80. Considering all of these bad audits, you
are not trying to recover money from any of them?
(Professor Melville) The issue is loss and, of course,
the cost of the litigation. In the case of Bilston College there
is a clear loss to the public purse and, therefore, monies to
be recovered. Generally when things go wrong in colleges we have
a retrospective claw-back system, whereby the money that was overclaimed
by a college or inappropriately claimed is actually paid back,
we claw it back largely by reducing the payments we make to colleges,
so there is no loss to the public purse.

81. It is a considerable worry to me, and I
have no doubt to some of my colleagues, that the external auditing
has been so poor. Do you think if the C&AG and the NAO were
appointed as the external auditors for all these colleges that
your auditing would improve?
(Professor Melville) I think the C&AG knows my
view on this and I would answer yes. I should add, that is a personal
view. It is a matter for the Learning and Skills Council. I do
believe there is some merit in the arrangements that are operated
currently by Audit Scotland in Scotland.

82. Can I go on to the position of the lack
of improvement which has been noted in the current year in the
numbers in Category C, what targets did you set for the next few
years for that figure?
(Professor Melville) I have to say that we have not
set any targets, that will be a matter for the Learning and Skills
Council. It is a matter for their decision as to whether they
continue with the same kind of monitoring process.

83. Would it not be helpful to them, they are
going to come in, after all, next year?
(Professor Melville) They are present in shadow form.
Their Chief Executive was appointed at the beginning of October.

84. The Chief Executive is?
(Professor Melville) John Harwood.

85. Can I go on to a number of questions about
governors, you said that you are doing some training for principals
in financial matters, what training are you giving to governors?
(Professor Melville) First of all, we have produced
a new guide for governors, which came out of a joint review, that
came out in March 2000, and in the first section of that there
is an induction section that is designed for new governors. We
also introduced a requirement that within six months of appointment
all new governors should be trained. We have developed governor
training materials that go alongside the College Governor, which
is the name of the document I referred to. Those materials have
now been distributed to all colleges. We have trainers who will
train governors and we have provided each governing body with
£2,000, in order to buy training from these trainers. We
have put together a fairly comprehensive package. In addition
we are, of course, continuing our review of the quality of governance
as part of our inspection process, so we will be monitoring the
improvement we hope to see from the training. In the last year
we have seen some improvement in the quality of governors.

86. I am glad to hear it. I think you said in
answer to the Chairman at the beginning that it was difficult
to prevent colleges going into Category C, that your main work
was involved in getting them out of it afterwards, which seems
a rather pessimistic viewpoint. Would you agree with me that it
as much the governors' job as the principal's job to make sure
that the college is not going into the Category C?
(Professor Melville) It is very centrally a responsibility
of governors. Within the financial memorandum one of their requirements
is the solvency of the college.

87. That being so, what proportion of the governors
being appointed currently have any prior knowledge of the education
system, apart from their own education?
(Professor Melville) I do not think that is something
that I could answer, even with notice. I suspect it is not something
that we collect[10].

88. Do you think it is important?
(Professor Melville) Let me answer slightly differently.
We have introduced a requirement that there is financial expertise
amongst governors. That, I think, was an important step forward.
We have also introduced a requirement that there are audit committees
and a member of the audit committee has financial expertise.

89. How much time are governors expected to
spend on the job?
(Professor Melville) It has never been defined. It
is an unpaid responsibility. Governors usually meet between three
and six times a year. I have heard it suggested that governors
might spend something of the order of a day a month.

90. Between three and six times a year. If they
are only meeting three times a year it could be four months before
they get the new financial update. That does not give us much
of a chance of picking this sort of thing up quickly.
(Professor Melville) The vast majority of governing
bodies have finance committees.

91. The whole body meets three to six times
a year, the sub-committees will meet more often.
(Professor Melville) Yes.

92. They receive no remuneration, as you say,
what happens to them if something goes wrong?
(Professor Melville) As far as governors are concerned
they are indemnified, provided they have acted in good faith.
There are a number of instances where things have gone wrong seriously
with governors and the governance have actually resigned. The
Secretary of State currently has powers on our recommendation
to dismiss governors. Those powers are being increased. That is
a wider basis on which the Secretary of State can dismiss governors
and also require them, that is directly, to take particular steps
in the new Learning and Skills Act.

93. Since you agreed with my point a moment
ago, that governors are very important in terms of preventing
colleges going into Category C, and since they are not remunerated
and may end up with egg on their faces and loss of face in the
local community, do you think there is anything to be said for
trying to reward governors a bit more and getting a better quality
and working a bit longer on colleges?
(Professor Melville) I think there is a case for better
quality governors and this may well be one of the reasons behind
the small towns effect that is noted in the report. Small towns
notably have more colleges that are Category C and colleges in
small towns tend to have more difficulty getting good governors.
There is an important issue there, and through The College Governors
we have tried to suggest ways in which colleges might recruit
better governors.

94. How do you think they could recruit better
governors?
(Professor Melville) We provide local support through
our regional offices and encourage colleges to work directly with
local professions and to approach some of the larger audit firms
who have partners who live in rural locations and also to advertise.
There is also a requirement that was introduced in 1999 that all
governing bodies have search committees, they have a specific
committee which is charged to search for new governors. We encourage
good practice, and that they keep a number of people in reserve.
On the issue of remuneration, the Government have considered this
on a number of occasions and decided against remunerating governors,
although I believe the College Associations are in favour of this.
The key argument is that school governors are not remunerated
and there is a parallel drawn with them.

95. Do you think you would get a better quality
of governor in general if schools or further educational colleges
were remunerated?
(Professor Melville) I must say I am agnostic on that
issue. I do not think it has been proven that it would follow
for the level of remuneration that might be made. Expenses are
paid to governors. I do not think there is any strong evidence
either way.

96. Do you think it is worth researchingpilot
studies?
(Professor Melville) I think it is rather difficult
in terms of a pilot to pay some governors and not others and then
monitor their performance on quality.

97. You might pay the ones in small towns.
(Professor Melville) I think the key issue is that
this is the Government's decision. The governance of colleges
is something which is reserved within the Education Act to the
Government. Both the previous Government and the current Government
have looked at the issue as has been drawn to their attention
on a number of occasions and decided against that.

98. Can I go on to the cancellation of courses.
There are problems, I know, in some colleges, because of the financial
difficulties that they are in, and they are inclined to, perhaps,
propose an awful lot of courses and then cancel some of them rather
at the last minute when they are not getting sufficient students
to make it worthwhile. Is that a problem that you are particularly
aware of and, if so, what is being done about it?
(Professor Melville) It is something that we are concerned
about, and we do occasionally get complaints from students. We
have a complaints procedure where we deal with individual cases,
so it is an issue. We do not regard it as good practice for colleges
to withdraw at the last moment, although, of course, one of the
important issuesand we have seen one of the case studies
in the reportis that course costing is an important issue.
In one of the examples that is commended by the NAO report, the
college has a rule that it does not run courses where there are
less than 12 students. Colleges always have to balance. The key
issue is that proper notice is given and students are helped to
find alternative programmes either in that college or in another
college. Certainly we do not condone the issue of courses being
withdrawn at the last moment. Where we have complaints we take
this up with the college and try to get the college to recompense
in some way.

99. Are you taking active steps to make sure
that they do combine courses with nearby colleges in that sort
of situation?
(Professor Melville) That is precisely what I am saying.
The issue of collaboration and the issue of trying to run courses
between colleges and sharing recruitment processes is something
that has increased in the climate of collaboration introduced
from 1997 onwards.