Corporate report

Memorandum of understanding between the Department for Education and Ofsted

Published 16 February 2023

Applies to England

© Crown copyright 2023

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Purpose

This Memorandum of Understanding (MOU) has been agreed between the Department for Education and Ofsted in accordance with HM Treasury’s handbook Managing Public Money (“MPM”) (as updated from time to time) and has been approved by HM Treasury. See Annex A for relevant guidance and instructions.

1. Throughout this MOU, the Department for Education is described as the DfE and the Office for Standards in Education Children’s Services and Skills as Ofsted, and, collectively, as ‘we’, with the expressions ‘our’ and ‘us’ being used accordingly.

2. The MOU sets out the broad governance framework within which Ofsted and the DfE operate. It sets out Ofsted’s core responsibilities; describes the governance and accountability framework that applies between the roles of the DfE and Ofsted; sets out how the day-to-day relationship works in practice, including in relation to governance and financial matters; and records other government requirements that apply to Ofsted as an ‘arm’s length body’. It is not intended to cover every detailed aspect of the working relationship between the 2 parties. It is a statement of principles to enable us to discharge our respective responsibilities effectively and to avoid duplication of effort, misunderstanding or unnecessary impact on third parties.

3. The document does not convey any legal powers or responsibilities but both parties agree to operate within its terms.

4. References to Ofsted include all its subsidiaries and joint ventures that are classified to the public sector and central government for national accounts purposes. If Ofsted establishes a subsidiary or joint venture, there shall be a document setting out the arrangements between it and Ofsted agreed with the DfE. At the time of signing, there are no such subsidiaries or joint ventures.

5. Copies of the document and any subsequent amendments have been placed in the libraries of both Houses of Parliament and made available to members of the public on Ofsted.gov.uk.

6. This MOU should be considered in the context of the applicable legislation, the Education and Inspections Act 2006, and relevant sections of other legislation including the Education Act 2005, the Care Standards Act 2000, the Education and Skills Act 2008, the Children Act 2004 and the Childcare Act 2006.

Roles of the DfE and Ofsted

7. The DfE is the ministerial government department responsible for children’s services and education, including early years, schools, higher and further education policy, apprenticeships and wider skills in England. Its responsibilities include oversight of the legislative framework and overarching policy on inspection.

8. Ofsted inspects and regulates services for children and young people and for adult learners as required by legislation. It is a non-ministerial government department. His Majesty’s Chief Inspector (HMCI) is statutorily responsible for Ofsted’s inspection and regulatory work.

9. Ofsted inspections serve many purposes. The Permanent Secretary draws some assurance that funding from the Department is being spent well through regular, independent assessments provided by Ofsted, inspections of the quality of provision in early years providers, schools, further education and skills providers, initial teacher training, local authority children’s services and children’s social care. The inspections determine provider quality using a wide range of criteria established in inspection frameworks. The inspection process, including the professional dialogue with leaders, helps providers to improve. Through Ofsted’s inspections, the Department can monitor educational and care standards and trigger intervention where it is needed. Ofsted inspections also provide assurance to parents, students, commissioners, and responsible bodies. Ofsted also aggregates and shares the insights from inspection. HMCI reports annually to Parliament on the quality of education and care and provides advice to Government. In its regulatory role, Ofsted determines whether certain providers are fit to provide services and takes enforcement action against those that are not. Ultimately, Ofsted’s inspection and regulatory work improves outcomes for children.

10. It is an independent inspectorate and regulator and is accountable to Parliament through HMCI. Ofsted’s remit includes:

  • Early Years and childcare (registration, inspection & enforcement).
  • Maintained state-funded schools and academies (inspection).
  • Further education and skills (inspection).
  • Independent schools (inspection, including at pre-registration) and other independent school inspectorates (quality assurance).
  • Children’s Social Care (register, inspect, enforcement).
  • Local authority children’s services & safeguarding (inspection).
  • Initial Teacher Training (inspection).
  • Secure training and probation education functions (inspection).
  • Schools educating forces families’ children abroad (inspection).
  • Cafcass (inspection).
  • Local area SEND services (inspections).

