16 December 2002 Media Statement

Transend report outlines spending, governance

Minister for State Owned Enterprises Mark Burton has today received the Auditor-General’s report on allegations of impropriety at New Zealand Post subsidiary Transend Worldwide Limited.

The report outlines instances of ill-defined policies and procedures and extravagant spending by a number of Transend staff during the last two financial years.

The report also found that New Zealand Post had taken the appropriate steps to address these issues in early 2002.

“I want to be very clear on this issue. While I am greatly reassured by the Auditor-General’s findings regarding the current state of Transend, I regard the extravagant practices of some staff with regard to travel and accommodation detailed in the report as utterly unacceptable behaviour.

“I am disturbed by both the conduct of some individuals outlined in the report and the failure of Transend’s management at the time to provide appropriate leadership and control of the situation.

“However, the board of New Zealand Post had already moved to address these issues at Transend well before this report was undertaken.

“I have stressed my grave concerns about the findings of this report to the current chairman of New Zealand Post. I have stated clearly that the closely monitored systems now in place must be stringently maintained in order to ensure that this kind of extravagant behaviour cannot occur in the future.

“I have also stressed that the current board must continue to take all necessary steps to monitor adherence to New Zealand Post policies, and be vigilant that all employees remain aware of their responsibilities.”

The report raises concerns in a variety of areas, including:

- A lack of appropriate travel and accommodation policy, which was inconsistent with the policies of New Zealand Post, and led to overspending by some senior Transend staff.

- Failure to fully inform the New Zealand Post parent board in regard to the risks involved with proposed projects

- Inadequate management of everyday costs, leading to imprudent spending.

- Lax credit card procedures, which allowed excessive spending on meals and entertainment

The report states that in March 2002, after the appointment of a new acting manager, appropriate steps were taken to clarify and enforce Transend’s travel and expenditure policies, bringing them into line with those at New Zealand Post. Changes included a move from first-class hotels to modest business class, economy class travel for all flights under 5 hours, and more stringent rules surrounding the appropriate use of company credit cards.

Since these changes were implemented, the report notes that spending at Transend has been more prudent and is now applied to legitimate business purposes only.

Mark Burton emphasised the importance of the Auditor-General’s findings.

“Obviously, I am disappointed that such behaviour occurred, but Transend’s current systems of governance and accountability are appropriate and well-monitored.

“While I have no reason to believe that similar behaviour is occurring in other SOEs, I will be writing to all boards to bring this report to their attention. It provides an object lesson on the importance of good governance. In particular, careful management is needed to minimise the risks associated with overseas subsidiaries.

“There are timely warnings here for every SOE. It is vital for boards to closely monitor their company performance and staff expenditure.”

ENDS

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