Background Briefing Documents to Carich Story

Please also find attached a letter of complaint that was sent to the Minister for Maori Affairs on October 15 2003. It outlines a formal complaint from Carich against the Tertiary Education Commission (TEC) and it's General Manager Ann Clarke for breaching several principles of the Treaty of Waitangi.

The other document (Minister Letter) is a formal complaint that was sent to the Associate Minister of Tertiary Education on October 13 2003. It outlines damages to Carich caused by the TEC's actions, particularly when commenting to the media without first letting Carich know what they intend to say.

The third document is the Ministerial Briefing paper that was presented to the Minister in the meeting last Tuesday.

Hon. Parekura Horomia
Minister for Maori Affairs
Parliament House
Wellington

October 15th 2003

Tena Koe e te Minita,

He honore, he kororia, he wahakaaro pai ki nga tangata katoa. He mihi nui ki a koe e te Minita.

I am writing to you in your capacity as Minister for Maori Affairs to make a formal complaint against the Tertiary Education Commission (TEC) and it’s General Manager, Anne Clark for what we consider to be a clear breach of the principles of the Treaty of Waitangi.

Ann Clark's recent comments about Carich Computer Training in last Sunday’s edition of the Sunday Star Times and further discussions between her and Carich staff yesterday are a breach of core principles of the Treaty. Throughout, the TEC’s and Anne Clark actions and comments fail to uphold the principles that the Treaty of Waitangi requires; the active protection of Maori interests, demonstration of partnership, consultation, and acting in good faith.

According to a seminal judgment of the New Zealand courts on the principles of the Treaty, the following judgment is relevant: New Zealand Maori Council vs. Attorney General (1987). The court asserted the following relevant principle, "The Treaty established a partnership, and imposes on the partners the duty to act reasonably and in good faith". Justice Cook characterised this duty as 'infinitely more than a formality'. He stated that, 'If a breach of the duty is demonstrated at any time, the duty of the Court will be to insist that it is honored.'

Ann Clark's recent comments, many of which have or will be proven to be inaccurate, appear to be a malicious attempt to damage or close down a valuable, successful and innovative Maori education provider. This sort of comment by a senior government official is highly destructive and does little to build confidence in TEC's integrity and support of hard working Maori providers.

Further, her comments contradict the Tertiary Education Strategy, particularly Strategy 2. The strategy refers to partnership with Maori, genuine collaboration and working together. In the document there is mention of a concern that the strategy needs to be "realistic and doable". I share this concern in specific regard to this instance and the leadership of the TEC.

These public comments by Ann Clark have caused significant unnecessary stress - not only to staff and management at Carich but also to our students.

We expect the Tertiary Education Commission and it’s General Manager, Anne Clark to apologise publicly for this clear breach of several principles of the Treaty of Waitangi, for the inaccurate provision of information and for the damage that has potentially been caused to a treasured leader in the Maori and general New Zealand educational community.

Naku noa, na

Carich Training Centre Ltd

Steve Mahery
Associate Minister of Tertiary Education
Government House
Wellington

13 October 2003

Dear Minister

On Friday and Saturday we were required to attend to calls from the Sunday Star Times related to Carich’s financial viability. I trust your staff have now made you aware of the resulting article in Sunday’s edition.

This letter of complaint is to urgently request that you attend to three areas, which have harmed our company and are affecting our ability to operate:

 The fact that TEC commented to media without first advising Carich
 The incorrect information TEC gave to the Sunday Star Times
 The phrasing of statements, which I can only describe as Naïve, at best.

1. Media comments:
The fact that TEC commented to media without first advising Carich is a breach of common courtesy that does not support the spirit of our partnership. Until now, the TEC and Carich have been working together as partners in the delivery of education services to our learners.

Would it not have been more appropriate to contact me before agreeing to any comment to the media? But, unfortunately, it gets worse. Three of my executives spoke with the journalist by speakerphone on Friday evening, who advised in that conversation, that your executive actually asked that he not disclose to Carich, what she actually said to him!

2. The incorrect information:
 Contrary to the TEC statement that we suspended debt repayment a fortnight ago, Carich has as late as last week met all it's debt repayment requirements.
 Contrary to the confirmation the TEC provided to the SST that "the TEC had now confirmed that it "would not be possible" for Carich to meet that [the October 31] deadline," we believe that it is more than possible to meet any deadline.
 In fact we believe that the TEC owe Carich a sizeable sum of money. We have agreed to an independent audit, which is due to start this week, and this will prove our case to be correct.