11. Section 117 of the Education and Inspections Act 2006 sets out that Ofsted is to perform its functions for the general purpose of encouraging:

  • the improvement of activities within HMCI’s remit
  • the carrying on of such activities as user-focused activities; and
  • the efficient and effective use of resources in the carrying on of such activities

12. Ofsted must have regard to a number of matters as set out in the Education and Inspections Act 2006[footnote 1]. Ofsted must also have regard to such aspects of government policy as the Secretary of State may direct[footnote 2].

13. The Act also prescribes the functions of HMCI[footnote 3]. It places a general duty on HMCI to keep the Secretary of State informed about:

  • the quality of activities within HMCI’s remit and (where appropriate) the standards achieved by those for whose benefit such activities are carried out
  • improvements in the quality of such activities and in any such standards
  • the extent to which such activities are being carried on as user-focused activities
  • the efficient and effective use of resources in the carrying on of such activities and services

14. The Act specifies that HMCI must provide information or advice on matters related to activities within HMCI’s remit[footnote 4], if requested to do so by the Secretary of State; and provides HMCI with a power to provide advice to the Secretary of State at any time on any matters connected with any activities within HMCI’s remit[footnote 5]. The Act also gives the Secretary of State a power to assign additional functions to HMCI in connection with activities within HMCI’s remit.[footnote 6]

Matters of common interest

15. Whilst we are separate government departments that operate independently with distinct roles and responsibilities, most of Ofsted’s work relates to education and social care for children and young people, for which policy is made and implemented by DfE.

Implementing the MOU

16. To support the effective working relationship between us we will:

  • Acknowledge each other’s different remits, responsibilities, accountability structures and enabling legislative frameworks.
  • Notify each other in a timely and appropriate way where there is a likelihood of announcements and issues which may impact on each other’s key areas of work or responsibilities. Where these matters are confidential or sensitive, we will communicate this to one another and respect that confidentiality, sensitivity and any legal requirements.
  • Inform each other in a timely and appropriate manner on policy and other developments, engaging in early dialogue on matters that will affect the work of the other. Where these matters are confidential, we will communicate this to one another and respect confidentiality and any legal requirements.
  • Share information about programmes of work that would be of interest to the other, where appropriate in advance of that work starting.
  • Hold regular meetings between all relevant ministers and HMCI to share information and, where appropriate, concerns and enable HMCI to fulfil her responsibilities to ministers.
  • Hold monthly meetings between HMCI and the DfE Permanent Secretary and other senior officials to discuss relevant issues and developments, and to provide and receive updates on the parties’ work.
  • Maintain regular (at least monthly) contact between DfE and Ofsted teams.
  • Support respective correspondence and parliamentary activities, contributing, inputting or redirecting where necessary in line with agreed ways of working.

17. The inspection policy unit in the sponsor department is the primary contact for Ofsted on sponsorship matters, but Ofsted also liaises directly with other officials in relation to its work. The responsible senior civil servant for this relationship is the Director of School Strategy and System Reform. They are the main source of advice to the responsible minister on the discharge of their responsibilities in respect of Ofsted.

18. Ofsted and the DfE will make each other aware of any legal risks or litigation that are likely to have a significant impact on each other’s respective remits or to incur significant reputational damage.

Ofsted’s governance and accountability

19. HMCI reports to Parliament through Ofsted’s Annual Report and Accounts. HMCI is also called to give evidence to the Education Select Committee and the Public Accounts Committee.

20. Ofsted shall operate corporate governance arrangements that, so far as practicable and in the light of the other provisions of this framework document or as otherwise may be mutually agreed, accord with good corporate governance practice and applicable regulatory requirements and expectations.

22. In particular Ofsted should, where applicable, comply with the principles and provisions of the Corporate Governance in Central Government Departments Code of Good Practice (as amended and updated from time to time) to the extent appropriate and in line with their statutory duties or specify and explain any non-compliance in its annual report and accounts. It should also comply with MPM and have regard to the relevant Functional Standards as appropriate and in particular those concerning Finance, Commercial and Counter Fraud.

23. In line with MPM Annex 3.1 Ofsted shall provide an account of corporate governance in its annual governance statement including an assessment of its compliance with the Code with explanations of any material departures. To the extent that Ofsted intends to depart materially from the Code, the DfE should be notified in advance.

