Health Commissioner to seek apology after 'cooking the books' accusation

The Health Commissioner will seek an apology from the former Health Minister, after she suggested at Parliament that he had "reputation for cooking the books".

Professor Lester Levy clashed with Labour's health spokeswoman Dr Ayesha Verrall at a scrutiny week select committee session today, over the way Health New Zealand (HNZ) has treated some of its expenses, totalling almost $300m.

Statements show HNZ moved the period when it would account for redundancy payments after talks with the Auditor-General, moving from 2023-24 to the current financial year and pushing the forecast deficit 2024-25 to more than $1 billion.

It also changed how much it was allowing for Holidays Act paybacks in this financial year.

Health NZ's annual report - released on Tuesday - revealed it sought a letter of support from ministers as an assurance the Crown would meet any calls on its debt.

Levy defended the approach today, stating that changing a draft financial statement after talks with an auditor was standard practice, as was the support letter.

When asked by Verrall if he was seeking a "particular outcome" - where the accounts would present a worse deficit in 2023-24, and a smaller deficit in 2024-25 under his leadership as commissioner - Levy said he was not.

Verrall quoted an article by political commentator Janet Wilson in The Post: "During his time at the three DHBs [Levy] was able to produce financial surpluses which became deficits after he left. He wasn't so lucky as crown monitor of Canterbury's DHB from 2019 to 2022 when the deficit rose from almost $178m to $222m."

Verrall went on to ask: "Dr Levy, given your reputation for cooking the books, did any minister or-"

But she was interrupted by cries of dissent from the rest of the committee, with some calling for a point of order.

"I resent that comment," Levy responded, and then asked for an apology. He also said he would provide evidence to refute those claims.

Committee chairperson, National MP Sam Uffindell, warned the committee they were "verging on being disorderly" and asked members to desist from further related lines of questioning.

Levy said there was "no reason for us to want to cook the books".

"The books are not good. There's serious under-performance, financial performance."

But he said that this revolved around the ongoing monthly deficit, not the redundancy or Holidays Act payback provision.

Dealing with a billion-dollar deficit

Health NZ on Tuesday reported a $722 million deficit for 2023-24, and forecast a $1.1 billion loss in the current financial year, one day before fronting at Parliament.

Opposition MPs were still disgruntled about the delay in the release of the agency's annual report.

Auditor-General John Ryan said it had taken some time to adjust HNZ's draft financial statement to move the redundancy payments to 2024-25, and adjust the Holidays Act payback.

Now it had been adjusted, "we are satisfied that the $1.83 billion provision is reasonable", Ryan said in a statement.

He said the letter of support from ministers to HNZ "is not uncommon for public agencies with deficits".

"Further equity support may not be needed," Health NZ said in a statement.

Health Minister Shane Reti was not concerned.

"Both sides put their arguments to the table, and at the end of the day, Health New Zealand agreed to bring those expenses into this current financial year rather than into the previous financial year."

Reti said the letter "assures that the Crown will meet any calls on debt that a state-owned entity might incur".

'Creative accounting' or standard practice?

Newsroom earlier reported the issues came up after HNZ's former chief financial officer Rosalie Hughes raised concerns with Ryan.

Ryan confirmed he met Hughes and other HNZ leaders. "In the course of those meetings, no matters were raised that weren't already within the scope of the audit," he said.

Levy told the committee today that his leadership team believed its view on the holiday pay remediation was correct, and that there was a case to be made for the redundancy provision being accounted for in 2023-24.

Verrall had asked if this was "creative accounting".

Levy said that case was not accepted, and that provision was withdrawn.

"That is standard, that in unaudited management accounts you would have your perspective - if that's not accepted, then that's not accepted," by the auditor, Levy said.

Deputy commissioner Roger Jarrold added: "We quite quickly agreed with the office of the Auditor-General we couldn't comply with the standards and we withdrew that provision" around redundancy.

On the payback provision, Ryan had earlier questioned if it was "materially overstated", and said it was not initially based "on the best available information".

