Higher education funding unclear

Toomas Mattson | 8/29/2012 | 12:00 AM

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TALLINN, 29 August 2012 – The National Audit Office finds in its audit report that the Ministry of Education and Research has failed to achieve success in using performance indicators in funding institutions of higher education, but it still wants to transfer to a funding model that is based on performance indicators. Many aspects of the implementation of the new higher education funding model are still unclear.

The last time the National Audit Office audited the organisation of higher education funding was in 2008 and it pointed out to the Ministry of Education Research that the funding system, which is based on state-commissioned education, does not work in real life, as universities cannot guarantee the required number of graduates. The number of graduates does not depend on the work done by the universities alone, and providing funding solely on the basis of the number of graduates may cause a decrease in the quality of education. The funding provided to institutions of higher education did actually not depend on whether the state received the agreed number of graduates. This is why the Ministry of Education and Research was forced to change the higher education funding system. The Ministry of Education and Research has been trying to resolve this problem since 2009 by entering into performance agreements with institutions of higher education, where it was planned to agree in other performance indicators in addition to the number of graduates.

When the National Audit Office audited higher education funding again in 2012, it had to admit that the situation has not improved. The number of graduates is the only performance indicator considered by the Ministry of Education and Research in financing institutions of higher education. Funding has continued on the basis of the established routine. The funding system was not adjusted irrespective of the failure of institutions of higher education to perform the performance contracts they had signed.
 
In the 2008/2009 academic year alone, institutions of higher education failed to provide state-commissioned education for more than 20.9 million euros paid to them. Meeting the goals of state-commissioned education is the most problematic in areas considered priorities by the state, such as the natural and exact sciences, technology, production and construction.
Audit Manager of the National Audit Office Külli Nõmm admitted that the situation has improved in comparison to earlier years. She was especially pleased about the progress in doctoral studies, where the goals of state-commissioned education were met to the extent of 68% in the 2008/2009 academic year (the respective indicator in the 2005/2006 academic year was just 55%).
On 10 May 2012 the Riigikogu adopted the new act that amends the Universities Act, Institutions of Professional Higher Education Act and other acts, which changes the current higher education funding system significantly and replaces state-commissioned education with operating support based on performance indicators. The changes are certainly necessary, but the National Audit Office sees several problems in their implementation.
 
The Ministry of Education and Research still doesn’t have any successful experience in how to distribute money to higher education on the basis of several performance indicators, which makes it difficult to assess how well the ministry manages to do it. Also, the time left for the implementation of the new procedure is so short that testing the new funding model is impossible.
Not all of the performance indicators specified in the new Universities Act can actually be assessed with reasonable assurance. It is still unclear whether and how the state will regulate how many specialists should be educated in certain specialities. Moreover, universities have been promised millions of euros of additional funding before any performance indicators have even been agreed on. The National Audit Office therefore sees the threat that the new funding system will increase the administrative burden of the institutions of higher education and the ministry, but it is not transparent and may not contribute to substantive changes in higher education.
Director of Audit of the Performance Audit Department Tarmo Olgo said that the future of higher education is interesting. “At the moment, we could compare the higher education reform to the construction of a building without a completed technical solution. The new Universities Act was adopted, but the Ministry of Education and Research has still not introduced the exact content of the new funding model to the general public and it is still being developed. My experience shows that the development of a well-functioning performance management system takes years, but the new system whereby institutions of higher education are financed on the basis of their performance should be implemented in the next year already.”
 
The National Audit Office also found that the financial health of public universities is currently satisfactory and they generally manage themselves well, but their future is uncertain, as the impact of the new funding procedure on the revenue of universities is unclear.
Revenue from state-commissioned education currently comprises 30% of the revenue of larger universities and this percentage is expected to increase in the future. The biggest financial risks lie in the increase in management and depreciation expenses resulting from investments, and in the increasing salary pressure.
 
Toomas Mattson
Head of Communication Service
+372 640 0777
+372 513 4900
toomas.mattson@riigikontroll.ee
  • Posted: 8/29/2012 12:00 AM
  • Last Update: 11/10/2015 5:34 PM
  • Last Review: 11/10/2015 5:34 PM

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