Education Minister Erica Stanford has written to the NZQA, expressing concern about its financial situation and IT risks. Photo: RNZ / Angus Dreaver
A looming deficit and complicated IT problems prompted the government to order the NZ Qualifications Authority's (NZQA) board to step up its oversight of the organisation.
Proactively-released documents show the Education Ministry warned Education Minister Erica Stanford in April that the authority was facing a deficit of $10-12 million for the financial year to the end of June, with a further $3m deficit in the 2025 financial year.
The ministry's briefing said the 2023-24 result was up to $8.5m worse than forecast, and the 2024-25 forecast was problematic.
"Whilst NZQA is exempt from identifying savings as part of the government-wide programme, it needs to reduce costs to be fiscally neutral. Not reducing costs would mean it will incur further deficit in FY25 where it has insufficient financial reserves. This would expose NZQA to material financial risk," the briefing said.
NZQA has since informed RNZ that its 2023-24 financial result had not yet been finalised, but it was likely to be a deficit of about $9.4m, excluding redundancy costs.
Annual reports show the authority also made a $16m deficit in the 2022-23 year.
Meanwhile, the ministry's report said NZQA was relying heavily on next year's Budget to resolve financial and IT woes.
It also said the authority's board needed members with experience in business case development and change because of IT projects it was involved in.
The report said the board met every two months, but the ministry recommended monthly meetings.
The paper mentioned "more intensive monitoring and reporting", and said the ministry had "initiated an independent financial review to assess the quality and transparency of financial information and advice that NZQA provides to its board".
It said NZQA's permanent workforce had grown 23 percent since mid-2019 and its reliance on contractors and consultants was high.
The organisation spent $30m on contractors in 2023, including $12m related to external exams.
The report said a move to cloud-based systems has increased IT costs a lot, but two large IT projects were due to finish soon.
Stanford wrote to the authority expressing concern about its financial situation and IT risks.
"Given the seriousness of these risks, I expect that the Board meets more frequently (at least monthly) to provide confidence that it has sufficient oversight of these risks," her letter said.
"I have received you initial plan to address the stability of the organisation and expect the ministry's independent advice on it shortly."
Asked by RNZ if she had confidence in NZQA's governance and management, Stanford said in a statement: "I have recently announced three new appointments to the NZQA Board to strengthen its business, governance, and financial capability. The appointees bring significant public and private sector experience and expertise.
"I look forward to working with the new Board, it is my expectation NZQA has a sharp focus on delivering on its strategic priorities. I expect the Board to provide its new financial sustainability plan in the coming months."
NZQA chief executive Dr Grant Klinkum said the board would meet 11 times a year, rather than the previous schedule of eight meetings.
He said the organisation's main IT system was reaching the end of its life.
"NZQA has invested in our key technology platforms over the last few years, however our 20-year-old legacy IT system (called eQA) is increasingly difficult and expensive to maintain. In our briefing to the Incoming Minister we indicated this challenge, and Budget 2024 provided NZQA with $6.5 million to address key technology risks," he said.
Klinkum said the money would be used to stabilise eQA, deal with urgent risks and pay for IT maintenance, and prepare a business class to replace eQA.
NZQA said eQA stored records of student achievement and the standards, qualifications and credentials listed on the New Zealand Qualifications and Credentials Framework. It was not used to provide online exams.
Klinkum said NZQA's 2023-34 deficit reflected rising costs especially in IT licensing and support, and the use of cash reserves to pay for key operations, including replacing a human resources IT system that was unexpectedly retired.