Universities in the Irish Republic face having their government funding cut if they fail to meet a set of national objectives for higher education.
The Higher Education Authority, Ireland's equivalent of the UK's funding councils, this month launched a consultation paper on plans to incorporate performance measures into institutional funding.
The document sets out a number of objectives for universities and colleges to pursue, with the warning that up to 10 per cent of funding could be withheld from any institutions that fail to meet the targets.
The objectives include: widening participation and increasing student and graduate numbers; improving teaching; achieving "world-class quality" and advancing institutional and structural reform.
The HEA said a total of EUR13 billion (£9.6 billion) will be invested in higher education in Ireland between 2007 and 2013, the period of the current national development plan. It said institutional autonomy would be recognised when considering how universities and colleges spent their money, but added: "The institution will need to show that it is achieving results that assist in attaining the national objectives. In the future, funding will be linked to institutional performance in this regard."
Despite the threat of financial penalties, the consultation paper says that universities must be given leeway to innovate without fear of falling foul of performance monitoring.
The paper says: "Institutions should continue to innovate in developing their strategic aims, subject to usual controls. It is accepted that not all innovations will be successful, and account will be taken of the particular circumstances of each case."
The first review of institutions' performance is planned to take place this year, but it is a trial run and will have no funding implications. The HEA intends to implement the process in full in 2009.
An HEA spokesman said: "It will mean that institutional spending will be more transparent and accountable, there will be a greater focus on the national objectives while respecting a college's decisions about the best ways to achieve those objectives, and the assessment process will also help colleges with their own development."
The Irish Universities Association, which represents Ireland's seven universities, declined to comment on the proposals until members had met to discuss the consultation paper this week.
Universities have until March to respond to the HEA's proposals. The first reviews are scheduled to take place in the autumn.