Part 5: Implementing the 2024/25 contracted services plan

5.1
In this Part, we describe:

• advice within Oranga Tamariki about implementing decisions;
• how Oranga Tamariki notified providers of its decisions;
• the reaction from providers and the wider social services sector;
• how contract negotiations continued until the end of 2024; and
• the Minister's intervention in early 2025.²¹

Internal guidance about implementing decisions

5.2
On 19 July 2024, after the Chief Executive signed off the second set of contract decisions, National Office notified regional staff of the 2024/25 contracted services plan. National Office also provided staff with an Advice Note on 22 July 2024 that had guidance on how to implement the decisions.²²

5.3
The Advice Note included:

• template letters to send to providers of services that Oranga Tamariki had decided to reduce or discontinue;
• an instruction that, where Oranga Tamariki had decided to reduce a contract and where it had not yet paid providers their first quarterly payment, staff should assess whether it should pay this before the contract was varied to "ensure that no overpayment is made based on the proposed change to the service"; and
• a new approach to purchasing care services that involved paying for 70% (nine months) of care provision, using monthly reporting and quarterly reconciliation, and adjusting funding after that in line with actual usage.

5.4
The Advice Note also gave regional staff advice about their responsibilities when discontinuing a service, including guidance on what Oranga Tamariki expected of providers and Oranga Tamariki staff in terms of winding down services and referring clients elsewhere.

5.5
The Advice Note said that providers were responsible for identifying other local services to refer clients to, communicating with clients about their needs, facilitating referral, or encouraging clients to self-refer.

5.6
The Advice Note said that the role of staff included monitoring the transition plan, working to confirm the funding needed for transition, and sharing a list of other available services with providers.

Notifying providers about decisions

5.7
Oranga Tamariki contacted providers between late July and mid-August 2024 to notify them of the decisions it had made about their contracts – in particular, about changes to contracts for 2024/25.²³

5.8
We saw examples of the letters Oranga Tamariki sent to providers to give them formal notice of its decisions. The letters followed the templates set out in the Advice Note. The letters included a table of affected contracts and what the change in 2024/25 would be (for example, that Oranga Tamariki would reduce or discontinue the contract).

5.9
However, the letters also set out all possible scenarios that could apply depending on what decision Oranga Tamariki had made. It was difficult for providers to identify which parts of the letter were about their contract(s).

5.10
For example, the letters did not explicitly state the effective end date of contracts for services that Oranga Tamariki was discontinuing. Instead, they gave scenarios – for example, that Oranga Tamariki would stop its funding either by 30 September 2024 if the contract had expired on 30 June or after the notice period listed in the terms of a contract that allowed termination for convenience. Providers had to determine which scenario applied to them.

5.11
The letters to providers did not provide any rationale for the decisions or explain why Oranga Tamariki was varying or ceasing contracts for services.

5.12
After notifying providers of decisions to reduce their funding or no longer fund their services, Oranga Tamariki discussed transition planning with them. It confirmed that it would provide an agreed amount of funding to assist with winding down services. We were told that Oranga Tamariki was not contractually required to do this in all cases (for example, where the contract had ceased on 30 June 2024) but did in recognition of the need to allow time to wind down services.

5.13
We understand that, in line with the Advice Note, Oranga Tamariki sent providers a template to fill out. We were told this template asked for information about staffing and other financial implications, how providers would use funding from Oranga Tamariki to address these, and where they would refer children and families to.

5.14
However, providers told us that they did not know where to refer clients. Some were not aware of any other similar local services or were unsure which providers were still going to be funded. Some told us that other services already had long waiting lists, such as counselling for parents and whānau.

5.15
We heard from providers who received no response or information after asking Oranga Tamariki for support with identifying services to refer clients to. We are aware that, in some instances, regional staff worked with providers on their transition plans. In other instances, providers were simply given the transition plan template and told that they needed to fill it out.

