Further Kohanga Reo issues

My earlier post on the Kohanga Reo Trust Board debacle dealt mainly with political and media perception issues. However, there are some significant legal issues at play here, which should perhaps be looked at.

Following the money trail

The first is financial accountability. The Trust Board’s response, through spokesperson Derek Fox, has been to angrily denunciate the government for calling in the SFO. That’s not an acceptable response. The Ministry of Education provides funding to the Kohanga Reo Trust. The Trust funnels some of those funds to its corporate subsidiary, Te Pataka Ohanga (TPO), by providing the  funds to individual Kohanga Reo who then contract TPO for services. TPO is wholly owned by the Trust. The same people run both entities. Sure, legally it’s correct to say that once the Trust funds have been diverted to TPO, they’re no longer “public funds” under the EY (Ernst & Young) report remit. Nonetheless, the money trail is direct enough that the public is entitled to accountability from TPO.

Should the SFO be investigating, as opposed to the Attorney-General? I guess that’s now up to the SFO. It can get involved where the amount involved exceeds $2 million or where the matter is deemed to be sufficiently in the public interest. It’s highly unlikely that the funds involved exceed that $2 million threshold (regardless of what Winston Peters may have said yesterday), so it’s up to the SFO to make call as to whether an investigation is sufficiently in the public interest. And if the SFO declines to investigate, there’s always room for the Attorney-General or police to investigate.

Koha v Related Party Transaction – does it make a difference?

The EY report raised an issue to do with koha rule breaches, the major one being a $50,000 payment to one of the Trust Board members. Which Board member received this $50,000 payment? We don’t know, because the Trust Board is refusing to disclose that information. Derek Fox, as transparent as ever, has stated that it won’t be revealed because “It wasn’t a related party transaction – it was a koha”.

With respect to Mr Fox, that makes no difference at all. The payment is not a contractual issue where confidentiality requirements can be argued. It is a conscious decision by the Board to make an arbitrary $50,000 payment, using public funds received directly from the Ministry of Education. It doesn’t matter if it’s called a koha or a bonus or a related party transaction. There is absolutely no legal justification for failing to disclose it, other than that the Trust Board (and presumably, the individual Board member who received the payment) don’t want scrutiny about why it occurred.

In fact, there was likely a legal requirement to disclose the payment back in 2012, with the Early Childhood Education General Manager, Karl Le Quesne, declaring that the Trust “was required to disclose this payment in their 2012 annual report. The NZ Herald article goes on to note that “Ms Parata’s office did not return calls to say whether she backed her officials’ view”.

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