Background

Section 287 of the Education and Training Act 2020 (“Act”) requires the Secretary for Education to determine and publish in the New Zealand Gazette, criteria for assessing the level of risk to the operation and long-term viability of tertiary education institutions, other than Te Pūkenga – New Zealand Institute of Skills and Technology.

This notice sets out the criteria for risk assessment for universities and wānanga, following a review under section 287(3) of the Act.

The risk assessment criteria set out in this notice are used by the Chief Executive of the Tertiary Education Commission (TEC) and the Minister of Education (“Minister”) to establish whether there are reasonable grounds to believe that an institution is, or may be, at risk for the purposes of applying an intervention under sections 288–290 of the Act.

The various interventions are discretionary powers. This means that if one or more of the risk assessment criteria is met by an institution, it does not automatically result in an intervention being applied. Whether the Chief Executive of the TEC or the Minister decides to initiate an intervention will depend on their assessment of the nature and level of the risk or risks, and the thresholds for the various types of intervention set out in the Act. Other relevant considerations may also be taken into account before deciding whether, or how, to intervene. This could include the appropriateness and the effectiveness of any steps already taken by the council of the institution and how long the council has had to address the risk.

Different levels of intervention under the Act have different risk thresholds. These risk thresholds are described in the Act as whether:

• an institution “may be at risk” (sections 288 (provision of information));
• the “operation or long-term viability of an institution is at risk” (section 289 (Crown observer)); and
• “there is a serious risk to the operation or long-term viability of the institution” (section 290 (Crown commissioner)).

The “may be at risk” intervention is intended to address possible and emerging risks before they crystallise, and may assist in avoiding the need for other interventions. Therefore, a risk need not necessarily have developed to the point where the risk assessment criteria are fully met for the Chief Executive of the TEC to reasonably consider that a tertiary education institution may be at risk.

The “at risk” and “at serious risk” interventions are available to the Minister where identifiable risks have crystallised and significant intervention may be warranted. For these interventions to apply, the tertiary education institution must have met one or more of the risk assessment criteria.

Impact of COVID-19 Pandemic

Many of the risks to universities and wānanga have increased given the effects of COVID-19 and the considerable ongoing uncertainty that exists regarding the future. As a result, the threshold for Criterion 7 has been set lower than would ordinarily be the case to reflect the impacts of COVID-19. Whether the Chief Executive of the TEC or the Minister decides to intervene in these circumstances will depend on their assessment of the situation, including the nature of the risk and the thresholds for the various types of intervention set out in the Act. Any other relevant considerations will also be taken into account. The Chief Executive of the TEC or the Minister will assess the institution’s approach or plan to mitigate the risk, including the appropriateness of any steps already taken by the institution, and the timeframes required to address the risk, before deciding whether or how to intervene.

The risk assessment criteria apply to two areas. These are:

• organisational; and
• financial.

Nothing in this notice limits or affects the duties of a tertiary education institution council under section 281 of the Act, or any other duties or obligations of an institution or council under any other enactment.

Words and phrases used in this notice bear the same meaning as under the Act.

Criteria for Assessing the Level of Risk

Organisational

1. The council has not fulfilled, and continues not to fulfil, its statutory functions and duties under the Education and Training Act 2020.

2. The council has failed, and continues to fail, to ensure the institution maintains adequate systems and processes for effective planning, and for the effective management of the financial and educational performance and infrastructure of the institution.

3. The council has failed, and continues to fail, to meet a material obligation under the Education and Training Act 2020, Crown Entities Act 2004 or Public Finance Act 1989 or any other aspect of the legislative and regulatory framework.

Financial

4. The institution is, or is at risk of being, unable to pay its debts as they become due in the normal course of business.

5 The institution has breached any of the conditions set by the Secretary for Education in a borrowing consent under section 282(7) of the Education and Training Act 2020, and the breach has not been remedied.

6. The institution is in default under any loan or other facility agreement with a bank or other commercial lender, or the Crown, and the default has not been remedied in a reasonable time frame.

7. The institution’s most recent published annual report has reported a deficit of over 5% of revenue and this deficit continues to exist if one-off, non-recurring expenses noted in the annual report are excluded.

Dated at Wellington this 16th day of December 2021.

KATRINA SUTICH, Group Manager, Tertiary, Ministry of Education.

Note: This notice for the criteria for wānanga and universities replaces the one published in New Zealand Gazette, 15 January 2019, Notice No. 2019-go167.