EUROPEAN COMMISSION Directorate-General for Education and Culture Life Long Learning: Education and Training policies School education and higher education Doc. MHE 26

CLUSTER “MODERNISATION OF HIGHER EDUCATION”

Summary report of the Peer Learning Activity on

Using financial instruments for steering system performance

The Hague, 7- 9 March 2007

Final Report approved by the Cluster

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Contents

Contents.............................................................................................................................. 2

1 Introduction .......................................................................................................... 3

2 Key issues on Using Financial Instruments for Steering System Performance ... 4

3 The Peer Learning Activity .................................................................................. 5

4 Key issues............................................................................................................. 6

5 Input to the debate ................................................................................................ 8

5.1 Initial hypotheses.................................................................................................. 8

5.2 Discussion Framework......................................................................................... 8

5.3 Workshop feedback.............................................................................................. 9

5.4 Overall Feedback................................................................................................ 10

6 Analysis of the selected measures...................................................................... 12

7 Review of original hypotheses ........................................................................... 16

8 Conclusions ........................................................................................................ 19

8.1 Overview of findings from the PLA .................................................................. 19

8.2 Lessons learned - Top ten suggestions for the design of steering mechanisms . 21

Annex 1. List of participants ............................................................................................ 22

Annex 2. Descriptions of country case study measures ................................................... 23

Annex 3. Overview of National Reports prepared for the PLA. ...................................... 33

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1 Introduction

A Peer Learning Activity (PLA) was organised on 7- 9 March 2007, in The Hague, on the topic of Using Financial Instruments for Steering System Performance. This PLA was organised in response to the needs of participants in the Cluster on “Modernisation of Higher Education” within the framework of the implementation of Education & Training 2010. The meeting was hosted by the Dutch Ministry of Education, Culture and Science, and the organising committee was made up of the Netherlands, the United Kingdom, the Czech Republic and the European Commission.

In addition to the host country of the Netherlands, nine other countries participated in the PLA: The Czech Republic, Finland, Flemish Community of Belgium, Greece, Hungary, Netherlands, Norway, Slovenia Spain, and the United Kingdom.

Each country that participated in the PLA was represented by two people: one governmental representative and one HEI representative. These were considered to be of influence within their respective work surroundings and able to disseminate the outcome of the PLA.

In preparation for the meeting, participants were asked to provide a brief national report on a simple template covering the following issues:

• Effectiveness of different financial instruments for steering at system level

- Use of specific instruments

- Formula-funding

- Non-financial instruments

• Performance indicators

• Effectiveness of different financial instruments for steering on system-level

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2 Key issues on Using Financial Instruments for Steering System Performance

The “Modernisation of Higher Education” Cluster was created within the framework of the implementation of Education & Training 2010. The first Council / Commission Joint Report on the implementation of E&T 2010 established the priority fields of action to enable the education and training sectors to contribute to the success of the Lisbon Strategy. The second joint Interim Report on the implementation of E&T 2010, adopted in February 2006 on the basis of contributions from Member States on progress achieved, draws specific attention to the higher education sector.

There are different HE models across Europe, ranging from the very autonomous to the state-controlled. Evidence shows that there is a trend towards increased institutional autonomy. This is also advocated by the Communications of the European Commission and endorsed by the European Council. But governments – will – still wish to retain influence over the investment of public funds in higher education1. What is the most effective way for the government to ensure HEIs delivering on national priorities? Benchmarking and showing good/bad practices is one way, but this PLA focused on combinations of financial stimuli and (formula-funding) lump sum budgets, and examined the following questions:

• What are the pros and cons of different approaches: performance contracts, multi-annual agreements, specific arrangements with a limited number of institutions, separate (stimulating) budget for a specific issue, funding council with programmes on a competitive base, etc?

• How can we avoid disadvantages – as much as possible - like extra bureaucratic and administrative burden?

1 DG EAC, Report of the PLA on ‘University Governance’, Copenhagen April 19-21, 2006, p12.

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3 The Peer Learning Activity

The Peer Learning activity was opened by Mr. Jo Van Ham, director of the Higher Education unit from the Ministry of Education, Culture and Science, and co-chaired by Jurgen Rienks from the European Commission and prof. Dr. Marijk van de Wende (CHEPS, OECD/IMHE). It was organised into three types of session:

• Presentations from the participants, based on an example selected from the country reports provided prior to the PLA. This presentation aimed to follow a standard template to facilitate the discussion, and the presentations were made in two working groups

• Analysis of the presentations and synthesis of the results provided and animated by experts from CHEPS. This was followed by a critical reflection by dr. Sijbolt Noorda, president of the VSNU2, on results from the PLA and on the CHEPS analysis. This analysis and the surrounding discussions forms the bulk of this report

• Visits on the ground and presentation of examples from the Netherlands:

- Platform Beta / Techniek, a semi-governmental institution aimed at stimulating technical studies gave a presentation of their activities and method of working

- A visit to the University of Professional Education: InHolland, Rotterdam and presentation of their activities.

At the start of each day a summary of the key conclusions based on the “blank questionnaire” approach used in previous PLAs was produced to refocus the discussions and provide the starting point for the following activities.

This structure followed the recommendations from the previous PLA about an increase in focus and more time for discussion and reflection by the participants.

2 The Association of Universities in the Netherlands.

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4 Key issues

The Lisbon Agenda, which is of course wider than the Bologna Perspective, gives a very specific view on the type of modernisation agenda that is necessary. The problem analysis is clear – there is uniformity of provision, a degree of insularity and fragmentation, and a strong influence of the state – even a tendency to micromanage – and general over-regulation. In the research area there are significant developments which are not always recognised at lower levels. Under-funding remains an issue and the 3% investment in research remains elusive, while overall spending on higher education remains low compared to international competitors.

The key challenges include:

• Widening access while championing excellence

• Diversity and flexibility

• Producing the right skills and competences for the labour market

• Lifelong learning/innovation

• Interdisciplinarity

• Interaction with society and with business and industry.

The surrounding conditions are crucial – Governance issue of deregulation and autonomy show huge differences across Europe, and Institutional management requires more professionalisation – a focus on efficiency and effectiveness.

Funding issues abound:

• Enhanced investment

• Competition based funding of research

• Output related funding – can it work?

• Meeting the funding gap from other sources – industry, student fees etc.

Steering is not a black/white either/or issue. People are using a mix of approaches to steer education, involving looking at national systems as economic markets, and governments steering competition between institutions. Some critical questions arise – how do you reconcile increased autonomy with increased accountability, how do you encourage entrepreneurial behaviour and links with industry and business, what are the best ways to use performance based measures and output based funding, and what should be the basis of the relationship between managers and funding agencies, and how are new issues such as contracts, accountability and audit best handled.

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The key questions addressed by the PLA were:

• How do you achieve national priorities by influencing the higher Education Institutions?

• What are the most effective combinations of targeted and generic funding?

• What are the pros and cons of the various instruments?

• How can you avoid the disadvantages that can arise?

• Should annual or multi-annual funding be addressed

However, there are also wider related questions on the agenda:

• If you work at a European level, how do you stimulate diversity of mission that still ensures convergence and the Bologna Agenda objectives?

• How do you avoid the idea of one size fits all in education policy

• How do you divide up activities/provision across institutions?

• What is the right level at which to act (regional/national/EU)?

• How do you balance research and teaching?

• What are the roles of the stakeholders?

• How do you enhance co-operation and competition for international competitiveness?

A strategic approach to this last issue provides many important choices for the EHA/ERA.

The PLA mainly discussed three types of funding:

• Formula Funding

• Agreements

• Project Funding

And looked at how they relate to core business and to additional activities.

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5 Input to the debate

5.1 Initial hypotheses

A set of initial hypotheses were set out by Prof Marijk van de Wende to form the basis of the discussion. These were statements designed to promote debate – the results of which can be found in the conclusions where these ideas were revisited in the light of the dialogue over the three days.

Initial propositions

Formula Funding

• Is preferable because it permits integrated management with low administrative burdens and high stability

• Does not allow for the rewarding of strong performance or sanctions for weak performance

• Does not allow steering towards additional activities

Agreements

• Are not efficient if no extra incentives are provided

• Are not efficient if they don’t match institutional missions or priorities

Project Funding

• Is not efficient if no new funding is attached (not just a reallocation of resources)

• Is not efficient if not associated with targets and time limits

5.2 Discussion Framework

In order to frame the discussions, the experts from CHEPS proposed a framework for analysis. This was based on a need to look beyond the questions and towards the solutions, taking into account that sometimes non-financial or legal instruments could be equally if not more important.

The three main types of instruments discussed were as follows:

Project funding, where funding is directed towards a specific outcome with a defined, often short-term, time horizon. Project funding may be for specific initiatives such as development of major new activities, or pilot in nature, to test mechanisms or concepts.

Agreements, where accords between policy makers and HEIs are negotiated in order to achieve specific objectives. These may or may not have funding attached.

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Formula Funding, where funding is based on an allocation system based on various funding formulas that provide funds in broad input categories or on output measures based on specific indicators.

The proposed framework enabled a discussion of how the various instruments could look at both core and new or additional activities. In this table x reflects the focus of the PLA on steering instruments to be used in addition to formula funding.

Core business Additional Performance

Project funding

Agreements

Formula funding

To categorise the instruments you need to look at a number of factors and, importantly, the context – what is the general philosophy, what is the state of the reforms, what other external factors need to be taken into account. Such influencing factors include:

• What are the goals – what is the purpose of the instrument?

• What is the scope? To which institutions does it apply, to which issues (broad range/highly focused) and what other stakeholders are involved?

• What is the support for the instrument in design and operation

• What is the legal basis? How much freedom of choice is involved for institutions and what are the consequences of non-delivery? How strictly is it applied?

• What are the costs of designing and applying the instruments for all of the parties concerned (government, HEIs, other stakeholders.

• How effective is the instrument? Does it contribute to the goals as set? How can you assess this – objectively?

The PLA then looked at examples of instruments from the participating countries, addressing these issues. The individual presentations can be found in the virtual community, and summaries of the measures are in Annex 2. This was done in two parallel sessions, which then reported back.

5.3 Workshop feedback

The first workshop group noted that more and more funding seemed to be coming from non-state sources. The Czech Republic is using contract models for some activities with specific objectives. Greece is in the middle of a big reform of the higher education framework and has had a large increase in funding of HE. Up till now the funding-system has been based on the formula model followed by negotiation. However, a proposal of law for a new contract model based system is under negotiation in the Parliament. The Hungarian example was on the new Hungarian Development Plan which includes aspects of Higher Education from a social development perspective – which for example, provides for a quality development programme. The Netherlands example was that of

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Letters of Intent – a letter in which universities had to set out their plans for the next few years in accordance with national priorities. There were serious doubts as to its effectiveness, but it had been a central plank of policy. An interesting feature was that there was no extra money associated with the measure. For Spain the example discussed was the model from Valencia where 70% of funding comes from the state (region), of which 10% relates to performance indicators. Institutions can choose their own 15 indicators out of a shortlist provided by the regional ministry. So far this system seems to be well accepted. However, it is now necessary to change the model and there is no additional funding associated since the level in Valencia is already the highest in Spain.

In the second group Belgium (Flanders) looked at a number of steering mechanisms – all of which were dealing with small amounts of money. What was interesting was to see how the chain of mechanisms functioned. Finland explained their approach to dealing with the rationalisation of Graduate Schools. At present they have 20 institutions but 117 graduate schools, and need to find a ways to reduce this latter number. For Norway a metrics based system for research institute funding was presented – moving from inputs to outputs as the basis for funding. There was some evidence that it was have an effect, looking, for example, at bibliometrics. For Slovenia many of their mechanisms are too new to be able to comment on many of the issues – especially regarding implementation. However, they presented the case of co funding by tenders of postgraduate studies that finances 60-80 % of tuition fee for students whose faculties fulfilled the conditions of the tender (among others tuition fee must not exceed the one set by the state). The tender was first issued in 1998, when 27% of students received co-financing. In the academic year 2004/05 this percentage was 53%. The UK presented the example of an instrument to fund excellence in teaching and learning. The Research Assessment Exercise has concentrated research funding, but a need was felt to look at other areas of excellence. The instrument funded 74 Centres of Excellence in Teaching and Learning (CETL), selected on the basis of peer review. But effectiveness was limited because only the supply-side was taken into account; student demand proved to be limited. They are currently looking at new instruments for 3rd stream activities.

5.4 Overall Feedback

The participants also heard a challenging intervention from Sijbolt Noorda, who made the following statements:

• Take diversity of the system into account. It is a both given and desirable.

• Steering involves trying to influence real people, with their own ambitions and mindsets, on issues they most likely already thought of.

• Make sure you address and involve the right level.

• Be aware of the complexity of a university, where academic peers are most important and not necessarily the administrators.

Following the discussion between the participants the following points emerged as important, although not necessarily universally accepted.

• There is a need to recognise the diversity between and within higher education systems

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• Steering a university is always a question of steering at at least three or four layers, and there are no formal hierarchical links between the layers

• You are trying to steer a system that is already in motion

• The time lags in education make it a difficult system to steer. You cannot predict the future, but you can predict that there will be change.

• Not all institutions need to respond to all priorities in the same way

• Incentives can be either positive or negative, and may be more than financial.

• There is a tension between widening access and developing excellence, and between co-operation and competition, raising questions of when it is better for institutions to work together and when alone.

• What is/should be the relationship between market type steering and social/system type sustainability.

• The role of the academics is also key – for them personal prestige is possibly more important that institutional prestige.

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6 Analysis of the selected measures

On the basis of the framework and the presented measures, the experts from CHEPS presented an overall analysis of the measures.

Firstly each of the selected measures was categorised against the set of criteria originally set out and discussed above:

• Goals of each measure

• Effectiveness, as reported

• Scope and coverage of the measure

• Degree of support from stakeholders

• Legal aspects – whether the measure was mandatory or not

• Costs to all the parties involved

In summary this gave the following picture:

Measure Goals Effectiveness Scope Support Legal aspects costs

Valencia À la carte part of funding model

Change institutional mentality and profiling ++

All univ; 10% of core funding; many issues; annual formula

Eventually universities supportive

Mandatory; binding; clear deliverables; clear consequences of non-delivery

HEI: low Gov: considerable

Netherlands Letters of intent HEIs must take up responsibility re. National HE goals

-- All HEIs; hardly extra money; many issues; 4 year

Low managerial and political commitment

Non mandatory; non-binding; no clear deliverables; no consequences

HEI: low Gov: low

Hungary Open tenders career survey

Setting up alumni system Better harmonisation of HE output and labour market need

Too early to tell All HEIs/ grads; substantial extra money; limited # of issues; 6-7 years

Unknown. Maybe jeopardised by uncertainty

Non mandatory; binding; clear deliverables; consequence non-delivery: refunding

HEI: limited Gov: limited

Greece 4 year Academic development programmes

More institutional autonomy, enhance efficiency, activate HEIs, social accountability

Too early to tell

All HEIs; HEI can get more money according to its profile, development goals and mission; open list of issues; 4 year and annual renegotiations

Broad. It was the proposal of the Rectors’ Conference(5-7 May 2006)

Mandatory; binding; (no clear deliverables); consequences non-delivery:

HEI: limited Gov: limited

Czech Republic

Decentralised programmes of development

Improve institutional performance, strengthen position of rector

+ (according to universities),

more potential integration

within universities

All HEIs; 5% of public funds; limited # issues; one year within 5 year plan of Ministry

broad

Mandatory; binding; clear deliverables; consequences non-delivery: no new contract

HEI: limited Gov: limited

Flemish community

Specific budget for educational development

Innovation of teaching, flexible learning paths, introduction BAMA

+ All HEIs; limited extra money (matching); limited # of issues; 2-years

Broad despite small budget

Non mandatory; binding; soft deliverables; consequences on non-delivery: no new contract

HEI: reasonable Gov: low

Finland Structural development of HEIs

Strengthening quality, efficiency, effectiveness, competitiveness and internationalization

Too early to tell, but looks promising

All HEIs, research institutes (private sector)

Principles generally accepted

Government resolution; deliverables in the form of coalitions, federations and mergers

HEI: pay part of the costs; Gov: 45 m€ for 3 years

Norway Performance based part of research component

Increase research performance of HEIs ++ (Seemingly) All HEIs; 15% of total grant;

limited # of issues; time? Broad (some academics reluctant)

mandatory; binding, clear deliverables; consequences on non-delivery: no performance no pay

HEI: high Gov: relatively small

England Setting up Centres of excellence in Teaching and Learning

To recognize and award excellence in teaching + (Seemingly)

All HEIs; ?% of inst. Budget; limited # of issues; 5-years

Broad (what about student demand)

Non mandatory; binding; clear deliverables; consequences on non-delivery: lose funding

HEI: low Gov: low

Slovenia Public tender for co-financing of post graduate students

Encourage LLL, increase # pg students ++

All HEIs; ? Money; limited # of issues; ongoing

broad Non-mandatory; binding; deliverables?; consequences?

