Securing student success: Regulatory framework for higher education in England

The approach to general monitoring is designed to identify where further investigation is necessary to identify whether risk has increased in any particular area for an individual provider. The OfS will use ‘lead indicators’ constructed from regularly obtained reliable data from providers and others, alongside ‘reportable events’ that providers must report to the OfS. It will also make use of wider strategic intelligence relating to the sector and/or individual providers, where appropriate, including whistleblowing and student complaints.

Where these sources of information suggest that further investigation is necessary, the OfS will engage with the provider to seek further information and make a judgement about whether the risk of a breach has increased. The OfS will consider whether action is necessary and being taken by the provider. The purpose of this dialogue will be to obtain assurance about whether the provider continues to satisfy its conditions of registration and to reassess the extent of the risk of a future breach. Regulatory intervention, such as the imposition of specific conditions, will not usually be taken only and immediately on the basis of the lead indicators themselves, but after the OfS has established through further assessment that the risk of a breach has increased. Sanctions will not be applied unless one or more conditions have been breached.

The OfS will not systematically reassess the compliance of each provider with each of its conditions of registration on a scheduled cyclical basis, other than as a result of random sampling. This targeted approach to monitoring allows the OfS to discharge its duty to have regard to the need to use its resources in an efficient, effective and economic way.

As it conducts its monitoring activities, the OfS will update as necessary the risk profile for an individual provider. For example, notification of a ‘reportable event’ would prompt a further risk assessment of that provider in relation to its ongoing conditions of registration.

The OfS will identify a small number of lead indicators that will provide signals of change in a provider’s circumstances or performance. Such change may signal that the OfS needs to consider whether the provider is at increased risk of a breach of one or more it its ongoing conditions of registration. These indicators will be based on regular flows of reliable data and information from providers and additional data sources, and will include information about outcomes for students from different backgrounds. Lead indicators are likely to include, but not be limited to, the following:

• overall student numbers and patterns that might suggest unplanned and/or unmanaged growth or contraction
• applications, offers and acceptances for students with different characteristics
• changes in student entry requirements and the qualifications profile of students on entry
• continuation and completion rates
• TEF performance
• degree and other outcomes, including differential outcomes for students with different characteristics, or where there is an unexpected and/or unexplained increase in the number of firsts and 2:1s awarded
• the number, nature or pattern of student complaints to the OIA
• graduate employment and, in particular, progression to professional jobs and postgraduate study
• composite financial viability and sustainability indicators based on annual financial statements and forecasts.

The lead indicators are likely to show changes that might not, in themselves, reveal areas of weakness or concern for an individual provider, but simply flag possible increased risk, such as a rapid increase or decrease in student numbers. The OfS will not use crude ‘triggers’ or performance thresholds to monitor risk, preferring a more flexible approach that takes into account the context for an individual provider.

Absolute performance against an indicator will form part of the overall context for assessing risk. For example, when monitoring continuation rates, a decrease for an individual provider could mean performance had worsened. However, levels of absolute performance need to be considered in the context of performance across the sector as a whole and might be considered to be of less concern in the wider context.

The OfS will seek to ensure that the selection and specification of lead indicators allow the identification of possible increased risk before this crystallises. Indicators that provide strong signals of likely future risk (for example significant shifts during the student recruitment cycle) and data trends over time will be more useful than data that retrospectively reveals where problems have already occurred (unless those problems have not previously been identified).

The OfS will ensure that its lead indicators allow it to monitor a provider’s performance for all students from all backgrounds, for example by splitting student outcome indicators for different student characteristics. The OfS will also pay particular attention to outcomes achieved for students studying at different levels and in different modes (e.g. undergraduate/postgraduate).

The OfS will evaluate whether its selection of indicators remains effective in identifying increased risk, and will ensure the range of indicators provides sufficient coverage of the areas of regulatory concern. While the starting point is to use the same set of indicators for all providers, the OfS will consider whether different indicators should be used for providers with different characteristics.

