Part 4: Client Service Performance of the Māori Trustee

Introduction

4.1
The role of the Trustee is to help manage Māori Land. The Trustee is independent of the Crown²⁸ and is accountable both to clients and to the Māori Land Court. Overall, the Trustee manages about 7% of all Māori Land.

4.2
In this part we:

• provide an overview of the Trustee;
• describe the Trustee’s operating environment;
• consider the Trustee’s client service performance;
• recommend how the Trustee could improve client service performance; and
• identify areas of risk that could affect the Trustee’s future client service performance.

Overview of the Trustee

Structure of the Trustee

4.3
The Trustee is a statutory body, constituted as a corporation sole under the Māori Trustee Act 1953. Under that Act, the Chief Executive of the Ministry of Māori Development Te Puni Kōkiri (TPK) – or an officer nominated by TPK’s Chief Executive – must carry out the role of the Trustee.

4.4
The Trustee carries out his duties through the MTO, which is part of TPK. The MTO provides the Trustee with staff, office accommodation, corporate support, and IT services. Unless specified otherwise, when we refer to the Trustee, we also include the MTO.

4.5
The MTO has 48 full-time staff, five regional offices, and a Head Office in Wellington. The Whangārei office covers Taitokerau, Hamilton covers Waikato-Maniapoto, Rotorua covers Waiariki, Gisborne covers Tairāwhiti, and Wanganui covers Aotea, Takitimu, and Te Waipounamu. Figure 5 on the next page illustrates the relationships between TPK, the MTO, and the Trustee, and shows the MTO’s structure and office locations.

Figure 5
Structure of the Māori Trustee and Organisational Relationships

Role and Functions of the Trustee

4.6
The Trustee’s main role is to manage Māori Land on behalf of its owners, mostly through leasing for conventional farming. The Trustee provides trust and agency services, and oversees the administration of leases. The Trustee also disburses rental funds, and invests client funds when requested.

4.7
The Trustee’s purpose is to:

• protect the interests of Māori clients and their land; and
• overcome the adverse effects of fragmented and multiple ownership and uneconomic land through fair, proper, and prudent administration and management within the principles and obligations of trusteeship and agency.

4.8
The Trustee maintains about 111,000 client accounts. As at 31 March 2003, the Trustee was responsible for managing about 116,000 hectares of Māori Land (about 7% of all Māori Land), with an associated annual rental income of $9.5 million.

4.9
Like any private trustee, the Trustee is ultimately accountable to the owners of the land (and other assets) that he administers for the exercise of his fiduciary duties. The degree of accountability varies according to the type of trust arrangement that operates between the Trustee and the clients.

The Trustee’s Operating Environment

The Trustee Operates In a Competitive Market

4.10
Most of the Trustee’s work (both land management and funds management) is subject to market forces. In most cases, the Trustee’s clients are not required by legislation to use the Trustee’s services.²⁹ If clients are dissatisfied with the service they receive from the Trustee, they can take the administration of their land from him and place it in some other form of administration whenever they choose. For example, Māori Land owners can take their business to another trustee if they feel that:

• the Trustee is not looking after their land properly; or
• the fees charged are too high in comparison with someone else carrying out similar functions; or
• they want to administer the land themselves.

4.11
These market forces also apply to the Trustee’s funds management functions. If the Trustee’s performance is below a client’s expectations, the client can choose to have another provider manage their funds.

Funding of the Trustee

4.12
The cost of the services provided by the MTO to the Trustee is funded by an appropriation through Output Class D5: Services to the Māori Trustee of $4.225 million (GST-inclusive) for 2003-04 under Vote Māori Affairs. This level of funding has remained static for several years³⁰, and can be recovered by the Government using the powers of the Māori Trustee Act.

4.13
Unlike the situation that exists for most government agencies, the Minister of Finance has the power to requisition the return to the Crown of any of the funding provided to the Trustee. This is based on the premise that the fees the Trustee charges cover the costs of his operations, therefore enabling him to return the funding to the Crown and keep any “profit”.³¹ The Minister of Finance last exercised this power of requisition in 1993 (for $7.4 million). Since then, about $40 million has accumulated in the Māori Trustee’s General Purposes Fund and is recorded as a debt to the Crown.

4.14
Figure 6 on the opposite page shows how the Trustee is funded, and the service relationships between TPK, the MTO, and the Trustee.

