23 May 2018: On 20 February 2018, the Auditor-General received a request from Hon Nikki Kaye to investigate the way the Government is managing its contract negotiations with partnership schools and the possible transition of partnership schools to other schooling models. This is our response.

Hon Nikki Kaye
MP for Auckland Central
National Party
Parliament Buildings
Private Bag 18041
Wellington 6160

Dear Ms Kaye

PARTNERSHIP SCHOOLS: REQUEST FOR INVESTIGATION

Thank you for your letter dated 20 February 2018 requesting that the Auditor-General investigate the way the Government is managing its contract negotiations with partnership schools and the possible transition of partnership schools to other schooling models. Staff from our Office subsequently met with you and Hon Christopher Finlayson on 28 February 2018 to discuss this in greater detail. You also provided further information on 8 March and 18 May 2018.

After careful consideration, we have decided not to conduct a formal inquiry at this time. Our reasons are detailed in this letter.

Context

Your request follows the Government’s decision to remove the partnership school model from New Zealand’s education system. The Government has introduced the Education Amendment Bill, which will repeal the sections in the Education Act 1989 that provide for the approval and operation of partnership schools. The Bill has transitional arrangements that will allow existing partnership schools to operate until their contracts expire or are terminated. The Bill’s explanatory note states that the purpose of these transitional arrangements is to allow time for negotiations about the future of existing partnership schools.

Partnership school sponsors that wished to continue to provide schooling for their students had to apply to the Minister to become a state school.

The Ministry of Education (the Ministry), on behalf of the Minister of Education (the Minister), is currently engaging with partnership school sponsors on the termination of their contracts and applications to establish new state schools.

Your concerns

You have expressed several concerns about the processes underway. In summary, you have concerns that:

• The Minister and Ministry have put undue pressure on partnership schools to terminate their contracts.

• The Minister, who is the decision-maker on applications by partnership schools to establish new state schools, has made public comments that indicate he has a closed mind about the future of the schools.

• Ministers have been giving partnership schools “mixed messages” about their futures, with different messages being given to different schools.

• Some Ministers have potential conflicts of interest because of their personal connections with particular schools: Hon Kelvin Davis (Associate Minister of Education), Hon Willie Jackson, and Hon Peeni Henare.

• Despite these Ministers’ potential conflicts of interest, Cabinet decisions have been made about partnership schools with no Ministers declaring any interests.

• Schools with connections to Ministers are receiving preferential treatment.

Our work

The primary role of the Auditor-General is to report on how public money has been used and what has been achieved with it. The focus is on providing assurance on public accountability documents and selected areas of public sector performance.

The Auditor-General has an associated power to inquire into a public entity’s use of resources under section 18 of the Public Audit Act 2001. Factors that we consider when deciding whether to inquire include:

• whether the issues involve a public entity’s use of resources;

• whether there is any indication of systemic issues, such as whether there might be problems with the entity’s overall governance or management;

• the seriousness of the issues; and

• whether the issues are relevant to the wider sector.

The Auditor-General cannot inquire into or question Government policy. In such circumstances, the Auditor-General’s inquiry power is limited to the extent to which a public entity is using its resources consistently with that policy.

We have carefully considered your request under section 18. As part of our work, we have obtained information from the Ministry and reviewed media statements, statements made in Parliament, and publicly available Cabinet papers. We paid particular attention to the steps being followed, and who the decision-makers are, in each of the processes.

You gave us the names of three partnership school sponsors and suggested that we contact them to get their perspective on the processes being followed. One of those sponsors contacted us independently with their concerns. Given the reasons we outline below, we decided that it was not necessary to contact the remaining two sponsors.

Contract negotiations and applications for new schools

The contract negotiations and the applications for new schools are a result of the Government’s clear policy to remove partnership schools. Governments are free to pursue their chosen policies, even if some people or organisations consider that they will be negatively affected by policy changes. As mentioned above, the Auditor-General’s inquiry power is limited to the extent to which a public entity is using its resources consistent with that policy.

The partnership school contracts allow for termination by mutual agreement or at the Minister’s convenience. The Ministry has told us that the contract negotiations with schools are being approached on a “without prejudice” and case-by-case basis.

The process for sponsors applying to establish a new state school will depend, to an extent, on the school model they have chosen. At its most basic, the Ministry will assess the applications and provide advice to the Minister, with the Minister being the decision-maker. The Ministry has said that each application will be assessed on its individual merits and against relevant legislative criteria. The same process and requirements will be followed as for any application to establish a school in the state system.

The two processes are being managed by different divisions in the Ministry and staff maintain a separation between the decision-making processes. In particular, the Ministry has stressed that staff involved in the application process for new schools have no involvement in the contract negotiations.

The Ministry has also told us that it considers it desirable to ensure that changes in the schooling of students are managed seamlessly. The Ministry would like to ensure that there is no avoidable gap between a partnership school closing and the opening of a new state school.

If any partnership schools have concerns about how the Ministry’s processes have affected them, they might wish to consider making a complaint to the Ombudsman. The Ombudsman is the appropriate agency for investigating complaints by individuals about the administrative acts and decisions of government agencies.

Potential conflicts of interest

You raised concerns that several Ministers might have potential conflicts of interest and that Cabinet has made decisions on partnership schools without any Ministers declaring interests.

Cabinet has made policy decisions that apply generally to the removal of partnership schools. However, it has no formal role in decisions about individual partnership schools. Only the Minister is responsible for making decisions on the termination of partnership school contracts and applications to establish new state schools. There have been no suggestions that the Minister has any potential conflicts of interest.

Other Ministers, including Hon Kelvin Davis, Hon Willie Jackson, and Hon Peeni Henare, are not decision-makers on individual partnership schools. While Hon Kelvin Davis is an Associate Minister of Education, he does not have responsibility for partnership schools. This responsibility lies with the Minister.

For these reasons, it was not necessary for us to speak to any Ministers about the allegations and so we cannot comment on the nature of interests that may exist.

The Ministry has told us that the Minister is keeping Cabinet informed and might need to seek Cabinet approval if any policy changes or new funding are necessary. The Minister might also seek Cabinet’s input or guidance on particular issues. Depending on the nature of these decisions or input, any potential conflicts of interest will need to be identified and managed. This is the responsibility of the relevant Minister, the Prime Minister, and the Cabinet Office.

General

A copy of this letter is being sent to the Ministry. Also, given the public interest in this issue, we intend to publish this letter on our website.

Thank you for writing to us about your concerns.

Yours sincerely

Greg Schollum
Deputy Controller and Auditor-General

ends

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