The provision of reliable and timely data by providers to the OfS and the DDB is central to achieving a risk-based and proportionate approach to monitoring and regulation. The implementation of the OfS’s data strategy may initially increase regulatory burden, but the long term aim is to use data to reduce regulatory burden. Such data requirements are not therefore intended as a regulatory burden on providers but to provide the information that allows the OfS to be an effective and proportionate regulator. It is anticipated that this data will be largely quantitative and generated as a result of a provider’s existing management functions, minimising the burden on providers and allowing for greater consistency, comparability and objectivity when looking across a range of providers. The OfS’s data strategy will address these issues.

Providers will be required to notify the OfS of certain types of changes or events that would not usually be picked up by data flows alone. The OfS will publish guidance on the events it requires registered providers to report.

Reporting of such changes or events may prompt the OfS to undertake a reassessment of risk in relation to one or more of a provider’s ongoing conditions of registration. The OfS will then use this risk assessment to determine whether any further regulatory action is required, such as the imposition of specific conditions of registration and/or increased monitoring. For example, the OfS might reassess the financial sustainability of a provider, and the effectiveness of governance arrangements, if it is notified that a merger is taking place. Similarly, in response to a change of ownership, the OfS would investigate the new owner, consider its suitability to own an English higher education provider, and reassess the risk presented by the provider.

The OfS will also draw on information volunteered by providers and others, including whistle blowers, as well as any wider experience it gains through other contact with that provider.

The OfS will seek input from students – this may be insights from lead indicators from the national student surveys, complaints raised with the OIA, or by inviting information from individual students and student bodies.

The OfS will seek confirmation that all systemic risks are being identified by its routine approach to the monitoring of individual providers. The OfS will operate a process to reassess providers’ compliance with their ongoing conditions of registration and will do this for a random sample of providers each year.

Although random sampling will afford the OfS the opportunity to check risk or compliance with conditions at a provider level, its main purpose is to provide:

The initial probability of a provider being identified by random sampling will be equal across all providers, regardless of risk assessment and the conditions (ongoing or specific) in place for each of them. To maintain proportionality, no provider will be subject to further selection by random sampling if it has been sampled during the previous three years.

The OfS will begin by sampling five per cent of all registered providers each year. The probability of being assessed will increase incrementally for each year in which a provider is not sampled. The systemic benefits of uncertainty are intended to promote the desired provider behaviours, while creating a more proportionate system overall.

The sample pool will be categorised, with providers of different kinds grouped so that the sample in each year represents the diversity of the sector (e.g. by different legal forms or different categories on the Register).

The OfS will use the assessments undertaken through this process to confirm that a provider continues to satisfy its ongoing conditions of registration, to update the individual provider’s risk profile, and to put in place any specific conditions or enhanced monitoring required. Through random sampling, the OfS will better understand the extent to which it is able to identify increased risk through monitoring. If significant new issues are identified by this process, the OfS will refine its overall approach to provider monitoring.

Section 69 of HERA enables the OfS to conduct efficiency and effectiveness studies in the management or operations of a registered provider. This is designed to allow the OfS to ensure that providers are delivering value for money for students and taxpayers.

The OfS will deploy this power as part of its risk-based approach to regulation. If it has concerns about the efficiency or effectiveness of a particular provider identified through its risk monitoring and risk assessment processes, it may carry out a study to investigate whether the provider is providing value for money to both students and taxpayers. The OfS may work collaboratively with providers across the sector, to benchmark efficient performance and highlight areas of good practice, benefitting students, providers and the public purse more generally.

The OfS will undertake monitoring activity for purposes beyond its regulation of individual providers. For example, the OfS is required under section 38 of HERA to monitor student transfers, and under section 68 to monitor the financial sustainability of the sector. In collecting information for these purposes the OfS will, where possible, seek to rely on the same data and information, statements and forecasts collected for its routine monitoring of individual providers and will follow the general principles of proportionality.

