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

1. Our proposed changes would streamline our assessment of a provider’s governance arrangements by requiring submission of a set of governing documents directly to the OfS. We are proposing that we would assess these documents directly, removing the need for a provider to carry out a self-assessment of its approach and documents. We think this would reduce burden for well-prepared providers. We are also proposing to include the current requirement (set out in our registration guidance¹) for a provider to produce a business plan within this new initial condition and to set clear criteria for what this business plan should include. Again, we expect that a well-prepared provider will already have this information.
2. We are also proposing requirements that will ensure that the leaders of a provider have appropriate knowledge and expertise and are ‘fit and proper’ to carry out their roles. Finally, we are proposing that a provider should have comprehensive arrangements to prevent, detect and stop fraud and inappropriate use of public funds.
3. We are not proposing to make any changes to the ongoing conditions of registration for management and governance as part of this consultation. This means that providers registered with the OfS will remain subject to the requirements of ongoing conditions E1 and E2.
4. In this part of the consultation, we are seeking views about our detailed proposals relating to effective governance and the reasons for our proposals. We have set out the main alternative options we have considered in Annex B. Annexes C-G include the proposed drafting for each of the proposed elements of the initial condition. The requirements are presented separately for the purposes of this consultation to make it easier for respondents to comment on the content of the proposals. If we decide to implement our proposals, we will consider how to most clearly present the requirements as part of the OfS regulatory framework.

[1] See Regulatory advice 3: Registration of English higher education providers with the OfS and Guidance for providers about the financial information required for registration.

5. As explained in the introduction to this consultation governance in the higher education sector has never been more important.[2] Higher education providers must be able to navigate a challenging financial landscape in an increasingly volatile, uncertain and complex global environment. Those responsible for the governance of registered higher education providers must have the capacity and skills to navigate these challenges to ensure that their students continue to receive a high quality education. In doing so, it is important that providers can identify and act to mitigate risks to public funding and ensure value for money for students. This is why we have proposed ‘sector resilience’ as a strategic priority for the OfS’s organisational strategy for 2025 to 2030.^[3]
6. We are clear that new providers can enrich the higher education sector, bringing high quality courses, innovative approaches and extending choice for students. It is important that well-prepared providers are able to register with the OfS smoothly and with minimum burden. However, in the current context, risks to students and taxpayers can be significant if a provider is registered without robust governance arrangements in place. Weak governance increases the risk that students would not receive a high quality education, and that the provider could become insolvent, resulting in harm to students. There could also be an increased risk to the use of the significant public funding that can be accessed by a provider once it is registered.
7. The OfS’s current initial conditions relating to management and governance, conditions E1 and E2, have been in place since 2018. During this period, we have registered more than 400 providers, and we have drawn on this experience in developing our proposals. We have seen a shift in the types of providers applying for registration – from large, established providers with an extensive track record, through to the current position where most applicants are smaller, newly established providers. Although many of these new providers are well prepared and go on to make an important contribution to the higher education sector, we think some changes in our assessment of governance arrangements are needed to ensure that we are effective in identifying providers where this is not the case. We have seen some issues of concern including:

1. Governing bodies that lack the skills and experience to navigate the challenges facing their provider. Some governing bodies have weaknesses that mean that they did not appropriately identify and respond to financial risks, putting their students’ education at risk. In the most serious cases, a lack of appropriate skills and expertise on a governing body has resulted in mismanagement over many years, leading to a significant negative impact on students, including disruption to their study due to course or provider closure.
2. Providers seeking registration that do not have sufficient awareness or understanding of the responsibilities of a registered provider, and the associated regulatory requirements. Some providers have failed to meet their regulatory obligations to submit information once registered. This is particularly of concern where it relates to the submission of financial information. In the most severe cases, serious financial issues at a provider have not been communicated to the OfS in a timely way. This reduces our ability to support students if an institutional closure were to occur. Similarly, a failure to submit accurate data about student outcomes can reduce our ability to ensure courses are high quality and standards secure.
3. Providers that may have misused public funding. Some providers present governance arrangements at registration that appear to meet our requirements for transparency and external scrutiny, but it subsequently transpires that those arrangements are not representative of how decisions will be made in practice. There have also been instances of a provider applying for registration where we have reason to believe that the provider itself, or people responsible for managing it, have been previously involved in the misuse of public funds.

8. It is important that our registration assessment is sufficiently robust to prevent these sorts of providers from registering and accessing the benefits that come with registration. We need to have the right tests in place at registration to ensure that each provider has effective governance arrangements in place to manage challenging circumstances and deliver high quality courses to students.

[2] See Introduction to the consultation on new registration conditions.

[3] See Consultation on OfS strategy for 2025 to 2030.

9. To address these issues, we are proposing to introduce a new initial condition of registration, condition E7, which would require a provider to have effective governance arrangements for the purpose of being a registered higher education provider. This condition would replace the existing initial conditions for management and governance, initial conditions E1 and E2.

10. Our proposal to introduce initial condition E7 is intended to make the assessment process more streamlined for well-prepared providers while ensuring that we are able to identify and refuse registration for providers that are not ready. It does this by requiring a provider to submit a set of governing documents and a business plan as part of its registration application. The documents would then be assessed by the OfS. This would remove the need for a provider to carry out a self-assessment of its own arrangements against the public interest governance principles as part of its application, and provide greater certainty to providers about the information we require to make our assessment. We think that well-prepared providers would already have most (if not all) of the documents and information that they would be required to submit, so we expect this to be a reduction in burden overall.
11. The proposed condition also sets out some specific tests in relation to a provider’s leadership team. This is to ensure that certain individuals have the right expertise and are fit to lead the provider and meet the responsibilities that come with registration. Our initial view is that these tests are important to ensure the governance of the provider is robust and able to deliver good outcomes for students and taxpayers.
12. To reduce risks to public funding, we are also proposing requirements to ensure that a provider has appropriate arrangements in place to manage these risks and that it does not have a history of fraud or misuse of public funding.
13. We have considered alternative approaches to those set out in this consultation. We have set these out in Annex B. We welcome views on these alternatives alongside comments on our proposals. The introduction to this consultation (Annex B: Matters to which we have had regard in reaching our proposals) sets out the matters we have considered in formulating these proposals.⁴

[4] See the introduction: Annex B: Matters to which we have had regard in developing our proposals.

14. This consultation will close on Wednesday 23 April 2025. The introduction to this consultation (How we would implement these proposals) sets out how we would implement our proposals, including a proposed timetable for implementation.⁵

[5] See the introduction: How would we implement these proposals.