3. The phrasing of your executive’s remarks:
At best, Minister, the comments of your executive were naïve. If it is your department’s intention to undermine public confidence in the PTE and Foreign Fee Paying Student sector at a time when it is most challenging for us, your department’s tactics are very effective.

To state to the media that TEC has considered the closing down of Carich is severely damaging, regardless of whether you have or not. Is this how you choose to communicate such important considerations to Carich and the market generally?

Minister, let me make it clear that your department is a valued customer. It is not my company’s only customer but I can state with confidence that TEC is our most unpredictable customer.

In an industry where we must straddle the line between State funded education and the realities of commercial enterprise, headlines like Sunday’s are potentially disastrous. They create urgent and intensive work to restore the confidence of creditors, partners, students and all other stakeholders.

Perhaps some basic training for your people is in order, in the way media works and how to maintain personal integrity without creating mayhem for your fellow partners.

Our company is sensitive enough to appreciate the effect on your organization given the tough operating conditions for PTE’s right now and recent market casualties. But we would like to think that your department is working to assist us in every way possible rather than attempting to grow the casualty list!

These comments from the TEC have been very costly for our organisation. We expect that they will with your support provide a statement that we are able to provide to our stakeholders that mitigates some of their concerns.

Yours in partnership

Caron Taurima

Report to the Minister of Tertiary Education

TABLE OF CONTENTS

REPORT TO THE MINISTER OF TERTIARY EDUCATION 1
1. EXECUTIVE SUMMARY 2
PLAN OF ACTION 3
2. COMPANY VISION 4
CARICH NEW ZEALAND VISION 5
3. BUSINESS PROFILE 6
A) OWNERSHIP 6
B) STAFFING 6
C) SITE LOCATIONS 6
D) DIRECTORS 6
E) MANAGEMENT 7
F) OPERATIONS 7
G) COMPANY PRODUCTS 8
H) PARTNERSHIPS 9
4. SIGNIFICANT ACHIEVEMENTS 10
5. CARICH’S FINANCIAL POSITION TODAY 12
6. ISSUES RELATED TO TEC – WHY CARICH IS IN THIS POSITION 13
7. THE WAY FORWARD – TRUE PARTNERSHIP WITH TEC 17
8. CARICH’S LONG TERM SUSTAINABLE FUTURE 19
9. LIFE WITHOUT CARICH 20
10. APPENDICES 22
Appendix One – Memoranda of Understandings Domestic 22
Appendix Two – NZQA Audits 22
Appendix Three – Ministerial Briefing Document to Parekura Horomia 22
Appendix Four – Media Information 22
Appendix Five – Memorandum of Understandings International 22
Appendix Six – Joint Venture Business Proposals 22
Appendix Seven – Company Structure 22
Appendix Eight – Partnership Correspondence 22
Appendix Nine – Additional Reference Material 22
1. Executive Summary

Tene koe

Ka tangi te titi, ka tangi te kaka, ka tangi hoki ko au. Tiheimauriora!

Carich has been severely impacted as a result of the short notice cancellation (4 days) of our major Wananga contract (a joint TEC and Wananga decision) in March this year, with a net impact loss of $12 million dollars. Carich requests your assistance to agree a way forward and work with us.
Carich is a prime example of a Maori organisation succeeding in mainstream tertiary education. This report highlights Carich’s performance as an educator with an excellent track record providing assistance to TEC in implementing the Tertiary Education Strategy. We have worked strategically to ensure that we are able to provide quality learning experiences for our students that allow them to increase their contribution to whanau, community and the knowledge economy.
Our innovations and drive for competitive edge have led to the exciting development of a unique (1st in the World) blended e-learning system for lower decile/second chance learners, delivered on a large scale in New Zealand (Computer Gym).
The success of Computer Gym enabled the expansion of the concept with a joint venture partnership in South Africa this year with the support of the School Governing Bodies of Gauteng Province and the South African Department of Education (Gauteng).
In addition Computer Gym was recently recognised by being awarded the TUANZ Tertiary e-learning award. In its design we followed the blueprint of social responsibility and have developed an educational e-learning system for positive social change. As we have developed this programme a total of six 100% ‘all requirements met’ audits by the New Zealand Qualifications Authority (NZQA) in the past 18 months has confirmed our credentials as a quality education provider committed to the objectives of the Tertiary Education Strategy which supports the Maori Draft Education Strategy.
Carich continues to run a commercially viable and sustainable business as evidenced by long term contracts and strategic alliances with key partners such as; Te Wananga o Aotearoa (TWOA), Tai Poutini Polytechnic, Te Whare Wananga o Awanuiarangi (TWWOA) and UNITEC (MOU stage). However, like many others in the industry Carich is facing a temporary cash flow dilemma which is being addressed with the assistance of Price Waterhouse Coopers (PWC) and KPMG.
As a key stakeholder and partner of the Tertiary Education Strategy it is of significant importance that under the spirit of collaboration and partnership between Carich as a Maori Training Provider and the TEC as administrators of the Treaty of Waitangi we discuss and put in place a process to move forward which will give all parties a level of confidence in each other to achieve the Tertiary Education Strategy objectives.
Since the Sunday Star Times article of 12th October 2003, Carich’s progress on the “Plan of Action” outlined below, has been hindered by factors beyond our control, however we have managed to restore a degree of confidence with most key stakeholders, we wish to discuss this issue in detail personally with the Minister, once greater priorities have been achieved.
Our proposed “Plan of Action” to address these greater priorities follows.