5.16
Providers and Te Pai Ora SSPA told us that, in some instances, Oranga Tamariki continued to refer new clients to providers whose services it was discontinuing. Oranga Tamariki told us that, in its view, services were still active when referrals were being made because discontinued services had a notice period before ceasing. However, it was not clear to us why a referral would be made to a service that Oranga Tamariki was discontinuing rather than to services Oranga Tamariki intended to continue to fund.

5.17
We were also told that Oranga Tamariki withheld payments it owed to some providers, as well as transitional funding, until they completed a transition plan. We saw correspondence from Oranga Tamariki to providers that appeared to confirm this.

Reactions from providers and the sector

5.18
It is clear from our inquiry work that these decisions took providers by surprise and that they were not given a clear rationale for them.

5.19
Many providers were not expecting changes to their contracts, particularly when the contract was not due to expire. Others were used to the previous practice of rolling contracts over and were not expecting 2024/25 to be any different.

5.20
Some providers said that, because their services were over-utilised, they could not understand why their contract was being terminated or reduced.

5.21
Providers also said that the late notification of the decisions to reduce or exit contracts:

• impeded their ability to do financial and operational planning for 2024/25; and
• undermined planning and investment decisions that they had already made on the basis that they had a multi-year contract or because they expected their contract to be renewed as it had been in previous years.

5.22
For example, some providers had committed to investments to help build their capacity to provide services, signed new lease agreements, extended subcontracts, and hired new staff or extended staff employment agreements.

5.23
Several providers said that their contracts being discontinued or varied at late notice (some of which had been signed relatively recently) meant that they unexpectedly needed to restructure and make staff redundant or redeploy them.

5.24
Providers reported difficulties in communicating with Oranga Tamariki about their concerns about decisions. We were told about, and saw, examples where queries from providers about the decisions went days or even weeks without a response. We understand that at least one provider submitted a request under the Official Information Act 1982 to try to understand the reasoning behind the decision about its contract.

5.25
We also heard that many of the regional staff that providers had been working with were made redundant in the organisational restructure shortly before or after providers were notified about the contract changes. This meant that providers either had new people to work with or did not know who to contact.

5.26
In some instances, providers felt that the best information they could get was from other providers rather than Oranga Tamariki. For example, Te Rūnanga o Toa Rangatira – with whom Oranga Tamariki has a formal partnership and contracts – led a hui with other affected providers in Porirua to discuss the changes being made and explore ways to work together to reduce the affect on the vulnerable children and communities they work with.

5.27
Concerns among providers also led to an escalation in concern from bodies such as Te Pai Ora SSPA, Aroturuki Tamariki – Independent Children's Monitor (Aroturuki Tamariki), and Mana Mokopuna – Children & Young People's Commission (Mana Mokopuna).

5.28
Te Pai Ora SSPA told us that it heard many concerns from its members about funding decisions, how they were being treated, and the limited information they had received. In August 2024, Te Pai Ora SSPA surveyed its members and reported that:

• where services were being reduced or discontinued, Oranga Tamariki did not know where children and whānau would now go for support;
• rushed decision-making, poor communication, and a lack of clarity were causing distress to the social services sector and its communities; and
• a lack of transparency and clear rationale for decisions had broken trust between Oranga Tamariki and the sector.

5.29
Aroturuki Tamariki and Mana Mokopuna raised similar concerns with Oranga Tamariki. For example, Aroturuki Tamariki wrote to the chief executive of Oranga Tamariki seeking any documentation describing the overall funding strategy and the rationale for change. Aroturuki Tamariki told us it considered that no clear evidence or rationale was provided in response to this request. With respect to changes to prevention and early intervention services, Aroturuki Tamariki also said that no evidence had been provided to it to show how a social investment approach had been used to inform decisions.

5.30
Representatives from Waikato-Tainui, with whom Oranga Tamariki has a formal partnership, also told us that they were seriously concerned about the decision-making. Waikato-Tainui compiled a detailed summary of the outcomes that it had observed in its rohe, based on information from its staff and from Oranga Tamariki.