Figure 6
Financial and Service Relationships of the Māori Trustee

4.15
Parliament provides TPK with funding for the MTO. This makes TPK, not the Trustee, accountable to Parliament for the funding of the MTO. However, even though not legally required to, the Trustee has provided annual reports to Parliament in recent years. This shows that the Trustee is open to reporting performance – one of our client service expectations. The annual reports mainly provide information relevant to the Trustee’s clients, such as the rate of return on the funds invested on their behalf. We discuss issues of operational land management reporting in the section on time recording in paragraphs 4.38-4.41 on page 67.

4.16
The State Services Commission, TPK, and the Treasury are jointly reviewing the Trustee’s role and functions. While this review has been in progress for more than 10 years, no clear decisions have been made, and, at present, no part of the accumulated $40 million can be used for the Trustee’s normal operating costs.

4.17
Completing the review (something this Office considered necessary back in 2001³²) would reduce some of the uncertainties concerning the Trustee’s operations and funding, and would allow full attention to be given to client service. We discuss the review in detail in paragraphs 4.43-4.46 on pages 68-69.

4.18
The Trustee also carries out tasks for which fees cannot be recovered and which, consequently, no other provider is willing to carry out. These include the management of uneconomic blocks of land (see paragraphs 4.19-4.21 on pages 61-62), and services to the Māori Land Court (especially searches on behalf of clients of the Māori Land Court Unit to find out whether the Trustee holds rental income from their interests in Māori Land). While these tasks have been recognised in past reviews, the Trustee is not given dedicated funding to carry them out. Costs are recorded against those blocks of land that are economic in the sense that the owners have rental income from which to pay for services received.

Uneconomic Blocks of Land

4.19
Some of the land handled by the Trustee is uneconomic in the sense that it cannot support costs being applied to it (for example, administration costs such as fees for rent reviews, and activity-related costs such as surveying to create access to landlocked land).

4.20
The Trustee is under no obligation to manage any land, let alone uneconomic land. However, a significant proportion of the land that the Trustee administers earns little or no income and actually incurs costs for the Trustee. The Trustee is also given such land by the Māori Land Court to administer.³³

4.21
As no other trust service providers would administer these blocks of land (because they would lose money), only two other options are available for Māori Land owners:

• manage the block of land themselves; or
• leave the block of land without any form of management.

Duties Imposed on the Trustee by the Māori Land Court

4.22
Decisions of the Māori Land Court can require the body administering a block of land to incur extra costs (such as extra notice of proceedings) before the Court is satisfied that an application should be granted. In that sense, the Trustee is no different to other organisations. However, we did note instances where the duties imposed by the Māori Land Court were quite demanding (for example, requiring further meetings of owners, and even specifying the methods by which owners were to be contacted). The demands placed on the Trustee varied between Māori Land Court registries.

4.23
The Māori Land Court has the ability to make such directions. However, these extra requirements are falling on an organisation whose funding has not been adjusted to cope with the resulting increase in workload.

The Trustee’s Client Service Performance

4.24
Unlike clients of the Māori Land Court, clients of the Trustee are able to choose whether or not to use his services. Trustee clients, especially those with land that returns good rental income, can engage someone else to manage their land if they become dissatisfied with the Trustee’s performance. Accordingly, the Trustee’s ability to maintain a stable client base can be seen as a positive indicator of client service performance.

4.25
It is important for the Trustee to provide clients with clear and concise information about the Trustee’s operations and the returns able to be given to them. The Trustee is able to do this because of having staff with a sound knowledge of the clients, their land, and their needs. This knowledge is a prerequisite to providing good client service.

4.26
We were impressed by the way regional MTO staff were able to recall details relating to particular blocks of land under their administration. Staff members also attend meetings of owners that are often held outside business hours, and occasionally provide reports to the owners on the current status of the block of land. Staff consistently raised a concern with us that the present level of funding made it difficult to continue such work (which they thought was a valuable client service). Nevertheless, we saw that staff put in a lot of effort to identify possible avenues of development for their clients’ land.

4.27
We found a number of examples where the Trustee is working on innovative solutions to increase returns to Māori Land owners. In Gisborne, for example, the Trustee is aiming to gain more bargaining power with corporate lessees by amalgamating the management of individual blocks of land into one large unit for lease. Such arrangements, while time-intensive to set up, can result in major benefits for owners.

How Could the Trustee Improve Client Service Performance?

4.28
Overall, the Trustee is providing clients with a good level of service. However, we identified four areas where the Trustee could improve service to clients:

• use of more qualitative land management performance measures – particularly in regard to rent collection and review;
• providing Reports to Owners;
• maintaining client account records; and
• implementing a time-recording system.

