Special Report 112 – Financial governance and reporting in education and training boards
Published on 15 March 2021
Education and training boards (ETBs) manage and operate second-level schools, further education colleges, community national schools and a range of adult and further education centres delivering education and training programmes.
Under provisions of the Education and Training Boards Act 2013, 16 ETBs were established on 1 July 2013 when the 33 predecessor vocational education committees (VECs) were dissolved. Three ETBs directly replaced three VECs. Most ETBs took over the services previously provided by two, or in some cases three VECs. In addition, responsibility for further education and training for the purposes of employment transferred to the ETBs from SOLAS, together with a national network of 16 training centres.
The objective of the rationalisation process was to coordinate first and second level education with further education and training programmes and to position the sector for future development.
In 2018, aggregate expenditure incurred by ETBs was €2,095 million, over half of which related to remuneration of circa 32,000 staff. ETBs receive the majority of their funding from the Department of Education (the Department) and SOLAS.
The typical structure of an ETB includes the board and an executive team. The board is responsible to the Minister for the operation and proper functioning of the ETB. The executive team typically consists of a chief executive, a director of schools, a director of organisational support and development and a director of further education and training.
Given the scale of operations of the ETB sector, and the very significant changes in their structure and responsibilities, a review of financial management by ETBs was considered timely.
The examination drew on a framework developed for the assessment by public sector bodies of their financial management systems, referred to as the financial management maturity model (the model) which is built around five key themes.1 The model identifies five levels of maturity. (The characteristics of each maturity level are set out in paragraph 1.7.)
1 The key themes identified in the model are financial governance and leadership, financial planning, financial information for decision-making, financial monitoring and forecasting and financial and performance reporting.
Special report 101 Financial Management Maturity Model: A Good Practice Guide was published by the Comptroller and Auditor General in July 2018.
This report presents the findings of an examination carried out in a sample of five ETBs involving the application of two themes from the model, namely: financial governance and leadership; and financial monitoring and forecasting. Boards were asked in respect of each theme at what level they believed their ETB should be operating. Senior managers were also asked for their assessment of the level they were achieving. The result was that senior managers assess that, in general, they are underachieving somewhat relative to the level to which boards aspire.
Figure 1 provides a summary of the results following application of the model to the selected ETBs.
The examination found
- There was inconsistency between the boards examined in relation to the most appropriate level of financial maturity, as varying levels of maturity were considered appropriate.
- The format of the financial statements for the ETB sector does not comply with generally accepted accounting practice. The accounts are largely cash based, and important information — for example, the value of assets owned — is not included. The format of accounts is determined by the Department and is structured to reflect the current funding and system arrangements in ETBs. The Department intends that the move to financial management shared services will support better financial reporting arrangements for ETBs. In the interim, some improvements in the disclosure of properties used have been made in the templates for ETB financial statements.
- Currently, ETBs operate largely on legacy financial systems which are inadequate for organisations of their size and complexity. Little progress has been made on developing appropriate financial systems including the development of ICT systems for ETBs on a ‘shared services’ basis.
- Suitable performance indicators are a critical element in the assessment of the extent to which an organisation is achieving its key business objectives. SOLAS provides funding to ETBs under a performance delivery agreement which specifies funding and the associated performance indicators for further education and training programmes. By the end of June 2020, the Department had put in place performance delivery agreements with each ETB. Performance delivery agreements set out the key principles to be adhered to in relation to financial management/governance and corporate governance and accountability between the Department and an ETB. These agreements note that an ETB’s service plan sets out the core activities and services to be delivered by the ETB in the year.
- The level of internal audit resources available to ETBs is limited. A number of boards concluded that the resources available were not adequate for organisations of their size and complexity. The insufficient staffing complement was compounded by the inability of the ETBs’ internal audit unit to recruit and retain staff. While the number of staff in the unit has increased from four at the end of 2018 to nine in 2020, the City of Dublin ETB is also now within its remit having previously had its own audit arrangements.
- A number of issues in relation to how ETB boards operate need to be addressed by the Department. Attendance at board meetings could be improved. There are 21 members on each ETB board and even though meetings are held consistently with a quorum (i.e. 12 or more members), full attendance is not happening. In some instances, non-attendance at meetings over a consecutive period of six months has triggered automatic resignation.
- The Education and Training Board Act 2013 sets out how boards of ETBs are to be composed, including member representatives of local authorities, staff, parents and bodies nominated by the Minister. The review found that the level of financial management skills and experience at board level was variable and that although training was provided to board members in 2017, financial management was not a significant part of the training provided.
- Board members often receive a large volume of information which is difficult to navigate. The financial information included in board papers is typically a one-page document which does not include any narrative information to explain the figures therein.
The examination identified instances of good practice in a number of areas in the financial governance and reporting systems in place in the sampled ETBs. These examples of good practice when applied across the sector would generally improve the financial governance and reporting practices of ETBs.
The rationalisation and reform programme of the ETB sector has been on-going for over six years. The reform programme included projects associated with enhancing financial management and ICT systems in the sector given the deficiencies in the financial information and IT systems inherited from VECs. However, progress has been slow in the development of ICT systems on a ‘shared services’ basis, and in streamlining reporting arrangements to facilitate enhanced oversight by the Department. Also, no significant changes have been made in the format of the financial statements of ETBs, which in its current format is cumbersome, difficult to follow and does not comply with up-to-date accounting practice.