Media release - Commerce Committee

Select committee report on Television New Zealand Limited

1 February 2001

¡§Today the Commerce Committee presented it report to the House on the 1999/2000 financial review of Television New Zealand Limited¡¨, said Chairperson David Cunliffe.

The committee reported on the following matters:

„h the net surplus after tax for the 1999/2000 year was $43.1 million
„h the Minister of Broadcasting has released a draft TVNZ charter
„h TVNZ has announced details of its digital television plans
„h we are concerned that TVNZ did not disclose its digital television plans at the hearing of evidence to enable proper parliamentary scrutiny of them
„h additional amounts have been written-off in respect of TVNZ¡¦s earlier digital television proposal
„h we still have some concerns about governance procedures at TVNZ, in particular the operation of the Audit Committee and the need for more information about the Remuneration Committee in TVNZ¡¦s annual report
„h there were significant ¡§unadjusted audit differences¡¨ at year-end and the external auditor and TVNZ disagreed on the application of the policy for amortising programme costs
„h staff salaries have continued to rise despite efforts to reduce them with 14 more staff earning over $100,000 than last year
„h legal fees concerning the abandoned appeal of the Hawkesby settlement were nearly $140,000
„h advice from the Chief Executive in respect to a complaint about a Holmes programme led to concern about the robustness of TVNZ¡¦s complaints procedure.

Two issues, the company¡¦s digital television plans and complaints procedure, could have been fully disclosed to the committee utilising parliamentary procedures to hear evidence in private or secret, but were not.

The report is attached:

1999/2000 Financial review of
Television New Zealand Limited

Report of the
Commerce Committee

February 2001

Television New Zealand Limited

Recommendation

The Commerce Committee has conducted the financial review of the 1999/2000 performance and current operations of Television New Zealand Limited and recommends that the House take note of its report.

Introduction

We have reviewed the performance in the 1999/2000 financial year and the current operations of Television New Zealand Limited. Appendix A to this report sets out our approach, our membership and the evidence and advice received. We wish to draw the attention of the House to the following matters.

Summary

„h the net surplus after tax for the 1999/2000 year was $43.1 million
„h the Minister of Broadcasting has released a draft TVNZ charter
„h TVNZ has announced details of its digital television plans
„h we are concerned that TVNZ did not disclose its digital television plans at the hearing of evidence to enable proper parliamentary scrutiny of them
„h additional amounts have been written-off in respect of TVNZ¡¦s earlier digital television proposal
„h we still have some concerns about governance procedures at TVNZ, in particular the operation of the Audit Committee and the need for more information about the Remuneration Committee in TVNZ¡¦s annual report
„h there were significant ¡§unadjusted audit differences¡¨ at year-end and the external auditor and TVNZ disagreed on the application of the policy for amortising programme costs
„h staff salaries have continued to rise despite efforts to reduce them with 14 more staff earning over $100,000 than last year
„h legal fees concerning the abandoned appeal of the Hawkesby settlement were nearly $140,000
„h advice from the Chief Executive in respect to a complaint about a Holmes programme led to concern about the robustness of TVNZ¡¦s complaints procedure.

Two issues, the company¡¦s digital television plans and complaints procedure, could have been fully disclosed to the committee utilising parliamentary procedures to hear evidence in private or secret, but were not.
Financial performance

This is the first year TVNZ has had a 30 June balance date. The following table sets out TVNZ¡¦s unaudited financial performance for the period 1 July 1998 to 30 June 1999 and audited results for the period 1 July 1999 to 30 June 2000.

Table 1.

1999/2000 $ million 1998/99 comparison $ million
Operating revenue 473.4 429.3
Operating surplus before one-off costs 88 71.7
One-off costs (18.8) (10.4)
One-off profits from sale of investments n/a 161.6
Net profit after taxation 43.1 197.3
Dividend 30.2 127.2

Group revenue increased by $44.1 million to $473.4 million and advertising revenue increased from $279 million to $295.8 million (a six percent increase).

Performance against Statement of Corporate Intent

TVNZ¡¦s results against the financial targets contained in the Statement of Corporate Intent (SCI) are as follows:

Table 2.