HEI: low Gov: low

Once this summary had been prepared the various elements were analysed according to the framework, and assessed.

However, there are some problems with assessing effectiveness. It is assumed that there are some underlying relationships.

Well specified goals High chance of effectiveness Broad support High chance of effectiveness Limited scope High chance of effectiveness Non Mandatory status High chance of effectiveness Clear deliverables High chance of effectiveness Clear consequences High chance of effectiveness Low cost High chance of effectiveness

While this may be true for the individual relationships, in combination the picture is more complex – due to the inter-relationships between the different criteria, and there is no account taken of the context.

effectiveness

scope

support

Legal aspects

costs

This means that the assumptions on the effectiveness of instruments need to be taken as tentative and offering some guidance, rather than being firm.

On the basis of the presented measures, some conclusions could be drawn in the PLA.

• Many goals are formulated in rather vague terms. More precision – preferably quantified – is preferred, among other things with respect to assessing effectiveness – without this it is difficult to make adequate judgements.

• Many of the instruments presented were rather new, i.e. too early to tell the effectiveness. However there are many issues about when is the right time to measure effectiveness, which again refers back to the quantification and precision of objectives.

• There appears to be some ‘self selection’ in the case of the chosen instruments: instruments that seem to work have been presented. However, ‘bad cases’ could be very informative too if we want to understand why some instruments work (in a specific context) and others don’t.

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• “Effectiveness” has various faces. The use of the instrument can be considered as one of them. We think, however, that there is more than just measuring direct effects. Impact – in terms of the instrument’s contribution to solving a policy issue – should be included as another indicator for measurement.

• Related is the issue of sustainability: do changes really get institutionalized when temporary instruments stop?

• In terms of the instrument’s effects, side effects – positive and negative – should also be included.

• There was agreement in the group that the mix of instruments is essential (as is also confirmed in research literature on this issue). Such mixes, and the constitution of the mixes were not discussed in detail at the PLA. Further analysis of interaction effects between the various features of the instruments is required.

• The use of specific instruments in the institution may produce all sorts of effects that have not been considered during the PLA. In this way The HEIs have been regarded as ‘black boxes’.

• In nearly all cases the instruments seem to have generated broad support (except for the Netherlands). This seems to be a factor that positively correlates with effectiveness (which is in line with the initial assumptions).

• Generally speaking the costs of implementation are seen as rather low. Of course it is necessary to specify what kinds of cost are included and for whom. Apart from direct costs (e.g. for the government in the form of budgets), opportunity costs should be taken into account as well. Other costs could be “bureaucracy” (regarding drawing up contracts, reporting, etc.). Generally there was a feeling that perhaps costs had been understated in the examples.

• About half of the instruments are mandatory; it is not clear how this relates to the effectiveness. There are two rival assumptions:

a. mandatory means you can't escape and the instruments produce desired outcomes;

b. freedom of choice in using the instrument means that when it is used it will be effective.

• Clear deliverables and transparency in advance about the consequences of non-compliance or non-delivery are important.

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7 Review of original hypotheses

Returning to the original questions put forward for the PLA, these can be re-summarised as follows:

• What is the most effective way for the government through public funding to ensure HEIs delivering on national priorities?

• What are the most effective combinations of direct financial incentives (targeted funding or project funding) and lump-sum (formula funding)?

• What are the pros and cons of the different approaches and instruments (performance contracts, multi-annual agreements, competitive funding programmes, etc.)?

• How to avoid disadvantages like extra bureaucratic and admin burden (costs)?

• Annual or multi-annual cycles?

Looking at the original hypotheses, these need to be amended to take into account a number of views. They would therefore become:

• In the view of the HEIs, formula funding is preferable over all other forms of funding, as it permits integrated management approaches, and provides low additional admin burden and stability.

• Formula funding doesn’t allow steering on underperformance or rewards of strong performance. - However, it remains a “one size fits all approach” (while diversity is key)

• Formula funding does allow steering on additional performance - was generally accepted

• Agreements are ineffective if no extra incentives are provided - was generally accepted

• Agreements are ineffective if they don’t match with institutional mission and priorities - was generally accepted. Hence the importance of (ex ante) consensus & dialogue (interactiveness)

• Project funding is ineffective if no additional overall funding3 is related - was generally accepted. However, the exact relationship between the amount of funding and amount of change is as yet unclear – although it is definitely not linear.

• Project funding is ineffective if no targets & time limits are defined - was generally accepted. However targets need to be clear in order to measure achievement and the measurement tool should be in place. Timescales need to be appropriate to achieve effects, to measure effects, and to assess sustainability.

3 In other word the funding attached to the project should be new money, not just a redistribution of existing resources.

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There are some key questions that arise from this. It was agreed that steering mechanisms involve more than funding alone – and indeed there is a whole issue around the changing balance of funding and whether, indeed, the government is always and necessarily the main direct funder. No discussion of steering can take place without a thorough review of the wider steering context. Instruments need to take into account the competing requirements of competition between institutions and co-operation between them.

A number of factors are important in addition to funding, for example the element of excellence, prestige or esteem. In some cases this may be almost of the nature of “building a league’ as in the sporting context. This reflects a move away from a redistributive approach (redistributive justice) and the potential consequent lack of differentiation. However, there is a risk of replacing it with other forms of convergence (for example, academic drift) when prestige is only attached to one function (for example, research excellence). The way to counterbalance this may be to reward excellence in other areas – for example teaching, innovation, and contribution to regional development or social mission.

The role of government as the main funder is one that is increasingly coming under scrutiny. In the UK, for example this is no longer the case, with less than 50% now coming from direct government funding. In the Netherlands and in most other countries it remains at 70%4. It is, however, clear that more private contributions will be necessary if the target of increased percentage of GDP for Higher Education is to be met, since the public purse is limited. There are strong links between reputation and the ability to attract extra external funding, and also the best students (which in some countries is a strong factor on income) and staff.

The national context is too limited a perspective, in the case of Higher Education, since there are major driving forces at European and global level. Indeed the Universities themselves are more exposed and engaged in the European and global context than national governments. Issues such as prestige have a strong international dimension – rankings (however one may criticize their validity) have a very strong influence. Research is increasingly becoming a global activity, leading to risks of brain drain. OECD and CHEPS have produced scenarios showing that specialisation and concentration in the research function of universities will increase leading to a concentration of funding: creating “top universities” / mergers, etc. Thus the issue of “league tables” cited above has a truly international dimension. International student markets are growing, both at undergraduate and graduate levels – indeed in the UK they are a major source of income for some institutions. Generally Higher Education is an internationally networked sector with a strong notion of working with peers.

Turning to the tension between co-operation and competition, it is clear that there are a number of strategic options for enhancing global competitiveness in line with the Lisbon Objectives. However this gives rise to a number of important questions:

• What is the best mix of competition and cooperation at national and European level?

• What can institutions best do together and what best in competition to each other?

• How do you reconcile the twin objectives of access and excellence

4 See Education at a Glance, OECD Indicators 2006.

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To discuss this you need to return to the basic assumptions and paradigms.

There are competing visions in Europe5

• the university as a service enterprise in competitive markets

• the university as an instrument for national political agendas

• the university as a public service model (i.e. Higher Education cannot be solely market-driven as the logic of the market does not apply easily to education)

As yet these are not really reconciled, and give a multitude of partly inconsistent criteria of success, and competing understandings of what forms of organization and governance will contribute to good performance.

Looking at the issues of more Market-type Steering and Social Sustainability, it seems that rather than being driven by competition for consumer needs, higher education institutions are driven by competition for institutional reputation. More institutional autonomy in such a ‘reputation race’ may lead to:

• institutional hierarchies (with only one “winning model”)

• social stratification of the student population?

• costs explosions, related to hiring the best faculty and attracting the most talented students

It has been suggested6 that instead, the coordinative capacity of the market should be used; a new set of ‘social contracts’, which lay down the mutual obligations between universities and their stakeholders.

5 For more details see M. van der Wende. European Responses to Global Competition in Higher Education. Paper for the Crisis of the Publics Symposium. CSHE, University of California, Berkeley (26-27 March, 2007). 6 See, for example, Van Vught, 2006.

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8 Conclusions

8.1 Overview of findings from the PLA

The conclusions of the meeting have been grouped together under general headings and are set out below. Finally a list of “top ten” suggestions for the effective design of measures for financial steering arising from the PLA are set out.

General issues on steering

These issues concern the principle of steering in general, and the underlying issues.

• There was consensus that some degree of steering is necessary or desirable – or at least unavoidable, but to be successful this requires well-defined objectives. Active steering is only necessary if you want to induce change.

• Different steering methods and even philosophies can live together and build up a consistent system. Context is important in choosing the instruments; funding is only part of these. A mix of approaches seems to be accepted as best - but what is the best mix? This also depends on whether it is an attempt to manage supply or demand. Understanding the dynamics of the system, including the wider context, is important in selection of the mix of instruments.

• Timing and timescales are important for measuring effects and achieving sustainability. Targets need to be clear in order to measure achievement and the measurement tool should be in place.

Financial steering

The conclusions relating directly to funding itself were that:

• In the view of the HEIs, formula funding is preferable over all other forms of funding, as it permits integrated management approaches, and provides stability coupled with low additional administrative burden.

• Formula funding does not allow: steering on underperformance; rewarding of strong or additional performance. It is a “one size fits all” approach (while diversity in HE is a key-issue!).

• There must be something of value to the HEI to make them buy into the process. Agreements are ineffective if no extra incentives are provided. These could be other factors than funding and still have a great impact: prestige, quality, and esteem.

• The strategies and focus of institutions are not just the results of funding incentives. Agreements could be ineffective if they don’t match with institutional mission and priorities. Hence the importance of (ex ante) consensus & dialogue (interactiveness).

• Projects could be less effective if no additional external funding is related. But the exact relationship between the amount of funding and amount of change is as yet unclear.

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• Some instruments are very small compared to overall budgets and expected results. Large shifts create dependency and can make it difficult to induce sustainable change. Percentages should be at a level appropriate for triggering action.

Indicators and measurement

Following on from the nature of the instrument is the issue of being able to judge the success of the measure – through the use of appropriate indicators and measurements. Where the instruments are output based, the issue of indicators and measurement comes into the discussion – linked to the setting of clear objectives. However this area is one where many failings and pitfalls were identified. These included:

• Large administrative burdens lead to inefficient instruments where any change achieved is not proportionate to the cost incurred by some or all parties.

• An overall system should be based on a few central indicators – as few as possible or only as many as necessary. The indicators should also measure at the appropriate level.

• Indicators need to be of quantity of outputs and results and of the quality of the results – in the case of complex lists of indicators, some indicators seem not to contribute to judgements on either quality or quantity.

• Many countries seem to have complicated financial regulations at the strategy level and unclear legislative rules, which include or lead to a lack of precision in the definition of indicators and measures of success.

• Inappropriate numbers of indicators or poorly devised indicators can lead to perverse behaviours, with scoring on indicators being more important than achieving the objectives. As HEIs, and indeed funders, become more educated in the processes, there are examples of people “playing the system” or altering behaviour to benefit from funding, while not respecting the underlying objectives. Institutions can also develop sophisticated manipulative behaviours limiting the usefulness of any indicator over time.

Autonomy/governance

The issue of governance is of course crucial to the discussion. Respecting the autonomy of institutions, some issues have to be addressed when steering at system level:

• The links between governmental steering and institutional steering need to be addressed, and of the balance between steering the sector as whole and steering the individual institutions.

• What is the relevant level of steering (national, regional…) – depending on the nature of the measure, the objectives and the governance systems concerned.

• How are roles shared between the stakeholders and what are the implications of changes in relationships and roles? Some instruments fundamentally change the nature of the relationships between stakeholders and this can have an impact on the degree to which the measure is accepted and ultimately its effectiveness.

• Too much autonomy and too little accountability can stifle reform. • Dissemination of the results of change should be part of the steering process.

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• It is important to bring end users as stakeholders into the steering process. This might involve some significant period of discussion and consensus building in the design phase of a measure.

8.2 Lessons learned - Top ten suggestions for the design of steering mechanisms

1. Define your objectives clearly and know how you will recognise and measure success

2. Take the context (national and international) into account

3. Make sure you are trying to steer the right people at the right level (supply or demand, national, regional, international), with the right mix of instruments

4. Involve the stakeholders to build support – make sure there is a sharing of the mission

5. Attaching money to a measure seems to increase effectiveness, although it is not a precondition. If money is attached it should be at a level sufficient to induce change, but not so much as to block movement or develop inappropriate dependence. Bear in mind that non-financial drivers such as prestige may also be important

6. Decide whether it should be mandatory or non mandatory. Either can work but require different mechanisms for commitment. If it is mandatory there should be sanctions for non-compliance, and if it is non-mandatory there must be incentives to achieve commitment (although these may not be financial).

7. Keep the costs and complexity down for both sides as far as possible and ensure that they are proportionate to the funding, importance and duration of the measure.

8. Do not try to have to many indicators, but have sufficient to know what is going on.

9. The timescale should be appropriate – both the duration of funding and the point at which success is judged.

10. Understand what works and doesn’t work, including the external effects on and of the measure. Learn and be prepared to change.

