The decision to keep a failing charter school open was based on data that showed the children had virtually nowhere else to go.

Education Minister Hekia Parata today announced she would give Te Pumanawa o te Wairua until the end of the year to meet new targets, despite a damning audit report about its finances, achievement and governance, and ministry advice it should close.

Auditors were unable to locate a list of current staff and their salaries. About $4000 of cash withdrawals from the school's debit card could not be supported by corresponding invoices.
Questionable spending at the school included Eftpos withdrawals from takeaways and petrol stations, and purchases from cafes, Domino's Pizza, KFC and Burger King.

Ms Parata took full responsibility for both the decision to open the Northland school and to keep it open, she said.

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The minister said her choice was focused on the 39 children at the school who were not guaranteed an education elsewhere.

"At the heart of this are kids who otherwise might not get the opportunity to go to other schools," Ms Parata said.

A report from the ministry of education, requested by Ms Parata after the ministry advised her close the school following a damning audit, gave a profile that showed the children presented "the most challenges of all the Partnership Schools' student population".

It showed one had no previous record of formal schooling. Four were last enrolled between 2010 and 2012. All had a long involvement with truancy and 9 have attended six or more schools.

"There is no guarantee that all the students could go back into mainstream education," the ministry wrote.

They said while there were risks to keeping the school open, the risk of closure was that the students would be challenging to any school or provider, and would potentially disengage again if the school closed.

Asked if that was a poor reflection on the nearby state schools and if there was a review planned around that, Ms Parata said "absolutely".

"There are challenges in the Northland network of schools and are working on those challenges with those schools," she said. She did not know how a child came to have no record of learning.

Asked if the Authorisation Board, which recommends charter schools to the minister, should be held accountable, Parata said opening the school had been her decision.

However, she said lessons had been learnt and that her parliamentary secretary David Seymour was looking at ways to refine the model.

The minister's decision means the school will be allowed to stay open and will be given a large funding boost - despite an audit finding grounds to terminate its contract and financial management problems.

Its long-term future remains unclear, however, with a the minister to further consider its future after the results of another audit in October.

The recently renamed school was one of five charter or partnership schools to open at the start of last year.

Located on a farm 65km in Whangaruru, northwest of Whangarei, the kura caters for Years 9-13 students who typically have been on the margins of the education system.

It has been plagued with problems since opening, including a fallout between senior managers and serious health and safety issues including bullying and drug use.

In February, the kura was issued a performance notice and given 28 days to resolve issues before a ministry-commissioned audit by Deloitte.

REACTION

Charter schools were introduced under an agreement between the Act Party and National, and more money was included in this year's Budget for the model's expansion after lobbying from Act leader David Seymour.

He said today's decision was the right one, and struck a balance between the care of the students and the integrity of the partnership school system.

If improvements were not made the school would close at the end of the school year, Mr Seymour said, but he believed the changes - including new trustees and principal - would help a great deal.

Reaction to the decision has been swift, with Labour's education spokesman Chris Hipkins said the decision to keep the school open defied belief.

"The Government said if charter schools failed they would close them down. They are not closing down a charter school that is clearly failing and has been failing since the beginning.

"This is one of the problems with the charter school model - the Government seemed to think they could create competition in the education system, open and closing schools willy-nilly. The reality is it is a lot harder than that, as they are finding out."

The Green Party is called on Government to cancel its latest charter school application round, and to disestablish the Authorisation Board.

"Both the Education Minister and the PSKH board have put their desire to open charter schools ahead of the safety of the children in them, ignoring repeated warnings by the Ministry of Education that some schools were not ready to be opened," education spokesperson Catherine Delahunty said.

"The board is chaired by Catherine Isaacs who is hopelessly compromised by her relationship with the ACT party. The board has demonstrated it is not up to the task of objectively assessing applications to run a school.

Auckland University's associate professor of education Peter O'Connor agreed saying the board's advice that the school was ready to open demonstrates its complete lack of knowledge of the education system - exacerbated by the minister following this advice rather than that of her ministry.

"Educational experiments need to be carefully managed by people with expertise in education. Even more so when it involves working with our most vulnerable young people," he said.

BACKGROUND

A report from the Ministry of Education on the audit's findings outlines its damning findings, including that the school had inadequate financial management practices, had failed to provide proper information to the ministry, and had completed only one of the required actions in the performance notice.

NZQA data indicated that although 49 students were entered for NCEA credits, only one school-leaver gained a formal qualification at the school.

The school maintained incomplete performance data which meant that the achievement data published in its annual report cannot be relied upon.

Deloitte found poor financial controls, and the school was unable to provide key financial information such as operational budgets, forecasts and management reports.

A list of current staff and their salaries was not available. About $4000 of cash withdrawals from the school's debit card could not be supported by corresponding invoices, and analysis raised concerns as to whether some expenses could not considered normal operational expenses.

Analysis raised concerns as to whether some expenses could not considered normal operational expenses, "specifically the ATM, round dollar EFTPOS withdrawals from Takeaways, BP, and purchases from Cafes, Domino's Pizza, KFC and Burger King".

"The Auditor certifies that the breaches and failings noted in the report are ongoing and a result of systemic process shortcomings with the school's governance, operational and financial management practices.

"The Ministry considers that the breaches are not capable of remedy...the grounds exist for you to issue a termination notice."

Ms Parata said she had decided not to take that advice because of her concerns about where the students would be taught if the school was closed.

"Keeping them in school and learning is in their best interests and the best interests of the wider community. That is why I have decided to give the new Board a chance to show it can make a difference to the lives of kids who otherwise face a bleak future."

Both Ms Parata and Prime Minister John Key have promised to shut down any charter or partnership schools that have not performed - and promoted that as a strength of the publicly-funded, privately-run model.

The school had taken steps to rectify shortcomings including appointing a new chair and reviewing policies and procedures, Ms Parata said, but they did not go far enough.

The board has agreed to work with the Ministry of Education to find a new principal. It will also appoint one or more trustees nominated by Ms Parata, and appoint a trustee with a financial and business background.

"If the board had not agreed to those changes, I would have issued it with a notice to terminate the agreement when I met with it in Whangarei just under three weeks ago," Ms Parata said.

"To assist the school to address the issues identified in the special audit, I have agreed to its request for up to an additional $129,000 this school year for the extra costs associated with implementing its remedial plan."

Special Audit

Further Advice from the Ministry of Education