When is a subsidiary not a subsidiary, but an independent and untouchable private fortress? When it's being investigated by the keystone cops at Parata & Sharples Detective Agency

Hekia Parata was triumphant this week that public money was safe on her watch; finally releasing the long-awaited and delayed Ernst Young report into allegations of misspending on the kohanga reo movement she happily declared that an organisation no-one had accused of misspending had not misspent a cent.

The good news, the ministerial slueth revealed on Tuesday night, was that the Kohanga Reo Trust had a clean bill of health... even though no-one had suggested it was dirty. The investigation has been prompted by allegations made on Native Affairs last year against the Trust's subsidiary company, Te Pataka Ohanga.

But the fact the allegations were against TPO were irrelevant to the Parata & Sharples Detective Agency. They knew better.

So these keystone cops drew up the terms of reference, which any logical person might have assumed would have included looking at TPO.

But no. Instead, they ordered their gumshoes Ernst Young to give the Trust a thorough going over. Predictably, the auditors found no public funds had been misused by it. Case closed, Parata & Sharples said. Thanks goodness the public has watchdogs like us on the job!

But if they were detectives in a TV series they'd have been sacked or laughed off screen before the first ad break. But it's worse than that because the clients are you and me and the investigation they ordered was a most unsubtle charade; Parata somehow thinking she could say 'look over here', when everyone knew the problem was over there.

In simple terms the Maori TV reporters had found misuse of public money by organisation B (TPO). National and the Maori Party responded by holding an inquiry into organisation A (the Trust).

But hang on, Parata & Sharples have argued, TPO and the Trust are separate bodies. The Trust is accountable to the government because it directly recevies taxpayer funding so that was the only body they could investigate; the many millions it then gives to TPO and what TPO does with that money is not the government's problem or responsibility.

The suggestion was that if they only could have investigated TPO they would have, but - poor them - the long arm of ministerial law only streteched so far.

Trust spokesman Derek Fox, while otherwise critical of Parata, spent the week running a similar line; that TPO only spent its own money and the money it received from the Trust was effectively in private hands. TPO delivered books, computers, insurance and so on to kohanga all over the country as it was paid to do. What it did with that payment was a matter for the Trust and its board.

Fox repeatedly used the example of a school buying books from Whitcoulls. If a school uses taxpayers' money to buy a book at Whitcoulls and Whitcoulls managers spend that money on a wedding dress or unreceipted koha, is that the public's business? No. Whitcoulls' money is its own.

Similarly, he told Kathryn Ryan and Geoff Robinson that what they did with their state-funded pay was nobody's business but their own. In the same manner, what TPO did with its money was its own business.

Which sounded plausible. Briefly. Until you realise that TPO is a wholly owned subsidiary of the Trust and its three directors are all Trust board members.

In short, trying to draw a line between the Trust and TPO is spin of the most irrational kind. It's nonsense. If you apply the relevant facts to Fox's analogy then you need to imagaine Whitcoulls as a wholly owned subsidiary of the Education Ministry or this book-buying school. Then it might work.

But of course if you do that, it's quickly clear that what this subsidary Whitcoulls does with its money would absolutely be in the public interest. Undoubtedly, TPO uses public money, it's accountable to the government for its use and its spending should have been the focus of the Ernst Young investigation.

Yet it's this flawed rationale that TPO is somehow an independent body that every cuplable politician is hiding behind, not just Fox. Parata, the Maori Party, even John Key have tried to insist that TPO's money is not public money and that the government has no oversight over it. Hence the decision to hand matters over to the Serious Fraud Office.

Te Ururoa Flavell and John Key both stayed on message on The Nation this morning, insisting that the Trust and TPO are different entities and that money passing between the two stops being relevant to taxpayers once it reaches TPO.

Surely that line cannot be sustained. Native Affairs host Mihi Forbes later on The Nation explained that the two organisations are essentially two parts of the same whole and former senior cabinet minister Steve Maharey made it clear that any disctinction was pure political mischief.

So Parata and Sharples appear to have been trying to hide the truth in the terms of reference they created, and then Parata has been shown to have been simply wrong in her assertions about the Trust and whether TPO receives public money. That's either inept or dishonest.

Whether or not the Trust has behaved properly (and it seems to have not), Parata & Sharples both need to be held to account for wasting $90,000 on a report that looked in the wrong place. They failed in their duty and now it's their turn to be held to account.

Comments (9)

by Alan Johnstone on March 22, 2014
Alan Johnstone

Is a "koha" counted as income by the ird for tax purposes ?

If it's for services rendered, then do you charge gst on a "koha" ?

by Nick Gibbs on March 23, 2014
Nick Gibbs

Surely the Trust is the body that contracts to the govt to provide services. If they complete this contract thoroughly and provide the said services, then how can the govt complain?

From the EY report it does seem they met their contractual obligations.

by william blake on March 23, 2014
william blake

Allan http://www.ird.govt.nz/non-profit/np-gst/liable-gst/

The speech marks around the word are unnecessary.

 

by stuart munro on March 23, 2014
stuart munro

Well, a second significant ministerial failure in a fortnight. If Key were a strategist he'd sack both and call an early election - could not fail if the polls are to be believed. Instead I think we're going to see a trail of blood in the water all the way to September. Milk too.

National party selection process: https://www.youtube.com/watch?v=MVc2IFq0JDQ

by Alan Johnstone on March 23, 2014
Alan Johnstone

William, your link over how non profit organisations have to treat donations, that isn't the case here.

"But the trust's spokesman, Derek Fox, said the trust would not reveal which of its board members got the payment.

He said it was a payment to a board member who had worked "well above the call of duty" on its successful claim to the Waitangi Tribunal. "

That's very different.  It's a payment to a individual and would appear to have a tax obligation

by william blake on March 23, 2014
william blake

"Allan" yes it is.

http://www.kohanga.ac.nz/

by Alan Johnstone on March 23, 2014
Alan Johnstone

<Sigh> I know what the Kohanga is.

What's in question is not a $50k payment to the Kohanga, but a $50k payment from the Kohnaga to a board member. There are legal exceptions to non profits so donations aren't taxable income, everyone knows and excepts this.

The board member isn't a non profit organisation, they are a person. As Derek Fox said, it was given for services rendered. That's taxable income in anyones language surely ?

 

 

by Chris Webster on March 23, 2014
Chris Webster

Tim:  'is spin of the most irrational kind. It's nonsense.'  

Agreed: The Charities register link is to TPO as a registered charity.

Click on the Rules @ p-22 is box diagram which clearly show the link - as a solid line between TPO directors & the NT & a dotted line between TPO GM & KRNTB.

IN addition - look at the complicated policy in the TPO 2011 & 2012 audited accounts. And the money that has been paid in loans to unidentified people.

Further the 2000 TPO constitution (amended) @ 2.1 states:  The company has been incorporated solely to manage the economic activities of TKRNT....@ 2.2.3 distributions to TKNT .. @ 2.4 no private pecuniary profit of any individual.

I think I can understand the walking on eggs-shells .. and twitching curtains now.. the kingitanga remains as the patron of the kohanga reo (a role that Dame Te Ata had from day one).

The 3-directors on TPO are the same directors on NKRT. No one is above the law.  It would be wrong for this inquiry to be shut down decause of the kingitanga involvement. Maybe that is why Hekia & Pita kicked it into SFO balliwick. 

Charities register:  http://www.register.charities.govt.nz/CharitiesRegister/ViewCharity?accountId=7857e413-128a-dc11-98a0-0015c5f3da29&searchId=17abaccf-9091-413e-8848-c9fda26cacde

 


by on March 27, 2014
Anonymous

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