Oromahoe Trust
Background
The Oromahoe Trust is an Ahu Whenua Trust under Te Ture Whenua Māori Act 1993. The Trust was established in 1990 and is located 15 minutes from Keri Keri, Kaikohe, Paihia and Waitangi. The Trust has approximately 700 shareholders.
The core business of the Trust is in sheep and beef farming, forestry and property. The total landholding is 1351 ha, having grown from 1000 ha in 1990. The Trust's asset base is now valued at approximately $5.6 million.
The Trust has seven trustees including the secretary. The Trust does not have any permanent subcommittees but forms them on an 'as needed basis'. At present the Trust has an informal education subcommittee.
Trustee meetings are held bi-monthly. Special Trustee meetings are called as needed, with an average of about one to two per year. An AGM is held in November each year.
The Trust does not have any joint venture partnerships, subsidiary companies or associate companies, although it has had joint ventures in the past. The Trust employs five full-time staff and three part-time staff. Administration of the Trust is contracted out.
Governance Decision Making Processes
The Trust's first strategic plan was developed by the trustees in 1991. The plan consisted of a set of objectives and timeframes. The strategic plan has fundamentally been the same since. The plan is reviewed on an ad-hoc basis: where old objectives are met new objectives are put in their place. Last year the Trust considered whether it needed to develop a more comprehensive strategic plan. It decided to stay with the status quo.
The Trust's financial year is from July to June and receives its financial accounts at the end of June. Annual planning usually takes place around August to September. The administrator and farm manager develop the plan together. The plan is more in the form of a budget. Once the plan is completed by the farm manager and administrator, it is then presented to the trustees who discuss it at the next Trust meeting. If it is in order, it is adopted by the trustees. Sometimes the plan is not adopted until the next meeting, usually because something requires further clarification.
The Trust has a checklist which basically outlines the process undertaken for making an investment decision. If an investment opportunity is brought to the table the trustees first decide whether it fits within the Trust's constitution, objectives, broad strategy, other plans and budgets and whether professional input is required. Input will also usually be sought from management and administration. The Trust will then either decide to undertake a feasibility study internally or employ someone external.
The Trust has had two investment opportunities in the recent past where these methods were used. One was a tourism opportunity (internal subcommittee) and the other was a papakainga/housing opportunity (external expert).
A feasibility study for the tourism investment opportunity was undertaken internally. The Trust decided to go ahead and went to the shareholders for approval. The general policy of the Trust is to take all major decisions to the AGM. It has yet to hold special general meetings for such decisions.
The Trust's due diligence policy is to undertake a due diligence process for all investment opportunities either internally or externally. If undertaken internally it is in the form of a feasibility study and a subcommittee is formed specifically for this purpose. External due diligence is undertaken through professional services.
The Trust has full insurance cover but does not have trustee indemnity insurance. The decision about whether to get indemnity insurance has been debated. One reason against seeking the insurance was that trustees may be less accountable if they have this 'safety net' to fall back on. The Trust has no formal risk management policy, instead employing a common sense approach. For example, shareholders must seek permission from the farm manager to be able to enter the farm.
If a trustee has a conflict of interest he or she must declare the conflict of interest and abstain from voting.
The secretary maintains that the Trust has operated successfully because it employs excellent staff; realises the difference between governance and management, has good planning; has a good chairperson who has the respect of the shareholders, adopts a consensual decision making approach, knows its limitations and understands the importance of seeking and accepting expertise when needed.
The Trust has discussed the possibility of amalgamating with three or four similar trusts in the area. The trustees were initially keen to amalgamate but decided that they still had the economies of scale to operate as a Trust on their own. The secretary believes that this is a possible change that could take place in the future.
The governance milestones for the Trust have been:
- Trust creation
- Appointment of farm manager
- Attempt at amalgamation
- Forestry contracts
- Stockyards lease
- Purchasing another farm
Operational Practice
The Trust uses the Institute of Directors best practice guidelines and has modified these guidelines to suit the Trust's needs. The farm manager has a draft Occupational Safety and Health (OSH) policy in the form of an OSH manual. The Trust has in the past used Ministry of Agriculture and Forestry industry forecasts. These forecasts monitor other farms thereby giving the Trust an indication about expenses and income. The Trust also benchmarks the performance of the farm against other similar sized local trusts and farms.
