164

NEW ZEALAND GAZETTE

No. 9

“Liquid Funds Ratio” in respect of an institution is the ratio calculated as follows and expressed as a percentage:

Liquid Funds + Available Credit Lines
———————————————
Operating Cash Payments

“Maximum Permitted Debt/Equity Ratio”, in respect of an institution which is party to an Approved Borrowing Agreement,
means a debt/equity ratio specified in that Approved Borrowing Agreement, that institution’s exceeding which (or meeting
or exceeding which) will constitute or result in a Default Event.

“Maximum Permitted Liabilities to Assets Ratio”, in respect of an institution which is party to an Approved Borrowing
Agreement, means a liabilities to assets ratio specified in that Approved Borrowing Agreement, that institution’s exceeding
which (or meeting or exceeding which) will constitute or result in a Default Event.

“Minimum Required Interest Cover Ratio”, in respect of an institution which is party to an Approved Borrowing
Agreement, means an interest cover ratio specified in that Approved Borrowing Agreement, that institution’s failure to
exceed which (or failure to achieve or exceed which) will constitute or result in a Default Event.

“Operating Cash Payments” is the amount recorded as cash paid or applied to operations in the audited annual or budgeted
(as the case may be) statement of cash flows of an institution.

“Operating Cash Receipts” is the amount recorded as cash received from operations in the audited annual or budgeted (as
the case may be) statement of cash flows of an institution.

“Operating Surplus/Deficit” is the amount recorded as the net surplus or deficit (as the case may be) in the audited annual or
budgeted (as the case may be) statement of financial performance (financial statements component) of an institution,
adjusted by deducting any non-recurring revenues and adding back any non-recurring costs (in each case as reflected in the
relevant statement of financial performance). An example of non-recurring revenue is a profit on the sale of an asset.
Examples, of non-recurring costs include losses on asset disposals or revaluations and restructuring costs. An item does not
qualify as non-recurring simply because it is unplanned or unexpected.

“Reforecast”, in respect of an institution, means any financial forecast or similar document which is prepared by or for an
institution in relation to a financial year in respect of which there is already a council-approved group budget, and which is
either approved by the council of the institution as an amendment to or update of that group budget or regarded by the chief
executive of that institution as forecasting or reflecting, more accurately overall than that group budget, that institution’s
likely actual financial performance for that period; and includes any working papers upon which that financial forecast is
based.

“Total Revenue” is the amount recorded as total revenue or total income in the audited annual or budgeted (as the case may
be) statement of financial performance of an institution.

“risk criteria” means any of the criteria set out below.

An “unfavourable trend”, in respect of a particular financial ratio and an institution’s audited group financial statements for
five consecutive financial years, exists if:

(a) the average of that ratio calculated with reference to the audited group financial statements for each of the third,
fourth and fifth (in time) of those financial years is less favourable to that institution than the average of that ratio
calculated with reference to the audited group financial statements for each of the second, third and fourth (in time)
of those financial years; and

(b) the average of that ratio calculated with reference to the audited group financial statements for each of the second,
third and fourth (in time) of those financial years is less favourable to that institution than the average of that ratio
calculated with reference to the audited group financial statements for each of the first, second and third (in time) of
those financial years.

Other words and phrases defined in the Education Act 1989 bear the same meaning in this notice.

Criteria for Risk Assessment

The criteria listed in the table below enable an objective assessment to be made of whether an institution or the operation or
long-term viability of an institution is at risk and, if so, the level of such risk. The level of risk determines the nature of action
available to the Secretary or the Minister. Each of the criteria is marked in columns 1, 2 or 3. The marking indicates which
level of risk the criteria are relevant to assessing. The key to the table is:

Level 1 = relevant to assessing whether an institution may be at risk

Level 2 = relevant to assessing whether an institution may be at risk and/or whether the operation or long-term viability of
an institution is at risk

Level 3 = relevant to assessing whether an institution may be at risk and/or whether the operation or long-term viability of
an institution is at risk and/or whether there is a serious risk to the operation or long-term viability of an
institution