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Preliminary decision on Wananga commission taken

20 June 2005 Media Statement

Preliminary decision on commission taken

Education Minister Trevor Mallard announced today that he has taken further steps towards appointment of a commissioner to Te Wananga o Aotearoa.

“In accordance with the procedures outlined in the Education Act, I have written to the council of the wananga today to inform it that my preliminary decision is that the council should be dissolved and a commissioner be appointed in their place.

“In consideration of the wananga’s current financial and operational situation, I have no choice but to invoke the level of statutory intervention that I believe is needed to safeguard the interests of the wananga’s students.

"In my view the appointment of a commissioner will deliver the governance capability required to rebuild this institution and return it to a stable and viable position. There is little doubt that the wananga is a key part of our educational infrastructure and one that we all want restored to full capability, meeting the needs of Maori.

“This decision has not been straight forward or taken lightly. The appointment of a commissioner is the highest level of intervention available to the government, and requires a high threshold to be passed before a commissioner is an option.

“On 9 May I informed the wananga’s council that I would be consulting with them, and any other interested parties, over the possible need to appoint a commissioner.

"I have received advice that indicates convincingly that there is a serious level of financial risk, and risk to the operation or long-term viability of the wananga.

“The wananga is in serious breach of several of the intervention criteria under the Education Act, particularly with regard to the absence of audited financial accounts and the institution’s ability to repay debts is an ongoing issue.

“More fundamentally, the council has not been able to convince me that it will not continue to struggle with the reality of the wananga’s situation, or provide the necessary leadership or capability to work proactively with the Crown Manager to reduce risk.

“The council now has 21 days to make any submissions as to why my preliminary decision should not be confirmed. If the council do not provide convincing evidence or reasons to change my decision, a commissioner will be appointed in July.”

See also letter to Te Wananga o Aotearoa:
http://img.scoop.co.nz/media/pdfs/0506/mallardletter.pdf

Questions and answers are attached.

Question and Answers – Te Wananga o Aotearoa
20 June

What steps have been taken to date towards appointment of a commissioner?
The Education Act (Section 195D) sets out the procedure for moving to a commissioner. An appointment of a commissioner is not instantaneous, but includes a process of consultation, forming a preliminary decision, submissions and confirmation.

In light of information arising from the investigations of the crown observer/manager, Brian Roche, the Minister wrote to the council on 9 May 2005 indicating his intention to consult with the wananga’s council, and other interested parties, on the possible need to appoint a commissioner. The wananga’s council responded with a letter on 16 May, 2005.

Today the Minister has written to the council providing his preliminary decision that a commissioner should be appointed to replace the wananga’s council.

As set out in the Education Act, the council has at least 21 days to respond to the preliminary decision. Until 11 July the council can make any submissions as to why the preliminary decision should not be confirmed.

What interventions has Government taken to date?
The current statutory intervention is that of a crown observer, which recognises significant risk had already been identified at the institution. The Minister of Education appointed Brian Roche as crown observer in February 2005.

Shortly after that the council agreed to that appointment being extended to that of crown manager, which took effect in March 2005 and was in addition to his role as crown observer.

The crown manager was delegated control of all financial responsibilities previously held by the council, to control and stabilise the wananga, and to restore public confidence in the financial management and accountability of the tertiary education institution at senior management and governance levels.

Prior to these developments, a crown development advisor was appointed in 2002, in response to concerns about the wananga’s rapid growth.

What is the difference between a crown observer, a crown manager and a commissioner?
 A crown observer is a medium level statutory intervention under the Education Act. The crown observer’s role is advisory only.
 A crown manager is non-statutory and relates to financial management and control. The crown manager was appointed with the agreement of the wananga council in this case.
 A commissioner is the highest level of statutory intervention under the Education Act that can be put in place and replaces the council of an institution.

On what grounds can the Minister propose to appoint a commissioner?
An institution must be considered to be at serious risk to appoint a commissioner, the highest level of statutory intervention available to government. Serious risk is defined as both:
a. at risk of being unable to pay its debts as they become due in the normal course of business; and
b. according to the intervention criteria published under Section 195A(2) of the Education Act, there is a serious level of risk to the operation or long-term viability of the institution.
Also, the Minister must believe, on reasonable grounds, that there is a serious risk and that other methods of reducing that risk have failed or appear likely to fail.

