reasonable care in governing your corporation, making best use of your skills and experience, and taking appropriate advice when necessary
- should give enough time to your role, including preparing for and participating in meetings
6. Ensure your corporation is accountable
You must comply with accounting and reporting requirements. You should also:
- demonstrate that your corporation complies with the law and is run effectively
- ensure accountability in your corporation, especially where duties or tasks are delegated to staff
For more information on your responsibilities, we strongly recommend that you read the Charity Commission guide ‘The essential trustee’.
You should also follow the Nolan ‘7 principles of public life’. These are ethical standards expected of people in public life: selflessness, integrity, objectivity, accountability, openness, honesty and leadership.
In addition, your board should have its own code of conduct.
Recruiting and developing governors
Your corporation’s instrument and articles set out the rules on board composition.
Your board must include staff and student members. For sixth-form corporations, your board must also include parent governors.
It’s common for the college principal to be a board member, but this is not a statutory requirement.
Your board is responsible for selecting new governors and appointing existing governors to new board positions. Exceptions are:
- special arrangements set out in your instrument and articles for the appointment of staff, parent (in the case of sixth-form corporations) and student governors, such as peer nomination or election
- where other bodies may have a role in appointments
Example Another body plays a role in appointments at Catholic sixth-form college corporations. The board must include members, known as foundation governors, who have been appointed by the Bishop or religious order to preserve and develop the character of the college, and to ensure the college is conducted in accordance with the trust deed of the diocese or religious order
Terms of office
Your corporation’s instrument and articles set out the length of governor appointments, and whether they can be extended.
All the codes of governance used by corporations emphasise the value of board membership being refreshed at intervals. Your board should check that the instrument and articles are consistent with the code it’s using.
Your corporation’s instrument and articles set out the minimum age for board members.
The minimum age is normally 18, except for student governors.
Disqualification restrictions and checks
No one disqualified under charity law from being a charity trustee can be a college corporation governor.
Reasons for disqualification include being disqualified as a company director or having an unspent conviction for various offences.
The Charity Commission can lift disqualifications.
Before appointment, your board should obtain a declaration from prospective governors that they are not disqualified.
Your board should also request a Disclosure and Barring Service (DBS) criminal records check to be sure that a prospective governor is eligible to serve.
In addition, safeguarding legislation restricts who can work with children and vulnerable adults.
Where a prospective governor’s role has the opportunity for contact with children and vulnerable adults, your board should consider and record on a risk assessment basis whether an enhanced DBS check is needed. This should include a check against the DBS list of those barred from working with these groups.
An enhanced DBS check may also be needed if there is any change in a serving governor’s role.
‘Fit and proper persons’
As charities, corporations that claim UK tax relief and exemptions must meet the management conditions in schedule 6 of the Finance Act 2010.
This requires that all your corporation’s managers, including governors, are ‘fit and proper persons’, as set out in the HM Revenue and Customs (HMRC) publication ‘Guidance on the fit and proper persons test’.
Find out more about governor eligibility.
Your board should ensure that recruitment is informed by:
- your corporation’s instrument and articles
- good practice in the code of governance it’s using
- equality and diversity considerations, as boards with a range of backgrounds and perspectives are likely to lead to better governance
- desired board behaviours
- the mix of skills, knowledge and experience required by your corporation’s strategic and business plans, such as qualified finance and estate management practitioners and education professionals
Your board may wish to consider:
- the development existing governors may need to step up, where appropriate, into chair or vice-chair roles
- establishing a succession planning policy, to determine a list of prospective governors ahead of time
Your board may delegate some of its recruitment activity to a search or nominations committee or to staff. But your board must retain overall control of the process.
Advertising and searching for candidates
Recruitment should be open and transparent. It should not rely solely on informal networks as this limits the field of candidates.
There should be a clear role description and person specification. Adverts and information packs should avoid discriminatory language. Consider a range of competencies, such as negotiating, team working and specialist knowledge.
Where another organisation or person who is not part of the board plays a role in appointing governors, your board should make them aware of the skills and experience the corporation needs. Your board should also highlight any gaps in representation from particular groups.
Ways of attracting candidates which have worked for corporations, in addition to advertising, include:
- open evenings
- promoting opportunities via local employers, chambers of commerce and local authorities
- charity volunteer recruitment sites, such as Inspiring FE Governance
- organisations that support underrepresented groups in public life, such as the Black Young Professionals Network
- executive search agencies
It can be helpful to manage expectations by being clear about the time commitment required, but also indicating the support that can be provided to governors. This might include, for example, your corporation’s policy on paying childcare costs.
