Released for publication by the Minister of State Services, 18 July 2005.

Education Sector Review

Proposal

1 This paper reports back on the Education Sector Review of the three education agencies being the Ministry of Education, the New Zealand Qualifications Authority (NZQA) and the Tertiary Education Commission (TEC) and seeks endorsement of the findings and recommendations of the review, and agreement to publicly release the review early in July 2005.

Background

2 Both the senior secondary and tertiary education sectors have been changing rapidly. The changes include policies on funding, qualifications and assessment; structural changes such as the formation of TEC; and rapid growth in the overall number of students and the international dimensions of the sector. These changes have had major impact on the sector as a whole, the central education agencies, teaching institutions, and students.

3 Earlier in the year a number of issues emerged (e.g. scholarship / NCEA results variability, Te Wananga O Aotearoa funding and governance issues) which give cause for concern about underlying problems in the education sector.

4 On 7 March 2005 Cabinet [CAB Min (05) 8/20] agreed that an Education Sector Review be undertaken of the effectiveness of machinery of government and governance arrangements for the education sector agencies, which would focus on the three education agencies involved in the administration of senior secondary school qualifications and tertiary organisations (that is the Ministry of Education, the New Zealand Qualifications Authority and the Tertiary Education Commission).

5 The State Services Commissioner, Secretary to the Treasury, and the Chief Executive of the Department of Prime Minister and Cabinet, conducted the review. The Chief Executives were also asked to form a judgement on further work required on machinery of government and governance arrangements for the three agencies for the years to come, in order to restore/build confidence in the sector.

6 In conducting the review, the review team met with over 40 stakeholders and a number of individuals with experience in the sector, the senior managers of the Ministry of Education and the boards and senior managers of NZQA and TEC.

Comment

7 The scale, scope and speed of change in the senior secondary school and tertiary education sector has had a significant impact on students, teachers, institutions and the central education agencies, particularly the Ministry of Education, NZQA and TEC. It constrained the capacity of senior personnel in the three education agencies to maintain strategic oversight and manage strategic implementation risks, as evidenced by the recent report on Scholarship 2004.

8 Similarly policies and levers used by the three agencies did not quickly reflect new goals established by the government (for example greater emphasis on value, quality and relevance in the funding arrangements for tertiary education). This contributed to the emergence of the presenting problems - funding going to courses which appear to be low value, or of less relevance, or where the level of funding appears generous relative to the costs of course provision.

9 The system (meaning the three agencies and the processes by which they do their work) has not quickly adapted to or learned from the changes and the pressures they brought. The core reason is that the three agencies did not do everything possible to get education goals and strategic objectives driving and shaping the development, content, implementation and administration of specific strategies and policies. Because the agencies also were not aligned behind the same goals there was not alignment between the agencies. Nor did they engage enough on the interests and concerns of the students, the teaching institutions and the wider community in the design and implementation of those strategies and policies.

10 The best and most sustainable gains in aligning policies with goals will be achieved by improving leadership, capability development, relationship management and communications. There is also specific work required to improve understanding and clarity of the three agencies' roles, to remedy gaps in policies and their implementation, to develop governance linkages between the agencies and with Ministers, and to consider the focus and location of some functions.

11 To support leadership of the sector, three specific coordination and oversight arrangements are recommended:

• A high level group comprising the Education Minister(s), the Secretary for Education, and Chairs of the boards and chief executives of NZQA and TEC.
• The Secretary for Education to have overall responsibility to lead the Ministry of Education, NZQA and TEC so that the developing focus on achieving outcomes and strategic implementation gets greater emphasis.
• A central and senior level strategic policy and oversight unit in the Ministry to support the two previous roles and to ensure activities of all three agencies are contributing effectively to senior secondary and tertiary education goals.

