HEFCE

M14/97

July 1997

Code of Best Practice for Members of the Higher Education Funding Council for England

Explanatory Notes

1. At its meeting on 21 September 1994, the Board of the HEFCE agreed to adopt the 'Code of Best Practice for Members of the Higher Education Funding Council for England'. This was based upon a model code issued by the Treasury in response to the Cadbury Report and a series of Public Accounts Committee reports.

2. The Treasury issued a revised model code in February 1997, largely to reflect the Nolan Committee's recommendations in its first report, 'Standards in Public Life'. The Board has amended its code of best practice in the light of the revised model code. The amendments were formally adopted by the Board at its meeting on 14 May 1997.

Code of Best Practice for Members of the Higher Education Funding Council for England

1. This document sets out a revised code of best practice for Board members of the Higher Education Funding Council for England (HEFCE). It is based upon a model issued by the Treasury in June 1994 and updated in February 1997. Modifications taking account of the Council's own characteristics and circumstances have been agreed with the Department for Education and Employment (DfEE), the HEFCE's sponsor department.

Public Service Values

2. The Board and its Executive must at all times:

Observe the highest standards of impartiality, integrity and objectivity in relation to stewardship of public funds and management of the Council.
Comply fully with the principles of openness, and comply with all reasonable requests for information from Parliament, users of services and individual citizens.
Be accountable to Parliament, users of services, individual citizens and staff for the activities of the Council, its stewardship of public funds and the extent to which key performance targets and objectives have been met.
Maximise value for money through ensuring that services are delivered in the most efficient and economical way, within available resources, and with independent validation of performance wherever practicable.

Relationship with the Sponsor Department

3. The Secretary of State for Education and Employment is answerable to Parliament for the policies and performance of all public bodies sponsored by the DfEE, including their use of resources and the policy framework within which they operate. The respective roles of the DfEE and the Council are set out in the Management Statement. This is supplemented by the Financial Memorandum specifying the terms on which the Council receives and spends its funds.

Role of the Chairman

4. Communications between the Board and the Secretary of State will normally be through the Chairman, except where the Board has agreed that an individual member should act on its behalf. Nevertheless, individual members have the right of access to Ministers on any other matter which they believe raises important issues relating to their duties as Board members. In such cases, the agreement of the rest of the Board would normally be sought.

5. Day-to-day business between the Council and the DfEE will be conducted by the Chief Executive and other members of staff.

6. The Chairman should ensure that all Board members, when taking up office, are fully briefed on the terms of their appointment, and on their duties and responsibilities. They should also be given a copy of this Code of Best Practice; other relevant background material such as the Council's Management Statement and Financial Memorandum; its latest corporate plan and annual reports and accounts; the Non-departmental Public Bodies Accounting Officer Memorandum; notes describing the Council's organisational structure and statutory basis of operation; and the rules and procedures of the Board. The Chairman should encourage new Board members to attend an induction course on the duties of Board members of public bodies, or some other suitable induction programme.

7. The Chairman has particular responsibility, with the Chief Executive, for providing effective strategic leadership on matters such as:

Formulating the Board's strategy for discharging its statutory duties.
Representing the views of the Board to the general public.
Ensuring that the Board, in reaching decisions, takes proper account of guidance provided by the Secretary of State and the DfEE.
Encouraging high standards of propriety, and promoting efficient and effective use of staff and other resources throughout the organisation.
Providing an assessment of performance of individual Board members, on request, when they are being considered for reappointment to the Board or appointment to the board of another public body.

8. The Chairman should ensure that the Board meets at regular intervals throughout the year; and that minutes of meetings accurately record decisions taken and, where appropriate, the views of individual Board members.