For Catholic sixth-form college corporations, either the Bishop or the Provincial of the religious order will have a recruitment process for foundation governors and will liaise with your corporation regarding skills requirements.
Selection and appointment
Interviews should be carried out by a panel of governors.
Those conducting interviews should receive appropriate training and use agreed selection criteria.
Selection recommendations should be presented to the full board for consideration.
Before appointment, your board:
- must ensure that checks are carried out on an individual’s suitability
- should ensure that prospective governors:
- are made aware of the legal responsibilities they will assume as charity trustees
- declare any conflicts of interest or loyalty
Your board should also be transparent in reporting recruitment.
Sharing details in annual reports of selection procedures and of the work of search committees will enable your board to show that open recruitment processes are in place.
Find out more about recruiting governors.
Governor development and support
Investment in individual governor learning is an investment in your corporation as a whole.
Your board should ensure all governors have opportunities to develop.
This will maximise governors’ contribution to college success, and reduce the risk of ineffective governing.
New governors should be offered a structured induction programme. This is important to ensure they:
- understand the context of their role, including the legal status and powers of your corporation and their responsibilities as charity trustees
- understand the roles of key people in your college and the difference between governance and operational management
- are aware of important documents, such as the instrument and articles and the corporation’s strategic plan
New and student governors can also benefit from being supported by a mentor or buddy.
Your board’s clerk or governance professional is an important source of expertise for governor learning.
Find out more about governor development and support.
Positive board behaviours
How board members work together is as important as governance structures and processes. Your board should encourage positive team behaviours. This includes:
- fostering a culture where governors feel able to constructively question and challenge
- valuing independent thinking
- understanding each other’s perspectives and collaborating to achieve the best outcomes
Your board should regularly discuss its ability to work as a team, including expectations about behaviours.
Find out more about positive board behaviours.
Your board should evaluate the contribution of individual governors annually.
Appraisals help governors to develop in their role and make your corporation more effective. They are also an opportunity for governors to provide feedback on how the board works.
The chair usually leads appraisals, which may involve self-assessment or 360° feedback. The vice-chair or an external facilitator can lead appraisal of the chair.
Appraisals should also inform your board’s governance reviews.
Find out more about governor appraisal.
Specific roles in the corporation
The effective running of a board requires the appointment or election of governors and others to specific roles, in accordance with your corporation’s instrument and articles.
The appointment of a governor to a specific role does not remove any responsibility from other governors to manage the corporation in accordance with the legal and regulatory framework.
Key roles in a corporation include:
If you are the chair, you are responsible for:
- ensuring the effective functioning of your board
- setting expectations for high standards of governance
- giving your board leadership and direction, and keeping it focused on its core functions
- ensuring all board members understand what is expected of them, and receive appropriate induction, training and development
- ensuring that student governors are supported and engaged
- conducting performance reviews of board members and addressing any attendance or other issues which arise
- leading the recruitment and performance management of the principal and, where appropriate, other senior post-holders
- being the main conduit for communication between the board and the principal
- building effective relations with the clerk, the principal and the senior management team
You should also champion positive board behaviours. You should create the right conditions for board members to work together, so that they:
- feel comfortable questioning or challenging decisions
- actively contribute skills and experience
- participate constructively in meetings
All board members have equal responsibility for the governance of a corporation.
Your voice carries the same weight as that of other governors. You should not dominate the decision-making process. This does not prevent you from exercising a second or casting vote if your corporation’s instrument and articles allow this.
Find out more about the chair.
Corporation clerks, also known as governance professionals, are critical to board performance.
You should ensure your board invests in your clerk’s professional development and that there is an annual appraisal for the clerk, based on clear and measurable objectives to support and improve governance.
Your clerk should support boards in meeting high standards of governance and fulfilling legal or regulatory requirements. Your clerk should play an important role in communication between the board and executive managers.
Your clerk can provide guidance on:
- effective governance
- your obligations as a governor and your board’s powers
- legal issues relating to governance
- the implications of policy or regulatory developments
- training and development opportunities for governors, underpinned by the clerk’s regular skills audits of the board
- assessment of board performance
The clerk also plays a key role in the induction of new board members, and helps to engage student governors with your board’s work.
Find out more about professional development for clerks.
