subsidiaryThis deliverable involves carrying out the tasks required by legislation to create the NZIST and convert the 16 current ITPs to subsidiary companies.

The action is led by Kim Ngārimu, who is supported by Peter Winder and Kathy Grant.

What's been done

We've scoped what needs to be considered and have secured legal advisors to begin preparing advice on the requirements, process and timing.

What the Board needs to consider

  • What happens via legislation, what requires support to ensure a smooth transition, and what has not been factored into the legislative process?
  • What is occurring via other workstreams? What are the connection points?
  • What needs to occur for 1 April – and what is more geared towards getting the foundations for the transition period from 1 April 2020 through December 2022?
  • Resourcing this stream of work:
    • Legal advisors Bell Gully
    • Attendance at ITP sector Finance Forum (CFO/Corporate Service Managers reference group). Secure input regarding issues and materiality to ensure the Board has covered all the operating details.

Transition issues

Governance

The Establishment Board will consider how the Parent/Subsidiary operating model will be led and make initial decisions to set the IST up for success, including:

  • Appointment of subsidiary directors (and fee structure) through the Board and subsidiary governance model workstream
  • Governance model with NZIST through the Board and subsidiary governance model workstream
    • Some considerations in scope will be reporting, accountabilities and communication
  • Connecting with the Tertiary Education Commission (TEC)
    • The Board will understand initial links with relationship managers and form a view for the aligning the end state, for example, exploring a single entry point for funding across the national network of provision
    • Investment plan cycles for subsidiaries will be understood
  • Linkages with regional leadership groups will be explored

Some of these issues are critical, while others (for example, investment plan cycle for subsidiaries) are not necessary for 1 April. Discussions regarding TEC relationship managers suggest that these relationships are intended to continue – IST will need to form a view on how that might align with the parent/subsidiary relationship. Reporting, accountabilities and communication in the subsidiary/ parent accountability space is a critical issue – a suitable framework will need to be developed and clearly articulated prior to 1 April – there are clear links to consideration for CEs roles and decision-making, noted below.

Assets and liabilities

The Establishment Board will need to consider how to lay a foundation of financial health for the IST while giving effect to government direction regarding the use of regionally accumulated assets. Some considerations include:

  • Consolidation process: ITPs to subsidiaries, then full consolidation
  • Balance sheet risk assessment (capital asset strategy workstream)
  • Approach for lands gifted / bequeathed to specific ITPs
  • Jointly owned assets, for example:
    • TANZ Ecampus Ltd owned with other ITPs
    • Joint ventures with private operators
  • Subsidiaries/companies owned and Trusts controlled by ITPs
  • Land transfer requirements (LINZ) to subsidiary companies, and post transition phase

IST will need to identify any litigation or claims both against the ITP and by it with others, as well as any areas of non-delivery with TEC/NZQA that may result in a claim back or other payment to TEC/NZQA. The Board will need to understand any joint ventures or partnerships that have on-going obligations or expectations and financial commitments (for example, MIT has a complex three-way partnership with the Counties Manukau DHB which the DHB will expect to continue).

Critical issues have been identified although guidelines will need to be articulated in relation to gifted land – jointly owned assets – which may become cash if there are relevant pre-emptive rights that are exercised.

Employees

At the CE level, the Establishment Board will consider the current arrangements in place with CEs to understand the level of continuity that can be expected during transition, along with how best to ensure that all employees are well supported through the transition. Some considerations include:

  • Chief executives – stocktake of current tenure with continuity arrangements to subsidiary companies and through transition period
  • Change management expertise to support people through change
  • Working with unions
    • Collective contracts differences/alignment and cycle of negotiations
  • Staff engagement with existing ITP Chairs and CEs

As part of understanding continuity, the Board will also note any tier 2 positions that are acting or short term.  The Board will seek to understand the State Services Commissioner’s role with respect to collective employment agreement negotiation to make sure that we are aligned to public sector expectations. The Board will consider what change management resource needs to be in place to ensure that employees are well supported through transition.

