Part 2: Proposals for new initial condition E7 - Effective governance

Retaining current initial conditions in their current form

1. We have considered whether we need to make changes to the initial conditions for management and governance, or we could continue to use the existing requirements to assess providers at registration.
2. The current climate in the higher education sector means that providers are under more financial pressure than ever, and we need to be able to assure ourselves that the providers we register have effective governance arrangements that are ready to respond to these challenges. Taking account of the providers that we now see applying for registration, we think that we can most effectively achieve this with more focused, rules-based, initial requirements – for this, we need to introduce a new initial condition.
3. We considered whether we should retain existing initial conditions E1 and E2 alongside introducing new requirements through initial condition E7. However, as there are overlaps between the coverage of the proposed and current requirements, this would create undue burden for providers. Our initial view is that replacing initial conditions E1 and E2 with our proposed initial condition E7 would allow us to avoid duplication of requirements in this area. It also means we could remove the requirement for providers to produce self-assessments as part of their application, helping to manage the volume of documentation providers are required to submit as part of their registration application.
4. As we are proposing to introduce E7 as an initial condition only, there would be no impact on the requirements for registered providers. It is therefore important to retain ongoing conditions E1 and E2 to ensure we continue have management and governance requirements in place for registered providers.

Making changes to the existing conditions but not replacing them

5. We considered if we could achieve our aims by making changes to the existing conditions. This could be through changes to the wording of requirements in the conditions, or by issuing revised guidance to accompany the existing conditions. This could have the advantage of introducing fewer substantive changes for providers.
6. Our initial view is that a more substantial change is required in how we assess governance arrangements at entry, to provide assurance about the governance of new providers given the current context. We also think that presenting our requirements in a more focused and rules-based way would be helpful to providers. The tests are designed to make sure that those with effective governance arrangements can easily evidence that they meet these requirements.

Retaining current arrangements

7. We have considered not making any changes in relation to the assessment of governing documents. This would involve retaining the requirement for a provider to complete a self-assessment of its arrangements against the public interest principles, alongside the submission of all governing documents referenced in the self-assessment, and the additional evidence needed to satisfy the new requirements in the proposed condition E7. However, for the reasons set out in this document, it is our initial view that changes to this approach are necessary and can be delivered without imposing undue additional burden.

Assessing the public interest governance principles without reference to a self-assessment

8. We have considered whether we should retain a detailed assessment of a provider’s governing documents at registration, in relation to the risk of breach of ongoing condition E1. This would mean continuing to require the provider to submit a self-assessment of its governing documents.
9. We also considered whether there might be a slimmed down option for the provider submission, such as requiring a provider to submit details of where each principle is upheld in its governing documents but removing the need for a self-assessment. This would allow us to conduct a detailed assessment of the public interest governance principles at registration, even if they were not one of the focus areas of initial condition E7.
10. Retaining an assessment in relation to the public interest governance principles at registration, even if this were not part of an additional condition, would necessarily mean an additional submission requirement for providers. It is likely that providers would need to submit a wide range of governing documents in support of their submission and that OfS assessors would need dedicate significant time to review all these documents to confirm the provider’s submission. Taken alongside our other proposals, this is unlikely to represent an efficient use of OfS resources.
11. There are various routes by which the OfS could become aware of concerns about a provider’s approach to the public interest governance principles, including through third party notifications. Our initial view is that there are sufficient mitigations in place to ensure that a provider will comply with its ongoing conditions if registered and that concerns around their ability to do so would be flagged during registration.
12. On balance, our initial view is that a direct assessment of whether the governing documents uphold the public interest governance principles at registration, whether it is in relation to the initial conditions of registration, or the risk of breach of an ongoing condition, would result in additional burden for providers at the point of registration that is not outweighed by the value of this. This is because we think that the additional work this would require from providers in preparing their registration applications, and for the OfS to assess them, is not appropriate given the other requirements that are in place and the other options available for monitoring and intervention of these requirements.
13. Our initial view is that the proposed requirements for condition E7 would, if adopted, collectively help ensure that a provider’s arrangements would uphold the ‘governing body’, ‘risk management’ and ‘fit and proper’ public interest governance principles. By doing so, we think that – combined with the other proposals set out in this document – we would have assurance in the governance arrangements and the key individuals responsible for operating those arrangements. As such, we would be assured (to the extent appropriate at the point of registration) that the governing body would be effective at meeting its ongoing obligations in E1 and E2, and so additional checks at registration would be disproportionate.

