Health NZ deficit grows after Auditor-General intervenes

The deficit Health New Zealand is facing in the current financial year has gone up.

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

The former would have been larger, and the latter smaller, if not for the Auditor-General John Ryan's intervention.

The upshot of the intervention was that redundancy payments HNZ tried to put in the previous year, were shifted into the current year.

That took time and was the reason the agency has been two weeks late releasing its financial statements, Ryan said.

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."

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

The second major matter was how much the agency was allowing to cover its billion-dollar-plus of paybacks for years of Holidays Act breaches - and Ryan ended up getting this amount adjusted down.

"We are satisfied that the $1.83 billion provision is reasonable," he said in a statement.

However, in HNZ's new annual report, he noted that "significant uncertainty remains" around it - while also noting the payback programme had been "slow".

The annual report also reveals that HNZ's 2023-24 deficit spurred it to get a letter of support from the Health and Finance Ministers, acknowledging it may might need the Crown to pitch in, though it said" "Further equity support may not be needed".

"There is uncertainty whether the group [HNZ] will be able to meet its obligations because a net loss of $722m was incurred," Ryan wrote.

"The letter acknowledges that equity support may be required and that the Crown will provide such support where necessary."

It was not uncommon for public agencies with deficits to receive such support, he added.

Reti said there was nothing unusual in obtaining a letter, and district health boards had done so before.

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

Health NZ's liabilities exceed assets by $4.4b, and to hit a deficit of $1.1b this financial year requires it to save about $660m.

Its various reports out on Tuesday signalled a year ahead of more restructuring and job cuts, and talk about more consolidation and streamlining.

Ryan had earlier questioned the health agency over its position on the redundancy payments, and if the Holidays Act paybacks were "materially overstated".

"The audit identified that the provision for holiday pay remediation was initially not based on the best available information," he said.

Health NZ deputy commissioner Roger Jarrold said they had been acting to protect staff "to ensure there is sufficient funds for payment".

They had limited the research into how much the payback might be, because that would not necessarily have provided more certainty, while it would certainly have cost more money and time, when they were working to pay back staff as quickly as possible, Jarrold said in a statement.

They set the provision after six months of talks with auditors, he said.

Ryan said the adjustments to HNZ's financial statements pushed it past the deadline to release them.

The upshot of moving redundancy expenses into the current year was that the deficit for 2024-25 topped a billion dollars.

Ryan last year pushed Health especially, and other agencies, to hurry up and pay back their staff for Holidays Act breaches, but HNZ is still months away from that.

As for whether Commissioner Lester Levy might call on the Crown for equity if things went badly this year, 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."

Dr 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 not concerned about changes to the financial accounts over redundancy and the Holidays Act, and pleased with Levy's "initial progress" on the deficit.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.