Government releases findings of investigations into Practical Education Training Centre
Investigations into the Practical Education Training Centre (PETC) have confirmed that a number of its students misused
the Student Loan Scheme and this was not reported to the government by PETC.
The New Plymouth-based private training establishment had offered computers to students as part of its extramural travel
courses. The Government suspended funding to PETC, including access to the Student Loan Scheme, in September 2001
because of concerns about the low number of students completing the courses, despite high enrolments.
Associate Education (Tertiary Education) Minister Steve Maharey said the Government has now completed three separate
investigations into PETC and its students: the Ministry of Education (MOE) has investigated whether PETC breached the
terms and conditions under which it receives government subsidies; the New Zealand Qualifications Authority (NZQA) has
investigated the quality of the distance travel courses and whether PETC should retain its registration; and the
Ministry of Social Development (MSD) has investigated individual students’ possible misuse of the Loan Scheme to obtain
computers.
PETC has not been the subject of an investigation into fraud, but rather for non-compliance with its annual funding
Notice. Fraud was only ever an issue for those PETC students who were not genuinely studying.
Steve Maharey said the key findings of the investigations are: the Ministry of Education investigation found that PETC
breached its annual funding Notice. The Notice sets out conditions on which the Government funds private education
providers. PETC breached the Notice because it did not immediately inform the Government about the suspected abuse and
the extent of it; the NZQA investigation found that the training materials used were not suitable for distance learning
by second chance learners and that there were no suitable procedures in place to identify whether the course was a
suitable course for all students applying to enrol;
. . / 2 the Ministry of Social Development investigation found that a number of students had misused their student
loans, and in some cases it appears there was a deliberate intent to defraud the scheme.
“As a result of these findings PETC has agreed the imposition of new tougher conditions specific to it in order to
retain access to government funding in the future.
“These include: PETC not being able to include the cost of computers in its student tuition fee; placing PETC on a
managed enrolment plan with on-going and more intensive monitoring and reporting of student educational outcomes; and
allowing PETC to only claim tuition subsidies for students who have successfully completed 10% or more of the programme
as genuine students.
“Criminal charges have been laid against 10 students who enrolled in the PETC distance learning travel course and these
cases are currently with the Crown Prosecutor. The Ministry plans to lay charges against one other student.
“In addition, seven students, who the Ministry believes have misused the scheme but not defrauded it, will have their
student loans converted to Ministry of Social Development debts. This means that MSD will not transfer their loan to
Inland Revenue for collection in the future, but will take immediate action to recover this debt from the student.
“Of the 1300 students who had their loans frozen in 2001 when the investigations commenced, 481 genuine students have
gone on to successfully complete at least 10% of the distance travel course. These 481 students will be able to access a
student loan (including the cost of a computer) for this course and MSD will be writing to these students to advise
them. The balance of the 1300 students will not have their outstanding student loan applications approved.
“NZQA advises me that PETC has addressed the identified quality issues and there are currently no grounds to support
further action regarding the ongoing registration or accreditation of PETC as a training provider.
“To ensure this situation doesn’t occur again the Government announced in November 2001 a new system to identify and
monitor closely any unusually high enrolment activity. In addition, all education providers must now be able to
demonstrate that tools and other extras offered as part of a course are absolutely necessary for that area of study.
“I am confident that these new provisions will prevent incidents of this kind happening again. However, I do not intend
to let this incident constrain our delivery of education or put barriers in the way of any legitimate student’s right to
education," said Steve Maharey.
Investigation into Practical Education Training Centre (PETC): Questions and Answers
How much money has PETC received from the Government? In 2001 PETC received: $17 million in student loan money for
tuition fees, and $5.4 million in Ministry of Education tuition subsidies.
No money has gone to PETC for this long distance travel course since August 2001 when funding was suspended.
A further $3.2 million in student loan advances and $7.1 million in tuition subsidies will be paid now that the
investigations have concluded and the government is satisfied that they are being claimed for genuine students.
How much money has the Government saved by doing these investigations? By taking action to suspend student loan payments
to PETC in August 2001, MSD has saved around $5.6 million that would have been issued had all outstanding student loan
applications for PETC been approved.
Ministry of Education tuition subsidies worth a further $3.7 million will not be paid to PETC because the investigation
has determined that these were being claimed for non-genuine students.
How many PETC students have been investigated? Around 550 students of the 4000 who enrolled in the PETC distance
learning travel course during 2000 and 2001 were contacted regarding their studies. Of these, 107 have been subject to
more intense investigation by MSD's Benefit Control Unit.
Why are only 11 students facing prosecution action? Because it would have been impractical to pursue all of those
assessed as non-genuine students, particularly given that in many cases intent to defraud would have been difficult to
prove.
Have the investigations taken longer than expected? Yes. This was the first investigation of its type and it was
necessary for the relevant government agencies to determine it could be prosecuted within the boundaries of current law.
It was also necessary to ensure that students and PETC were treated fairly and properly, including affording PETC the
right to read the final report and comment on it, both in terms of accuracy and also the investigators’ conclusions.
The Ministry of Education, MSD and NZQA absorbed the costs of the investigations within their existing baseline.
What was the effect of the investigations on students who were legitimately studying? Students who have been undertaking
work and achieving unit standards have had these recorded with NZQA. Because students enrolled in these qualifications
are not in receipt of student allowances or the student loan living cost component they won’t have been financially
impacted during these investigations.
Why is the Government continuing to fund PETC? Many of the students enrolled in PETC’s distance learning programme are
people that the government is keen to see actively involved in and succeeding in tertiary education in greater numbers.
They include Maori students, mature women students, students from isolated rural areas. For some of them this is their
first exposure to tertiary education. NZQA has assured me that the quality of the programme at PETC is now of a
sufficient standard to enable its courses to continue.
Are there other tertiary education providers in a similar position? Investigations of other providers have confirmed the
Government’s view that the behaviour investigated at PETC was not widespread. PETC was the fastest growing (in terms of
student numbers) private provider in the country. Only 30 PTEs, in receipt of Ministry of Education funding, offer
distance provision. PETC is the only private provider to experience this level of growth in distance provision.
Following investigations, two other providers were found to have similar course structures to PETC. They were offering
computers with distance education and had very poor completion rates. Both institutions were very co-operative, have
only claimed genuine students for funding, and the courses are now no longer taking new enrolments.
NZQA and the MOE are monitoring closely the academic achievement within distance qualifications.
What steps are being taken to safeguard the integrity of the student loan, tuition subsidy and quality assurance
systems? NZQA audits private providers annually and is entitled to conduct additional special audits whenever there is
an indication of potential problems. NZQA is now working more closely with MOE and other agencies to develop indicators
that will provide earlier signals of potential problems.
A new risk management framework is now being implemented which is sensitive to the need to balance access to education
against the potential for abuse of the system to protect taxpayer funds. The aim is to identify risks to the
government's educational and financial tertiary education objectives by using existing funding, quality assurance and
student support information more systematically. This includes monitoring students’ educational outcomes, the capacity
and capability of providers to deliver education, patterns of access to the Student Loan Scheme, and changes in student
numbers at individual providers.
A number of other changes have also been made to the student loan scheme this year on an interim basis, including:
requiring tertiary education providers to document the costs that students are able to claim through the student loan
scheme; requiring providers to obtain the permission of the Secretary for Education to include overseas travel in their
compulsory fees or course-related costs; and requiring providers to have effective student monitoring and achievement
systems.
The Ministry of Education will be promulgating revised provisions for 2003 shortly.