Transparency Times February 2019

From the Chair

Suzanne Snively Chair Transparency International New Zealand

Suzanne Snively, Chair Transparency International New Zealand

The literature is clear that the greater the wellbeing of the population, the lower the level of corruption.

The Government’s priority of Improving the wellbeing of New Zealanders and their families has government agencies busily compiling budget bids that can be monitored according to their contribution to wellbeing.

An attribute of the wellbeing approach, based on living standards analysis, is that it can describe outcomes for people in ways that can be implemented to make a difference to peoples’ lives.

For example, a plan to support prisoners as they are released into the community has already led to a reduction in the number of prisoners. This has changed the upward trajectory of prison numbers, in this way preventing New Zealand from otherwise having the highest per capita prison population in the developed world.

Strengthening the Impact

Three key factors that will strengthen the impact of the Governments wellbeing budget are:

  • First, that a start is made now to set measurable targets that directly relate to people. This is why it’s helpful to have a baseline from 1 July 2019, the first day of the well-being budget year. As well as publishing these targets on the Statistics New Zealand and Treasury websites, it’s good to think about ways of publishing them in places so all people can see them. This means going on social media, such as on FaceBook. It also means looking for places where everyone will see the wellbeing achievements against targets – perhaps on the back of milk bottles and bread packaging. Ensuring that the public regularly sees this data will help people assess for themselves whether the policies implemented are in fact contributing to improving their living standards.
  • Second, let’s make sure that government projects and related social initiatives are in fact aligned with the wellbeing budget monitoring. Examples of policies that focus on engaging directly with people include the Open Government Partnership, former Prime Minister Jim Bolger’s Fair Pay Task Force, the Sustainable Development Goals and Whanau Ora, plus, all the many other projects which say they want to hear the direct voices of people about what they need to do to improve living standards and improve wellbeing. Experience-based knowledge gained from these projects once aligned, can be applied more rapidly and more quickly contribute to improving wellbeing.
  • Thirdly, it’s a good time for the private sector to do its bit to improve living standards for people. This is achieved through responsible investment for sustainable growth, customer relationship building, staff loyalty, and a country brand based on a reputation for integrity.

These three factors are minimum requirements for a wellbeing focused budget to lift the vulnerable out of poverty. They are the minimum to ensure that the wellbeing budget is effective in improving living standards.

Business Needs to Step Up

While the wellbeing budget is designed to be good for people, it is also good for organisations too, including business.

It’s time for all New Zealand businesses to embrace the wellbeing framework. Doing so ultimately contributes to their returns. It is not an added burden or distraction; it is an essential part of being a successful business.

For businesses, there are many benefits:

  • Most importantly, wellbeing contributes to New Zealand’s reputation and brand for integrity – this is fundamental to what makes any organisation, be it in the business, the public, community or financial sector, achieve higher levels of productivity
  • Well-being programs help lower costs 
    • The cost of capital is lower as shareholders give preference to businesses with good governance that goes hand-in-hand with wellbeing
    • Easier (e.g. less expensive, more open and quicker) access to new customers
  • Ethical organisations achieve higher returns, even during times of financial crisis
  • Staff prefer to work for ethical organisations
  • Ethical organisations achieve greater customer satisfaction.

It’s time to expect business organisations to realise the additional returns that can be earned by embracing wellbeing in their culture and leveraging the contribution we all make to New Zealand’s reputation as a trusted society and a good place to do business.

As our businesses become more profitable, they contribute to the tax base, they contribute more to civil society AND they can invest in ways that create more quality jobs.

Focus on Our People

The key to wellbeing is that the focus is on our people:

  • Our people as members of our society, as employees, as customers, as users of services, as investors, as depositors in banks.
  • Our people as whanau, family members, friends and colleagues.

With good information about what works best to improve wellbeing, everyone can do something to make a positive difference.

There can be wellbeing for all New Zealanders, demonstrating that a sovereign nation can function harmoniously. This is the basis of a strong integrity system, which is the strongest way to prevent corruption.

Suzanne Snively, ONZM

Chair

Transparency International New Zealand Inc.