Assessing a more comprehensive range of governing documents

14. We have considered whether to include more governing documents within the set of governing documents required for our proposed new assessment. This could include an assessment of the terms of reference for other committees, a full suite of policy and process documents and, where applicable, evidence that these have been followed in practice (demonstrated by minutes of meetings, or records of decisions made). As above, this would require substantially expanding the proposed condition to define the wider set of documents required (or functions for which we wanted to see the corresponding governing documents) and what we expected each document to contain. While this would ensure we had a comprehensive understanding of a provider’s arrangements on paper, our initial view is that requesting more than we are proposing would unnecessarily increase the burden on smaller providers and on providers that had not started operating at the point of application. In practice, the weight we would be able to place on additional documents, and the level of meaningful scrutiny we would be able to give them, would be unlikely to justify the additional burden.
15. For instance, one of several areas where there might be a strong case for a more comprehensive review of governing documents is in relation to the academic governance public interest governance principle, given the high priority of quality and standards within our regulation. Information we could seek to assess in this area might include the structures, terms of reference and membership for any academic boards, or key academic policies such as those in relation to admissions, assessment and feedback, academic appeals, or misconduct. However, our initial view is that this would duplicate the assessments of conditions B7 and B8, which both provide opportunities to seek further information about a provider’s academic governance arrangements where necessary.

Assessing a narrower range of governing documents

16. We also considered whether we could require a narrower set of governing documents than we have proposed in the new condition, particularly from providers that had not yet started operating. Alternative options could potentially remove document requirements, to avoid duplication, in the following areas:
    • Elements of a provider’s ‘risk and audit functions’ are assessed by the requirements in the fraud and inappropriate use of public funds requirement.
    • Assessment of senior leaders’ skills and expertise are the proposed focus of the knowledge and expertise requirement (although this assessment is much more limited in terms of the number of individuals it covers and the coverage of matters beyond the governing body’s knowledge and expertise).
17. Our initial view is that any acceptable version of an initial effective governance condition must, as a minimum, seek to look closely at the operation of a provider’s governing body and the documents that govern it. Therefore, we have not considered alternative options that would remove requirements for governing body documents. We have sought to allow some flexibility on the exact documents needed to facilitate assessment but envisage it would always involve the governing body’s terms of reference and a provider’s articles of association (or equivalent documents) as a minimum. We consider that these are both things that should be available at the point of registration if a provider were to be considered ready to be registered. Our view is that a provider without either of these documents could not realistically be considered to have determined how it plans to operate.
18. In contrast to our views about governing body documents, we have considered alternative options that involved removing the assessment of risk and audit functions, and the documents that govern them. This is partly because of the potential for duplication, and because this is the only area in which we have proposed to scrutinise governance at a more granular level than the governing body’s overarching authority and oversight. We explored whether we could consider a provider’s risk and audit functions purely through the proposed fraud requirement. It would therefore not be included as part of the governing documents requirement and would streamline our assessment. However, we think it would be unlikely to have a significant impact on submission requirements for providers as they are likely to need to provide the same documents in relation to the proposed fraud requirement. We think the severity of the risks that a provider’s risk and audit functions would need to manage, and the potential serious impacts on students and taxpayers, mean that it is important to apply scrutiny to this area. Additionally, we think the duplication between the two requirements will be minimal because of their different focus. The governing documents requirement is intended to ensure a provider has appropriate structures in place to oversee risk and audit; the fraud requirement looks at the arrangements a provider has in place to detect, prevent and stop fraud and the inappropriate use of public funds.
19. At this stage, it is our view that – given our strategic priorities and the issues we have encountered in more recently registered providers – it is important to take a slightly more prescriptive approach in these areas. We need to ensure that we have a mechanism to scrutinise the provider’s arrangements – for both discharging its risk and audit functions, and for managing conflicts of interests – before that provider has any access to public money. Our initial view is that these documents would represent the minimum necessary to assess the appropriateness of a provider’s arrangements for effective governance in practice.

