Guidance

College requirements for novel, contentious and repercussive transactions

Updated 12 April 2023

Applies to England

Purpose

1: The purpose of this publication is to help colleges:

• understand the concept of novel, contentious and repercussive (NCR) transactions
• ensure that when situations arise when a college is considering entering into a financial transaction that is novel, contentious or repercussive that the proper factors are considered and consents obtained.

2: The guidance is one of a series of “bite size” guides issued by the Education and Skills Funding Agency (ESFA) following the decision of the Office for National Statistics (ONS) in November 2022 to classify the English further education (FE) college sector to central government for the purposes of national accounts.

Status

3: This document explains requirements for colleges and their subsidiaries, which arise from their status as central government bodies, as well as providing guidance in respect of those requirements. The overall requirements for all central government bodies are set out in HM Treasury’s Managing Public Money. This publication seeks to explain those requirements with regard to NCRs in the context of the FE college sector.

4: The requirements set out in this publication will remain in force until such time as it is withdrawn or superseded.

Who is this publication for?

5: This guidance is primarily for use by:

• college principals/accounting officers, chief executives, and finance directors
• college governors as charity trustees Colleges include further education colleges, sixth form colleges and designated institutions under the Further and Higher Education Act 1992 (as amended). The guidance also covers their subsidiaries (i.e. references to “colleges” in this guide should be taken to mean “colleges and their subsidiaries”).

College internal and external auditors may find this guidance helpful in planning their work.

It is our intention to publish a College Financial Handbook (CFH) in due course. The CFH will cover matters set out in the bite size guides as well as other material.

Background

6: When ONS determined that English colleges were to be classified to the central government sector, this decision meant that colleges would be required to follow the overall financial control framework for all central government bodies, Managing Public Money (MPM). MPM provides a framework of financial oversight, whereby the majority of financial decision-making is delegated to operational leadership in organisations. However, there are certain classes of transactions where decision-making is never delegated and this includes transactions that are novel, contentious or repercussive.

7: This restriction does not mean that all such transactions are forbidden, only that the college does not have the authority to enter into them without permission from DfE. Consequently, all such transactions must always be referred to DfE for approval, and the request must be made before the transaction occurs. DfE may refer such requests to HM Treasury for approval, so colleges should allow sufficient time for proposals to be considered.

Definitions

8: The concept of a novel, contentious or repercussive transaction may be new to college staff, and it would not be practical to set out an exhaustive list of examples.

• Novel transactions are those of which the college has no experience or are outside its range of normal business.
• Contentious transactions are those that might cause criticism of the college by Parliament, the public or the media.
• Repercussive transactions are those that may have wider financial implications for the sector or which appear to create a precedent.

9: There is no financial threshold in relation to novel, contentious or repercussive financial arrangements; all such transactions require approval, regardless of value. Further, colleges should assess these matters objectively: if a transaction could reasonably be considered to be novel, contentious or repercussive, then it must be treated as such.

Consideration

10: Given the potentially wide range of transactions that could, potentially be considered novel, contentious, or repercussive it is not possible to list the series of points that would need to be considered when assessing the permissibility of a proposed transaction. Each instance must be considered on its own merits, taking into account factors such as financial exposure, value for money, reputational risk and propriety. Colleges are therefore advised to frame their requests for approval in terms of a business case that sets out all the pros and cons, risks and opportunities. If further information is required, then DfE will approach the college concerned, but providing the fullest possible information at the outset will reduce the risk of delay.

DfE approval process

11: Colleges should use the DfE college approvals form to request permission for any transaction that is considered novel, contentious or repercussive. The proposed transaction must not be entered into until the college has received documented permission from DfE.