Pacific Region Meeting of Transparency International

Claire Johnstone
Pacific Programme/ Maori Caucus

Claire Johnstone
TINZ Member with Delegated Authority Pacific Programme

Pacific Visioning Meeting

TINZ worked together with its global secretariat, Transparency International (TI) to bring together the 5 Pacific TI Chapters plus Integrity Fiji, for a Pacific Visioning Meeting on 8 and 9 February 2019 in Wellington.

The meeting was arranged on short notice with enthusiastic support from the TINZ Team. All attendees went away hopeful about their success in the Pacific.

Chapter representatives from Vanuatu, Solomon Islands, PNG, New Zealand, and Australia were joined by individuals from the TI Secretariat in Berlin and officials from New Zealand’s Ministry of Foreign Affairs and Trade (MFAT) and Australia’s Department of Foreign Affairs and Trade (DFAT).

Integrity Fiji also attended to collaborate on the vision as it follows TI’s process for becoming re-accredited.

The engagement of the officials signalled a renewed commitment to fighting corruption in the Pacific from both the New Zealand and Australian governments.

TI Pacific Chapters Meeting Wellington February 2019
Back row from banner: Henri Makkonen (TI Australia), Serena Lillywhite (TI Australia), Willie Tokon (TI-Vanuatu), Daniel Webb (TI – Pacific advisor), Joseph Veramu (Integrity Fiji),
Middle Row: Leonard Chan (MFAT), Koila Bula (Integrity Fiji), Claire Johnstone (TINZ), Wilson Toa (TI Vanuatu), Alejandro Salas (TI), Arianne Kassman (TI PNG), Stephanie Hopkins (TINZ), Akae Beach (TI PNG), Autumn Prow (TINZ).
Front Row: Joy Abia (TI Solomons), Michael McWalter (TI Solomons), Ruth Liloqula (TI Solomons), Nikola Sandoval (TI), Suzanne Snively (TINZ), Julie Haggie (TINZ), Steven Wawrzonek (DFAT).

Issues plaguing the Pacific

Issues of corruption continue to plague the Pacific region including:

  • Many examples of corruption at senior levels of national governments
  • Corrupt governments and individuals taking advantage of distance from financial centres to bring ill-gotten gains to the region
  • Exploitation of the rich natural resources of the region.

Chapter Issues

The chapters added to the conversation by discussing their primary concerns.

Fiji spoke about the lack of understanding of corruption at a grass roots level and the need for a stronger focus on anti-corruption legislation.

New Zealand and Australia highlighted how the region is targeted for money laundering.

Papua New Guinea remains concerned about interference in civilian rights in democratic elections. Lack of process and threatening behaviour made people feel at risk if they did not vote to support the current government. There is also a lack of transparency in public decision making. This exposes the country to resource extraction, land acquisition and exploitative procurement.

The PNG Chapter is lobbying for Freedom of information legislation though participating in the Open Government Partnership.

TI Solomon Islands is concerned about large amounts of Foreign Aid money, destined for the provinces, disappearing. The indications are that it is being used for personal gain as opposed to where it was meant to go. In addition to this, public officials act outside of the law or without authority and do not comply with legislation, regulation, financial guidelines and other policies.

Vanuatu continues to experience lack of transparency by public officials and the need to monitor land rights. The Chapter demonstrates the value of transparency through monitoring the allocation of funds to Members of Parliament.

TI introduced Pacific Advisor, Daniel Webb at the Pacific Meeting. He showed his commitment through listening to the Chapters present.

Summing it up

Transparency International Asia Pacific Regional Programme Manager, Nikola Sandoval, summed up the meeting as a strong demonstration about how anti-corruption interests can work together in the region to bring local experience together with international knowledge.

Suzanne Snively, Chair of Transparency International New Zealand, praised the chapters, TI, MFAT and DFAT, for the courage to grapple with the large challenge of corruption in the Pacific.

It is reassuring that both the New Zealand and Australia Governments acknowledge that our two nations have a role to play in collaborating with our Pacific neighbours to stem the blight of corruption before it becomes too large. Snively emphasised that

“This commitment is not just motivated by the desire to being good neighbours but through the realisation that what happens in those countries affects us economically and environmentally.”