Understanding current CEs’ tenure and employment agreements together with identifying relevant delegations are critical to ensuring continuity during transition. The IST will need to form a view on process and decision rights relative to the subsidiary Boards.

Financial matters

The IST will need to understand the range of non-TEC revenue that each ITP is earning. There are a range of government funding streams beyond TEC, as well as a range of real commercial activities and it is wise to understand their scope, nature and risks alongside the forecasts of other revenue.

Similarly the IST will need to understand the nature, extent and timing of cost control and cost reduction activities in each ITP that are aimed at balancing their books. The Establishment Board will need a very good picture of cash requirements and how current boards are addressing operating losses. A short list of considerations includes:

  • Budget issues and year end forecasts. Budget setting for next period.
  • Reserves
  • Disestablishment audits
  • Annual and Final Reports (clarity around requirements for 31 Dec reporting and March 31 close off)
  • Approval of Annual Accounts between 1 April and 30 April, which is when most audits will finish.

Commitments

The Board will need to understand capital and non-cancellable operating commitments. For non-cancellable operating commitments, the Board will need to consider the appropriateness of a threshold.

Decision making

The Board will need to set:

  • Delegations on 1 April 2020
  • Decision making rights and delegations on 1 April 2020 for Subsidiaries

Intellectual property

An inventory of intellectual property ownership and rights will be gathered.

Information systems

The Board will prioritise gathering information for the IST on:

  • Scoping and stock take of life cycle of current systems
  • Options for moving towards common IT platforms

Accountabilities

The Board will consider present accountabilities and where they should sit in the new structure.

Education matters

The Board will consider learning environment and performance expectations for the first year into transition: what decisions will need to be made prior, and what decisions ought to be deferred, such as:

  • ITP / Site-specific accreditation issues
  • Education performance Indicator (EPI) performance issues
  • Mix of delivery performance
    • 2020 Semester One intake
    • Actuals equivalent full-time students (EFTS) on 1 April 2020
    • Year End EFTS forecast
  • Course Fee setting, discounting and student services levies (consider that these remain will with subsidiaries at 1 April, and will be worked through during the transition period)
  • Graduation activities – 1 April start date is mid graduation cycle for some ITPs. What implications are there around this? For example, which institution is the conferring institution?

The IST will need to start to understand the qualifications and courses that each ITP is delivering - this will be a big issue post 1 April. The Board will begin the process to understand:

  • The product landscape
  • The student profile
  • Identify any courses where there is a plan to discontinue and teach out the current qualification, and
  • The degree of difference and similarity between the courses offered across the network, as well as current plans for new qualifications, and/or the re-establishment and revamp of qualifications and courses.

The IST will need to build a picture of fees for each programme. They will differ across the country and one of students’ key concerns will be what we need to do to harmonise fees.  Prior to 1 April 2020 the Board will prioritise information gathering.

International education

The Establishment Board’s priority will be information gathering on:

  • International marketing strategies, commissions and recruitment
  • International partnership activities (communications with other jurisdictions – for example China MOE agreements)

Business compliance matters

The Board will gather and understand IRD, NZBN, Provider numbers and other compliance matters.

Wider communications with businesses and students around transition

The Establishment Unit will use its in-house communications resource to build a full communications strategy across two periods – current to 01 April 2020, and 1 April 2020 through to 31 December 2022.

Marketing

The Establishment Unit will seek to understand the nature of competition between the ITPs and consider how to manage it post 1 April 2020. Ongoing marketing activity will be linked to the 'Name and Brand' workstream.

Major decisions

The Board will identify the timing, nature, and scope of major decisions that ITPs are currently considering and expect to consider prior to 1 April 2020 and after 1 April 2020.

Constitution

The Board will develop the constitution for each subsidiary, including rules, decision-making, shareholder rights and decisions, reflection of the legislative obligations of NZIST, and other relevant matters.