The Big Read: The $25 million student funding scandal

Te Whare Wananga o Awanuiarangi, a Maori University based in Whakatane. Photo / Greg Bowker

Taxpayers have already handed over millions of dollars to institutions which failed to deliver the education they promised. Steve Deane asks if we can have any confidence this won’t happen again.

Taxpayers have already handed over millions of dollars to institutions which failed to deliver the education they promised. Steve Deane asks if we can have any confidence this won't happen again From top: Te Whare Wananga o Awanuiarangi; the Warriors take part in a culture course at the Auckland University Marae; Donna Grant; Taratahi Agricultural Training Centre.

January 22, 2013, just another day of just another NRL pre-season. The mid-summer afternoon sun shines down on the 94 players and staff of the New Zealand Warriors league club as they twirl taiaha with varying degrees of effectiveness on the lawn outside Auckland University's marae. Former captain Ruben Wiki is there, as is legendary halfback Stacey Jones, alongside stars of today. Wayne Scurruh, at the time the club's chief executive, turns up despite the occasion falling during his holiday.

The day is a big deal, but it isn't overly serious. "It's a bit of a laugh," Warriors captain Simon Mannering chuckles into the camera during an interview with Maori TV.

The joke, it turned out, was on the taxpayer, who kindly provided $565,316 to fund the club's drive to improve its cultural awareness. Of course, few of the people on the marae that day knew they were completing in just one day a tourism course that would normally have involved 18 weeks of study.

One person who the authorities believe should have known was Donna Grant, daughter of the late Sir Howard Morrison. A towering figure in Maori performing arts, Grant sang a waiata as the visitors entered the marae grounds. At the time, she was on the Warriors board and had set up the club's now defunct charity arm the Warriors Foundation. She was also a director at Te Whare Wananga o Awanuiarangi, the Whakatane-based tertiary provider that contracted the foundation to deliver the Hei Manaaki course to the club's employees.

The Warriors take part in a Maori culture course at the Auckland University marae.

Awanuirangi received $6014 of taxpayer money for each Warrior who "completed" the course that day. How much of that went to the foundation isn't clear, because providers such as Awanuiarangi retain a percentage of the TEC fee (typically around 50 per cent) and pass on the rest to the subcontractor. What is clear is that it was entirely too much. The Tertiary Education Commission (TEC) -- the government body that funds and monitors the tertiary education sector -- demanded the money it had given Awanuiarangi be repaid in full. The less-than-hard-won certificates were recalled; and the Serious Fraud Office launched a still-ongoing investigation into Grant, who has declined several Herald requests for an interview.

Almost two years on, the Warriors club can look back ruefully at a nice day in the sun that turned into a minor PR fender-bender. But for a tertiary education sector that attracts roughly $2 billion of taxpayer funding annually, the scandal was merely the starting point of a probe that has uncovered widespread discrepancies and alleged rorts so far totalling more than $25 million across five institutions.

There are common themes to much of the overfunding unearthed by the forensic accountants contracted by the TEC. The institutions involved are far-flung, their courses not exactly mainstream. Agribusiness Training Limited, a private training establishment (PTE) based in Invercargill, collapsed in October when it was found to have overcharged taxpayers $6.2 million. The company had over-claimed for teaching hours for six years while delivering courses on bee-keeping and horticulture to students groups including "prisoners, a group of high school students and large numbers of hobby farmers", according to TEC's report.

At Masterton's Taratahi Agricultural Training Centre, another PTE, much of a $7.5 million overpayment related to the subcontracting of a course in farm fence building. Tutors at Taratahi were found to have been enrolled in courses they were teaching -- a breach also highlighted at Taranaki's Western Institute of Technology (WITT).

One of the country's 18 regional polytechs, WITT was found to have overcharged TEC $3.5 million relating to its Maori performing arts programmes. Investigators were unable to confirm the identity of large numbers of students who had been signed up following a recruiting drive to Hawera Marae. There was little evidence of many students having performed any study at all.