Ruth Liloqula TI Solomons presenting at TI Pacific Meeting Wellington Feb 2019
Discussion at the TI Pacific Meeting Wellington Feb 2019
Pacific Visioning Meeting attendies outside ministry 8-2-19

Sustainable Development Goal 16 (SDG 16): Governance in a rapidly changing framework

Darius Balfoort, Director, Balfour & Associates Wellington

by Darius Balfoort

Guest Contributor

The Sustainable Development Goals

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future.

At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries – developed and developing – in a global partnership. They recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.

In recent years, the terms ‘Sustainable Business’ and ‘Environmental Social and Governance (ESG)’ have had a muffled tone. This is now beginning to change as we enter a period of making responsible investments and a renewed interest from the public sector on ensuring sustainable growth.

“Sustainable development is not something somebody else somewhere has to do. We have to do it. We in New Zealand have to make a contribution to having sustainable human development” – Helen Clark.

The ‘we’ she refers to comprises not only government, business and civil society, but all of us personally.

SDG 16

Sustainable Development Goal 16 – Peace Justice and Strong Institutions

Transparency International (TI) and Transparency International New Zealand (TINZ) are committed to supporting the SDGs programme designed to end poverty, protect the planet and ensure prosperity for all.  TINZ is particularly focused on goal SDG-16 ‘Peace, Justice and Strong Institutions’ because this:

  • recognises that good governance is essential to achieving transparent and accountable institutions 
  • plays a critical role towards achievement of all the other SDGs.

 

Measuring Progress

I had the opportunity to take the initial TI course on SDG 16, aptly titled ‘Using Governance Data to Fight Corruption Across the SDGs’. The 17 overarching SDG goals contain 169 associated targets. Of these, 36 targets measure aspects of governance, inclusion or access to justice. Only 12 of the 36 governance targets are contained within SDG 16 (commonly referred to as the Governance Goal) with the remainder spread amongst the remaining 16 goals.

SDG targets are then broken up into indicators. Indicators require implementation of measurement and monitoring tools on a national and sub-national level to measure progress. 

The system is complex on both a micro and macro level. New frameworks require the implementation of new, sub-national and national measurement standards. Very few countries have implemented these particular measurements

A ‘metadata repository‘ of the SDG indicators is subject to on-going refinement. 

Limitations

In addition, it became abundantly clear throughout TI’s course that there are limitations to the SDGs. When provided with select targets and indicators, there are always going to be gaps in data collection efforts.

An excellent example is indicator 16.3.2, ‘unsentenced detainees as a proportion of overall prison populations.’

Unsentenced detainees are individuals that are held in detention while awaiting a sentence. Indicator 16.3.2 aims to measure the number of unsentenced detainees as a proportion of a population. The SDG targets are based on the expectation that those numbers decrease.

An unintended consequence of this indicator is that governments will push for unsentenced detainees to be sentenced at a more rapid rate to demonstrate progress.

To be effective, additional indicators need to be in place such as, ‘the number of cases brought against governments for inaccurate sentencing.’ The allocation of a sentence is a back-room task and subject to periodic errors in sentencing periods. Faster sentencing has the potential to lead to rushed judgements and inaccurate terms served. 

This example based on Indicator 16.3.2 demonstrates that implementation of SDGs across sub-national and national reporting frameworks is not straight-forward. In collecting data on SDG indicators, it becomes apparent that a wider framework with supplementary indicators will need to be implemented to support data collection efforts.

We have a role to play

Participation in TI’s course ‘Using Governance Data to Fight Corruption Across the SDGs’  provided insights into the role that TI in parallel with other civil society organisations will have to play.  The development of robust data collection is critical to ensuring the integrity of the SDGs. We have our role to play in the changes to come!

E-learning course

On 11 March, Transparency International will commence its E-learning course: ‘Corruption, Data and the SDGs‘ which uses governance data to tackle corruption across the SDGs.  

This second course on SDGs will equip activists and practitioners with the knowledge and skills they need to collect, analyse and use governance data to monitor corruption and promote anti-corruption reforms across the SDG framework, from healthcare and education to water and sanitation. 

The course provides a conceptual framework to use governance data for anti-corruption purposes, as well as practical guidance on how to develop influential evidence-based advocacy. It is primarily based around videos as well as quizzes, assignments and discussion forums. A key output of the course is a roadmap that learners can use to shape their own governance data projects.