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Annex 1. List of participants

Country Priv/Gov Title Surname Name Organisation

BE(FL) Gov Ms DE KOCK Linda Deputy director, Higher Education Policy Division, Department of Education and Training

BE(FL) Priv Ms HEYLEN Els Director Staff Services University Administration, Katholieke Universiteit Leuven

CZ Gov Ms STASTNA Vera Ministry of Education, Youth and Sports, Higher Education Department,

CZ Priv Prof SAHA Petr President of the Czech Rectors´ Conference / Rector of the Tomas Bata University

EL Gov Dr ASDERAKI Foteini Hellenic Ministry of Education and Religious Affairs

ES Gov Prof BERNABEU Guillermo Ministerio de Educación y Ciencia / University of Alicante

ES Priv Prof MORA José-Gines Technical University of Valencia

FI Gov Dr HEIKINEN Erja University Division; Dept. for Education and Science Policy Ministry of Education

FI Priv Prof SUTINEN Markku

HU Gov Dr VERES Pal Head of Department of Higher Education, Ministry of Education

HU Priv Dr CSIRIK Janos Head of national Bologna promoters / Head of Faculty, University of Szeged

NL (host) Gov Mr VAN NIEKERK Wim Directorate Higher Education; Ministry of Education, Culture and Science

NL Gov Ms RIJGHARD Saskia Directorate Higher Education; Ministry of Education, Culture and Science

NO Gov Dr HUSEBY Hedda Deputy director-general, Ministry of Education and Research

NO Priv Mr STAVE Ola Secretary General, The Norwegian Association of Higher Education Institutions

SI Gov Mr PRISTOVSEK Primoz Directorate for Science and HE SI Priv Dr KODRIC Borut

UK Gov Mr NYE Philip Deputy director, Department for Education and Skills

UK Priv Prof VICKERS Anthony Head of the Department of Electronic Systems Engineering, University of Essex

European Commission Mr RIENKS Jurgen Unit A2, School Education and higher

Education. DG EAC Co-chair Prof VAN DE WENDE Marijk CHEPS; IMHE Dr DE BOER Harry CHEPS Mr KAISER Frans CHEPS Consultant Ms COLLINS Isabelle Technopolis

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Annex 2. Descriptions of country case study measures

Country Spain / Valencia

Instrument

À la carte part of the funding model (10% of core funding)

• Formula funding with a flavour of contract • HEI chooses 15 out of 31 indicators (representing 15 regionally determined

objectives) • Indicators improvement oriented

Context

• Valencia is one of the 17 autonomous regions of Spain • Since 1994 formula based model (student driven but with elements of

dropout reduction and speeding up progress) • In 2001 new law on university governance • HEIs in Valencia are relatively well funded

Goal Change in institutional mentality regarding strategic management and institutional profiling

Scope Actors money Issues time

• All universities • 10% of core funding • List of issues/ indicators is variable (choice of HEI) • Annual formula

Support • After some hesitations, universities were in favour (they saw that it worked)

Legal aspects

Mandatory Binding

Clear deliverables

• Mandatory (as part of funding mechanism) • Legally binding (public law) • Clear deliverables • Consequences of non-deliverables clear (no extra funding)

Costs HEI

Gov.

• Univ. have to provide data on the selected indicators: costs are low since they have the information available anyway;

• Considerable: new model (1999) was accompanied with additional funds (Valencia univ. now are funded very well)

Effectiveness

• No deep analysis available but… • Performances of Valencian universities have improved significantly (drop

out, duration of study, publication scores/ research production) • Deep change in mentality of HEI management achieved • Mutual trust increased • Call for renewal of mechanism: “increase the ‘à la carte’-part” • ++

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Country The Netherlands

Instrument Letters of intent • Document (written by the HEI) in which they specify their contributions

to national priority goals (quality, accessibility, efficiency)

Context

• Neo liberal cabinet • Enhancing institutional autonomy (HOAK, WHW etc) • Higher Education research plans (HOOP); dialogue based agenda setting.

2004 less detailed than previous editions • More focus on indicators and performance (in line with Lisbon/ OMC)

Goal

• Secretary of state did not want to increase budget to achieve national priorities: HEIs had to make a contribution with the money of the existing core funding and had to show (in the letter of intent) how they would do that; what area they would focus at; what profile the wanted to chose.

• HEIs have to take up their responsibility towards society/ national goals, specified in HOOP

Scope Actors money Issues time

• All HEIs • hardly extra money (3 x 5 million) • Broad range of issues • 4 year

Support • Reluctance of HEIs; low commitment • low support among institutions • decline in political commitment after new secretary of state

Legal aspects Mandatory

Binding Clear

deliverables

• not mandatory • non binding • no clear deliverables (statement of intent) • no consequences

Costs HEI Gov.

• low • low

Effectiveness • very low • - -

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Country Hungary

Instrument

Open tenders in development programme • Call for contributions to implementation of parts of Hungarian

development programme, section social renewal/ human resources development and innovation/ HE quality development.

• Central programmes are first step of operationalisation of programme areas. Based on the results of the projects in central programmes, open tenders are launched to which HEIs can answer

• One central programme: career survey

Context

• Hungarian Development Plan • Main funding stream: EU development funds • In addition to the sector operational programmes (under which the

open tenders reside) there are regional operational programmes. HEIs are more focused on the implementation of these regional OP, co-operating with the region.

• Many HE-reforms, like mergers and reform of study programmes

Goal

Realization/ implementation of central programmes; more specific of the central programme career survey (first destination survey among graduates). HEI has to do that (setting up alumni system) and graduates are obliged to co-operate. Aim is also to harmonise the HE output and labour market need.

Scope

Actors money Issues time

• All HEIs; all graduates • Substantial additional budget available • Limited (setting up alumni system) • 6-7 years (central programme)

Support • Unknown; long time horizon creates uncertainty among HEIs

Legal aspects

Mandatory Binding

Clear deliverables

• Non mandatory • Legally binding (contracts) • Clear deliverables • Refunding on non-delivery

Costs

HEI

Gov.

• Limited (drawing up tender)

• Limited (drafting call for tenders and evaluating tenders)

Effectiveness • Too early to assess

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Country Greece Instrument 4 year Academic development programmes under New Law

Context

• A large number of reforms/ new laws in the last two years to modernize the HE system (degree recognition, quality assurance, ECTS, DS, Joint Degrees, LLL, etc.)

• Some stakeholders were happy with old system • State budget cover almost the total amount of HEIs’ expenditures (no

fees for undergraduate students, fees only for 1/3 of post-graduate study programmes)

• Public spending on HE has grown substantially (2003, 1,3% GDP,) • Old system: The overall budget is determined between Ministry of

Finance, Ministry of Education and buffer organizations (Rectors’ Conference, Presidents of TEIs; Conference)

• Old system: Institutional budget: negotiations between HEI and ministry, based on a formula connected with the operational expenditures and until 2007 was not connected with any performance indicator.

• New system: HEIs from 2008 designs a 4 year academic-development program in order to fulfil their missions and their special goals, which is published in the Official Journal of the State. Annual report and possibility of renegotiation of the budget.

Goal

• More autonomy (profile and needs covering) • Activate HEIs • Enhance efficiency • Social accountability

Scope

Actors money Issues time

• All HEIs • HEIs can get more money according to their development planning.

Operational expenses will be provided any way • Open list of issues • 4 year ; annual renegotiations

Support • Broad, as it was a proposal of the rectors conference

Legal aspects

Mandatory Binding

Clear deliverables

• Mandatory • Binding programming agreement • (no clear deliverables) • If a HEI does not submit a 4 year programme all kind of state financing

towards the HEI is suspended. Ministry will pay ONLY the operational costs and the cost for the support of the students

Costs HEI Gov.

• 4 year plan and annual report, drawing up the plan; cost limited • Ministry evaluates plan, taking into account quality assurance

outcomes; cost limited

Effectiveness • Too early to tell (since Parliament accepted it 08/03/2007), only the oracle at Delphi can tell…..

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Country Czech republic

Instrument Decentralized Programmes of development

HEIs may submit projects to spend their development budget. The size of that budget (the orientation limit) is determined through a formula

Context

• HE Act in 1998 involved steering based on funding mechanisms • Programmes of development: decentralised programmes based on

preliminarily set budget, centralised programmes based on competition; both requires to consider the significant state priorities (exceptionally in 2007 some priorities of centralised programmes were cancelled due to budgetary problems)

Goal • Improve institutional performance (minimize weaknesses)

• Strengthen the position of the rector • Contribute to the strategy of the ministry

Scope

Actors money Issues time

• All HEIs • Additional funds: 5% of public funds for higher education • Limited list of issues - focus on priorities of the state for the respective

year • 1 year, but within 5-year plan of Ministry and of HEIs (annual

updating) Support • Broad

Legal aspects

Mandatory Binding

Clear deliverables

• Mandatory (incentive which an institution can hardly avoid) • Binding contract • Clear deliverables • Consequences: if no project is submitted, no extra funding available; • Consequences: if targets not achieved no renewal of contract

Costs

HEI Gov.

• Annual projects: reasonable costs • Ministry evaluates projects annually: negligible/very reasonable costs

(in comparison with the budget of the whole programme of development)

Effectiveness

• Universities are positive on the effects of the decentralized programmes (more profiling, strengthened management)

• Effects concern integrating of HEIs: one big project bringing often quite independent faculties to strategic discussions, i.e. a step towards more integration

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Country Belgium, Flemish community

Instrument Specific budgets for educational development and innovation of teaching

and learning

Context

• Previously projects, later agreements: administrative burdens became high

• Several HE reforms (flexibiliserings decreet, Bologna, funding, associations of different types of HEIs)

Goal • Innovation of teaching and learning

• More flexible learning paths • Introduction of BAMA structure

Scope

Actors money Issues time

• All HEIs • Additional funds; limited: seed money for setting up a structure and

then institutions have to match funds, amount based on # stud. • Limited of issues: focus on teaching and learning innovation • 2 year

Support • Broad, despite small size of budgets attached

Legal aspects

Mandatory Binding

Clear deliverables

• Non mandatory, but all HEIs participated • Binding agreement • Soft targets: uncertainty on evaluation criteria • On negative evaluation: no funding for next two years

Costs HEI

Gov.

• Administrative burden, but less than previous instruments • Low • Annual review by committee

Effectiveness

• Overall perception that instrument has contributed to innovation in teaching and learning

• Reduction of institutional autonomy (HEIs prefer lump sum over separate budgets

• Increased uncertainty • Lack of transparency • +

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Country Finland

Instrument Structural development of HEIs (a new part both the three-year contract

and the formula)

Context • Modernization of HE, Lisbon strategies

Goal

• Strengthened quality, efficiency and effectiveness of activities and increased level of knowledge

• Enhanced functioning of the public system • Strengthened internationalization and competitiveness • Appropriate size of the education system and functional resource

allocation

Scope

Actors money Issues time

• HEIs, research institutes (private sector, MoT&1), MoEducation • 15 million euros 2007, at least the same in 2008 and 2009: total 45

million

Support • The principle accepted, still work to do with details

Legal aspects

Mandatory Binding

Clear deliverables

• Government resolution 07/04/05 on development of public research system

• MoE: principals of structural development in HEIs; Science and Technology Policy Council review

• Coalitions, federations, mergers? Enhanced research; 3 university pilot projects involving 7 universities; 3 mergers of polytechnics involving 7 polytechnics

Costs HEI Gov.

• At least 45 Million 2007-2009 government money • HEIs have to be willing to pay their share

Effectiveness • Al least good

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Country Norway

Instrument

Performance based part of the research component in 2002 funding system • 2002 funding system consists of three parts: basic (60%), education

(25%) and research (15%) on average • Latter consists of two parts: strategic and redistribution • Redistribution component is performance based • It is about 10 percent of the university budget and 1-2 percent for

university colleges. In total it amounts to about 1,2 billion NOK in 2007.

Context

• More emphasis on autonomy and devolving authorities • From • Quality reform in 2002/06 leading to mandatory changes in

institutional governance • 2005: new HE law (for public and private institutions) • Annual consultative meetings

Goal

• Increase research performance (quality and quantity) of the institutions • From input to output funding formula • High quality of research (also internationally) • Competition among institutions on research funding • Foreseeable budgets

Scope

Actors money Issues time

• All HEIs, but compartmentalised • 15% of grant for strategic and redistributive part => as regards

redistribution 3% of university budget; 2% of college budget • Limited; research aspect • ?

Support

• Broad, due to sector commitment in developing the instrument, informing unions

• Committees in the Norwegian Association of HE highly involved in development

• Some academics are reluctant

Legal aspects

Mandatory Binding

Clear deliverables

• Mandatory • Binding • Clear deliverables (# publications, PhDs, research grants from EU and

research council) • No delivery: no pay Lows score on indicators reduce the budget for the

institution

Costs HEI

Gov.

• High, in development of instrument (in use of hours) and the documentation system and the reporting for the institutions

• Relatively small, particularly when the system is up and running

Effectiveness

• Significant increase in number of publications • Too early to tell, but first results are encouraging. More systematic

evaluation is needed in due time • First indication: ++

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Country UK/England

Instrument

Centers of excellence in teaching and learning (CETLs) • More focus on teaching in funding is needed due to overemphasis on

research performance • Bidding for the creation of CETLs

Context • RAE

• HEFCE funds less than 50% of total HE budget Goal • To recognize and award excellent teaching

Scope

Actors money Issues time

• Bids open for all HEIs (260 bids received, 74 awarded) • €55 mln a year: ? what proportion of institutional budget? • Limited number of issues but broad range of subjects • 5 years

Support • Broad: all institutional stakeholders agree with the goal that teaching

needs more status and recognition; and the CETL instrument • Students?

Legal aspects

Mandatory Binding

Clear deliverables

• Non mandatory • Binding • Excellent study programme for 5 years • Non-delivery: lose funding

Costs HEI Gov.

• Low; developing programmes; light touch reporting • Low

Effectiveness • Effectiveness hindered because strongly supply driven (students interst

not taken into account) • Too early to say; seems quite effective

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Country Slovenia

Instrument Public tender for co-financing of post-graduate studies

• HEIs apply for co-financing, covering 60-80% of tuition fees for postgraduate students

Context

• New steering instrument: public tender for public funds. First one was started in 2006. The instrument at hand started in 1998.

• Recent amendments of HE act in 1999 (university autonomy) 2004 (quality evaluation and new lump sum financing system) and 2006 (study programmes)

Goal • Encouraging LLL

• Increasing postgraduate students

Scope

Actors money Issues time

• Every university can apply; only relevant to post graduate students • How high is tuition fee (relative to total cost of postgraduate study? • limited • 2 year (scientific master) 4 year (PhD)

Support • Broad, all stakeholders gained from the instrument; no indications of disapproval

Legal aspects

Mandatory Binding

Clear deliverables

• Non mandatory • Binding contract • ? • ?

Costs HEI Gov.

• Low • Low

Effectiveness • Negative side effect on quality of candidates, but participation is rising

• ++

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Annex 3. Overview of National Reports prepared for the PLA.

CZECH REPUBLIC

1. Instruments of steering on system-performance

a. Use of specific instruments

The basic policy goals are expressed by the categories of funding.

Funds for education create almost 50% of total budget. They are allocated

• on the basis of formula (84,5% of the education budget); • non-normative parts of budget (8,1% of the education budget) - special fond of Minister, budget for

accidents, special support for internationalisation etc. • on the basis of long term strategy plans – contract funding (7,4% of the education budget) based on the

Programmes of Development and Fund of Development of HEIs. The financial support for R & D from the public budget has two forms: institutional and targeted.

• Institutional support is provided to HEIs by the Ministry according to the recommendations of the Research and Development Council, and has two parts: 1) Support for specific research, i.e. research linked with the provision of Master’s and doctoral programmes. The total amount is allocated to HEIs according to a formula. 2) Support based on research plans, which should be comprehensive, relatively detailed documents, planning the research of the HEI for a period of 5–7 years, including needed staff and budget. Researches plans are evaluated by special committees composed of Czech and foreign experts and are approved by the Ministry.

• Targeted support can be obtained on the basis of competition within the framework of different programmes administered by the Ministry, other ministries, the Czech Science Foundation and the Academy of Sciences and EU (mainly Framework Programmes)

Social affairs -in 2005 about 5% of total budget7– include social support of students, social scholarships, subsidies for meals, grants for logging, doctoral students scholarships, mobility grants etc.

