Part 4: Appointing TWOA and MO1 Limited personnel

4.1
In this Part we:

• describe the general employment practices at TWOA;
• set out our findings on appointments of members of Rongo Wetere’s whānau to positions within TWOA and MO1 Limited; and
• discuss the fees paid to directors of MO1 Limited.

General employment practices

4.2
It is common for employees or contractors of TWOA to have a personal or family connection to other TWOA personnel. This is so at senior and junior levels, including cases where relatives have direct reporting relationships. The practice is not limited to Rongo Wetere’s whānau.

4.3
For much of TWOA’s existence (particularly when it was a small organisation, in its early years), it has been a close-knit organisation. The TWOA personnel we met displayed a strong commitment to, and passion for, TWOA’s work and goals. TWOA has relied heavily on personal links between individuals, and a strong feature of its practice is to work with people it knows and trusts. The people we spoke to did not see this as undesirable. If anything, they saw it as a positive part of the organisation’s culture.

4.4
The body of people established as TWOA came from a private organisation. For a long time, TWOA was a small organisation with meagre finances, and we were told that it often struggled to adequately remunerate new staff. We were told that this was a natural consequence of TWOA in its early years receiving little financial support from the Government. We were also told that it was difficult to attract qualified and experienced staff to Te Awamutu.

4.5
Rongo Wetere told us that a competitive approach to recruitment was not always an efficient use of time and money. He also said that a competitive approach does not always produce the best appointee.

4.6
We accept that small businesses in the private sector may often employ and contract with family members. However, TWOA is a public entity. If a public entity is considering appointing a relative of a senior person, it must manage the conflict of interest carefully. The entity must avoid perceptions of undue influence or preferential treatment. When employing staff, TWOA is required by sections 77F-77H of the State Sector Act 1988 to act independently, to appoint on merit, and (wherever practicable) to advertise vacancies so suitably qualified people can apply. Meeting these obligations should not be avoided because it is thought to be an inefficient use of time and money. In our view, the proliferation of related individuals working at TWOA suggests that TWOA has not always complied with its statutory requirements.

4.7
TWOA introduced a conflicts of interest policy in late 2003.²¹ From this time, it also set up a conflicts of interest register for Council members and senior managers. The register has been updated irregularly. It includes a column to record proposed “mitigating strategies” for each declared interest. A new draft conflicts of interest policy has been prepared in 2005.

Rongo Wetere’s whānau

4.8
We have not examined all appointments of personnel in TWOA that may have involved conflicts of interest. Instead, we focused on Rongo Wetere’s whānau. We identified 17 close relatives of Rongo Wetere who have – or have had – employment or contracting connections with TWOA.

4.9
In general, the individuals have been suitably qualified for the jobs TWOA appointed them to. However, the methods of selection are unclear and have varied widely. The use of a competitive approach has been inconsistent. Rongo Wetere’s involvement has also varied. He made some appointments personally, but there were many appointments where he was not involved closely. Kingi Wetere made some appointments in MO1 Limited.

4.10
We understand that members of Rongo Wetere’s whānau have been involved in TWOA and the AI Trust for a long time, and some of these people have been involved since before TWOA was established as a Crown entity in 1993. Many of the relatives told us that, especially in the early days, they gave much voluntary or casual help to TWOA. They sometimes worked long hours for little or no pay, for long periods. They incurred many direct expenses but did not ask or expect TWOA to pay them back. They did this out of loyalty to Rongo Wetere. As one relative said, “this was manaaki, our tīkanga, supporting the concept for our brother Rongo”.

4.11
We do not doubt the passion and dedication that people have shown for the goals of TWOA. However, the practice of employing relatives so readily should have stopped once TWOA was established as a Crown entity.

4.12
Because there are so many employed or contracted relatives, this report does not discuss all of Rongo Wetere’s whānau connections. The appointments of greatest concern involve the closest of Rongo Wetere’s relatives – his children and fiancée.

William Wetere – Information Officer and Marketing Manager

4.13
William Wetere was employed as TWOA’s Information Officer in 1997. The position was part-time at first, later became full-time, and later still changed into that of Marketing Manager. He came to the Information Officer position with experience in media and television production.

4.14
Rongo Wetere was involved in selecting William Wetere for the position. Rongo Wetere told us he thought that TWOA had advertised the position, and that it had considered other applicants. TWOA was not able to provide us with evidence to support this. A letter confirmed the appointment, but TWOA could not find employment agreements for the 2 positions (Information Officer and Marketing Manager). William Wetere’s appointment to the positions happened up to 8 years ago, so the records may have been lost or disposed of. We were told that few professionals were tempted to work at TWOA in those days, because wages were low and work conditions were often less than comfortable.