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Public sector leaders discuss CPI issues

The Leaders Integrity Forum held on 14 February was focused on the 2018 Corruption Perceptions Index (TI-CPI).  The forum explored what this index tells us about the challenges and risks to democracy in our rapidly changing world and how public sector leaders can make a difference.

TINZ Chief Executive, Julie Haggie, provided an overview of New Zealand’s number-two standing within the Corruption Perceptions Index 2018.  She also looked at how our leading trading partners are faring on the index. Notably China has dropped its ranking by 10 places. USA has also dropped – from 16 to 22 – to lose its spot in the top 20 countries perceived as least corrupt.  Australia has stagnated on a ranking of 13.

Julie’s presentation was followed by Catherine Williams, Deputy Commissioner for Integrity, Ethics and Standards, State Services Commission’s (SSC). She outlined the activities employed by SSC to build integrity across the public service.  These range from prosecution of wrong-doing, to recognition and celebration of exemplary behaviour.

The forum was chaired by Auditor-General, John Ryan who talked about the TI-CPI score being at the heart of our perceived integrity as a nation.

The Office of the Auditor-General writes a great blog on each of our Leaders Integrity Forums. This latest one will be at this link soon, and we encourage you to make these blogs part of your regular reading.

Auditor General, John Ryan chairs the Leaders Integrity Forum on 14 February 2019
Deputy State Services Commissioner, Catherine Williams, addresses the Leaders Integrity Forum 14 February 2019

Independent review of Open Government National Plan 2016-2018

David Dunsheath
Member with Delegated Authority
Newsletter Editor, Open Government Partnership, Parliamentary Liaison

David Dunsheath

TINZ Member with Delegated Authority for Open Government

Transparency Times Newsletter Co-editor

New Zealand’s second Open Government Partnership National Action Plan (OGP-NAP) 2016-2018, was completed mid last year. It is superseded by the third OGP-NAP 2018-20. The second plan was subject to a government-independent, End-of-Term Review through OGP’s Independent Review Mechanism (IRM). The IRM is conduced by a local reviewer, Keitha Booth, appointed by the International office of the OGP. It is the IRM’s role to take an independent look at how well the Government is doing at achieving the commitments it adopted for its NAP.

 A draft of the IRM’s report was recently released for public consultation. This opportunity has failed to be taken up widely by the public and so Ms Booth has been diligent in setting up individual meetings to discuss the details of the review. The OGP strictly adheres to what are very short periods for consultation. The latest review period closed 21 February.

TINZ considers that this IRM End-of-Term draft Report reliably summarises the strengths and shortfalls resulting from government’s implementation of its second NAP 2016-2018.  The IRM report’s recommendations influence the effectiveness of New Zealand’s current third OGP-NAP 2018-2020.

Findings

Of the seven commitments in the second NAP, only Commitment 6, ‘Improving access to legislation’, was considered truly ambitious with its “transformative potential”. Its completed milestones have led to the ‘Legislation Bill’ currently before Parliament. If passed, it will create a single online, open-format resource of all New Zealand’s primary legislation. A potential second stage of Commitment 6 would encompass the vast array of secondary legislation.  

Only one milestone of one commitment was not fully completed. This relates to engagement of government agencies’ expertise in presenting Budget data in ways to make it easy to understand. This was simply out-prioritised by preparations for the 2018 Budget, a precursor to this year’s Wellbeing Budget.

The IRM’s assessment of the ‘marginal’ extent to which six of seven commitments contributed to ‘open government’, is largely a reflection of the conservative original target/commitment settings.

Many concerns over ‘Official Information practices’ (Commitment 2) remain, to form a key component of the current, third, OGP NAP 2018 – 2020 plan.

For the second OGP NAP, mixed progress was made with improving open data access and practices (Commitment 3) but momentum is anticipated to increase. A recommended across-agency ownership role is yet to be finalised.  

Modest progress was made with ‘Tracking progress and outcomes of open government data release’ (Commitment 4). Statistics New Zealand has achieved increased, if modest, public involvement and provided a new interactive dashboard after seeking public comment on a static prototype design. Social media is being pursued for increased public engagement.   