Retaining current arrangements

20. We have considered not requiring a provider to submit additional information in its business plan. This would mean instead retaining the existing requirements for a new provider (that has been in operation and delivering higher education for fewer than three years) to submit a business plan showing how it will achieve financial viability and sustainability, to inform the OfS’s assessment of condition D. There are also other proposals in this consultation that would require the provider to undertake planning prior to registration. Proposal 2a in Part 3 of this consultation²² would require providers to submit contextualised financial scenario planning, assessing specific risks, such as changes in student enrolment, funding fluctuations, or unexpected economic downturns.
21. This consultation also proposes other requirements related to a provider’s set of governing documents and arrangements for protecting fraud and public money, which could provide some assurances about the approach a provider is taking to risk management. However, these requirements relate more to a provider’s overarching processes, rather than a consideration of specific risks and whether a provider has clearly identified risks and has plans to mitigate them.
22. The primary benefits of retaining the current arrangements would be to reduce burden, by removing an additional submission requirement for providers and removing the need for the OfS to assess business plans. Our initial view is that this would provide some evidence of a provider’s understanding of the higher education recruitment market, but it would not require a provider to demonstrate their understanding of the wider operation of the higher education sector. It would also not require them to demonstrate plans for meeting regulatory requirements after registration or how they have considered the interests of students in its strategy and ensured that risks of harm to students were identified and mitigated.
23. It is therefore our initial view that the current approach does not allow us to focus our attention on the most commonly identified issues in the providers recently seeking registration. As the primary benefit of maintaining our current approach would be to reduce burden, we have therefore proposed ways of limiting the additional burden associated with the proposed requirement instead.

Adopting the proposed approach but considering different ‘relevant requirements’

24. We have considered various options for alternative ways of defining ‘relevant requirements’ within the condition, which represents the substantive test that the OfS will apply to the information a provider submits.
25. We do not envisage any version of this requirement which would not include some minimum standards for the quality of the documents submitted. Therefore, the alternative options we have considered will always require documents to be clearly written, consistent and comprehensive as a minimum. Our initial view is that provider’s plans which do not meet these requirements would raise serious questions about the credibility of their contents, and of a provider’s approach to compiling them, and so would not be satisfactory in any circumstances.

Setting a lower threshold than ‘sound understanding’

26. We have considered whether our expectation that a provider’s plans demonstrate ‘sound understanding’ of the higher education sector, relevant risks, and ongoing conditions of registration, sets the right threshold at the right level, and whether it is applied to the right elements of a provider’s plans.
27. Rather than a ‘sound understanding’, we have considered whether a provider’s plans should just be required to demonstrate ‘consideration’ of the context of the higher education sector, relevant risks, and ongoing conditions of registration. This lower bar would partly meet our aim of ensuring a provider had undertaken prior planning, by requiring that a provider had at least thought through these issues as part of compiling its application. However, simply requiring ‘consideration’ would not allow us to protect the interests of students by addressing circumstances where a provider’s lack of knowledge or understanding could lead to unrealistic plans or assumptions, or the provider making poorly informed decisions once registered.
28. In terms of the scope of issues which judgements about ‘sound understanding’ should be applied to, our initial view is that the most important areas for a provider to understand prior to registration are its business plan, potential risks, and the ongoing conditions of registration. We have therefore primarily considered alternatives which would not require a provider to demonstrate a ‘sound understanding’ of the higher education sector in its plan. We increasingly receive registration applications from small, specialist, often newly established higher education providers, where any expectation that those in charge of a provider necessarily have a background in higher education may be disproportionate. In many cases, these individuals may be experts in their field, but new to higher education delivery. We do not expect all of a provider’s staff to be higher education experts nor a small, specialist provider with a very narrow course offering to have the same in-depth understanding of all elements of the higher education sector as a large multi-faculty university. Our initial view is that if a provider demonstrates a sound understanding of the context it is operating in, and draws on this to create its plans, then we can have confidence that it will be able to deliver its plans in practice.

