Two former charter schools under microscope for growing debt, illegal board appointments

Growing debt, an illegal board of trustees, and curriculum and management fees totalling hundreds of thousands of dollars a year prompted Education Ministry intervention at two former charter schools.Documents provided under the Official Information Act show the ministry identified serious governance and finance problems at Middle School West Auckland (MSWA) and South Auckland Middle School (SAMS).The ministry dismissed the boards of both schools, replacing them with commissioners in July at South Auckland Middle School and in August at Middle School West Auckland.A document outlining the case for a commissioner at SAMS said the school was at risk due to factors including low cash, arrears to the ministry for payroll, and serious procurement weaknesses.It said the school's board was illegal, the school should not have been paying $50,000 a year for the right to use a particular approach to teaching, and a forensic accounting investigation might be required.A separate document about MSWA said the school had built up a $183,000 debt to the ministry because it was repeatedly bouncing its payroll - meaning it did not have enough money to cover board-funded staff and the ministry was covering the gap.The document said the school had "sustained financial, governance, attendance and curriculum delivery challenges".It said the school's board did not understand its governance responsibilities and appeared unwilling and incapable of making the changes that were needed.Both documents were critical of the schools' handling of conflicts of interest and procurement.They highlighted payments to third parties for management services and for intellectual property rights related to the schools' curriculums, noting that the latter appeared to be unnecessary.Five years earlier, the Auditor-General criticised the schools over a $450,000 payment to the Villa Education Trust for services related to their switch from charter to state designated status.The schools' commissioners said the management payments had stopped.The commissioner of SAMS said a new contract for financial services to the school was let after a request for proposals.The commissioner of MSWA said it had "suspended payment for the curriculum IP while an investigation into the contractual obligations is underway".Middle School West.RNZ / Diego OpatowskiThe two schools were set up by the Villa Education Trust when a National-led government introduced charter schools for the first time but were forced to become state schools when a Labour-led government abolished the model in 2018.The schools became designated character schools with a combined board including Villa Education Trust nominees until 2022 when they moved to separate boards.A Gazette notice said the schools' special character was as middle schools using project-based education "with a focus on the "Growth Mindset" style of learning, based on the work of Carol Dweck"."The schools' vision is: Through effective teaching, quality facilities, a supportive learning environment, an optimal day structure and an integrated curriculum, young people develop and learn to give them a base for excellence in all spheres of life," the notice said.Middle School West AucklandThe document about MSWA set out the case for appointing a limited statutory manager in June this year, just months before that appointment was escalated to a commissioner.It said the school's roll had fallen to about 135 students and the ministry was critical of teaching at the school saying children's education was at significant risk.Less than 40 percent of the school's pupils attended regularly, which was bad enough to prompt statutory intervention, the document said.The report expressed concern about MSWA's payments to third parties and its relationship with the trust that formerly oversaw its special character.It said: "The school has an unresolved and complex relationship with the Villa Education Trust (VET). This includes unclear service expectations, continued high management fees originating from previous charter school arrangements, and procurement of curriculum services without appropriate procurement processes being followed. These arrangements have resulted in high curriculum delivery costs and continue to place pressure on the school's operating position."However, RNZ understands the trust ceased to exist last year and the Charities Register showed it was deregistered in February 2025.As well as recommending limited statutory managers, the document recommended a specialist curriculum advisor for MSWA "to address concerns regarding curriculum coherence and delivery, particularly in relation to the school's Project-Based Learning (PBL) model".It said integration between different subjects was loose and inconsistent, and classes relied heavily on independent student research with limited evidence of explicit teaching."There is risk that students are not receiving equitable access to curriculum coverage and learning progression, particularly in literacy and numeracy," the document said.The document said a commissioner would be appropriate if the board failed to comply with the limited statutory manager's directions, financial problems worsened, attendance did not improve, and the board's behaviour undermined student wellbeing or the public interest."Taken together, the sustained financial instability, ineffective governance and financial oversight, escalating attendance issues meeting statutory thresholds, and concerns regarding curriculum coherence and delivery indicate a significant risk to the ongoing operation of the school and to educational outcomes for students," it said.Middle School West, Auckland.RNZ / Diego OpatowskiSouth Auckland Middle SchoolThe ministry's document on South Auckland Middle School was highly critical of payments for use of intellectual property apparently related to the project-based learning approach that underpinned its designated character."We informed the Board at the last meeting that one of their current contracts which pays for IP for the designated character of the school has not been acquired through proper procurement processes and lacks due diligence by the Board. Our legal team's opinion has been that the Board should not be paying for curriculum IP that is the designated character of the school. The Board would have paid $150K in total over 3 years, to REDACTED for the IP of the curriculum, which is the Board's responsibility with an alternative constitution of a designated character," it said."It also appears the Board have disregarded the sale of the curriculum IP to Being AI from VET, on 8 April 2024 and have continued to make the $50K/year instalment payments to REDACTED. This is not addressed in the Board's workplan."The document also characterised the payments as high-risk."The board's continued "curriculum IP" payments to the former charter school owners are high risk from both a legal and audit perspective, given the lack of documented value-for-money assessment, sound procurement, and effective conflict-of-interest management aligned with the Auditor-General's expectations."In comments on a workplan the board submitted in March the document indicated the ministry wanted to recoup some of the money."The workplan fails to address how the Board will determine if there is any possibility of recovery of funds awarded for contracts in excess of $25K and payments for IP," it said.The document recommended appointing a commissioner with strong expertise in school finances."Based on the commissioner's findings, decide whether it is worth doing a forensic investigation. If there is no realistic way to recover funds, recommend not hiring a forensic accountant (to avoid wasting money)," it said.The document also set out a complicated series of governance and management changes.It said in April 2024, Being AI, a subsidiary of AGE Limited, bought the Villa Education Trust's education business, including the right to manage the two schools and intellectual property rights to the trust's curriculum.A year later, in May 2025, Being AI sold its education business to Crimson Education and RNZ understands both schools cancelled their management services contracts with Being AI prior to the sale.South Auckland Middle School then applied to transfer responsibility for its special character from the Villa Education Trust to Elim Christian Education Trust (ECTET).South Auckland Middle School.Supplied/Google MapsThe ministry did not respond until February the following year - when it turned the request down."ECTET is a Christian-affiliated organisation and the school's is [sic] a secular State school. The school must remain secular and deliver the designated character as described in the 2018 Gazette," a ministry report said.The ministry told the school's board it would have to propose an organisation that did not have religious affiliations, or return to a normal constitution that made the board itself responsible for the school's special character.But in the meantime the board had replaced Villa Education Trust-nominated members with three from Elim Christian Education Trust through what the ministry described as "an unknown process"."The board's composition since April 2025 has been illegal. The VET appointed members of the Board was replaced by members of the Elim Chrisitan Education Trust (ECET). There was no legal mechanism or process used by the Board to include these two members on the Board. One of the ECET members is now the presiding member of the Board. Note: The Ministry has advised the Board that ECET members cannot be part of the Board."The ministry's documents said the SAMS board asked in March 2026 to become a state school, which would result in the board losing the three nominated positions reserved for the body overseeing the school's special character.The document said the board elected a new presiding member without following the proper process."The Presiding Member has been placed on the Board with no legal provision, She is not elected neither does she represent VET," the document said.The ministry told RNZ that like the South Auckland school, Middle School West Auckland was "also a consideration for Elim Community Education Trust as proprietor".The document about SAMS said the board did not manage conflicts of interest properly despite warnings from the Office of the Auditor General.It said a contractor responsible for the school's finances was also on the school's board until the middle of last year - a conflict that was disclosed, but without a proper procurement process.It said auditors were not satisfied in 2024 with the school's handling of tendering for management services that were initially provided by the Villa Education Trust and later subcontracted to AGE."The school's governance appears to have not managed conflicts, have insufficient documentation, and non‑competitive arrangements. The Board has contracted a VET Board member to carry out financial management of the school and have had very limited visibility of the school's finances," it said.The commissioner at SAMS confirmed to RNZ a new contract for finance and payroll services began in July after a full RFP, and other management roles were brought in house.She said she could not comment on the IP payments due to Official Information Act provisions protecting the commercial position of the subject.RNZ attempted to contact former board members for this story.