Hon Bill English
Minister of Finance

10 December 2008

ACC shortfall inquiry Terms of Reference released

The Terms of Reference for the Ministerial Inquiry into the disclosure of the funding shortfall in ACC's Non-Earners Account has been released by Finance Minister Bill English today. The Ministerial Inquiry is to report on the large increase in government funding required for the ACC Non-Earners Account for the 2008/09 year and future years, determine why it was not identified in the 2008 Budget round, and report on its treatment in the 2008 Pre-Election Economic and Fiscal Update (PREFU).

The inquiry will be led by Mr Michael Mills, a Director at consulting firm MartinJenkins with extensive experience in regulatory issues and government processes. "I have asked Mr Mills to report his findings to me no later than 27 February 2009. Prior to that date I will be expecting an initial report back on why the ACC increase was not identified earlier and included in the PREFU, and what changes may need to be made as a result," Mr English said.

"The Treasury, Department of Labour, State Services Commission, Cabinet Office, and the ACC Board and staff will be consulted during the inquiry, and will provide assistance to Mr Mills as necessary. "There are serious questions to be answered about why a serious hole in the government accounts was not disclosed and what should be done to stop this situation recurring. I look forward to getting some answers." The full Terms of Reference is as follows: Ministerial Inquiry into disclosure of funding shortfall in ACC Non-Earners Account Terms of reference

The Ministerial Inquiry is established by the Minister of Finance. It is to report on the large increase in government funding required for the ACC Non-Earners Account for the 2008/09 year and future years, identify why it was not identified in the 2008 Budget round, and to report on its treatment in the 2008 Pre-Election Economic and Fiscal Update.

Specifically the inquiry is to:

1. Identify the date or dates on which the increase in government funding required for the ACC Non-Earners Account became known, to whom the information was communicated and on what dates.

2. Describe the normal process and timeline for identifying, obtaining actuarial validation of, seeking appropriation approval for, and reflecting in economic and fiscal updates any increase required in government funding for the ACC Non-Earners Account.

3. Describe the extent to which the process and timeline followed in 2008, including in relation to the Pre-Election Economic and Fiscal Update, was consistent with or different from the normal process and timeline and why any variation occurred.

4. Recommend what, if any, changes to systems and processes for identifying, obtaining actuarial validation of, seeking appropriation approval for, and reflecting in economic and fiscal updates any increase required in government funding for the ACC Non-Earners Account would be desirable.

5. Recommend what, if any, changes in the rules used to determine what is and is not a fiscal risk requiring disclosure in economic and fiscal updates would be desirable to improve transparency consistent with the intention of Part 2 of the Public Finance Act 1989.

6. Identify what factors (including progress to full funding, areas of cross-subsidy or cost-shifting, demand for and cost of services, and newly-legislated entitlements) gave rise to the increase in government funding required for the ACC Non-Earners Account.

7. Examine whether the normal principles and processes relating to government decision making in the pre-election period placed any constraints on consideration of the necessary additional appropriations to maintain existing ACC entitlements.

The Ministerial Inquiry is to be conducted by Mr Michael Mills. The following agencies will be consulted and will provide assistance as necessary: the Treasury, Department of Labour, the State Services Commission, the Cabinet Office, and the ACC Board and staff.

The costs of this Inquiry will be shared equally between ACC, the Department of Labour and the Treasury and met from within existing baselines.

The Ministerial Inquiry is to report to the Minister of Finance by no later than Friday 27 February 2009. An initial report back on why the ACC increase was not identified earlier and included in the PREFU, and what changes need to be made as a result is expected prior to that date.

ENDS

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