External Governance Reviews: Guide for FE College Corporations and Designated Institutions

These tips explain the purpose and benefits of external governance reviews and how to approach them. It will help you:

  • identify what an exam should accomplish
  • understand how to prepare for and approach an exam
  • select an examiner

Who is this advice for?

These tips are for governors, charities trustees, governance professionals, and senior college executives in:

  • continuing education (EF) companies
  • sixth form collegiate societies
  • designated schools funded by the Education and Skills Funding Agency (ESFA)

Insight

The Skills for jobs white paper presented various reforms aimed at strengthening governance. Among them are the new requirements for funding agreements from 2021 to 2022, under which EF Societies, Sixth Form Collegiate Societies and Designated Institutions must:

  • have an external governance review every 3 years
  • have an annual governance self-assessment
  • share results and associated actions with the on-demand service

When to have an external governance review

You must have an external governance review (which need not be a peer review or auditor) between August 2021 and July 2024, and every 3 years thereafter.

If you do not yet have regular exams, we encourage you to organize one before 2023 to 2024 if possible.

For Association of Colleges (AoC) and Education and Training Foundation (ETF) pilot exam participants, your next exam will be 3 years after the pilot exercise.

A governance self-assessment is due each year from 2021 to 2022, except in the year of an external review.

Benefits of an External Governance Review

Strong governance is fundamental to:

  • provide quality education
  • safekeeping of funds and assets
  • perform the 6 main duties of trustees under charity law

An external governance review independently assesses the effectiveness of governance.

The benefits of an external review include:

  • an expert and independent view of governance effectiveness, impact and board culture, bringing new insights and broader governance perspectives
  • stakeholder confidence that a board understands its responsibilities, is accountable, and is committed to continuous improvement
  • an opportunity to build on strengths and address identified weaknesses
  • encourage openness and strengthen the commitment of board members in the development of governance and good practices

Preparing for an exam

Board members, governance professionals and senior managers should participate in a planning process before a review is commissioned. Considerations for the plan include:

  • key roles and responsibilities
  • examiner’s mandate
  • the reviewer selection process
  • time of exam
  • costs and budget

The reviewer will need access to people, meetings and documents, so the board should consider allowing time for the reviewer to:

  • have one-on-one meetings with the Chairman of the Board, a selection of Board members, the governance professional and senior executives
  • gather insights from students, a range of college staff and key external stakeholders
  • observe agreed board and committee meetings
  • provide regular feedback to the board and governance professional as the review progresses, so that findings and recommendations can be tested

Selection of an external governance reviewer

Your council is responsible for choosing an appropriate examiner.

The examiner must:

  • be external, objective and independent
  • be an expert with relevant experience or qualifications such as:
    • governance experience in the charitable or educational sector
    • an advanced qualification from the Chartered Governance Institute
    • a history of performing exams
  • have strong communication and interpersonal skills
  • offer good value for money

Governance reviews are available from:

  • charitable or educational governance advisory bodies
  • independent charity, EF and HE consultants
  • professional bodies and the National Council of Voluntary Organizations (NCVO)

Services to charities can be less expensive than those in the private sector. It is recommended not to use the same examiner for more than 2 consecutive examinations.

The review should not be a peer review process.

Your board should agree the terms of engagement with the reviewer from the outset.

Define the scope and objectives of an external governance review

Early in the process, governors should work with the reviewer to help determine the scope of a review, which should be framed by the key principles of the governance code a board uses. However, the review should provide more than an overview of the extent to which a board has observed these principles. It should also:

  • consider overall governance effectiveness, including the impact of board behaviors
  • support continuous improvement by recommending actions to strengthen governance culture, policies and practices as appropriate

As part of examining the overall effectiveness of governance, the review can explore areas such as:

  • how board members carry out their role as directors of charities
  • the effect of board culture on decision-making, including encouraging appropriate challenge and contribution, and on an organization’s culture and tone
  • the impact of governance, including policies, practices and structures
  • how the board defines and communicates strategy
  • how the board models and promotes diversity best practices
  • Governor recruitment, induction, development and succession planning
  • the role, contribution and influence of the governance professional
  • governor, president, governance professional and senior management team dynamic and effective working relationships
  • board interaction with students and stakeholders

Findings and follow-up

The examiner should:

  • present the review as a report to your board of directors
  • have an open discussion with your board about findings and recommendations

Board members are responsible for:

  • implement the recommendations through an action plan with a clear timeline
  • review the plan regularly

Don’t forget to think about the capacity of the board and whether support will be needed to move the change forward.

Share exam results

Transparency and accountability are key to ensuring public confidence in how a charity is run and in the Seven Principles of Public Life.

Boards are required to disclose when an external review was conducted and by whom in their annual report and financial statements.

In addition, it is recommended that an overview of the review be available on your organization’s website, for example in the annual report. This overview should contain:

  • a summary of the exam results
  • highlights of your action plan, with updates following the annual governance self-assessment

You must invite your reviewer to comment on the summary of review results before publication.

The Ministry of Education (DfE) may have discussions with you about:

  • the results of your governance review
  • the progress of the action plan to identify good practices that can be shared with the governing bodies of other establishments
  • how to best support you in the areas of development

Return

To provide feedback on these tips, please contact: EF[email protected]

Further reading and resources

Charity Committee

The essential trustee: what you need to know, what to do

Conflicts of interest: a guide for directors of charities

Department of Education

Help and support for colleges (includes active support available from the EF Commissioner)

Higher Education Corporations and Higher Education Corporations: Guide to Governance

White paper on skills for employment

Education and Skills Funding Agency

Education and Skills 2021 to 2022 (College) Funding Terms

College Accounts Department

Governance codes

Charities Governance Code (CGC Steering Committee)

Code of Good Governance for Anglophone Colleges (Association of Colleges)

UK Corporate Governance Code (Financial Reporting Council)

Higher Education Governance Code (University Chairs Committee) (note that this is not one of the codes prescribed by ESFA financing conditions)

Governance review tools and guidance

Charity Governance Code diagnostic tool (CGC Steering Group)

Guidance Note – Conducting Externally Facilitated Effectiveness Reviews (College Development Network, Scotland)

Board Assessment in the Charitable Sector (Chartered Governance Institute)

Model Charitable Board Evaluation Questions (Chartered Governance Institute)

The board assessment process – visual aids (Chartered Governance Institute)

The virtuous circle of good charitable governance (Chartered Governance Institute)

Governance Reviews (NCVO Knowhow)

Governance Reviewers

Code of Practice for Board Reviewers (Chartered Governance Institute)

Shirlene J. Manley