For the year ending 30 June 2000 Actual 2000 SCI target 2000
NPAT to average equity 13.2 percent 16.1 percent
Equity to total assets 69.3 percent 70 percent
Interest cover (times) 29 20.8
Total revenue to assets 98.3 percent 86 percent
Accounting value of the Crown¡¦s investment $333.5 million $335.7 million

Profitability

TVNZ reported a net profit after tax of $43.1 million for the year ending 30 June 2000. This compares with an unaudited net profit after tax of $197.3 million for the year ending 30 June 1999. However, that year included substantial profits from the sale of shareholdings in Clear Communications Limited and Sky Network Television Limited and some one-off costs. If those profits from the above sales and one-off costs were excluded, the comparable net profit after tax was $35.7 million.

The improved financial performance is primarily due to strong growth in revenue including six percent growth in advertising revenue. This represents the highest annual advertising revenue for the company and reflects the high ratings performance for both TV ONE and TV2. The company currently has its highest rating on those channels since 1996. The profit result also reflects improved financial performance by Broadcast Communications Limited (BCL), TVNZ Australia, TVNZ Satellite Services and Moving Pictures.

Profitability may be affected next financial year, however, by the falling value of the New Zealand dollar. Based on current programme acquisition commitments a five-cent fall in the US/NZ dollar rate adds approximately NZ$7.5 million to programme costs. This, plus the possible impact of a flat economy on advertising revenue, will have a significant effect on the financial results for the coming year, according to TVNZ.

We consider that TVNZ¡¦s financial performance for the year under review has been satisfactory, although it performed below budget after allowing for some one-off costs. These were the settlement with Mr Hawkesby ($5.9 million) and the write-off of costs related to the digitial television proposal ($12.9 million). We have some concerns about the effect of the low dollar on TVNZ and await the reporting of 2000/01¡¦s financial results.

Equity

Equity in TVNZ has continued to grow and it now has substantial retained earnings. Since 1996 paid-up capital has remained constant at $140 million, whereas retained earnings have increased to approximately $193 million this year from $96 million in 1996. Moreover, total assets employed as at 30 June 2000 are funded 69 percent by equity.

Recent media comments have suggested that the Government may seek to review the capital structures of some State-Owned Enterprises (SOE), including TVNZ. We note that the SCI provides for a review of the capital structure of the company once key components of the charter for TVNZ have been developed and the route to digital television established.

Shareholding Ministers and TVNZ will need to consider the company¡¦s capital structure and the future capital requirements of the company. The capital requirements of the digital strategy will be very important in that regard, although we were informed that the digital television plan requires minimal capital outlay. We will watch developments in this area very carefully.

Broadcast Communications Limited

We note that Ministers have signalled an interest in examining whether BCL should be separated as a stand-alone SOE. If that were to occur, it would represent a significant change to the nature and scope of the TVNZ group of companies. TVNZ would inevitably be a markedly smaller organisation with a narrower scope of operations and financial performance could be affected.

Draft charter

The Minister of Broadcasting released a draft TVNZ charter for comment. The draft charter indicates in board terms the form of broadcast content TVNZ is to provide and may add more ¡§public broadcasting¡¨ objectives. Submissions closed on 31 October 2000. TVNZ expects the charter to have a significant impact on the organisation by providing it with a publicly endorsed raison d¡¦etre. It believes that the staff of TVNZ will embrace the charter when it is finally approved.

TVNZ anticipates that meeting the charter will lead to increased programming costs. Whether it leads also to a reduced dividend depends on funding decisions yet to be made through the Government¡¦s broadcasting policy development programme. The company will endeavour to meet the requirements of the charter in such a way that it does not lead to a significant lessening in TVNZ¡¦s combined audience share, ratings and revenue.

A number of initiatives have been taken to anticipate the introduction of the charter, and to reduce the ¡§lead time¡¨ between conception and implementation. These include testing the commercial viability of prime time low advertising zones on TV ONE, investigating a business case for regional news, and moving arts and culture into prime time.

We consider that the development of a charter will influence TVNZ¡¦s future and the Government should proceed with caution to ensure the long-term profitability, viability and value of the company. Government members strongly endorse the direction of the charter.

Digital television

Write-off of digital television costs

As at 31 December 1999 TVNZ incurred approximately $14.3 million on developing its digital television proposal. In our last financial review on TVNZ we raised concerns about the write-off of $6.8 million after the Government decided not to proceed with TVNZ¡¦s digital strategy. We were assured that the remaining $7.5 million in costs had future value.

