Even the best monitoring could not have prevented the sort of activity which saw an agricultural college overcharge the taxpayer by millions of dollars, Tertiary Education, Skills and Employment Minister Steven Joyce says.
Labour has gone on the attack after results from a Tertiary Education Commission (TEC) investigation into funding irregularities at Taratahi Agricultural Training Centre were released.
Taratahi has agreed to repay $7,549,000 it received over a six-year period during which it overcharged TEC for courses it delivered. A second breach involved the enrolling of 67 staff in an entry-level programme when little or no teaching took place.
Labour's tertiary education spokesman David Cunliffe said Mr Joyce needed to explain how the system had failed to pick-up on the issues at Taratahi.
The failure raised the question of how many of New Zealand's 600 tertiary institutions had similar problems, and were being overfunded.
"This has been going on since 2009. Why did the accountability systems fail? Why did it take a whistle-blower to expose it?" Mr Cunliffe said.
"What was Taratahi's Board doing? How was the Tertiary Education Commission's oversight unable to pick up these rorts until now?"
Mr Joyce said the problems were of real concern, but it was good that the organisation was now taking on responsibility to right them.
He defended the safeguards in place to ensure such mismanagement was picked up upon.
"You are reliant on what a provider says that they are doing, to some degree. TEC and NZQA had an independent review of their own monitoring processes to ask that question at the end of last year, and the review came back and said broadly they are doing the right thing and suggested that they tighten some things up.
"The review made the point that, actually, if people are not doing the things they say they are doing, it's very hard to pick that up through an audit."
The Serious Fraud Office (SFO) has launched its own investigation into Taratahi.
Taratahi's former chief executive, Dr Donovan Wearing, died suddenly in January - three months after the TEC confirmed it was undertaking a 'targeted review' of the organisation.
The Herald has been told Dr Wearing addressed staff at the sprawling campus just outside Masterton about the investigation on January 21.
The 52-year-old father of six was later found in a critical condition in a shed on campus grounds. He was taken to Wellington Hospital where he died at 10.30pm.
Dr Wearing's death has been referred to the coroner.
Taratahi board chair Mavis Mullins said the overpayments were the result of mistakes rather than fraud.
"I don't believe it is fraud, not at all," Mrs Mullins said. "We just didn't have the systems in place that allowed us to actually monitor well the inputs and how they were being measured."
It would be wrong to assume Dr Wearing was responsible for the situation, she said.
"This was about an entity, not about a person. It has just been tragic. We are still very mournful. But we have to be mindful there is a still a wife and still a family without a father. And there is nothing yet from the coroner so it is very difficult for us to make any comment. But we certainly don't pin anything on any one individual. This was a systems hiccup."
Mrs Mullins was not surprised the SFO had become involved due to the amount of money involved, however she was confident no criminality would be uncovered.
"Hand on heart I have no fears. That will come out okay."
Established in 1919, Taratahi owns and operates assets valued at more than $100 million.
It has 135 staff and more than 2000 students. It manages 50,000 stock including sheep, beef and deer, and milks a herd of 2500 cows. It has a resident campus near Masterton and non-resident campuses in Northland, Auckland, Waikato, Bay of Plenty, Taranaki, Manawatu, Hawke's Bay and Southland.
The Taratahi review followed two similar investigations, at Te Whare Wananga O Awanuirangi in Whakatane and Taranaki's Western Institute of Technology, which uncovered nearly $10 million in overpayments relating to incorrectly reported student numbers and course requirements.