11 April 2006

Chair of Housing New Zealand Corporation agrees Terms of Reference
for OAG inquiry

The Chairman of Housing New Zealand Corporation has agreed the Terms of Reference for the Office of the Auditor-General’s inquiry into allegations about accounting irregularities.

“The Terms of Reference have been developed so as to include any new matters that are brought to the attention of the Auditor-General’s inquiry,” Pat Snedden said.

“It is the policy of the Office of the Auditor-General not to comment during an inquiry and HNZC will be adhering to that policy with neither the Board Chairman, the Chief Executive or any other HNZC staff commenting until the inquiry is completed.”

Mr Snedden said all relevant parties with a material interest in the outcome of the inquiry were consulted on the Terms of Reference.

“The inquiry report will be made public in its entirety once it has been reported back to the responsible Ministers and the State Services Commission.”

The Terms of Reference

Both the statement and the Terms of Reference are on the HNZC website www.hnzc.co.nz The Terms of Reference will also be on the website of the Office of the Auditor-General in the morning www.oag.govt.nz

Terms of reference

Auditor-General's Inquiry into Certain Allegations Involving Housing New
Zealand Corporation
11 April 2006

1 Background

1.1 The board of Housing New Zealand Corporation (HNZC) has asked the Controller and Auditor-General to inquire into certain allegations made by a contractor of HNZC, and the steps taken by HNZC in response to those allegations resulting in a settlement agreement with the contractor.

1.2 The allegations were of 3 main types:

· that certain accounting practices in respect of HNZC's housing modernisation and
maintenance programmes were inappropriate and produced misleading financial
results;

· that certain inspection activities in respect of HNZC's housing modernisation and
maintenance programmes were carried out inadequately, or not at all; and

· that the contractor was subjected to bullying by other staff in response to his
allegations.
1.3 The settlement agreement dated 14 December 2005 involved a payment by HNZC to the contractor of $3,000 in full and final settlement of all claims the contractor might have against HNZC, in return for, among other things, the contractor's agreement not to communicate publicly or privately any of his concerns in respect of HNZC or other parties, including through communications with any Minister, MP, journalist, radio or television station.

1.4 The board of HNZC has undertaken publicly to initiate an inquiry into the above matters, so as to ensure total transparency and for the purposes of reporting to the responsible Ministers and the State Services Commissioner. The board has invited the Controller and Auditor-General to undertake the inquiry. The Auditor-General is the statutory auditor of HNZC and is an independent Officer of Parliament. He has agreed to undertake the inquiry on the basis set out in these terms of reference.

2 The inquiry

2.1 The inquiry will examine:

2.1.1 The allegations made by the contractor in an agreed statement of facts dated 23 November 2005, and any other allegations by the contractor that the Auditor-General considers it desirable to investigate.

2.1.2 The events leading up to the signing of the settlement agreement dated 14
December 2005, including (without limitation):

(a) how HNZC negotiated the agreement, how the terms of the agreement were
arrived at, and what advice HNZC took in respect of the agreement;

(b) what the payment of $3,000 was for, at whose initiative it was negotiated,
and how it was calculated;

(c) how the agreement was authorised and, in particular, whether the Chief
Executive Officer of HNZC authorised the agreement or was aware in
advance of its terms; and

(d) HNZC's policies and procedures in respect of the making of protected
disclosures, and whether the contractor was aware of them.

2.1.3 HNZC's process for developing its internal audit programme and how priorities
were determined, including whether the issues raised by the allegations were
appropriately included in the programme, what priority these were given and how
these were determined.

2.1.4 Such further matters arising out of the inquiry as the Auditor-General considers it
desirable to investigate.

2.2 The Auditor-General intends to report to the board of HNZC on:

· his findings and conclusions in respect of the allegations relating to HNZC's
accounting practices and inspection activities, and the adequacy of HNZC's
responses to those allegations;

· the extent to which there is clarity and transparency around HNZC's use of Crown
funding and third party revenue;

· his findings and conclusions in respect of any other allegations made by the
contractor and the adequacy of HNZC's responses to those allegations;

· his findings and opinions in respect of the settlement agreement and the events which preceded it; and

· such other matters arising from the inquiry that the Auditor-General considers it
desirable to report on.

2.3 The Auditor-General aims to report to the HNZC board by 19 May 2006. The board will
then report to responsible Ministers prior to public release of the report.

2.4 During the inquiry the Auditor-General will consult, as necessary, with the State Services
Commissioner in relation to any allegations that relate to matters of integrity and conduct
of employees within the state services. If the Auditor-General considers that any such
matters would more appropriately be investigated by the Commissioner, he will report that fact to the board of HNZC and to the State Services Commissioner.

3 Our mandate

3.1 The inquiry will be conducted under sections 17 and 18(1) of the Public Audit Act 2001 (the Act), which authorise the Auditor-General, respectively:
with the agreement of a public entity, [to] perform for that entity any services of a kind that it is reasonable and appropriate for an auditor to perform; and [to] inquire, either on request or on the Auditor-General's own initiative, into any matter concerning a public entity's use of its resources.

3.2 The Auditor-General's report to the board will be under section 21 of the Act, which authorises the Auditor-General to: report to a Minister, a committee of the House of Representatives, a public entity, or any person on any matters arising out of the performance and exercise of the Auditor-General's functions, duties and powers that the Auditor-General considers it desirable to report on.

ENDS

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