The Programme funding (about 11 % of total budget) – capital investments provide financial tools which also comprise the possibility of influencing major capital investment programmes, thus making possible both the renovation and the expansion of public HEIs (buildings and equipment, as well as large instrument equipment). In 2005 it was slightly more than 10 %.

In the period 2007-13 there will be Structural funds of EU for disposal.

The following table demonstrates the structure of 2005 budget of HEIs

Activity Billions CZK % of TOTAL

Education 15,1 46,60

Social affairs 1,6 4,94

R & D 4,9 15,12

7 Next to it there is indirect social support provided by the state – social and health insurance or family allowances for students before 26 years of age. This sum is not easy to be calculated punctually, however, there is approx. 8-9billion CZK.

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Programme funding – Capital investments 3,6 11,11

Other public funding 1,3 4,01

Total public funding 26,5 81,79

Incomes of HEIs from non-public sources */ 5,9 18,21

TOTAL incomes 32,4 100

*/ without funding gained in the EU Framework Programmes

There is no special funding council. The education part of funds is distributed by the Ministry. Funds for R & D are distributed mainly by the Ministry for HEIs and other institutions except the Academy of Science which has its own budget. The targeted support for R & D can be obtained on the basis of competition within the framework of different programmes administered by the Ministry, other ministries, the Czech Science Foundation and the Academy of Sciences and EU (mainly the Framework Programmes). We feel that there are too many providers of grants (in total more than 20) for R & D and that it leads to fragmentation of funds. We have been looking for a reduction in the number of R & D grant providers and consequently more effective use of money.

Performance contracts / multi-annual agreements

Contractual principle: In this case, the funding depends on the compliance between the Development Plans of individual institutions and the Development Plans of the state concerning higher education. The mechanism is based on the programmes published by the Ministry the (Development Programmes and Fund of Development of HEIs) and HEIs are invited to submit projects that fit to the programme priorities derived from the state strategy. The financial support of successful projects allocated on the basis of specific contracts enables to implement the state priorities through funding. The assessment of the project’s eligibility is based on the priorities of Long-term Plans of the Ministry and of particular HEI, and is executed by expert teams consisting of the members of the Czech Rectors Conference, Council of HEIs, and representatives of the Ministry.

The projects of institutions are in two mains categories: 1) Centralised – i.e. centrally evaluated – strong competitive bases 2) Decentralised - based on SWOT analysis of HEIs. Each HEI receives an “orientation limit” Funds for this limit are divided on formula bases according to the criteria agreed with Representative Commission. The rules are based on outcome indicators. (See below). Institutions design big integrated projects, one in each programme maximally. Projects are always submitted by the rector and the total sum of all projects submitted by a HEIs follows “orientation limit”. Each project has its own budget.

Role of market-forces

The Ministry monitors employability of graduates. At the time being the unemployment rate is lower than 4 %. (The average unemployment rate in the country is approx. 7 %.) There only limited differences between different branches. For the future the Ministry thinks about possible use of these data. But it does not plan to apply them financially in the near future. (The data are already public.) HEIs themselves use these data for regulation of number of students in particular study programmes, as well as in rethinking the curricula of these programmes and the structure of programmes offered by the institution (e.g. at University of Agriculture – from agriculture based disciplines to life sciences and economy).

Other instruments/incentives

The Ministry creates platform and organises seminars to exchange good practices and/or discuss problems. This practice is very useful and influences (initiates) HEIs in positive changes.

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b. Formula-funding

The Ministry uses several formulas which always follow the purpose of activities for which the particular budget is allocated. If the indicators are not tuned /chosen rightly they are, after negotiation with representations of HEIs (the Representative Commission) tuned or changed.

The basic formula (see funds for education) is: Total money = number of students x cost of study a programme. Basic normative for cost of study in 2006 was 33 986 CZK (1 200 €) for an academic year, per a student. Calculation is made on the bases of students admitted the previous year (to 31 October).

The study programmes are divided into 7 categories of study programmes according to cost of study= basic normative X coefficient of financial demand:

Group of Characteristic Study Programmes Group no. Coefficient of financial demand

Some Humanities, Economy, Law … 1 1,00

Philology, Teacher Training, … 2 1,20

Technology, … 3 1,65

Agriculture and Forestry, … 4 2,25

Chemistry, Medicine… 5 2,80

Veterinary Medicine, Some Arts, Dentistry, 6 3,50

Arts 7 5,90

Since 2005 similar principle is used for bonuses for successful graduates: Total money = number of graduates x cost of study a programme but the cost of study programme is only a certain % from the real cost. In 2006 it was 13 050 CZK (466 €) Bachelor’s and Master’s programmes and 19 575 CZK (700 €) in doctoral ones, i.e. 150%.

Individual HEIs can distribute this money to their faculties according to their own rules, but in doing so they usually follow the above-mentioned formula. The institutions allocate certain percentage (usually 25 – 40 %) of total for institutional activities for which no special support is distributed.

The formula for decentralised Development projects is calculated on the bases of outcome indicators – performance of the institution in education (no. of students and total funding for education), research results (based on total funds gained for R & D), achievements of institutions in internationalisation (mainly incoming and outgoing mobility), composition of academic staff as well as numbers of students.

There is also formula for calculating specific research. The formula for specific research includes indicators such as the amount of targeted expenditures for R & D obtained by the given HEI in the previous two years and the amount of targeted expenditures for R & D with proved successful implementation of results, the number of professors and associate professors and the number of students in Master’s and doctoral programmes.

c. Non-financial instruments

Benchmarking

There is no national benchmarking. Two Czech HEIs participate at the benchmarking project ESMA coordinated by the Copenhagen University.

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Dialogue between government/ministry and HEI

Any important decision has to be according to the Higher Education Act negotiated with the academic representation. There are two bodies - the Czech Rectors' Conference and the Council of Higher Education Institutions. The latter one involves the Student Chamber (composed of representatives of all HEIs). These bodies participate in preparation of any strategic document, e.g. at the time being they participate at preparation of the Updating of the Long Term Plan for 2008.

The practice has been accepted that the details of the distribution of the state subsidy to individual HEIs are based on mutual agreement between the Representative Commission and the Ministry. The Representative Commission is composed of representatives of the Czech Rectors' Conference, the Council of Higher Education Institutions, the HEI Registrars, and a representative of the labour union.

Regulations

HEIs have only negotiated number of students financed. At present the Ministry reduces funded numbers of Master’s degree programmes students and the growth of students is realised mainly in Bachelor’s degree programmes. (In 2006 the growth of funded students in total (Bachelor, Master, and Doctoral) was 7%, in Bachelor’s degree programmes 17%)

Reasons behind these instruments

The Ministry is convinced that it can through these mechanisms steer the system towards the desired development.

2. Performance indicators

a. In what way give HEIs account on their institutional performance?

The HEIs submit annually the Report on activities and the Report on financial management of the institution. The reports are made public, e.g. through the web sites of the HEIs.

b. Which indicators are used to measure institutional performance?

The mostly used indicators are numbers of students and numbers of graduates in particular study programmes, mobility of students and teachers, funding gained for R & D and/or education activities from public and other sources – competitive bases, entrepreneurial activities of institutions. See also 1 b Formula-funding.

c. How to compare HEIs with different missions?

d. How to facilitate HEIs with different missions?

e. Are the results monitored on system level? By whom?

The results are monitored by the Ministry, mainly by evaluation of the Report on activities and the Report on financial management of the institutions. Also the institutions monitor the results at the system level – E.g. Council of Higher education Institutions prepares summary reports and comparative analysis on different topics.

Are there any – positive or negative - financial consequences of (non-) fulfilment of contracts, meeting targets, etc?

There are financial audits and the incorrect use of targeted money provided by state means giving it back to the state budget, sometimes also a fine is prescribed.

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3. Effectiveness of different financial instruments for steering on system-level

a. Experiences from the past: do’s and don’ts.

b. Effectiveness of the instruments currently used

c. Side effects (positive and /or negative) of different financial instruments

d. Is a special arrangement made to minimise bureaucratic and administrative burden?

The Ministry endeavours to monitor effectiveness e.g. expressed by the cost of one graduate of a respective study programme at particular HEI. The relation between the institutions which provide graduates in the same study programmes could influence in the future distribution of money to the respective HEI.

Below are two diagrams describing financial flows in our higher education system. Possibly they might serve for better understanding. The first one is general; the second describes distribution of funds in the educational part of the higher education budget.

Funds in higher education

Distribution of funds in the educational part of the budget

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FINLAND

1. Instruments of steering on system-performance a. Use of specific financial instruments Funding council The Academy of Finland covers an increasing proportion of research budgets in universities. At least one university (of 20) states that it gets all research funding from sources other than the contract between the Ministry of Education and the university. The Ministry has outsourced all funding including quality evaluations of research agendas to the Academy - i.e. currently research and in the near future also graduate school programmes - which on its part is steered by the Ministry. Public funding for technology and development is channelled through The Finnish Funding Agency for Technology and Innovation (Tekes) which operates under supervision of the Ministry of Trade and Industry. Tekes plays a major part in the external funding of the universities, especially the Universities of Technology. Approximately 80 % of government R&D funding is channelled trough the Ministry of Education and the Ministry of trade and Industry. The amount of additional funding is for one a variable in the funding formula.

Separate budget for specific policy goals The national science, technology and innovation policies are formulated by the Science and technology Policy Council, which is chaired by Prime minister. The Council is responsible for the strategic development and coordination of Finnish Science and Technology Policy. Guidelines given by the Council lead to intersectoral government policy programmes which often come across also the HE sector. E.g. the current government has a programme on entrepreneurship policy, which has been transferred to the universities in the format of project funding. Technically the budget is not separate from the operating expense item of the Ministry of Education in the state budget. Performance contracts / multi-annual agreements The Ministry negotiates with the universities a contract for a three years period. The agreement is updated yearly by the annual recourses, based on both quantitative and performance based indicators (a formula). Role of market-forces Indirect effects on teaching and research appropriations, e.g. in the form of target set for degrees (both Masters and Doctors). Other instruments/incentives: Initial funding for development projects conducted by a group of universities. b. Formula-funding Core funding is divided to:

• Extent factor: Basic component, new students and facilities • Education: Master's degrees - both targets and realised • Research: Graduate schools, doctorates - both targets and realised • Societal services: Open university - targets and realised, other

c. Non-financial instruments Benchmarking Performance and quality evaluations are run by the Ministry of Education, the Academy of Finland and the Finnish Higher Education Evaluation Council both on an institution and on a discipline, locally and nationwide. Dialogue between government/ministry and HEI Performance guidance includes continuous, every day type of formal and informal discussions, development of functions of the Ministry and of universities.

39

Regulations As our universities are autonomous, it is up to them whether they follow the outlines of the Ministry strictly or loosely. However, there are a number of laws and decrees, which steer the functions in the universities, e.g. the system of degree and curricula is quite strictly regulated by the legislation. The goals are set together and the universities have the right to choose how to reach the goals. Reasons behind these instruments Most of the instruments are common to all administrative branches, with some variation. The heterogeneity that existed before made it difficult to set national goals and there were too many degrees of freedom in the means to reach the goals. As for the universities and performance guidance: three year formulas are developed together with the universities. 2. Performance indicators a. In what way give HEIs account on their institutional performance? The universities provide the Ministry with final central government accounts together with an annual report in February. In addition to those, the Ministry maintains a database, KOTA, into which the universities provide quantitative data, the accuracy of which is on their responsibility. KOTA database contains statistical data (like number of students, number of degrees, staff, financing, premises etc.) describing university performance by institutions and by fields of education. KOTA has been designed to be a tool both for the Ministry and the universities when it comes to planning, monitoring and management. All data transfers are conducted via internet. b. Which indicators are used to measure institutional performance? Quality and societal interactions (centres of excellence both in education, research, performing arts and life long learning, publications, internationalization, innovation and regional activities) and functional effectiveness as well as study processes (Candidate's, Master's and doctoral degrees, open university).

c. How to compare HEIs with different missions? The Ministry of Education has encouraged the universities in the spirit of structural development of the public research system to set priorities and define a profile and thus enabled the existence of a system with heterogeneous universities. Currently we are elaborating on a model where the comparison is done not between the universities but between the strategy chosen and the results achieved and this is then viewed against the nationally chosen (the Ministry and universities together) priorities. In the matter of results the comparison in the university sector is made mainly the by the field of education, and not by comparing universities to each other as whole. By the legislation it is ruled which fields of education are represented in each university.

d. How to facilitate HEIs with different missions? If a university has to create a profile and set priorities, there is a wider base for achieving different goals set.

e. Are the results monitored on system level? By whom? The Ministry of Education gives a report on the analyses of the financial statements of the universities. The science and technology policy council, headed by the Prime Minister. The council is a tool of the government to be able to dynamically face the societal changes, both national and international.

f. Financial consequences of (non-) fulfilment of contracts, meeting targets, etc. As for the performance based funding (currently 23 % of the total budget of Finnish universities), not reaching the goals does not bring money for those degrees that were not gained and if a university produces more degrees than the goals set, it will not get funding for the exceeding part of the degrees. If the university fails to reach the set targets of degrees, this will affect the target-setting for the next funding period. 3. Effectiveness of different financial instruments for steering on system-level a. Experiences from the past: do’s and don’ts. It has been difficult to cover quality issues on quantitative data.

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b. Effectiveness of the instruments currently used. The funding system is too fragmented from the point of view of the universities (too time consuming to try to get funding for all activities from different sources) and as for the Ministry, it is difficult to demand to meet certain political requirements if the funding is not provided by the Ministry. c. Side effects (positive and /or negative) of different financial instruments Roughly about 70-80 % of the total funding of the universities is budget funding from the ministry. This gives a certain security and continuity to the basic functions of the universities. d. Is a special arrangement made to minimise bureaucratic and administrative burden? All the data and documents, related to the annual performance negotiation process, are delivered via an internet based information system between the ministry and the universities. KOTA database is nowadays integrated as a part of this information system.

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FLEMISH COMMUNITY OF BELGIUM

Introduction

Policy Objectives

• to increase and to widen participation in higher education • to improve academic achievements • to decrease time to graduation • to get more mature students into higher education • to increase the number of PhDs • to improve research quality and productivity • to improve the industry-academia collaboration • to improve the quality of teaching • to improve efficiency: a better use of resources • to improve effectiveness of higher education • to enhance accessibility and equity

1. Instruments of steering on system-performance

a. Use of specific financial instruments

There is no funding council comparable to the HEFCE. It is the Ministry of Education and Training which is responsible for the funding of the higher education institutions.

• There is a Department of Education and Training Policy responsible for policy development, regulations and policy evaluation. There is an executive Agency for higher education and adult education responsible for the payment of the salaries of the teachers and the professors, except the staff of the universities and the payment of the allocations to the schools, university colleges and the universities; this agency is also responsible for the recognition for foreign degrees;

Each year the Government and the Parliament approve the global budget for higher education. The global budget is distributed to the HEIs according the rules and the formulas defined by the law. The Agency for higher education pays every month a twelfth of the amount to each HEI.

The funding of the universities consists of different funding streams:

• a lump sum for teaching and research covering the recurrent costs of the core operations (staff, materials and exploitation costs); about 1.150 MEuro

• a lump sum for basic research: about 125 MEuro • a lump sum for knowledge transfer activities and commercialisation: about 12 MEuro • a lump sum for student facilities (housing, restaurant and social services to students) • capital subsidies.