‘Ongoing engagement for OGP’ (Commitment 5) achieved very modest increases in civic participation, in part due to inadequate resourcing. However, the IRM notes that a much-enhanced focus on public engagement was then achieved during development of the current third OGP NAP 2018-2020.

Overall

Progress with plan implementation increased during its second year of the second OGP NAP after the change of government and its creation of the Open Government Portfolio.

The plan has provided valuable experience to the participating government agencies and the OGP coordinating agency, State Services Commission, leading to a yet stronger third OGP NAP 2018-2020 currently being implemented.

The wealth of recommendations from the IRM’s mid-term and end-of-term reviews have provided a significant contribution to development and implementation of the current OGP NAP.

TINZ thanks IRM’s Independent Researcher, Keitha Booth, for her End-of-Term Report that reflects thorough research and thoughtful comments. We applaud her wide consultation and extensive desk research towards preparation of this report, carried out within demanding requirements set by the OGP.

IRM Process

In order to ensure that each new plan gains optimum strength from its predecessor, OGP has an international system of government-independent reviews for each country. These reviews assess effectiveness of each OGP NAP for its design, implementation and outcomes and provide the public with opportunities to comment.

For each OGP NAP, there is a schedule of mid-term and end-of-term reviews undertaken with public consultation, each stage comprising: 

  • government’s own self-assessment report,
  • OGP’s IRM report.

This is a key process by which all stakeholders can track OGP progress within their respective countries. Comments were invited from the public.

New Zealand is one of approx. 80 countries which have voluntarily committed to the Open Government Partnership (OGP) global initiative. This is coordinated by the Washington DC-based international OGP body.

TINZ recognises considerable value from New Zealand’s participation, which strengthens national integrity systems through engaging the participation of the wider public, adding to the exercise of democracy. It aims to provide non-partisan assistance to successive governments to strengthen their OGP planning and widen public engagement in the design of ambitious commitments that will make a meaningful difference to the lives of New Zealanders.

Reserve Bank Act review: Greater consumer, client and Treaty protections needed

Julie Haggie
TINZ CEO

Julie Haggie

Chief Executive Officer
Transparency International New Zealand

Reserve Bank Act review

In November 2017 the Government announced it would undertake a review of the Reserve Bank of New Zealand Act 1989. It was intended to create a modern monetary and financial policy framework. The review is now in Phase-2. This looks at the financial policy provisions of the Act that provide the legislative basis for prudential regulation and supervision, and the governance framework around them.

Submission key points

Transparency International New Zealand (TINZ)’s submission contained the following key points:

  • Any amendment to the objectives of the Bank must be broad enough to enable the Reserve Bank to take into account environmental sustainability when discharging its responsibilities. This ought to include the impact of climate change on the future stability of New Zealand’s financial system.
  • Any review of the objectives of the Bank is an opportunity to apply the principles of partnership, participation and protection (that underpin the relationship between the Government and Māori under the Treaty of Waitangi) to monetary policy and regulation. It is disappointing that it is not featured in the consultation documents.
  • The Bank should establish a process of annual NGO dialogues, as conducted by the Dutch Central Bank (De Nederlandsche Bank, DNB). Such meetings would offer the opportunity for the Bank to share and discuss research. They would also enable NGOs to share and discuss their concerns and priorities for working with the financial sector.
  • TINZ supports depositor protection insurance, and made a broad range of suggestions including:
    • enhanced transparency and consumer protection
    • processes to limit complacency or risky behaviour
    • improved clarity and readability of information
    • improved depositors’ access to comparable information
    • better information where limits on protection are in place
    • support for depositors to understand the risks of lack of protection insurance
    • reporting in order to limit risky behaviour
    • clarity and timeliness for consumers where there is failure
    • insurance that is fit for purpose and not applied if it is not needed
    • ensuring that compensation cannot be offset against mortgages. 

Regulating money in New Zealand politics

Simon Chapple: Director, Institute for Governance and Policy Studies Victoria University of Wellington

by Simon Chapple
Director, Institute for Governance and Policy Studies
Victoria University of Wellington

In the aftermath of the controversy surrounding former MP Jami-Lee Ross and opposition National party leader Simon Bridges, discussions have focused on possible reforms of political donations in New Zealand.