Land Management Performance Measures – Rent Collection and Review

4.29
In the files that we reviewed, the amount of rent received generally matched that suggested by registered valuers. However, this does not occur for all of the land administered by the Trustee because the Trustee does not always have control over leasing arrangements. For example, owners can direct the Trustee to lease the land to someone who is offering to pay less rent but is associated with the owners in some way.³⁴

4.30
There have been significant improvements in respect of rent reviews as a result of intense management. For example, the Trustee has concentrated on reducing the level of rent arrears, and the length of time taken to collect them. Figure 7 below illustrates how rent arrears in Rotorua, and in total, have reduced between 1994 and 2003.

Figure 7
Reduction in Rental Arrears Since 1994 for Māori Land Rent Collected by the Māori Trustee

4.31
The Trustee measures completion of rent reviews, property inspections, and lease renewals in one performance target called “work on hand”. This measure sets a numerical target for the number of tasks that each regional office must complete in a month, and then reports on the number achieved. While this measure serves as a good indicator of workflow from the Trustee’s perspective, it would be appropriate to use more client-focused measures – such as timeliness and quality of the service provided to clients. For example, the Trustee could adopt a measure that looks at the percentage of lease renewals completed before the due date.

Providing Reports to Owners

4.32
During our file reviews we found that owners of some blocks of land received a Report to Owners from the Trustee. These short documents contained a brief description of the block of land and its background, valuation details, financial particulars (including lease arrangements and income), and details of ownership (including the number of unknown addresses for beneficiaries). These reports are a valuable method of informing Māori Land owners of the land’s status, and of important issues such as the imminent end of a lease.

4.33
The Trustee charges standardised rates to cover the cost of staff time to produce these reports. Predominantly, reports are produced for blocks of land that are economically viable. Certain regional offices also have more contact with owners through meetings than other offices. We do not expect the Trustee to undertake the reports on all blocks of land, given that some will never earn enough to cover the cost of providing a report. However, these reports are a valuable client service tool, and are an example of the Trustee clearly communicating with clients.

Maintenance of Client Account Records

4.34
The Trustee distributes about $5 million annually to clients through direct credit or cheque payments. The payments are made regularly throughout the year, with payments made only when the client account has reached a set minimum level. Client accounts are activated to enable payments once the client’s identity has been verified. Further, all accounts above a threshold balance are checked at the time the payments are made.

4.35
Another important aspect of the Trustee‘s operations is maintaining an accurate and complete record of Māori Land owners and beneficiaries. This includes updating ownership records in line with Court orders (for example, amending records to take into account a succession application processed by the Māori Land Court) as well as keeping existing records as current as possible. The Trustee’s performance in these two areas is currently under pressure, because of a backlog of both Court orders and correspondence.

4.36
The Trustee uses solely volume-based measures to assess performance in the client records area. For example, the Trustee sets a monthly processing milestone of 700 Court orders, and records performance against this target.

4.37
The Trustee should measure the timeliness and quality of the processing, as well as the volume. A quality measure could be introduced, along the lines of the percentage of orders completed within 10 days of receipt, or the accuracy of the processing. Such a measure will not resolve the backlog, but we recognise that the Trustee is investigating ways to do this. We consider that a quality measure would help the Trustee in terms of reporting, and would provide clients with useful information about the Trustee’s performance.

Implementation of a Time-recording System

4.38
It is standard practice, where fees are charged for services provided to the public, that those fees are based on the time and resources that the service provider has used in providing the service. This has two benefits:

• the provider is fully aware of the cost of the service they provide to individual clients and, by aggregation, the total cost of services; and
• the client has a clear understanding of what they are being charged for.

4.39
The Trustee does not operate any time-recording system that allocates staff time to individual clients as a matter of course. Nor does the Trustee invoice clients on a “time and cost” basis. Rather, owners of blocks of land earning rent are charged standardised rates for services (such as a Report to Owners) while owners of uneconomic blocks of land are not charged for many of the services they receive. This means that the Trustee does not:

• know the cost of the services provided to individual clients;
• know the extent of cross-subsidisation, if any, occurring between owners of different blocks of land; and
• have full access to useful management information.

4.40
The introduction of a time-recording system would solve these problems. In addition, a time-recording system that allows for more accurate charging for the time spent administering land will also better identify the time spent administering uneconomic blocks of land.

4.41
Moreover, among the issues that are being looked at by the government review of the Trustee is how the Trustee is funded and the level of funding that the Trustee should receive. The review would benefit from having explicit information about the Trustee’s cost structure and the extent of cross-subsidisation, if any, that exists between owners of different blocks of land. Such information would allow the Government to make explicit decisions about activities that it wants to fund.

