Auditor General damns the Govt’s charity funding processes
This column about the Auditor General's report into Gumboot Friday stated that questions had been raised about the independence and methodology of ImpactLab, a business chaired by Sir Bill English. I retract these statements and apologise for them.
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Should Government Ministers be able to dole out money to anyone they want? Or should proper rules be followed when disbursing taxpayer funds?
According to a landmark condemnation from the Auditor General this week, the politicians need to follow the rules. The watchdog published a damning letter on Wednesday that he had sent to the Ministry of Health, chiding them for letting the Minister for Mental Health, Matt Doocey, hand out $24m to a charity closely connected with various political parties – Mike King’s Gumboot Fridays.
The Decline of transparency, integrity, and accountability in the public service
Auditor General John Ryan says that “transparency, integrity, accountability, and value for money” need to be at the centre of how government agencies spend their money. Certainly, in the past, public money wasn’t just dished out to the mates of politicians. The public service was there to prevent such abuse of office. Officials have been tasked with ensuring that proper procurement processes are followed.
That protection against corruption no longer appears to be so healthy. Basically, the Auditor General says that the way the public servants just handed out $24m to Mike King “stinks”. Therefore, his landmark telling-off of the Ministry of Health should be a real wakeup call about the state of the public service. The letter needs much more attention.
Politicians picking favourites
The scandal over the $24m given to the Gumboot Fridays programme comes out of the closeness that many politicians and political parties have to comedian and mental health advocate Mike King. Across the political spectrum, politicians have championed King’s unorthodox methods and tenacity in trying to turn around the blight of youth mental health illness. The fact that King has been something of an outsider, rejected by the health system, has made him a cause celebre.
Hence the last Labour Government gave $600,000 of funding to his Gumboot Fridays programme in 2021 without any proper process. And then the new Coalition Government agreed to provide King even more money – giving Gumboot Friday’s $6m a year for four years- to counsel young people.
Although there are many charities and social services providers that also provide similar services to that of Gumboot Fridays, these competing providers were locked out of consideration for the $24m fund. New Zealand First and the National Party decided against any advertised and open tendering process for this service in favour of just giving the funding straight to Mike King.
Mental Health Minister Matt Doocey, therefore, instructed the Ministry of Health to sign a contract with King’s charity. There was only a little pushback to this. The Treasury, for example, advised that providing the money to the charity would involve risks due to ignoring the procurement rules. The Health officials also pointed out to Doocey that such funding would not be compliant with public procurement rules.
However, health officials came up with a way around the rules – a legal loophole. In health contracts there’s a provision to “opt out” of the standard procurement processes for cases of specialist health services. Although this exemption wasn’t meant for the likes of Gumboot Friday, it meant that officials were able to deliver what the Beehive wanted.
What the Auditor General said
The letter from Auditor General John Ryan essentially says that the Ministry of Health was too eager to please, and officials should have pushed back against their minister. They should have explicitly told Doocey that they couldn’t give the contract to King’s charity without breaking the rules. And regarding using the “opt-out” loophole, the Auditor General says the Ministry failed to give a “clear justification” for doing so.
The Auditor General’s six-page letter contains one key part that is worth quoting at length. This is his list of the five things wrong with the procurement process:
The selection of the supplier and the amount of funding was decided without an open and transparent process
There was no opportunity for a fair, open or competitive procurement process
The funding for the new initiative was specific to a supplier, rather than to a broad policy initiative or to achieve a policy outcome
The limited analysis on whether it was appropriate to directly contract the supplier or whether the supplier was best placed to deliver the policy objective was done only after the decision to provide funding to the supplier had been made
The decision to opt-out of the rules took place after the decision to engage the supplier and without clear justification of why an opt-out was appropriate
The letter acknowledges that officials were “put in a difficult position” because they were directed by their Minister to dole out the money to Gumboot Fridays. But the Auditor General simply doesn’t believe that officials pushed back hard enough: “the documents I have seen do not reassure me that the full range of risks associated with the procurement were communicated to ministers.”
The main firepower of the Auditor General’s letter was directed at the officials in the Ministry of Health. And there’s no doubt that they deserve the lambast.
But are the politicians getting off too lightly? The Herald’s Audrey Young thinks so, complaining that the Auditor General has slammed the wrong group: “The Auditor-General has eschewed any criticism of the politicians or coalition agreements themselves, effectively saying they are out of bounds. That is letting them off the hook. Someone with independence and oversight should be telling the politicians why such promises are problematic to good practice. If not the Auditor-General, then who?”
Matt Doocey has gone to ground this week, refusing to be interviewed on the Auditor General’s finding. Instead, he’s put out a statement, blaming officials: “While the decision to fund Gumboot Friday was a decision made by the government, how this commitment was implemented was a decision for the Ministry of Health. Throughout the process, the minister has sought, and received assurance from officials that the implementation option chosen by the Ministry of Health is compliant with government procurement rules.”
As Young rightly comments, the Minister’s attempt to blame officials is “galling”.
National Party connections to Gumboot Fridays
The Auditor General’s report only dealt with the Ministry of Health’s role in the procurement process for Gumboot Fridays. However, there are still other concerns about the funding.
The problem is that Gumboot Fridays is run by the “I Am Hope” charity, which is increasingly viewed as a National Party charity. The CEO that was running the charity for much of the time of the controversy was Troy Elliott, a National Party activist, who has been keen to become a National MP (following in the footsteps of his father who had been in Parliament).
The new chair of the charity is Naomi Ballantyne, who has been a financial donor to National in recent years. During the 2020 election year, she donated $20,600 to the party; last year, she made three further donations totalling $6840. She made her fortune in the life insurance industry.
Of course, in contrast to Gumboot Fridays getting $24m, we have leaned this week that David Letele’s South Auckland foodbank is having to close at Christmas this year due to a lack of government support. Letele is also something of a popular figure in political circles, with his innovative achievements incredibly respected. However, he doesn’t seem to be very close to any of the parties that are currently in power.
The unfortunate lesson for the charity sector therefore seems to be: it’s not what you do, it’s who you know.
Dr Bryce Edwards
Political Analyst in Residence, Director of the Democracy Project, School of Government, Victoria University of Wellington
Key Sources
Anusha Bradley (RNZ): 'Unusual and inconsistent' process to justify $24m 'Gumboot Friday' contract, auditor-general finds
Anusha Bradley (RNZ): 'Opt-out' clause used to justify lack of procurement process for Gumboot Friday funding
Felix Desmarais (1News): Gumboot Friday funding process 'unusual', not transparent – watchdog
Bryce Edwards (Democracy Project): Political Roundup: The Negative social impact of taxpayer-funded partisan charities
Oliver Lewis (BusinessDesk): Auditor-General criticises 'unusual' Gumboot Friday procurement process (paywalled)
No Right Turn: "The party of personal responsibility”
Bridie Witton (Stuff): Government’s Gumboot Friday funding found to be ‘unusual and inconsistent’
Audrey Young (Herald): Coalition Government wasting time and money on pointless election promises (paywalled)
As an old public servant who handed out government funds within the strict framework of policy, this article makes me sick. The public servants who made the recommendation to the Minister (who comes from a good Catholic family) should also be named. How else can we inject ethics back into the public sector?
I was informed of a word this week "kleptocracy". When I looked up its meaning the definition was: 'A government characterized by rampant greed and corruption'. Have we got there yet?
Another brilliant but concerning expose Bryce.