The Responsible Minister

24. The Secretary of State for Education can answer for Ofsted’s business in Parliament, in accordance with paragraph 7.9 of MPM.

25. The Secretary of State’s statutory powers in respect of Ofsted are set out in the Education and Inspections Act 2006, which also gives the Secretary of State a power to assign other functions to the board in connection with the performance of the Chief Inspector’s functions. The chair and other board members are appointed by the Secretary of State. Such appointments will comply with the Commissioner for Public Appointments’ Code of Practice for ministerial appointments to public bodies.

26. All such appointments should have regard to the principle that appointments should reflect the diversity of the society in which we live, and appointments should be made taking account of the need to appoint boards which include a balance of skills and backgrounds

27. The Secretary for State is also responsible for the policy framework within which Ofsted operates.

The Accounting Officer

28. HMCI acts as the chief executive of Ofsted. The Principal Accounting Officer (PAO) of HM Treasury designates HMCI as Ofsted’s Accounting Officer (AO) and ensures that they are fully aware of their responsibilities. The PAO issues a letter appointing the AO and setting out their responsibilities. The responsibilities of the AO are set out in Chapter 3 of MPM.

29. HMCI as Accounting Officer (AO) is personally responsible for safeguarding the public funds for which they have charge; for ensuring propriety, regularity, value for money and feasibility in the handling of those public funds; and for the day-to-day operations and management of Ofsted. In addition, they should ensure that Ofsted as a whole is run on the basis of the standards, in terms of governance, decision-making and financial management, that are set out in Box 3.1 of MPM. These responsibilities include the below and those that are set in the AO appointment letter issued by the PAO of the HM Treasury.

30. Responsibilities to Parliament and the public include:

  • signing the accounts and ensuring that proper records are kept relating to the accounts and that the accounts are properly prepared and presented in accordance with any directions issued by the Secretary of State

  • preparing and signing a Governance Statement covering corporate governance, risk management and oversight of any local responsibilities, for inclusion in the annual report and accounts

  • ensuring that effective procedures for handling complaints against Ofsted, in accordance with the Parliamentary and Health Service Ombudsman’s Principles of Good Complaint Handling, are established and made widely known within Ofsted and published on gov.uk

  • acting in accordance with the terms of MPM and other instructions and guidance issued from time to time by the DfE, the Treasury and the Cabinet Office

  • ensuring that as part of the above compliance they are familiar with and act in accordance with:

    • any governing legislation
    • this framework document
    • any delegation letter issued to Ofsted; and
    • any elements of any settlement letter issued to the DfE that is relevant to the operation of Ofsted

  • ensuring they have appropriate internal mechanisms for the monitoring, governance and external reporting regarding compliance any conditions arising from the above documents

  • giving evidence when summoned before the PAC on Ofsted’s stewardship of public funds.

31. Ofsted will operate its statutorily constituted board in line with good standards of corporate governance. Detailed responsibilities of the board are set out in the board terms of reference and corporate governance framework. Board remuneration is disclosed in line with the guidance in the Government Financial Reporting manual (FReM).

Responsibilities to the Board

32. The board determines strategic priorities for HMCI in connection with the performance of her functions, determines strategic objectives and targets relating to such priorities. Performance against strategic priorities is reviewed regularly by the board.

Managing conflicts

33. The AO must take care that their personal AO responsibilities do not conflict with their duties as a board member. In particular, the AO should vote against any proposal which appears to cause such a conflict; it is not sufficient to abstain.

Managing conflicts – strategic matters

34. If the board, or its chair, is contemplating a course of action involving a transaction which HMCI considers would infringe the requirements of propriety or regularity or does not represent prudent or economical administration, efficiency or effectiveness, is of questionable feasibility, or is unethical, HMCI in their role as AO should reject that course of action and ensure that the board has a full opportunity to discuss the rationale for that rejection.

35. Such conflicts should be brought to the attention of the responsible minister as soon as possible.

36. Furthermore, and if agreed with the responsible minister, the AO must write a letter of justification to the chair of the board setting out the rationale for not following the advice and recommendation of the board and copy that letter to the Treasury Officer of Accounts.