Areas of Risk That Could Affect the Trustee’s Future Client Service Performance

4.42
We identified three areas of risk for the Trustee that could affect future client service performance:

• the ongoing government review of the Trustee’s role and functions;
• retention of institutional knowledge; and
• training staff to meet changing needs of the Trustee’s portfolio.

Government Review of the Trustee’s Role and Functions

4.43
For more than 10 years, the Trustee has been the subject of a review by a team of officials from TPK, the State Services Commission, and the Treasury. Progress on this review has been very slow. This situation has not been helped by the turnover of officials from the agencies on the review team, which has led to re-litigation of points previously agreed. Simply put, there has never been any great impetus to complete the review.

4.44
The review team is considering a number of options for the accountability structure of the Trustee. The aim is to increase the transparency of the Trustee’s operations and expenditure beyond that currently provided by the annual reports of TPK and the Trustee.

4.45
In addition, the review is looking at ways to reduce any potential conflicts of interest about the current structural arrangement whereby the Deputy Chief Executive of TPK is also the Trustee (having had this role conferred by the Chief Executive of TPK). Options have been sent to the Minister of Māori Affairs, but a Cabinet paper for final decision has not yet been prepared.

4.46
When the review team has clear instructions on how the Trustee should be accountable, the team will be in a position to consider the question of funding. Issues to resolve include how (and at what level) the Crown should be funding the Trustee on an ongoing basis, including the degree to which it might wish to fund the administration of uneconomic blocks of land. If this is not completed in time to be made part of the 2004 Budget decisions, another year will pass with the ongoing funding position unresolved, and the Trustee’s situation will remain uncertain.

Retention of Institutional Knowledge

4.47
Many of the staff within the MTO have acquired core skills and knowledge over a period of many years. As at September 2003, the average length of service at the MTO was 9.2 years.

4.48
We witnessed circumstances where a high standard of service was provided because of the intimate knowledge that MTO staff have of the backgrounds, influences, and connections of each block of Māori Land in a given district.

4.49
Length of service also influences interaction of MTO staff with other agencies – especially when many of the Trustee’s staff gained their knowledge of the Māori Land system by working within the former Department of Māori Affairs, and alongside some present-day staff of the Māori Land Court Unit.

4.50
While this is an advantage in conducting day-to-day Trustee business, it also generates capability risks for the future as the Trustee is such a small organisation.As time passes and these staff members leave the MTO, it may well affect the level of service available to clients and could mean the loss of the specialised knowledge associated with individual blocks of land.

Training Staff to Meet the Demands of a Changing Trustee Portfolio

4.51
It is important that the skills and experience of MTO staff match the needs of the portfolio of assets that the Trustee holds. Planning by the Trustee needs to assess such demands (even on a regional basis) and identify whether training in business planning or finance, for example, would enhance the ability of MTO staff to meet the demands. As stated above, the MTO is in a good position to be able to do this as the current high level of staff knowledge and experience means that core-competency training is of little use.

4.52
For example, in a number of regions there is a growing demand for Trustee staff to help clients to access finance for improving land, or to provide some form of business planning/development advice. While detailed aspects of this advice can be outsourced or provided by other agencies, this is an area where the Trustee could provide training to staff to improve client service. This is particularly so if uneconomic blocks of land increase as a percentage of the future portfolio, requiring innovative ways to manage them successfully.

28: The Māori Trustee is independent of the Crown even though Te Puni Kokiri provides the Trustee with the services of the Māori Trust Office.

29: The Māori Land Court requires the Trustee to administer a small number of blocks of land that no other trust service provider will handle, but otherwise the Trustee has the freedom to administer any block of land that he wants to from those offered to him.

30: Appropriations for each financial year since 1999-2000 have been $4.225 million.

31: Presently, revenue from fees does not cover the Trustee’s operating costs.

32: Report of the Controller and Auditor-General, Māori Trustee – Governance and Accountability, Central Government: Results of the 2000-01 Audits, parliamentary paper B.29 [01b], pages 89-103.

33: While the Trustee is under no legal obligation to undertake the administration of this sort of land, he usually does as a matter of principle.

34: The Trustee can act in several roles in relation to a block of land. He can be appointed:

• as agent by the Māori Land Court (this appointment is specific and is decided by an owners’ meeting and set out in the Māori Land Court order. Any actions that are considered necessary that are outside the order require agreement at another meeting of owners);

• as agent by the Responsible Trustees, which means he does only what the Responsible Trustees direct and does not hold the land or have signing power;

• as the Custodian Trustee, where he looks after the day-to-day administration of the block of land under the written direction of the Responsible Trustees but does not have, for example, signing powers; or

• as in only one instance, as an Advisory Trustee.