Accountability is “the obligation of institutions to report to others, to explain, to justify and to answer questions about how resources are being used and to what effect” (De Boer and Goedegebuure in File and Goedegebuure 2003, p.212). The public needs to ensure that the institutions’ budgets are not overspent thereby requiring further appropriations, funds are not inappropriately used, and the cost of education is not unnecessarily high. Massy (1996,
p. 38) cautioned that “without accountability institutions have tilted too far towards
research and scholarship, failed to adapt to student aspirations and needs, and paid too little attention to efficiency.” A relationship has been detected between the models of
accountability and resource allocation. Ferlie et al (1996) cited five models of
accountability which are further placed in two broad categories. The link between the accountability models and RAM is depicted in Table 2.9. Concerning the concept of accountability to staff, Ferlie et al reported that in a National Health Service survey this concept received poor ratings. They also determined that the problem with the downward accountability had to do with the absence of a mechanism to ensure compliance with stakeholders’ views. The classical public administration model and the market-based models were the ones with some form of traction. These will be assessed against the type of RAM.
Table 2.9: The Link between Accountability and RAM Base Sub- Categories Traits Links with RAM Type of Control P o li t ic a ll y B a s e d S y s te m Accountability Upwards
Classical public administration doctrine
Local decision makers are regarded as agents of those who appoint them
Input Ex ante control system which include state regulated admissions requirements, curriculum, examination system, staff employment and revenue and expenditure, Accountability
to Staff
Board members are
accountable to the professional groupings
Input Professional dialogue and representation on governing boards
Accountability Downwards
Influence and responsibility are devolved
Input Informal dialogue and stake holder meetings M a r k e t- B a se d The New Rights Model
Citizens are viewed as consumers
Output Ex post factors judged against quantified standards Management
by Contract
Providers of services are held accountable to their purchasers through agreed contracts
Output Ex post based assessment against contract
Careful monitoring of the inputs has been the traditional form of accountability as per the classical public administration doctrine but as Massy pointed out governments are moving away from this system and relaxing line-item control. The U.S. system was quoted as an example where chancellors, in an atmosphere of severe appropriations cuts, were able to negotiate the change from LIB by pointing out that they could not be held responsible for making the university more efficient without the power to allocate and reallocate resources internally. Accountability and micromanagement do not mix because when decisions
about the quantity of input are taken at the governmental level, institutions can shift the blame for reducing quality of outputs (Massy, 1996).
Accountability was the original reason proffered for state management of HE but on the other hand, as Jongbloed (File and Goedegebuure 2003) pointed out, the trend towards institutional autonomy has been accompanied by a demand for more accountability. Both could be achieved by output funding because “reduced state intervention in operational matters implies that governments are less concerned with how funds are spent (on inputs) and increasingly interested in the achievements (the outputs) produced from the funds.” Thomas (2001) suggested, that in the English system accountability started with the financial agreement between the funding body (HEFCE) and the institution receiving the funds. The financial agreement is in broad terms and implies a weighted volume of activity, which is being funded against the resource being allocated (HEFCE 2003). If funding is provided for additional places and the institution fails to recruit as targeted, then funding is reduced. This, however, is subject to a second chance being given to enable the institution to overcome start-up difficulties. By so doing HEFCE ensured that additional resources led to increased activities. Input RAM, however, does not guarantee increased activities. As was pointed out with the German system, spending more on inputs did not result in educating more students. The output models therefore provide better bases for accountability because they offer mechanisms for benchmarking and judging results. A system of ex post control which judges institutions by results against contracts or standards therefore provides a better basis for taking action.
Accountability and its relationship with resource allocation must also be judged in the context of the governance and management systems adopted by a country because it is the glue which ties the two together. The relationship between the four is illustrated in Figure 2.3. Both the RAM and the method of accountability inform each other. Accountability balances the conflict between governance and management and the RAM supports both. The rationale for this statement will become clearer in the ensuing discussion.
Governance Accountability Management
RAM
Figure 2.3: The Relationship between Accountability, RAM, Governance and Management
Governance and the Accountability Perspective on RAM
Peril and Promise (2000), a World Bank Task Force review of HE in developing countries, stated, “the term ‘Governance’ indicates the formal and informal arrangements that allow higher education to make decisions and take action.” The report also distinguishes between external and internal governance. The former has to do with the relationship between the HEI and its supervisors and the latter with the lines of authority within the institution itself. This description projects governance as a plan, but it could also be viewed as an interactive relationship among actors and this is born out by Boer and Geodegebuure (File and Goedegebuurre 2003) who defined Governance as “the structure of relationships that brings about organisational coherence, authorised policies, plans and decisions”. Balderston (1995, p.55) brought both aspects together as he defined
governance as “the distribution of authority and functions among the units within a larger entity, the modes of communication and control among them, and the conduct of
relationships between the entity and the surrounding environment.”
