Request to inquire into decision to grant funds to the Manea Footprints of Kupe Cultural Heritage and Education Centre

10 July 2019

David Seymour MP
Private Bag 18888
Parliament Buildings
Wellington 6160 

Dear Mr Seymour

DECISION TO AWARD A GRANT TO THE MANEA FOOTPRINTS OF KUPE CULTURAL HERITAGE AND EDUCATION CENTRE

You wrote to my Office on 10 March 2019 about the decision, in February 2018, to grant $4.6 million to the Manea Footprints of Kupe Cultural Heritage and Education Centre (the Manea project) through the Provincial Growth Fund (the PGF).

You asked us to consider inquiring into that decision, under section 18 of the Public Audit Act 2001, because of concerns you have about the apparent involvement of the Regional Economic Development Minister, Hon Shane Jones, in that decision. Mr Jones had declared a conflict in relation to the matter.

We decided to look into your concerns and have now completed our inquiry. We obtained information from the Ministry for Business, Innovation and Employment (MBIE) about the process by which the grant was awarded, reviewed the guidelines in the Cabinet Manual about managing ministerial conflicts of interest, and spoke to staff at the Cabinet Office. This letter explains our findings and conclusions.

Our main findings are:

• The Cabinet Manual guidelines on Ministers’ conflicts do not necessarily require a Minister with a conflict to leave the room when a matter in which they have an interest is discussed.
• The Cabinet Manual guidelines also do not automatically prohibit a Minister with a conflict from participating in a decision in which they have a conflict of interest. Depending on the nature of the conflict, there will be situations in which continued participation is clearly inappropriate, and others where ministerial colleagues may consider continued participation by the conflicted Minister is helpful to the collective decision-making process.
• In the case of the Manea project, Mr Jones acted appropriately by declaring an interest. His conflict was also managed appropriately by transferring his decision-making responsibilities in that respect to one of his ministerial colleagues.
• In our view, having declared an interest, it might have been better for him not to confuse the situation by expressing a view on the Manea project when it came up for discussion (along with other matters) at the 12 February 2018 meeting of the regional economic development Ministers.
• Alternatively, if he was going to express a view, it would have been better if a record had been kept:
  • explaining why he was taking part in the discussion; and
  • confirming that his ministerial colleagues had agreed or asked him to participate, notwithstanding his conflict of interest.

However, overall we do not consider the exchange that took place between Mr Jones and Mr Robertson about the Manea project on 12 February 2018 raises any significant concerns about the decision to award the grant to the Manea project.

Background and findings

The decision to award a grant to the Manea project required the approval of four Ministers – Ministers Robertson, Twyford, Parker, and Jones (referred to collectively as the regional economic development or RED Ministers).

The Cabinet Office has confirmed that Mr Jones approached it sometime towards the end of November 2017 to ask for advice about a potential conflict of interest in relation to the project. He told them the nature of his interest was that he had championed the Manea project and knew one of the kaumātua involved in it.

The Cabinet Office agreed he had an interest that required management. Staff at the Cabinet Office spoke to officials at MBIE and it was agreed that Hon Kelvin Davis should take responsibility for Mr Jones’ decision making role.

Officials prepared a written briefing about the Manea project for the four decision-making Ministers (Ministers Robertson, Twyford, Parker, and Davis). The briefing recommended that the Ministers approve the grant.

Between 30 January and 7 February 2018, three of the four Ministers (Ministers Parker, Twyford, and Davis) signed the briefing, indicating that they approved it.

On 12 February 2018, a meeting was held of the RED Ministers. The purpose of this meeting was for the RED Ministers to approve funding of various projects that were to be announced at the launch of the PGF in Gisborne on 23 February 2018.

Approval was sought for eighteen projects. Most of these required the approval of all four RED Ministers. There were also four that, because they were for amounts under $1m, required the approval of Mr Jones only.

The Manea project was one of two projects described in the briefing as being “under active consideration by relevant ministers”. A note against it says “Do not have Min Robertson (MOF) approval, three in regional action plan others have approved – Davis, Twyford, and Parker”. This is consistent with what other records show – that is that, at the time of the 12 February 2018 meeting, three of the four ministers whose approval was required had given their approval, but that Mr Robertson was yet to approve it.

According to an email exchange between officials after the 12 February 2018 meeting, the Manea project came up for discussion at that meeting. Mr Robertson raised a concern about the broader management and commercial operations of the project. The email exchange records that, in response, Mr Jones “provided reassurance that as the project has Far North Holdings Ltd, the commercial arm of the Far North District Council, involved in the governance structures, he was comfortable their presence would alleviate any concerns on this issue”.

The email goes on to say that MBIE would “manage further concerns about the project through the terms of an investment agreement” and that “Minister Robertson was comfortable to sign the briefing knowing this mitigation was in place.”

After the meeting, there were further exchanges between staff in Mr Robertson’s office and officials at the Treasury and MBIE, clarifying Mr Robertson’s requirements before approving the project.

A signatory for Mr Robertson approved the grant for the Manea project on 24 February 2018. Alongside that signature is a hand-written note saying “NB Agreement is subject to the inclusion of appropriate milestones in the contract.”

Cabinet Manual guidelines on conflicts of interest

Guidelines for Ministers on identifying and managing conflicts of interest are set out in the Cabinet Manual.