5.31
In response to concerns that providers raised publicly, Oranga Tamariki and the Minister issued separate media releases. The media release from Oranga Tamariki provided data on the number of affected providers and contracts. It said that:

• 50 services (with 35 providers) ended naturally and as intended on 30 June 2024 – the contracted funding was one off, and or the service reached its intended end date.
• 269 services (with 142 providers) are being reduced to align to service levels based around forecasted utilisation and need.
• 337 services (with 190 providers) are being discontinued due to a change in prioritised need, under performance, and or underutilisation in previous years.
• 1470 services (with 451 providers) are already contracted in FY2025, or being re contracted with the same level of service from FY2024.
• We are in the process of procuring at least 50 new services during FY2025.

5.32
Both releases said that Oranga Tamariki had reviewed its contracts line by line to improve the efficiency of its spending and focus on caring for and protecting children in state care.

5.33
The releases emphasised that Oranga Tamariki was focused on funding services that had performed well. The media release from Oranga Tamariki said that "some providers have been able to accumulate significant surpluses and this is unacceptable". The Minister's release said that "For too many years Oranga Tamariki has been the cash cow for community service providers who say they will provide services, and then don't."

5.34
Every provider we interviewed emphasised that these releases significantly harmed their trust and confidence in Oranga Tamariki – at a time when many of them were actively discussing their contracts with Oranga Tamariki.

5.35
Providers told us that they recognised the importance of performance monitoring and funding effective services. However, they also said that the media releases made generalised, offensive statements about poor provider performance that unfairly affected public perception of all providers, including those who had had their contracts reduced or discontinued even though they had met or exceeded their performance measures.

Continuing negotiations until the end of 2024

5.36
Discussions between Oranga Tamariki and providers continued throughout 2024 as Oranga Tamariki sought to vary contracts.

5.37
Oranga Tamariki continued to provide delayed responses to providers' queries. In some instances, providers managed to get a response to questions about the future of their contract only if they escalated their concerns to the Chief Executive or Acting Chief Executive.

5.38
Several providers tried to contact Oranga Tamariki to negotiate the proposed variations to their contracts and come to an agreement. Some providers also counter-offered with a lower reduction than the one that Oranga Tamariki proposed.

5.39
However, these providers told us that Oranga Tamariki said that decisions were final. They generally found Oranga Tamariki unwilling to engage in negotiation, despite the contracts requiring that both parties agree to any variation.

5.40
Providers told us that Oranga Tamariki intended for contracts to be varied with retrospective effect (for example, backdating a reduction in services to take effect from 1 July 2024). Some providers also told us that Oranga Tamariki had said that, if they did not agree to a variation by a given date, they should "familiarise" themselves with the termination for convenience clauses in their contracts.

5.41
At least one provider was given notice of termination for convenience, with the stated intention of negotiating a new contract. Some Oranga Tamariki staff told us that they considered that this was a legitimate way to put commercial pressure on providers to accept a variation in the contract.

5.42
Providers also told us that Oranga Tamariki withheld payments it owed for services provided under their contracts until they agreed to variations. We heard that this left providers, especially small providers and those who relied heavily on Oranga Tamariki funding, with little option but to agree.

5.43
In response to our draft report, Oranga Tamariki told us that restraints within its systems required a signed variation before the payment could be made, which led to payments not being made. It also told us it was looking to remove those restraints to help ensure that providers are paid in a timely way, even if a variation is not yet signed. It was unclear to us why a signed variation would be required in order to pay providers for services under an existing contract, or why the system restraints were not remedied at the time issues with payments were being identified.

5.44
The ongoing negotiations delayed finalising the contracting round. Several providers told us that, in late October and early November, they either had not received new contracts to formally propose variations or had only just received a proposed variation.