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The funding of the university colleges consists of similar funding streams. There is only a small funding stream for (applied) research.

There are separate budgets: there is a specific budget for educational development and innovation of teaching and learning. The funding method consists of the following steps:

• Each institution has to submit an educational development plan: educational development is about innovation of teaching and learning: redesign of study programmes, new teaching methods, new methods of assessment, distance education,

• There is an external review of the plan; in some cases the reviewers have made some recommendations; • The resources are made available to the institutions for two years; • There is an evaluation of the results; continuation of the funding is depending of this evaluation. In case

of a negative opinion the funding can be withdrawn. Apart from the lump sum the new funding model will cover multi-annual agreements between the minister and each higher education institution setting out agreed objectives and targets and the commitment of the institution to deliver on them and the amount of funding involved. The overall aim is to increase participation of under-represented groups; to improve the academic success of those students

b. Formula Funding

The funding is tied to inputs but most to educational and research outputs. It is a performance-based funding of providers.

Lump sum for Teaching and Research:

• the number of enrolments (new entrants) • the number of credits awarded • the number of degrees awarded: bachelor, master and PhD • premiums for students eligible for a grant as a proxy for students from under-represented socio-

economic and ethnic groups (low cultural capital) • premiums for joint study programmes

Lump sum for basic research:

• the number of degrees awarded: bachelor, master and PhD • the number of publications (ISI database) • the number of citations (ISI database) • the number of newly appointed female professors* • the number of newly appointed professors coming from another sector, university or research institute*

Lump sum for knowledge transfer:

• the number of spin-off companies** • the number of patents** • the number of research contracts with the industry** • the revenue from licensing and the exploitation of IPR**

* those indicators have a small impact in the total budget

** those indicators play a minor: the distribution of a small budget

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c. Non-financial instruments

Regulations

There is a regulatory framework in place encouraging the HEIs to provide learning opportunities for lifelong learning, for part-time students (credit contracts), a better combination of working life and learning, for a smoothly moving on from professional (bachelor) study programmes to academic (master) study programmes,

Quality assurance and accreditation:

Accreditation is a precondition for government funding of study programmes, for the right of awarding recognised degrees and diplomas and for granting financial aid to students. Accreditation means “awarding a hallmark that indicates that certain quality standards have been satisfied’. A robust system of quality assurance and accreditation is the corollary of an output-based funding model. The students and some professors have expressed their concerns that linking funding to academic achievement could compromise the academic standards and could lower the quality by encouraging the institutions to pass students to ensure the funding will be received.

Market orientation

There are elements of market orientation but there also elements of central regulation.

• the numbers of funded students is not regulated; • the number of the funded programmes is to a certain extent regulated; • HEIs cannot select their students; • The funding flow is mostly driven by the decision of students; • The level of tuition fees for funded programmes are regulated; • The level of tuition fees for not-funded programmes are largely free.

3. Effectiveness of different financial instruments for steering on system-level

HEIs have to deliver each year a report and an account. The information needed for the funding formula is gathered by the Agency and by an external interuniversity department for R&D indicators, which is funded by the government. We are using the performance indicators to calculate and allocate the budget. The better the performance is, the bigger is the budget. There is a mechanism by which the global budget for higher education increases if the volume of input and output parameters related to students is exceeding by more than 2 % the volume of the precedent year.

We are not comparing institutions with different missions.

The broad mix of parameters/indicators facilitates the development of different institutional missions.

The overall substantial increase of the research budget and the use of performance indicators to allocate the budget to the universities have had positive effects in terms of an increase of the number PhDs, a reduction of the time to graduation of PhD’s, the research productivity and the research quality( the number of scientific articles in journals with a high impact factor and the number of citations).

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Experiences with targeted funding

• Targeted funding is more effective than (small) project funding and less administrative demanding both for the government as for the institution;

• We have a good experience with targeted funding of teaching innovation through the cycle: planning, evaluation of the plan, execution, evaluation of the results by an external commission and site visits; the cycle is on a multi-annual basis not at an annual basis; it gives room to the institutions for different approaches which fit better with their own profile and traditions; innovation needs time; this multi-annual cycle approach minimises bureaucratic and administrative burden;

• Keep the dialogue with the institutions alive; • The government should act as a partner not as a hierarchical controller;

Targeted funding could be seen as an infringement on the autonomy of the institutions. Special within a research university targeted funding of teaching innovation seems to be a guarantee that the university management turned its attention to the quality of teaching and learning and the educational provision is well resourced.

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HELLAS

Background information

The Hellenic higher education system comprises two parallel sectors : The university sector, which consists of 23 public universities (including the International and the Open University) and the technological sector, which consists of 16 public Technological Education Institutions (including the School of Pedagogical and Technological Education).

1. Instruments of steering on system-performance

a. Use of specific financial instruments

- The main source of funding is the state budget and the European funds. The only separate budget for specific policy goals comes from the Community Support Framework which is funding some post graduate study programmes or special research programmes or infrastructure under call for tenders. There also some special funds for research from various Programmes. There are no fees in undergraduate studies and there are fees only in the 1/3 of the post-graduate studies. Doctorate cycle is also free of charge.

- The new law that was approved by the Parliament on 8 March 2007 predicts that funding will be provided according to the four-year strategic planning of HEIs.

- There are very few private funds. The law encourages the HEIs to establish Lifelong Learning Institutes and charge fees or provide distance training.

b. Formula-funding

The Ministry of Economy and Finance, the Ministry of National Education and Religious Affairs and universities and TEIs are involved in the process of allocating funds. At first there is a general agreement between the Ministries and the Conference of the Rectors’ and the Presidents’ of TEIs on the amount of funds, the type of expenses (infrastructure, equipment etc), the standards and guidelines. Then, each individual HEI cooperates with the Ministry of Education in order to define the annual amount based on an algorithm, which takes into consideration

- the number of students and the academic staff,

- the number and the location of the departments,

- other needs, etc.

c. Academic-Development program

According to Article 5 of the new Law 3549/2007 every H.E.I. designs a 4 year academic-development program which runs within the predicted limits of the state’s budget and the program of public investments for higher education in order to fulfill its mission and its special goals. This program is designed by the Senate of every University or the Assembly of every T.E.I. after the General Assemblies of the Departments opinion according to the Internal Regulation of the relevant Institution. The compilation of the 4 year academic-development program is done in collaboration with all the academic units of the institution.

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The four year academic-development programs are a component of the general development of higher education of the country and are related to the specification, the order and the pursuit of the aims of every academic unit according to priority, to the development, support and coordination of the educational and research activities, to the infrastructure and equipment development, to the improvement of the offered services, to the co-ordination of the academic activities of H.E.I. with the corresponding advancements and perspectives in the academic area of the European Union.

As far as the financial side is concerned, the four year academic-development program of every H.E.I. is specialized:

a) in operational expenditure

b) in investments

c) in all the staff members of every category

d) in the complete record and utilization of the H.E.I. fortune.

e) in the programming of the financing from other sources other than the state budget.

2. Performance indicators

The proposal for the four year academic and development program is submitted by every H.E.I. to the Minister of Education and Religious Affairs by the end of February of the previous year from which the program begins. The compliance with the results of the assessment procedure is seriously taken into account, according to law 3374/2005 for the evaluation of the proposal concerning the four year academic-development program, on behalf of the Minister of Education and Religious Affairs. If the four year academic-development program is approved, as far as the financial side is concerned, by a common decision between the Minister of Education and Religious Affairs and the Minister of Financial Affairs, then a binding programming agreement is signed between the Ministry of Education and Religious Affairs and the relevant H.E.I. which involves the realization of the four year academic-development program’s goals and which is published in the Official Journal. If, on H.E.I. responsibility, the four year academic-development program is not designed, all kind of state financing towards the H.E.I. is suspended except the resources for the payment of all the categories of staff concerning the coverage of functional expenditure and the student provision.

3. Effectiveness of different financial instruments for steering on system-level

Since the precious system was ineffective the new law provides the HEIs with fiscal autonomy and the right to transfer and allocate the 20% of the budget according to their needs and simplifies the auditorial procedures. The new law also introduces the 4 year economical planning and establishes the position of the Secretary of the HEI for the most effective co-ordination of the financial and administrative work of the Institution.All HEIs, according to the new law, have to provide through their website or in any other way, any possible information about their administrative bodies and their decisions, the resources and the management of resources, the study structure, the number of registered students, the infrastructure and the total of services provided by them (Law 3549/2007, Article 18).

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HUNGARY

1. Instruments of steering on system-performance

a. Use of specific financial instruments

Funding council

According to the Act on HE of Hungary, adopted in 2005 by the Parliament, there are two different type of funding councils in Hungary.

The Higher Education and Research Council is an independent board of experts advising the

Minister of Education and Culture; contributing to the preparation of decisions, delivering opinions, and making proposals with respect to issues of improvement, funding, research and development in higher education. The Higher Education and Research Council had a Financial Sub-council.

The Financial Board (earlier: Economic Council) is a new body of HEI that delivers opinions, contributes to the preparation of strategic decisions and cooperates in the monitoring of the implementation thereof. The Financial Board have advisory role at the HEI. The Financial Board cooperates in both substantiating the execution of the tasks, responsible of the utilisation of funds, assets, public funds and public property received, and in monitoring their implementation, and contributes to the preparation of maintainer’s decisions. The Board monitors the functioning of professional efficiency and that of cost-effectiveness in the management body of the higher education institution. Members of the body are representatives of different stakeholders and delegated partly by the HEI partly by the minister of education and culture.

Separate budget for specific policy goals

The most important specific budget in Hungary is the budget of the New Hungarian Development Plan 2007-2012 (Earlier the National Development Plan 2004-2006) Within these development programmes the main professional, structural and infrastructural development actions and projects are financed:

• new buildings, facilities, • new programmes, • quality assurance, • carrier management, • Teacher training and methodological development etc.

Furthermore, according to the 2005 Act on HE grants available through applications shall especially be provided for:

a) disbursements of institutional teacher and researcher scholarships,

b) the execution of research and development tasks, and the utilisation of research results,

c) the implementation of accumulation (investment, renovation) objectives,

d) rewarding holders of the ‘quality award’,

e) the implementation of European Communities objectives, international education and research relationships, for supporting the activities of the higher education institution providing undergraduate,

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graduate, and doctorate courses in the territory of the Republic of Hungary to non-Hungarian nationals in fee-paying

training,

f) training in Hungarian language outside Hungary,

g) the promotion of equal opportunities,

h) launching and maintaining programmes with a small headcount,

i) the completion of cost-intensive degree theses and master projects,

j) the performance of library tasks of higher education institutions,

k) discharging student college tasks,

l) the activities of the academic student league,

m) the activities of the (PhD) student union,

n) courses relating to Hungarian studies,

o) activities supporting gifted students.

A developmental financial contribution will be paid by the state funded students as a kind of tuition fee from the academic year of 2007/2008.. It would provide additional sources to the management of the quality of HEIs and awarding students performing on a high level.

According to this amendment each of the students will need to pay a certain amount of fees from the 2nd academic year (third semester). The tuition amount will be calculated according to the students’ performance given in the first two semesters – and later this ranking will be observed at the end of each academic year. According to this ranking 15% of the students (top students) will not have to pay any tuition.

The use of the contributions paid by students as tuition fees will be regulated as well. A certain amount of the contributions will have to be used for improvements/institutional development and the rest has to be “given back” to students in the form of grants, scholarships, social support.

Performance contracts / multi-annual agreements

There are two different points of views when talking about contracts and agreements between the Ministry of Education and Culture and HEIs. (1) the agreement made between the Ministry of Education and Culture and non-state (private or church maintained) HEIs, (2) the other is the grant that may be provided on the basis of individual agreements made to all HEIs described by the new Act on HE (§128).

1. Private higher education institutions are eligible for the grants for student bursaries, training, and research under the same conditions as state higher education institutions up to the number of state financed students.

The Ministry of Education and Culture transfers grant to HEIs on a normative (student bursaries, training, research, maintenance,) base but in one amount (as a lump sum) from the central budget directly to state higher education institutions, and through the maintainer in the case of non-state higher education institutions. (Based on the maintainer’s declaration of consent, the Ministry of Education and Culture transfers the normative grant directly to the non-state higher education institution.) Where a higher education institution operates as a non-state higher education institution, it shall be financed on the basis of an agreement concluded with the Minister of Education and Culture.

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2. According to the Act on HE (§128) the Ministry of Education and Culture may provide grants on the basis of an agreement (to all HEIs), in particular for:

a) ad-hoc special institutional tasks,

b) the implementation of development objectives,

c) the activities of the National Academic Student Council,

d) the activities of the National Union of Students in Hungary and the Association of Hungarian Ph.D. students,

e) doctoral schools, including the activities of the National Doctoral Council;

f) the support of higher education institutions pursuing outstanding instruction, research, and development

activities,

g) the operation of high-value equipment.

Role of market-forces

The allocation of state funded places among HEIs and fields depends on the need and preferences of applicants and the feedback of labour market and economy. Depending on the feedback of the labour market and the HEIs obligation to follow graduate success (regulated by the Act on HE) the most successful HEIs can get an additional state funding - +10% of the normative funding – which is decided by the Minister responsible for HE.

Other instruments/incentives

Donations for public purposes may be given to HEIs as well. The publicly financed institutions, state HEIs and also all registered HEIs do not pay taxes. Therefore they do not have to pay taxes after income from donations either.

The tax system of Hungary also supports both individuals and corporations with certain tax allowances in case they decide to support higher education institutions by donations. Donations given for public purposes entitle them for tax credits. Giving money or real estate, shares, etc for public purposes are considered donations which leads to tax deduction from the individuals’ or the corporations’ taxable income. This procedure is strictly regulated and supervised by legal acts – Act on Corporate Taxes, Act on Income Tax and Act on non-profit companies/organizations - and administration, documentation and control are taken seriously.

b. Formula-funding

The formula has three parts:

• Teaching: depends on the (weighted) number of students of the pervious year • Research: depends on the number of teachers and research workers and other performance indicators. • Maintenance: depends on the number of students and personal.

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c. Non-financial instruments

Benchmarking

There is no standard benchmarking. Some organisations are publishing ranking of institutions depending on different aspects: quality of teaching, quality of research, labour market success, facilities etc.

Hungarian Accreditation Committee (HAC) publishes evaluation reports on HEIs, relating to institutional and professional operation.

Dialogue between government/ministry and HEI

There is a broad range of dialogue between Government and HEIs: HAC,, Higher Education and Research Council, Retcor’s conference, Round Table on Higher Education, National Bologna Board, Financial Boards (Economic Councils) are the main bodies of this dialogue. Choosing these bodies has mainly historical roots. The newer part (Round table on Higher Education, Financial Boards (Economic Councils)) is mainly driven by aiming more market influence on HEIs.

Regulations

According to a government decree a quality award is offered for the best performance HEI. From 2006 there exists a new capacity accreditation system of HEIs. The allocation of student places depends on the result of this accreditation and also on the needs of the labour market. A government act on HAC gives the Committee the right to evaluate HEIs and programmes and assures the quality of the HE system. Starting programmes, establishing new HEIs are only possible after successful accreditation procedure.

2. Performance Indicators

a. In what way give HEIs account on their institutional performance?

The HEIs have to report twice a year (in March and in October) their basic statistical data on the number of students, teachers and further personal, and also their different activities and budget.

