Former National Cabinet Minister didn’t know what questions to ask

There are now two widely differing accounts of what has been going on at HealthNZ and they can’t both be right.

On the one hand, the Health Minister claims he found out that HealthNZ was in financial trouble in March of this year.

On the other hand, HealthNZ reported on its March quarter on July 5 and claimed that it was in surplus at the end of the quarter.

A Select Committee grilled HealthNZ officials in March and confidently proclaimed that it would not run into deficit this year.

However, Treasury’s monthly financial statements show that HealthNZ did go into deficit in April and that the deficit grew rapidly through May, the latest period for which figures are available.

It was clear from yesterday’s Prime Ministerial post-cabinet media conference which included Finance Minister, Nicola Willis, that the Government had no confidence in the former HealthNZ board and regarded it as incompetent.

That board included Amy Adams, former National Cabinet Minister; Vanessa Stoddart, a widely experienced company director; and Naomi Ferguson, former Commissioner of Inland Revenue.

“It’s my view that the board didn’t even know what questions to ask to get the information that New Zealanders had a right to have,” Willis told the media conference.

“I don’t think the board was asking the right questions or getting the right information, and that’s why it took some months for us to get the real story out.”

The Prime Minister seemed to say that the board was not getting regular financial updates from management.

“I would expect a management team to furnish a board report each month that details that,” he said.

“But if a board is not getting that information, I would also expect them as governance to be talking to the management.”

But Reti said he had been getting updates.

He said he had received regular reports from Health New Zealand and the Ministry of Health outside of any quarterly figures. 

On March 3, HealthNZ officials, including the CEO, Margie Apa and the Chief Financial Officer, Rosalie Percival, appeared in public before Parliament’s Health Select Committee.

But that Committee, chaired by National MP Sam Uffindell and including former Labour Health Minister Ayesha Verrall, reported on April 2 that it had also grilled the officials in sessions stretching over three days for a total of nine hours and twenty-five minutes.

The Committee noted the $1.013 billion deficit for the 2022 – 23 year but said it was a product of two things: the nurse’s pay equity agreement and the write-down of a significant amount of expired COVID-19 inventory.

The report said, “The Ministry of Health is expected to fully fund the costs of the pay equity agreement in the 2023/24 financial year.”

And it concluded: “We expect HNZ to report no deficit in the 2023/24 financial year.”

That was tabled in Parliament on April 2 with no public comment from the Finance or Health Ministers or the Prime Minister.

But Reti said in a statement yesterday that officials and the Crown observer he had appointed in 2023 first signalled to him during March a deterioration in Health NZ’s financial outlook.

“I received one particularly significant update in writing from the Chief Executive on March 23.

“By March 25, I was sufficiently concerned to call Health NZ’s Board to a meeting with myself and the Minister of Finance and to announce the appointment of a specialist financial expert.”

That was Roger Jarrold, an accountant with extensive experience in the health sector.

Again, there is a wide gap between what HealthNZ told the Select Committee, and what the Committee understood, and what the Ministers are now saying.

Willis said she wrote to the Minister of Health on March 19 because she was starting to get information that there were real financial problems at Health New Zealand, where their forecasts were not being met, “and that there was some opacity there at that point.”

She quoted from her letter: “Therefore, were it not for the one-off surplus, my understanding is that Health New Zealand would be forecasting an operating deficit of around 150 million, less than the ministry’s expectation for 23-24.”

She said the Government’s understanding at that time was that Health NZ might be on track for a small deficit, “but only over time did it become clear how bad the problems were.”

“We had a situation where the board wasn’t getting accurate financial information, the minister wasn’t getting accurate financial information, and only by our officials pushing very, very hard did the full picture emerge.”

The medical news magazine New Zealand Doctor said last night it had asked Dr Reti’s office for a copy of Apa’s March 23 update but was told it would have to be lodged as an Official Information Act request. 

This situation is almost unprecedented: a Crown entity produces one set of figures, Cabinet Ministers another, and the Prime Minister accuses a former Cabinet Minister of incompetence.

Labour is calling for all of Health New Zealand’s monthly financial reports to be released.

“Last week, the Government began to claim that Health New Zealand faced a deficit in March, but official financial statements published two weeks ago said otherwise,” Labour Health spokesperson Ayesha Verrall said.

“The deficit figures are being used to justify spending cuts, and the public deserves full information, not just political spin.”

However, data is available from the Treasury in their monthly government financial statements.

These show a massive rise in the actual deficit starting in April when it reaches $256 million and then jumps to $568 million in June.

It is reasonable to now ask why did HealthNZ not see that coming and why didn’t a Select Committee ask more questions.