Relationship between the chair, clerk and principal
The chair, clerk and principal should maintain regular three-way communication to shape and refine your board’s business, based on a board-approved strategic agenda for the year.
A close and productive working relationship between the chair, clerk and college principal is key to effective governance.
They are the bridge between the business of your board and the operation of your college.
Subject to the rules on delegation in your corporation’s instrument and articles, your board can:
- set up committees, or working groups, to assist in meeting its responsibilities
- appoint governors and/or other persons as members of those committees
Your board should ensure that:
- committee members have the skills and experience for the role
- there are clear terms of reference that set out:
- the purpose and authority of the committee
- how the committee reports to your board
As a condition of government funding, your corporation must have an audit committee.
Your board can delegate aspects of decision making to a committee, but it cannot delegate responsibility and must retain overall control.
Find out more about committees.
Payments to governors and other personal benefits
Under charity law, you cannot normally be paid simply for serving as a governor, other than reasonable out-of-pocket expenses. You can only be paid, or receive another form of personal benefit, when it’s in the interests of the corporation and provides a significant advantage over other options.
These rules also apply when someone closely connected to you, such as a civil or business partner, benefits in a similar way.
Charity Commission approval is not needed if your board already has a power to make the payment.
You should not be present at board discussions or decisions about any such payments or benefits.
Your board must disclose any payments to governors in your corporation’s accounts.
Your board must also disclose any transactions or business arrangements between your corporation and an organisation or person with whom the governors or senior staff have a personal connection.
Example If your corporation buys sports equipment from a company run by a governor’s sister, that is a personal connection
Further information about payments to governors can be found in the Charity Commission publication ‘Trustee expenses and payments’.
The Charity Commission has a separate process for handling applications for governor payment where a college is going through significant change, such as a merger. Details can be found in the Association of Colleges’ ‘Guidance on governor remuneration’.
Making decisions and managing conflicts of interest
When making decisions, you and your co-governors must show you have:
- acted within your powers and made decisions consistent with your corporation’s purpose
- acted in good faith and only in the interests of your corporation
- made decisions based on sufficient evidence, informed by professional advice where appropriate
- considered all relevant factors, and disregarded irrelevant ones, such as risks and benefits, funding, stakeholders’ opinions and future college provision
- made decisions that are within the range of decisions a reasonable charity trustee body could make, such as being able to justify any decision not to follow professional advice
Decisions must not:
- be influenced by personal prejudices or connections
- be affected by any conflicts of interest
Governors are collectively responsible for making decisions about how their corporation is run. Each type of governor, such as staff or student governors, has equal responsibility.
If you are a governor nominated or appointed other than by the board, such as a student or parent governor, you are appointed in your individual capacity.
You are not appointed to represent any group you may be drawn from, or to follow instructions from the nominating or appointing body.
Following these decision-making principles will protect you in all aspects of running your corporation. If your board does not observe these principles and your corporation suffers a financial loss as a consequence, you and your co-governors may be personally liable under charity law.
Find out more about making decisions.
Managing conflicts of interest
A conflict of interest is where your personal interests or loyalties could, or could be seen to, stop you from making a decision in the best interests of your corporation.
Examples Examples of conflicts of interest include if:
• one of your relatives or business partners owns a company that enters into a contract with your corporation
• another body with which you serve or are employed has a business relationship with your corporation
Under charity law, you must identify conflicts of interest and prevent them from affecting the decisions you make with your co-governors.
Example College principals who are also governors should withdraw from discussions about their remuneration
Your board should have a conflicts of interest policy, with systems in place to record and manage any such conflicts. Your clerk or governance professional will play an important role in establishing and administering such systems.
Find out more about managing conflicts of interest.
Your board is responsible for ensuring legal and regulatory compliance across a range of areas, including:
- general principles of charity law and education law
- your responsibilities as operators of an educational institution, such as health and safety, information management and employment law
- conditions and obligations imposed by funding or regulatory bodies
Specific areas of compliance include, but are not limited to:
Education & Skills Funding Agency (ESFA) funding agreement
Your corporation needs to enter into annual funding agreements in order to receive money from the ESFA.
Funding agreements set out contractual requirements which your corporation must observe, in areas such as financial health and control, education performance standards, quality assurance, public accountability and the welfare of students.
Breaches of an agreement may lead to regulatory intervention or termination of the agreement. If your college’s provision includes higher education funded by the Office for Students (OfS), your corporation will also need to comply with the OfS regulatory framework.