The nature of the financing relationship with the HEI has often caused problems for its decision making and policy framework as society wrestles with the issues of funding and control. Academic independence is usually a cherished phenomenon in universities and this independence has been seen as necessary in order for the organisation to continue to
generate knowledge in teaching and research as well as the conscience of the society. According to the Columbia Encyclopaedia’s definition, academic freedom is “the right of scholars to pursue their research, to teach, and to publish without control or restraint from the institutions that employ them.” On the other hand there is the matter of accountability for the expending of funds. The battle between academic independence and public
accountability is therefore brought to light in Shattock’s (1983) statement that “universities may be autonomous self-governing corporations but in budgetary terms they are firmly tied to a comprehensive system of government resource allocation and expenditure control.” For many years it was thought that input RAM, negotiated budgeting and earmarked funding offered the best means of balancing the conflict between management and the governance elements of the HE system. However, these have proven inefficient and problematic for administration. The system of governance associated with these funding models has been described by Peril and Promise (2000) as state control. The report noted that many developing countries have gravitated toward state control, as they believe that governments are entitled to control systems that they fund. State control of higher education however has tended to undermine many major principles of good governance because the direct involvement of politicians has generally politicised higher education, widening the possibilities for corruption, nepotism and political opportunism (ibid.). The alternative governance system suggested is state supervision where the state is responsible for broad policies and national direction, and channels its resources in support of its stated policies. Under such a system funds are allocated to achieve results, levels of funding are determined by objective factors and institutions are at liberty to gain from efficiency savings. With these RAMs, governments do not get involved in the minute details of the institution’s expenditures as it plays the role of a consumer by procuring the finished product at an agreed rate. Faulkner (Zeghal, 1999) pointed out that this system is a form of management control which when accompanied with efficiency-oriented measures of performance, permits government decision making to choose those programs that will most effectively meet its objectives. The HEFCE system of allocating resources to institutions using the criteria of enrolment modified by retention, subject rating, unit prices, and quality factors, prevents intrusion into an institution’s detailed internal affairs by the funding mechanism. By using this model the government focuses on controlling the cost of the output (educated students) without being accused of meddling in the internal affairs of the institutions it supports.
Management and the Accountability Perspective on RAM
RAM must support the management principles that govern an institution. Therefore, the method necessary for accountability should also be compatible with both the RAM and the management principles. As societies move towards state supervised system of HEI governance, universities find themselves operating in increasingly complex environments, which require strategies to strengthen their competitive positions while satisfying students’ demands and achieving various quality and performance targets. Leaders of these
institutions cannot therefore just move with the tide but have to be able to be proactive and responsive to service demands. Strategic management, “that set of managerial decisions and actions that determines the long-run performance of a corporation” (Wheelen and Hunger, 2002, p.2) has become the preferred mechanism to cope with the increasing complexity of managing HEI. Wheelen and Hunger (2002) reiterate Chandler’s (1962) view that changes in corporate strategies lead to changes in organisational structure. Chandler posited that as new strategies were created they stretched the old structure to the limit hence new structures had to be created to deal with the new situations. HE
management systems that are dependent on state control cannot be responsive to changing circumstances, as they have to await instructions to act.
Strategic management can best be practiced in an atmosphere of flexibility, as it requires organisations to be responsive to calls of the business environment for change. RAM that is bureaucratic and does not support quick decision-making can therefore destroy the strategic intent of an organisation. Michael (2002) proposed the “strategic funding approach” which could enable HEIs to operate from a strategic management perspective. This approach he stated is “based on a long-term projection of the state’s needs and
direction (economic, social, medical, political, etc.) and the determination and allocation of resources to these needs/directions while institutions are free to align themselves with the state’s priorities to the extent that they want state’s resources”. The problem with the approach, he noted however, was the state’s inability to sufficiently and effectively make long-term strategic forecasts. He therefore suggested the “adjustable formulae funding strategy” that would allow a portion of the funding approach that is quantifiable to be built into a formula, the portion that is political to be handled politically, and the portion that is strategic to be handled strategically. In any case the point is made that the development of
RAM must take into consideration the thrust for strategic management in HE and the fact that this is not supported by input-based, negotiated or line item budgeting.
RAM that is concerned with objectives and targets and leaves it to the discretion of the institution to adopt the relevant strategies and choose the necessary inputs to achieve the objectives is the preferred choice. It is understood that in setting strategic objectives, an institution would take into consideration government’s policy as well as market demands. The government can maintain its influence by linking its support to specific outcomes. Hence by using RAMs that are output-based, formulaic and issued as block grants, governments will be able to avoid placing stumbling blocks in the strategic path of the university while at the same time achieve its political objectives.
Vilalta (2001) gives an example of the Catalan University system in Spain, which had shifted to a programme-based contract formula, which in turn opened the way to a system of financing and control of academic outputs for universities in the region. The positive results he cited were respect for and promotion of:
o A new framework for relating with government. o Funding based on the results.
o Predictability in allocation.
o Promotion of dialogue between government and universities.
o Possibility of introducing benchmarking mechanisms into the university system. o Transparency of the results of universities’ activities.
o Basis for accountability to society.