My colleagues Bryce Edwards and Michael Macaulay have raised the issue of taxpayer funding of political parties. So too has Minister of Justice, Andrew Little.

Green Party MP Marama Davidson has suggested the donation threshold for the disclosure of a donor’s name and address be lowered from NZ$15,000 to NZ$1,000. She has also proposed banning foreign donations outright and capping individual donations at NZ$35,000.

Several of these proposals warrant further discussion and contextualisation.

Foreign interference

Foreign interference in domestic politics is an increasing phenomenon worldwide.

Currently in New Zealand, foreign donations to a party of up to NZ$1,500 are permissible. Moreover, foreign donations below this amount are not individually or collectively disclosed.

It would be easy for a foreign state or corporate body seeking political influence to channel a large number of donations into the system just under the threshold via numerous proxies. Whether such interference has been happening is unclear, since New Zealanders do not know how much money currently comes in to political parties via foreign actors.

Even if foreign donations are not a problem now, one could rapidly develop. A strong argument can be made that foreign money has no place in democracy, including New Zealand’s.

New Zealand would not be going out on an international limb by banning foreign donations. Foreign donations to political parties are not permissible in the United Kingdom, Ireland and the United States. They are also banned in Canada but unfortunately a significant loophole exists. Australia is currently in the process of banning foreign donations.

Anonymity threshold

As noted, the threshold below which political donations can be anonymous could be lowered. A lower threshold would make it more difficult to evade name disclosure rules by splitting donations and attributing each part to a different donor.

Splitting may be what happened to the alleged NZ$100,000 Yikun Zhang donation. The NZ$1,000 threshold proposed by the Greens would be a huge improvement on the status quo. A donor of NZ$100,000 seeking to evade legislation and to remain anonymous would have to coordinate 100 individual donors, rather than seven.

But New Zealand could go lower still, to NZ$200, without being radical. Giving NZ$200 to a political party is huge for an ordinary New Zealander, and the reality is only a very small minority would need to disclose their names under such a law.

There is international precedent for setting much lower thresholds for anonymity than the Greens propose. For example, in Canada, the maximum amount of an anonymous donation was set at C$200 in 2015, while in Ireland it is currently €100.

Transparency v privacy

One concern with non-anonymity is that it delivers public transparency at the cost of private donor privacy. Currently, the Electoral Act 1993 contains a mechanism for anyone wanting to donate to a political party and not wanting their identity disclosed to either the public or to the party receiving the donation. To obtain such anonymity, the donation needs to be more than NZ$1,500.

The Electoral Commission aggregates all such donations. It passes them on to parties at regular intervals. When doing so, it does not identify the dollar amount of individual donations or the number or names of donors.

Not many donors use this protected disclosure avenue. For example, between September 2015 and June 2018, the commission passed on only NZ$150,000 in anonymised money to parties. At the same time, amounts well in excess of NZ$10 million were passed on by donors identifiable to political parties (but not necessarily to the public).

A preference for identifiable channels suggests current donors get value from non-anonymity. It implies most donors feel they are buying something. The fact that donors feel they are buying something should be cause for concern.

Donations cap

The Greens have suggested NZ$35,000 as a maximum cap on donations. Again, New Zealand could go much lower without being out of step with other countries. For example, in Canada donations to each political party are capped at C$1500 a year. Like Canada, Ireland has a maximum annual cap of €2500.

However, Geoff Simmons, leader of the Opportunities Party, has argued that a cap would make it difficult for small parties to get started. Simmons’ party was kick-started by large donations from multi-millionaire Gareth Morgan, who was also the party’s first leader.

Another possibility for the reform agenda is the Canadian approach of only permitting donations from individual people. Corporate and trade union donations are banned. However, this proposal is unlikely to be popular with neither National, which receives considerable corporate donations, nor Labour, which traditionally gets significant trade union funding.

Conclusions

All these proposals, inevitably, have pros and cons and possible unintended consequences. They are deserving of wide public debate. One hopes that the current government can provide the public with a credible forum for such discussions, as well as a clear pathway to sensible future reform.

