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Te Aute Trust Board

Background

In 1854, when Te Aute College was established as an Anglican Boarding School an endowment of approximately 7,000 acres of land was gifted to the school by the local rangātira, Te Hapūku, and Te Whatuiāpiti people. Governor Gray also provided a contribution to support the education of Māori and all other New Zealanders. The College continues to be supported by the endowment lands. Te Aute, renowned for its famous graduates, is synonymous with quality Māori leadership and continues to provide an environment which is conducive to the development of our young people as leaders.

In 1884 Te Aute Trust Board was formalised to look after Te Aute College Endowment Lands. The Trust is subject to a Private Act, namely the Anglican Church Trusts Act 1881 ("the Act"). The land remains in the Trust's ownership to this day.

In 1906 a Commission of Enquiry was conducted and the resulting recommendation was that the lands be subdivided into 23 blocks for lease. Ten years later the Trust Board formally signed the leases following the Anglican Church model of tenure known as the "Glasgow Leases". After this the Trust was left with 307 hectares of farmland, which the College farmed. The full running of the farm was handed over to the Trust from the College in 1976 when Te Aute College integrated to the state school system.

The purpose of the Trust is to provide education funding to Te Aute College and to protect and enhance the value of the Trust using the endowment lands.

Structure Diagram

The Project – Te Aute Farms Ltd

In 1998 the Trust purchased an adjoining lease block of 377 hectares to add to its established farming operations. It was in a run down condition and required the Board to supply major inputs, including fencing, fertiliser and pasture renewal. During a business planning process the Trust decided to separate the farm from the hostel and lease management operations.

This separation was because the accounts from the farms were boosting the Trust earnings above that which they could actually spend through the Trust. In 2003 the farm was set up as a separate business, Te Aute Farms Ltd ("TAFL"), with a single shareholding held by the Trust. All farm business including livestock, plant, assets and liabilities were transferred to the new company. The business became more efficient and focussed on commercial farming.

The Trust appoints a Farming Committee, which comprises three of its trustees. These trustees then became directors of TAFL by virtue of their appointment on to the Committee. Recently there has been an exception to this rule where the Trust has allowed a former Trust member, who has resigned from the Board, to remain on the Farming Committee. This is a first but was considered necessary to provide continuity and retain institutional knowledge.

The vision of the Trust is to have a top-performing farm that has sustainable and environmentally friendly practices where all the information gained in the operations can be shared. The Trust leases TAFL's 784 hectares of freehold land at an annual rate of $120,000.

The Trust also contracts TAFL as lease inspectors for the Trust's 1400 hectares of leasehold property.

The Trust's secretary, Palairet & Pearson, undertake all financial farm accounts and physical reviews of the farm's performance.

Business Environment

The Trust is responsible for managing the endowment lands, which are subject to the Glasgow Leases. These leases are an Anglican Church model of tenure, which effectively creates a property interest similar to that of a free-hold title because these leases operate over the land in perpetuity. All improvements on the land are owned by the lessee. The lease can only be reviewed every 21 years and the review is based on improved land value only. To date only four leases have been reviewed, the last being in 2000. Te Aute Trust Board is an active purchaser of the Glasgow Leases, the most recent being the purchase of the additional 377 hectares in 1998 and 100 hectares in 2001.

The Trust is also the proprietor of Te Aute College. The Ministry of Education entered into a Deed of Agreement on 1 October 1975 to run the school on the land. Te Aute Trust Board also owns the hostel at Te Aute. The Trust Board has authorised the College Board of Trustees to act on its behalf to run the boarding hostel.

Te Aute Trust Board has investigated other areas of investment, including commercial leases. However, based on the advice that "if you don't know anything about it then do not attempt it", it withdrew.

The Trust has never sold any land. It considered selling one block that a local hapū claimed to be wahi tapu. The land was to be sold on the condition that the purchaser provides the Trust with the right of first refusal if the property were to be on-sold. This sale has not proceeded.

Governance

The Trust Board has nine members, which are appointed by the Anglican Church and those appointments are at the Church's discretion. The Trust Board's ideal representation is a cross-section of people including "women, farmers, bishops and business".

In the mid 1980's there were only three Māori members on the Board. There were some discussions around an appointment policy, recognising the Trust's land was Māori land and that representation should also be mainly Māori. This was agreed to informally, however, the "best person for the role" is a priority. The Trust wants people on the Board who can compliment the skills already available. The Church looks for candidates who can add a new dimension to the way the Board thinks and performs.

Decision-making is carried out jointly by the Managing Directors and the Trust. The Managing Directors provide the Trust with options and background information and the Trust authorises or declines these recommendations. The Trust makes the decisions relating to the distribution of the revenue proceeds that its assets generate.

The Trust is under an obligation to consult only with the Church. Recently the Trust created a policy to provide for an annual consultation with the original donators of the land who are the tangata whenua. This consultation provides an overview on the following issues:

• Business status;
• Land maintenance and usage;
• Future planning; and
• Major projects, in compliance with the RMA.

