The government identified that there is 'significant scope for greater efficiency' in the further education (FE) sector and confirmed that 'major reform of post-16 education and training institutions is now necessary'.
What are Area Reviews?
To achieve this, the Department for Education and the Department for Business Innovation and Skills (BIS) have initiated the Area Review process with a focus on FE and sixth form colleges.
The aim of Area Reviews is to 'provide an opportunity for institutions and localities to restructure', with a view to them becoming more operationally and financially efficient and achieve greater specialisation. It proposed that the sector will move 'towards fewer, often larger, more resilient and efficient providers'.
How will it work?
The Area Reviews are being led by steering groups made up of stakeholders, including the Chair of Governors of each college, in the area subject to the review. Steering groups are conducting an analysis of the structure of institutions and localities, and considering possible options which may help achieve financial and operational streamlining such as mergers, collaborations, sharing of resources and increased use of technology.
Following each review, the steering groups make recommendations for change to each college. The colleges are expected to finance the implementation of the recommendations themselves wherever possible, but there will be a restructuring facility administered by the Treasury available where alternative funding for the changes cannot be secured.
How to Make the Most of an Area Review and what to Consider
Although the Area Review process is compulsory, FE colleges should use it to take advantage of the opportunities that the process may provide.
Our recommendations are:
- Engage in the process
Governing bodies should be prepared to fully engage in the Area Review process. We suggest holding a meeting once an institution has been notified of the timescale of the Area Review to consider the strengths and weaknesses of the relevant institution, areas for change and the desired outcome of the process (bearing in mind that that some change and restructuring is inevitable).
By having these discussions at an early stage, the representatives of the college who attend the initial meetings and take part in the steering group will be better prepared and more likely to be able to influence the discussions in a way that can achieve the desired outcome for the institution.
- Be candid
Governors should be candid when analysing the strengths and weaknesses of their college. They should consider the college's financial position, the current and future demand for post-16 education in the area, its estate and the performance of the institution. As charity law trustees, Governors have an obligation to act in the best interests of their college and must avoid exposing its assets, beneficiaries or reputation to undue risk. Governors should carefully consider their current position and the positive or negative effects of any changes on their beneficiaries.
- Informal discussions
Governors should consider the strengths and weaknesses of other FE providers within the same area. Other institutions may have similar objectives and collaboration, in some form, may achieve the economies of scale and efficiency that the government is aiming for. Governors may want to consider entering into informal discussions with other institutions prior to Area Reviews with a view to being able to make informed proposals to the steering group and influencing the process, so that the Governors have 'buy in' to the recommendations that are eventually made.
- Represent
There has been some criticism of how steering groups are operating in practice due to their size. An individual steering group could have up to 45 members, so it is important to ensure that the Governor (usually the Chair) who is representing the college is clear about what the institution wants to achieve from the Area Review, what the priorities are and is able make the college's voice heard.
- Report back
Thought should be given to how a college's representative will report back to the Governors and other stakeholders on the progress of an Area Review. The importance of effective stakeholder engagement and ensuring that all those with interest in the review have the opportunity to input has been highlighted by BIS. Stakeholder and Governor meetings should take place at appropriate times during the Area Review process, and should encourage discussion of the relevant issues to allow the representative to feedback and raise further ideas with the steering group.
Do institutions have to accept the recommendations made by Area Reviews?
Ultimately, Governors are solely responsible for the operation and strategy of their institution and cannot be forced to adopt the recommendations of the steering group. As charity law trustees, Governors should consider the recommendations alongside their responsibilities to ensure that the institution achieves the best possible outcomes for its beneficiaries.
The guidance stipulates that 'in considering the outcomes of reviews, it is important that college governors give careful weight to the long term stability of their institution'. If Governors do not implement the recommendations, they must be able to justify this decision on this basis (and evidence it through detailed minutes) and cannot reject them (without leaving themselves at risk of intervention by the Secretary of State) where doing so will expose the college to undue risk and possible collapse.
Although Area Reviews are compulsory, active participation in the process should ensure that the final recommendations made to each college are not unexpected and in many cases there are positive drivers for change which will assist the college in achieving its objects and further enhancing the student experience.
For further information please contact a member of our Charity Law team, or complete the form below.