Part 5: The Ministry of Education's role

Inquiry into management fees paid by South Auckland Middle School and Middle School West Auckland in 2018.

The Establishment Board told us that there was no conflict of interest because the Minister appointed the trustees to the Establishment Board knowing that they were also trustees of Villa Education Trust. The Establishment Board also said the Ministry knew the Establishment Board had engaged Villa Education Trust to provide establishment services and never raised any concerns.

We do not accept that the Minister or the Ministry's roles absolved the Establishment Board of its responsibility to identify and manage conflicts of interest:

  • As discussed, although the Minister's decision to appoint the trustees of Villa Education Trust as trustees of the Establishment Board resulted in a potential conflict of interest, that conflict did not crystallise until the Establishment Board considering engaging Villa Education Trust to provide establishment services. There is no evidence that either the Minister or the Ministry was involved in that decision.
  • When the Minister appointed the trustees to the Establishment Board, he specifically recorded that it was important that the roles, function, and responsibilities of the Establishment Board and Villa Education Trust remain separate. This should have alerted the Establishment Board to the possibility of a conflict of interest.
  • There is no evidence the Minister or the Ministry were aware of (let alone approved) the full arrangement between the Establishment Board and Villa Education Trust, which included that the Establishment Board would pay $450,000 in advance without a scope of works or agreed basis for the fees. Regardless, the Establishment Board was responsible for managing conflicts of interest, not the Minister or the Ministry.

Although our report has focused on the actions of the Establishment Board, the Ministry might consider additional steps to support the appropriate use of establishment funding in the future. The Ministry appointed a governance facilitator to help the schools with establishment (which included help with managing conflicts of interest). However, the governance facilitator was only appointed on 10 September 2018 (the same day the Establishment Board received the first tranche of establishment funding from the Ministry). The governance facilitator did not meet with the Establishment Board until after the Establishment Board had paid the $450,000 management fees to Villa Education Trust.

The Ministry told us that:

  • it was unable to properly assess whether the $450,000 management fees paid to Villa Education Trust was appropriate spending;
  • as self-governing entities, school boards "have full control over how they elect to spend the funding the Ministry provides";
  • it had no ability to recover the management fees if they had been an inappropriate use of public money; and
  • there was nothing more it could do on the matter.

Additional steps the Ministry could consider when providing establishment funding in the future include:

  • ensuring that the new state school is supported by a governance facilitator before providing establishment funding; and/or
  • considering some form of mechanism or guidance, so schools understand how they can spend the funding and the Ministry can effectively understand whether the school has used the money as intended and how it has managed any conflicts of interest.

We particularly encourage the Ministry to consider additional steps to support schools when (as was the case here) the Ministry is aware that the new school board is used to operating as a private body and needs to manage a significant potential conflict of interest.