The annual report for the period ending 30 June 2000 shows that TVNZ has now written-off $12.9 million. Only $1.6 million of capital costs are now thought to have value. TVNZ informed us that the equipment concerned cannot be readily sold or deployed for alternate use. Accordingly it was deemed appropriate by the company and its auditors to write this cost off. We are surprised that an additional write-off occurred subsequent to our last report.

Digital television proposal

TVNZ appeared before the committee on Thursday, 9 November. It was unable to respond fully to questions about its future DTV plans. On Monday, 13 November TVNZ and Telstra Saturn Limited (TelstraSaturn) signed a memorandum of understanding. TVNZ and TelstraSaturn intend to form a joint venture services company, which will provide a range of services to TelstraSaturn, and potentially other industry players as well. Further, TVNZ will provide its satellite transponder capacity to the joint venture company, allowing TelstraSaturn to access that capacity to provide a national pay-TV service, while TVNZ can provide a national digital free to air service. This service should be available around April/May 2001, according to TVNZ.

The benefits of digital television are:

„h clearer pictures and sound for viewers
„h massive capability for multiple channels catering to all tastes and demands
„h enhanced and interactive programming
„h e-mail and Internet access through television sets
„h bundled services of telecommunications and entertainment products across common technology platforms.

The benefits to TVNZ include:

„h low cost and effective establishment of the first genuine digital free to air platform for New Zealand
„h opportunities to expand and enhance New Zealand content
„h commercial leverage of TVNZ¡¦s skills and resources in the infrastructure of broadcasting to provide new revenue streams to the group
„h opportunity to develop a strategic relationship in the area of convergence with an international partner.

The deal is non-exclusive and both companies hope that their agreement may act as a catalyst to promote unconditional open access, on commercial terms, to all set-top boxes. TVNZ has been in commercial discussions with Sky Network Television Limited. However, to date an agreement has been unable to be reached. The main issue for TVNZ is unconditional open access, on commercial terms, to set-top boxes for all service providers.

We look forward to following developments regarding digital television and the commencement of services during the middle of this year. We note that TVNZ has no plans to become a pay television broadcaster. It is unacceptable that TVNZ did not discuss its plans at the committee hearing as we play an important scrutiny role pursuing accountability on the public¡¦s behalf. Next time an SOE intends to make a major announcement that roughly coincides with a select committee appearance, we would expect a more timely approach to co-ordinate the release of such information at a mutually advantageous time to allow proper parliamentary scrutiny.

Governance issues

High board member turnover

During the period under review a significant number of board members left the company - five out of a total of eight. TVNZ informed us that it is not normal for more than half the total number of board members to change in any one year, and that the change of Government was a factor in the high turnover that occurred earlier in 2000. The appointment of board members is entirely the prerogative of the company¡¦s shareholding Ministers.

An almost totally new board can cause teething problems, given the loss of institutional knowledge and a different mix of skills and experience. TVNZ informed us that the new board members are working diligently to become conversant with the various issues facing the company. TVNZ implemented a comprehensive induction programme for new directors.

Audit Committee procedures

We have concerns about the procedures followed by the TVNZ Audit Committee. In our last financial review report we identified inadequate governance procedures as an area of concern and something which required the attention of the new board at TVNZ. We note that the board has strengthened key areas such as the authorisation of salaries over $160,000. However, there remain some areas of concern.

External auditors were not present for all meetings of the Audit Committee. TVNZ informed us that external auditors are invited to attend Audit Committee meetings to discuss the matters that are relevant to the performance of their functions. There has never been any intention to exclude them from the relevant parts of the Audit Committee meetings. However, according to TVNZ, there may be items on the agenda that have no relevance to the external auditors and they are not invited to be present for discussion on these matters. We note that the Audit Plan was tabled at the Audit Committee but no opportunity was given to the external auditors to discuss or obtain feedback on the plan and that this is unusual.

The external auditors were invited to the year-end meeting of the Audit Committee, at which time they raised a number of audit issues which they believed were important. These related to ¡§unadjusted audit differences¡¨. However, we understand that there was no discussion on the issues during the time the external auditors were present. We understand that it would be expected for the Audit Committee to discuss the specific and significant audit issues raised by the external auditors, but it did not do so. This is equally as unusual.

