As the Covid-19 pandemic hit, the Government retooled its provincial investment fund to better help weather the impacts. Three years on, a watchdog report says the public can't yet have confidence any of those investments represented value for money
The Auditor-General’s office has delivered a stinging critique of the Provincial Growth Fund ‘reset’, saying inadequate risk management and a flawed assessment process mean it cannot be sure the fund’s investments will represent value for money.
The National Party has suggested staff involved in the reset may be among those to face the axe as part of a public sector clear-out should it win the election.
In mid-2020, the Government announced a reset of the PGF, with over $600 million of funding reallocated to support regions through the pandemic.
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In a report to Parliament’s economic development committee, deputy controller and auditor-general Andrew McConnell noted the reset had been designed and implemented at speed in an uncertain environment, when MBIE's Kānoa regional economic development and investment unit (RDU) - in charge of administering the fund - was dealing with significant staffing challenges.
“Given these factors, we did not expect to find a perfect process, but we did expect to see one that was fit for purpose given that over $600 million of public money was involved.”
However, while some of Kānoa’s work met expectations, McConnell said the office could not be sure its investments represented value for money, due to deficiencies in a number of areas.
There was not enough evidence that risks had been proactively identified, assessed and managed, while funding applications were assessed inconsistently against a “complex” project framework.
“We also did not see enough evidence of how Kānoa-RDU appropriately scrutinised applicants’ claims of their projects’ benefits, such as the number of jobs that would be created.”
McConnell said there did not appear to be clear reporting on or regular monitoring of how well the provincial growth fund reset was meeting its objectives, and there was incomplete record keeping of some processes.
“Significant investment of public money should be appropriately monitored and have its overall outcomes periodically measured and publicly reported. This is not an unreasonable expectation, even in a pandemic.” – Andrew McConnell, deputy controller and auditor-general
In wider remarks about the Government’s Covid-19 response, the deputy auditor-general acknowledged the “new and innovative” ways in which public servants had worked to meet the pandemic’s challenges, but said the office’s recent work had shown insufficient attention was being paid to transparent decision-making and ensuring investments were achieving their intended outcomes and representing value for money.
“Significant investment of public money should be appropriately monitored and have its overall outcomes periodically measured and publicly reported. This is not an unreasonable expectation, even in a pandemic.”
National Party economic development spokesman Michael Woodhouse told Newsroom taxpayers were entitled to expect Kānoa-backed projects represented value for money, but the unit had failed to track progress against what few “vague measures” it had put in place.
“Goodness knows what they have been doing, but they certainly haven't been evaluating those projects against the assessed measures, and that's frankly emblematic of a government that doesn't appear to know how to do much more than cut a ribbon or announce a project.”
Asked whether National would scrap the unit if it won power, Woodhouse said the party would announce its policy in time but it was clear the organisation was “very top-heavy”.
“Just as the 14,000 bureaucrats across the public sector [hired since 2017] will be feeling nervous about the possibility of a National-led government, Kānoa should be as well, because I think that they're not delivering the sort of value for money that the taxpayer expects, and this report is is absolutely the proof of that.”
On wider concerns about public spending, he said he had long held a view that governments found it too hard to answer whether programmes were meeting their intended outcomes.
Woodhouse said it was possible a National government would need to “legislate for performance” to ensure government departments had a better handle on their outcomes, although he was not yet sure what such a policy would look like.
In a statement, Kānoa’s strategy, planning and performance manager Isabel Poulson told Newsroom the unit welcomed the report and was “proud of the positives…highlighted by the OAG’s review”.
“We acknowledge the areas for improvement. However on balance this review recognises the extraordinary times this funding was being delivered in and shows a job well done,” Poulson said.
The Auditor-General’s review, “undertaken…during ‘peacetime’ and without the pressures of the moment”, would help officials to improve their future work.
Regional Development Minister Kiri Allan told Newsroom she would be working closely with Kānoa to address the report’s findings and areas for improvement.
“We always take reports of this nature seriously and I acknowledge its findings,” Allan said.
Asked by Newsroom about the Auditor-General’s broader comments about the need for greater accountability in public spending, Finance Minister Grant Robertson noted the report’s mention of urgent decisions being made “under extraordinary circumstances, pressures and uncertainty”.
“I have said previously I would like to see improvement in how the public finance system operates, which we are addressing in part through the Public Finance Act modernisation programme. We know the system needs to change to provide better information and we all have a role to play in that,” Robertson said.
