Farmers Weekly has learnt the Taratahi Agricultural Training Centre board initiated discussions about a rescue package with the Tertiary Education Commission and the Government, which started a process that ended in an interim liquidator being appointed in December.
That followed a financial analysis by PricewaterhouseCoopers of Taratahi’s accounts in October and November, which warned debt and falling enrollments would continue a run of deficits and risk eroding its asset base and create future liabilities.
An audit of Taratahi’s 2017 accounts by the Auditor General referred to material uncertainty relating to going concern.
The report, completed on August 1, said the Taratahi board was satisfied it was a going concern but the auditor said confidence depended on meeting financial forecasts, including student numbers, successfully integrating Telford and continued financial support of its backers and the TEC.
“These matters indicate that a material uncertainty exists that may cast significant doubt on Taratahi’s ability to continue as a going concern.”
PWC said Taratahi needed $28.5 million over two years to clear debt and fund deficits and capital expenditure but that would balloon out to $32.6m if cost savings were not achieved.
That would have cleared all Taratahi’s debt, including a secured mortgage held by Westpac on the Mangarata Farm, in two years.
Taratahi owes the TEC $10.5m and Westpac $13m and the board proposed a rescue package of cost savings, a restructured business and courses, selling the 518ha Mangarata farm, a $6m working capital cash injection and a moratorium on repaying the TEC for overpayments.
That was rejected by the TEC, which said Taratahi is a private training establishment using an operating model that is not financially viable, faced with falling student numbers and unsustainable debt.
The TEC estimates 750 current and potential students are affected by the liquidation. About 500 are due to complete their qualifications in 2019. A further 250 students were to start their studies this year though enrollment applications ceased being accepted in December, the busiest month.
About 250 staff have had their pay suspended.
Last year the Government spent $100m assisting three polytechnics.
Whitireia, based in Porirua, received a $15m cash injection and might get more this year while Auckland-based Unitec was given a $50m loan and $33m went to Tai Poutini.
The Tai Poutini package included a capital injection of $8.5m, which a Cabinet paper said allowed the West Coast polytechnic to continue to operate and make operational and educational improvements.
The TEC also agreed to write-off a $24.878m debt it was owed for historic under-delivery.
That was not its first hand up. In December 2016 the Government appointed a Crown manager and in the following April injected $3.6m to allow it to continue operating and for business case options to be prepared.
“Effectively, Tai Poutini Polytechnic is in a receivership situation but the Crown is continuing to provide support because it is critical for tertiary education provision on the West Coast,” a report for Cabinet said.
Its $24.878m debt dwarfs its $12m in assets but it also has cashflow issues and was unable to meet its operating costs through 2018.
The polytechnic is similar in size to Taratahi at 750 effective full-time students but of those only 350 efts are on the West Coast. It employs about 100 people.
In July 2017 Taratahi took over Lincoln University’s Telford division in south Otago, buying the buildings and assets for $1 and leasing the farm from the Telford Farm Board, all done with the approval of the TEC.
The deal included a $2m payment from Lincoln to Taratahi but earlier the cash strapped university had accessed $10m of reserves held by Telford.
While Taratahi had financial and enrollment issues, a 2017 NZ Qualifications Authority external evaluation and review report on the provider found it was meeting the essential needs of most students, employers, iwi and stakeholders.
Its self-assessment information, which the report said had previously varied in quality, was improving and the educational achievement of students was mixed yet mostly sound.
Significant proportions of students progressed to higher-level training and the NZQA described teaching and programmes as generally effective.
While most students stayed engaged in their studies the report found gaps in meeting the pastoral needs of some student groups, saying some gaps were significant.
Sources said providing pastoral care is costly and complex and Taratahi was not funded for it.
The review said Taratahi was working to address some challenges but had strong relationships with key stakeholders and other tertiary organisations and primary industry bodies.
“More evidence of impacts and improvements is still required before NZQA can be confident in Taratahi’s overall performance.”