Several senior figures in the tertiary sector spoken to by the Weekend Herald believe the misreporting is the result of a funding crunch intersecting with a reporting and monitoring system that operates largely on trust. Its genesis can be traced to funding reforms in 1999, when the tertiary education sector comprised of just seven universities, four colleges of education (teachers' colleges), 25 polytechnics, three wananga and 849 PTEs (private training establishments), with sporadic access to public funding. From that year onwards private operators could receive public money on a broadly similar basis to their public sector rivals, sparking a major expansion in the sector. In 1999 there were 189,797 equivalent full time tertiary students (EFTs) in the country. Just five years later that number had increased to over 280,000. Much of the increase was driven by the private sector, with the number of students at PTEs roughly doubling from 20,823 to 40,439.

Rotorua's Donna Grant. Photo / Andrew Warner

But there were problems. In March 2004, the Herald reported that taxpayers were funding thousands of students to complete courses in subjects such as twilight golf, singing along to CDs sent to them in the post, sewing, and personal grooming.

An uncapped "bums on seats" funding system meant providers were funded for every student they could attract, regardless of the quality of the course.

Then-opposition education spokesman Bill English described the situation as a "scandalous waste of money". Reform followed. The new system linked funding to educational outcomes as well as student numbers. Providers were required to justify funding for courses at their inception as well as their completion through rigorous and ongoing data provision. The system was designed to eradicate the graft and waste in the sector. For the best part of a decade, it seemed it had succeeded. It hadn't. Many of the issues uncovered over the last 18 months have been going on for years -- undetected by a monitoring system that has consistently handed even the glaring offenders glowing performance reviews.

How is it done?

What one senior tertiary administrator euphemistically described as "inventive" data reporting essentially boils down to manipulating the Single Data Return (SDR), the mechanism that determines funding levels based on enrolments, withdrawals, qualifications and course completions. Some claim the system, which requires relentless reporting and projecting of student numbers three times each year, is part of the problem.

Tertiary providers say they have been feeling the pinch of a funding crunch for some time now, as limited Government increases have lagged behind their rising costs. Opposition politicians such as Labour's David Cunliffe call the money "woefully inadequate", (a view that is unsurprisingly rejected by the Government). The financial pressure is certainly on -- once-skyrocketing student numbers have been flat for the best part of decade and the competition for those students has increased.

Faced with a system that inextricably links their operational funding to academic performance and student head count, tertiary institutions have a strong incentive to present a positive impression of both. Those providers overseeing poor academic performance and facing a decline in student numbers seemed to have faced a choice: accurately report the decline through the SDR and accept decreased funding -- and the potentially damaging knock-on effects that come with it -- or fudge the books and hope to turn things around over the next cycle.

Taratahi Agricultural Training Centre.

At least five organisations have apparently opted for the latter, with disastrous consequences.

So far the TEC's investigations have turned up more than 25 million in overpayments. The institutions involved have been forced to find millions of dollars from within already stretched budgets to repay the money.

Steven Joyce, the minister who oversees funding of the tertiary sector, utterly rejects the notion that funding pressures are at the root of the problem. "I just don't accept that," he says. "All institutions are funded on a similar measuring stick. And while not all of them are profitable, most of them are. The funding for the sector has grown."

Joyce also argues that there are no common threads to the funding scandals -- even though he also trumpets pattern recognition software recently adopted by TEC and NZQA as a key tool in detecting future anomalies. "They are all a bit unique," he says of the five investigations so far completed.

"There are no real patterns that dictate that there is a particular thing going on. It is just people failing to follow the funding rules, for whatever reason."

Whatever the reason, there has been a human as well as a financial cost. Former Taratahi chief executive Donovan Wearing died during the investigation into the college's funding irregularities. he was found unresponsive in a utility shed on the campus grounds shortly after addressing staff about the investigation. His death has been referred to the coroner.

Grant is the subject of a Serious Fraud Office investigation after irregularities were uncovered at Awanuiarangi. Her PTE, Rotorua-based Manaakitanga Aotearoa Charitable Trust (MACT), has now been deregistered by NZQA following a separate investigation. At WITT there were multiple resignations, while students were left pondering the true value of their qualifications.

Cunliffe is in no doubt some of the blame lies with the Government.

"It is clear there is a system failure," he says, pointing to the glowing Education Evaluation Reviews NZQA handed to providers later found to have gamed the system. In the case of MACT, two NZQA inspectors spent two days at the trust before reporting in August 2013 that they were "highly confident in educational performance and highly confident in capability in self-assessment". A TEC review, commissioned just 14 months later, found multiple failings in the delivery of the two courses MACT taught, including overcharging the taxpayer $2.7 million during 2013 and 2014.

