Competitive Funding for Higher Education

1. Competitive Funding for Higher Education Richard Hopper Senior Education Specialist The World Bank Baku, Azerbaijan – May 13, 2009

2. Knowledge Economy

3. Challenges in higher education Draft State Program on Higher Education • Identified key weaknesses in Azerbaijan’s higher education system • Quality of teaching and learning • Rational allocation of public resources • Accountability in the use of public resources

4. Overview • 51 universities in Azerbaijan • 36 public institutions • 15 private institutions • At 27 public universities overseen by Ministry of Education • 105,000 students enrolled • 99,000 bachelor’s level • 6,000 master’s level • 25,000 staff employed • 12,000 teaching staff • 1,000 research staff • 12,000 administrative staff • Per-student cost: 1,070 Manat in 2008 • At 15 private universities • 4,000 students enrolled • 3700 bachelor’s level • 200 master’s level

5. Autonomy with accountability • Steps to increase accountability • Introduction of quality assurance • Accreditation • Introduction of rational financing mechanisms • Recurrent budget (salaries, operating costs) • Investment budget

6. World Bank • World Bank has experience in addressing these challenges in many countries • Ministry of Education seeks World Bank support to help address the challenges facing Azerbaijani higher education • Higher education project is being prepared

8. Project Objectives • Develop Ministry of Education capacity • Higher education oversight • Develop quality assurance capacity • Accreditation system • Develop rational financing mechanisms • Per-capita financing • Base resource allocation • To cover core recurrent budget • Allocated according to transparent formula • Distributed through demand-side vouchers • Competitive funding • Supplemental investment allocations • To improve quality of teaching and learning • Allocated according to promised results • Distributed through transparent procedures

9. Many financing mechanisms to transfer public resources • Supply-side financing • Direct transfers funds to institutions • Negotiated budgets, line-item budgeting, block grants, formula funding, competitive funding, or performance-based funding • Demand-side financing • Channels funds to institutions indirectly through students • Scholarships, vouchers, subsidized student loans, or service commitments

10. Demand-side: Through students via student financial assistance and vouchers Supply-side: Historical or formula based core funding to institutions Competitive funding Performance-based funding Each country unique • Governments develop a blend of financing mechanisms • Combine supply-side with demand-side financing • Gradually introducing innovative ways to provide support • A way to drive government priorities

11. Gradual introduction of financing innovations is important • Allows flexibility to adapt funding to evolving priorities • Provides opportunity to gradually modify organizational behaviors • collaboration, transparency, accountability, and the inclusion of stakeholders • Permits ways to reward universities for quality • Encourages budget stability • Lessons of experience • There is no ideal mix • Should be introduced gradually and prudently • Impact of each new mechanism should be evaluated • Adjustments to each mechanism can be made before scaling up

12. Competitive Funding • Government grants to universities • Investments to improve the quality of teaching and learning • Grant procedures are key to success • Proposal process • Eligibility criteria • Selection criteria and process • Implementation • Sufficient financial management and procurement capacity required • Monitoring of performance is critical • Rationalizes public expenditure • Involves frontline service providers (academic departments and faculty) in the design, financing, and execution of activities and investments with the goal of improving education quality

13. Promotes autonomy with accountability • Encourages greater… • Independence of financial management • Independence in human resource management • Independence of physical plant management • Independence of decision making • Greater accountability for results

14. Benefits • Flexible mechanism • Can target key problems • Output-oriented • Engenders culture of competition, peer review • Requires clear rules • eligibility, selection and implementation criteria • Requires institutional capacity • decentralized managerial freedom and accountability

16. Steps • Capacity assessments for procurement and financial management • Draft operational procedures manual • Identify driving purpose of funds • Identify key beneficiaries • Develop eligibility criteria • Develop operational procedures for grant selection • Develop operational procedures for grant implementation • Develop procedures for monitoring and evaluation • Integrate clear ways to regularly update procedures • Launch competition • Calls for proposal • Proposal writing workshops • Selection process • Reinforcement of management capacities as needed • Grant allocation • Grant supervision

17. Thank you

18. Proposed timeframe • March 2009 • PHRD effectiveness March 2009 • May 8 – 15 • Preparation mission • PHRD action planning • Jun 29 – Jul 2 • Technical mission • Commence PHRD activities • Oct 5 – 17, 2009 • Pre-appraisal mission • Jan 12, 2010 • Decision meeting • Jan 18 – 29, 2010 • Appraisal mission • Mar 8 – 19, 2010 • Negotiations • Jun 9, 2010 • World Bank Board review • August 2010 • Loan signing • October 2010 • Loan effectiveness

19. Project Development Objective • Components • Environment • Social • Results Framework • Economic Analysis • Implementation arrangements • Procurement • Financial Management • PHRD activities