Plan of Action

A summary report from PWC report, page 12, indicates a $715,000 profit can be achieved by 31st March 2004 provided:
 TEC accepts Revised SDR
TEC accepts revised SDR return for Carich’s December 2002 Computer Gym course, of approx $1.3 million; Audit results supplied Thursday 23rd October.

 Restore Carich’s Reputation in the Market Place
 TEC to recognise Carich as a credible PTE
 To ensure current contracts and agreements give the confidence to our relevant stakeholders (JV education partners);

 TEC Supply Letter of Continued Support
TEC to supply letter of continued support and correct comments related to a recent media statements which has affected current initiatives with our bank, stakeholders, equity investors, creditors, staff and most importantly our students.

Securing the above from TEC will place Carich in a much stronger position to solidify contractual opportunities that will support cash flow requirements as defined on page 12 of the PWC report. At the Ministerial meeting scheduled for Tuesday 21st October 2004, factual evidence and information will be supplied in support of the following:
 Business agreements with Joint Venture Partners
JV Partner letter agreeing to Carich supplying National Certificate course to be delivered this financial year through Computer Gym approx $2-$4 million additional revenue, not accounted for in current PWC page 12 cash flow report – will be confirmed 30th October 2003

 Bank Support
Bank letter advising funding support to Carich conditional upon TEC confirming in writing continued collaborative partnership with Carich as an education provider

 Assets Sale and Lease Back
Letter from Finance Company for Lease-Back confirming intention to finance Carich’s assets to the value of $3 million.

 Prospective Equity Investors
Letter from KPMG being engaged to manage Carich equity investment plan for conclusion December 2004 – target $3-$5 million.

Summary of Cash Flow Contributions: Oct – Dec 2003
Subject to TEC Support
Minimum Maximum
SDR Return $ 1,300,000 $ 1,300,000
JV Partner $ 2,000,000 $ 4,000,000
Asset Lease Back $ 1,500,000 $ 2,000,000
Equity Investment $ 3,000,000 $ 5,000,000
Potential Input $ 7,800,000 $12,000,000

We are confident with TEC support and Carich’s “Plan of Action” that we will not be in breach of the 2003 TEC Notice of Terms and Conditions signed between TEC and Carich.

2. Company Vision

Vision for a Decade
The critical elements of the 2003 Business Plan are outlined below. This visionary framework is the basis on which the strategic initiatives through to the year 2005 have been established.

 CARICH will be a unique institution offering a holistic multi level approach to education.
 CARICH will promote an international perspective to its activities to ensure its graduates have the knowledge and skills to succeed in an international environment.
 CARICH will have a total commitment to its customers for the quality of education and training, the quality of service, and the quality of the environment.
 CARICH will offer flexible learning environment characterised by innovation in teaching and the use of technology.
 CARICH will graduate Maori and Pacific Island students in numbers at least equal to their relative percentages in the general population.
 CARICH will emphasise an effective partnership with industry to ensure that the programmes offered are relevant and the graduates are work ready, and to promote applied work relevant research linking industry needs to vocational training.
 CARICH will have an unsurpassed learning environment offering a comprehensive range of amenities and services