The HEIs also have to go through accreditation procedure in every 8 years. The accreditation procedure – carried out by the HAC - is mandatory and involves two separate procedures. On the one hand, it involves examining higher education institutions (education and training activities and conditions, research activities and facilities, staff, organisational structure and infrastructure), on the other hand, the degree programmes themselves (their curriculum content, the proportion of practical and theory-based instruction, qualified staff and infrastructure). Each institution has to undergo the accreditation procedure every 8 years and an interim control procedure after 4 years.

In terms of internal evaluation, institutions are obliged to prepare:

• their annual institutional evaluation report (on the performance of the previous year – financial, academic, etc). and

• self-evaluation documentation, as part of the accreditation procedure (every 8 years) and the interim control procedure (4 years after accreditation) for which the HAC provides detailed guidance.

The State Audit Office exercises the right to investigate the financial activities of institutions.

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b. Which indicators (if any) are used to measure institutional performance

From 2007 HEIs have to follow graduate success on labour market and inform the ministry (salary, unemployment rate, etc). Another indicator is the applicants/capacity ratio. On the research field we measure the publications, research grants, etc. HEIs with different missions are not compared and facilitated. There is statistical book from these data published by the Ministry of Education but there is no monitoring on system level. There are no direct consequences of these data, except of the students’ scholarships (scholarships are distributed by HEIs).

The National Higher Education Information Centre publishes reports, analysis and national rankings of HEIs every year depending on different indicators (facilities, research performance, quality of teaching, popularity of faculties and programmes, etc.).

There is an ongoing process within the National Development Plan, Human Resources Operative Programme that aims to develop new indicators of HE performance on different levels (national, sectoral, institutional etc..)

c. How to compare HEIs with different missions?

Part of indicators relates to the education and training, others to research. Colleges are focused mainly on training, universities both, training and research. The funding system allows HEIs to choose their mission by assuring equal opportunities and conditions.

d. How to facilitate HEIs with different missions?

As mentioned above HEIs successful in training or in research can get additional funding directly from the state, and also can attract more students and more grants and other sources.

e. Are the results monitored on system level? By whom?

See above.

The Hungarian Accreditation Committee is responsible for quality assurance of institutions and study programmes (accreditations) and supports institutions in developing internal quality assurance mechanism. The accreditation procedure is compulsory for all types of higher education institutions and programmes.

f. Financial consequences of (non-)fulfilment of contracts, meeting targets, etc

Monitoring and control of the National Development Plan projects exist and operates well. Negative financial consequences depend on the individual contracts.

3. Effectiveness of different financial instruments for steering on system-level

a. Experience from the past: dos and don’ts.

Formula funding was an important move in 90s. Unfortunately the formula was changed too often and the weighting (of students) was changed too often too. Institutions were rather interested in increasing the number of students and getting more additional financial resources than improving the quality.Other problem was that the

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real funding system operated more on a basis way, but we are working on the regulation of the really formula funding depending on the new act on HE.

b. Effectiveness of the instruments currently used

Research support is not very effective as it depends more on formal indicators and less on real outcome. Maintenance has a weak part too: More personal brings more money. On the training field we are expecting HEIs increasing the quality of teaching, better allocation of students between fields and institutions.

c. Side effects (positive and/or negative) of different financial instruments

As the formula depends mainly on the number of students it occurred as a negative side effect that subject areas with a small student interest are interested in keeping the students and so they may lower the teaching standards. On the research field HEI-s are more interested in academic indicators (publications etc.) and less in market oriented research projects and innovations.

d. Is a special arrangement made to minimise bureaucratic and administrative burden?

Concerning the institutional performance there is a relatively high autonomy of HEIs from the year 2006 and they are facing less bureaucratic and administrative burdens.

Institutions have the freedom to:

• transfer appropriations; • retain and accumulate residual amounts; • keep their own income in a separate account; • in case of certain conditions pursue business activities without the obligation to pay any taxes and

duties; • use proceeds from the sale of properties for development purposes in case it is spent on institutional

development; • sell their own properties; • have the right to found businesses, Limited liability companies; • contribute to a fund set in order to manage risks; • take onto long term obligations within the PPP programme; • take out loans subject to certain conditions and • subscribe government securities.

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NETHERLANDS

1. Instruments of steering on system-performance

a. Use of specific financial instruments

Funding Council

There is a funding council for scientific research. One of the key issues nowadays is whether and to what extent greater competition and incentives are needed in order to foster a more dynamic research landscape. There is no funding council for higher education in the Netherlands.

Separate budget for specific policy goals

Some specific policy goals are supported by a separate budget (for example):

• technics /technical science (Platform Beta/Techniek) • deepening and broadening of existing networks between higher education institutes and the corporate

sector (lectoren, RAAK) • excellent students • foreign students.

Separate budgets are available for these issues. Division of these budgets among the HEI’s is delegated to several semi-governmental institutions. Most of these semi-governmental institutions have a temporary status. These semi-governmental institutions make agreements with each HEI about the performances and targets a HEI is aiming at. The semi-governmental institutions also see to it that the HEI’s fulfil these agreements. If a HEI does not fulfil the agreement the HEI can (in some cases) be excluded for a next trench.

Performance contracts /multi-annual agreements

Targets on performances (the higher education sector as a whole) are embedded in a national agenda. This national agenda is drawn up in interaction and close consultation with the outside world. The agenda is discussed with umbrella organisations such as the Higher Professional Education Council and the Association of Universities in the Netherlands.

Performance contracts /multi-annual agreements with HEI’s do not exist in the Netherlands. In the past the government tried to make a deal by means of the so called ‘Letters of intent’. HEI’s were asked to set down in a letter to the government how they would go to contribute to the national targets. The idea was fine tuning of strategic plans of HEI’s with national priorities by dialogue between government and HEI’s. This didn’t work out due to:

• the absence of agreements on concrete indicators/targets per HEI • low political commitment • neither positive (extra budget) nor negative (sanctions) financial incentives.

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Role of market-forces

The discussion of an open system is very much alive. The demand for, and provision of, higher education is becoming more and more diverse. Public knowledge institutes are acquiring more turnover from the market. At the same time the number of private – and international – providers is increasing. Cooperation is taking place with non-funded providers. Moreover – certainly in vocational education – a discussion will arise on forms of learning that are linked to companies. All this begs the question of what the system’s limits are, as financed by the government. Greater insight is desirable into the positive and negative effects of steps towards the creation of an open system. Therefore some ‘experiments’ started in which a limited number of non funded HEI’s get access to public funding for some specific programmes.

Other instruments /incentives

Some part of the funding (lump sum) universities get is a fixed budget. Adjudication of this part of the budget does not depend on a formula (see 1b) but on agreements in the past. The government asked the Advisory Council for Education (Onderwijsraad) to advice about a new rationale for these agreements: is it possible to make agreements more flexible, depending on national priorities (and proven quality) and to broaden these agreements to institutes of higher professional education.

b. Formula funding

Nowadays formula funding is based on number of students. More specific the formula is based on:

• Number of registered students • Number of graduates • Number of students who dropped out • Length of study (stay) of graduates and drop outs.

The Minister has introduced plans for a new funding mechanism based on the notions on more flexibility, more freedom of choice, and more quality. The purpose of the reform is to transform the higher education system into a more differentiated and market-driven system where students and institutions obtain more freedom and more responsibility. The new funding system will be based on the provision of learning entitlements. This allows students to ‘cash’ their entitlements for (parts of) education at any place and time. This demand-driven system is supposed to turn students into critical customers, and higher education institutions into responsive providers, offering quality and meeting the needs of an increasingly heterogeneous student population.

Because the Dutch Cabinet is under resignation the proposed act is (temporarily) not under discussion.

c. Non-financial instruments

Benchmarking

All kind of relevant information on HE is gathered and published by the government each year (Kennis in Kaart). The information includes indicators on:

• Quality, Accessibility, Efficiency of the system • and national priorities (e.g. participation, innovation, international mobility)

The government do not make rankings of HEI’s in Kennis in Kaart. However, some newspapers do use this information for their own rankings.

Europe and the rest of the world are becoming more and more important for the Netherlands. Dutch higher education is greatly influenced by European developments and decisions. It is very important that the

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performance of the Netherlands is judged in an European and international perspective. Therefore the Netherlands participate in OECD reviews and international rankings.

Dialogue between government/ministry and HEI

There is a strong dialogue between government umbrella organisations for HEI’s, students and employers. Most governmental measures are discussed with umbrella organisations. The dialogue is aimed at consensus. The most important organisations are the VSNU (Association of Universities in the Netherlands) and the HBO-raad (Netherlands Association of Universities of Professional Education).

Regulations

The new (proposed) Higher Education and Research Act will introduce a new form of governance for the higher education sector: the governance will further distance itself to allow the institutions more room. In line with the increased autonomy that the institutions will have, most of the provisions regarding internal management structures have been deleted in the proposed bill. This room will, however, have limits. The focus is now on the horizontal accountability towards internal and external interested parties: students, professionals (teachers /scientist), employers, society. Therefore these stakeholders will get a stronger position.

Because the Dutch Cabinet is under resignation the proposed act is (temporarily) not under discussion.

Reasons for these instruments

The government is convinced that intensive interaction between HEI’s and stakeholders is more effective than central steering. Nevertheless, the government is still responsible for performance and transparency of the system as a whole. Therefore the relation between HEI’s and government is still of the utmost importance, but has to be reformulated. There will be a shift towards agreements and incentives with a focus on the performance of HEI’s. The government is investigating whether, next to formula funding (lump sum), a second flow of money (aimed at specific/selective stimulation of HEIs) could be a good additional instrument.

2. Performance indicators

a. In what way give HEI’s account on their institutional performance?

The Dutch quality system has been recently converted to a system of accreditation. As of 2002, responsibility for accreditation lies with the Netherlands-Flemish Accreditation Organization (NVAO). According to the section of the Dutch Higher Education Act dealing with the accreditation of higher education (2002), all degree programmes offered by research universities and universities of professional education will be evaluated according to established criteria, and programmes that meet those criteria will be accredited: i.e. recognized for a period of six years. Only accredited programmes will be eligible for government funding, and students will receive financial aid and graduate with a recognized degree only when enrolled in, or after having completed, an accredited degree programme. Accredited programmes will be listed in the Central Register of Higher Education Study Programmes (CROHO) and the information will of course be available to the public.

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In addition to this system of accreditation HEIs give account on their performances on a yearly basis. They report to the government about the issues mentioned under 1c benchmarking. The results are published - as said – in the publication Kennis in Kaart.

HEIs also give account on their financials: solvability and profitability are key issues.

b. Which indicators (if any) are used to measure institutional performance?

All degree programmes offered by research universities and universities of professional education will be evaluated according to established criteria. The following subjects are judged during accreditation:

• Attainment level • Programme • Quality and quantity of staff • Facilities • Quality Assurance • Results

In addition HEIs report on a yearly basis about the issues mentioned under 1c benchmarking.

c. How to compare HEIs with different missions?

The Dutch system of accreditation measures a minimum level of quality. These standards apply for all HEIs.

d. How to facilitate HEIs with different missions?

The funding system in the Netherlands leaves room to differ between universities. Part of the universities’ funding is a fixed budget, now – although often implicit - used to pay for e.g. uneconomic but important academic programmes, expensive infrastructure, etc. Maybe this budget can be used to facilitate HEI’s with different missions (see also 1a any other instruments /incentives).

e. Are the results monitored on system level? By whom?

• The – prior mentioned – publication Kennis in Kaart gives insight into performances of HEI’s. • Students who want some information about different programmes at different HEIs can visit the website

www.studiekeuze123.nl. This site compares programmes based on (for example) opinions of students. • There is a central registration of number of graduates.

f. Financial consequences of (non-) fulfilment of contracts, meeting targets, etc.

Mostly the financial consequences are limited. Occasionally HEIs can be ‘sanctioned’ by not awarding future requests (see 1a).

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3. Effectiveness of different financial instruments for steering on system-level

a. Experiences from the past: do’s and don’ts.

An analysis of financial instruments (next to formula funding) shows that criteria on which an extra budget is divided are of great importance. If the criteria are too specific, the HEIs have no room to take account of their own specific situation. There is a risk that HEIs are forced to take non-productive measures to meet the criteria. On the other hand if the criteria are too broad, selection is very difficult. So don’t make the criteria too specific or too broad.

b. What can be said about the effectiveness of the instruments currently used?

It is very difficult to say something about the effectiveness of the instruments. To say something about the effectiveness a concrete (short-term) target is needed. And ideally there is a ‘zero-setting’. Only some of the used instruments meet these conditions. The most effective instruments:

• are aimed at a specific, well-defined goal, • and are broadly accepted (political commitment as well as commitment of HEIs).

There are good examples, such as Platform Beta/Techniek (technics) which are very effective due to an almost personal approach; each arrangement is geared to conditions of the HEI.

Point of special interest is how to make sure that the results are enduring (long-lasting), especially when the budget is temporarily.

c. What is known about side effects (positive and /or negative) of different financial instruments?

Some say ‘number of graduates’ is a perverse indicator of formula funding, because in stead of stimulating quality, this indicator would stimulate fastness (without depth).

In the (recent) past the indicator ‘number of registered students’ brought a negative side effect.

d. Is a special arrangement made to minimise bureaucratic and administrative burden?

The new (proposed) Higher Education and Research Act will introduce a new form of governance for the higher education sector: the governance will further distance itself to allow the institutions more room and minimise bureaucratic and administrative burden.

Based on this new form of governance, separate budgets for specific policy goals will be limited. Only when there are strong indications that specific and selective incentives are more effective than formula funding, a separate budget is under discussion. In addition we deliber to cluster several specific budgets to create some kind of funding council for education in the Netherlands.

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NORWAY

Introduction

Substantial changes have taken place within tertiary education in Norway the last ten years, mainly aimed at encouraging institutions to be more responsive to the needs of society and the economy. As a result of the Norwegian Quality Reform (2002-2006), all higher education institutions were given significantly greater autonomy in managing and organising their activities. The increased institutional autonomy and accountability has initiated radical changes in methods and tools both for the higher education institutions (HEIs) and the authorities. There has been a transaction from ministerial micromanagement to management by objectives and risk management, which basically means that the Ministry of Education and Research identifies goals and monitors the institutions’ goal achievement. The governing of the higher education sector is thus characterized by supervisory control, rather than detailed follow-up. The Ministry has several approaches for practicing management of objectives, and the funding system and annual consultative meetings are the most important.

1. Instruments of steering on system-performance

a. Financial instruments

The Norwegian higher education system consists of 36 public institutions and about 30 private institutions. Both for the public and 25 of the private institutions, government funds are the main source of income. Government funds are distributed to all institutions based on a funding system, which is partly performance based. The funding system is constructed in order to give incentives for goal achievement.

The funding system consists of three components:

• First, the basic component is fixed, based on an historical budget level, and varies between different institutions. It secures stability and predictability, and represents on average around 60 percent of the grant to the institution.

• Second, the education component implies that n average around 25 percent of the grant is distributed on the basis of the number of study points (ECTS-credits) obtained by the students at each institution and the number of incoming and outgoing exchange students. It has no upper limit, and is created in order to give incentives for goal achievement with regard to the first main goal: Universities and university colleges should offer education of high international quality. Rewarding the number of study points can give incentives to increase the throughput of students. This can be done among others by increasing quality in education through closer follow-up of students and more contact between teachers and students. The teaching component covers around 40 percent of the costs of a study, while 60 percent of the costs are covered through the basic component.