A serious incident is an adverse event, whether actual or alleged, which results in or risks:
- significant loss to your corporation’s money or assets
- damage to your corporation’s property
- harm to your corporation’s work, students or reputation
Examples Serious incidents include fraud, cybercrime, extremism allegations and safeguarding issues
Your board must ensure that serious incidents are reported promptly to:
- the appropriate authority, such as the police or, for safeguarding, the local authority
- external and internal auditors, your audit committee chair and/or ESFA in line with the corporation’s funding agreement and the Post-16 audit code of practice
Your board and your college staff should not use non-disclosure agreements and confidentiality clauses to prevent an individual from making a disclosure in the public interest (whistleblowing) under the Public Interest Disclosure Act 1998 regarding a serious incident.
Your board must safeguard the corporation’s money and assets.
Your board must ensure that:
- a whistleblowing policy is in place
- there are procedures to follow if fraud is detected
- significant fraud is reported to ESFA, the chair of the audit committee and external and internal auditors
Your board should ensure that:
- a counter fraud strategy and fraud response plan are in place
- an annual fraud risk review is part of its risk management strategy
- appropriate counter fraud measures are in place, such as strong financial controls and pre-employment screening of staff
- there is fraud awareness training for staff
All attempted or actual fraud should be reported to Action Fraud, the UK national fraud and cybercrime reporting centre.
Find out more about fraud.
There are restrictions on the use of your corporation’s funds for political activities.
Under your corporation’s funding agreement:
- your corporation must not use government funding to influence Parliament, government or political parties
- the funding must only be used for the purpose of delivering the services agreed or for meeting any other requirement in the funding agreement
It’s acceptable to use government funding to pay membership fees to college associations.
In addition, charity law says that your corporation may only undertake political activities, within certain limits, in support of its charitable purpose.
Find out more about political activities.
Your board must:
- make arrangements to safeguard and promote the welfare of students under 18 and high needs students aged 18 to 25
- have regard to all the requirements of the statutory safeguarding guidance ‘Keeping children safe in education’
- ensure that anyone working at your college who has harmed, or poses a risk of harm, to a student under 18 is referred to the DBS
- ensure that pre-appointment checks are carried out for new staff
- ensure that it meets national minimum standards where residential accommodation is provided for under 18s
Your board should ensure in particular that:
- a governor has leadership responsibility for safeguarding arrangements
- there is a designated safeguarding lead in the senior executive team, who takes day-to-day responsibility for safeguarding
- there are systems to support safeguarding, including an effective child protection policy and procedures for raising concerns about staff
- anyone working at your college who has harmed, or poses a risk of harm, to a high needs student aged 18 to 25 is referred to the DBS
- read Part 1 of ‘Keeping children safe in education’
- receive appropriate safeguarding and child protection training at induction plus regular updates
- know what to do if they have concerns about a child
- understand that concerns about sharing information should not stand in the way of keeping children safe
Find out more about safeguarding.
Under the Counter-Terrorism and Security Act 2015, your corporation must have due regard to the need to prevent people from being drawn into terrorism.
This is known as the Prevent duty, and is part of the government’s counter-terrorism strategy, CONTEST.
Under the Prevent duty, FE providers and practitioners must exemplify British values in their practice and use opportunities to explore British values and to challenge extremism. British values are defined as including democracy, the rule of law, individual liberty, and mutual respect and tolerance for those with different faiths and beliefs.
Your board should ensure that:
- there is an executive lead for the Prevent duty
- a risk assessment is carried out of where and how students and staff may be in danger of being drawn into terrorism
- governors and staff receive appropriate training and know the process for referring concerns to the appropriate body, such as the local authority or police (referrals should also be notified to ESFA)
- subcontractors that deliver courses are aware of the Prevent duty
- there are clear policies for:
- the management of events and the hosting of speakers
- Prevent is embedded in your corporation’s other policies, such as use of IT equipment
Find out more about the Prevent duty.
The Equality Act 2010 applies to your corporation as:
- an employer
- a provider of a service or public function
- a provider of education
- a public body
Your corporation must:
- have due regard for the need to eliminate discrimination
- advance equality of opportunity and foster good relations between people who share a protected characteristic, such as disability and gender, and those who do not
- publish equality objectives and information demonstrating how it meets these
The act also includes specific requirements for education providers. In particular, it prohibits your corporation from discriminating against, harassing or victimising prospective and current students.