37. If the responsible minister agrees with the proposed course of action of the board, it may be appropriate for the minister to direct the AO in the manner as set out in MPM paragraph 3.6.1 onwards.

Managing conflicts – policy and operational matters

38. If HMCI is contemplating a course of action that is in conflict with the responsibilities of the Accounting Officer but nevertheless they believe it to be the right course of action, the AO must write a letter of justification to the responsible minister setting out the rationale and copy that letter to the Treasury Officer of Accounts. The responsible minister should consider the case and, if the minister agrees with the proposed course of action, then the minister should direct HMCI in the manner as set out in MPM paragraph 3.6.1 onwards.

The Board

Composition of the Board

39. The board consists of the chair, HMCI and between 5 and 10 non-executive members who have a balance of skills and experience appropriate to directing Ofsted’s business. The chair designates one board member as the senior non-executive member.

Duties of the Board

40. The board has the following functions:

  • to determine strategic priorities for HMCI in connection with the performance of her functions
  • to determine strategic objectives and targets relating to such priorities
  • to secure that HMCI’s functions are performed efficiently and effectively.

41. The board is to have other functions in connection with the performance of the Chief Inspector’s functions as may be assigned to it by the Secretary of State.

42. HMCI provides the board with all necessary information to fulfil its responsibilities including on changes likely to affect Ofsted’s strategic direction or on the attainability of its statutory targets, and on steps being taken to deal with such changes. Where appropriate, the board will bring such matters to the attention of the responsible minister via the executive team, sponsorship team or directly.

43. In performing its functions, the board is to have regard to:

  • the need to safeguard and promote the rights and welfare of children
  • any matters raised by the Children’s Commissioner with the board or HMCI
  • views expressed by relevant persons about activities within HMCI’s remit
  • levels of satisfaction with such activities on the part of relevant persons
  • the need to promote the efficient and effective use of resources in the carrying on of such activities
  • the need to ensure that actions taken by HMCI in relation to such activities is proportionate to the risks against which it would afford safeguards
  • any developments in approaches to inspection or regulatory action
  • best practice among persons performing functions comparable to those of HMCI

44. In performing its functions, the board must also have regard to such aspects of government policy as the Secretary of State may direct.

45. Ofsted’s chair and board members may serve more than one term on the board. Ofsted’s chair must meet with the Permanent Secretary for an annual discussion of objectives. A performance review must be conducted before the chair may be considered for reappointment.

Board Committees

46. The board may set up such committees as necessary for it to fulfil its functions. As is detailed below, at a minimum this should include an Audit and Risk Committee chaired by an independent and appropriately qualified non-executive member of the board.

47. The board may set up committees to assist its consideration of particular issues, such as audit and risk, but it retains responsibility for, and endorses, final decisions in all areas considered by its committees. The chair should ensure that sufficient time is allowed at the board for committees to report on the nature and content of discussion, on recommendations, and on actions to be taken.

48. The chair should ensure board committees are properly structured with appropriate terms of reference. The terms of each committee should set out its responsibilities and the authority delegated to it by the board. The chair should ensure that committee membership is periodically refreshed and that individual independent non-executive directors are not over-burdened when deciding the chairs and membership of committees.

The Chair’s Role and Responsibilities

49. The chair is responsible for leading the board in the delivery of its responsibilities. Such responsibility should be exercised in the light of their duties and responsibilities as set out in their appointment letter, the statutory authority governing Ofsted, this document, and the documents and guidance referred to within this document.

50. Communications between the Ofsted board and the responsible minister should normally be through the chair.

51. The chair is bound by the Code of Conduct for Board Members of Public Bodies, which covers conduct in the role and includes the Nolan Principles of Public Life.

