In Australia the Federal Government plays a dominant role in higher education funding. Changes to the role and structure of the higher education system in 1988 aligned the universities more closely with national economic goals and sent the message to institutions that they were expected to adopt a more managerial mode of operation in order to contribute to achievement of the goals. In 1991, a system-wide quality assurance program was developed in which a national committee makes judgments about the outcomes and quality assurance processes of universities and places them in "quality" groupings which attract various levels of "reward" funding. Analysis of the impact of this program on institutional governance and on institutional roles and relationships with government reveals that several factors have strengthened central managerial power at the expense of disciplinary and collegial power. These factors include the wide scope of the evaluation program, the strong institutional-level focus, the limited timescale of the process, and the importance of performance indicators and of external stakeholder judgments. Power has also shifted from institutions to the Federal government, as institutions are pressured to conform to the government's vision of higher education's role in order to receive good assessments and subsequent funding rewards. (JDD)