Part 1: Introduction

Inquiry into certain allegations about Housing New Zealand Corporation.

In this Part, we explain:

How our inquiry came about

On 27 March 2006, we received information from Ernst & Young concerning allegations made by a former contractor of Housing New Zealand Corporation (the Corporation) about certain accounting and management practices. As the Auditor-General’s appointed agent in auditing the Corporation, Ernst & Young is required to inform us of any significant audit-related issues identified during the course of an audit or at any other time.

On 10 April 2006, the Board of the Corporation asked the Auditor-General to consider undertaking an inquiry into:

  • the contractor’s allegations; and
  • the Corporation’s response to the allegations, which had resulted in a settlement agreement with the contractor.

The settlement agreement was dated 14 December 2005, and involved a payment by the Corporation to the contractor of $3,000 in full and final settlement of all claims the contractor might have against the Corporation (including his concerns about the abrupt manner in which his contract with the Corporation had ended). In the agreement, the contractor agreed not to communicate publicly or privately any of his concerns about the Corporation or other parties, including through communications with any Minister, member of Parliament, journalist, or radio or television station (the non-disclosure clause).

The Auditor-General agreed to the Board’s request to conduct an inquiry. Terms of reference were formulated and agreed with the Board on 11 April 2006.

We consulted on the terms of reference with the Department of Building and Housing, the State Services Commission, the Treasury, the Department of the Prime Minister and Cabinet, and the Office of the Minister of Housing.

Scope of our inquiry

Our inquiry examined:

  • the Corporation’s handling of the allegations raised by the contractor, including whether the issues raised by the allegations were appropriately included in the Corporation’s internal audit programme;
  • the events leading up to the signing of the settlement agreement, including:
    • the negotiation of the agreement, how the terms of the agreement were arrived at, and the advice taken by the Corporation about the agreement;
    • what the payment of $3,000 was for, at whose initiative it was negotiated, and how it was calculated;
    • how the agreement was authorised and, in particular, whether the Chief Executive of the Corporation authorised the agreement or was aware in advance of its terms; and
    • the Corporation’s policies and procedures for making protected disclosures; and
  • the allegations made by the contractor.

The full terms of reference for our inquiry are set out in Appendix 1.

One of the contractor’s original allegations was that certain inspection activities in the Corporation’s housing Modernisation and maintenance programmes were carried out inadequately, or not at all. When we met with the contractor at the start of our inquiry, the contractor did not raise the adequacy and frequency of property inspections as an issue other than in connection with payments made to the Corporation’s provider of property inspection services. Accordingly, we do not discuss the allegation further in this report.

How we conducted our inquiry

Our inquiry team first met with the contractor to obtain further details about his concerns.

We also met with various staff members from the Corporation’s Manukau and Wellington offices.

We discussed the inquiry with various external parties, including Ernst & Young, PricewaterhouseCoopers (which assists the Corporation’s internal audit function), and organisations that have done business with the Corporation relevant to our inquiry, in particular with the National Property Improvement team.

We reviewed a significant amount of documentation from the Corporation and performed some specific audit testing.

We gave all the affected parties a chance to comment on a draft version of the report.

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