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The Column November 19th

The Column November 19th

This week:

The column looks at the Government's mis-management of taxpayers' money, and the lack of control mechanisms that Labour has in place to ensure that public money is spent as it should be...

Earlier this month, the Auditor-General released his report into the public funding of community-based organisations. The report – requested as a result of the Pipi Foundation fiasco – paints a frightening picture of Government agencies splashing around taxpayers’ money with seemingly gay abandon.

Overwhelmingly, the lasting impression is that the Government does not know how many organisations receive public money, whether the money is producing worthwhile results, or how much money is tied up in its contracts.

The Auditor-General’s investigation sought to identify what sort of funding arrangements actually exist, the processes by which these arrangements were entered into, the effectiveness of performance monitoring processes, and whether organisations receiving Government funding performed adequately and complied with their contractual obligations.

All in all, the review exposed the widespread systemic failure that exists within the Government agencies investigated to adequately monitor the spending of public money. These agencies – the Education Ministry, Te Puni Kokiri, the Community Employment Group of the Labour Department, the Poutama Trust, Trade New Zealand and Industry New Zealand – in general gave out substantial grants with few controls, little monitoring, and a minimal focus on whether the expected results were delivered. Since all the agencies investigated were found to have failed to properly monitor the spending of taxpayers’ money – that is 100 percent failure in the sample taken – the malaise, without the shadow of a doubt, is prevalent right across the public sector.

The Auditor-General found that, all too often, funding agencies failed to check the legal status of organisations applying for funding, inadequately monitored whether the segregation of duties between the governing body and management was appropriate, and neglected to properly assess whether there was a risk that Trustees could personally benefit from the funding arrangements. Further, the potential for ‘double-dipping’ – receiving funding from other Government agencies for the same or similar purposes – was not fully investigated.

Funding bodies were also found to be wanting in the area of contract monitoring and management, with in-depth breakdowns of project costs unavailable, checks on the meeting of contractual obligations not documented, audited financial statements not provided, site visits not recorded, and final payments often made in advance of project completion without the normal safeguard of an invoice approval process.

The Auditor-General also raised serious concerns over whether the level of scrutiny applied to assessing the inherent worthiness of projects before public funding is given was sufficient.

While there have been some very high profile failures – including the Pipi Foundation and associated interests totalling $1.98 million, the $3 million contract that CYF had with the now liquidated Northland Maori social service provider Te Hau Ora O Te Tai Tokerau, and the now terminated $2.37 million contract with the Hawkes Bay Maori housing company Tu Kahu Limited – literally tens of thousands of grants have been made on a basis that defies robust scrutiny.

Under Ministerial direction, Housing New Zealand has now been forced to diversify its role from solely providing state housing, to funding mainly Maori providers to ‘build capacity in the community’ (whatever that means) and to provide cash grants – some up to $50,000 – to Maori private homeowners to upgrade their run-down houses. The Education Ministry tries to administer some 4,000 contracts worth $600 million, the Labour Department’s Community Employment Group has well over 3,000 contracts worth $23 million, and CYF has around 1,000 contracts worth almost $100 million.

In its Estimates Review of CYF earlier this year, the Social Services Select Committee, raised concerns about the department’s ability to effectively monitor and measure such a large number of contracts. The department responded with the admission that “most of the programmes are small and difficult to evaluate with multiple interventions being even more difficult to monitor and measure than single interventions”.

In light of the concerns raised by the Auditor-General it is no wonder that trying to assess exactly how much funding is given to community organisations, and for what purpose, has been so difficult. The information is not readily identifiable in annual reports, nor can it easily be found through Parliamentary Questions. What we do know, however, is that many of these contracts are associated with the Labour Government’s massive quarter of a billion dollar investment in Maori through its ‘closing the gaps’ strategy, and – since each arm of Government operates as a standalone silo – right now Government agencies will be throwing money at the same groups of Maori, totally unaware that others are doing the same.

While this amounts to an irresponsible use of public money, the Labour Government – forever generous to groups it is courting for on-going voter support – is quick to accept the trappings of ministerial power and the privilege of high office, but slow to recognise its responsibility to taxpayers. As a result, taxpayers will have to watch as the Government moves to distance itself from any accountability for the mis-spending of public monies which is undoubtedly going on right now.

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