Wananga invites funds scrutiny

Te Wananga O Aotearoa has broken its silence on allegations of financial mismanagement and challenged the Government to call an independent commission of inquiry.

But the Weekend Herald understands the wananga also needs the Government to approve a $15 million suspensory loan and may face financial difficulty otherwise.

Wananga head Dr Rongo Wetere said, in a statement issued by law firm Chen Palmer & Partners, that an independent commission of inquiry would give everybody what they wanted and the wananga had nothing to hide. Education Minister Trevor Mallard said he would consider the proposal.

The Government yesterday appointed a Crown Observer to the wananga's council, understood to be experienced trouble-shooter Brian Roche, according to a letter from council chairman Craig Coxhead to Mr Mallard.

That same letter made it clear the Government and the wananga were negotiating over terms of reference for an independent review.

The Auditor-General is also conducting a review into conflicts of interest at the wananga. The wananga believes a commission of inquiry should replace that review.

The Cabinet will discuss the options on Monday.

The Government and the wananga are also discussing the payment of a $15 million suspensory loan.

The 2001 Treaty of Waitangi deed of settlement gave the wananga $40 million and the suspensory loan facility, which would convert into a permanent grant if conditions were met.

It is understood the wananga is depending on getting the loan and if it doesn't could be forced to breach its financial arrangements with its bank, BNZ.

A spokeswoman for Mr Mallard said the loan had not been made because under the deed of settlement conditions had to be met before it could be accessed.

Discussions were continuing with the wananga about meeting the conditions, which include the quality of education, student numbers, the proportion of Maori students and student progression to higher levels.

There has been speculation that the Government could dissolve the wananga's council and appoint a commissioner to run the institute.

But under the Education Act it cannot do this unless there is a serious financial risk to the operation or its long-term viability.

It is believed an institute would have to be insolvent for this process to be triggered and even if the $15 million loan is withheld, it is unlikely the wananga would be in such a dire financial predicament.

Its 2003 annual report showed it had a surplus of $33 million, but a source said it was no longer in a strong position.

Last week a leaked email, from former Government adviser Graeme McNally to the wananga council, was tabled in Parliament exposing the wananga's financial predicament.

Mr McNally said the institution faced "nothing less than a disaster" in its 2004 financial result and cited operating spending of 9 per cent (or $15 million) above budget, and capital spending of $9 million over budget.

Another source said yesterday the institute was in a bad financial position because it had over-extended itself by expanding so rapidly.

Sources say Dr Wetere approached Finance Minister Michael Cullen last year about accessing the suspensory loan facility and wanted to use the bulk of it to repay one of its subsidiary trusts for intellectual and capital property it had invested in the wananga.

Critics claim this would be an abuse of taxpayers' money and say it is one reason the Government is wary of approving the loan, which would not have to be paid back.

Chen Palmer & Partners has confirmed the wananga had instructed it to advise on whether the settlement reached with the Crown was being honoured.

Accounting firm Ernst & Young is understood to have advised the wananga council its proposal was viable.

Wananga sources said there was a belief that the Government was also withholding the loan to force Dr Wetere to resign. It is also understood at least three council members want Dr Wetere to stand aside.

A wananga spokesman said yesterday Dr Wetere would not be resigning.