Accountability to Shareholders
The Trust is accountable to its shareholders through the audited financial reporting system. The financial report is presented at the AGM along with the annual reports. These include the Trustees' report, grants report, farm manager's report, forestry report, financial report and shareholder ownership list. Many of the shareholders live locally and are based around the one marae, so trustees informally consult with the shareholders often.
Performance Reporting
The Trust undertakes standard reporting mechanisms to measure economic performance. Initiatives reported against for social and cultural performance are mainly in the form of grants, such as:
- Tertiary grants
- Kaumātua grants
- School grants
- Whare karakia development grant
- Roopu based employment initiatives
- Grants to kapahaka groups
The Trust has a draft environmental policy. Some of the environmental initiatives suggested include fencing off native bush, rivers and waahi tapu sites. The Trust also funded the formation of a landcare group which is to promote the enhancement and water quality of the Waitangi River.
Board Performance Review
The trustees have undertaken to review their performance bi-annually. The review is to be undertaken internally. The trustees regard the AGM as their external review.
Engaging with Shareholders and Stakeholders
If stakeholders want to engage with the Trust they can request to attend a bi-monthly trustees meeting. The Trust prefers any proposals to be put in writing in the first instance and be given to the Secretary prior to the meeting. The Secretary can then forward copies of the proposal so that the Trustees are more informed on the night of the meeting.
Elections
Elections are held on a three year rotational basis at the AGM. Voting is done by a show of hands and representation is whānau-based. Usually each of the seven whānau nominates someone. The Trust may in the future move towards requiring a profile or curriculum vitae from candidates.
Operational Processes
The Trust understands the difference between governance and management believing that this is essential to operating as an effective Māori organisation. The secretary has seen first hand other trusts 'fall apart' because this distinction is not recognised.
The Trust has a farm manager who has an employment contract which is reviewed annually using key performance indicators and is renewed every three years.
The Trust's employment policy is to employ the best person for the job. However, it is likely to employ whānau first and then people from the local community. At present no whānau are employed full-time.
The Trust's policy on delegation of authority ensures transparency within the Trust. The policy outlines the farm manager's responsibilities, providing him with the ability to employ people and terminate their contracts, and to operate the farm independently of trustee input. The farm manager has the authority to utilise funds as long as the expenditure is according to the budget. The Trust has an open meeting structure whereby the farm manager attends and participates at the bi-monthly meeting. This is one way the management interacts with the trustees. Otherwise the chairperson and other trustees are always accessible to the farm manager. Operational policies are reviewed annually and are usually documented in the minutes.
People
The secretary believes that seven trustees is an optimum number although conceding that the Trust could function effectively with five trustees. All trustees are democratically elected but representation is very much whānau-based.
The Trust encourages trustees to attend various courses or conferences. A key aspect of the Trust's professional development strategy is to fund trustees for 'out of pocket expenses' for attending various hui, conferences and training. The Trust is also investigating developing a succession strategy. The Trust will, in time, require in time people with new skills, and hopes that the tertiary grant recipients will bring their skills back to the Trust.
Financial Analysis - Oromahoe Trust
| Actual 1999 | Actual 2003 | |
|---|---|---|
| Revenue | 737,210 | 755,253 |
| Operating surplus before tax | 187,561 | 56,017 |
| Net Surplus (NPAT) | 141,334 | 45,304 |
| Average Total Assets | 5,250,181 | 5,866,529 |
| Average Shareholders’ funds | 4,728,310 | 5,559,043 |
| Actual 1999 | Actual 2003 | |
|---|---|---|
| Operating Surplus (%) | 25.44% | 7.42% |
| Return on average equity after tax (%) | 2.99% | 0.81% |
| Return on assets (EBIT)/average total assets) (%) | 3.57% | 0.95% |
| Actual 1999 | Actual 2003 | |
|---|---|---|
| Current Ratio | 1.66 | 3.12 |
| Quick Ratio (equity ratio) | 0.08 | 0.36 |
| Actual 1999 | Actual 2003 | |
|---|---|---|
| Debt to average equity (%) | 6.15% | 31.02% |
| Gearing (%) | 8.28% | 4.71% |
| Proprietorship (%) | 91.72% | 95.29% |
Page last updated: Mon, 04 Dec 2006