52. In addition, the chair is responsible for:

  • ensuring the board discharges its statutory duties
  • encouraging high standards of propriety
  • ensuring, including by monitoring and engaging with appropriate governance arrangements, that the board’s affairs are conducted with probity
  • representing the views of the board externally and internally
  • providing for the induction, training and assessment of board members

53. In common with every board member, the chair will have regard to:

  • the need to safeguard and promote the rights and welfare of children
  • any matters raised by the Children’s Commissioner with the board or HMCI
  • views expressed by relevant persons about activities within HMCI’s remit
  • levels of satisfaction with such activities on the part of relevant persons
  • the need to promote the efficient and effective use of resources in the carrying on of such activities
  • the need to ensure that actions taken by HMCI in relation to such activities is proportionate to the risks against which it would afford safeguards
  • any developments in approaches to inspection or regulatory action
  • best practice among persons performing functions comparable to those of HMCI

54. The chair also has an obligation to ensure that:

  • the work of the board and its members are reviewed and are working effectively, including ongoing assessment of the performance of individual board members with regular formal evaluation and more in-depth assessments of individual performance when board members are being considered for re-appointment
  • in conducting assessments the view of relevant stakeholders including employees and the DfE sponsorship team are sought and considered
  • all non-executive directors including the chair continually update their skills, knowledge and familiarity with Ofsted to fulfil their role both on the board and committees. This will include but not be limited to skills and training in relation to financial management and reporting requirements, risk management and the requirements of board membership within the public sector
  • board members are fully briefed on terms of appointment, duties, rights and responsibilities; they, together with the other board members, receive appropriate training on financial management and reporting requirements and on any differences that may exist between private and public sector practice
  • the responsible minister is advised of Ofsted’s needs when board vacancies arise
  • there is a Corporate Governance Framework in place setting out the role and responsibilities of the board consistent with the relevant sections of Government Code of Good Practice for Corporate Governance
  • there is a code of practice for board members in place, consistent with the Cabinet Office Code of Conduct for Board Members of Public Bodies

Individual Board members’ responsibilities

55. Individual board members should:

  • comply at all times with the Code of Conduct for board Members of Public Bodies, which covers conduct in the role and includes the Nolan Principles of Public Life as well as rules relating to the use of public funds and to conflicts of interest
  • demonstrate adherence to the 12 Principles of Governance for all Public Body Non-Executive Directorsas appropriate
  • not misuse information gained in the course of their public service for personal gain or for political profit, nor seek to use the opportunity of public service to promote their private interests or those of connected persons or organisations
  • comply with Ofsted’s rules on the acceptance; of gifts and hospitality, and of business appointments
  • act in good faith and in the best interests of Ofsted
  • ensure they are familiar with any applicable guidance on the role of public sector non-executive directors and boards that may be issued from time to time by the Cabinet Office, HM Treasury or wider government

Ofsted’s funding

56. Ofsted is funded by Parliament and has its own Supply Estimate.

57. As a non-ministerial department, in line with Managing Public Money,[footnote 7] Ofsted has the ability to settle its Spending Review directly with HM Treasury. For administrative efficiency, where relevant Ofsted will work with HM Treasury and DfE on its Spending Review proposals, and any subsequent changes, before formal submission of financial information to HM Treasury.

Delegated authorities

58. Ofsted’s delegated authorities are set out in the delegation letter attached to this framework document. This delegation letter may be updated and superseded by later versions which may be issued by HM Treasury.

59. In line with MPM Annex 2.2 these delegations will be reviewed on an annual basis.

60. Ofsted shall have HM Treasury’s prior written approval before:

  • entering into any undertaking to incur any expenditure that falls outside the delegations or which is not provided for in the non-ministerial department’s annual budget
  • incurring expenditure for any purpose that is or might be considered novel or contentious, or which has or could have significant future cost implications
  • making any significant change in the scale of operation or funding of any initiative or particular scheme previously approved by HM Treasury
  • making any change of policy or practice which has wider financial implications that might prove repercussive or which might significantly affect the future level of resources required
  • carrying out policies that go against the principles, rules, guidance and advice in MPM

Banking and managing cash

61. Ofsted must maximise the use of publicly procured banking services (accounts with central government commercial banks managed centrally by Government Banking).

62. Ofsted should only hold money outside Government Banking Service accounts where a good business case can made for doing so, and HM Treasury consent is required for each account to be established. Only commercial banks which are members of relevant UK clearing bodies may be considered for this purpose.

63. Commercial accounts where approved should be operated in line with the principles as set out in MPM.

64. The AO is responsible for ensuring Ofsted has a banking policy as set out in MPM and ensuring that policy is complied with.