This editorial was initially published on The Conversation

Refer also to Porous line between political access and political influence in November 2018 issue of Transparency Times.

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Perception versus reality, it’s time to take a closer look…

Bernie McKendrey, Deputy Chair, The Institute of Internal Auditors New Zealand

by Bernie McKendrey
Deputy Chair
The Institute of Internal Auditors New Zealand

Examples of Poor Control

The few recent public examples below would suggest that we do indeed need to sharpen up our governance and control environment.

2018 New Zealand Transport Authority Fraud
2018 Waikato District Health Board CEO Fraud
2016 Milford Asset Management Market manipulation
2016 Victoria University Fraud
2015 Immigration New Zealand Bribery & corruption
2014 Dunedin City Council Fraud
2013 Auckland Transport Fraud
2013 Auckland District Health Board (ADHB) Fraud

 

And let’s not forget the RBNZ/FMA recent banking and insurance reviews; is our trust in these organisations who manage our assets or public funds misplaced?  Where can we look for assurance and comfort? Who protects the public?

Issues Raised

The above cases – in particular the Waikato and Auckland District Health Board’s and Milford- raised issues that include:

  • Too much reliance on internal policies and procedures with insufficient or no checking that these were effective (implemented, followed, reviewed).
  • Poor or little reporting to Board / Board committees and no follow-up on initial concerns raised.
  • Poor contract management and controls
  • Weak control environment – responsibility to review budgets, re-assess delegated authorities and expenditure limits; acceptance of answers provided with little or no evidence in support.
  • General arrogance by those in governance and leadership roles with a general lethargy to act when concerns are raised, and the whistle is blown.

A Case study: Auckland District Health Board

“A ‘Cocksure and arrogant’ ADHB manager stole taxpayer funds for daughter’s birthday”

Stephen John Paterson was Commercial Services Manager at the ADHB who controlled millions of dollars in an annual budget and approved invoices for security work, colluded with a security guard to steal thousands of health funds.

He had worked at the ADHB for 21 years, breaking in as an orderly before being exposed by an internal audit investigation triggered by a whistleblower referral. Court documents show a number of fraudulent activities including approving invoices for security work to a company which was set up by the security guard.

Paterson was caught when the ADHB was conducting an internal audit and found the irregularities with invoicing and expenditure approvals.

The Judge in the case described Paterson as “quite cocksure and arrogant”; “He had become reckless as to his need to be diligent and extremely cautious when expending public money,” and “Like many fraudsters he had become over-confident about his position, his ability and entitlement to use this position.”

Fraud Control

Organisations can reduce the risk of fraud by remembering these salient points.

  1. Individuals in governance or leadership roles must be mindful of their role as stewards of the control environment, hold the organisation to account and seek and demand assurance on control effectiveness.
  2. Internal auditors need to act with “healthy scepticism”. It is their role to ask questions, challenge and provide assurance.
  3. Effective processes must be in place to deal productively with whistleblower calls.
  4. Ensure there is transparency of supplier spend when there is limited segregation of duties,
  5. Conduct effective independent management review of a contract’s operational clauses.
  6. Be prepared to invest in professional expertise when warranted (professional investigators, evident reporting to a high standard).
  7. Don’t underestimate the “red flags” such as:
    • above norm good news on the results
    • overly dominant managers
    • working unnecessary long hours
    • annual leave not taken
    • receiving high levels of hospitality
    • life style change, to name a few.

To conclude, sound governance and strong assurance and risk management functions are basic and fundamental essentials.

Transparency, disclosure and providing quality information are imperatives for creating and building trust between governors, managers, customers and the public.

To quote Steve Rubel – Trust is not self‐evident – we must make it so.

International Transparency School

Applications to the Transparency School 2019 are now open.

Since 2010 the School has gathered together more than 1000 young professionals from around 120 countries worldwide.

Transparency International School on Integrity is an annual state-of-the-art anti-corruption and accountability training event for future leaders. The upcoming School will take place during 8-14 July, 2019 in Vilnius, Lithuania. The School exposes its participants to the latest developments in the field of anti-corruption and accountability and offers real opportunities to try and implement their ideas in practice.