Audited financial statements and financial forecasts will usually give the OfS sufficient data and information to monitor and report on the financial sustainability of the relevant providers. It is therefore not the intention to normally ask for any additional information or data from providers to enable the OfS to fulfil its duty under section 68 of HERA (there may be exceptions, such as when data returns are incomplete or unreliable).

When compiling the financial sustainability summary for its annual report, the OfS will take into account any wider developments and external factors it is aware of, such as changes in the costs of borrowing.

The responsibility for monitoring the ‘Prevent duty’ in the higher education sector, as set out in the Counter Terrorism and Security Act 2015 (CTSA), is currently held by the Higher Education Funding Council for England (HEFCE) and will be transferred to the OfS. This allows for effective monitoring of providers’ compliance with the duty and the action to be taken if they fail to comply.

Most higher education providers hold charitable status. Some are registered with, and regulated directly by, the Charity Commission. However, many are ‘exempt charities’, exempt from registration with and direct regulation by the Charity Commission. Exempt charities have a Principal Regulator appointed whose duty is to promote compliance with charity law by the charities they regulate.

From 1 April 2018, the OfS will succeed HEFCE as the Principal Regulator for higher education providers that are exempt charities. The OfS will discharge its obligations as Principal Regulator as part of its routine monitoring activities.

This section explains how the OfS will make use of its powers of intervention in circumstances in which it perceives there to be an increased risk of a provider breaching one or more of its ongoing conditions of registration, or when such a breach has occurred.

The OfS has a range of interventions at its disposal:

The use of the OfS’s intervention powers will be subject to the requirements of its own internal governance arrangements.

The OfS may also use interventions that relate specifically to access and participation plans (refusal to agree a new access and participation plan) and degree awarding powers and university title (variation or revocation of degree awarding powers and revocation of university title).

The OfS will usually intervene when there is, or has been, a breach of an ongoing condition of registration, or when it perceives that the risk of a breach is increased. The OfS will use its risk assessment, and a provider’s risk profile, in deciding whether an intervention is required and, if so, which form(s) that intervention should take. The OfS’s response will be proportionate and relevant to the risk it is seeking to mitigate. The OfS may only impose a sanction where there is, or has been, a breach of one or more of a provider’s conditions of registration.

The OfS must have regard to its general duties under section 2 of HERA when deciding whether and how to intervene. In particular, the OfS will be required to take into account the need to use its resources in an efficient, effective and economic way and follow best regulatory practice by ensuring its actions are:

The OfS will consider a range of factors before deciding whether to intervene, and if so, which form that intervention should take. Not all factors will be relevant in every circumstance, and the OfS will consider the relevant factors in the round when making its decision. The factors include:

The OfS has a range of interventions available to it, described below. Alongside these interventions, there are other tools that the OfS will use to encourage compliance, but which are not considered direct ‘interventions’ for individual providers. For example, the OfS can ask for clarification or further information, and may publish any information that it deems relevant about an individual provider, or about the sector as a whole.

The OfS may put in place more frequent or more intensive monitoring requirements of a provider. For example:

The OfS may also take targeted action if it needs to establish the facts before reaching a judgement about whether there is, or is likely to be, a breach of one or more ongoing conditions of registration. Relying on general ongoing condition F3, the OfS:

The OfS will aim to notify the provider of the outcome of any investigation and/or consideration of the provider’s response within 15 working days of the conclusion of the investigation unless there are circumstances which mean that this is not possible.

The OfS may use its powers of entry and search as set out in section 61 and schedule 5 of HERA, to investigate suspected serious breaches of a provider’s ongoing conditions of registration or its OfS funding or student support funding conditions. In order to exercise this power, the OfS must seek and obtain a magistrate’s warrant. As set out in Schedule 5, a magistrate would need to be satisfied that four tests are met before granting a warrant, as follows:

The OfS will exercise these powers rarely and only in exceptional circumstances where it appears to the OfS that its usual investigation methods would not be effective, for example where there is reason to believe that relevant information would be destroyed or interfered with if requested in the usual way or if the provider has not complied with prior requests for information or cooperation.