TVNZ informed us that the external auditors had frequent discussions with management on their ¡§unadjusted audit differences¡¨. TVNZ management thoroughly briefed the Audit Committee on the issues of disagreement between TVNZ and the external auditors. According to TVNZ, the Audit Committee was well informed of the issues and the point of difference between TVNZ and the external auditors, and felt there was no need to further debate the issues upon which the company and the external auditors differed in opinion.

The gap set by TVNZ between the final year-end Audit Committee and the board meeting scheduled to approve the accounts was one day only. It is critical there is sufficient time between the meetings to permit appropriate consideration and resolution of audit issues. TVNZ has now addressed this issue by providing for a three-day gap between the Audit Committee and full board meeting prior to release of both annual and interim results.

Unadjusted audit differences

The two largest unadjusted differences related to the treatment of the Olympic Games and Rugby World Cup sports rights. While the external auditors considered that TVNZ should write down the asset to Olympic Games and Rugby World Cup sports rights (amounting to $9.4 million and $3.6 million, respectively), TVNZ did not, and these amounts were not written down in TVNZ¡¦s accounts. TVNZ considers it has been consistent in its application of the policy of recognising sports costs in the period of the event and informed us that the Audit Committee had endorsed the treatment.

Accounting policy changes

During the period under review TVNZ changed the basis of amortising its programme costs. The application of the policy in relation to current affairs programmes at year-end was a point of disagreement between TVNZ and the external auditors, and related to the company¡¦s interpretation of the new policy, which the auditors considered an amendment to the policy. We were advised by the Audit Office that the external auditors believe the new policies are clear and should not be amended.
Scope for improvement

We consider there is still scope for further improvement of TVNZ¡¦s governance procedures. The Audit Committee has met four times but the involvement of the external auditors in these meetings has been inadequate. Similar attitudes towards disclosure were displayed before the select committee about the company¡¦s DTV plans and complaints procedure. The Audit Committee is a useful forum for debate between the auditors and representatives of the board on issues of financial reporting, and the effectiveness of internal control and processes.

We believe the Audit Committee is a vital part of the governance procedures of an organisation and that, unless there are exceptional circumstances, the external auditors should be in attendance at Audit Committee meetings and afforded the opportunity to address significant issues. Discussions between management and the external auditors are no substitute for robust debate at board level, and we consider more consideration be given to the concerns of the external auditors in future. We also recommend more emphasis on governance processes be given in the annual financial report.

Staff salaries

Increase in number of employees earning over $100,000

We expressed serious concerns about the level of some staff salaries in our last financial review report on TVNZ. We also noted that the Chairman of TVNZ ¡§had significant concerns regarding the level of remuneration paid to some staff¡¨. The number of employees earning over $100,000 at TVNZ has increased to 124 in 1999/2000. During the period under review the Chairman indicated that salaries would be renegotiated downwards. The following table sets out disclosed remuneration levels paid to TVNZ staff in recent times.

Table 3.

1/1/1998 ¡V 31/12/98 1/1/1999 ¡V 30/6/99 1/7/1999 ¡V 30/6/2000
No. of employees earning $100,000 or more 110 N/a 124
No. of employees earning $200,000 or more 14 16 (annualised) 18
Highest bracket $760,001 - $770,000 740,000 ¡V 760,000 (annualised) $770,001 - $780,000

TVNZ now employs more people earning over $100,000 than ever before, and the highest bracket paid has also increased. TVNZ has an annual remuneration review procedure for all staff. It benchmarks all remuneration to relevant market and industry levels in New Zealand, and where relevant, offshore. It would be interesting to compare the salaries TV3 pays its staff.

We note that there has been no formal contact between the shareholding Ministers and the board on the issue of remuneration. We also note that TVNZ has expanded its Australian, BCL and IT operations, established a new internet portal subsidiary Nzoom Limited, and made permanent roles previously undertaken by consultants.

Remuneration Committee

No mention is made of the Remuneration Committee in TVNZ¡¦s annual report. The committee consists of members of the board and is chaired by Dr Ross Armstrong. It is an official subcommittee of the board, with its meeting attended by appropriate executives. It approves policy and authorises remuneration levels of staff above $160,000 per annum (this includes presenters). The committee meets three or four times each year, and on other occasions as necessary, for example, new appointments.

We are surprised that staff salaries have continued to rise despite undertakings being given to the committee and publicly to reduce them. We want to see more information about the operation and work of the Remuneration Committee provided in future annual reports, starting with the 2000/01 period. The composition and activities of the committee should be reported in a similar way to the Audit Committee and we would like to see some evidence of the robustness of the benchmarking system.