Jarrold said in a statement that it would have cost time and money to better assess the liability, which would have remained very uncertain anyway, so they pressed ahead. They wanted to avoid having insufficient funding to pay back staff.

As for whether Levy might call on the Crown for equity if things went badly, Jarrold said, "We are monitoring cashflows daily and it is possible that if we meet our budgets, including the savings targets, further equity support may not be needed".

Reti said it was standard commercial practice to get a letter from the Crown "to make sure that they were still a going concern".

He was pleased with Levy's "initial progress" on the deficit, he said in a statement.

The 'reset plan'

Verrall also asked HNZ today why it had yet to produce a fully-costed health plan for the Auditor-General.

HNZ chief executive Margie Apa said district health boards previously wrote annual plans, but they were not costed, and this was new for the sector.

The Auditor-General had a draft plan, but under the Government Policy Statement on health, the agency needed to "rework activity" to ensure it was affordable, she said.

Verrall asked Levy whether he planned to release the "reset plan" - the system-wide roadmap for reining in costs.

"We have not, but we will consider it," Levy said.

Verrall noted Health New Zealand's annual report referred to a "new operating model", and asked why that had not been made public.

Levy said the new operating model was part of the reset plan, prompting derisive snorts from opposition MPs.

"Commissioner, can you see our frustration?" Verrall said.

"Your accounts are presented late to Parliament, we don't have any information on what you're doing, thousands of jobs are being cut.

"Yet you come at the beginning of this hearing and lecture us about talking about anecdotes when you're not releasing any data on what you're doing."

Levy said Te Whatu Ora aimed to release its long-awaited workforce plan next week.

Labour MP Ingrid Leary asked for assurances that HNZ would not be "dumping" all the documents on the reset plan in the week before Christmas to evade scrutiny.

"Will you also give an assurance that cuts to jobs won't just be those with 'manager' in their title as we've seen elsewhere in the public service, just to keep up myth that there are no cuts to the front-line?"

Levy said the reset plan would not be released before Christmas, as it still required "clinical engagement".

"We are looking to protect the budget for front-line services, I can't say more than that. "Models of care may change."

"Centralisation" had failed, he said.

"It's not a bureaucracy, it's a health delivery agency, so we are pushing as much resource as we can to the front-line."

HNZ reiterates there is no hiring freeze, too many nurses

Earlier, agency officials doubled down on claims there were too many nurses, despite pleas from health sector workers for more staff.

Te Whatu Ora chief executive Margie Apa said they were well over budget.

"I don't think any service would ever say we don't need more nurses, but the reality is we are ahead of budget, in terms of what we've recruited, and the run rate for the organisation, we're at $100 million a month over our budget."

She said it might appear as though there were not enough nurses despite the excess, because they were incorrectly distributed, with challenges getting staff into areas such as mental health and critical care, leaving those areas short.

Levy dismissed union claims of "a hiring freeze", saying staff numbers increased more than in the 2023/24 year than in any of the previous eight years.

"So we're hiring more people, spending more, and if you look at the output, it's less than most people realise."

Overall, staffing had grown 1.5 times faster than "outputs", he said.

"For [increased] ED attendances on an annualised basis, it's 2.2 percent, first specialist appointments 2.3 percent, total hospitalisations case-weighted 2 percent."

Meanwhile, waiting times had actually worsened, Levy continued.

"It's a paradoxical situation - more is being spent, more people being hired, outputs are increasing - but not at the same rate as FTE hired - and at the same time performance is deteriorating."

Levy said that proved it was possible to get better results out of the existing budget.

"Our system has got elasticity for performance improvement within the resources we already have, and we should be making sure we achieve that before we look for additional money," he said.

"Because the reality is additional money has been provided, and the service hasn't improved."

Later in the hearing, Levy told MPs he was confident that Te Whatu Ora could return to budget by the year after next, with yet to be revealed changes to its "operating model".

Health NZ's reports this week signalled a year ahead of more restructuring and job cuts, and talk about more consolidation and streamlining.

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