The act provides similar protection to former students in certain circumstances – for example, when a college provides a reference.
In order to preserve and develop its Catholic character, a Catholic sixth-form college can favour the admission of Catholic students, except in relation to courses that constitute vocational training.
If your corporation has 250 employees or more, it must also meet the gender pay gap reporting requirements.
Find out more about equality.
To change the statutory name of your college, your board must:
- follow the relevant provisions in your corporation’s instrument and articles
- consult stakeholders
- apply to the Secretary of State for approval
There are rules on the names, words and expressions allowed. These also apply to business (trading) names. For example, a new name should not be similar to that of an existing educational organisation.
Find out more about name changes.
Financial and estate management
Your board oversees your corporation’s financial performance and must ensure financial sustainability and solvency.
Your board should:
- ensure that financial strategies are affordable and consistent with its strategic plans and objectives
- manage strategic risk
- monitor financial performance using key performance indicators
- ensure it receives reliable and timely financial information, including cash flow forecasting, so it can recognise any difficulties at an early stage
- ensure there are robust financial controls, especially in high risk areas such as payroll systems
- ensure delegated authority to staff is clearly documented
- ensure financial policies and procedures are regularly reviewed
- take immediate action and professional advice when it thinks insolvency is a possibility
Reserves are unrestricted funds available for your corporation’s purpose. They exclude equity in land and buildings, and funds designated for future spending.
Your board should ensure there is a reserves policy in place that:
- justifies and explains keeping or not keeping reserves
- identifies and plans for the continuation of essential education services for students
- reflects the risk of an unplanned closure in relation to spending commitments and potential liabilities
A reserves policy provides an indication of future funding needs and overall resilience.
Your board should review the effectiveness of its reserves policy in the light of any changes in funding and the economy, together with emerging operational risks, to ensure sustainable delivery of your corporation’s charitable purpose.
Find out more about reserves.
Investments and trading
Your corporation can invest to generate additional income, subject to any restrictions in its instrument and articles.
Investing must be in the best interests of your corporation. It must also be necessary or expedient for your corporation’s provision of education.
Your board must:
- exercise care and skill when making investment decisions
- take expert advice on investments
- assess the suitability of investments
- take into account the need to diversify investments
- review investments periodically and when circumstances have significantly changed
- be able to justify ethical investments
Your board should:
- agree an overall investment policy and objectives for your corporation
- agree the balance between risk and return
- be aware that some investments may have tax implications
As a charity, your corporation can lawfully engage in trading. Trading must be necessary or expedient for your corporation’s provision of education.
There is preferential tax treatment for charities, and your board should ensure trading is structured in a tax efficient way.
There are three types of trading:
Primary purpose: trading to directly further your corporation’s primary purpose. This includes the provision of educational services in return for course fees.
Ancillary: trading that contributes indirectly to your corporation’s primary purpose, but is treated as primary purpose trading for tax purposes. This includes the sale of textbooks to students and the provision of a crèche for a fee.
Non-primary purpose: trading that does not directly further your corporation’s charitable purpose, and is carried out to raise funds. If such trading exceeds the relevant HMRC threshold and/or poses a significant risk to your corporation’s assets, it must be undertaken by a trading subsidiary.
Your corporation must follow certain rules when using charitable funds for trading.
Primary purpose and ancillary trading
Your corporation’s funds must only be used for the purpose for which they were given or generated.
Example ESFA funding for a college in England cannot be used for the delivery of further education overseas
Non-primary purpose trading
When considering investing in a trading subsidiary, your board must:
- take professional advice
- ensure the investment is consistent with your corporation’s investment policy
- compare other forms of investment and make an objective assessment as to whether this investment would be in your corporation’s interests
- consider if independent funding could be provided instead of funding by your corporation
- be satisfied with the viability of the subsidiary
Your corporation can provide money for the start-up of a trading subsidiary. This is different from your corporation’s money being used for primary purpose trading.
Funding a trading subsidiary is an investment of funds for profit, with returns being passed to your corporation, usually via Gift Aid.
Where a trading subsidiary needs more than a nominal subscription of share capital to operate effectively, your corporation may only provide this if the payment can be justified as a suitable investment.