Hawkesby affair

Subsequent to arbitration TVNZ reached a settlement with Mr Hawkesby and this is represented in the accounts as a one-off cost of $5.6 million. TVNZ has decided not to appeal the arbitration. The company sought the advice of two leading Queen¡¦s Counsel experienced in arbitration. Their advice was that the chances of TVNZ succeeding in an appeal were not high. Having received this advice, the board decided to abandon the appeal it had filed. Legal fees totalling $137,891 were incurred in relation to the appeal.

TV3 commenced legal proceedings against TVNZ in relation to Mr Hawkesby¡¦s move from the former to the latter. We note that the proceedings brought by TV3 have been settled out of court. It has been reported that the settlement was in the region of between $300,000 and $800,000.

Complaints procedure

During the course of our review, questioning regarding a complaint to TVNZ by Mr Jeremy Punnett, a New Zealander based in London, raised concerns about the way TVNZ handles complaints about programmes. Although the complaint made by Mr Punnett concerned a matter of considerable public interest, we draw no conclusion about the merit of the complaint, but we do about the way it was handled.

On 4 October 2000, Mr Punnett complained by letter to TVNZ about the behaviour of a TVNZ reporter concerning a Holmes show investigation into an advertisement by Mr Richard Poole in major daily newspapers, and a lack of initial objectivity shown by TVNZ.

At the select committee hearing on 9 November, the Chief Executive said he was aware of an article in The Independent that related to Mr Punnett¡¦s complaint. He said ¡§¡K given the headline and the nature of the allegations, whilst I have not received, and I am not aware that the company has received a specific complaint from the gentleman referred to in the UK, I have asked for a report to basically give me the satisfaction that there is no substance to the allegations.¡¨ Evidence was given by both the Chairman and the Chief Executive of TVNZ that the complaints procedure was a robust one and just a few months previously a Queen¡¦s Counsel had completed a check of the complaints procedure to ensure it was robust.

Mr Punnett¡¦s letter of 4 October was not treated as a formal complaint or possible formal complaint and therefore according to TVNZ¡¦s complaints procedure, it was not drawn to the Chief Executive¡¦s attention by the Programme Standards Officer.

After the select committee hearing, Mr Punnett was contacted by the Chief Executive and invited to lodge a formal complaint.

We reached the following conclusions. Where a serious complaint, such as that of Mr Punnett, is made about a programme, we believe that, unless there is good reason, it should be referred to the formal complaints procedure.

Perhaps more importantly, all complaints (including all adverse allegations about programmes) should be acknowledged within a prescribed timeframe. If a complaint is not considered to be a formal complaint, then the complainant should be advised that the complaint has been received and that the complainant is entitled to make a formal complaint to the broadcaster. The complainant should be advised of the procedure for doing so and have every opportunity to have their complaint dealt with as a formal complaint should they wish.

We affirm the existing procedure that formal and possible formal complaints should be referred to the Chief Executive.

We are concerned that, without the committee¡¦s questioning, Mr Punnett¡¦s complaint may not have ended up as a formal complaint. We consider that the classification of complaints is fundamental to the integrity of the complaints procedure. This confusion would not have arisen had the Chief Executive provided full information to the committee.

APPENDIX A

Approach to this financial review

Pursuant to Standing Order 330, the annual report of Television New Zealand Limited was referred to the Commerce Committee on 14 September 2000. We were required to conduct this financial review and report to the House within six months of the referral of the annual report. We commenced our financial review by developing a financial review questionnaire which we forwarded to Television New Zealand Limited for a response prior to calling the Chairman of the board and Chief Executive to appear before us.

We met on 9 and 16 Novmber 2000, 7, 14 and 15 December 2000 and 1 February 2001 to consider the financial review. Our review took four hours and 30 minutes.