12 Behavioural issues are central to achieving alignment and coordination effectively. In particular:

• Significant improvements in communication and relationship management, both between the three agencies and between them and sector institutions;
• Enhancement of capabilities and organisational culture to enable better leadership, improved relationship management, effective exercise of discretionary decision-making powers, and more effective change management.

13 The review team concluded that no major structural change for the three education agencies is warranted at this time. This is because of the effects of uncertainty in a possibly lengthy transition to implement new structures, lack of capability at present in the agencies to cope with further structural change, and the risk to current policy implementation.

14 There is work already underway on a number of issues raised in this report, including the policy work underway in relation to quality, relevance and value for money in sub-degree provision and longer term sustainability of tertiary funding, and it is important that this continues and is given emphasis.

15 Implementation of some of the report's recommendations (e.g. the work plan for the proposed strategic unit, and the review of monitoring of TEIs) could usefully involve central agency participation.

16 While the review signals ways the three agencies can improve their effectiveness the review was not approached as a comprehensive performance or efficiency review of the agencies, and the report should not be read that way.

17 The report and the recommendations are presented as they relate to the three agencies under review. Implementation of many of the recommendations will need to consider the roles of other agencies, and the functions of the Ministry relating to other parts of the education sector.

18 The State Services Commissioner is currently conducting a review into NZQA and the scholarship examinations of 2004 [Cab Min (05) 5/1]. The State Services Commissioner has already reported on part 1 of the review. The Commissioner is to report on part 2 of the review on the performance of NZQA in respect of school sector qualifications (including the management of variability in respect of NCEA levels 1 to 3), by 31 July 2005.

Consultation

19 The Department of Prime Minister and Cabinet and the Treasury have been consulted in the preparation of this paper. The Ministry of Education, the New Zealand Qualifications Authority and the Tertiary Education Commission provided comments on the early drafts of the review report.

Financial implications

20 There are no immediate implications arising from this paper, however it will require agencies to work together to prioritise their baselines to implement the recommendations.

Human rights

21 Not applicable.

Legislative implications

22 No direct implications.

Regulatory impact and compliance cost statement

23 Not required.

Gender implications

24 Not applicable.

Publicity

25 The Ministers of Education and State Services will release the review report and this paper.

Recommendations

26 It is recommended that the Cabinet Policy Committee:

26.1.1 agreed the terms of reference for the Education Sector Review of the effectiveness of machinery of government and governance arrangements for the education sector agencies, which would focus on the three education agencies involved in the administration of senior secondary school qualifications and tertiary organisations, that is the Ministry of Education, the New Zealand Qualifications Authority (NZQA) and the Tertiary Education Commission (TEC) and recommend next steps, and

26.1.2 noted that the Education Sector Review would be undertaken by the State Services Commissioner, Secretary to the Treasury, and the Chief Executive of the Department of the Prime Minister and Cabinet would report to the Prime Minister, Minister of Finance, Minister of State Services and Minister of Education by 20 May 2005.

26.2.1 The three education agencies should work together to develop and implement strategies to achieve the government's education goals for student and learner outcomes, based on a shared view of the goals and each agencies contributions to them;

26.2.2 The policies and activities across the three education agencies should be better aligned in order to achieve learning outcomes for students;

26.2.3 Stronger leadership in the senior secondary and tertiary education sector is required across the three agencies. The Ministry of Education should exercise this leadership, with the Secretary for Education taking the prime lead role, with strong support and contributions from the central education Crown entities;

26.2.4 Significant improvement in communication and relationship management is needed between both the three education agencies and with sector institutions;

26.2.5 Enhanced capability (including strategic implementation and change management) and organisational culture is required in all three agencies to support improved strategic alignment around education outcomes;

26.2.6 There are a number of institutional and organisational issues where there are opportunities to enhance the alignment of activities with strategic goals e.g. some issues of role clarity and opportunities to improve the design, interaction between, and use of, the levers in the tertiary sector.