The Cabinet Manual is the primary authority on the conduct of Ministers in New Zealand. It documents Cabinet’s procedures and provides authoritative guidance for Ministers, their offices, and those working in government. It provides guidance rather than prescribing rules. Any sanction for non-compliance with the Cabinet Manual is at the discretion of the Prime Minister.

For Ministers’ interests, the Cabinet Manual includes these points:

• Ministers are responsible for ensuring that no conflict exists or appears to exist between their personal interests and their public duty. Ministers must conduct themselves at all times in the knowledge that their role is a public one; appearances and propriety can be as important as actual conflicts of interests (paragraph 2.60).
• It may not be appropriate for Ministers to participate in decision-making on matters affecting family members, whānau, or close associates (paragraph 2.66).
• Public perception is a very important factor. If a conflict arises in relation to the interests of family, whānau, or close associates, Ministers should take appropriate action (paragraph 2.67).
• Ministers do not act in isolation from their political, constituency, and community networks. Some Ministers are elected to Parliament because of their close association with and advocacy for particular interest groups. Participation in decision-making by such Ministers allows Cabinet to consider diverse viewpoints in reaching a collective decision (paragraph 2.68).
• Ministers should take care to ensure that they do not become associated with non-governmental organisations or community groups where:
  1. The group’s objectives may conflict with government policy;
  2. The organisation is a lobby group; or
  3. The organisation receives or applies for government funding (paragraph 2.69).
• Any possible conflict arising from association with a non-public body should be dealt with using one or more of the measures set out in paragraphs 2.73-2.74 of the Cabinet Manual. These include declaring an interest, not receiving papers, and transferring responsibility to another Minister or the department.

We make the following observations about the Cabinet Manual guidelines on Ministers’ conflicts:

• The guidelines recognise that, as is generally the case when dealing with conflicts of interest, assessing whether a conflict exists, and if so, how to manage it, is not necessarily straightforward.
• The appropriate response to a conflict of interest will be determined by the nature and seriousness of the conflict.
• The guidelines emphasise the importance of perception, as well as the risk of an actual conflict of interest. However, the guidelines also acknowledge that Ministers do not act in isolation from their political, constituency, and community networks, and that participation in decision-making by Ministers might sometimes be helpful to the decision-making process, notwithstanding a potential conflict.
• Interests must be declared and, if appropriate, a Minister’s decision-making responsibilities transferred to another Minister, or sometimes to a department. However, having declared an interest, there is no explicit requirement for a Minister with a conflict to leave the room when the matter is discussed. It will depend on the nature of the conflict.
• In some situations, a Minister with a conflict may continue to take part in a discussion of the matter if their colleagues agree. How Ministers conduct themselves after declaring an interest is a matter of judgement, in the first instance for the individual Minister and their colleagues and ultimately for the Prime Minister, bearing in mind the legal and political risks their particular conflict may give rise to.
• There may be situations in which it is clearly inappropriate for a conflicted Minister to remain involved in a matter – for example, where there is a financial interest, or a clear and direct personal interest. In other situations, participation by a conflicted Minister might be acceptable if the conflict is of a less serious nature and the decision-making process will clearly benefit from the Minister’s involvement.

In conclusion

Based on the information my Office has been given and our review of the Cabinet Manual guidelines on Ministers’ interests, we have reached several conclusions.

Mr Jones acted appropriately by seeking advice from the Cabinet Office, declaring an interest, and agreeing to arrangements for another Minister to exercise his decision-making responsibilities in relation to the Manea project.

There is no reason why Mr Jones should not have been present at the meeting on 12 February 2018 at which the project was discussed. That meeting was not specifically about the Manea project. The Manea project was one of several projects referred to in the briefing prepared for the meeting. Mr Jones needed to be at the meeting to discuss and approve most of the other items on the agenda.

The Cabinet Manual guidelines do not necessarily require a Minister with a conflict to leave the room when a matter in which they have an interest is discussed. That is a matter of judgement, depending on the nature of the conflict.

Similarly, the Cabinet Manual guidelines do not necessarily prohibit a Minister with a conflict from participating in a decision-making process. That again will depend on the nature of the conflict, and the extent to which ministerial colleagues consider there is benefit to the decision-making process in involving the conflicted Minister.

The decision that was made on the grant to Manea project was made on the basis of a written briefing prepared by MBIE officials. That briefing specifically records that Mr Jones had declared a conflict and would not be receiving a copy of the briefing. We are not aware of the project being discussed at any meetings involving Mr Jones, other than the 12 February 2018 meeting.

By the time of the 12 February 2018 meeting, three of the four Ministers whose approval was required had already approved the grant, based solely on the briefing.

The signature indicating Mr Robertson’s formal approval of the grant for the project was dated 24 February 2018, after officials at the Treasury and MBIE had agreed a way to address the concerns he had about the project in the terms of the associated investment agreement.

Having declared an interest, it might have been better for Mr Jones not to confuse the situation by expressing a view on the Manea project when it came up for discussion at the 12 February 2018 meeting.

Alternatively, if he was going to express a view, it would have been better if a record had been kept:

• explaining why he was taking part in the discussion; and
• confirming that his ministerial colleagues had agreed or asked him to participate, notwithstanding his conflict of interest.

Overall though, the exchange that took place between Mr Jones and Mr Robertson at the 12 February 2018 meeting does not raise any significant concerns about the decision-making process which resulted in the award of a grant to the Manea project.

Because of the potential public interest in this matter, I have decided to publish this letter on my Office’s website.

Yours sincerely

John Ryan
Controller and Auditor-General