Corporate Responsibilities of Board Members

9. Board members have corporate responsibility for ensuring that the Council complies with any statutory or administrative requirements for the use of public funds. Other important responsibilities of Board members include:

Establishing the overall strategic direction of the organisation within the policy and resources framework agreed with the Secretary of State.
Ensuring that the Council follows the principles of openness, which include giving prompt responses to public requests for information.
Ensuring that the Council operates sound environmental policies and practices.
Ensuring that high standards of corporate governance are observed at all times.
Overseeing the delivery of planned results by monitoring performance against agreed strategic objectives and targets.
Ensuring that, in reaching decisions, the Council has taken into account any guidance issued by the DfEE.
Ensuring that the Council operates within the limits of its statutory authority; within the limits of the Council's delegated authority agreed with the DfEE; and in accordance with any other conditions relating to the use of public funds.

10. The Council is established under statute (the Further and Higher Education (FHE) Act 1992) and has corporate responsibility for all actions taken by Board members, including any wrongful ones. This means that, if judgement is made against the Board, any financial settlement would normally be met from the Council's funds rather than from the personal assets of individual Board members.

Responsibilities of Individual Board Members

11. Individual Board members should also be aware of their wider responsibilities as Board members. Like others who serve the public, they should follow the seven principles of public life set out by the Committee on Standards in Public Life (the Nolan Committee). These are given at Annex A. Board members must:

Undertake on appointment to comply at all times with this Code of Best Practice and with rules relating to the use of public funds.
Act in good faith and in the best interests of the Council.
Not misuse information gained in the course of their public service for personal gain or for political purposes, nor seek to use the opportunity of public service to promote their private interests or those of connected persons, firms, businesses or other organisations.
Ensure that they comply with the Board's rules on the acceptance of gifts and hospitality.

12. Board members are expected not to occupy paid party political posts or hold particularly sensitive or high profile unpaid roles in a political party. However, part-time members are free to engage in political activities, provided that they are conscious of their general public responsibilities and exercise a proper discretion, particularly in regard to the work of the Council. On matters directly affecting that work, they should not make political speeches or engage in other political activities. Full-time Board members should abstain from all controversial political activities. However, these restrictions do not apply to local councillors or to peers in relation to their conduct in the House of Lords.

13. Although any legal proceedings initiated by a third party are likely to be brought against the Council, in exceptional cases proceedings (civil or criminal) may be brought against the Chairman or other individual Board members. For example, a Board member may be personally liable if he or she makes a fraudulent or negligent statement which results in loss to a third party. Board members who misuse information gained by virtue of their position may be liable for breach of confidence under common law or may commit a criminal offence under insider dealing legislation.

14. However, individual Board members who act honestly, reasonably, in good faith and without negligence should not normally incur any liability in an individual capacity, provided they are acting in furtherance of their Board functions.

15. Under the terms of appointment set out in Schedule 1, Section 4 of the FHE Act, the Secretary of State is empowered to remove a Board member from office if he or she is absent from Board meetings for longer than six consecutive months without the Board's permission, or is unable or unfit to discharge the functions of a Board member.

Professional Advice

16. Board members may wish to seek legal or other independent professional advice in the furtherance of their duties. Normally they should consult the Council's legal advisers. However, if they consider it necessary to take independent advice, they will be entitled to do so at the Council's expense on condition that the Chairman or Chief Executive is consulted beforehand, and subject to a limit of £10,000 in any one instance. Expenditure in excess of this sum may only be incurred with the prior approval of the Board.

Financial Interests of Board Members

17. Board members should declare any personal or business interests which may conflict with their responsibilities. Guidance on the acceptance of gifts, hospitality and awards is given at Annex B. Guidance on declaring and registering interests is at Annex C.

Delegation

18. With the exception of the Chief Executive, Board members serve on a part-time basis. To the extent permitted by the FHE Act, responsibility for day-to-day matters is delegated to staff so far as is practicable, within a clearly understood framework of control.

19. The Board may also decide to delegate, where it has power to do so, responsibility for specified matters to individual members or committees of the Council. In February 1993, the Board adopted a scheme of delegation to the Chairman and the Chief Executive, covering the Council's administrative budget, allocation of funds within budgets agreed by the Board, and approvals required under the Financial Memorandum between the Council and institutions.

Strategic Planning and Control

20. The Board is responsible for overseeing the production of a corporate plan. Preparing the corporate plan provides an opportunity for the Council to determine its key strategic objectives and targets; and to agree with the Secretary of State or officials on his or her behalf, the policy and resources framework within which the Council will discharge its duties.

