‘Unacceptable’
Auditor slams Wintec bosses’ spending
● Former chief executive Mark Flowers and top Wintec staff visited China and spent up in hotels and bars without prior approval or a business case.
● After scrutinising 10 years’ worth of accounts, a public watchdog found Wintec kept such loose records, with receipts often in Mandarin, that auditors were unable to account for how much public money was spent or what it was for.
● The Audit NZ probe was prompted by a three-year
Waikato Times investigation during which Flowers refused to be interviewed.
Areport into spending on overseas trips by executives at a Waikato polytech has slammed the tertiary provider. The Audit New Zealand report found that Wintec was unable to provide an account of how it spent public money.
The report comes after a three-year Stuff investigation into spending by the tertiary provider, during which time then chief executive Mark Flowers would not be interviewed about allegations of mis-spending.
Problems highlighted in the report included incomplete and inaccurate accounts of spending and many instances when expenditure was not properly approved.
It also found that many receipts were in Mandarin so the approver was unable to understand what the expense was for.
Wintec was also not able to explain how it spent large cash advances when executives were in Asia on business.
‘‘We are particularly concerned about the processes, patterns of behaviour, and level of documentation we saw in our work on international travel expenditure.
‘‘Some of these practices simply do not meet accepted standards of public sector behaviour and provide an increased opportunity for the misuse of public money.’’
Wintec council chairman Barry Harris said, while he accepted the report was highly critical of Wintec spending, there was no evidence of any wrongdoing.
This was despite Wintec not being able to furnish Audit NZ with full records of where taxpayers’ dollars were being spent.
‘‘I would say there was no evidence of wrongdoing, what I am seeing here is a looseness of process over a period of time that has largely been shored up within the systems,’’ he said.
‘‘Audit NZ identified shortfalls in information that led them to that conclusion and they have given us a series of recommendations that we will implement.’’
The cost of multiple investigations into spending and conduct at Wintec and the resulting legal and public relations advice and security guards pushed the taxpayers’ bill for the saga to more than half a million dollars.
Audit NZ was asked to look at the expenses incurred by former Wintec chief executive Flowers and members of the executive team on trips to China and Hong Kong to build the tertiary institute’s student market there in 2009-2017 and also at redundancy and severance payments to staff from 2013 to 2017.
Flowers has been on sick leave since August and will retire in March.
While the report acknowledges the allegations of inappropriate or personal expenditure, it says that no direct evidence of serious wrongdoing was found but weaknesses in Wintec’s systems provided increased opportunity for the misuse of public money and it could not rule out that this had happened.
Auditors stymied by lack of records
The lack of receipts and financial reporting was so bad that Audit NZ even gave up looking at some years’ expenses as it was unlikely to find a result.
‘‘We spoke to Wintec about the value of us covering the remaining intervening years and travel to other countries, and it was agreed that we would not do so at this stage as further work is unlikely to change our findings.’’
Wintec’s China agent would often pay for costs and seek reimbursement. But, up to 2013, no invoices were attached to show what the money was spent on and it was approved for payment by Wintec anyway.
‘‘Put simply, Wintec has been unable to show what these expenses were for and, therefore, what public money has been spent on,’’ said the report. ‘‘As a public entity, this is unacceptable.’’
Findings include:
There was limited evidence of prior approval or a business case for trip costs, receipts and documents were inadequate or often in Mandarin and untranslated which meant the person approving expenditure would be unable to know what it was for, unexplained cash advances, executives approved their own expenses, expenditure that was beyond moderate or conservative, confusion over whether gifts complied with Wintec’s policy.
The report raised ‘‘serious doubts’’ about Wintec’s controls on spending and Audit NZ urged the publicly funded tertiary provider to urgently review them.
Flowers defends his record
In a statement from Mark Flowers released at the same time as the Audit NZ report, Flowers said he was unable to engage meaningfully in the travel expenses probe due to ill health, but said the organisation was audited every one of the 16 years under his watch and no unauthorised spending was raised with him.
‘‘At no time have I ever made inappropriate or unauthorised use of public funds’’’ Flowers said. ‘‘At all times, my expenses were submitted to the council chair, clarified where necessary, and approved.’’
But the fact that Audit NZ couldn’t find enough paperwork or information to put together a complete account of Flowers’ and his team’s spending in China was ‘‘not good enough’’ for a public entity, said the financial watchdog.
‘‘Senior executives of public entities must be transparent about, and accountable for, the expenditure they incur,’’ the report said.
Auditors also found issue with severance and redundancy payments at Wintec under Flowers’ tenure, with 35 per cent of redundancy cases having no written proposal outlining the reasons for a restructure. The report did not look at the appropriateness of the redundancy.
Minister demands action
Education Minister Chris Hipkins said he expected Wintec to have robust policies and processes in place to ensure that government funding is appropriately managed and used responsibly.
‘‘Audit NZ’s findings and the findings from Simon Mount QC, make it clear that Wintec needs to urgently review its systems and policies to ensure they align with the expectations for public entities.
‘‘Wintec is an autonomous tertiary education institution and as such this is a matter for its Council. I expect the Council to make the changes necessary and continue to encourage good process and responsible behaviour.’’
How the bosses’ spending trail vanished:
❚ Instances of costs being charged back to hotel rooms without detailed receipts or invoices. There is no way to know what those charges were for, or whether they were an appropriate use of public money.
❚ There was a practice for all room costs for the travelling party to be transferred to one room and paid from there. The invoice for this room would include the consolidated charges, but sometimes supporting invoices or documentation relating to the transferred costs would not be retained. In these cases, there is no documentation to explain what the costs were for and, in some instances, who incurred them.
❚ Wintec’s China agent would pay for some costs and then invoice Wintec for reimbursement. A summary was included and often receipts in Mandarin. However, through to 2013, auditors found instances where no receipts or supporting documentation were provided and expenses were approved anyway.
❚ Auditors found instances where the documentation was incomplete and did not support the amount in the summary and invoice.
❚ Minibar expenses were incurred in 2009 and 2010 before a prohibition was placed on this. But, auditors found Wintec had a very flexible approach to alcohol purchased in restaurants and bars. In some instances, expenses from more than one bar or restaurant were incurred on the same night (for example starting at Hari’s Bar, then Oyster Bar, and then back at Hari’s Bar.) This pattern suggests the charges were for more than reasonable dinner costs.
❚ A cash withdrawal of Chinese yuan (NZ $270.48) by Mark Flowers on his Wintec credit card that was subsequently exchanged with another non-executive staff member for New Zealand dollars. There is no evidence of any reconciliation of the cash or repayment to Wintec of any unspent cash.
❚ A transaction on Flowers’ Wintec credit card of NZ$421.47 for a cash advance. There was no evidence of receipts explaining how the cash was used.