Media release

12 October 2006

Speaker responds to Auditor-General

The Speaker, Hon Margaret Wilson, today accepted the Auditor-General’s report, in which he advised that Parliamentary Service had incurred breaches in allocating funding outside the appropriation. She made it clear however that she did not accept the legal analysis on which the Auditor-General relied.

Under Section 65Z of the Public Finance Act 1989 the Speaker, who is also the Minister Responsible for Vote: Parliamentary Service, was required to report to Parliament in relation to expenditure the Auditor-General decided was outside the scope of the relevant appropriation.

As indicated by the Auditor-General, S65Z took effect only on 1 July 2005, so his power to direct only applied to the expenditure incurred from 1 July to 16 September (the day before the General Election).

As the Responsible Minister, the Speaker was required to include in her report to Parliament:

a. The nature and extent of any alleged breach of the appropriation that the Auditor-General has reason to believe has occurred; and
b. The events that gave rise to the alleged breach; and
c. The remedial action taken or proposed to be taken to correct the breach and prevent its recurrence.

Her Report addressed these three matters.

Briefly, the Auditor-General found breaches in the allocation to seven of the eight parliamentary parties. His finding was based on an interpretation of what activities fell within the definition of “parliamentary purposes”. A legal opinion from Crown Law, which found that a “parliamentary purpose” is negated if one of the purposes of the communication is to invite support for party policies, supported his interpretation.

This interpretation was not conveyed to the parties before the 2005 election. The Auditor-General did however express in his 2005 Report on advertising expenditure his concern at the interpretation and administrative practices of Parliamentary Service surrounding advertising.

The Parliamentary Service Commission noted this concern and recommendation for a review, which it agreed to undertake after the election.

Ms Wilson said there appeared to have been a genuine misunderstanding as to the new interpretation which the Auditor-General expected to be applied by both the Parliamentary Service and parliamentary parties. It was unfortunate a clearer direction was not given before the election.

‘The Auditor-General’s 2005 Report dealt with advertising in the pre-election period but gave no specific direction for the 2005 election.

‘Parliamentary Service and parliamentary parties continued with past practices. Unfortunately the new interpretation was not communicated prior to the expenditure being incurred.

‘If a specific direction had been given, both Parliamentary Service and the parliamentary parties would have implemented it.

‘There is no evidence of any intention not to comply. Parties thought they were acting lawfully.’

Ms Wilson also stated she had received legal advice that supported the interpretation used by Parliamentary Service and parliamentary parties for many years. That legal opinion is attached to her Report.

In her response, Ms Wilson recommended four courses of action:

1. Validation

‘Appropriations by Parliament are a cornerstone of the New Zealand parliamentary system and are of such importance that I have decided to recommend that the normal process of validating legislation, as provided in S26C of the Public Finance Act 1989, be introduced to remedy the breaches,’ Ms Wilson said.

‘Although the unlawfulness in this instance is surrounded by much political controversy, it does not alter the fact that legislation is required to validate the unlawfulness.

‘Although it is a matter for Parliament as to whether it passes validating legislation, if there is no validation, reimbursement does not purge the unlawfulness. Without legislation the unlawfulness remains.’

2. Reimbursement

‘Reimbursement is not required and nor is it normal or common practice if Parliament enacts validating legislation,’ Ms Wilson said.

‘However, in this instance the matter must be considered seriously if public confidence in Parliament is to be maintained.’

Ms Wilson said parliamentary parties had not yet had an opportunity to read the Auditor-General’s Report or her report.

‘It is essential in the interests of natural justice that they be given that opportunity before I finally report to Parliament on this issue,’ Ms Wilson said.

‘I therefore require the parliamentary parties to consider the two reports and report back to me on whether they intend to reimburse the unlawful expenditure in time for me to report back to Parliament next Thursday.’

3. Parliamentary Service

The Auditor-General’s Report was critical of Parliamentary Service administration processes.

‘This is a matter of serious concern,’ Ms Wilson said. ‘I intend to act on the suggestions of the Auditor-General and refer the report to the Appropriations Review Committee for a review of administrative practices.

‘I agree with the Auditor-General that the issues are more fundamental than an administration process. I have therefore decided that an independent review of the statutory framework is also needed.’

Ms Wilson said she would consult the Parliamentary Service Commission when it meets next Wednesday and seek their support for an external review of the statutory framework of Parliamentary Service, the Parliamentary Service Commission and that of the Speaker.

‘It may also be time to go a step further and review whether the Speaker should have such a role as Responsible Minister,’ she said.

‘It should also be noted that Parliamentary Service is in a difficult position. The legal and parliamentary framework within which it works does not permit proper oversight.’

4. Legislation to Clarify What Activities are Lawful

Both the Auditor-General’s report and the Speaker’s report raised the question of the need to be very careful when approving activities undertaken by Members in undertaking their parliamentary duties.

Incorrect understanding of “parliamentary purposes” and in particular, which activities fell within those purposes or were explicitly for “electioneering purposes” for administering advertising expenditure, was at the heart of the breaches.

‘The present position is so uncertain that it may be unworkable on a practical day to day basis,’ Ms Wilson said.

‘Because of the uncertainty I am recommending that consideration should be given by Parliament to legislation to clarify the meaning of “parliamentary purposes” in the interim.’

‘This would enable Parliamentary Service, the Parliamentary Service Commission, Members of Parliament and the Responsible Minister to continue activities consistent with the law until long-term reviews are completed.

‘MPs and the public need certainty that the resources used to fulfil responsibilities to the electorate are lawful. This can only be achieved by closer statutory direction.’

ENDS

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