Openness and Responsiveness

21. Board members and the Executive should conduct all their dealings with the public in an open and responsible way. They should take account of the Standard of Best Practice for Openness in Executive NDPBs and NHS bodies in the 'First Report of the Committee on Standards in Public Life' (Cm 2850-I). Wherever possible, the Board should provide for access to records of their decisions and should publicise the arrangements made.

22. Board members are responsible for providing Parliament (including its Select Committees) and the public with as full information as may be reasonably requested concerning their policy decisions and actions. They should be able to demonstrate that they are using resources to good effect, with probity, and without grounds for criticism that public funds are being used for private, partisan or party political purposes. Board members and Council staff should conduct all their dealings with the public in an open and responsible way.

Accountability for Public Funds

23. Board members have a duty to ensure that public funds which for this purpose include all forms of receipts from fees, charges and other sources are properly safeguarded. They must ensure that at all times the Council conducts its operations as economically, efficiently and effectively as possible, with full regard to the relevant statutory provisions and to relevant guidance in Government accounting.

24. Board members are responsible for ensuring that the Council does not exceed its powers or functions, which may be defined in statute or otherwise, or through limitations on its authority to incur expenditure. Members are normally advised on these matters by the Chief Executive and the Council's legal advisers.

Annual Report and Accounts

26. As part of its responsibilities for the stewardship of public funds, the Board should ensure that a full statement of the use of such resources is included in the annual report and accounts. These accounts should be prepared in accordance with the Accounts Direction issued by the Secretary of State for Education and Employment, and such other guidance as may be issued, from time to time, by the DfEE and the Treasury.

27. The Council's annual report and accounts should be well publicised. The annual report should contain a summary of the annual accounts and details of how to obtain the full accounts. A statement by the auditors should be included in the summary to confirm that it is consistent with the annual accounts. It should also state whether the report on the annual accounts is qualified and provide details if this is the case.

28. The annual report should:

provide a full description of the Council's activities
state the extent to which key strategic objectives and agreed financial and other performance targets have been met
list the names of the current Board members and senior staff
give details of remuneration of Board members and senior staff in accordance with Treasury guidance
contain information on access to the register of members' interests.

The Role of the Accounting Officer

29. The Chief Executive has responsibility, under the Board, for the overall organisation, management, and staffing of the Council and for its procedures in financial and other matters, including conduct and discipline. This involves promoting by leadership and example, the values embodied in the Nolan Committee's seven principles of public life. Board members should support the Chief Executive in undertaking this responsibility.

30. The Chief Executive is the Council's designated accounting officer. He is responsible to Parliament and the accounting officer of the DfEE for the resources under his control. He has personal responsibility for the propriety and regularity of the public finances for which the Council is answerable; for keeping proper accounts; for prudent and economical administration; for avoiding of waste and extravagance; and for the efficient and effective use of all the resources in the Council's charge. The accounting officer has a responsibility to see that appropriate advice is tendered to the Board on all these matters.

31. More detailed guidance on the role of an accounting officer is set out in the NDPB Accounting Officer Memorandum, which covers appearances before the Public Accounts Committee of the House of Commons. All Board members should ensure that they have a copy of this document. The Treasury's handbook 'Regularity and Propriety', describes what these concepts mean in a financial context. Although the handbook is intended primarily for accounting officers, Board members should also familiarise themselves with it.

Audit

32. The terms of reference and current membership of the Council's Audit Committee are attached at Annex D.

The Council as Employer

33. The Board should ensure that:

The Council complies with all relevant employment legislation, and that it employs suitably qualified staff who will discharge their responsibilities in accordance with the high standards expected of staff employed by public bodies. All staff should be familiar with the HEFCE's main aims and objectives.
The Council adopts management practices which use resources in the most efficient and economical manner.
The Council's rules for recruiting and managing staff provide for appointment and advancement on merit, on the basis of equal opportunity for all applicants and staff. In filling senior staff appointments, the Board should satisfy itself that an adequate field of qualified candidates is considered, and should always consider the merits of full open competition, which should normally be used for recruitment of external candidates.
The Council's Board and its staff have access to expert advice and suitable training opportunities to enable them to exercise their responsibilities effectively.