Following a rigorous selection process, students spend seven highly intensive days learning from leading anti-corruption and accountability professionals. Transparency School seeks to create a peer-to-peer learning and integrity-building environment. This links theory with practice and helps young leaders to acquire skills to better convey the message of anti-corruption.

Please find more information at www.transparencyschool.org.

Workplace leadership conference in Wellington

John Dow
Director Work in Progress

The WORK IN PROGRESS — workplace leadership in the new collar future, conference will be held at Rutherford House, Victoria University on Thursday 28 February 2019.

This one day Conference will bring together some of the latest thinking and ideas relating to workplace leadership, wellbeing, flexibility of employment, lifelong learning and upskilling.

TINZ CEO, Julie Haggie, and Chair, Suzanne Snively, will facilitate a session where they will discuss the value of transparency in the workplace.

“The increasingly important need for transparency, integrity, diversity and inclusiveness within businesses and organisations adapting to the dynamic new economy will be key themes within the day’s presentations, panel discussion and working groups as attendees seek answers for succeeding in the new collar future.” said Director John Dow.

Registrations are still open through www.wipwellington.co.nz

Submissions schedule

TINZ encourages you to exercise your democratic responsibilities by responding to invitations from government agencies, with your opinions on future direction-setting and legislation.

The following two centralised websites known to TINZ, invite and facilitate public submissions on a variety of legislation, policies, levies, plans and projects currently being processed, together with recently closed submissions:

Unfortunately, only some agencies utilise either or both of these facilities. Other agencies conduct their own publicity.  TINZ aims to ensure this fragmentation is remedied within the spirit of the new Open Government Partnership National Action Plan (2018-2020).

Submissions currently being sought

The following invitations known to be of relevance to TINZ, are currently open for public comment by their stated deadline. We encourage everyone to become involved directly as important opportunities to exercise your democratic responsibilities.

Government Procurement Rules 4th edition draft for consultation sought by MBIE

  • Deadline 5 March 2019
  • This consultation follows the recently closed consultation on the Supplier Code of Conduct.  

Recent TINZ submissions

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New Zealand transparency, integrity and accountability

Govt demands change in insurance sector after damning report The government will fast-track consumer protection measures in the financial sector, after a damning report into life insurance companies

Serious Fraud Office warns billions in public funding potentially misused The chief executive of the financial crime investigation agency, Julie Read, said she expected up to 5 percent of government funding to be obtained or used fraudulently.

Government axes controversial Saudi sheep deal, saving taxpayers $1m It has cancelled the contract to deliver an abattoir to Saudi businessman, Hmood Al Khalaf, saying the New Zealand public will not be giving him another cent.

‘Marginal’ open govt progress under National Independent reviewer Keitha Booth has questioned the last government’s efforts to improve openness and transparency, saying a lack of ambition had led to only “marginal” improvements to practice.

NZ among the least corrupt public sectors in the world Scoop.co.nz – Press Release: Transparency International NZ

Grant Robertson outlines a Wellbeing Approach Institute of Public Administration New Zealand (IPANZ)

International

Top 10 International Anti-Corruption Developments for January 2019

Denmark again the least corrupt country in the world However, the new Corruption Perceptions Index doesn’t take Danske Bank scandal into account

Fashion industry unites to tackle slavery and trafficking in supply chains Ahead of Paris Fashion Week, UK Crime, Safeguarding and Vulnerability Minister Victoria Atkins spoke at the Paris Supply Chains Conference where representatives from governments, the fashion industry, textiles and civil society came together to discuss measures businesses should take to eradicate modern slavery and trafficking in their supply chains.

Fighting corruption should be a key strategy for strengthening democracy Public Finance International – Corruption weakens democratic institutions and populist leaders can take advantage of mistrust in public bodies, says Transparency International’s Coralie Pring

 

TINZ Team

TINZ engages New Zealand and the New Zealanders in a broad range of issues related to building stronger integrity systems to mitigate the impact of bribery and corruption. TINZ Directors, Members with Delegated Authority and staff provide subject matter expertise in the topic areas of interest. Below is a list of TINZ Subject Matter Experts as of June 2019.

To view by topic, visit the category page which lists TINZ topics and respective current subject matter experts. The TINZ Team when this newsletter was published can be found at TINZ Team February 2019