AABA

ACCA PRESIDENT, NATIONAL AUDIT OFFICE AND HULL UNIVERSITY

AABA reproduces (see below) a letter from the National Audit Office (NAO). It is commentary on the going-ons at Hull University and also mentions the name of ACCA President, Dr. Moyra Kedslie.

Under the Human Rights Act 1998, ACCA is a 'public body'. It regulates the insolvency and auditing industries. Its President is a 'public figure'.

For some considerable period, the UK press has made comments upon the conduct of Dr. Kedslie. ACCA's own mouthpiece, 'Accounting & Business' has remained silent. It is censorhsip as usual. We invite readers to make up their mind about the futness of Dr. Kedslie to be ACCA President.

HULL UNIVERSITY AND ACCA PRESIDENT (7 Sept 2000)
Press Comment on the New ACCA President (5 May 2000)
FURTHER REVELATIONS ABOUT ACCA DEPUTY-PRESIDENT (29 Jan 2000)
Call for ACCA Deputy President to Resign (20 May 1999)
IS MOYRA KEDSLIE FIT TO BE ACCA DEPUTY-PRESIDENT? (18 May 1999)

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Comptroller and Auditor General
Sir John Bourn KCB

National Audit Office
Buckingham Palace Road
Victoria
London SWIW9SP
Telephone 020-7798 7777
Facsimile 020-72336163
E-mail John.BOURN~nao.gsi.gov.uk

Our Reference 017/1 154/00/F

STEWARDSHIP AND ACADEMIC STANDARDS AT THE UNIVERSITY OF
HULL

I am writing, further to my letter of 29 March, to tell you of our findings about the running of the former School of Management at the University of Hull, and to provide an update on the remedial action now being taken by the University. It is clear that the departures of some staff and changes of role for others helped to resolve a number of problems. We have therefore concentrated our attention on the alleged continuing weaknesses caused by organisational lack of accountability and control, rather than the specific actions of individuals. We have sought clarification of a number of points from the University's Vice-Chancellor, Dr David Drewry, and have agreed our findings with the Higher Education Funding Council for England (HEFCE).

Alleged weaknesses in internal controls and failure to take corrective action
The main allegations are that:

the Department of Management Systems and Sciences was poorly controlled, and the then Head ofthe Department (Professor Flood) claimed that University rules were evaded as far as possible;
external audit carried out a number of investigations, but their terms of reference and findings were not subsequently made available;
significant expenditure on travel and entertaining was authorised initially by Dr Kedslie as Head of the Department of Accounting and Finance, and then countersigned by the then Dean of the School (her husband);
weaknesses in financial systems were brought to the attention of the then Vice-Chancellor and other senior officers, with no appropriate response; and
Price Waterhouse, while acting as external auditors, reported over several years that the University had inadequate financial controls and in 1996 expressed their wish not to stand for re-appointment as auditors.

It is clear that there were weaknesses in controls, and that these were identified in the 1997 Coopers and Lybrand report. In the light of this report, budget-holding and other executive responsibilities were changed in the newly established School of Management within the Faculty of Social Sciences. In all, there were five audit reports relating to the School of Management. These were made available to senior officers, the appropriate committees and Council, although it is not standard practice for audit reports to be published within a university.

With respect to the appointment of Coopers and Lybrand as external auditors. Price Waterhouse did bid for the work when the contract was market tested, and lost out in competition. Furthermore, they did not elect to use the facility available to them to inform HEFCE or Coopers and Lybrand of any matters of concern upon their departure.

]In conclusion, between 1992 and 1997 there was an inadequate management response to the
weaknesses identified and that this was essentially an issue of corporate governance. During this period, some remedial action was taken, such as the renegotiation in 1996 of all contracts with overseas agents, which was presided over by a Pro-Vice-Chancellor and assisted by the University's solicitor. However, a significant step towards addressing the issue was taken only with the establishment in 1997 of the Faculty of Social Sciences, and the assumption by the Dean of the Faculty of responsibility for financial matters in the Schools of Management and Accounting, Business and Finance. Further significant change came with the appointment of the new Vice- Chancellor, who took up post on I October 1999. He commissioned a comprehensive review of the way forward for the University, which is currently being completed. In addition, as you may be aware, a new business school within the Faculty came into operation in August 1999.

Alleged examples of personal gain from the teaching of overseas MBAs

The main allegations are that:

remuneration and travel expenses of University staff teaching on the overseas MBA programme were reimbursed by cheques drawn on personal bank accounts;
overseas agents were directly responsible to Professor Briston for considerable cashflows generated by the MBA programme;
approved course directors' fees and teaching rates for MBA courses allowed some staff to receive considerable benefits;
further benefits were gained by adding new locations for MBA courses regardless of any competitive impact this might have on recruitment at other locations; and
the University paid unusually large levels of commission to its overseas agents arranging MBA courses.

Again, it is apparent that financial controls were weak, and this led to expenses and other remuneration being processed in ways which did not follow accepted good practice. Nevertheless, payments to directors and tutors were made on an agreed basis, and were properly disclosed in the accounts. Whilst they were above the market rate for the seniority and background of the staff involved, it is normal to include an element of reward for generating substantial new business. In the event, Programme Directors' fees were discontinued in 1997 and course fee payments have recently been adjusted to accommodate an agreed workload for staff in the Business School.

In May 2000, the University concluded a strategic review and a detailed internal audit of international operations. They recommend clearer lines of responsibility, improved systems of costing and pricing, reduced reliance on overseas agents and more rigorous compliance with quality assurance procedures. In both cases the resulting action plan will give named individuals responsibility for implementation to a timetable, and provide for monitoring, by the Planning and Operations Committee and the Vice-Chancellor respectively.

Alleged inconsistencies in academic standards

The main allegations are that:

Emile Woolf College in Malaysia was not subject to sufficiently detailed vetting before a franchise for delivering the MBA programme was established, and no formal agreement was signed for three years;
the Joint Board of Studies, which had overall responsibility for the examination process, did not always meet as required; and
the results of overseas students were upgraded in order to safeguard fee income.

We have concluded that controls over franchises were weak, although the key franchise giving rise to concerns - that involving Emile Woolf College in Malaysia - ended in 1997. The University currently operates no overseas franchises. Instead, the recent international strategy review recommends greater use of partnership arrangements with well-established institutions and more rigorous compliance with quality assurance procedures.

Exam results for a group of eleven Malaysian students were upgraded from third class to lower second class degrees. An internal review led by a Pro Vice-Chancellor concluded that the original exam board and external examiner were not sufficiently professional, but that the end results were acceptable since the marks had been borderline and due account had not been taken of language difficulties. There is no clear evidence that the safeguarding of contractual income was a motivator behind the decision to upgrade these results,
A number of other steps are being taken in order to strengthen controls and ensure that past mistakes are not repeated:

the administration of overseas activities has been reorganised, so that the International Committeeresponsible for distance-taught and other operations now reports to Planning and Operations Committee and the Senate, and has representation from all Faculties;
the numbers of overseas programmes and associated agents have been reduced;
a new MBA structure is to be introduced in time for the next academic year with clearer lines of responsibility assigned to directors; and
there should be closer liaison between the University's Finance Office, Academic Office and Business School in administering the financial and quality aspects of overseas programmes.

I hope that you will find this a helpful summary of our findings with respect to this complicated set of allegations. I am aware of the recent media profile of the University, and will ensure that my education team continues to monitor closely the situation. In particular, the team intend to follow up the implementation of University's action plans and the establishment of its new MBA structure.

JOHN BOURN