Firm principles of openness and accountability for the running of universities, colleges and training councils are to be set out by the Nolan Committee on Standards in Public Life.

The committee, which met on Monday to discuss the issues and questions it wants to address in the second stage of its review, will include the appointments procedures of governing bodies and systems for reporting and safeguarding the spending of public funds in its examination of further and higher education institutions and Training and Enterprise Councils.

A consultation paper detailing the areas to be covered is to be issued at the end of this month, with responses invited until October 31 and oral hearings beginning in mid-November.

Lord Nolan said the main concern of the committee was likely to be "procedures for maintaining standards of propriety" in the governance of local public spending bodies. These include grant-maintained schools and housing associations as well as universities, colleges, TECs and Local Enterprise Companies in Scotland. They are responsible for Pounds 11 billion of public funds.

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The review is likely to recommend broad measures to tackle the kinds of problems highlighted by the Commons Public Accounts Committee in its report on severance payments to senior university and college staff, published last week. The report criticised Huddersfield University for offering its former vice chancellor, Kenneth Durrands, a severance package of more than Pounds 411,000, and questioned Portsmouth University's decision to award its vice chancellor, Neil Merritt, a Pounds 52,500 settlement after reprimanding him for his expenses claims.

A Nolan Committee spokesman said: "We are looking very much at the structure of systems that reduce the chance of those kinds of things going wrong or ensuring they become public when they do start to go wrong."

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Public Accounts Committee members expressed surprise and concern that Huddersfield University governors should have judged Professor Durrands's original severance package, subsequently cut to Pounds 150,000 after funding council intervention, to be reasonable.

They were also strongly opposed to a "gagging" clause included in the original severance agreement under which Professor Durrands was required to make no public statement for four years about his dismissal. The report found eight other settlements in higher education had included "gagging" clauses.

The report calls for compliance to guidelines on governance, such as those issued by the Committee of University Chairmen, to be set as a condition of grant by the funding councils.