The OfS may decide to impose a specific ongoing condition where it considers that a provider presents a specific risk that is not addressed by a general ongoing condition; to mitigate an increased risk that a provider may breach an ongoing condition of registration; or to prevent or remedy a breach. The specific ongoing condition will be targeted to mitigate the specific risk that is posed and will be focused on actions or activities by the provider that the OfS may require, or prohibit, to ensure that the provider is able to satisfy its ongoing conditions of registration.

The OfS could impose a variety of specific ongoing conditions on an individual provider. Some examples are set out below:

Section 6 of HERA sets out the process by which the OfS will vary or remove a specific condition of registration, or impose a new specific ongoing condition. The OfS will notify the provider’s governing body of its intention. This notification will include:

If the provider’s governing body makes any representations by the deadline, the OfS will have regard to these in deciding whether to vary, remove or impose the specific ongoing condition(s) of registration. The OfS will then inform the provider’s governing body of its decision and the date when it takes effect. In addition, the OfS will inform the provider’s governing body about:

The OfS is empowered by HERA to impose a monetary penalty instead of, or in addition to, other sanctions. This sanction may be appropriate where, for example, a provider has engaged in one of the following practices: deliberately or negligently breached its ongoing conditions of registration; been dishonest and concealed information; benefitted financially from failing to comply with its ongoing conditions of registration (for example by failing to ensure necessary resourcing); or had repeated breaches. The OfS would take into account the severity of the impact of any monetary penalty, especially on the provider’s students.

The Secretary of State will set out in regulations the matters to which the OfS must/must not have regard when imposing a monetary penalty and the penalty amount.

If the OfS intends to impose a monetary penalty, it will notify the provider’s governing body of this intention and the amount of, and reason for, the proposed penalty. The provider will have a specified period to make representations, which must be not be less than 28 days from the date when the notice is received by the provider. The OfS must have regard to these representations in taking a final decision about the monetary penalty. At the end of that process the OfS may issue a penalty, specifying the amount and the period within which it must be paid. If the provider disagrees with the decision to impose the penalty, or the amount of the penalty, the provider can appeal to the First Tier Tribunal. The requirement to pay the penalty is suspended at any time when an appeal could be brought or such an appeal is pending. An appeal can be made on one or more of the following grounds:

There are four possible outcomes of an appeal. The Tribunal may:

The OfS may decide to suspend a provider’s registration (or suspend some of elements of its registration), in the event of a breach of an ongoing condition of registration, to immediately reduce the impact of the breach on students or taxpayers. During the suspension, the provider will be expected to take remedial action (secured through the imposition of specific conditions of registration), with the OfS lifting the suspension once it is satisfied that the breach has been remedied.

An example of where suspension might be appropriate is where a particular course has very weak continuation rates or with few students progressing to managerial or professional employment, or further study. Following investigation, it is apparent that changes need to be made to the course design. The provider has breached one of its ongoing conditions, but will be able to remedy the breach. To prevent more students from being affected, and to ensure that the provider takes action to remedy the breach, the OfS may decide to suspend the provider’s recruitment of new students to the relevant course until remedial action is taken.

The OfS will usually notify the provider’s governing body of the intention to suspend its registration, including:

The OfS will have regard to any representations made by the deadline in deciding whether to suspend the provider’s registration. The OfS will notify the provider’s governing body of its final decision and this notification will include the date on which the suspension takes effect, the excepted purposes, the remedial conditions (if any) and confirmation as to the grounds for suspension.

Where the OfS considers there to be an urgent need to protect public money (e.g. due to the material risk of fraud or the misuse of public funds), the OfS will suspend registration with immediate effect and notify the governing body of the suspension – the notification will include the same information as required for OfS’s notification of a final decision.

The suspension will remain in place for as long as is necessary to resolve the issues that led to the suspension. Resolution of these issues may be through further investigation (i.e. an intervention) and could lead to further sanctions, as appropriate, or restoration of registration.

