Letter in response to concerns about funding for the Port Nelson Slipway project

A member of Parliament wrote to us with concerns about a possible conflict of interest related to funding for the Port Nelson Slipway project. This is our letter in response.

4 May 2023

David Seymour MP
Parliament Buildings
Wellington

Tēnā koe Mr Seymour

FUNDING FOR THE SLIPWAY AT PORT NELSON

Thank you for your letter dated 11 October 2022, in which you raised concerns about funding that was provided for the Port Nelson Slipway project.

Your concerns

You expressed concern about a possible conflict of interest between former Minister Hon Shane Jones and a company called Aimex Limited that, in your view, had not been appropriately disclosed or managed and you asked me to inquire into this matter.

You noted that:

  • Mr Jones’ electoral return (dated 5 February 2021) disclosed a donation of $5,000 received from Aimex Limited on 30 July 2019;
  • a loan of $9.8 million to Aimex through the Provincial Development Unit (PDU) of the Ministry of Business, Innovation and Employment (MBIE) was agreed on 23 August 2020; and
  • the loan was approved by three Ministers, including Mr Jones in his then role as Minister for Regional Development.

Our work

In light of your request and publicly available information on this matter, my Office carried out some inquiry work on the funding for the Port Nelson Slipway project.

We obtained information from MBIE (as the agency responsible for administering and managing funding for the project) about the application and decision-making process, including:

  • copies of briefings to the Infrastructure Reference Group (IRG) Ministers1 (the Ministers) about the application;
  • copies of approvals for any funding in relation to the application and any other information provided by the Ministers about the decision; and
  • information about the processes for identifying, documenting, and managing potential conflicts of interest.

Responses to our request for information were provided by Kānoa-Regional Economic Development and Investment Unit (Kānoa-RDU)2 within MBIE. Kānoa-RDU manages and administers a range of funds, including the Provincial Growth Fund (PGF) and the Infrastructure Reference Group projects.

We also wrote to Mr Jones and asked for any information that he held about:

  • the nature of his relationship with Aimex Limited (before and after the donation was made);
  • the process by which any potential conflicts of interest were identified; and
  • whether any conflicts of interest were identified in this instance and, if so, what actions were taken to manage the conflict.

Mr Jones responded to our request and confirmed that he did not hold any documents that could be provided to us. He also told us that, when the Port Nelson Slipway project was being considered for funding, he was not aware that a donation had been made to his election campaign.

What we have seen

Background and application for funding

In April 2020, Crown Infrastructure Partners called for applications for projects from the public and private sectors that were “shovel-ready”, or “ready to start as soon as the construction industry returned to normal in order to reduce the economic impact of the COVID-19 pandemic”3 and might be suitable for government support.

About the same time, the IRG was established. The purpose of the IRG was to work alongside the PDU to recommend to the Ministers which project proposals should be considered.

At that time, Port Nelson Limited and Aimex Limited (a marine engineering company) applied to the PDU for funds to redevelop the slipway at Port Nelson. The redevelopment was proposed to be done jointly between those parties.

Approval

In May 2020, the IRG reported to the Ministers recommending projects for approval for shovel-ready funding. That report included a recommendation to fund the application made by Port Nelson Limited and Aimex Limited.  

In July 2020, Mr Jones, as the Minister for Infrastructure, wrote to Portfolio Ministers4 advising them of the projects that they had been allocated for contracting, managing, monitoring, and reporting purposes. Through this process, Kānoa-RDU was informed that it had been allocated the Port Nelson Slipway project and that there was an in-principle approval from the Ministers to provide a $9.8 million loan to the project.

On 18 August 2020, Kānoa-RDU provided advice and sought final approval from the Ministers on funding decisions. This included a recommendation that the Government support the Port Nelson Slipway project in the form of a loan of up to $9.8 million to Aimex Limited.

The proposal was approved by three Ministers, including Mr Jones as the Minister for Regional Development and the Minister for Infrastructure. A letter to Aimex Limited, dated 8 September 2020, also confirmed the decision.

Donation

As outlined in the material you provided to us, in February 2021, Mr Jones filed a Return of Electoral Candidate Donations and Expenses for the 2020 General Election. That return showed he had received a $5,000 donation from Aimex Limited in July 2019.

Our findings

The donation to Mr Jones’ election campaign could be perceived as a potential conflict of interest that needed managing. We do not consider that there is sufficient evidence to suggest that the potential conflict eventuated. We outline our reasons below.

We asked Mr Jones about the nature of his relationship with Aimex Limited (before and after the donation was made), and whether any conflicts of interest were identified and managed. He told us that when he was involved in the decision to approve the funding, he was not aware that Aimex had donated to his election campaign.

Mr Jones told us that he first became aware of the donation from Aimex Limited when he filed a Return of Electorate Candidate Expenses and Donations for the 2020 General Election in 2021. This was after the Ministers had made the funding decision and after Mr Jones had left Parliament. We have not seen any evidence to suggest that Mr Jones was aware of the donation when he made the funding decision or that he had any other connection with Aimex before approving the funding. As he was not aware of a potential conflict of interest when he made the funding decision, the potential conflict was not identified or managed.

Subsequent changes to how the funding was structured, and who received it, meant that Aimex did not receive any funding.

Between the decision in August 2020 and April 2021, there were changes to how the project would be delivered. Rather than it being a joint project between Aimex Limited and Port Nelson Limited, Port Nelson Limited would be solely responsible for the Port Nelson Slipway project. As a result, Aimex did not receive any direct benefit.

During the same period, changes were also made to the proposed funding structure for the Port Nelson Slipway project (although there was no change to the total amount). The final funding proposal in April 2021 (when Mr Jones was no longer a Member of Parliament) was a combination of a loan, a grant, and an equity investment. Kānoa-RDU and Port Nelson Limited were to draw up the final funding agreements, including loan documentation, without further involvement from the Ministers.

General comments

As outlined above, although no conflict of interest eventuated, there was a potential conflict that was not identified at the time the decision was made. Properly identifying and managing conflicts of interest is important to maintaining the public’s trust and confidence in how public money is spent. This is especially so when decisions are being made at the highest level of government (that is, by Ministers), or in relation to significant funding decisions. In circumstances such as this, it is imperative that there are systems in place to ensure that Ministers can promptly identify all potential conflicts (including perceived conflicts) and can take sufficient steps to appropriately manage them.

The identification and management of conflicts of interest in the public sector is a matter that continues to arise in the work undertaken by my Office and is of ongoing concern to me. While conflicts of interest arise in all walks of life, there are higher expectations about how they are managed in the public sector because it is public money that is being spent and public powers that are being exercised.

Thank you for drawing this matter to my attention. Because of the public interest in this matter, we intend to publish this letter on our website.

Nāku noa, nā

John Ryan
Controller and Auditor-General

1: These were the Ministers of Finance and Infrastructure and the Associate Ministers of Finance. The Infrastructure Reference Group (IRG) comprises infrastructure leaders who work alongside the PDU.

2: Kānoa-RDU was established in 2018 in MBIE to support delivery of government funding that would enhance economic development opportunities in regional New Zealand.

3: See Crown Infrastructure Partners (2022), Quarterly Infrastructure Reference Group Update Q4: to 31 December 2022, at www.crowninfrastructure.govt.nz.

4: The letter was also sent to chief executives of relevant agencies, including the chief executives of both MBIE and the PDU.