36. The Board will adopt a code of conduct for its staff using the model issued for executive NDPBs by the Cabinet Office in August 1996, subject to any modifications that may be necessary - and that are agreed with the DfEE - to take account of the Council's own particular characteristics and circumstances. This will cover arrangements to enable staff to raise concerns about propriety with a nominated official in the first instance and subsequently, if necessary, with a nominated DfEE official.

37. The Board has a responsibility to monitor the performance of the Chief Executive and other senior staff. Where the terms and conditions of employment of the Chief Executive and other senior members of staff include an entitlement to be considered for performance-related pay, and where such payments are assessed by Board members, the Board should ensure that it has access to the information and advice required to make the necessary judgements.

Annex A

The Seven Principles of Public Life Outlined in 'Spending Public Money: Governance and Audit Issues', (Cm 3179), March 1996.

The following seven principles of public life were set out by the Committee on Standards in Public Life (the Nolan Committee) for the benefit of all who serve the public.

Selflessness

Holders of public office should take decisions solely in terms of the public interest. They should not do so in order to gain financial or other material benefits for themselves, their family, or their friends.

Integrity

Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might influence them in the performance of their official duties.

Objectivity

In carrying out public business, including making public appointments, awarding contracts, or recommending individuals for rewards and benefits, holders of public office should make choices on merit.

Accountability

Holders of public office are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office.

Openness

Holders of public office should be as open as possible about all the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.

Honesty

Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.

Leadership

Holders of public office should promote and support these principles by leadership and example.

Annex B

Acceptance of Gifts, Hospitality and Awards

1. The Council is responsible for allocating significant sums of public money.

2. It is imperative that Board members should maintain high standards of propriety and professionalism if they are offered gifts, hospitality or awards.

3. Some Board members may spend time with representatives of institutions and other organisations where it is normal business practice or social convention to offer gifts, hospitality or awards. Offers of this kind can place members in a difficult position since to refuse may cause misunderstanding or offence; but to accept may give rise to questions of impropriety or conflict of interest, or to criminal liability.

4. Board members may not accept any benefit as an inducement or reward:

For taking any action (or specifically not taking action) in his or her official capacity as a Board member.
For showing favour (or disfavour) to anyone in his or her official capacity as a Board member.

5. The guiding principles are:

The conduct of individuals must not create suspicion of any conflict between their official duty and their private interest.
The actions of individuals in their official capacity must not give the impression (to any member of the public, to any organisation with whom they deal or to their colleagues) that they have been (or may have been) influenced by a benefit to show favour or disfavour to any person or organisation.

Gifts

6. Gifts other than of token value should generally be refused.

7. If members have any doubts about whether a gift should be refused (it is accepted, for example, that refusal of a gift may cause offence), they should consult the Secretary who at his discretion may discuss the matter with the Chairman.

8. If the Secretary considers that a gift cannot be used to support the Council's business, he may authorise retention of the gift by the individual. Alternatively, if the individual does not wish to retain the gift, arrangements may be made for the gift to be stored until disposal, for example through a local charity.

9. Board members should record any gifts accepted in the central register held by the Secretary. Any Board member with a query about the contents of the register should direct it to the Secretary.

Hospitality

10. It is accepted that Board members may receive hospitality from the head or senior members of an institution; that they may attend as part of their official function an event organised by another body for promotional or influential purpose; that they are sometimes offered a nominal fee for presenting a paper or speech at a conference; and may receive the occasional invitation to a cultural event.

11. Offers of hospitality that exceed the normal (that is, occasional lunches or dinners while visiting an institution) should in general be refused. The following items should be avoided:

Hospitality offered instead of fees for broadcasts, speeches, lectures or other work done.
Inducements which could lead to a contractual relationship between the Council and a supplier or consultant.
Substantial offers of social functions, travel or accommodation.
Frequent acceptance of meals, tickets and invitations to sporting, cultural or social events, particularly from the same source.

