The Tertiary Education Commission has given Te Pūkenga a list of organisations it must engage with. Photo: supplied
The Tertiary Education Commission has ordered an independent razor gang to spearhead cost-cutting at Te Pūkenga after forecasts revealed the institute's polytechnics face four years of financial losses including an $118 million deficit this year.
The Tertiary Education Commission has told the national institute of skills and technology it did not believe it had the capability to make the necessary changes.
This week it wrote to the institute, naming the organisations Te Pūkenga must engage with - Volte Consulting, PricewaterhouseCoopers, Calibre Partners, and Deloitte - and the people within those organisations who would be doing the work.
"I am aware that these engagements will come at a significant cost to Te Pūkenga. However, I consider that this work is critical to support Te Pūkenga and its business division to move towards financial sustainability," commission chief executive Tim Fowler said.
Te Pukenga chief executive on consultants for cuts
The letter followed another sent in June, in which Tim Fowler gave written notice that the commission required Te Pūkenga to obtain specialist help.
"My reason for giving this notice is that I believe on reasonable grounds that the long-term financial sustainability of Te Pūkenga may be at risk," he wrote.
"Te Pūkenga is forecasting an $85 million deficit for 2024, including a cumulative deficit of $118 million for the former institute of technology and polytechnic (ITP) business divisions. All ITP business divisions are forecasting to report a deficit in 2024.
"Recent forecasts show that the former ITP business divisions as a group are expected to report ongoing deficits over the next four years. Only three business divisions are forecast to report a surplus by 2026, and the TEC's view is that some of the assumptions underpinning the forecasts are optimistic."
The letter said nearly all former polytechnics needed significant changes to support their financial sustainability.
"Some are likely to require wholesale changes to their operating models to become financially sustainable," it said.
"I do not believe that Te Pūkenga has sufficient management capability and capacity to maintain its day-to-day operations whilst supporting and undertaking the extensive operational changes that are likely required and to do so in a timely manner."
Fowler's letter said Te Pūkenga must use specialist help to figure out what courses were required in each region and how that could be provided by the polytechnics, including their staff numbers and property requirements.
Te Pūkenga acting council chair Sue McCormack responded with a letter that said it had been working on cost-cutting and would work with the advisors.
However, she insisted the institute did have the right people to oversee cost-cutting.
"Although we agree with the Tertiary Education Commission (TEC) that we do not have the capacity to deliver this work ourselves within the set timeframe provided, we are disappointed with the assertion that Te Pūkenga does not have the required capability to
deliver this work. Te Pūkenga kaimahi have extensive experience in cost out and asset sales over the last decade, with a number of people across the network having dealt with such activities prior to and during the establishment of Te Pūkenga," she wrote.
Te Pukenga chief executive on consultants for cuts
Te Pūkenga chief executive Gus Gilmore told staff on Thursday the exercise would begin with a six-week "discovery" exercise during which the consultants would to ascertain the financial position of the polytechnics, the profitability of courses and campuses, and the use of property.
The commission has wanted deeper cuts at Te Pūkenga's polytechnics for some time and in May the Tertiary Education Minister Penny Simmonds wrote to the institute asking it to resume cost-saving measures.
Tertiary Education Union assistant national secretary Daniel Benson-Guiu said staff were bewildered by the announcement.
He said it made no sense to cut polytechnics when the government had not yet decided on the future shape of the polytechnic sector.
"Spending money on consultants when that money could be saved and or invested into staffing is a no-brainer for our members," he said.
Benson-Guiu said he had never heard of TEC making such an instruction to a tertiary institution.
"The Tertiary Education Commission is forcing Te Pūkenga to use its own money on consultants when Te Pūkenga has said that they have the expertise in-house to be able look at the range of measures that the TEC and the minister are wanting Te Pūkenga to under take," he said.
Financial viability years away for some
Te Pūkenga chief executive Gus Gilmore told RNZ some polytechnics would not be financially viable for several years but putting the sector on a sustainable footing was "absolutely" possible.
"Already we've got a small number of polytechnics viable, we've got a number on the road to viability and then we've got some that are going to need improvement teams to reach future sustainability and that will be over a two to three-year period," he said.
Gilmore said Te Pūkenga had the capability to make changes, but not the capacity because staff were focused on meeting the needs of the institute's 240,000 learners.
The institute had talented staff who could contribute to the work and consultants would add impetus to it.
"The consultants that we'll be working with will add that extra impetus to move at a pace that we're looking to deliver results by the end of the year on," he said.
Gilmore said the government wanted to move to a system of regional entities and consultation on that was expected to begin in about two weeks.
"The minister's already talked about eight to 10 new entities, regional polytechnics, as part of that future vision. There'll be a lot more to come as the consultation unfolds."