These key principles apply to the relationship between your corporation and a trading subsidiary:
your board must always put the interests of your corporation before those of the subsidiary
your corporation’s assets must not be used (other than as a suitable investment), or be put at risk, for the benefit of the subsidiary
if the subsidiary uses your corporation’s staff, land, buildings or equipment, this must be on a proper contractual basis at commercial rates
the subsidiary can only use the corporation’s land and buildings if that use is permitted by the terms under which your corporation occupies the land – for example, consent might be required from the freeholder if the college site is leased
as a governor, you cannot be paid as a director or employee of the subsidiary, unless the Charity Commission approves this
your board must monitor the performance of the subsidiary and your corporation’s investment in it, to ensure that the investment remains a good use of funds
You and your fellow governors may be personally liable for any financial loss to your corporation if your board does not observe these principles.
Find out more about investments and trading.
Your board is accountable for how it spends public funds, and how it meets the terms and conditions on which funding was provided.
Under the ESFA’s Post-16 audit code of practice, your board must commission a regularity audit, carried out by independent auditors, to provide assurance on regularity and propriety regarding the use of public funds.
Your board must publish a statement of regularity, propriety and compliance in its annual accounts, identifying spending that has fallen short of accepted standards.
Your board must demonstrate how it has used funding by publishing audited financial statements on its college website, and making its accounts available to anyone who reasonably requests a copy.
Find out more about regularity.
Your board must comply with the following reporting requirements:
Meet ESFA reporting requirements, such as prompt notification of any significant deterioration in current or forecast finances and immediate notification of the risk of insolvency.
Submit to ESFA:
- a three-year financial plan
- an audited annual report and accounts, including a regularity report and a number of associated documents
Your board must ensure that the accounts follow:
- the ESFA college accounts direction
- Financial Reporting Standard 102
- Statement of Recommended Practice for Further and Higher Education (SORP)
Find out more about reporting requirements.
Your board is responsible for overseeing the management of land and buildings, and for ensuring estates are used in the most efficient way for the benefit of students.
Your board must ensure that health and safety, fire safety, planning permission and other legal requirements are met.
It should ensure that:
- there is an estate strategy, reviewed at least every three years and linked to wider strategic planning
- there is a three year estate maintenance plan
- adequate insurance is in place
- decisions on estate matters are:
- made in the interests of your corporation, including getting the best possible deal in property transactions
- supported by appropriate information, such as written professional valuations
- it obtains appropriate professional advice (legal advice is important for the sale or mortgage of property, as statements regarding the corporation’s charitable status must be included in related documents)
- sales or leases are advertised, unless a surveyor advises otherwise
- there is an updated record of property assets, including key dates such as for lease renewals or rent reviews
- delegated powers for the management of the estate by staff are clearly documented
Where your corporation does not own the freehold of its college’s land, your board needs to abide by any restrictions, conditions or requirements contained in the relevant lease or other document relating to the occupation and use of the land.
For Catholic sixth-form college corporations, your corporation occupies land under bare licence and must act in accordance with any parameters set by the diocese or religious order which owns the land.
Find out more about estate management.
A new insolvency regime for FE and sixth-form college corporations provides for orderly winding up and other insolvency proceedings in the unlikely event of a college corporation becoming insolvent.
It also provides for a special administration regime, known as education administration, which protects education provision for existing students of the college as a whole.
Find out more about insolvency.
Changes to corporate structure
When undertaking structural changes, such as dissolutions and mergers, your board must ensure it meets all legal requirements. These include public consultation where a corporation is dissolved, and protection of the employment rights of staff.
Your board should:
- ensure that the changes are consistent with the charitable purpose of the corporation
- carry out due diligence checks, such as financial, commercial and legal checks, to be satisfied that structural changes are in the best interests of the corporation and students
- ensure there is a strategic business case for change, together with a risk management assessment
- take appropriate professional advice at the outset, independently from other corporations involved
- have a communications strategy and engage at an early stage with stakeholders, such as students, staff, ESFA and banks
- consider the capacity of governors and executive staff to manage change in terms of time and skills, and whether external restructuring and project management expertise is needed
- agree the governance arrangements for the project with partner organisations, such as a dedicated merger committee with representatives from each partner’s board, plus independent members
- ensure strong project management, with clear processes for monitoring and reporting to the board
- manage the expectations of change partners at the outset, such as board composition and senior appointments in a merged organisation
- manage conflicts of interest, such as a principal playing a leading role in project management when an outcome of change is that they may lose their job
- ensure that merger preparations give due consideration to the quality of teaching and learning, alongside financial, property and legal matters
Find out more about changes to corporate structure.