12. If Board members have any doubt about whether to accept hospitality they should refer the matter to the Secretary, who in turn may discuss it with the Chairman.

13. If, exceptionally, the Secretary agrees that the circumstances justify the normal level of hospitality being exceeded, this will be recorded in the central register.

Awards and Prizes

14. Board members should consult the Secretary if they are approached by an outside organisation offering an award or prize which could in any way be seen to be connected with their role as Board members. Retention of the award or prize will normally be allowed, provided that:

It is offered in recognition of personal achievement.
It is not a gift (see above).

15. In deciding whether the award would give rise to public criticism that it was in fact a gift, members are advised to consider:

The status of the awarding body - for example, whether it is a registered charity.
The regularity of the awards made by the body.
The range of people to whom the awards are given.
The method of selection.
The standing of the selectors.
Any Council dealings with the awarding body. Criticism, however unfounded, might be made if it appears that the award is given with a view to future benefit to the body concerned.

Annex C

Declaration of Interests and Register of Interests

1. The code of best practice requires that the Chairman and other Board members should declare any personal or business interests which may conflict with their responsibilities as Board members.

Declaration of Interests

2. Any Board member who has a material interest, either directly or through a partner, spouse or close relative, in matters likely to be considered by the Board should declare that interest. Such declarations should describe the interest clearly and state whether it carries direct or indirect financial benefits. This requirement also applies to members of senior management.

3. Relevant interests in this context are as follows:

Executive and non-executive directorships of, significant shareholdings in, or employment by, public or private companies likely or possibly seeking to do business with the Council or with any of the institutions it funds.
Ownership or part-ownership of, or employment by, businesses or consultancies likely or possibly seeking to do business with the Council or with any of the institutions it funds.
Remunerated or honorary positions and other connections with HE or FE institutions which may give rise to a conflict of interest.

Register of Interests

4. The code requires that a formal register of interests is established. The register should be made available to the public, on request, at Northavon House. The existence and availability of the register should be noted in the annual report.

5. The register should include details of all directorships and other relevant interests declared by both Board members and members of senior management, as defined in paragraph 3 above.

6. The register should be kept up to date through an annual survey of members' interests, carried out by the Clerk to the Board.

Conduct in Meetings

7. Any Board member who has a clear and substantial interest in a matter under consideration by the Board should declare that interest at any meeting where the matter is to be discussed, whether or not that interest is already recorded in the Register. At the discretion of the Chairman, the member concerned should withdraw from the meeting during the relevant discussion or decision.

Membership of Committees

8. Board members should not accept positions on Council committees or working groups where a conflict of interest is likely to arise.

Annex D

Audit Committee

Terms of Reference

1. The Audit Committee is responsible for:

Reviewing and advising the Council's Accounting Officer, and through him, the Board on:
1. The procedures and processes for ensuring the effectiveness of the financial and other control systems - including those for ensuring the proper protection of assets - within the Council itself and institutions.
2. The scope and effectiveness of the work carried out by the Council's Audit Service, including value for money studies. In this respect the committee will be concerned with the planning, operation and follow-up work arising from the Council Audit Service's annual report.
3. The criteria for the selection and appointment of the Council's audit service, including assessing the adequacy of the resources available for the work required.
4. Any reports from the National Audit Office and the DfEE Audit Service, including the response to any Management Letters.
5. The remuneration of the National Audit Office for the audit work undertaken on the Council's annual accounts.
Providing advice to the Board on such financial issues as the Board requests from time to time.
Providing an annual report of the Committee's work to the Board.

2. The Audit Committee is authorised by the Board to:

Investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
Obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

Membership (at July 1997)

Chairman:: Vacant
Members:: Mrs Joan Bingley, Board Member; Mr Anthony Booth CBE, Board Member; Mrs Deborah Goodwin, Touche Ross; Dr Peter Knight, Vice-Chancellor, University of Central England in Birmingham

See the HEFCE Audit Committee web page for current membership.