5.45
We also heard that, despite work in 2024 to refresh the contracts' terms and conditions, these had not been consistently rolled out in all contracts. Similarly, Oranga Tamariki had repeatedly said that pay equity variations would be completed in September 2024, which it later delayed until December 2024. As at April 2025, Oranga Tamariki had still not provided pay equity funding to eligible providers through their contracts.

5.46
Several disputes emerged during this period, and providers sought legal support for potential or actual disputes. This resulted in Oranga Tamariki also seeking internal legal support.²⁴

Attempt to close the contracting round

5.47
The Acting Chief Executive held several hui with providers and partners in late 2024 in an attempt to recognise that there had been issues with the process, listen to their concerns, and try to reset relationships.

5.48
Providers and partners told us that these meetings were generally positive and they appreciated the effort. However, they also said that there did not appear to be any identifiable change in behaviour from Oranga Tamariki after those conversations.

5.49
On 2 December 2024, the General Manager, Commissioning and Investment wrote to providers. The letter stated that Oranga Tamariki would end negotiations for service contracts for 2024/25 by 13 December 2024 (excluding contract variations for pay equity), given the need to look ahead and plan arrangements for 2025/26.

5.50
On 10 December 2024, before Oranga Tamariki intended to close the contracting round, Stand Tū Māia publicly announced that it would take legal action against Oranga Tamariki.²⁵ Specifically, Stand Tū Māia announced that it intended to seek an injunction against the decision to terminate a three-year integrated contract worth $21 million each year.²⁶ This announcement followed several months of engagement and dispute between Stand Tū Māia and Oranga Tamariki about the termination of the integrated contract.

5.51
On 13 December 2024, Stand Tū Māia issued a further release stating that it had reached a resolution with Oranga Tamariki, including agreeing a different end date to the contract. The contract end date was extended again to 30 June 2025 and, at the time of this report, no decision had been made about the future of the contract.

Minister for Children's intervention in early 2025

5.52
In January 2025, media outlets reported that Barnardos' "0800 What's Up" helpline, a nationally available counselling service for children and young people, was at risk of closing because of changes to Barnardos' funding. We understand that there had been ongoing funding negotiations between Barnardos and Oranga Tamariki, as part of which Barnardos included a proposal to reduce the funding for the helpline to try to preserve its funding for core social work. We also understand that Barnardos told Oranga Tamariki of its intention to make a public announcement about the potential funding changes for the helpline.

5.53
On 30 January 2025, the Minister issued a media release stating that she had "intervened in [the] review of social service provider contracts to ensure that Barnardos can continue to deliver its 0800 What's Up hotline".²⁷ The release said that the Minister had sought an explanation from Oranga Tamariki and that, based on the information available, its handling of the situation did not meet the Minister's stated expectations.

5.54
The release also stated that the Minister asked Oranga Tamariki to pause its review of contracts and "extend existing contracts for providers who do not have a current contract, or have a contract that will end shortly, until 31 December 2025".

5.55
In February 2025, Oranga Tamariki told us it was preparing advice on how to implement the Minister's request, including seeking further clarification from the Minister on which categories of contracts were included in the request to extend existing contracts. It had also provided initial estimates of the financial implications of different scenarios.

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21: It was not possible to provide specific dates for all events discussed in this Part.

22: This version replaced an earlier Advice Note circulated on 3 July 2024.

23: Oranga Tamariki did not inform all providers on the same date.

24: Oranga Tamariki's contracting policy requires it to seek legal advice if any significant dispute arises under a contract, there is any threat of litigation from a current or former contracting party, or if there is any indication of unlawful activity from the other party.

25: Stand Tū Māia describes itself as a "charity providing an Intensive Wraparound social service response through its Stand for Children service." See "Who we are" at standtumaia.nz.

26: The contract had been signed in October 2023 and was due to run until 2026.

27: See "Barnardos decision reversed" at beehive.govt.nz.