Carich New Zealand Vision

M I S S I O N S T A T E M E N T
To be the Benchmark of our Competitors

V I S I O N
Everyone is proud of what we do
Our employees are proud of their work
Our Competitors respect us
Our Customers and Suppliers prefer us

To achieve this Vision, we will always look for ways to improve the quality of our service

V A L U E S

C Cooperation We will work as a team to achieve our goals
A Accountability We will take responsibility for our actions and consequences
R Respect We will act with respect for each other and our customers at all times
I Innovation We encourage innovation and diversity that will make us flexible, open to change and not bound by traditions or structures that are no longer functional
C Communication We are committed to open and honest communication with one another
H Honesty We will be honest in our relationships – internally and externally, and will act with integrity at all times

Q U A L I T Y O B J E C T I V E S
To achieve the Statement of Performance Education Objectives for the Ministry of Education
- 90% of students will be satisfied with the course delivered
- 70% of students will be awarded the qualification if this is a one year qualification) or progress to the next year of the program
- Systems and processes efficiently and effectively support the business to ensure 90% customer and staff satisfaction
- Meet the requirements of all external audit and contractual obligations
- Emphasis on quality to ensure a consistently high standard in every phase of our operations

3. BUSINESS PROFILE

a) Ownership
Carich Training Centre Limited Caron Taurima 75%
Richard Taurima 25%
Established: 1988 Incorporated: 23 April 1991

b) Staffing
1999 2000 2001 2002 2003
March 2003 Oct
Totals 59 80 108 240 478 233

REGION STAFF NUMBERS FTEs
HEAD OFFICE 51 51
AUCKLAND REGION 71 64
HAMILTON 21 18
WELLINGTON REGION 27 27
CHRISTCHURCH 39 36.5
ASCENT 12 6
NEXT STEPS 12 7.5
TOTAL STAFF 233 210
Figure 1 - Staff Numbers as of end Oct 2003

c) Site Locations
Campus Locations: Auckland, Manukau, Hamilton, Wellington, Lower Hutt, & Christchurch

d) Directors
Richard and Caron are of Maori descent and have many networks within the Maori and Pacific Island communities throughout New Zealand.
 Caron was named Maori Businesswoman of the Year in 1995 and 1999
 Caron was named Ernst & Young Entrepreneur of the Year Oct 2003

e) Management

f) Operations
The senior management team meet once a month, and the Board of Directors meet monthly. There are weekly teleconferences with senior management and regional managers.
The company achieved “all requirements” met in NZQA audits in August 2002, March 2003 and May 2003.

g) Company Products

Our main products are detailed below:-

Fee paying courses to Level 3 for New Zealand students. Including National Certificate Level 2,3,4 in computing and business administration. Carich have both Skill New Zealand and Work and Income contracts delivering employment outcome focused courses.

A nationwide course covering the National Certificate in Employment Skills contracted by the Department of Corrections to deliver in 5 prisons. Approx 2000 inmates trained 2001 & 2002.

Higher level (Level 4 & 5) IT courses for national students covering international qualifications as well as NZQA qualifications. Courses cover Diploma of Computing and National Certificate of Multimedia.

International Education courses for foreign students. Courses cover English Language, Diploma & National Certificate courses. Microsoft Certified Professional, Microsoft Certified Administrator, Microsoft Certified Systems Engineer, Microsoft Certified Database Administrator, Microsoft Certified Solutions Developer.

Computer Gym is an Online learning application offering Nat. Certificate in Computing Level 2 & 3. Training is run from 6am – 10pm with flexible learning options and times for students a self empowered learning course. Large trainings room with roaming tutors, access to workshops, and assessments at any time for students.

Ascent Business Institute (ABI) offers Diploma’s in Business Administration and Finance & Accounting. ABI was purchased in July 2003 and is part of the Carich umbrella of companies.

h) Partnerships
Carich has key partnerships with the following providers to deliver Computer Gym courses on both Carich sites and our JV partner sites.

Te Wananga O Aotearoa (TWOA)
TWOA was Carich’s first strategic alliance partner for the delivery of Computer Gym at both Carich and TWOA sites. Being affiliated with the largest Maori Wananga confirms both our Maori links and our commitment to the Treaty of Waitangi and the Draft Maori Education Strategy.

Te Whare Wananga o Awanuiarangi (TWWOA)
Carich have completed our MOU with TWWOA and are currently awaiting the MoE to place the approved course on the STEP website. Strategic contract to deliver 1500 EFT’s per annum over a 3 yr period.