• Third, around 15 percent of the grant is distributed through the research component. This component is created in accordance with the third main objective: Universities and university colleges should obtain results of high international quality in research and development work. The research component has a strategic part and a performance-based part. The strategic part includes specific funds to PhD-positions and scientific equipment among others. The performance-based part is a fixed amount which is redistributed each year. Four indicators determine the redistribution: Number of PhD-candidates, research grants from EC, research grants from the Research Council of Norway, and scientific publishing. In order to create the latter indicator, the Norwegian Association of Higher Education Institutions is responsible for creating and updating a list with national and international scientific journals of high quality in which publishing should be rewarded.

The third main objective focuses on the HEI’s ability to cooperate with external institutions, communicate research results, and meet the needs of the society. The Ministry is currently considering a new performance-

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based component in the funding system with indicators measuring communication of R&D results and innovation.

In addition to government grants, the institutions are encouraged to get external funding. External funding has grown considerable in importance with the transition from gross budgeting to net budgeting in the period from 2001 to 2004. The most important sources of external funding are research grants from the Research Council of Norway and the EC, which is also awarded in the funding system. Furthermore, the institutions are constantly getting more involved in commercial activities.

It is possible to impose economic sanctions on the HEIs in the case of non-fulfilment of instructions from the government, although this option has seldom been used in practice. In the budget for 2007, however, a budget cut was divided disproportional between the institutions, based on whether they had performed required student place cuts the year before.

c. Non-financial instruments

The most important non-financial steering instrument is the act relating to universities and university colleges, in addition to other relevant rules and regulations applicable to the higher education institutions. Another important non-financial steering instrument is the annual consultative meetings between the institutions and the Ministry. In the meetings, the institutions get feed-back on their performance, their goal achievement is discussed and they get signals on which areas they should focus. The consultative meetings are prepared on the basis of annual reports from the institutions to the Ministry. In addition to several performance indicators used actively in sector analysis and institutional benchmarks.

2. Performance indicators

In order to assess in which degree the objectives set by the Ministry are reached by the institution, performance indicators are used in addition to subjective judgements. These quantitative indicators are reported to the national database for higher education (DBH) annually by each institution. Table 1 below shows some of the most vital indicators used by the Ministry both related to the funding system, and also those used in the consultative meetings with the various institutions. The public higher education institutions in Norway are all governed by the same main objectives and performance indicators mentioned in the table below.

3. Effectiveness of different financial instruments for steering on system-level

The Norwegian funding system was introduced in 2002, with effect as from 2003, and it is therefore early to conclude with regard to its effectiveness. However, there are clear indications that at least the teaching component works as intended. As expected, the production of study points has grown considerable the last years, and most of the increase is due to better throughput of students. At the university colleges, the increase is also due to a growing number of students admitted to the programmes, and hence a better exploitation of resource. A recent evaluation of the Quality Reform indicates that the funding system can have influenced the institutions’ focus on study point production and throughput of students.

Performance indicators are as mentioned above increasingly becoming an important fundament for our non-financial instruments. We have now access to comprehensive data sets on higher education, but the challenge is to transform the data into consistent and useful indicators. Collecting data and developing statistics of high quality have therefore been central concerns in the Ministry in recent years.

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Table 1 List of indicators (2005)

First objective: Universities and university colleges should offer education of high international quality

Second objective: Universities and university colleges should obtain results of high international quality in research and development work

Third objective: Universities and university colleges should be educational institutions and research institutions with integrity and ability to meet the needs of the society

Fourth objective: Management of employees and economy at the universities and university colleges should secure efficient exploitation of resources

Study points (138 689) Number of PhD-candidates (855) Indicators are under development Number of exchange students incoming (3 963) outgoing (4 213)

Research grants from EC (NOK 159 209 000)

Research grants from the Research council of Norway (NOK 1 778 640 000)

Indicators in the funding system

Scientific publishing Number of applicants (19 540) Completion rate of PhD-students Student registered in further education courses

(14 566) Degree of budget implementation

Registered students (195 027) Number of scientific employees (15 512) Number of ECTS-credits taken in further education courses (8 059)

Size of external funding (NOK 3 740 414), and various sources of funding

Number of candidates (32 160) Number of scientific employees in exchange programs (3 186)

The liquidity position

Study points per student (mean 42)

Accounts accepted by the Office of the Auditor General of Norway

Marking distribution Percentage of failure (mean 8%) ECTS-credits produced / planned ECTS-credits (mean 79%)

Drop-out rates of students Number of applicants (607 450) Number of exchange students

Indicators used in consultative meetings

ECTS-label and DS-label Number of graduates getting relevant jobs Communication of R&D results (e.g.

newspaper articles) Costs per student / ECTS-credits Indicators under

development / possible new indicators Income two/five years after graduation Student projects in cooperation with business

community Other effectiveness indicators

Note: Data in brackets are for all institutions in 2005

SLOVENIA

Introduction

General description

Higher education together with higher vocational education forms Slovene tertiary education.

Picture 1: Structure of Tertiary education in academic year 2005/06

Note: Post-secondary vocational education is higher vocational education.

Higher vocational education

Higher vocational education is organised in parallel with higher education, and not as an integral part of it. First vocational colleges were established in 1996/97. Programmes are markedly practice-oriented and tightly connected with the world of work. In these courses, practical training accounts for around 40% of the curriculum and is completed within companies. Higher vocational education lasts for two years ending with a diploma examination, which enables graduates to start working in specific occupations. Until June 2004 when the parliament passed a new Higher vocational education Act this type of education was regulated by Vocational and Technical Education Act and Adult Education Act. In academic year 2003/04 42 vocational colleges (21 public and 21 private) enrolled 12.116 students.

Higher education

Since 1993 Slovene higher education is regulated by Higher Education Act. It was first amended in 1999 and introduced a number of solutions that were a result of an open public discussion on the development of higher education and the functioning of higher education institutions (universities and their autonomy, funding system, participation of students) and laid new foundations for a further development of universities and other higher

education institutions. Three additional amendments were adopted in 2000, 2003 and June 2004. The last amendment to Higher Education Act introduced new structure of higher education studies according to the bologna guidelines.

• First cycle has binary system of academic and professional study programmes. Both studies can be offered by universities and free-standing higher education institutions. While faculties can offer both academic and professional study programmes, professional colleges can offer only professional study programmes.

University members can be faculties, art academies and also professional colleges.

• Second cycle offers only one type of studies. Master study programmes can be offered by universities and faculties. Professional colleges can offer this type of study programmes in cooperation with universities, faculties and art academies or by themself, if they fulfil the conditions regarding staff and research.

• Third cycle is Doctor of science. First ‘post-reform’ study programmes will start with academic year 2005/06. New study programmes will be introduced gradually, so that in academic year 2009/10 only ‘post-reform’ study programmes will be offered. Until then Slovene higher education institutions will offer both ‘pre- and post-reform’ study programmes. The last time students will be able to enrol in ‘pre-reform’ study programmes is in academic year 2008/09 and they will have to finish their studies by 2015/16. Once new study programmes are adopted, they gradually replace the existing pre-reform ones.

According to the Higher Education Act from 1993 higher education institutions may be established by the state or by the private (national and foreign) natural and legal persons. Public higher education institutions are established in order to provide public services. Under certain conditions, private higher education institutions can be granted a concession for public service (and consequently public co-financing) by

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government decree on the basis of a public tender. In such cases private higher education institutions are co-financed under the same conditions as the state ones. In academic year 2003/04 three out of five free-standing higher education institutions delivered undergraduate programmes with concession.

First two private higher education institutions were founded in 1995, another four in 1996 and then in average by one per year until 2004. In 2003 four private higher education institutions joined newly founded public University of Primorska. In academic year 2003/04 higher education was offered by:

• 3 public universities that enrolled 68.506 undergraduate and 6.614 postgraduate students: • University of Ljubljana, which consist of 23 faculties, 3 art academies and 1 professional college. • University of Maribor, which consists of 12 faculties and 1 professional college and • University of Primorska, which consists of 3 faculties, 2 professional colleges and 2 research

institutes and • 7 free-standing higher education institutions – 4 faculties of which only one offers also

undergraduate studies and 3 professional colleges – enrolled 3 % of all undergraduate students.

According to the Population Census results in 2002 13 % of population aged 15 years or over attained tertiary education, which is 5 percentage point more then in 1991.

In 1993, when the Higher Education Act was adopted, Slovenia had 40.239 undergraduate students (81.3 % full-time and 18.7 % part-time), who were all enrolled in one of the two existing public universities – University of Ljubljana and University of Maribor. The number of undergraduate students increased by 10 % in comparison with the academic year 1991/92, the first after Slovene independence, and by 36 % in comparison with academic year 1985/86. In academic year 2003/04 the number of enrolled undergraduate students increased by 76 % since 1991/92 and by 139 % since 1985/86, but decreased in comparison with academic year 2002/03 by 2.2 %, which can be contributed to smaller enrolment of part-time students.

Enrolment is increasing also in post-graduate studies in academic year 2003/04 6.774 students were enrolled, which is 125 % more then in academic year 1998/99 when 3.006 students were enrolled.

Unemployment by school attainment in Slovenia (2002 to 2004)

Unemployment did not represent a bigger problem until the 1990s. The changes in economy since 1991 brought also changes in the labour market and resulted in growth of unemployment rate.

According to labour survey results conducted by Statistical Office of the Republic of Slovenia (Rapid Reports: Labour Market, No100/2004 and 85/2005) the ILO unemployment rate in the 4th quarter 2002 was 6,5 %, 6,7 % in 2003 and 6,4 % in 2004. According to the same survey the ILO unemployment rate for unemployed with higher education was 3 % in 4th quarter 2002 and in the same period in 2003 3,5% and 2,5 % in 2004. The unemployment rate for unemployed with higher education in all unemployed regardless the education was in 4th quarter 2002 4,9 %, 6,1 % in 2003 and 5% in 2004.

Share of total public expenditure for tertiary education in GDP amounted to 1,33 % in 2001 and 2002 and 1,36 % in 2003. In the Master Plan for Higher Education Slovene government made it an objective to increase this value to 1,4 %.

1. Financing systems for higher education

In December 2003 Slovene government adopted the Decree on the public financing of higher

education and other university member institutions (in text as Decree) 2004-2008, which replaced Standards for financing Higher Education adopted by the government in 1992. Decree regulates the public financing of study and extracurricular activities, investment and investment maintenance and development tasks at universities and free-standing higher education institutions established by the Republic of Slovenia, and the financing of certain tasks of national importance. The provisions on the financing of study and extracurricular activities and development tasks also applies to private higher education institutions with concession, while the provisions on the financing of development tasks also applies to private higher education institutions providing certified study programmes if they receive public funds.

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The instrument of lump-sum funding was chosen to surpass the direct payment for individual HE activities and costs, so the HEI would gain higher degree of financial autonomy. There is a certain percent of the funds they are free to distribute according to thair needs or planns or strategies.

a Funding of study activities

Public financing of study activities for a university or free-standing higher education institution is defined as total funds (lump sum). Study activities of higher education institutions comprise:

• educational and related research, artistic and professional activities of higher education • teachers and staff and scientific staff, • library, information and other professional activities, and • organisational, administrative and infrastructural activities.

Financing of higher education differentiates between undergraduate and postgraduate studies.

Undergraduate studies Undergraduate study activities are publicly financed for all full time students, while the part time students pay tuition fees. The state allocates funds to higher education institutions based on the methodology set by the Decree. There is no division between academic and professional study programmes.

The methodology for the allocation of the funds is divided into two parts:

1. Planning of the budget and

2. Allocation of the funds to higher education institutions.

1. Planning of the budget on the state level

The budget is planned so that the Annual budget funds for study activities from the previous fiscal year are increased each year in real terms by at least the growth in gross domestic product but not less than 2.5% with regard to the realisation for the previous year for study activities. From all the funds, planned for higher education at the relevant ministry, the utmost 4% is reserved by the minister for specific policy and development goals. Those funds are being delivered through public tenders for specific adevelopmental activities.

2. Allocation of the funds to higher education institutions.

Annual funds for study activities of a higher education institution (LS) comprise basic annual funds

(OLS) and standard annual funds (NLS).

LS = OLS + NLS

Basic annual funds for a higher education institution (OLS) are defined in the Decree. For the year 2004 they were fixed at the amount of 80% of the annual funds for study activities of the higher education institutions in 2003.

The standard annual funds for a higher education institution (NLS) are determined taking account of the annual initial value (LIV), the total number of students (Š), and the number of graduates (D) multiplied by the weighting (Ud) and the factor for the study group f(s) to which the higher education institution belongs.

NLS = LIV * Σ (( Š + D * Ud) * f(s))

The annual initial value (LIV) shall mean the standard annual funds per student in the first study group and shall be calculated as the quotient of the difference of annual budget funds (LPS) and the basic annual funds of all higher education institutions (. OLSZ) and the total number of students (Š) and the number of graduates (D) multiplied by the weighting (Ud) and the factor f(s) of the study group to which the higher education institution belongs.

LIV = (LPS - Σ OLS) / Σ ((Š + D * Ud) * f(s))

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Students (Š) are full-time students in undergraduate study programmes excluding absolventi

(graduands) at the higher education institution in the current academic year.

Graduates (D) are graduates of full-time undergraduate study programmes at the higher education institution in the previous calendar year.

The graduate weighting (Ud) is the ratio between standard funds for graduates of the study

programme and students of the same programme.

Study groups (s) combine higher education institutions by dominant study fields or subfields. Study field means one of the 22 fields defined in the Isced classification of study fields (UNESCO, November 1997).

The factor of the study group f(s) expresses the ratio between the funds allocated for the provision of study in the study group compared to the first study group. There are six study groups, which value varies from 1,00 to 4,50.

The funds are allocated annually with contracts.

Postgraduate studies

Postgraduate students pay tuition fees. However the state provides public funding for co-financing of these tuition fees through:

a. Public tender for co-financing of postgraduate studies that finances 60-80 % of tuition fee for students whose faculties fulfilled the conditions of the tender (among others tuition fee must not exceed the one set by the state). The tender was issued first time in 1998, when 27% of students received co-financing. In academic year 2004/05 this percentage is 53%.

b. Additional 9% of the postgraduate students receive co-financing through a ‘Young researches’ financing scheme, which covers full tuition fee, part of the material costs for the research in which the student is involved and salary for the young researcher.

b. Funding of research

Higher education institutions obtain funds for research in accordance with the provisions of the Research and Development Activities Act. In December 2003 the government established the Slovenian Research Agency. The Agency is an indirect user of the state budget in accordance with the legal provisions in the fields of public finances and public agencies. The Agency carries out the tasks entrusted by law and which are in the public interest, with the objective to provide for a permanent, professional and independent decision-making on the selection of programmes and projects that are financed from the state budget and other financial sources. The Agency also performs professional, development and executive tasks regarding the implementation of the National Research and Development Programme and of its specific components as well as other tasks for the enhancement of research and development activities.

Financing of research programmes and projects is divided through a public tender. Funds for research and infrastructure projects and research programmes are calculated according to standards set by the government.

c. Funding for investment

Funds for investment (building, renovation or purchase of real estate and equipment) and investment maintenance are determined pursuant to:

• Act on Basic Development Programmes in the Area of Education and Science, 2003-2008 or • the multi-annual investment programme of the higher education institution to which the minister

has consented, • annual investment programme of the higher education institution and • adopted budget.

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3. Performance indicators

HEI are required to give account of their spending and realisation of their plans by the end of February every year. They do it through annual reports, confirmed by the governing boards which consist of financial and "business" reports.

