Audit New Zealand told the Southern District Health Board
last year it should refer its long running multimillion-dollar
dispute with South Link Health to police if it considered there
was evidence of fraud.
If it did not consider there was fraud, it should reach an
agreement with South Link on ''future actions'', the office
advised the board in late October.
In its response to Audit NZ, board management agreed the
issue should be resolved in ''a timely manner''.
In February, the board engaged a forensic accountant in
connection with the dispute.
The report on the board audit, dated October 31, was released
a week ago by the board under the Official Information Act,
following a request on February 18.
On February 19, board chairman Joe Butterfield, under
questioning at Parliament's health select committee, revealed
the board had been told in 2010 the dispute might involve
fraud, but the dispute was not referred to police.
Board executive director of communications Steve Addison said
last week the board would not comment about the progress of
the forensic accountant's investigation ''while negotiations
continue''. In March, the board and South Link confirmed they
were in discussions.
South Link insists it spent the money in dispute on approved
programmes and has no case to answer, either commercially or
In the report to the board management, sent on October 31,
audit director Andy Burns said the board had brought the
dispute to auditors' attention ''which indicates a less than
robust approach to the DHB's management of an issue over an
extended period of time''.
The parties had been in mediation on two occasions in 2009
and 2010, the report said, and it appeared no progress had
been made since that time.
The report said it was not clear what role the Ministry of
Health had played in this process, and the extent of
investigation carried out by its Audit and Compliance Unit
(to which the matter was referred in late 2010).
''We have seen a minute that Audit and Compliance be asked to
investigate, but no evidence at this stage that the contact
was subsequently made or that action was taken.''
The report said the dispute involved whether savings South
Link made on DHB funded services had been spent by South Link
''and if they have, whether the areas of spend were jointly
The then Otago DHB and South Link had agreed that savings of
$6.2 million were paid to South Link by the South Island DHBs
between 1995-96 and 2002-03 financial years.
This was not in dispute. The DHB acknowledged agreement was
reached on spending of $923,825, but disputed any further
spending was approved and also questioned whether the money
was still held by South Link.
The auditors said they had not been provided with
documentation to indicate that either party had evidence to
substantiate what was, and was not, agreed at the time.
The board advised while there was a hiatus in the dispute
following the change of chief executive, the board had
regularly discussed the matter and follow-up meetings with
South Link had been held, and options for resolution
The auditors said their observations were based on the
limited information available to them.
Questioned about the reason for the board's delay in
releasing the audit report, which was not formally explained
by the board, although it was 18 days over the 20 days
maximum allowed under the Official Information Act, Mr
Addison, who is responsible for co-ordinating OIA responses,
said it appeared it was not logged as an OIA request, but
sent on to determine whether the document sought existed.
In part of her response to a call to investigate what had
happened with this request, chief executive Carole Heatly
apologised and advised she was reorganising the way OIA
requests were handled.
In her view, the importance placed on OIAs had not been high
enough, and, as part of a reorganisation of her office and
administrative functions, she would be returning dealing with
requests to the chief executive office.
''That way I'll be sure of a timely response from the
organisation and an elevation in how important being open and
transparent with the public is.''
Ms Heatly said a change proposal would go out to staff soon.
In the meantime, she was satisfied with the way in which the
communications department was managing OIAs.
The department co-ordinated the process but the responses
came from throughout the organisation and the department was
reliant on timely co-operation.
Mr Addison had suggested the co-ordination of OIAs sit within
her office and the half-time worker managing OIAs would
transfer to her office.