Trustees are expected to provide comprehensive input otherwise their usefulness on the Board becomes questionable. There is no specific policyregarding appointment terms, and trustees can be re-appointed to the Board. There is only one trustee who has attended an Institute of Director's training course. Most of the other trustees have had similar training through their involvement in other external environments.

The Trust is very clear about the distinction between governance and management. The Trust stays out of decisions such as running the school. These aspects are left to the school. Professor Whatarangi Winiata initiated good benchmarks for governance in the mid-80's which were recorded in the minutes and are still followed today.

The extent of the Trust's relationship with the school is by appointing four of its members to the School Board. These members report back to the Trust on specific issues. The Trust is also required to approve the budgets of the school because it provides the school's funding for hostels and relevant maintenance.

There is currently no induction training for new directors to TAFL and the Farming Committee has expressed concern with this and has decided to prepare for succession through associate director positions. The Trust is looking at incorporating this into its own practices as it finds that when people come on as new trustees it takes a while to get used to the issues. TAFL finds it very important that its governors have a succession policy.

An important relationship for the Trust is the one it has with its lessees. The Trust is actively building relationships with the current lessees to ensure the Trust is viewed as a good contender for any lease sales in light of the competition for the leases. The Trust also sees that good relationships with neighbouring farms are important for the survival of the Trust's Māori farmer training programme, where lessees may be able to  provide access to their farm operations.

Strategic Thinking

The farm has a business plan, which outlines the land development and management policies to be implemented. A priority area within the business plan is technology and genetics. The business plan is updated every two years and is an important guideline for operations and governance. It also sets targets that are pursued by the farm operators. A target that has recently been exceeded is the increase in stock. Strategic planning meetings are undertaken by:

• the Manager;
• the General Hand;
• three directors;
• a Supervisor (Palairet & Pearson); and
• an Ag Quality consultant (independent)

TFAL had a series of meetings to identify how it was going to do things in the future and this produced a number of ideas. These ideas formed a strategic business plan. Factors included in TFAL's business plan are:

• An outline of the strengths, assets and threats of the business;
• The identification chart of the different classes of land for specific uses;
• A business review and consultancy schedule;
• The format to report back to the Church and tangata whenua.

New projects or ideas must first be put before the Trust or TFAL as a formal proposal. Ideas that better the farm or generate profit are likely to proceed.

The Trust is interested in investing in research and development if an opportunity arises in relation to the farming operations.

Risk Management

Often risk management processes require contracting the expertise of other people. Te Aute Trust Board has a large number of consultants that it uses. The consultants are chosen for the specific fields that they specialise in, and if they can add value their recommendations will be implemented. Such consultants provide quality information and expert advice to assist the Trust to make informed decisions, thus reducing risk. An area of financial risk is managed by ensuring the Trust works within the Charitable Trust framework to ensure it retains its charitable status.

Compliance with the Ministry of Education lies with the school's Board of Governors rather than the Trust through delegation.

The Trust uses insurance brokers and obtains trustee's liability insurance. The Secretary is responsible for ensuring that all integrity is maintained and there is no risk to policy due to non-compliance.

There can be conflicts of interest as the Trust is an active purchaser of the Glasgow leases and it is also the authority that is required to authorise any transfer of lease. Despite this, the Trust is obligated to sign the lease transfer if the new lessee is responsible, respectable and solvent.

The Trust does not currently have a register for conflicts of interest. However, if any conflict occurs it is recorded in the minutes. Additionally, when Te Aute Trust Board is exercising any of its shareholder rights in respect to TAFL then the Trustees who are also directors of TAFL abstain from voting on any relevant issue.

There is no dispute resolution process. This is something that is a little concerning to the Board. It has been lucky to date as any disputes the Trust has had have always been able to be resolved. The disputes that arise are usually between the school governors and the Trust. The Trust recognises the important role of the Bishops in resolving such disputes.

Operations

The Trust delegates the running and management of the hostels to a Board of Governors due to the compliance requirements set by the Ministry ofEducation.

The Trust gets its secretarial and accountancy support from an external agent, Palairet & Pearson. This includes conducting an independent analysis on how TAFL is doing. This report is provided directly to the Trust.

There are two permanent employees on the farm: the manager and the general hand. They are constantly up-skilling themselves by attending farm management and other specialised courses, and going to field days. Both employees have been pushing the boundaries, with targets being exceeded and objectives being met. Notably, in 2005 TAFL was the Eastern Regional winner and finalist in the Māori Farmer of the Yearcompetition.

Both employees have contracts and their performance is managed by assessing their achieved targets against those in the business plan. This is undertaken independently. Incentive payments have been used from time to time in the contracts. The directors of TAFL meet with the farmers every two months and there is an open phone policy.

Currently the farm has a feed monitor consultant who uses the farm as a model and provides operations feedback with assessments on the growth of the grass each week.

Financial Summary - Te Aute Farm Ltd