The Kohanga Reo debacle

Radio NZ reported:

An Ernst & Young review has found the trust didn’t misuse public funds, but didn’t look into the financial dealings of its commercial arm, Te Pataka Ohanga.

Education Minister Hekia Parata says that’s because the commercial arm isn’t publicly funded.

The Taxpayers’ Union says that’s irrelevant, and has labelled the process a whitewash.

Its executive director Jordan Williams says the key allegation that public money, meant for teaching kids, was used for dresses, fuel and cash withdrawals, was ignored.

He says the Maori Affairs Minister Pita Sharples and Education Minister Hekia Parata have chosen to turn a blind eye to what are serious allegations.

The Serious Fraud Office is now investigating what Ms Parata has described as further ‘unsubstantiated allegations of mis-spending’ by the commercial arm of the Kohanga Reo Trust Board.

It’s a pretty terrible look for the Government to announce late at night an inquiry has cleared the Kohanga Reo Trust Board, and then the next day refer its subsidiary to the Serious Fraud Office.

The Herald editorial:

To obtain the right answers, it is necessary to ask the right questions. Asking the wrong questions invites only obfuscation or a muddying of the waters. So it is with the independent review of the Te Kohanga Reo National Trust. EY (Ernst & Young) was asked by the Ministry of Education “to assess the effectiveness of the financial internal controls over public funding received by the trust”. But that was not the central issue raised last October by Maori Television’s Native Affairs programme, which alleged two leaders of the trust’s commercial arm, Te Pataka Ohanga, had used business credit cards to buy dresses, accommodation and gifts worth thousands of dollars. Predictably enough, the review was silent on this.

That situation appeared to suit some of those involved. From the outset, the trust had sought to block the results of Native Affairs’ seven-week investigation. It went to the High Court to try to block the programme’s broadcasting before backing down. Yesterday, a spokesman, Derek Fox, insisted lamely that the relationship between the trust and Te Pataka Ohanga was the same as any other employer-employee relationship, and that the subsidiary was free to spend its money in whatever way it deemed appropriate.

The Government’s initial attitude also amounted to an attempt to brush the matter under the carpet. The Education Minister, Hekia Parata, sat on the review for a week before hastily convening a press conference at 8pm on Tuesday. She was, she said, “pleased to be here to assure New Zealand taxpayers that their monies had been expended appropriately”. That may have been largely so in the narrow confines traversed by the EY review. It found the trust’s controls were “effective for an operation of its size and complexity, but some improvements are needed around credit card returns and koha payments”. But Ms Parata, too, used the lamest of defences when the focus turned to spending at Te Pataka Ohanga.

According to her, it was a subsidiary owned entirely by the trust, and the Government was not responsible for monitoring its expenditure. Yet the ultimate source of Te Pataka Ohanga’s funding is the Ministry of Education. Public money is transferred from the trust to it, and the Government has every reason to ensure it is spent appropriately. And that, as Labour’s Nanaia Mahuta said, there is a high level of transparency and accountability.

Ms Parata’s inane placement of Te Pataka Ohanga beyond Government purview merely compounded the woeful waste of public money that resulted from the ministry’s ill-judged terms of reference. Fortunately, better sense prevailed late yesterday, and the Serious Fraud Office is to investigate the allegations of misspending. The minister attributed this change of tack to claims that she had continued to receive, and the need to restore public confidence. Even then, however, she did not back away from her contention that Te Pataka Ohanga was a private organisation and outside the Government’s scope. It had, said Ms Parata, no more power over Te Pataka Ohanga than over a stationery shop or an insurance provider.

By any yardstick, the involvement of public money makes that nonsensical. Clearly, there was a grievous abuse of normal governance process when the kohanga reo structure was set up. That includes Te Pataka Ohanga somehow enjoying a charity status.

I think there were a number of mistakes here.

The first is having an inquiry that did not have the ability to actually investigate the allegations around the subsidiary. It reminds me of the quote from Yes Minister:

‘Minister, two basic rules of government: Never look into anything you don’t have to. And never set up an enquiry unless you know in advance what its findings will be.’

Ernst & Young have no powers to investigate Te Pataka Ohanga, but the Auditor-General has extensive powers and I believe it would have been far better for the Auditor-General to be asked to investigate.

The second mistake was to trumpet the Ernst & Young report as basically having cleared the Trust, and making it look like the issue was now all settled. Ministers should have used their political nous to realise that the report would not settle the issue, as it didn’t cover the allegations that led to the report being commissioned. They could have released the report, yet said they were unhappy about the transparency of the arrangements where the taxpayers fund individual kohanga reo, which in turn contract back to the subsidary of the trust. They could have said in future they will insist all contracts (which are taxpayer funded) between the related entities be public and transparent. But it seems they didn’t want to.

Finally they did a referral to the SFO the day after the report was released, which looks Mickey Mouse. Was it really new allegations that emerged only after the report came out? Why were these allegations not known before the report?

So overall a very unimpressive response by the Government. it seems they didn’t see the woods for the trees.