HERA sets out the circumstances in which the OfS has the power to deregister a provider. One of the following two conditions must be met:

The OfS may decide to deregister a provider where the risk to the student or taxpayer is so serious that using another sanction would not be sufficient. Before deciding to deregister a provider the OfS will consider, in particular, the impact of deregistration on the provider’s students.

A provider must also be removed from the Register where the OfS becomes aware that the provider no longer is, or no longer intends to become, an English higher education provider.

A provider may request to be removed from the Register on a voluntary basis, as set out in section 22 of HERA, for example, where a provider chooses to exit the market. In such cases, the governing body of the provider must formally apply to the OfS, setting out why it wishes to be deregistered and when it would like the deregistration to come into effect. The OfS will normally deregister the provider on the date requested, unless such a date gives insufficient time to deregister the provider in an orderly fashion and without impact on the provider’s students. If the OfS is minded to alter the date of deregistration from that requested, it will usually seek to agree this with the provider. Under section 22 of HERA, the OfS must then remove the provider from the Register, but is obliged to keep a list of providers removed from the Register in this way. This will be part of other, historic information the OfS will make available.

If a provider is deregistered, or suspended from the Register to the extent that students cannot complete their courses, the provider’s student protection plan would be triggered.

Where the OfS has determined that it is necessary to deregister a provider, it will notify the provider’s governing body of the intention to remove its registration, including:

The OfS will have regard to any representations made by the deadline in deciding whether to remove the provider’s registration. The OfS will notify the provider’s governing body of its final decision and, if it decides to deregister the provider, this notification will include the date on which the removal takes effect and information about the grounds for removal, rights of appeal and the period within which the appeal may be made.

A provider that OfS is proposing to remove from the Register has a right of appeal against the decision itself and the date of removal from the Register. The provider may appeal to the First Tier Tribunal. A provider can make an appeal on the following grounds:

There are four possible outcomes of an appeal. The Tribunal may:

Section 21 of HERA sets out a power for the OfS to refuse to approve an access and participation plan for a provider for a specified period after a plan that is currently in force has expired. This sanction may be applied where in the view of the OfS, the provider has failed to comply with a general provision of its current plan or with its mandatory fee limit condition. Section 12 of HERA states that a provider should not be regarded as having breached an equality of opportunity provision of its plan if it can show that it has taken all reasonable steps to comply with it.

The expectation is that, where the OfS has concerns in relation to access and participation plans, it will consider the intervention factors as set out above and will, in exceptional circumstances, consider use of the power to refuse to agree a new access and participation plan alongside its range of other interventions.

In those circumstances the OfS will notify the provider that it will refuse to approve a new plan after the current one comes to an end. That refusal may last for a period that the OfS specifies in a notice. The Secretary of State will make regulations about the matters the OfS must take into account in deciding whether or not to refuse to approve a plan, and the procedure it should follow when giving notice of refusal and the effect that the notice has.

HERA gives the OfS powers to vary or revoke degree awarding powers, and to revoke university title. These sanctions may be used regardless of how and when the provider obtained degree awarding powers or university title, and applies whether or not a provider is registered.

Should a provider be deregistered, the OfS may put in place transitional arrangements or a ‘saving provision’ in particular to protect the interests of students. This means that a provider may continue to be treated as a registered higher education provider following deregistration, for purposes specified by the OfS, for a transitional period. Such provision may allow a deregistered provider’s existing students to continue to access student support, where the quality and standards of the provider’s provision are adequate and it is in the students’ interest to remain at the provider. The provider would be required to meet its continuing obligations to its students for the ordinary duration of (or until withdrawal from) their course. This is called a ‘teach out’ period. Under these circumstances, the OfS will notify the governing body of its intention to allow the provider to continue to deliver courses to its current students for a specified period and that no new students are allowed to be registered. The OfS will set out the conditions that will apply to the provider and the processes that it will need to follow during this specified period.