When I was involved, the average cash reserves of ITOs were six months operating expenditure. Some had larger reserves and justified it to the TEC it on the basis of future spending plans. Given that ITOs don’t typically hold much in the way of physical assets that seemed an OK balance between a guideline with a process for those at the margins. So the TEC should be able to explain to the Minister the specific circumstances of every ITO that holds large cash reserves of greater than six months. In theory.

ITPs had $250m in “current cash” at the end of 2008, as well as $1.4B in longer-term assets. ITPs train roughly the same number of people as ITOs.

The level of ITO reserves as a proportion of annual ITO funding dropped from 2003 to 2008.

While one or two ITOs have quite significant reserves, most do not. Many of those that do have longstanding historical reserves gifted to them by industry (cf. endowments).

I meant that ITOs don’t have a lot of physical assets that need maintaining and, more importantly, replacing so have less need to build reserves than other TEOs that do have physical plant and buildings.

Six months might be a lot but TEC have had a couple of reviews of this area so have had the opportunity to talk or regulate this average down.

The individual risk is sorted out by the explanation to the TEC that goes with those having more than 6 months reserves.

Last time I looked there were 3 or 4 ITOs that the TEC ought to have had a discussion with about the ITO’s plans.

Has the TEC identified a lack of tools to implement policy (if it exists), a failure to implement policy with the tools it has, or something else?