Te Pūkenga in dire straits
Damning report reveals financial meltdown at new mega polytech
Leaderless, well behind schedule, and sinking into a $110 million black hole.
The fortunes of Te Pū kenga, the country’s new merged mega polytech are in dire straits before the organisation has even properly begun functioning.
A damning memo sent from Tertiary Education Commission deputy chief executive Gillian Dudgeon to Education Minister Chris Hipkins paints a black picture of Te Pū kenga’s fortunes – and provides illumination on the possible reason for the recent mysterious departure of chief executive Stephen Town.
Based at the Wintec campus in Hamilton, Te Pū kenga is the result of the Government’s reform of vocational education and involves the country’s 16 institutes of technology and polytechnics and four Industry Training Organisations becoming one entity.
It is envisaged to be critical in resolving the country’s skills shortage. But now it is Te Pū kenga’s own situation that appears to be critical.
On Friday chairperson Murray Strong announced in an email that Town had ‘‘requested personal leave and the council has agreed to it and we wish him well’’.
A Te Pū kenga spokesperson said no other information was being made publicly available on how long Town was expected to be on leave, or why he was on leave.
Te Pū kenga council member Peter Winder will be acting chief executive in the interim, Strong’s email said.
Dudgeon’s grim memo to Hipkins – which is dated May 16 but was published on the commission’s website late last week – sets out the details of Te Pū kenga’s troubles.
The organisation’s financial situation was a ‘‘significant concern’’, with the Te Pū kenga group forecasting an at-least $110m fullyear deficit. ‘‘This is $53.5m worse than budget ($56.5m deficit) and is predominantly due to lower provider-based enrolments,’’ she said.
These enrolments were down by 12% on the previous year. ‘‘This decline is in strong contrast to Te Pū kenga’s 2022 budget, which assumed a 4% increase in enrolments.’’
Dudgeon did not hold back on her misgivings. ‘‘We continue to be concerned that little work has been undertaken by Te Pū kenga to improve its financial position while a strategy to improve its long-term sustainability has yet to be put in place.
‘‘This work urgently needs to be undertaken to support Te Pū kenga’s bid for Crown funding and to provide assurance to Ministers that its planned transformation programme is affordable.’’ Some parts of the memo deemed commercially sensitive had been censored, including mention of a figure that the $110m deficit could further balloon, due to ‘‘rising cost pressures’’. Hipkins’ own handwritten notes on the memo revealed he shared Dudgeon’s trepidation over Te Pū kenga’s management and ability to get itself out of its financial hole – particularly with what was termed the ‘‘minimum viable product (MVP)’’.
‘‘I’m concerned the MVP doesn’t have enough emphasis on immediate financial sustainability issues,’’ he wrote. ‘‘I’d like an urgent update on what Te Pū kenga is doing to trim costs now in response to lower enrolments. I’d like to see a plan for some early wins re: network efficiencies ASAP.’’
Dudgeon also lamented the apparent lag in progress to get the new organisation up and running. ‘‘With Te Pū kenga still very much in the design phase, the tight timelines continue to be of concern to the TEC,’’ she said, later noting ‘‘there appears to be minimal rationalisation/transformation planned as part of the organisation changes, which will see financial performance remain poor.’’
In reply Hipkins wrote: ‘‘This is my number one area of concern.’’
The TEC findings belie Te Pū kenga’s 2021 annual report, released on June 23, in which Town hailed a $7.6m surplus.
As Dudgeon noted, ‘‘while Te Pū kenga’s 2021 result showed improved performance, it is increasingly looking like this was a temporary effect from increased domestic volume and a decision to delay spending.
‘‘As that volume comes back out of the system (and is not assisted by a Covid-19 funding guarantee as occurred in 2020), larger deficits have re-emerged, consistent with those being reported prior to Te Pū kenga’s establishment.’’
The 2021 annual report also
showed one employee – evidently the chief executive – was earning an income of between $670,000 and $679,999. A further five Te Pū kenga employees are earning between $380,000 and $451,000.
Hipkins said he had ‘‘made my expectations on Te Pū kenga clear and I know they are working hard to achieve the outcomes we all want.
‘‘It’s a large and complex transition, and TEC and the Ministry of Education have been keeping a very close eye on it.
‘‘Regarding enrolments, with record low unemployment, it’s accepted that demand for funded places decreases. One of the reasons for the reforms is we fully expected to see provider-based enrolments continue to decline, while work-based enrolments such as apprenticeships are likely to keep increasing.’’
Winder said he was working closely with the Te Pū kenga council, the executive team and others to ensure the endeavour was a success.
‘‘The best way to do that is to roll your sleeves up and get stuck in – which is precisely what I am doing.’’
Like Hipkins, he reckoned low unemployment and plenty of job opportunities were the main reason for the big enrolment drop-off.
‘‘... learners should be able to learn in the way that best suits their circumstances, and in particular be able to earn as they learn in-work.
‘‘This is why Te Pū kenga is bringing together campus-based, online and on-the-job learning. As that happens we expect a shift away from on-campus learning towards more online and in-work training.’’