Decision on request to inquire into Health Benefits Limited

15 August 2014

On 24 June 2014, the Auditor-General received a request from Hon Annette King to investigate into the current financial situation and mandate of Health Benefits Limited. Our response to Hon Annette King is set out below.

Hon Annette King
Parliament Office
Private Bag 18888
Parliament Buildings
Wellington 6160

Dear Ms King

I refer to your letter of 24 June 2014, in which you requested under section 18 of the Public Audit Act 2001 an investigation into the current financial situation and mandate of Health Benefits Limited (HBL).

In considering this request, my office has reviewed HBL board papers and other programme information provided by HBL, and held discussions with a number of senior DHB, Ministry of Health, and HBL staff. We have also discussed the situation with our appointed auditors of HBL and some of the District Health Boards (DHBs). We have paid particular attention to the arrangements for the national Finance, Procurement and Supply Chain programme (FPSC), as this programme is the largest initiative led by HBL with the most potential to impact on DHBs. I am now aware of a number of changes that have been made to this programme since the letter from DHB Chief Financial Officers to the DHB Chief Executives of 7 March 2014.

I note the following factors concerning the current state of the FPSC and HBL’s engagement with DHBs:

  • Recent changes to the governance arrangements for the FPSC provide for stronger participation by DHB management in governance. For example, the programme Steering Committee, previously chaired by the Chief Executive of HBL, is now chaired by the Chief Executive of Auckland DHB;
  • the interim Chief Executive of HBL has acknowledged that HBL needs to engage more effectively with the sector, and has committed to doing so;
  • some services are now being delivered to DHBs through the FPSC, specifically a procurement service through healthAlliance Limited which went live on 1 July;
  • the FPSC programme is currently undergoing a re-planning exercise with most programme activities paused, pending the outcome of that exercise; and
  • senior Ministry of Health staff are monitoring progress and are in regular contact with the executive of HBL and with the DHB leadership representation on the FPSC programme.

In light of the changes that HBL and DHBs have made to the FPSC programme governance, the oversight role exercised by the Ministry of Health, and the re-planning of the FPSC programme now under way, I do not consider that starting a separate inquiry would add value at this time.

I have made the appointed auditor of HBL aware of your concerns, and asked that he consider the information that you have provided when conducting his 2014 audit. I have requested that I receive a briefing at the conclusion of the 2014 audit so that I can further consider the risks in this matter, and the adequacy of the changes that HBL and DHBs have made to the FPSC programme. This is a continuation of the attention that my office has paid to shared services in the health sector for some time, which is reflected in commentary in our last two health sector reports. In our report Health sector: Results of the 2012/13 audits, I noted the work of HBL, the need to ensure accurate reporting of sector savings and the risks associated with the FPSC. We will continue to monitor this and take action as appropriate.

Please feel free to contact me if you would like to discuss any matters arising from this letter. 

Yours sincerely

Lyn Provost
Controller and Auditor-General