Operating Environment

In 2012, government funding for tertiary education was prioritised to support growth in high-performing areas that were considered likely to contribute to economic growth and benefit all New Zealanders. This was in line with previous years’ practice and in accordance with government policy. It meant that funding was reprioritised away from areas of poor performance – those areas of provision that demonstrated low completion rates or poor educational outcomes. This policy was strengthened by the implementation of performance-linked funding that links 5 percent of tertiary education organisations’ (TEOs’) Student Achievement Component (SAC) funding to previous performance.

Tertiary education organisations continued to work innovatively and collaboratively with other providers to seek efficiency gains in 2012, reviewing programmes to ensure they responded to stakeholder needs and aligned with the Government’s priorities, and exploring additional sources of revenue. The Tertiary Education Commission (TEC) carried out a full investment round in 2012. This required providers to develop investment plans for 2013–14 that explained how they intended to contribute to the Tertiary Education Strategy 2010–15 priorities and, in particular, to address participation of priority learner groups, performance and accountability.

The Government’s focus throughout 2012 was to create more places in areas of high demand, ensure that providers were able to meet their costs, and make available the resources to support the Christchurch earthquake recovery. Additional resources are needed in Christchurch to reinstate the tertiary education infrastructure and to enable providers to realign education and training options to meet the needs of the rebuild.

To progress on the Tertiary Education Strategy 2010–15 and obtain value from its investment, the Government’s initiatives in 2012 were aimed at strengthening educational and financial performance and focused on:

The following pages summarise the TEC’s response to the Canterbury tertiary education institutions’ (TEIs’) earthquake recovery and outline initiatives that focus on those outcomes and strengthen sector capability.

Tertiary Education Commission’s response to Canterbury TEI’s earthquake recovery

During 2012, two Canterbury TEIs, the University of Canterbury and Lincoln University, signalled to the Government the need for assistance by way of capital support to help the TEIs with the rebuild of their campuses. The Christchurch Polytechnic Institute of Technology (CPIT) advised that, while it could cover the costs of its campus remediation, it could not expand its trade training provision to meet increased workforce demand and, accordingly, would be seeking capital support.

The TEIs were directed to present their requirements using the Treasury’s Better Business Case methodology so the Government could consider their requests. The TEC helped with this process and, in September 2012, the TEIs presented their Programme Business Cases.

In November 2012, Cabinet provided in-principle support for the requests from the University of Canterbury and Lincoln University for the science and engineering components of their business cases. Cabinet also provided in-principle support for the expansion of trades provision at CPIT and directed the TEIs to move to developing individual project business cases for those initiatives identified.

Further help was provided by the TEC during the year to ensure the TEIs were adequately supported, including maintaining SAC funding levels and amending the rules for the Performance-Based Research Fund (PBRF).

Māori performance initiativesTop

While progress has been made for Māori learners, disparities have remained the same relative to other learners and a step up in performance for Māori learners is essential to reduce these disparities. In 2012, the TEC Board of Commissioners agreed to set stretch plan performance commitment targets and to identify up to $10 million of SAC funding from baselines for more places for TES priority learners to achieve parity in educational outcomes. Providers were expected to set out in their Investment Plans the strategies for achieving better outcomes for Māori learners.

To be eligible for the additional SAC funding, TEOs were expected to have a good track record of performance for Māori and Pasifika learners, including meeting or exceeding participation targets. They had to provide evidence of demand above existing allocations and were expected to commit to ongoing high performance. As a result, $6.36 million of SAC funding was allocated for additional places for Māori and Pasifika.

TEOs are expected to report progress in achieving their 2011 Investment Plan commitments for Māori and Pasifika in their 2013–14 Plans.

Pasifika performance initiativesTop

In 2012, the TEC released the Pasifika Framework 2013–2017, which outlines a whole-of-sector approach to improving Pasifika tertiary outcomes. The Pasifika Framework 2013–2017 sets out four areas that will have the greatest impact for Pasifika learners: successful transitions; accelerated educational performance; improved interagency collaboration; and effective research.

The TEC has worked with the Ministry of Education and other government agencies to:

The TEC’s work also extended to engagement with tertiary providers to:

Pasifika Trades Training initiativeTop

In 2012, the Pasifika Trades Training initiative was introduced with the aim of raising the profile of trades training in the Pasifika community as well as to support the rebuild of Christchurch. The initiative offered a fees-free place in a one-year pre-trade training course at Levels 3–4. Pasifika community leadership was an important point of difference with this initiative as was the role of church ministers in providing nominations, ongoing support and pastoral care.

Institutes of technology and polytechnics (ITPs) were expected to work with industry training organisations (ITOs) to progress learners into industry training agreements. Five ITPs participated in the initiative: CPIT, Wellington Institute of Technology, Whitireia Community Polytechnic, Manukau Institute of Technology and Unitec Institute of Technology. Church ministers were used to recruit and support learners throughout their programme of study. For 2012, 258 learners participated in the initiative.

The Pasifika Trades Training initiative was successful in several ways, including:

There were 177 learners who successfully completed the pre-trade qualification. In March 2013 (nearly three months after graduation), eight learners had secured apprenticeships, four were still being confirmed, 22 learners had secured work in the trades industry and 44 were going on to further study, including nine at diploma level.

Literacy, language and numeracyTop

The TEC published the Adult Literacy and Numeracy Implementation Strategy in 2012. This follows five work streams, which include further developmental work on the Assessment Tool and addressing Māori and Pasifika literacy and numeracy needs. This work aligns with the existing Pasifika Framework and forthcoming Māori and Youth and Transition frameworks. The tertiary sector is increasing the number of programmes and courses that include embedded literacy and numeracy at New Zealand Qualifications Framework (NZQF) Levels 1–3.

During 2012, the TEC consulted with the sector regarding the development of indicators to measure gain in literacy and numeracy based on Assessment Tool data. This work was due to conclude in 2013 so that performance measures could be released in 2014.

Improving pathwaysTop

Secondary–tertiary partnerships

In 2011, trades academies were introduced as part of the wider Youth Guarantee initiative providing funding for a new type of Secondary–Tertiary Programme (STP). STPs provide opportunities for senior secondary school students to achieve credits simultaneously towards secondary and tertiary qualifications. Initially, the TEC was responsible for administering funding for five tertiary-led trades academies and the School of Secondary–Tertiary Studies at Manukau Institute of Technology. In 2012, the number of TEO-based trades academies grew to 11, with 1,806 funded places allocated across eight ITPs, two private training establishments (PTEs) and one ITO.

Most trades academies are based on two-year programmes, but other models range from one full-time year to part-time programmes of one or more days a week. One programme included block courses during school-holiday breaks. While some trades academies struggled to get full enrolment at the beginning of the year, others enrolled more students than they were funded for, indicating a high level of interest from the 186 participating secondary schools. Six trades academies achieved more than the performance expectation of 80 percent enrolment, and the average attendance rate across all trades academies was 84 percent, compared with the expected performance target of 80 percent.

Youth Guarantee

Youth Guarantee, the fees-free tertiary programme, aims to increase the educational achievement of 16- and 17-year-olds not currently engaged in education, and to improve transitions between school, tertiary education and employment. The TEC has been responsible for funding Youth Guarantee fees-free tertiary education at Levels 1–3 on the NZQF in PTEs, ITPs and wānanga since 2010.

In 2012, Youth Training was merged into Youth Guarantee. This included the expansion of the programme from 34 TEOs in 2011 to 150 in 2012 and enrolling 8,901 learners across the country. Māori participation increased 13.8 percentage points, from 29 percent in 2011 to 42.8 percent in 2012. Similarly, Pasifika participation increased by 3 percentage points, from 14 percent in 2011 to 17 percent in 2012, while European participation decreased slightly, from 52 percent in 2011 to 46.9 percent in 2012. For many TEOs, 2012 was a transitional year that focused on the development of programmes and on systems alignment.