The investigation into MACT was launched because of Grant's links to Awanuiarangi. Like many of the TEC's investigations, the review of Awanuiarangi was prompted by a complaint from a student -- in that case a volunteer from the Te Matanini national kapa haka festival, who was somewhat surprised to learn he/she had been enrolled in and completed a tourism course at the Wananga.

The dependence on whistle-blowers "just shows that we have got a broken monitoring system", says Cunliffe. "It's an honesty box system, the monitoring agents don't conduct any audits and don't share data. NZQA appears not to want to know about the robustness of some of the self-assessment. There are repeated examples where they have given people a reasonably clean bill of health when they have later been shown to be rorting blind."

Joyce insists the monitoring system is working just fine, describing it as "much more accountable" than it has ever been. "While there have been and will be some issues with individual institutions, the system is robust and delivering strong results for students."

But can those results be trusted? At many of the institutions reviewed by TEC the answer was: "clearly not". Hundreds of students have had their qualifications withdrawn.

A whistleblower who worked as a quality assurance officer at a South Island polytechnic told the Herald it was common practice to cheat external performance reviews.

"You could fudge the moderation system. I did it plenty of times because my employers would require me to do that. You would go through and find the best samples for NZQA. There was one time I refused to do it and that was where I started getting into shit."

The whistleblower, who had previously worked for NZQA, is no longer in the industry. She left, she says, in disillusionment after discovering similar practices at other providers.

TEC's targeted reviews are now complete, but the affair is not over. This week Mr Joyce's office confirmed to the Herald there were three more reviews under way or being considered, including one into Intueri, the country's biggest private education provider. Cunliffe believes many more institutions require serious scrutiny. Labour has tabled hundreds of written parliamentary questions and lodged numerous Official Information Act requests seeking more information about a further 30 providers, mainly PTEs.

Cunliffe alleges Joyce is intentionally obscuring the full extent of the problem -- which Joyce flatly rejects. "Mr Cunliffe is incorrect and indulging in conspiracy theories," he says.

Perhaps the only thing the pair agree on is that the issue is not done and dusted. "I'm fully expecting there to be more investigations over time," says Joyce. "Whether those investigations come to anything is obviously a different question."

Cunliffe believes the investigations will most certainly come to something. "I think this is just beginning."

The Story So Far

TE WHARE WANANGA O AWANUIARANGI: October 2014

The Whakatane-based wananga agrees to repay $5.9 million in taxpayer funding after an investigation finds NZ Warriors players and staff gained qualifications after doing one day of an 18-week tourism course, while volunteers at a national kapa haka festival also received certificates. Donna Grant, Awanuiarangi's director of performing arts, resigns from the wananga and is referred to the Serious Fraud Office.

WITT: November 2014

Six staff members resign as the Western Institute of Technology in Taranaki repays TEC more than $3.5 million following an investigation into its National Certificate in Maori Performing Arts courses. A probe by forensic accounting firm Deloitte found students were not properly enrolled, attendance records were poorly kept and qualifications granted without assessments.

TARATAHI: September 2015

Masterton's Taratahi Agricultural Training Centre agrees to repay $7,549,000 it received over a six-year period during which it overcharged the taxpayer. A second breach involved the enrolling of 67 staff in an entry-level programme when little or no teaching took place. 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. A second SFO investigation is launched.

AGRIBUSUSINESS TRAINING: October 2015

Agricultural training provider Agribusiness Training Ltd collapses after being ordered to pay back $6 million in taxpayer funding for under-delivering contracted teaching hours. Deloitte found five Agribusiness programmes delivered fewer teaching hours than its NZQA programme approvals specified.

MANAAKITANGA AOTEAROA CHARITBLE TRUST: November 2015

Rotorua private training establishment Manaakitanga Aotearoa Charitable Trust is stripped of its NZQA registration and ordered to repay $2.6 million in TEC funding. Operated by Donna Grant, the Maori performing arts college is subjected to reviews by Deloitte and NZQA, which find it under-delivered teaching hours, failed to record student attendances and over-reported the number of students successfully completing their studies.