Risk management and assurance
Managing risk is essential to ensure your corporation’s key objectives are met, and to protect its funds and assets.
Poor risk management, or poor handling of the aftermath of errors, can undermine your corporation’s reputation for integrity, competence and educational effectiveness.
Types of risk include:
- Compliance: Includes breaches of information law arising from poor management of personal data
- Financial: Such as demographic changes in the number of students reducing income
- Academic: For example, standards of teaching and learning giving rise to adverse Ofsted inspection outcomes, leading to a fall in student recruitment
The board must ensure there is a clear risk management policy so that:
- significant risks are identified, assessed, monitored and managed
- the effectiveness of risk management, internal control systems, assurance arrangements and business continuity planning is regularly reviewed
- a risk exposure profile can be created that reflects the board’s views on what levels of risk are acceptable
- risk management is ongoing and part of operational procedures
Your board may delegate elements of the policy, but must retain overall responsibility and must publish a statement in annual accounts about how it manages risk.
Important means of managing risk include:
- the effective use of risk registers covering all areas of risk relevant to the corporation, including reputational risk
- use of professional specialist advice to inform significant decisions
- buying insurance – note that some insurance is compulsory, such as employers’ liability
- effective financial controls and monitoring
- effective oversight of the principal and other senior staff
- effective mechanisms for monitoring the corporation’s governance and performance
Your board must publish a statement in its annual accounts about how it manages risk.
Find out more about risk management.
Financial controls and monitoring
Your board must safeguard your corporation’s assets.
Your board should ensure that:
- robust financial controls are in place
- the effectiveness of financial controls is reviewed at least annually
- it promotes a culture of control, which is embedded in the operations of the organisation
Internal financial controls are essential checks and procedures that help to:
- ensure compliance with legal and regulatory requirements for financial management
- reduce the risk of loss through, for example, theft, fraud or error
- identify problems early
- ensure financial reporting is robust and of sufficient quality
Your board may delegate the detailed work on implementing and monitoring financial controls but is responsible for deciding the controls needed.
Find out more about financial controls.
Your board must set up an audit committee with clear terms of reference.
The committee may include people who are not part of the board, but the majority of the committee must be governors and must not include the chair of the corporation or principal. Staff governors should not be members.
The role of the audit committee is not limited to financial matters. It must assess the adequacy and effectiveness of:
- governance, risk management and control processes
- assurance arrangements
The audit committee has a number of other responsibilities including:
- advising your corporation on risks of insolvency, safeguarding of charitable assets, and the effective and efficient use of resources
- overseeing your corporation’s policies and processes about fraud, irregularity, impropriety and whistleblowing
- monitoring the implementation of recommendations from auditors
Find out more about audit committees.
Oversight of the principal and executive staff – challenge and assurance
Your board has overall control of the corporation. It may delegate authority to the principal and senior executive team, but not ultimate responsibility.
Your board must be able to ensure that delegated authority is properly exercised, through appropriate monitoring and reporting procedures.
To do this, your board should:
- set out in writing the extent and limits of any delegated authority, to include reporting-back protocols
- regularly review the terms of the delegation
- have access to high quality and timely data and information
- have governors with the skills to interpret the full detail of educational performance, financial and other data
- constructively challenge, and seek assurance from, senior staff and use other methods where appropriate to independently verify information
- identify the questions that need to be asked of the executive to create robust accountability
Governors should be prepared to test that senior staff have:
- developed the business case for any proposal
- sufficient and robust data to support reported performance
- fully considered the risks involved in any proposed action and ways of mitigating them
Find out more about challenge and assurance.
Mechanisms for monitoring governance and performance
Governance is not a static state. Your board should keep under review:
- board and corporate performance, including:
- regular reviews of board composition and skills mix
- the instrument and articles and corporate policies to ensure they continue to support, and are adequate for, the delivery of the corporation’s purpose
- outcomes and impact
- compliance with regulatory frameworks
Governance codes of practice
A governance code of practice is a tool that helps your board to continuously improve and meet high standards.
As a condition of government funding, your corporation must confirm compliance with, or due observance of, one of three governance codes of practice:
All codes expect a board to carry out an annual assessment of governance and board performance.
This should be validated regularly by external quality assurance.
These processes will:
- help your board to manage risk, and identify weaknesses and areas for improvement
- provide assurance to government and funders, students, staff, employers and other stakeholders
Find out more about monitoring goverance.