Hon Pete Hodgson
Minister of Health

3 April, 2007 Media Statement

Auditor-General to look at Auckland regional DHBs

The Minister of Health Pete Hodgson has asked the Auditor-General to undertake a focused performance audit to examine how conflicts of interest are dealt with in each of the three Auckland DHBs (the Auckland DHB, Counties-Manukau DHB, and the Waitemata DHB) under section 16 of the Public Audit Act 2001.

"The recent decision in the Auckland High Court which overturned new $560 million contract principally because of a conflict of interest has caused me to ask how this happened – with a view that it not happen again, said Pete Hodgson

"I said my first step was to ensure a new interim agreement was in place and last Thursday that happened. I thank all of those who were involved in that negotiation.

A next step is to ensure that this doesn't happen again. Findings from the office of the Auditor-General around the issue of conflict of interest will be vital to assist other District Health Boards in this matter."

Terms of Reference

Background
1 On 20 March 2007 the High Court issued a judgment setting aside the Auckland regional District Health Boards' (DHB) contract for laboratory services in the Auckland region. The principal reason for the contract being set aside was that the decision to enter into a contract for laboratory services was procedurally flawed on account of the Court’s finding that one of the DHB Board members was in a conflict of interest position and that the DHBs did not do enough to protect the process of awarding the contract from that conflict.

2 As a result, the Minister of Health has asked the Auditor-General to undertake a focused performance audit to examine how conflicts of interest are dealt with in each of the three Auckland DHBs (the Auckland DHB, Counties-Manukau DHB), and the Waitemata DHB under section 16 of the Public Audit Act 2001.

3 The Auditor-General has agreed to this request.

Terms of Reference

4 The performance audit will examine whether:

4.1 Each DHB has and is operating adequate systems and processes for identifying and disclosing conflicts of interest, having regard to legal and other public sector standards;

4.2 Each DHB has and is operating adequate systems and processes for managing conflicts of interest, having regard to legal and other public sector standards;

4.3 The governance and management structures and arrangements of each DHB adequately support the prudent management of conflicts of interest.

5 The audit will not consider:

5.1 the factual situation that was the subject of the decision Diagnostic Medlab v Auckland District Health Board and Ors (High Court, Auckland Registry CIV 2006-404-4724, 20 March 2007, Asher J);

5.2 whether the contract the Auckland regional DHBs entered into with Lab Tests Auckland Limited should have been set aside.

6 The Auditor-General will report his findings to the Minister of Health, and publicly.

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