Tai Poutini Polytechnic
Tai Poutini Polytechnic Computer Gym on Carich sites commenced July/August this year. Computer Gym to be delivered on the West Coast sites commences April\May 2004.

South African Government, Tecknikon Pretoria, Tecknikon South Africa , School Governing Bodies and Soweto Community.
Taking 12 months to establish effective partnerships Carich have now commenced training from October training 32 teachers to deliver Computer Gym in SA to 400 students starting Dec 2003. This site in Soweto is a pilot site with a progress plan to roll out Computer Gym sites through out school computer labs, in connection with schools, communities and Carich transferring the knowledge to the specific groups.

4. Significant Achievements

a) Computer Gym – A World leading Innovation
Computer Gym is the educational tool which has been developed in New Zealand and which we are now licensing in South Africa, commencing MOU’s in China and Australia.
Computer Gym is outstandingly successful in teaching computer skills to Maori and Pacific Island people. Even more importantly, it has given to thousands of people, assurance for the first time in their lives, that they are intelligent and capable of dealing with technology skills.
Currently 28% Maori students enrolled in Computer Gym compared to a national census of 13.5% Maori Nationally.

b) 100 % Audit Performance with NZQA
Carich has participated in six NZQA audits in the past 18 months and ALL requirements have been met.

c) TUANZ Innovation Award 2003 – Tertiary Education
Carich Computer Gym this year, won the Telecommunications Users Association Tertiary Education Award for e-learning.

The TUANZ awards recognize outstanding innovation and achievement in telecommunications and Education. This award is benchmarked against Industry and the two finalists Carich won against were The Open Polytechnic and Air New Zealand.

Anton Van Schalkwyk, Carich’s Educational Programme Developer and one of the driving forces behind Computer Gym, accepted the award on behalf of the Computer Gym development team.

d) Export Business
South Africa
The success of Computer Gym has enabled the expansion of the concept with a joint venture partnership in South Africa this year with the support of the School Governing Bodies of Gauteng Province and the South African Department of Education (Gauteng).
This pilot started October 1 and South African forecast revenues March 31 2005 are circa NZ$5 Million.

China

We are in the advanced stages of negotiations with education providers in China’s Eastern Province in partnership with The Cambridge Group , to deliver Computer Gym and English Language courses.
Initial revenues are expected by December 2003.

5. Carich’s Financial Position Today

A PWC audit report submitted with this document states::

A $715,000 profit to March 3, 2004 can be achieved provided:
- $3 million cash injection can be achieved
- $1.3 million payment related to Dec 02 wash-up
- continued TEC support for existing contracts

Our position today is that we are an inherently viable business with a temporary cash flow problem caused by unforeseen circumstances in New Zealand.
Our programme to resolve this is detailed in section 7.

6. Issues Related To TEC – Why Carich Is In This Position

There is no single issue which has created our current temporary cash flow position, although Carich management is firmly of the view that improved communication and understanding with TEC will be fundamental to a satisfactory resolution.
It will become clear as we explain the key events below, how both parties must clearly embrace the TEC strategic values of transparency and honesty – we believe these are specific values to address in a review of our partnership.

Carich’s responses to TEC’s Strategic Elements

TEC requirement: Mission: To inspire excellence, demand relevance and improve access.
Carich Response: We proudly offer Computer Gym as an outstanding achiever in every aim of this mission.

TEC requirement: Vision: To be the best
Carich response: Computer Gym’s outcomes and the number of JV education partners signed long term MOU’s with Carich.

TEC requirement: To be responsive
Carich response: No education provider has responded more successfully, to the need of New Zealanders in most need, to cope with the Knowledge Economy

TEC requirement: To be consistent
Carich response: Our statistics show consistent improvement

TEC requirement: To be honest
Carich response: Carich initiated the review that we believed we had been overpaid by $3.2 million to TEC

TEC requirement: To be transparent
Carich response: We refer to NZQA audit reports and recorded levels of co-operation

TEC requirement: To be results focussed
Carich response: We refer to 100% audits results and the successful completion rates for all Carich courses.

