Lillian Hanly, Political reporter

The country's highest watchdog has issued a scathing assessment of Oranga Tamariki's procurement and contracting practices last year.

In a report released on Thursday, the Auditor-General found Oranga Tamariki was "poorly prepared" to carry out its contracting round during the 2024/25 financial year, and fell short of expectations for public organisations.

The report stated the effects of the decisions by the child protection agency were "still not known" and this was "unacceptable."

"Oranga Tamariki did not plan the contracting round well and left its decision-making until late in the process.

"It documented its decision-making poorly and its decisions were not adequately informed by evidence of how they would affect children and their families," Auditor-General John Ryan said.

The Auditor-General said he considered those failures "harmed trust and confidence in Oranga Tamariki."

The Office of the Auditor-General announced late last year it would investigate the procurement and contract management practices of Oranga Tamariki, following concerns raised about the agency's decision-making.

In June 2024, providers were given little notice their funding from the care and protection agency would be reduced or discontinued as their contracts came up for renewal in the new financial year, putting at risk the services they provided to vulnerable children and communities.

Oranga Tamariki had been reviewing its contracts to address "under-utilised or under-performing services, remove the duplication of services being provided and align services to its core business priorities."

RNZ reported in January this year the cuts to early intervention services in the community had advocates worried more children would end up in care.

One decision by the agency had since been reversed by the Minister for Children Karen Chhour who also told Oranga Tamariki to pause its review.

In its report, the Auditor-General's office outlined the context in which these decisions were made, noting Oranga Tamariki had been aware of issues with its procurement and contract management practices.

It also identified financial pressures and had forecasted its 2023/24 spending would go over budget.

The Auditor-General also noted in November 2023, the Minister for Children directed Oranga Tamariki to refocus its spending on "core functions and activities" and find cost savings of 6.5 percent from its overall budget.

As part of the investigation though, policy decisions or strategy underpinning the contracting decisions Oranga Tamariki made were not examined.

Commenting on government policy decisions is outside of its mandate.

The report acknowledged Oranga Tamariki's right to make decisions about which services it wanted to purchase, including to discontinue services or enter negotiations to vary contracts.

It also noted the need to monitor providers' performance to ensure "public money is being spent in keeping with the contract."

"I recognise the challenges that Oranga Tamariki faced and do not doubt that Oranga Tamariki intends its spending to benefit the children who need it and that it wants to target this spending well.

"Providers also told us that they understood that Oranga Tamariki was in a difficult situation and that it could not guarantee them funding."

However, the report said Oranga Tamariki was "poorly prepared to carry out the 2024/25 contracting round."

"It did not have a strategic approach to procurement and contract management that was informed by a comprehensive understanding of providers, their services, or most importantly the needs of children and their families.

"It had not made material improvements to its contracting practices despite being aware of issues with them for some years."

The Auditor-general said the "effects of decisions on children and their families are still not known."

"Given that this is the core role of Oranga Tamariki, it is unacceptable for it to be in this situation."

The report highlighted other issues with procurement and contract management from the 2024/25 round, saying they were not in line with good practice:

• Setting performance measures and monitoring performance.
• Paying promptly for services that had been provided, including ongoing delays in passing on social sector pay equity funding to providers.
• Negotiating changes to, and planning to exit from, contracts.
• Managing its relationships with providers and te Tiriti o Waitangi partners.

Additionally, it said Oranga Tamariki was "slow in, or resistant to, acknowledging responsibility for errors".

"At its worst, its public statements appeared to blame providers for a situation that was fundamentally its responsibility.

"I consider that these failures have harmed trust and confidence in Oranga Tamariki," said the Auditor-General, "in my view, Oranga Tamariki could have avoided many of the issues that arose in the contracting round if it had robust procurement and contract management systems."

He said the agency needed to place as much emphasis on managing contracts and relationships with suppliers as it did on procuring the services in the first place.

He said public organisations need to demonstrate they can act as a trusted partner, including when they've made explicit commitments to partners and providers about Te Tiriti o Waitangi.

"They need to have sound ethical judgement, do what they say they will do, accept where they have made mistakes, and take steps to improve."

He said Oranga Tamariki fell short of these expectations in the 2024/25 contracting round.

The Auditor-General concluded by acknowledging the agency had begun work to improve processes, but said Oranga Tamariki needed to make "significant and urgent improvements" to address the concerns outlined in the report.

The report's recommendations

The report made four recommendations for Oranga Tamariki:

• Prepare and implement a clear strategy for procuring services from, and managing contracts with, social service providers.
• Engage with the social services sector to prepare and implement a standard process for contracting rounds, including consistent time frames for when it will make decisions about Outcome Agreements and notify providers.
• Ensure that, in future contracting rounds: recommendations are informed by a detailed analysis of the likely effect on children, young people, and the sustainability of the social services sector; and it records this analysis clearly in relevant decision-making documents.
• Urgently improve its contract management practice, including by: linking performance measures to outcomes; taking a consistent, predictable approach to performance monitoring and reconciliation; routinely paying on time for services that have been provided; anticipating and planning for the end of contracts to ensure a smooth transition; communicating with providers in an open and transparent manner; and taking commitments it has made to te Tiriti o Waitangi partners into account in managing contracts.

Oranga Tamariki said it accepted the findings of the Office of the Auditor-General's (OAG) inquiry into their procurement and contract management processes.

Oranga Tamariki Acting chief executive Andrew Bridgman said, "We have already made significant changes to address the issues the Auditor-General now outlines. These shifts include new governance and leadership, stronger programme management, improved contract management and a refreshed commissioning framework.

"We look forward to continuing to work with providers to ensure services are available that improve outcomes for tamariki and rangatahi."

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