On what grounds has the Minister formed the preliminary view that a Commissioner should be appointed?
The wananga has breached several of the level 2 and 3 intervention criteria published in Section 195A(2) of the Education Act, namely:
– The wananga failed to complete audited financial statements for 2004, and the deadline of the end of April 2005 has now expired. No indication of when the financial statements will be completed has been given.
– There is an ongoing issue around whether the 2004 financial statements will meet the auditors “going concern” test and whether any representation made by the council on this point will be acceptable to the auditors.
– The wananga failed to seek approval for an unauthorised loan.
– There were major variations to the 2004 budget that were not council-approved, which demonstrated an absence of an effective system of internal financial controls and delegations of authority to incur expenditure. The financial controls that are currently in place are only operating because of the crown manager’s presence at the wananga.
– There has been a material increase in risk for the wananga as a result of poor business planning or failure to respond to financial signals.
– The wananga is seriously exposed to potential tertiary education funding policy changes, signalled by government.
– An inability to repay debts is an ongoing issue. A short-term government loan of $12 million was required in May 2005 to meet the wananga’s immediate financial requirements, including wages to staff and payments to creditors.
In addition, there are serious concerns around the organisational capability of the council, including its ability to design a senior management structure appropriate to an institution of this size, or to implement proper financial controls and effective human resource management practices.
Despite the council providing some recent reassurances that it will seek to address some of the internal operational issues of the wananga, there is a lack of confidence based on past experience that the council can actually do what it says it will do. For example, the wananga in the past has been focussed on growth, and did not ensure that that growth was matched by quality and that it was supported by adequate infrastructure.

If appointed, who will the commissioner be?
No decision has been made on this. The minister must first make his final decision on whether to go ahead with the appointment, and before that happens, a second period of consultation with the wananga’s council will take place, of at least 21 days.

If appointed, what would be the commissioner's role?
A commissioner would replace the existing council and provide the governance capability for the amount of time necessary for the wananga to regain stability and viability.

In the event a commissioner is appointed, an advisory group would also be appointed to work alongside the commissioner.

Who might be part of the advisory group?
People who have good experience of governance and particularly of tertiary institutions, and understand the framework within which a wananga operates. Members of the existing council may well be considered for this group.

How long would a commissioner be appointed for?
There is no fixed time period for a commissioner's appointment. In accordance with the Education Act, the Minister must review the appointment at least once in every 12 months following the appointment. As soon as the Minister is satisfied that the risk that gave rise to the appointment of the commissioner has reduced to such an extent that is it appropriate that the institution be administered by a council, a new council must be appointed to govern the institution.

Who would pay for a commissioner?
The costs of the commissioner will be met by the wananga just as the council costs are currently.

Other issues that are not related to this statutory intervention process

When will the government pay the wananga the suspensory loan, which was negotiated as part of its Treaty settlement?
The government still intends to effect the Deed of Settlement with the wananga (that resulted from the decision of the Waitangi Tribunal). However, the Deed of Settlement provides for certain conditions to be met before payment of the suspensory loan funds:
a. The Secretary for Education must agree that there has been material achievement of the performance targets set out in the Deed of Settlement signed in 2001; and
b. The wananga and the Ministry of Education need to agree on key performance indicators going forward. Those indicators will inform the decision as to whether the suspensory loan will be converted into equity.

These requirements have not yet been fully satisfied.

The wananga has not submitted a complete case showing evidence of past performance targets being satisfied, although a report received 30 May from the wananga is currently being assessed. All targets were subject always to achievement and maintenance of high quality standards.

The targets being reported on include the Maori student ratio being 80 per cent, retention and completion rates, and the requirements to have a certain proportion of first year students. Assertions without evidence, that targets and standards have been met are not enough to kick in the payment of the suspensory loan.

More importantly, the future performance measures, including terms of quality, to be agreed upon at the time of payment of the loan funds have also yet to be settled.

The council has correctly concluded that development of the measures will need to be tied closely to the new charter currently being developed for the wananga by the Tertiary Education Commission. It will be necessary to have the new charter established, before decisions can be made on the loan.

How does this process affect development of the wananga’s new charter?
The Tertiary Education Commission has been consulting with the wananga’s council to develop a new charter, and will continue working on the charter in consultation with a Commissioner if appointed. Development of the new charter is a priority, as it is important that the wananga has a robust charter in place as soon as possible as it will shape development of the wananga’s profile.

ENDS

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