1. Computer Gym Phase One – Completed December 2002
We have been dealing with TEC over the SDR for this first phase of Computer Gym. Our first SDR has had two revisions which were related to efficiencies in our recording systems. Like any innovative system, improvements occur as we learn along the way and the revisions specifically related to our progressive enhancement of software. TEC has acknowledged this through the engagement of an auditing team.
 The first review identified that we had over - claimed and we announced to TEC that we owed money - a repayment plan of $3.2 million back to TEC, was agreed.
 The second review will soon be resolved and is subject to an agreed PWC independent audit due for completion on Thursday, October 23, 2003. In summary, Carich identified in August a further 573 EFTS which could be claimed. We now propose that TEC owes Carich a further $1.3 million.

2. Te Wananga O Aotearoa (TWOA) Cancelled Contract
Following Government’s decision to reduce PTE EFTS back to 2001 levels, Carich was left with an infrastructure of employees, property and equipped classrooms for much larger numbers.
Our solution was to continue Computer Gym’s success via strategic partnerships with institutions that had students and EFTS funds available.
Carich and Te Wananga O Aotearoa developed a partnership for the delivery of Computer Gym phase two.

By March 2003, there were around 4,000 students studying the Computer Gym course at both Carich Computer Gym sites and at Te Wananga O Aotearoa sites throughout the country. By this time the NZQA had audited Computer Gym three times, giving it successive 100% passes and continuing to find that “all requirements were met.”

Carich had spent $410,000 on marketing this course and securing students.

Later in March, Wananga advised Carich that it could not continue following its discussions with TEC.

Losses to Carich amounted to over $835,000 in unrecoverable costs and $1 million per month in lost revenue.

3. Te Whare Wananga O Awanuiarangi (TWWOA)
Since the Sunday Star Times article of October 12, this organisation has indicated its support to Carich and is keen to have any perceived concerns resolved between TEC and Carich. We are both jointly awaiting approval for the Computer Gym course on the STEP website.
Agreed programme: 1,500 EFTS – Computer Gym on Carich and TWWOA sites. (Supporting TES initiative to “bridge the digital divide in rural New Zealand.")

4. Tai Poutini Polytechnic
Since the Sunday Star Times article of October 12, this organisation has indicated its support to Carich and is keen to have any perceived concerns resolved between TEC and Carich.
Agreed programme: 500 EFTS – Computer Gym, Auckland and additional programmes on South Island West Coast. (Supporting TES initiative to “bridge the digital divide in rural New Zealand.”)

5. UNITEC
Since the Sunday Star Times article of October 12, this organisation has placed on hold, plans for a Computer Gym course until our relationship is resolved (TEC and Carich).
Agreed programme: 350 EFTS – Computer Gym on Carich Auckland campus and UNITEC Waitakere site

6. Media Comments
The comments in the Sunday Star Times of October 12 have affected Carich in a number of ways;
 Creditors have expressed concerns
 Education partners have placed programmes on hold
 Prospective investors have stepped back
 Employees have required intensive time from management - morale has been impacted
 International agents have ceased bringing foreign fee paying students to Carich
 Students are expressing concerns
 While the bank has been supportive, it is closely monitoring our discussions with TEC

The fact that the TEC was considering the closure of Carich was the first time it had been communicated to Carich!

7. Potential Impact on Export business
Carich has developed two sources of Export Revenue $:

 Foreign Fee Paying Students
International student revenue now represents 20 percent of Carich total revenue. However, a number of harmful external factors have impacted our potential growth rate of this business:
 The SARS Virus
 The collapse of Modern Age resulting in a general decline among international agents who are crucial to our supply of customers
 Publicity in China. We acknowledge Ministerial initiatives with this issue and Carich offers its own knowledge and connections as a possible means of support to restoring confidence of this vital long term market.
Despite these factors, Carich continues to grow this business. However, the international agents have expressed concerns since the October 12 article. This experience alone, illustrates the need for TEC to work closely with us, for the health of our industry.

 Computer Gym courses in South Africa.
We have just engaged into partnerships with South African Government Departments for the delivery of Computer Gym in Soweto. The pilot programme started in September with 32 teachers of the Soweto District. This will lead to three Computer Gym sites (to be established by February 2004), in conjunction with Tecknikon South Africa and the School Governing Bodies of Gauteng.
The South African Government views Carich as a credible trainer of indigenous peoples and takes an interest in the success of Carich New Zealand in Africa.

7. The Way Forward – True Partnership with TEC

The way forward and how TEC can work in a collaborate partnership.