Committee members

David Cunliffe (Chairperson)
Kevin Campbell (Deputy Chairperson)
Steve Chadwick
Hon Ruth Dyson
Gerrard Eckhoff
Warren Kyd
Dr the Hon Lockwood Smith
Pansy Wong

Committee staff

Alan Witcombe (Clerk of the Committee)
Matthew Andrews, Parliamentary Officer (Select Committees)

Evidence and advice received

In addition to the 1999/2000 annual report and corporate plan, we considered the following evidence and advice during this financial review:
„h Response to the Financial Review Questionnaire, dated 3 November 2000 (FR/TVNZ/3)
„h Responses to the Commerce Committee¡¦s supplementary questions, dated 24 November 2000 (FR/TVNZ/12)
„h TVNZ presentation to the Commerce Committee (FR/TVNZ4)
„h Audit Office briefing report, dated 9 November 2000 (FR/TVNZ/8)
„h Crown Company Monitoring Advisory Unit briefing report, dated 9 November 2000 (FR/TVNZ/7)
„h Clerk of the Committee briefing report, dated 9 November 2000 (FR/TVNZ/5)
„h Letter from the Chief Executive of TVNZ, dated 11 December 2000 (FR/TVNZ/18)
„h Letter from the Chief Executive of TVNZ - addendum to correspondence of December 11, dated 13 December 2000 (FR/TVNZ/19)
„h Key press clippings from committee staff (FR/TVNZ/6).

APPENDIX B

Complaints procedure

On 4 October 2000 Mr Jeremy Punnett, a New Zealander based in London made a complaint to TVNZ on two issues related to the Holmes show investigation of Mr Richard Pool and his campaign. Mr Punnett specifically complained about:

„h the behaviour of a TVNZ reporter
„h the lack of initial objectivity shown by TVNZ.

Mr Punnet transmitted his complaints in a letter (18 pages of material) to the Chairman of TVNZ and copied the letter and other documents to the Chief Executive, the General Manager ¡V TV ONE, Paul Holmes and the Minister of Broadcasting, Hon Marian Hobbs. The complaints were discussed in an article in The Independent titled ¡§Is TVNZ a lapdog of the New Right¡¦s PR campaign¡¨, dated 1 November.

At our hearing of evidence from TVNZ on 9 November the Chief Executive told us that ¡§¡K given the headline and the nature of the allegations, whilst I have not received, and I am not aware that the company has received a specific complaint from the gentleman referred to in the UK, I have asked for a report to basically give me the satisfaction that there is no substance to the allegations.¡¨

The Chairman of TVNZ assured us that the company¡¦s complaints procedure had been recently assessed and, consequently, is regarded as robust.

As we began consideration of our report to the House on the financial review of TVNZ, it was brought to our attention that Mr Punnett had written to TVNZ on 4 October, making two complaints, and had not received a response at the time of the hearing.

TVNZ and Hugh Rennie QC, who undertook an independent audit of the complaints procedure in 1999, consider that the procedure is appropriate. In their opinion, the procedure in regard to dealing with formal complaints relating to what the station has screened is robust.

Complaints are received and logged in three ways at TVNZ. First, correspondence about on air programmes that are labelled as a ¡§formal complaint¡¨ or quote the Broadcasting Act 1989 are immediately referred to the Programmes Standards Officer and proceed immediately down the path of the formal complaints process. Up to 300 such complaints are dealt with by the company in this way annually.

Second, correspondence where the intent is not specific or clear, but it appears that the correspondence may have a formal complaint in mind, are likewise referred to the Programmes Standards Officer, and a letter sent to the complainant advising how the process works and inviting them to confirm their wish to go through the statutory process.

Third, complaints about matters other than what has been screened, such as people trying to influence news coverage to reflect or solicit support for their point of view, are sent to the relevant editors or managers for consideration and reply. TVNZ receives many letters, e-mails, and telephone calls that contain ¡§complaints¡¨ about the company¡¦s activities.
Table 4. Complaints procedure

Criteria Forwarded for response Reported to the Chief Executive Acknowledged on receipt Punnett experience
Formal complaint Labelled ¡§formal complaint¡¨ or identifies broadcast programme or cites Broadcasting Act or code Programmes Standards Office Monthly summary report Yes Not considered applicable on 4 October 2000

Complaint reassessed and treated as formal complaint in November
Possible formal complaint Does not specify Broadcasting Act or code but contains serious allegations which may be referred to BSA Programmes Standards Officer Monthly summary report Yes, including advice about formal complaint process in certain circumstances Notification of formal complaint process not provided
General complaint Does not refer to a screened programme Relevant programme manager e.g. news Not routinely reported Yes Initially treated as a general complaint despite referring to Holmes show

TVNZ informed us that there was nothing in Mr Punnett¡¦s original correspondence suggesting it was a formal complaint in the terms of the Broadcasting Act. TVNZ¡¦s formal complaints procedure is set up to deal with complaints specifically about programmes and their presentation.