Adopting alternative approaches for assessing a provider’s plans to ensure ongoing compliance

29. We have considered alternative options for ensuring that a provider has robust plans for complying with the ongoing conditions of registration, if registered, which do not require a provider to set this out as part of the business plan. We considered a separate, standalone requirement for providers to submit a ‘compliance plan’ document. This would be similar to the ‘quality plan’ required in relation to condition B7, and would include a similar qualitative assessment of whether, in the OfS’s judgement, the plan was likely to ensure the provider’s ongoing compliance. This would represent a higher bar than the proposed approach, which only requires a provider to set out its compliance plans clearly and coherently (as per the general requirements of information in the business plan), alongside consideration of whether it has the ability to deliver these plans in practice. However, we are initially proposing that – rather than a separate, more substantial requirement – it would be more efficient to ask providers to summarise compliance arrangements within a business plan and to undertake a less comprehensive assessment. We consider that the aims around ensuring providers are adequately prepared for future regulatory requirements can be sufficiently satisfied by a more limited description of a provider’s plans, focusing on key areas. While a more substantial requirement would be more robust, we consider there are limits to the amount of assurance that can be gained from such plans and, therefore, that a standalone requirement is a less proportionate option.
30. We also considered not proposing any requirements in the initial condition relating to a provider’s ability to comply with ongoing conditions of registration; instead, we would rely on the existing ongoing conditions to ensure compliance. Once registered, ongoing condition E2 requires a provider’s management and governance arrangements to continue to ensure compliance with all relevant conditions of registration. Although this would reduce burden at the point of registration, it is our experience that such an approach is unlikely to sufficiently address the issues of under-preparedness that we often see in newer providers. We find that providers are often unaware of the ongoing conditions, or may be unrealistic about the resource commitments needed to comply with them. Condition E2, and the other ongoing conditions, provide a mechanism to deter and address non-compliance of providers once they are registered. However, the most common areas of non-compliance which this requirement is seeking to address (mandatory reporting and data returns, in particular) are generally difficult to identify until after harm has already occurred. It is therefore our initial view that an upfront requirement, rather than reactive approach to enforcing condition E2 once a provider is registered, would represent a more efficient and effective approach – which would better protect students.
31. We considered an approach where we would examine a provider’s plans, looking at its objectives, targets, strategy for achieving them and its own assessment of risk. If we judged that provider to pose a higher risk, we would seek further information about responsibilities and processes for ensuring compliance. Elements of the business plan require a provider to identify the most substantial risks arising from its chosen approach, which should include risks of non-compliance. These elements of the requirement alone would partially address our aims by allowing us to consider whether a provider had managed to identify the most significant non-compliance risks arising from its business model. It would not, however, provide assurances that a provider had fully considered all of the regulatory requirements it would be subject to once registered. Nor would it ensure that the provider had allocated appropriate resources to fulfilling those requirements. If a provider is underprepared, it may still successfully identify risks around quality and standards, or high profile issues related to financial viability. However, it may be unaware of some elements of our requirements, such as statutory data returns, reportable events and specific requirements of our accounts direction. These lower profile areas are those which we most commonly see non-compliance in relation to, and those which we are seeking to address through this requirement. It is therefore our initial view that there is a need for a more thorough consideration of all areas than is covered by the ongoing conditions of registration.

Adopting the proposed approach with alternative information requirements

32. It is our initial view that each of the detailed information requirements listed in requirement E7B.5 represent the minimum necessary in order to meet our different policy objectives. However, we invite respondents’ views on whether there are other pieces of evidence that might be typically included in a provider’s business plan or strategy that we should ask for, in order to fully understand a provider’s business model and the potential risks it might face. We also invite views on whether there are things that we should avoid requesting, or alternative sources of evidence that we should ask for to achieve the same ends.
33. Some example areas where we have considered there to be scope for alternative information requirements are already mentioned in the sections above, in relation to the information a provider might submit about its risk identification and management, and its plans for ongoing compliance.

