We are pleased to see that Murray McCully has posted on the serious problems at NZAID.
NZAID Flunks Audit New Zealand’s overseas aid budget will this year hit $429 million, headed for $600 million in 2010. The critics in the aid community maintain the traditional refrain that this is too little, too late. But recent reports suggest that they would be better occupied focusing on the quality, not the quantity, of the current aid expenditure.
In late 2007, Parliament’s Foreign Affairs Committee commenced its annual financial review of NZAID. Such reviews are commenced with a report from the Audit Office, detailing their findings from the mandatory audit process. And last year’s review, the results of which became public this week, do not make for pretty reading. The Audit Office report identified a litany of serious deficiencies:
NZAID had “entered into contracts for services without having gone through a normal tender process,” had “failed to ensure the agency was not being funded for the same work by other donors,” could not produce “evidence to indicate whether or not NZAID had considered ‘value for money’,” and had departed from “what we regard as good practice around paying only on delivery of services, or, when paying in advance, only paying a proportion to minimise the risk of public money not achieving desired outcomes”.
The Auditors also criticised a lack of “any provision to retain funds pending successful contract completion”, and identified an aborted contract where no attempt had been made to recover pre-payments.
Asked to explain, the NZAID officials argued that the pace of aid budget increases had given them speed wobbles. In fact, the report was truly damning, its criticisms going right to the heart of the organisation whose role is to deliver the assistance generously provided by New Zealand taxpayers to the intended recipients. And with more taxpayers’ money in the pipeline for next year, the Audit Office identified “major improvements” as being required, “to which the entity should give urgent attention.”
The great irony, of course, is that NZAID sits under the wing of the Foreign Affairs Ministry (MFAT) as an autonomous entity. The Audit report on MFAT itself was positively glowing. So, how could it be that an entity that was part of MFAT, until the current government decided to make it an autonomous being, could attract such a shoddy audit report, when its parent is, we are told, in pristine audit condition? Ammunition, to be sure, for those critics who saw the original split as an expensive exercise in political correctness.
More Critical Reviews There was more bad news for NZAID last week when the Audit Office produced a performance audit of selected projects currently in the pipeline. The performance audits are part of a programme of regular reviews of government agencies for which the Audit Office has received additional funding.
The Auditors selected a sample of nine NZAID funding arrangements. They found “poor practice in six of the nine funding arrangements.” So, what sort of poor practice did the auditors find? Well, fundamentally poor practice, when you consider the nature of the NZAID work programme:
-“contractors being contracted before a search was carried out on the ACS database.” - “management of conflicts of interest not being documented.” -“contractors starting work before a contract was in place.” -“contracts not being tendered when the contract value exceeded the stated limits.” -“contractor fee rates increasing during the contract without a clear documented reason for the increase” and -“contract variations for retrospective funding.”
In any government agency, these findings would be serious. In an agency whose sole business is the efficient administration of $429 million of aid monies annually, they strike at the heart of its reason for being.