We note that a formal complaint to the broadcaster must be in writing. However, it is not a requirement, but merely preferable, that the letter includes the words ¡§formal complaint¡¨. The letter should identify the reasons for the complaint. Again, it is preferable that the specific standards from the Codes of Broadcasting Practice are cited, but it is not a requirement. However, a formal complaint must refer to a programme that has been broadcast.

TVNZ informed us, that as a general rule, all correspondence that provides a return address receives a reply. We were informed that all correspondence to the Chief Executive and Chairman is acknowledged directly or investigated and acted upon. TVNZ said it is a matter of judgement as to whether a complaint will be brought to the attention of the Chief Executive or Chairman. All correspondence passes through the shared office resources of both positions. Given that formal complaints are dealt with by the complaints procedure and the Programme Standards Officer, all such complaints are passed through to that office as a matter of course. The Chief Executive is advised of formal and potentially formal complaints and outcomes by way of a monthly summary report.

The Programmes Standards Officer emailed Mr Punnett on 13 November to advise that TVNZ had decided that the best and fairest way to handle his concerns was to offer him the opportunity to lodge a formal complaint, following a telephone conversation between Mr Punnett and the Chief Executive. Mr Punnett received official acknowledgement of his complaint on 14 November, and a report from TVNZ on the complaint dated 5 December.

Four issues emerged about the way in which Mr Punnett¡¦s complaint was handled by TVNZ:

„h initially it was not treated as a formal or possibly formal complaint and therefore it was referred to a news manager despite being addressed to the Chief Executive and Chairman
„h if it had been treated as a formal or possibly formal complaint it would have appeared in the monthly summary report from the Programmes Standards Officer to the Chief Executive
„h the complainant was not advised of his right to make a formal complaint and how to go about making one. Over a month elapsed before the complaint was acknowledged
„h TVNZ did not acknowledge the correspondence until after political pressure was placed on it by the committee and news media.

On 13 December the Chief Executive wrote to us and said that Mr Punnett should have, at the very least, received an acknowledgement and identification of his complaint and advice on making a formal complaint. The process, when followed correctly, is designed to respond in such a fashion. The Chief Executive said this did not happen initially because the original correspondence was passed routinely from his office to the Head of News who, in turn, asked for a background explanation from those in charge of the Holmes show. The Chief Executive said that those responsible at the Holmes show ignored the obvious requirement to respond to Mr Punnett and give him the necessary information to progress his concerns to a formal complaint if he felt the need. The Chief Executive said that this is unacceptable.

Accuracy of evidence

The fact that Mr Punnett complained to TVNZ on 4 October is undisputed. Our interest in the matter was not to insert ourselves in the substance of the complaint but to ensure that the procedures put in place by the broadcaster are being observed.

The Chief Executive informed us that he was made aware of the issue on 1 November by a public affairs executive at the company, following the article in The Independent. He requested an internal report from the Managing Editor to establish the facts of the matter.

We were informed that the report was sent to the Chief Executive¡¦s office on 8 November. He was in Wellington preparing to appear before the committee. On 9 November the Chief Executive answered questions before the committee and returned to Auckland, where he read the report.

On 10 November the Chief Executive telephoned Mr Punnett in London and, subsequently, a letter was sent informing him of the procedures for making a formal complaint. TVNZ believes it was implicit in the request for an internal report that all the allegations contained in The Independent article would be addressed. It was the Chief Executive¡¦s view, after reading the report and the correspondence, that this matter would best be dealt with by removing it from the political and media arena of speculation, allegation and rumour and submit it to the formal complaints procedure.

On 13 December the Chief Executive wrote to the committee. He said that at the committee hearing he was in the middle of a process designed to investigate exactly what was behind the claims and counter-claims surrounding the Poole story. He said he had intervened as soon as the matter was drawn to his attention and felt that to discuss the issue at a public hearing without access to all the background would not assist in coming to grips with the facts of the matter.

We note that select committees have the power to hear evidence in private or secret. The Chief Executive did not request to be heard in private or secret, with the public excluded, when asked questions about a possible complaint.

Broadcasting Standards Authority

TVNZ informed us that the formal complaints procedure has now dealt with Mr Punnett¡¦s complaint and he has been advised of the outcome and his right to refer it to the Broadcasting Standards Authority.

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