Monitoring governing body compliance with the MAA
Under section 65 of the Further and Higher Education Act 1992, we have the power to set terms and conditions to the grants we make to English higher education institutions (HEIs). These terms and conditions are set out in our Memorandum of Assurance and Accountability (MAA) (HEFCE 2017/08).
Amongst other things, the MAA requires the governing bodies of HEIs to use public funds for proper purposes and to achieve value for money from public funds across teaching, research and other activities in the interest of students.
HEFCE monitors compliance with the MAA through our analysis of a range of data supplied to us by HEIs, other intelligence gathered through our engagement with HEIs and assurances given to us by HEIs' governing bodies.
Promoting governing body compliance with the Charities Act 2011
Under section 26 of the Charities Act 2011, we have the duty, as principal regulator for those HEIs which are exempt charities (i.e. charities exempt from registration with the Charity Commission), to do all we reasonably can to promote compliance by governing bodies with their legal obligations in exercising control and management of the administration of the charity. The Charity Commission directly regulates the 19 HEIs which are charities but not ‘exempt’, and also the vast majority of the not-for-profit higher education providers (HEPs) which are registered as charities in the so-called ‘alternative provider’ part of the sector. It also directly regulates most student unions.
The most effective way for HEFCE to consider HEIs’ compliance with their legal obligations as charities is usually to look into any concerns on a case-by-case basis. This is because, although many of the same overriding legal obligations apply to all charities, the precise obligations of each institution will turn on how it is constituted and on what its individual governing documents say.
Senior staff pay in the HE sector
For more than 20 years we have required higher education providers to disclose their vice-chancellors’ remuneration in their annual financial statements, together with information about the remuneration of higher-paid staff and any severance compensation payments made to them.
The 2017 grant funding letter to HEFCE from the Department of Education expressed concern about the upward drift of salaries of some top management in the sector and urged senior leaders to exercise restraint.
It has always been our practice to issue guidance from time to time to the HEIs we regulate and we follow up this guidance in a variety of ways to fulfil our ‘promotion’ duty under the Charities Act (see above). In June 2017, we issued updated guidance on the remuneration of senior staff and on severance pay.
We will routinely follow this up after the next cycle of remuneration committee meetings has taken place to check whether due regard has indeed been given to the guidance in practice.
It is important to note that HEIs are autonomous institutions and also, as charities, are legally obliged to be independent of government control. Neither HEFCE nor the Charity Commission is therefore legally empowered to set salary levels for vice-chancellors or other senior executive staff or to require changes in salaries for specific employees in specific HEIs or HEPs. A change in the law would be needed for us to do that. However, we can and will investigate if the setting of those salaries raises governance issues.