Alternative means of collecting information about a provider’s provision

34. The other aspect of the information requirements where we consider there to be alternative options is in relation to the descriptions of a provider’s courses and students. E7B.5 sets out a number of information requirements relating to descriptions of a provider’s range of higher education courses and the characteristics of its students, both current and planned, over the period of the business plan. We have proposed that providers should give an overarching description of a provider’s courses and students rather than an exhaustive catalogue, but could consider more or less detail.
35. In particular, we recognise that a provider is already required to provide a list of courses it offers or plans to offer as part of the information submitted in relation to condition B8, and to provide forecasts of student numbers as part of condition D. These requirements are slightly different to the information that would be requested as part of the proposed business plan. The description of a provider’s courses under condition B8 is exhaustive, but does not cover the entire period in scope of the business plan, as would be necessary to give a full picture of how a provider’s offer might change over the medium term. The student number forecasts do cover the same period (for providers that are unable to provide full audited financial statements), but do not require providers to give any commentary on typical characteristics of those students – this information would be necessary to understand challenges or risks which might be associated with the provider’s plans.
36. For both condition B8 and condition D, detail on courses and students is requested as part of the business plan to form a wider narrative description of the provider’s aims and objectives and its strategies for achieving them. As such, an overarching description – which allows a provider to draw out distinctive details of focus on specific traits which may not be immediately obvious from more exhaustive sources – may be more effective in supporting assessment. We also do not consider descriptions of this nature would be particularly burdensome to provide, as part of a much broader description of a provider’s plans. It would reduce effort for both providers and the OfS in cross-referring to other evidence included in the provider’s application. We would be open to considering alterations to the requirements if any of these were considered overly burdensome, but it is our initial view that this would be the most efficient way of receiving the information we need.

Introducing a survey as an alternative submission requirement

37. We have considered whether it would be possible to identify and assess the risks posed by a provider’s particular business model without requiring submission of a business For example, an alternative approach could attempt to categorise a provider as higher or lower risk by factors drawn from other aspects of its application, such as its size, course characteristics or corporate form. This approach could be supported by asking providers to complete a short survey as part of its application, which asked questions about common areas of risk, such as whether the provider intended to recruit international students, was planning to expand its partnerships, or was planning to use recruitment agents. Although such an approach would likely help reduce burden, we believe it would also likely be less effective at providing an in-depth understanding of a provider’s approach, or associated risks. It is not our experience that provider risks can be effectively judged on such broad categories as large versus small, or charitable versus for-profit. Some of these characteristics are not static and may change significantly after registration, depending on the provider’s plans. It is our initial view that the specific risks and challenges a provider is likely to encounter can only be sufficiently understood through a more detailed understanding of its plans over the medium term. Gaining assurance of a provider’s approach to managing these specific risks is also an important aim of this proposal. We do not consider that confidence about a provider’s approach to managing risks could be achieved without asking for direct evidence of how this will be done. This is why we plan to request detail about how a provider will manage the specific risks arising from its approach as part of the business plan requirement.

Adopting the proposed approach but considering a different time period

38. We have considered requiring that a plan needs to cover only a three-year period. This would still provide a sense of a provider’s future plans, but may require less detail, so result in less burden. However, where providers planned to significantly change the size and shape of their business, which is more likely to be the case for newly established providers not yet offering higher education, a three-year plan would be unlikely to capture the full extent of this change. Therefore, it would fail to meet our aims about ensuring plans are underpinned by a sound understanding of the sector and that associated risks would be appropriately managed. On balance, we consider that, as many providers need to produce financial forecasts for the entirety of this period, they will have already undertaken some degree of planning over the same timeframe. Therefore, there are limited benefits related to reducing burden by shortening the time period.

Adopting the proposed approach with an alternative submission format

39. We have considered different structure and format requirements that could apply to the submission of a business plan as a further means of minimising burden. Set out earlier in this consultation (see Format of the information submitted), we have proposed a flexible approach which would allow providers to make use of documents they already have, rather than necessitating the creation of business plans from scratch.
40. We considered alternative options to require all providers to submit a single document, following a uniform template instead. There would be benefits to this more directive approach. It would reduce ambiguity for providers about what information to include, and in what order, and a uniform template could mandate that providers follow our preferred structure. Also, it is likely that a uniform template would be easier for OfS officers to assess, and less likely we would need to ask additional queries or for clarifications during the assessment process. However, for providers that already have business plans or strategic documents that largely fulfil our requirements, it would result in additional, unnecessary work to reformat existing material.
41. At this stage, we have chosen the more flexible option. If we were to take this proposal forward, we would expect to produce additional guidance about structure and formatting of information within the plan, but our initial intention is that any such guidance would be optional. Additional guidance could also include the production of a template for providers to follow. We recognise that, even where providers have documents readily available, they might find it helpful to follow a prescriptive template which gives certainty that all content requirements and considerations are being met.

22 See Proposal 2: Information about financial viability and sustainability and corporate structure.

Retaining current arrangements

42. We have considered alternative options which would maintain the current approach in relation to the assessment of knowledge and expertise. The reasons for proposing a change to this are set out in Proposal 4.