Reducing Costs
In 2002, Carich became a very large company by New Zealand standards, in employee numbers.
TEC’s announcement of EFTS cutbacks meant we had to downsize. However, the TWOA contract in March encouraged Carich to sustain staffing levels in the belief that we would secure gainful work for them.
A cancellation of the contract after we had completed student recruitment and equipment installation was a significant financial impact. Staff reductions became inevitable. We completed this in two stages, amounting to a decrease from 480 to 233 staff. October is the first month of positive impact.
We still have surplus real estate to sub-lease.

Extra revenues
Our plan is to secure circa $5 million into the company by December this year, via additional business, equity and other means.
The summary PWC report, (page 12), indicates a $715,000 profit can be achieved by 31st March 2004 provided we secure $4.3 million.
Our key initiatives are:
 Business agreements with Joint Venture Partners
JV Partner has written to Carich – subject to CEO sign-off on October 30 - to supply National Certificate course to be delivered this financial year through Computer Gym approx $2-$4 million additional revenue, not accounted for in current PWC page 12 cash flow reports – will be confirmed 30th October 2003

 Bank Support
Bank letter advising funding support to Carich conditional upon TEC confirming in writing continued collaborative partnership with Carich as an education provider

 Assets Sale and Lease Back
Letter from Finance Company for Lease-Back confirming intention to finance Carich’s assets to the value of $3 million.

 Prospective Equity Investors
Letter from KPMG being engaged to manage Carich equity investment plan for conclusion December 2004 – target $3-$5 million.

Our summary of cash injection high/low estimates are:

Minimum Maximum
SDR Return $ 1,300,000 $ 1,300,000
JV Partner $ 2,000,000 $ 4,000,000
Asset Lease Back $ 1,500,000 $ 2,000,000
Equity Investment $ 3,000,000 $ 5,000,000
Potential Input $ 7,800,000 $12,000,000

We are confident with TEC support and Carich’s “Plan of Action” that we will not be in breach of the 2003 TEC Notice of Terms and Conditions signed between TEC and Carich.

How TEC can assist us short term
We need to resolve the areas of our partnership with TEC in order for Carich to continue.
Specifically, we request:
 Acceptance of the PWC audit related to the December 2002 SDR revision and agreement that funds are due.
 Agreement to accept a separate submission for costs related to the TWOA cancelled contract
 Agreement to urgently process the STEP approval for joint partnership between TWWOA and Carich.
 An undertaking that TEC will urgently review the Strategic Priorities fund for EFTS growth similar to 2002 December numbers.
 A written mutual agreement on media relations policies and a jointly agreed statement following this meeting at an agreed time.
 Under the spirit of collaboration and partnership between TEC and Carich as a Maori training provider that we have a level of confidence that Carich is working within a safe environment.
 A written mutual agreement on media relations policies and a jointly agreed statement following this meeting at an agreed time.
8. Carich’s Long Term Sustainable Future

New Business Development (NBD) - New Zealand
Carich has a new business development team and the following summarises their work to date:

Tertiary Education Partnerships (TEO’s)
Eight TEO’s have been consulted, resulting to date in business relationships with:
 Tai Poutini Polytechnic
 Te Whare Wananga o Awanuiarangi
 A Memorandum of Understanding with UNITEC.

All TEO’s have acknowledged Carich’s ability to identify and provide a new mode of learning – Blended Learning Model.
New Business Development continues to meet with government departments and Industry Training Organisations to provide computer training. NBD is currently working with Waitemata District Health Board – Whitiki Maurea to provide the Computer Gym model for Maori Mental Health.

Government Departments and ITO’s
 New Business Development has met with, SFRITO, New Zealand Industry Training Organisations and Forest Industries Training and Education Council (FITEC). SFRITO has asked Carich to submit a training proposal using the Blended Learning Model for Business Administration level 3 and level 4.
 NZITO, CEO Carl Ammon has requested details on numeracy and literacy training as a Blended Learning Model.
 Forest Industries Training and Education Council (FITEC), CEO John Blakey wants computer training via distance learning.
 Carich has submitted a tender for Fonterra Co-operative Group. Providing basic Computer Training with potential out reach of 21,000 into rural New Zealand.
 Fletcher Steel CIO contacted Carich to provide a needs analysis and GAP training for their IT Department. Carich is in the process of formalising this training with a MOU.