4.15
William Wetere’s appointments occurred before TWOA set up a conflicts of interest policy and register.

Kingi Wetere and William Wetere – MO1 Limited

4.16
When TWOA set up MO1 Limited in 2001, Kingi Wetere became the first General Manager and William Wetere became Operations Manager. We were told that these appointments, as well as the transfer of other staff, were part of the basis on which the Mahi Ora course was bought by MO1 Limited. Immediately before the purchase, Kingi Wetere and William Wetere held equivalent positions with the vendor company Mahi Ora Limited. We were told that it made sense, for business continuity reasons, for them to carry on managing the course.

4.17
We were told that Rongo Wetere was not involved in these appointments. TWOA could not tell us what, if any, selection methods were used, and who approved the appointments. The positions were not advertised. People we interviewed could not recall any particular discussions about the appointments, and the appointments were not written into the sale and purchase agreement (nor recorded in any other contract between Mahi Ora Limited and MO1 Limited). There may have simply been assumptions or oral understandings about the continued operations of the Mahi Ora course. TWOA’s Council does not appear to have been involved.

4.18
Minutes of the first board meeting of MO1 Limited show that Rongo Wetere, Kingi Wetere and William Wetere were all present and took part. Rongo Wetere chaired the meeting. During the meeting, Kingi Wetere’s appointment as General Manager was the subject of a formal resolution, but it appears to us that it was simply confirmation of an arrangement already informally agreed. The salaries for Kingi Wetere and William Wetere were set at the meeting. We were told that all 3 were excluded from decision-making about those salaries. There is no record in the minutes of any abstentions or declarations of interest.

4.19
Kingi Wetere was also an inaugural director of MO1 Limited. We do not know how this decision was made, who made it, and to what extent (if any) Rongo Wetere was involved. TWOA could not provide any evidence that TWOA’s Council considered or determined the composition of the board of MO1 Limited.

4.20
The board members of MO1 Limited later decided to appoint William Wetere as a director of MO1 Limited. Rongo Wetere took part in the board meeting where that decision was made, and seconded the motion to appoint William Wetere.

4.21
Later still, William Wetere (who was effectively the second in charge) became General Manager of MO1 Limited for a period (and, for part of that time, shared the job with Kingi Wetere). Rongo Wetere was absent from the board meeting when William Wetere was appointed as General Manager, although Kingi Wetere was present and took part in the meeting.

4.22
All of these appointments were before TWOA set up a conflicts of interest policy and register. After the register was set up, Rongo Wetere recorded that his son Kingi Wetere was General Manager of MO1 Limited. Kingi Wetere also recorded his relationship with Rongo Wetere. The register noted, in the relevant “mitigating strategy” columns, that Kingi Wetere reported to MO1 Limited’s board, and that Rongo Wetere would not be involved in Kingi Wetere’s salary setting, review, and performance appraisal. It did not address the likelihood that Rongo Wetere, as a member of the board himself, would be dealing regularly with matters in which Kingi Wetere was intimately involved.

Marcia Krawll

4.23
Marcia Krawll has had 3 consultancy contracts with TWOA since 2001. All 3 related to her role as International Events Co-ordinator, and the third also provided for her position as Programme Co-ordinator. As Programme Co-ordinator, Ms Krawll managed the creation of the Greenlight programme (see Part 7). She came to the positions with experience in event management, educational consulting, programme development, and indigenous issues, and with contacts in North America. She is not an employee of TWOA. TWOA receives her services under a series of fixed-term independent contractor arrangements.

4.24
Ms Krawll’s first 2 contracts pre-dated her personal relationship with Rongo Wetere. We have no particular concerns about them. When the second contract ended in late 2002, Ms Krawll and Rongo Wetere were in a personal relationship. Ms Krawll continued to carry out some work for more than a year after that contract expired, including 5 international trips (see Part 8). She submitted invoices for some of her time, but told us that she was largely consulting at no charge during this period.

4.25
The third contract was agreed in late 2003, but was backdated to cover part of the previous uncontracted period. Rongo Wetere helped negotiate this contract, and the rate of pay. He sent a memo to TWOA’s Council chairperson in which he declared his conflict of interest and attached a draft contract, recommending that it be approved. The chairperson reviewed and signed the contract for TWOA.

4.26
At about this time Rongo Wetere recorded his relationship with Ms Krawll in TWOA’s conflicts of interest register. The recorded mitigating strategy is that Ms Krawll’s contract would be approved, and her performance monitored, by the Council chairperson.

Kingi Wetere – Pouhere

4.27
When Kingi Wetere was employed as a part-time Pouhere in 2004, he was one of 2 TWOA employees with this title. The Pouhere positions are strategic senior management roles, reporting to Rongo Wetere. The precise nature of the positions is unclear to us. They have been described as involving strategic planning and special projects, as being deputies to the chief executive, and as forming part of a succession plan to groom potential successors for Rongo Wetere’s eventual retirement. TWOA knew about Kingi Wetere’s leadership and management skills through his tenure as General Manager of MO1 Limited.