Applying knowledge and expertise requirements to a different subset of individuals

43. We are not proposing to apply these requirements to all of a provider’s governing body and senior management team. We consider this would result in an overly burdensome and disproportionate process, and it would be difficult to directly assess broader, less specific expectations (as in the current condition).
44. We have considered whether there are additional, specific roles that should be subject to minimum knowledge and expertise requirements. Given the importance of timely, accurate data returns in informing our regulation and determining funding, we have considered including knowledge and expertise requirements for the person responsible for compiling statutory data returns, as an additional ‘key individual’. The knowledge and expertise requirements for this individual would need to include a detailed understanding of the various data returns a provider was required to submit, and some evidence of expertise in the compilation and validation of student data.
45. It is our initial view that the knowledge and expertise of other staff, such as those responsible for data management functions, would be adequately tested by the business plan requirement. For this, we would seek assurance from the provider’s plan about its awareness of ongoing regulatory requirements, and evidence that it had made appropriate plans for suitably skilled and resourced people to fulfil them. We recognise that, depending on the provider’s arrangements, this role could be spread across a number of individuals – which could make testing difficult.

Using alternative means of testing knowledge and expertise of key individuals

46. We have considered various alternative ways of testing whether key individuals have the relevant knowledge and expertise to fulfil their duties, such as setting an exam, asking for references, reviewing CVs and qualifications, or carrying out our own research on publicly available information on individuals. We also considered making visits to providers’ premises and speaking to other staff to assure ourselves of how key individuals work in reality. However, it is our initial view that the most practical and least intrusive way of testing this would be through interviews with the chair of the governing body, the accountable officer and, where necessary, with other people meeting the definition of ‘key individuals’. We propose that, in most cases, these interviews would be held online using video conferencing software with appropriate adjustments made where these are needed.

Retaining current arrangements

47. We have considered maintaining our current approach to assessment of a provider’s policies and processes in relation to a fit and proper test (as set out in Annex F). The reasons for why we think this is not the right option is set out in the main document (see Proposal 5).

Adopting an approach where the OfS is required to approve each appointment of a key individual as fit and proper before their appointment by a provider

48. Our proposal is that the fit and proper test should continue to be applied by providers directly using the test or criteria that are set out in paragraph E7D.6 of the draft requirement.
49. We have considered whether we should instead adopt a fit and proper test whereby the provider would submit key individuals they have appointed to the OfS for approval. Under this model, a key individual could not be confirmed in their role until they had been judged as being a fit and proper person by the regulator. The benefits of this would be that the provider could rely on the OfS to undertake appropriate checks and therefore be confident they would meet the test once key individuals had been approved.
50. However, we think such an approach would add additional burdens, costs and delays to appointments of key individuals, creating uncertainty for providers when recruiting to these roles and thereby adding risks to ongoing oversight of management and governance at providers. It is also doubtful whether this would reduce the regulatory burden on providers, as they are likely to ‘pre-check’ key individuals to manage the risks to recruitment and appointment delays.
51. We maintain that a more efficient and less intrusive process is to continue to review the provider’s policies and processes in this area, to assess whether they are robust, and to validate the outcomes of the checks undertaken for those key individuals currently in post.

Adopting the proposed approach but restricting matters to which the OfS will have regard when determining if an individual is fit and proper (sections E7D.2 and E7D.4) to those occurring in the UK only

52. The matters that the OfS will consider when assessing whether an individual is fit and proper are listed in Table 2 and Table 3. We propose that these matters include events that have occurred in the UK and overseas, however, we considered the option of restricting these matters to those which occurred in the UK only. Our initial position is that events that occur outside of the UK are equally relevant when assessing an individual's track record to determine whether they are fit and proper. Restricting the scope of these matters to the UK would, in our opinion, pose a risk to the aims of ensuring protection against the misuse of public funding, protection of the interests of students and maintaining the good reputation of the higher education sector.

Adopting ‘honesty, integrity and reputation’ as the test, rather than the fit and proper test as proposed

53. We have considered whether more general concepts of good character in the guise of honesty, integrity and reputation would be a more appropriate test. However, we consider such matters to be too broad in scope and open to differing interpretations. They also may not always be relevant to the purposes of the fit and proper test in relation to higher education. A test based on these matters alone would be difficult to assess and enforce in a consistent manner. Our initial view is that the fit and proper test should be based on the natural, ordinary meaning of ‘fit and proper’ and assessment of verifiable actions of key individuals that translate to risks to the protection of the interests of students, protection of public funds and the continuing good reputation of the higher education sector in England.

