Part 8: Control environment within the Māori Education Trust
8.1
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.
8.2
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.
8.3
The Trust processes between 12,000 and 13,000 scholarship applications each
year, and administers the distribution of scholarships to about 7000 successful
applicants.
8.4
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.
8.5
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
8.6
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.
8.7
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
8.8
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
8.9
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
8.10
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.
8.11
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.
8.12
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
8.13
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.
Overall control environment
8.14
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.