All the above suggest that an output-based RAM invariably leads to a flexible management system and market-based accountability. He pointed out, however, that without care in designing the accountability structure there could be the following pitfalls:
o Problems in defining common indicators.
o Annual revision could lead to inter-institutional mistrust.
o It could provide a mechanism for extreme competition between universities. o It could lead to problems of budget restrictions under conditions of austerity. The HE governance authority and its management have to be held accountable for the resources which it is allocated and accountability is the factor that balances both
governance and management. Therefore, any assessment of accountability must take into consideration the extent to which the system enables both governance and management.
The following questions therefore need to be answered in assessing for accountability in a RAM:
1. Type of control: What are the bases on which the state examines the use of the resources? Does it use ex ante or ex post factors?
2. Accountability model: What accountability model is used? Is it politically or market based?
3. Type of governance system: How does the state monitor the HEIs use of resources? Is it a state supervised or state controlled system?
4. Management system:
a. Does the RAM enable independence in the internal planning of the HEI? Does the HEI have to await government response before new initiatives?
b. To what extent does the RAM provide the management of the HEI with certainty about the availability of the resources?
c. To what extent can management predict the amount to funding to be allocated?
Earmarked Versus Blocked Grant Debate
The notion of accountability has also led to the discussion of whether the funds granted should be earmarked or issued as blocked grants. Jongbloed (in File and Goedegebuure, 2003) described earmarked funding as that which can only be used for specified objectives. Funds that are not used for the particular expenditure or activity must be returned to the funding authority. With blocked grants, on the other hand, the institution can “decide for themselves how to finance their operations to produce the intended outcomes”. Line item budgeting has been cited as the best example of earmarked funding. This type of funding, Sanyal (2002) described, was where the institution receives funding by expenditure categories (line-item) such as personnel, investments, teaching, material, travel expense and building maintenance. Examples of countries which practice earmarked funding are France, Germany, the Czech Republic, China, Nigeria, and Uganda. The provider of the funds would consider every detail of inputs in order to have them valued and such costing would in turn determine the amount of funds to be provided. Monitoring thereafter is by controlling the expenses. The process is illustrated in Figure 2.4.
In this system the central authority controls the income and approves expenditure by objects or activities. The operating units are only responsible for expending the funds
according to the approval limits. Expenditure variance reports are most important in this system as they provide the information for the monitoring exercise.
Gobbels-Dreyling (2003) stated that the German system with a strict use of earmarked funding depended on a structure of ex ante control to determine adequate use of funds. The state regulated the admissions requirements, the framework of the curriculum, the examination system and the employment and salary scheme of the staff and the revenue and expenditure of the HEI. The system resulted in increased public and political control in the 1960s and 1970s and eventually ended with direct state intervention in the internal processes of the institutions. The level of inefficiency that resulted in the system was shown in the fact that while enrolment was declining expenditure was increasing. It was therefore concluded that a complex system like higher education cannot be regulated and
Figure 2.4: The Processes of the Input RAM
Costing the
Determining Providing Monitoring
the inputs inputs the Funds the expenses
o Number of staff o Quantity of
equipment o Setting of o Grant or o Expenditure
and furnishing Budget subvention to Control
fund specific Management schedule
o Maintenance
items o Material and
equipment
controlled centrally because the state’s intention to guarantee the proper spending of funds was counteracted by the attempt to regulate in detail (ibid.).
Of line-item budgeting and its object class which determine the funding, Balderston (1995, p.157) stated, “the trouble with the object-class budget is that it is almost completely devoid of any conceptual representation of what the institution is doing”. The main problems therefore with earmarked funding are that it offers no incentives for efficiency gains, it stifles initiative, and it causes encroachment on institutional autonomy. Little wonder then that Weiler (1998) stated “no change in higher education financing has been more consequential than the change from line-item budgets to block grants (lump sums). In the overall move towards greater autonomy … this shift has been the single most important factor”. The most significant steps in the transition to block grant funding, which Weiler further identified, were allowing universities to use funds from unfilled staff positions to cover operating expenditures in teaching and research; allowing limited
transfers between line-items; and selecting a number of instructions for pilot projects to try out more encompassing schemes of block grants.
From the experience of the USA Weiler (1998) points out that with block grant funding government was able to conceal budget cuts in the total allocation; it enabled performance to be tied to specific objectives rather that expenditure demand it resulted in the
establishment of conditions for a successful autonomy-accountability relationship in the education system; caused the debate about the evaluation of outcomes which includes indicators for completion rates in different programmes, research productivity,
employment record of graduates and the number of scholarly awards; and provided the opportunity for cross-subsidization between programmes so that the savings in one can be invested in another. With the proper framework Weiler suggested blocked grant funding appears to be better suited for HE financial administration.
Accountability-Resource Allocation Link
The discussions above suggest that the market-based accountability model is consistent with the state supervisory governance system as well as the model of management by initiatives. It is also consistent with the intention of blocked grant funding. Conversely the