Procurement

65. Ofsted shall ensure that its procurement policies are aligned with and comply with any relevant UK or other international procurement rules and in particular the Public Contracts Regulations 2015.

66. Ofsted shall establish its procurement policies and document these in a Procurement Policy and Procedures Manual.

67. In procurement cases where Ofsted is likely to exceed its delegated authority limit and the procurement is a policy matter, procurement strategy approval for the specific planned purchase must be sought from the DfE. For operational procurement, such as digital systems and property, where Ofsted is likely to exceed its delegated authority, approval must be sought from HM Treasury.

68. Goods, services, and works should be acquired by competition. Proposals to let single-tender or restricted contracts shall be limited and exceptional, Ofsted shall comply with all Cabinet Office spend controls.

69. Procurement by Ofsted of works, equipment, goods, and services shall be based on, a full option appraisal and value for money (VfM), i.e., the optimum combination and whole life costs and quality (fitness for purpose).

70. Ofsted shall:

  • engage fully with government wide procurement initiatives that seek to achieve VfM from collaborative projects
  • comply with all relevant Procurement Policy Notes issued by Cabinet Office
  • co-operate fully with initiatives to improve the availability of procurement data to facilitate the achievement of VfM

71. Ofsted shall comply with the commercial and grants standards. These standards apply to the planning, delivery, and management of government commercial activity, including management of grants in all departments and non-ministerial departments, regardless of commercial approach used and form part of a suite of functional standards that set expectations for management within government.

Risk management

72. Ofsted shall ensure that the risks that it faces are dealt with in an appropriate manner, in accordance with relevant aspects of best practice in corporate governance, and develop a risk management strategy, in accordance with the Treasury guidance Management of Risk: Principles and Concepts.

Counter fraud and theft

73. Ofsted should adopt and implement policies and practices to safeguard itself against fraud and theft.

74. Ofsted should act in line with guidance as issued by the Counter Fraud Function and in compliance with the procedures and considerations as set in in Managing Public Money Annex 4.9 and the Counter Fraud Functional Standard. It should also take all reasonable steps to appraise the financial standing of any firm or other body with which it intends to enter a contract or to provide grant or grant-in-aid. 75. Ofsted should report detected loss from fraud, bribery, corruption and error, alongside associated recoveries and prevented losses, to the counter fraud centre of expertise in line with the agreed government definitions as set out in the Counter Fraud Functional Standard.

Staff

Broad responsibilities for staff

76. Within the arrangements approved by the Treasury Ofsted will have responsibility for the recruitment, retention and motivation of its staff. The broad responsibilities toward its staff are to ensure that:

  • the rules for recruitment and management of staff create an inclusive culture in which diversity is fully valued; appointment and advancement is based on merit; there is no discrimination on grounds of sex, marriage and civil partnership, sexual orientation, race, religion or belief, disability, age or gender reassignment
  • the level and structure of its staffing, including grading and staff numbers, are appropriate to its functions and the requirements of economy, efficiency and effectiveness
  • the performance of its staff at all levels is satisfactorily appraised and Ofsted performance measurement systems are reviewed from time to time
  • its staff are encouraged to acquire the appropriate professional, management and other expertise necessary to achieve Ofsted’s objectives
  • proper consultation with staff takes place on key issues affecting them
  • adequate grievance and disciplinary procedures are in place
  • whistle-blowing procedures consistent with the Public Interest Disclosure Act are in place.

Staff costs

77. Subject to its delegated authorities, Ofsted shall ensure that the creation of any additional posts does not incur forward commitments that will exceed its ability to pay for them.

Pay and conditions of service

78. Ofsted’s staff are subject to levels of remuneration and terms and conditions of service (including pensions) within the general pay structure approved by the Treasury. Ofsted has no delegated power to amend these terms and conditions.

79. If civil service terms and conditions of service apply to the rates of pay and non-pay allowances paid to the staff and to any other party entitled to payment in respect of travel expenses or other allowances, payment shall be made in accordance with the Civil Service Management Codeand the annual Civil Service Pay Remit Guidance, except where prior approval has been given by the department to vary such rates.

80. Staff terms and conditions should be set out in an Employee Handbook, which should be provided to the department together with subsequent amendments.