Performance-linked fundingTop

Performance-linked funding is one of several approaches intended to improve educational outcomes for students and employers and improve value for taxpayers’ money.

Performance-linked funding is targeted to encourage all TEOs to reach an acceptable standard of educational performance. From 2012, a maximum of 5 percent of a TEO’s total SAC or Industry Training funding was at risk, based on an organisation’s educational performance in the previous year.

The TEC has developed a performance-linked funding calculator, and organisations are provided with a copy so they can model the impact of performance-linked funding for themselves.

Funding impacts were first introduced in 2012 for the SAC fund. A total of $2.989 million in performance-linked funding adjustments were made to the December 2012 payments of 50 TEOs.

The introduction of performance-linked funding for ITOs has been delayed until 2014, as this sector is experiencing significant change and the current fund requirements ensure funding is linked to performance.

Changes to foundation learningTop

Budget 2012 established a separate funding pool for entry-level tertiary education (Levels 1–2 on the NZQF). One-third of this pool was made available to all SAC providers, including PTEs, through a new competitive allocation process.

The TEC completed the first competitive allocation process in October 2012, awarding 5,401 equivalent full-time students (EFTS) and $37 million of foundation education for both 2013 and 2014. Of the 144 applications received, 25 providers were successful – 18 PTEs, six ITPs and one wānanga.

The allocation process enabled more places for learners (1,700 additional EFTS compared with current SAC prices), thereby achieving both quality and greater value for money.

The Government intends to make the whole SAC Levels 1–2 funding pool available on a competitive basis, phased in over two or three Investment Plan periods.


The performance of the ITO sector continued to improve in 2012 as a result of the impact of new operational policies introduced from 2011 and the focus of ITOs on their core business. ITOs have responded to the Government’s priority to simplify and strengthen the sector by seeking further merger and amalgamation opportunities with other ITOs. At the start of 2012, there were 32 recognised ITOs. During 2012, mergers reduced the number of ITOs to 20 by the year end and other mergers are planned. Further details about the mergers are provided in the separate section on ITOs.

Capital Asset ManagementTop

The aim of Capital Asset Management (CAM) is to deliver services in the most cost-effective manner through the management of assets for present and future customers.

Cabinet Office Circular: Capital Asset Management in Departments and Crown Entities: Expectations CO (10)2 sets out expectations for asset management in departments and Crown agencies including TEIs.

As at 31 December 2012, TEIs collectively owned or managed assets with a net book value of around $7.9 billion. This made TEIs’ assets collectively the fourth-largest social-asset portfolio across government. The majority of assets were held by universities ($5.88 billion), followed by ITPs ($1.76 billion) and wānanga ($0.26 billion). The value and importance of these assets to the social, cultural and economic wellbeing of New Zealand reinforces the need for TEIs to set high standards when it comes to managing their assets.

In 2012, the TEC worked closely with tertiary education sector bodies and individual TEIs to establish and implement an integrated CAM Monitoring Framework. This framework articulates how the TEC will monitor CAM plus provide advice and guidance to TEIs where appropriate.

Other achievements during 2012 included the following.

Performance-Based Research FundTop

The PBRF is a TEC-administered fund designed to encourage and reward excellent research in the tertiary education sector. The PBRF is allocated by assessing the research performance of TEOs and then funding them accordingly. PBRF funding is based on three elements: quality evaluation, research degree completions, and external research income.

The quality evaluation is a peer-review process that determines the quality of research at the level of an individual researcher at TEOs. This measure accounts for 60 percent of the funding pool and provides the basis of funding for a period following each quality evaluation. TEOs that do not participate in the quality evaluation cannot access funding through the two other measures.

The TEC undertook a quality evaluation in 2012. This invited submission of evidence portfolios by TEOs and the assessment of these by peer-review panels and expert advisory groups. Panels made decisions at the end of 2012 and the interim results were released to the sector and other stakeholders in April 2013. TEC will present the final report later in 2013.