4.28
Rongo Wetere selected Kingi Wetere for this position after consultation with others. The position was for a fixed term of 12 months. The position was not advertised, and there was no competitive selection process. TWOA could not provide evidence that it considered any other candidates for the position. The chairperson of the Council signed the employment agreement for TWOA.

4.29
The family relationship between Kingi Wetere and Rongo Wetere had been recorded in TWOA’s conflicts of interest register by the time the appointment was made, but the register contained no mitigating strategy about how to manage any issues arising from Kingi Wetere holding the position of Pouhere.

Concluding comments

4.30
Rongo Wetere and Kingi Wetere made declarations in the conflicts of interest register soon after it was set up in late 2003. Some, but not all, of Rongo Wetere’s whānau connections and related entities were recorded in the register. Mitigating strategies were recorded for some, but not all, interests. In practice, there was often little consideration of how to manage conflicts of interest beyond writing them in a register and abstaining from signing some contracts.

4.31
Within the public sector, declaring a conflict of interest, with nothing more, is unlikely to adequately manage the situation. Nor is asking someone else to sign a contract (as occurred with Ms Krawll and the Pouhere position) a sufficient mitigation measure when the conflicted person has been heavily involved behind the scenes anyway.

4.32
In some of the appointments of close relatives, Rongo Wetere was directly involved. With the senior positions discussed here, even where Rongo Wetere did not participate in the formal resolution or in signing the contract, it seems that the decisions were made with his knowledge and (at least tacit, and perhaps explicit) consent or support. Regardless of how well suited the appointees may have been to the positions they were appointed to, in our view their personal connection to Rongo Wetere must have been significant in them being considered for, and obtaining, their positions. This is not an acceptable way for public entities to employ staff.

4.33
The wisdom of having several members of one family holding senior positions in a public entity is questionable. For example, in 2002 and 2003 most of the board members of MO1 Limited were members of Rongo Wetere’s whānau. A son of TWOA’s chief executive was once the head of TWOA’s subsidiary, and later was in a position akin to a deputy chief executive role at TWOA. In our view, there is a potential for a lack of independence and rigour in decision-making when several members of one family hold senior positions in an organisation.

4.34
TWOA is not a small family business in the private sector. It is a public entity, and should be managed as a public entity.

Fees paid to directors of MO1 Limited

4.35
Two other inaugural directors of MO1 Limited in 2002 were Min Marshall and Bruce Bryant. Ms Marshall was already employed by TWOA, as its Corporate Services Director. Mr Bryant is an accountant in private practice and was, at the time, a member of TWOA’s Council.

4.36
The board of MO1 Limited agreed to pay Ms Marshall $40,000 a year (and superannuation), and Mr Bryant $50,000 a year (and expenses), for their roles as directors.

4.37
These payments did not meet the fee guidelines issued by the Cabinet Office. (The guidelines apply to subsidiaries of TWOA.) Ms Marshall’s and Mr Bryant’s fees were more than twice the maximum set out in the fee guidelines.

4.38
In Ms Marshall’s case, she was already an employee of TWOA. If, because of her senior position in TWOA, she needed to be involved with MO1 Limited, it should have been considered part of her job. It was not appropriate for her to receive directors’ fees on top of her salary.

4.39
Our appointed auditor identified the issue about Ms Marshall in his audit of MO1 Limited’s 2002 financial statements, and brought it to the attention of MO1 Limited. The payments to Ms Marshall stopped. An agreement was reached where she was expected to – and did – repay a portion of those fees. She resigned as a director of MO1 Limited in 2004.

4.40
The issue about Mr Bryant was brought to the attention of MO1 Limited in 2004, and Mr Bryant decided to resign as a director of MO1 Limited. MO1 Limited continued to engage his services as a professional adviser under an ongoing consultancy arrangement with his accounting firm. (When his term as a member of TWOA’s Council expired, TWOA also engaged him on a similar consultancy basis.) He was not asked to repay any fees. Rongo Wetere told us that he did not consider asking for the money to be returned because of Mr Bryant’s considerable contribution to MO1 Limited. In our view, MO1 Limited should have considered asking him to do so.

4.41
Ms Marshall and Mr Bryant told us that they did not know about the relevant guidelines and expectations around directors’ fees. We accept those explanations. TWOA and MO1 Limited did not appear to be aware of the guidelines either. We are disappointed that these issues arose. However, we are satisfied that, once the improper fee payments were identified, they were stopped.

21: This policy came about because of the internal review into the Kiwi Ora course discussed in Part 7.

22: Cabinet Office, Cabinet Office Circular CO (03) 4: Fees Framework for Members of Statutory and Other Bodies Appointed by the Crown (latest edition July 2003).