81. Ofsted shall abide by public sector pay controls, including the relevant approvals process as set out in the Senior Pay Guidance and the Public Sector Pay and Terms Guidance.

82. Ofsted shall operate a performance-related pay scheme that shall form part of the annual aggregate pay budget approved by HM Treasury, where relevant with due regard to the Senior Pay Guidance.

83. The travel expenses of board members shall be tied to the rates allowed to senior staff of the non-ministerial department. Reasonable actual costs shall be reimbursed.

Pensions, redundancy and compensation

84. Compensation scheme rules and pension scheme rules should reflect legislative and HM Treasury guidance requirements regarding exit payments.

85. Ofsted staff shall normally be eligible for a pension provided by PCSPS, Staff may opt out of the occupational pension scheme provided by DfE, but that employers’ contribution to any personal pension arrangement, including stakeholder pension, shall normally be limited to the national insurance rebate level.

86. Any proposal by Ofsted to move from the existing pension arrangements, or to pay any redundancy or compensation for loss of office, requires the prior approval of either Cabinet Office or HM Treasury. Proposals on severance must comply with the rules in chapter 4 of MPM.

Additional funding

87. If the government changes policy direction or requests Ofsted to do something over and above the funding agreed in the Spending Review Settlement letter, then Ofsted is likely to require additional funding. The DfE will set out the nature, scope, and timing of the policy change and/or extra work it wishes Ofsted to undertake.

88. In such cases, Ofsted will provide a detailed breakdown of the projected additional expenditure. DfE must respond to these provisional costs so that Ofsted can determine how, and the extent to which, it is able to respond to the change of policy and/or request, although Ofsted may choose to begin preliminary work on such developments whilst funding is being established.

89. Once agreed, the additional funding will be confirmed in writing by the DfE. The letter should set out the work that Ofsted has agreed to undertake (including outcomes or outputs if relevant), timescales and any additional reporting requirements. The budget for the additional work will either be transferred to Ofsted as part of Main or Supplementary Estimates or invoiced by Ofsted to the DfE. Arrangements for long-term, ongoing funding of these activities will be subject to review at the next Spending Review. Any new requirements may cause the MOU to be refreshed to reflect these changes.

Reporting

90. Ofsted is responsible for contributing its financial information to the Whole of Government Accounts programme, and to the Online System for Central Accounting and Reporting directly to HM Treasury.

91. Ofsted provides information returns directly to the Cabinet Office and publishes on its website a range of information under the transparency guidelines.

92. Ofsted must publish an annual report of its activities together with its audited accounts after the end of each financial year. The accounts should be prepared in accordance with the relevant statutes and specific accounts direction issued by the department as well as the Treasury’s Financial Reporting Manual (FReM).

93. The annual report and accounts must:

  • cover any corporate, subsidiary or joint ventures under Ofsted’s control
  • comply with the FreM
  • outline main activities and performance during the previous financial year and set out in summary form forward plans

94. Information on performance against key financial targets is included within the annual report and accounts and subject to the auditor’s consistency opinion. The report and accounts shall be laid in Parliament and made available on Ofsted’s website, in accordance with the guidance in the FReM.

95. The majority of Ofsted’s budget is allocated directly by HM Treasury and as such, HMCI reports directly to Parliament, laying Ofsted’s annual report and accounts before Parliament each year, as set out in paragraphs 20-23. A significant minority of funding is allocated by DfE, and for this funding, Ofsted is accountable to DfE via specific agreements for these funding streams.

Internal audit

96. Ofsted shall:

  • establish and maintain arrangements for internal audit
  • ensure that any arrangements for internal audit are in accordance with the Public Sector Internal Audit Standards (PSIAS) as adopted by HM Treasury
  • maintain an audit committee of its board in accordance with the Code of Good Practice for Corporate Governance and the Audit and Risk Assurance Committee Handbook.

External audit

97. The Comptroller & Auditor General (C&AG) audits Ofsted’s annual accounts and lays them before Parliament, together with their report.

98. In the event that Ofsted has set up and controls subsidiary companies Ofsted will, in the light of the provisions in the Companies Act 2006, ensure that the C&AG has the option to be appointed auditor of those company subsidiaries that it controls and/or whose accounts are consolidated within its own accounts.