These reports are prepared and measured through matching the goals with the realisation through the indicators, such as:

• number of students/number of graduates • LLL programmes, • the volume and results of the research and development activities, • international cooperation (volume and results), • numbers in mobility of students and staff, • investments, buying of real estate, • human resource management

The treatment of HEIs with different missions has not yet become an issue in Slovenia. The missions do not differ at the moment to a significant extend. Nevertheless there can be a difference in the developmental policies, where the funds are allocated through public tenders and there could be some differentiation with regard to harmonising the goals with the government policies. There are legal consequences on the other hand if the financial contracts are not fulfilled, the annual contract for the subsequent year is adequately lower in the segment where the funds have not been spent to the requirements.

4. Challenges for the future

The main challenges recognised as one of the priorities by the government for the future are to ensure the quality of tertiary education and stimulate lifelong learning, which will ensure higher efficiency in the transfer and innovative use of knowledge in the economy in order to boost economical development. The funding of higher education is one of the most important tools with which the government can stimulate higher education. That is why the introduction of result-oriented lump sum financing is seen as an important step toward giving higher education institutions their financial autonomy and making them accountable for their actions. Through this the government is stimulating result-oriented management and higher responsiveness of the universities to the trends and needs of the society.

As for results it is very hard yet to have a real overview and comparison to any other system of finance.

References

File J. and Goedegebuure L. (2003) Real-time systems: Reflections on Higher Education in the Czech

Republic, Hungary and Slovenia.

RS Ministry of education and sport: Strokovna izhodišča za nacionalni program visokega šolstva v

Republiki Sloveniji; 1997.

RS Ministry of education, science and sport: Education system in Slovenia 2003/04; 2003.

Statistical Office of the Republic of Slovenia: First release, Education; No. 218 – Dec. 2004.

RS Ministry of finance: Annual report 2001, 2002, 2003.

Statistical Office of the Republic of Slovenia: Statistical Yearbook 1991 to 2004.

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Statistical Office of the Republic of Slovenia, Rezultati raziskovanj (for academic years 1985/86,

1991/92 to 2003/04).

Statistical Office of the Republic of Slovenia: Census of population, households and housing, 2002.

Statistical Office of the Republic of Slovenia: Rezultati raziskovanj – Študentje v Republiki

Sloveniji (for academic years 1991/92 to 2003/04)

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SPAIN

Introduction

Higher education institution financing in Spain is a responsibility of regional governments. Consequently, there are 17 financing models for funding institutions. In this report we will presents some traits of these models, but they cannot generalised to the whole country.

Many of the incentives for improving performance in Spain are focused on staff activities. Nevertheless, staff working conditions and salaries are a national matter, although regions can establish additional incentives. In this report we will mention both types of incentives.

1. Instruments of steering on system-performance

a. There are several tools for steering system performance:

Funding of institutions:

Each autonomous region has a different funding system. The smallest regions (with only one university) have not special funding models, but all the biggest regions with several universities have developed more or less sophisticated funding systems. Although most of the public funding is based on inputs (number of students, costs of different programs, etc) a portion (not too big, but significant) is related to outputs. In some regions, the “performance funding” is related to similar indicators for all the universities in the region. In other regions, each university reaches a specific agreement with the regional government (a contract-programme) in order to establish specific multi-annual goals for the institution in such a way that the achievement of these goals is awarded by extra funds.

The above mentioned funding is, in principle, for teaching and basic research activities. In addition, research teams apply for regional, national or European research programmes. These programmes are very competitive and they are a powerful tool for steering the performance of the university research system.

Incentives to staff:

Most senior academics in Spain are civil servant with a nationally regulated salary. Nevertheless, financial incentives have been introduced in order to increase the performance of staff and consequently the performance of the system.

The most relevant is the Research Productivity Bonus. This is a national mechanism for rewarding productivity in order to promote the commitment of civil servant academic staff to research. Academics, with a positive assessment (made by national committees), receive a permanent bonus after each six years of research activity. Assessment criteria are relatively rigorous and the monetary reward is not too high, but these bonuses became in a significant sign of internal prestige and a key to academic promotion.

Regional governments have recently setting up systems to reward the productivity of their academic staff. Each regional government is adopting different criteria to assess productivity and setting different salary increases. Some regional governments have opted to increase the amounts awarded to academics under the national bonus system (for example by doubling the amount received for these bonuses). Other regional governments have opted to assess the individual performance of academic staff including teaching, research and managerial activities.

c. Non-financial instruments

In Spain there is no tradition of governmental white papers or equivalent. Governments steer the higher education system through regulations more than through recommendations or dialogue with universities (although, on the other hand, most people in charge of higher education in governments come from the university world).

Apart of financial tools, probably, the most effective tool of steering higher education is Quality Assurance. QA started relatively soon in Spain. In the early 90’s quality became a key issue in higher

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education policy. In this sense, an interesting case is the Quality Award for Doctoral programmes. In spite all university departments with enough number of doctorate holders are allowed to deliver a Doctoral programme, only those reaching a good level of quality receive the award. In this moment having o not this award makes the difference between departments.

As we have mentioned before, in spite the research productivity bonus was established as a financial incentive, currently its relevance is by far more related to prestige.

Market mechanism

Market mechanisms at institutional level are very scarce. Competition among institutions is almost non-existent and rankings or equivalent tools have not influence on public opinion. Nevertheless, market mechanisms are very relevant at individual level and finally this has an important influence on the institution itself.

Probably the most important financial incentive for academic staff in Spanish universities is its legal capacity of academic staff for dealing with public or private institutions for developing applied research contracts, developing lifelong learning activities or making consultancy. The university itself signs these contracts, receives the funds, retains a part for overheads, pays for the costs, and pays the academics involved in the contracts as agreed.

The consequences are threefold. On one hand, more dynamic individuals can double their earnings (personal incentive). On the other hand, institutions take advantage of the entrepreneurialism of part of the academic staff for developing market oriented activities (institutional incentive). Thirdly, the institution receives extra funds (overheads) and increases the number of assistant and young researchers who are paid through these extra activities (financial incentive).

2. Performance indicators

As an example, the funding model in the Region of Valencia includes 15 objectives. Six of these are teaching-related, three are related to R&D, one is related to post-graduate studies, one to employment, one to innovation, one to management and two to cultural activities. These objectives were measured using 31 indicators. These indicators are provided by the universities and checked by the regional government.

The amount of funding related to these objectives is 10% of total funding. The maximum and minimum values of the corresponding indicators were negotiated between each university and the Regional Government. This turned goal-oriented funding into à la carte funding and resembled a contract funding system more than a homogeneous funding model. In these agreements each universities is allowed to select the specific set of indicators more convenient depending on its specific objectives or its real situation in regard to the indicators.

3. Effectiveness of different financial instruments for steering on system-level

Mechanisms for funding institutions have worked relatively well. The first region in implementing a funding model connected to performance indicators was the Region of Valencia in the early 90’s. The rest of regions have followed this example because the results were considered positive by government and universities. In fact, nowadays Valencian public universities have one of the highest levels of financing among the Spanish universities and general indicators on performance of the system (both for teaching and research activities) show a comparatively good level for Valencian universities. Experts agree that this is a consequence of the financing model which has been working for more that 14 years.

On the other hand, an interesting example of a non-useful incentive is the case of the teaching productivity bonus. This incentive was established at the same time that the research productivity bonus and with similar monetary award. The only difference was the assessment. For assessing research activities, national committees were established and not everybody receive a positive assessment. In the case of teaching activities, internal institutional committees were established. As a consequence of this “too close evaluation” all professors are positively assessed (exceptions are anecdotic and connected with cases of extreme misbehaviour). Obviously, the system is not an incentive at all and it has become an additional way of rewarding seniority. The way of assessing incentives is a key aspect for their effectiveness. As this case show, a proper assessment is even more important than the monetary value of the incentive.

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UNITED KINGDOM 1. Across the UK, the Higher Education sector operates on a turnover of £17 billion employing 340,000

people. Economists have estimated that directly and indirectly UK Higher Education Institutions stimulate activity worth £42 billion to the economy, plus over £3 billion in export earnings and that every job in an HEI creates another one elsewhere in the economy. Add in the contribution of Further Education Colleges which provide HE and we have a something close to a £50 billion business which creates over 600,000 jobs. Well over two million students now benefit from the opportunities it offers, and graduates can still expect to enjoy lifetime earnings of over £100,000 greater than those with only A levels or equivalent.

2. This success has been driven, not so much by a top-down delivery chain or by “steering”, but by

market forces with a diverse range of HE providers operating in a series of markets. Student numbers at HE providers range from about 100 to over 30,000. Institutional budgets range from less than £5m to over £500m.

3. Employers are key not only to sustaining existing demand through the wage premium they pay to

graduates but also in creating new HE demand and stimulating different types of work-based provision.

4. The HE system in the UK is highly devolved. We do not, generally speaking, regulate. Under current

legislation, we are obliged to leave to others (and the disciplines of the market):

• Who is admitted to study Higher Education • What is taught • Who teaches • How individual institutions are funded • Who runs HEIs and what strategies HEIs pursue • How “quality” is formally assessed.

5. The Government’s major supply side lever is funding but the Government is becoming a “minority share-holder”. Core public funds from Government are less than 50%. The strength of English higher education lies in the autonomy and diversity of its institutions and students. Every institution has an imperative to establish a competitive position in strong markets. We wish constantly to strengthen this. Recent legislation does so in particular by offering institutions the chance to decide their own fee levels, within limits, and secure a new source of funding under their own control. Institutions will increasingly need to be even clearer about what they are offering, what their market is, and where their key strengths lie.

6. At the same time, the Government retains the capacity to intervene in the HE market on either the

supply side or the demand side. A recent example of this is the emphasis given to “employer enagement” within the grant letter the Secretary of State gave to the Higher Education Funding Council for England:

“Strategic Priorities

On Employer Engagement, Sandy Leitch’s recent report has set out the importance of developing a high-skills workforce, with an ambition that by 2020 over 40 per cent of the population aged 19 to State Pension age should be qualified to Level 4 or above. That is a rise from around 29% at present. As Leitch says, sustaining current trends in HE, with increasing numbers of young people entering higher education, will take us some of the way there, but not far enough. We need to develop radical approaches that can lead to much higher levels of access to higher education by older people already in the workplace. This means models of HE that make available relevant, flexible and responsive provision that meets the high skill needs of employers and their staff. It will be important that the Higher Level pathfinders through Train to Gain operating in three regions are successful and lessons can be learned in good time so as to inform the expansion of Train to Gain. I will look to you and the Learning and Skills Council to work

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closely together to provide assurance that the ambition set out by Sandy Leitch for the expansion of Train to Gain and Higher Education can be delivered by building upon the skills brokerage model already successfully implemented for the lower level skills.

I would like you, in consultation with the Department and higher education providers, to develop a new model for funding higher education that is co-financed with employers, achieves sustained growth in employer based student places, and introduces the principle of employer demand-led funding. Building on the start that has been made this year, I expect you to aim to be delivering at least 5,000 additional student places in such provision in the 2008-09 financial year. There should be a growth strategy in place which aims to deliver year on year growth of at least 5,000 entrants in the following two CSR 07 years; “

7. The Government will monitor progress towards these objectives through regular discussions with the Funding Council.

Overview of flows of money and influence Annex A

DfES

SLC5%

HEFCE38%

Students

Universities and HE Colleges

OFFA UUK/SCOP

Office of Scienceand Technology

Money

Influence

Research Grants

5%

Postgraduate Fees2%

Other Government (mainly Health)

QAA Research4%

Non-research7%

UCASOther Income

18%

UK Charities4%

OverseasStudent

Fees8%

ResidencesAnd

Catering6%

Other researchincome

3%

Includes:-Other fee income-Income for non-research services-Endowments-Other operating income

Links to three publications from our Funding Council which will provide answers to some of the specific questions about formula funding and performance indicators.

www.hefce.ac.uk/pubs/hefce/2006/06_17/ - Funding HE in England - How HEFCE allocates its funds

HEFCE Funds for teaching

Just over 90 per cent of HEFCE teaching funds are allocated through our mainstream teaching funding method. The remainder consists of funds for widening participation and other recurrent teaching grants. The first part of this section covers our mainstream teaching funding method and is structured as follows:

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• general funding principles

• overview of the funding method

• detailed description of the method.

General funding principles

In distributing the funds, we aim to meet the needs of students, employers and the nation by promoting high quality teaching. Our overall budget is set by the Government so the funding method does not affect the total sum available for distribution to institutions.

As teaching funding is part of a block grant, institutions have considerable freedom as to how they distribute it internally to support their own aims and objectives. The funding method aims to ensure that we allocate an appropriate level of teaching funding for an institution as a whole. As such, it is designed to be efficient in distributing funding between institutions in the sector, not between departments within an institution. We do not expect institutions to mirror our allocation methods for their own internal purposes. Although our funding is determined according to the activity in academic departments, it is intended to support institutions more generally, including, for example, their central facilities such as libraries, computer centres and administration.

Our teaching funding method is based on a principle of similar resources for similar activities. For each institution our model calculates a level of 'standard resource' which reflects the number of students it has, the mix between different subject areas, and a number of institution-related cost factors. Standard resource is not, however, what we actually pay institutions, but rather a notional benchmark of what we think institutions’ share of overall resources should be to reflect their teaching activities. We compare standard resource with what institutions are actually receiving in HEFCE teaching grant plus broad sector-wide assumptions about levels of income from other sources. We want this assumed resource to come within 5 per cent above or below the standard level.

This 5 per cent margin (the tolerance band) exists, not because we think it reasonable for institutions’ funding to vary by ±5 per cent, but to give institutions flexibility and to minimise the accountability burden. This flexibility is both in the nature of the provision they offer to students within broad subject areas (for example, in terms of course content, staffing structures and methods of delivery), and in allowing them to make some changes to the mix and volume of student numbers without financial implications. It is for this reason that the principle of the funding method has been to have similar resources for similar activities, not the same resources for the same activities. This broad-brush approach to funding helps to keep the accountability burden lower than might otherwise be the case. Without it, we would have to measure activity much more finely, as potentially any change in student numbers, however minor, could have a direct effect on grant.

The funding method allows institutions to obtain additional funded student places according to criteria that we determine. The Government has made funding available to support growth in higher education (HE) for 2006-07 and 2007-08. This has enabled the allocation of approximately 30,000 full-time equivalent places across the sector during this period. The numbers have been allocated to major projects that have already secured funding through our Strategic Development Fund, or to support growth to meet national or regional needs. In order to reduce our use of bidding schemes, which can be time-consuming and burdensome for the sector, we developed a new process for distributing additional places for 2006-07 and 2007-08. This is described in HEFCE 2005/14 ‘Allocation of funds for additional student numbers 2006-08’.

(…)

Institutions receive teaching funds in the form of HEFCE grant and tuition fees. Full-time undergraduate students may receive assistance with their fees. Postgraduate students on taught courses pay fees to institutions mostly from their own funds. Students from outside the EU are generally expected to meet the full costs of their courses.

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www.hefce.ac.uk/pubs/hefce/2006/06_47/ - Public resources for teaching and student numbers

www.hefce.ac.uk/pubs/hefce/2006/06_34/ - Review of performance indicators:

• "Students • Indicators of widening participation (WP) • Indicators of progression and non-continuation • Indicator of employment outcomes • Indicator of research quantity

For many of the indicators, supplementary tables give the sector breakdown of the indicator by subject and entry qualification, and by other factors where this is appropriate. These are produced as part of the work done to calculate the various indicators and benchmarks."