26.1 Note that on 7 March 2005 Cabinet [CAB Min (05) 8/20]:

26.2 Note the key findings of the Review that:

26.3 Note the appended recommendations of the Education Sector Review report;

26.4 Agree with the review conclusion that at this time there should be no major structural change, either to make NZQA or TEC into separate departments or to merge them into the Ministry of Education;

26.5 Invite the Minister of Education to establish a high level group comprising Education Ministers, the Secretary for Education and Chairs and Chief Executives of NZQA and TEC, to assist Ministers to make policy decisions that reinforce the achievement of shared education outcomes and clarify the areas on which the two Crown entities should focus;

26.6 Agree that the Secretary for Education should have overall responsibility to lead the Ministry of Education, NZQA and TEC so that so that the focus on achieving outcomes and strategic implementation of policy decisions in the senior secondary and tertiary education sectors receive greater attention;

26.7 Direct the Secretary for Education, in consultation with the State Services Commission, to report to the Minister of State Services, the Minister of Finance and the Minister of Education by 30 November 2005 on his proposed approach and key steps for exercising his strategic leadership role outlined in recommendation 26.6;

26.8 Agree that the Ministry of Education, NZQA and TEC should progress all of the remaining recommendations in the Education Sector Review report that are not specifically outlined in recommendations 26.4 to 26.7, and report to the Minister of State Services, the Minister of Finance and the Minister of Education by 30 November 2005 on progress, next steps and any financial implications;

26.9 Direct Treasury and the State Services Commission to report to the Ministers of Finance and State Services by 31 October 2005 on options to provide greater support for departments which "host" Crown entities (refer recommendation "t" in Annex 1);

26.10 Invite the Minister of State Services and the Minister of Education to release the Education Sector Review report and this paper;

26.11 Note that there is a programme of work to be considered by Cabinet in respect of tertiary education sub-degree provision and foundation learning, and longer term sustainability of tertiary funding which amongst other things, addresses some of the issues identified in the Education Sector Review;

26.12 Note that part 2 of the review by the State Services Commissioner on the performance of NZQA in respect of school sector qualifications (including the management of variability in respect of NCEA levels 1 to 3) is to be reported on by 31 July 2005 [Cab Min (05) 5/1].

Annex 1: Education Sector Review - Recommendations

Alignment of agency activities with overall goals and strategies

a The three agencies should work together to develop and implement strategies to achieve the government's education goals for student and learner outcomes, based on a shared view of the goals and each agency's contributions to them.

b Statements of Intent (SOIs) for the three agencies should be aligned from 2006 to ensure the staff and activities of each agency contribute in a complementary manner to the shared outcomes.

c The three agencies should as part of their Managing for Outcomes planning for 2006/7 and beyond develop a work plan and timeframe to review all the major policies and activities they currently undertake, to ensure these are contributing as well as possible to those outcomes, and to drop or seek approval to drop elements which do not contribute.

d Ministers should include these expectations for joint strategic work and programme review, aligned SOIs, and requirements for enhanced leadership and relationship management (see below) in letters of expectation, appointment letters and other accountability documents for the 2006/07 year and beyond.

e The Secretary for Education should consider immediately establishing at a senior level in the Ministry a central unit for overall strategic policy development and oversight to ensure the activities of all three agencies are contributing effectively to tertiary and senior secondary sector goals. This unit should include staff seconded from the other education agencies.

Leadership and coordination

f The Secretary for Education should have overall responsibility to lead the three agencies so that the developing focus on achieving outcomes and strategic implementation gets greater emphasis. While the role should be undertaken with a facilitative approach, the Secretary should have strategic oversight of progress, and lead the three agencies to act to overcome problems.

g There should be a high level group, meeting 3-monthly and convening as soon as possible, comprising Education Ministers, the Secretary for Education, and Chairs of the boards and chief executives of relevant agencies. In keeping focus on the outcomes for the sector, the broad purpose of the group would be to assist Ministers to make policy decisions that reinforce the achievement of those outcomes and clarify the specific contributions expected from each of the agencies and their boards.

