Part 1: Introduction

Inquiry into the University of Auckland’s decision to purchase a house in Parnell.

Background

1.1
In January 2020, the media reported that the University of Auckland (the University) had spent $5 million to purchase a house in Parnell. The house would be rented by the incoming Vice-Chancellor, who took up the position in March 2020.

1.2
This raised questions for our Office about the University’s use of resources, which is a matter that the Auditor-General can inquire into under section 18 of the Public Audit Act 2001. To us, the purchase appeared unusual for a New Zealand university, and we wanted to understand how it came to make this decision and the business justification for it.

1.3
Section 161(1) of the Education Act 19891 (the Act) protects the academic freedom and institutional autonomy of universities. However, that freedom does not exclude universities from being accountable for how they spend public money. Like all public organisations, they are required to spend that public money well and follow good practice in doing so.

1.4
The Act reinforces this, requiring tertiary education institutions to:

… act in a manner that is consistent with –

(a) the need for the maintenance by institutions of the highest ethical standards and the need to permit public scrutiny to ensure the maintenance of those standards; and

(b) the need for accountability by institutions and the proper use by institutions of resources allocated to them.

Why we were interested in this matter: sensitive expenditure

1.5
Our initial view was that this arrangement was unusual for a New Zealand university and that it involved “sensitive expenditure”. Sensitive expenditure is spending by a public organisation that could be seen to give a private benefit to an individual employee in addition to the business benefit gained by the public organisation or a benefit that is disproportionate to the business purpose.

1.6
It is important that public organisations manage sensitive expenditure appropriately and are aware of how it might be perceived. Otherwise, public trust and confidence in an organisation can be damaged or diminished.

1.7
We recognise that, for valid reasons, individual public organisations may make their own decisions about what is appropriate sensitive expenditure, depending on their circumstances. However, all public organisations need to take into account the same principles when determining their organisational approach (or attitude) to sensitive expenditure decisions.

1.8
There are principles that underpin decision making about sensitive expenditure. Expenditure decisions should:

  • have a justifiable business purpose;
  • preserve impartiality;
  • be made with integrity;
  • be moderate and conservative, having regard to the circumstances;
  • be made transparently; and
  • be appropriate in all respects.

Scope of our work

1.9
Our work focused on how the University managed the purchase of the Parnell house from a sensitive expenditure perspective.

1.10
In carrying out our work, we:

  • wrote to the University with questions about its decision to purchase and maintain the house;
  • obtained and considered documentation the University provided in response to our questions;
  • visited the University in early 2020 and met with senior University staff involved in the decision-making and the processes for selecting the property in 2019;
  • spoke with the current Vice-Chancellor after she had started her role in March 2020; and
  • talked with staff at Te Kawa Mataaho Public Service Commission (formerly the State Services Commission).

1.11
We understand that providing accommodation in connection with employment might give rise to income that is subject to income tax. We have not reached a view about whether the Income Tax Act 2007 applies to this case in that way, but the Vice-Chancellor and the University might want to consider this point.

Subsequent events

1.12
After we completed our work and provided a draft report to the University for comment, the University told us that it has initiated a review of its sensitive expenditure policy and other matters. It also told us that it has been in contact with the Public Service Commission about this issue.

1.13
The Vice-Chancellor also told us that she has recommended to the University Council that the house in Parnell be sold to assist with the University’s overall financial position.

Structure of this report

1.14
In Part 2, we describe the background to the house purchase and the provision of housing for the previous and current Vice-Chancellors.

1.15
In Part 3, we discuss our findings about the house purchase.

1: Now replaced by section 267 of the Education and Training Act 2020.