99. The C&AG:

  • will consult Ofsted on whom – the NAO or a commercial auditor – shall undertake the audit(s) on his behalf, though the final decision rests with the C&AG
  • has a statutory right of access to relevant documents, including by virtue of section 25(8) of the Government Resources and Accounts Act 2000, held by another party in receipt of payments or grants from Ofsted
  • will consider requests from departments and other relevant bodies to provide regulatory compliance reports and other similar reports at the commencement of the audit. Consistent with the C&AG’s independent status, the provision of such reports is entirely at the C&AG’s discretion

100. The C&AG may carry out examinations into the economy, efficiency and effectiveness with which Ofsted has used its resources in discharging its functions. For the purpose of these examinations the C&AG has statutory access to documents as provided for under section 8 of the National Audit Act 1983. In addition, Ofsted shall provide, in conditions to grants and contracts, for the C&AG to exercise such access to documents held by grant recipients and contractors and sub-contractors as may be required for these examinations; and shall use its best endeavours to secure access for the C&AG to any other documents required by the C&AG which are held by other bodies.

Exchange of information

101. Where appropriate, and at all times operating in accordance with the requirements of the Freedom of Information Act 2000, the Data Protection Act 2018, the General Data Protection Regulation (GDPR), and any other relevant data protection legislation and/or contractual agreements, we will aim to share information we already hold where this is in the public interest.

102. Where a request for information is received by either party under the Freedom of Information Act 2000 or data protection legislation, the party receiving the request will notify the other party in a timely and appropriate way where there is a likelihood the request may affect their work or responsibilities. We will also consult each other about any disclosure either of us intends to make of any information received from the other party.

103. Confidential information provided by one of us to the other must be transferred, stored and processed securely. Both parties will ensure that adequate and appropriate arrangements are in place to protect the confidentiality and integrity of information provided/shared. Both parties will also ensure that their own arrangements are acceptable to the other.

104. Similarly, the Department and Ofsted will ensure all necessary checks and balances are in place if we are asked by another ministerial department, non-ministerial department, agency or other public body or devolved administration for information we have shared with each other.

Review of this MOU

105. This MOU will be reviewed at least once every 3 years, as agreed by all parties unless there are exceptional reasons that render this inappropriate that have been agreed with HM Treasury and the Principal Accounting Officer of the sponsor department.

Variation and changes to this MOU

106. The DfE and Ofsted may agree at any time to amend this MOU with updates made in the light of experience of its operation in practice. This could include instances of a change in leadership, contracts or established new requirements.

107. Any amendments must be in writing and agreed to by the parties.

Term and termination

108. This MOU shall commence on the date of signature by both parties, and shall continue, with any revisions, unless it is terminated in accordance with paragraph 106.

109. In the case of any disagreements around this MOU, all efforts will be made to negotiate and agree a new MOU within 2 months.

Resolution of disputes

110. Any disputes between the sponsor department and Ofsted will be resolved in as timely a manner as possible. The department will seek to resolve any disputes through an informal process in the first instance. If this is not possible, then a formal process, overseen by the senior sponsor, will be used to resolve the issue. Failing this, the senior sponsor will ask the relevant policy Director General to oversee the dispute. They may then choose to ask the Permanent Secretary to nominate a non-executive member of the department’s board to review the dispute, mediate with both sides and reach an outcome, in consultation with the Secretary of State. Signed:

For DfE The Rt Hon Nick Gibb MP Permanent Secretary

For Ofsted Amanda Spielman His Majesty’s Chief Inspector 2 November 2022

 

Annex A: Guidance

Ofsted shall comply with the relevant sections of the following guidance, documents and instructions.

Corporate governance

Financial management and reporting

Management of risk

Commercial management

Staff and remuneration

General

  1. Section 117(2) of the EA 2006 ↩

  2. Section 117(3) of the EA 2006 ↩

  3. Section 118(1) of the EA 2006 ↩

  4. Section 118(2) of the EA 2006 ↩

  5. Section 118(3) of the EA 2006 ↩

  6. Section 118(4) of the EA 2006 ↩

  7. See paragraph 7.9.2 of HM Treasury publication ‘Managing public money’. ↩

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