1. Hon TONY RYALL (National—Bay of Plenty) Link to this
to the Minister of Health
Does the Otago District Health Board follow the Auditor-General’s guidelines on procurement with respect to all of its contracts with suppliers and providers?
Hon PETE HODGSON (Minister of Health) Link to this
I am advised that it is the practice of the Otago District Health Board to follow the contracting advice of the Auditor-General and of Treasury. I am also advised that some high-profile contracts the member may be aware of rather obviously did not meet those standards and are, therefore, the subject of an alleged fraud inquiry.
What is the delegated authority to approve spending under contracts of the Otago District Health Board chief information officer, and what is the threshold before cumulative approvals are referred to the chief executive officer or the board?
I do not, of course, know the answer to that, because I am neither a manager nor a board member of the Otago District Health Board. I am happy to advise the House, however, that delegated authorities were tightened up a couple of years ago, and that procurement policies were tightened some 3 months after the change of Government.
Barbara StewartWould he concede that a health system divided into 21 separate entities—or 22, counting District Health Boards New Zealand—provides a fertile ground for activities such as those uncovered in Otago, and how does he intend to improve the level of accountability of the district health boards?
That is a point of view, I guess—that if we were to atomise the system more, we would get more cases of this sort, and vice versa. That did not seem, however, to work very well in the case of Enron, and I cannot imagine that 21 baby Enrons would have in any way increased the problems that that company already faces.
When the Government apparently tightened procurement procedures 3 months after it came to power, did the Minister ever envisage that a mid-level district health board manager might be able to award untendered contracts that he monitored himself and for which he authorised payments of up to $5 million a year, unchecked?
The Government did not tighten procurement policy 3 months after the general election. As a matter of fact, the chief executive of the Otago District Health Board did, because he felt that the procurement policy was not at that point tight enough. A number of the contracts that are under inquiry pre-dated that—if that is not already clear to the member. I also point out to the member that in the course of this alleged activity, the Otago District Health Board has been subject to audit by Audit New Zealand on no less than seven occasions, that Audit New Zealand at no time found anything untoward, and that to those who know a little about the form that the alleged serious activity might have taken, it is no particular surprise that Audit New Zealand found nothing seven times. It is a matter of fact that the alleged fraudulent activity was first detected internally by staff members at the Otago District Health Board.
What is the Minister’s expectation of what a district health board’s policy would be if it was informed that a board manager was driving to work in a late-model Lamborghini and parking it next to the board’s Corollas; what action would he expect a district health board to have taken in those circumstances?
I advised the House yesterday that I was unable to confirm there had not been any earlier questioning of the person who is now subject to serious fraud inquiries. I am not able to tell the House who asked whom what, in which year, or the employment that the gentleman was in at the time. I know a good deal more information than I am able to give the House; it is not in the national interest for me to give further information. We must let the inquiry proceed without it becoming some sort of cause célèbre in the meantime.
Does the Minister think it is consistent with Auditor-General guidelines on procurement that a district health board might be put into a position where it is forced to pay for a professional sailing crew to fly to Fiji to return a 50-metre luxury launch back to Dunedin, and what assurances can he give that the residents of the Otago region will not be paying for this malfeasance for years to come through lack of surgery and services?
The people of Otago have already been paying for it, because this is money that has been, in part, lost to the health system. The hope is that there will be recovery of some proportion of the $16 million, and that there may be some recovery of some further proportion through insurance. The quanta are not clear, but they will not total the $16 million that are lost. The long and short of it is that the Otago District Health Board, I think, has managed the situation commendably since the point at which an employee or two of the board finally worked out what might have been going on. I think the actions taken by the board since an alleged fraud discovery was made have been managed well indeed.
Jo GoodhewWhat policy would the Minister expect a district health board to adopt if, say, it became aware that a board manager owned a Lamborghini, a Formula One racing car, a Bentley, plus 27 other cars?
The truth of the matter is that some of these cars have come to light only recently—people have been finding Rolls-Royces in garages around the country, even in recent weeks. But it is worth repeating—and I will do so—that I am not able to give the House information about what challenges were made to an alleged fraudster, by whom, in which year, or indeed the nature of the employment the alleged fraudster had at the time. Those are matters that have to be discovered and put into a forthcoming court case.