Relationship management and communications

h An overall consistent and effective relationship management and communications strategy for stakeholders needs to be developed by December 2005, involving all three agencies. The three agencies' senior managers should take a leading role in this work, in the context of the overall strategic alignment outlined previously.

i Developing that relationship management strategy must involve a comprehensive stakeholders' needs analysis. The strategy should focus on the consistent alignment of messages with goals and strategies, and the development of high quality consultation processes.

j Internal relationships within and between the three agencies should be improved; in some cases there appears to be a sense of long-standing tension which may need specific attention.

Capability

k The overall joint strategic alignment process should include capability assessment, gap analysis and planning to enhance capabilities in each of the three agencies.

l In that capability assessment process, particular consideration needs to be given to capabilities for:

• relationship management and communications, including a significant culture change to move the agencies to a much more outward looking and information sharing approach
• strategic implementation and change management
• decision-making and judgements in an increasingly complex and discretionary operating environment.

Role clarity

m In the context of the overall strategic alignment, the Secretary for Education and TEC should by October 2005 review and seek confirmation from Ministers of the underlying model for TEC's roles. This should balance its role as an intermediary between the government and tertiary institutions, with its role of increasingly steering the sector towards the education goals for student outcomes through funding arrangements and profile negotiations. Following that, consideration should be given to the extent to which funding decisions for TEIs should take into consideration issues of financial viability, the nature of the Crown's interests in charters and profiles, and the requirements for information flows necessary to support the provision of advice on the overall situation of individual TEIs.

n The Ministry, TEC and NZQA should by October 2005 clarify their respective roles in relation to policy advice, by agreeing on principles to guide their respective lead and contributory roles on:

• funding determinations and s 159ZA of the Education Act 1989
• the transition phase from policy development to implementation.

o  As part of the overall relationship management strategy these changes and distinctions in the roles of the three agencies need to be communicated to sector stakeholders.

Key levers

p The review team endorses and gives particular emphasis to the importance of the current policy work underway in relation to quality, relevance and value for money in sub-degree provision and longer term sustainability of tertiary funding.

q Advice should be developed for Ministers on whether legislative change is required to clarify the provisions which affect funding of courses with low strategic relevance.

r TEC and the Ministry should jointly develop by March 2006 a strategic longer-term approach to negotiation of profiles. This should link profile negotiations and monitoring of TEOs more effectively with the objectives established for funding arrangements.

Governance and structures (the three education agencies)

s The high level group with Ministerial involvement (recommended above) should address governance issues, in particular to clarify interactions between Ministers and boards, and establish the expectations Ministers have for the areas of focus for the boards.

t Treasury and SSC should investigate, by October 2005, options for greater support for departments which "host" Crown entities to develop selection strategies and provide induction training and information for board members, and for improvement in the quality of monitoring by those "host" departments. (This is wider than the education sector.)

u At this time there should be no major structural change, either to make NZQA or TEC into separate departments or to merge them into the Ministry. This is because of the extra burden of cost, uncertainty in a possibly lengthy transition, lack of capability in the agencies to cope with the change, and the risk to current policy implementation. Taken together with the original reasoning that led to NZQA and TEC being established as Crown agencies and which still has validity, these outweigh the potential for better alignment and coordination, the benefits of a strong signal of change as a catalyst for improvement, and other gains from restructuring.

v There should be no move of the administration of the senior secondary schools examination system into the Ministry at this time.

w The Ministry and TEC should consider by October 2005 how monitoring of TEIs should be undertaken so as to ensure that all the Crown's interests are receiving coordinated attention. This may entail making recommendations on the allocation of monitoring roles to the respective agencies.

General

x Central agencies should participate in the implementation of some recommendations (e.g. developing the work plan for the proposed strategic unit, the review of monitoring of TEIs).