Smaller or larger collection of documents to demonstrate arrangements

54. We are proposing that providers must submit, at a minimum, a specified set of documents to demonstrate that it has comprehensive arrangements in place to prevent, detect and stop fraud and inappropriate use of public funds. Where there are specific risks posed by a provider’s business plan it must also have arrangements in place to address those risks.
55. When reflecting on this approach, we considered specifying a very small range of documents (for example, conflict of interests policy, internal control process and whistleblowing policy). However, our initial view is that OfS oversight of only a limited range of documents may be insufficient to identify where providers are not adequately prepared to receive or access public funds and therefore pose significant risk to those funds.
56. We also considered the option of specifying a much larger suite of documentation to be submitted. We considered that a larger specified list of documentation may provide more assurance. However, our initial view is that this approach would be significantly higher burden for providers as it is likely that they would have to produce new documentation specifically for the purpose of registration with the OfS, despite having a different range of documents that may already be fit for purpose. We also considered it likely that the arrangements in place at providers, and how these were documented, would rightly differ between providers based on their characteristics. For example, a provider that intends to grow rapidly by subcontracting provision and using recruitment agents is likely to require different arrangements to a small provider delivering one course to directly enrolled students.

Use a different time period to assess track record

57. When assessing a provider’s track record in relation to receiving and/or accessing public funds, we are proposing to consider any relevant matters that have occurred within the past 60 months of the date the provider applied for registration. Our initial proposal is that if any of the circumstances outlined in section E7E.3.a of the proposed condition have occurred in the past 60 months, the provider will be deemed not to have a satisfactory track record unless there are exceptional circumstances. We currently consider that this time period represents the best balance between the need to consider past offences and decisions to minimise the risk to students and the sector, and ensuring it is not overly burdensome for providers. Our view is that an obligation to report the matters in section E7E.3.a from the preceding 60 months would enable the OfS to observe if there are systemic issues that could still be relevant to the operation of the provider whereas any older matters could lose relevance.
58. We also took into account that other regulatory bodies such as the Financial Conduct Authority, Ofqual and the Charity Commission use a five-year threshold for similar disclosures and our initial view is that the proposed timeframe is appropriate for our purposes in balancing fairness with risk management.
59. In developing the proposals, we have considered whether we should only consider more recent matters and therefore shorten the time period in which we assess a track record (for example 36 months) as a lower burden and more risk tolerant approach. However, our view is that a time period longer than 36 months would give us greater assurance that, at the point of registration, any weaknesses in a provider's arrangements had not only been fully addressed, but that any students previously recruited under weaker arrangements would be unlikely to still be engaged in their studies. This would reduce the risk that registering the provider and granting access to the student loans system would lead to the inappropriate use of public funds. Furthermore, we do not anticipate that a longer time period for the track record test should preclude providers that have otherwise resolved historic issues as we have proposed a mechanism for a provider to demonstrate the changes it has made.

Automatic assumption of non-compliance or full discretionary approach for the track record requirement

60. As outlined above, our initial proposal is that if any of the circumstances outlined in section E7E.3.a of the proposed condition have occurred in the past 60 months, the provider will be deemed not to have a satisfactory track record unless there are exceptional circumstances. We have considered the option of not including the opportunity for providers to overturn the initial presumption through submission of exceptional circumstances. While we consider that, in most cases, these scenarios should result in a provider failing to satisfy the condition, our initial view is that we should not completely restrict our ability to apply judgement in exceptional circumstances by creating conditions under which a provider would always automatically fail to satisfy the condition. We consider that this approach may prevent the OfS from registering providers that are otherwise suitable to receive public funds and therefore reduce student choice and diversity in the higher education market.
61. We have also considered whether it would be better to take a fully discretionary approach to these circumstances by removing any initial presumption and considering every scenario on a case-by-case basis. However, our initial view is that the circumstances listed in section E7E.3.a of the proposed condition are serious enough and strongly indicative of future risks to public funds that it is likely that the OfS will consider any provider affected by these matters to have an unsatisfactory track record.