$20 million loan to save wananga

Te Wananga o Aotearoa headquarters in Te Awamutu. File picture / Greg Bowker

Embattled tertiary education provider Te Wananga o Aotearoa is on the brink of insolvency and the Government is to bail it out with a $20 million loan, Education Minister Trevor Mallard announced this morning.

"Today I reported to Cabinet that the situation at the wananga is more serious than we had envisaged and they are in immediate danger of not being able to pay their payroll and also a substantial amount of their creditors," Mr Mallard told reporters.

The loan followed an investigation by Crown Manager Brian Roche into the wananga's financial state.

Mr Mallard justified the loan saying it was not "a good look" to leave a crown entity's contractors and bills unpaid.

He said the statutory process under the Education Act to dissolve the wananga's council and appoint a commissioner had started.

A final decision on whether a commissioner would be appointed would follow discussions with the wananga -- which had five days to respond initially followed by 21 days of formal consultation.

"I have not taken this step lightly. But advice from the crown manager indicates that the financial situation at the wananga is so precarious that I am obliged to take all action available to me under the Education Act for the sake of the students, staff and creditors." Mr Mallard said. "To not do anything would be irresponsible."

If a commissioner is appointed their role would be to deliver the overall governance needed to assist the crown manager, staff and others to rebuild the institution.

Mr Mallard said if he decided to appoint a commissioner he would also appoint an advisory group to work with the commissioner.

"There has never been a commissioner appointed for a tertiary education institution in New Zealand in the past and therefore this is an indication of a very, very serious financial and I might say governance and managerial situation."

Under a commissioner a new council would eventually be appointed. The wananga could turn down the commissioner but could not expect government support if it did that.

The loan will run from May 17 to July 31. The crown manager appointed in March will remain at the wananga for the term of the loan which will have the condition that the wananga improve its management structure.

Mr Mallard said the wananga was facing a cash flow problem and it had a lot of assets.

"What I don't want to provoke is a fire sale of buildings around the country. I think if there is to be a process it's got to be carefully managed in order to extract the best value."

Mr Roche's investigation had found poor accounting and management systems.

The wananga has been in the news in recent months over a range of allegations that the institution, which got $239 million in taxpayer funding last year, misused funds and that relatives of executives had benefited.

Enrolments had dropped last year and this year -- partly attributable to low unemployment rates. Projections for enrolments this year had been as high as the low 30,000s but this had reduced to the mid-20,000s.

"It's clear the institution is going to be much smaller than it has been in the past."

An investigation by the auditor-general continues.

A spokesman for the wananga was unavailable for comment this morning.

- NZPA