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Scotland's teaching quality assessment system should be radically revised by abandoning its current four-point rating scale, using existing reward funds to boost institutions' plans to improve quality and bringing in lead assessors from outside Scotland for smaller subject areas.

These are among 35 recommendations from a review group set up jointly by the Scottish ÖйúAƬ Funding Council and the Committee of Scottish ÖйúAƬ Principals.

Sir Ronald Miller, deputy chairman of the Scottish Amicable Life Assurance Society, who chaired the review team, said: "We found that although the general principles of quality assessment went relatively unchallenged, there are considerable concerns about the process. Quality assessment is not an end in itself, but it was felt to be a closed process rather than helping further developments."

At present, departments with an excellent rating win extra funded student places. The review proposes that they should be graded on different aspects of quality, with an overall judgment of "quality approved" or "quality not approved", and that funds should be diverted to support best practice, which could include collaboration between institutions.

The review uncovered criticisms of misinterpretations and inaccuracies in assessment reports, Sir Ronald said. It proposes giving institutions the chance to provide a "facilitator" to work with the assessment team and correct factual misconceptions. Institutions should also have a limited right of veto when they believe there are potential conflicts of interest with an assessor.

Executive summaries available from Linda Henry, SHEFC, Donaldson House, 97 Haymarket Terrace, Edinburgh EH12 5HD (0131) 313 6500.