Part 8: Control environment within the Māori Education Trust

Inquiry into the Ministry of Education's monitoring of scholarships administered by the Māori Education Trust.

As the Trust is not a public entity within the Auditor-General’s mandate, we did not undertake a comprehensive internal control review. Our inquiry was limited to controls around the administration of taxpayer-funded scholarships.

The Trust is an organisation of 4 permanent staff, including the General Manager. Governance responsibility resides with the Trust Board. The General Manager is the only staff member to hold any financial delegation from the Board.

The Trust processes between 12,000 and 13,000 scholarship applications each year, and administers the distribution of scholarships to about 7000 successful applicants.

Areas of the Trust’s internal control environment that impact on the scholarship schemes can be grouped into controls that influence the:

  • accuracy/validity of application details;
  • completeness and accuracy when applications are entered into the scholarship databases;
  • accuracy of business rules within the scholarship databases to ensure that assessments are correct;
  • completeness and accuracy of database reporting;
  • quality of review procedures over successful applicants;
  • reconciliation between the scholarship databases and the financial system; and
  • milestone reporting, and its reconciliation to scholarship databases and the financial system.

In order to assess the effectiveness of the internal control procedures, we reviewed a sample of scholarship applications, to determine whether they had been:

  • correctly recorded in the database;
  • assessed correctly against the appropriate criteria;
  • appropriately reported as meeting or failing to meet the criteria; and
  • paid appropriately where successful.

Our findings and conclusions

Data entry errors

We found data entry errors relating to courses of study and academic achievement grades. The risk of data entry errors is compounded by the need to enter details into both the scholarship database and financial system. The process of entering an application into the scholarship database requires entry of the same data into multiple tables. The level of data entry errors in the 2003 year was lower than earlier years. None of the data entry errors identified in the applications we reviewed affected the eligibility of the applicant, or the decision to award or not award the applicant a scholarship.

The Trust’s management told us about initiatives currently under way within the Trust to enhance the control environment, primarily through greater use of technology. These initiatives include the development of an interface between the scholarship database and the financial system. This will reduce the need for duplicated data entry, and thereby reduce the risk of data entry errors. The Trust’s investment in system integration was partly designed to enable greater reporting functionality.

Scholarship database

The assessment of eligibility is system-dependent. All applications are entered into the scholarship database and automatically assessed against criteria coded into the database. The Trust depends upon external specialists to modify the eligibility criteria against which the database assesses applications. We were assured that this dependency would decrease with the development of a new system.

Segregation of duties

The ability of the Trust to achieve an ideal segregation of duties is limited, as with many entities of a similar size. In the Trust’s case, this is particularly evident in relation to the payment process. Milestone reporting

The process used to generate milestone reports has been time-consuming for the Trust, and there have been discrepancies between the various schedules provided to support the milestone reports.

Since the inception of the scholarships contract, milestone reporting has followed a template. This approach has also been adopted with the Manaaki Tauira contract. In following this approach, the Trust has not complied with all of its contractual reporting obligations. In particular:

  • it has not given the Ministry a schedule of the value of scholarships paid under the Trust’s scholarship schemes included in Appendix 3 of the scholarships contract;
  • the Trust has not provided reports of actual administration costs against the budget submitted as part of the Manaaki Tauira milestone reports; and
  • milestone reports contain inconsistencies between various schedules.

At the time of commencing this inquiry, the Trust was working with the Commission to reach agreement regarding an ongoing milestone-reporting template.

Confirmation of courses of study

The Trust relies on educational institutions to confirm that the NZQA has approved both the institution and the course being studied by the scholarship recipient. We would expect the Trust to confirm this directly with the NZQA.

Recommendation 11: We recommend that the Trust confirm the institution and course of study of all proposed scholarship recipients with the New Zealand Qualifications Authority before processing any scholarship payments.

Overall control environment

The controls operating within the Trust ensured that most applicants were correctly recorded in the database. In most cases, the Trust had correctly assessed applicants against appropriate criteria and paid scholarship recipients appropriately, where they were successful. The exceptions, and areas where improvements could be made, are described earlier in this report.

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