New business development – international
We expect export revenue to exceed domestic revenues in the financial year ending March 31, 2006
 South Africa is our first revenue - producing export market
 China will be our second export revenue - producing market. First income forecast December 2003.
 Initiatives continue in Australia, United States, South America

9. Life without Carich

The Impact On Export Education Without Carich
Carich is one of the very few Tertiary Education Organisations in New Zealand that has a strong profile around the Asia Pacific Rim as well as China, Africa and America. In the current climate, where a number of overseas governments are becoming increasingly uneasy about the wisdom of sending students to New Zealand, if Carich was to stop trading this would have a dramatic effect on export education for New Zealand.
The question that overseas stakeholder would have to ask themselves is, ‘If one of the largest PTE’s in New Zealand is not sustainable what about the other organisations?” What is known about the recent collapse of Modern Age is that there was a ‘flow on’ effect from its closure. It is estimated that approximately six other smaller language schools, that had a relationship with Modern Age, collapsed soon after it became insolvent. It can be expected that a school the size of Carich would have far more profound implications for export education if it became insolvent. Unfortunately, these ‘flow on’ effects would not just be felt locally in New Zealand but also would be felt globally in the previously mentioned regions.
If China is used as a scenario, what are the possible ramifications of a New Zealand without Carich? Firstly, Carich has an extensive network of agents in China (approximately three hundred) among whom negative word of mouth spreads very quickly. If Carich was to become insolvent it is likely that the negative effects to the flow of International students from China to New Zealand would be far-reaching.
In some cases many local agents in New Zealand have up to 200 agents in China. The Carich agent network is not limited to China alone, but includes Eastern Europe, South America and central Asia. Agents have not been impressed by the handling of the winding up of Modern Age and many believe that their students were severely disadvantaged. The effect of a possible closure of Carich in their mind would be disastrous and many have begun aggressively marketing Australia as a preferred destination as a ‘flow on’ effect from last Sunday’s article.
Carich continuing to Trade could ensure that an element of calm is placed back into the marketplace and that agents continue to see New Zealand as a preferred destination.

The Knowledge Loss Without Carich
The intellectual property associated with Carich is of real significance to the education sector in New Zealand. Carich continues to be a leader in the provision of e-enabled education for New Zealand citizens who are largely ‘second chance’ Maori & Pacific Island learners. Without Carich, thousands of disadvantaged New Zealanders would not have the opportunity to access foundation learning opportunities. However, equally significant is the loss of the intellectual capital that resides within the Carich Online Development teams.
The Carich Online Development teams are recognised in New Zealand and overseas as pioneers in the research & development of a leading edge e-learning platform. Indeed, the ‘dynamic capability’ of Carich has been driven by the intellectual property that resides within these teams. Without this competitive advantage Carich would not have been in a position to provide thousands of second chance learners with pathways into learning via ‘Computer Gym’.
The TUANZ award (in 2003) recognised the Carich Online Development team’s innovation (and contribution to tertiary education) in constructing an e-learning platform that is now recognised internationally as being of a global benchmark standard. However, in the event of Carich not continuing as a business this capability will disappear – to the detriment of all New Zealand.
The key point to understand about the Carich Online Development teams is that the expertise they have gained is knowledge based. Their skills, understandings and insights have been honed by years of research & development activities that remain at the forefront of e-learning globally. These R & D people are knowledge workers and as such are only effective in the context of the group they work within. Without working as a group the knowledge base of each of these individuals will be fragmented and it will be extremely unlikely to be replicated elsewhere in New Zealand. In recognition of this fact, Carich (through its e-Collaboration tender to TEC) is proposing to support the New Zealand governments tertiary education strategy by providing the government with a digital learning framework, digital learning object generator and the collective skills and knowledge of the Carich Online Development teams to facilitate this initiative.
The decision to provide ‘leading edge’ technology to New Zealand via an e-Collaboration tender was not driven by commercial imperatives, but rather, a concern that New Zealand needs the type of expertise that the Carich Online Development teams can provide.
The final point is that the Tertiary Education Commission actually forecasts that it will take another couple of years to be able to create the type of e-learning platform that Carich already has. In this regard, it is suggested that any strategy that would intentionally undermine Carich’s viability is akin to, “pulling the rice seedlings up to make them grow faster”.

10. APPENDICES

Appendix One – Memorandum of Understandings Domestic
Appendix Two – NZQA Audit’s
Appendix Three – Ministerial Briefing Document to Parekura Horomia
Appendix Four – Media Information
Appendix Five – Memorandum of Understandings International
Appendix Six – Joint Venture Business Proposals
Appendix Seven – Company Structure
Appendix Eight – Partnership Correspondence
Appendix Nine – Additional Reference Material

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