Part 10: Observations about the transfer process

10.1
In our view, the attempted transfer of the responsibility for contracts with the Trust from the Ministry to the Commission could have been better managed.

10.2
The Ministry and the Commission were not managing the transfer of responsibility for the contracts with the Trust using standard project management practices. We would have expected the transfer to be planned with explicitly agreed timeframes and defined roles for both organisations. This should have occurred when the Commission began to assume responsibility for management of the contracts with the Trust in July 2003.

10.3
The Ministry and the Commission should also have agreed a process for being jointly responsible for resolving any issues during the transfer process.

10.4
A Mutual Services Agreement between the Ministry and the Commission, dated August 2003, sought to create a general protocol between the entities as to how financial management, forecasting and reporting were to operate. In our view, this Agreement did not provide sufficient detail on the mechanics of how responsibility for the contracts with the Trust would be transferred from the Ministry to the Commission.

Communication of concerns to the Trust

10.5
While the Commission did raise concerns relating to the Trust’s practices directly with the General Manager of the Trust, the seriousness with which they were viewed was not communicated. The Commission told us that raising these concerns with the Trust would have been inappropriate as the contractual relationship was between the Ministry and the Trust.

10.6
In the Commission’s view, it was appropriate to raise these concerns with the Ministry in an effort to allow the Ministry to provide further information where this was available.

Escalation of the Commission’s concerns

10.7
The Commission raised its concerns formally with the Secretary for Education via a phone-call between the General Manager and the Secretary, and an e-mail dated 30 January 2004. The documents forwarded by the General Manager of the Commission to the Secretary for Education identified the Commission’s concerns, and included some brief analysis by Commission officials, based on their interpretation of the information they had available. The documents referred to poor contract management and monitoring on the part of the Ministry, and poor financial management by the Trust.

10.8
The General Manager of the Commission told us that some of the concerns were not well supported by the information available. Nevertheless, all of the concerns raised by the Commission officials were presented to the Ministry in a series of strongly worded memoranda.

10.9
The extent and serious nature of the concerns about the Ministry’s monitoring, and Trust’s management practices, led to the Secretary for Education taking advice before asking the Auditor-General to undertake an inquiry.

10.10
As noted previously, this transfer process could have been better managed. Better management would have made it easier for the Ministry and the Commission to jointly resolve the matters raised.

Legal advice about the Crown subsidy

10.11
One of the more serious concerns raised by the Commission related to the manner in which the Crown’s contribution to the Trust’s own scholarships was calculated. The Commission’s disquiet was based on its officials’ interpretation of the scholarships contract. The Commission did not seek legal advice in arriving at this interpretation.

10.12
We would have expected legal advice to be sought regarding the interpretation of a legal document – especially if the interpretation had the potential to raise serious concerns about the prudent use of taxpayer funding and the quality of monitoring by another public entity – before any concerns were passed on to the Ministry by the Commission.