March 8, 2016 3:00pm by David Farrar

MOH cost blow out unacceptable

An $18 million blowout refitting the Health Ministry’s head office in 2014, has bought a strong rebuke from Treasury, accusing the ministry of “serious financial mismanagement”.

That’s very strong words, but justified.

Independent auditors were called in to investigate how the ministry “miscalculated” the levels of its cash reserves, and a $24 million refit required a further $18 million from the Government to complete.

Some projects, especially IT, will cost more than originally forecast. But a 75% blow out on a building refit is well beyond acceptable. It isn’t entirely clear if the $18 million is extra costs or cash they thought they had, but didn’t. Either scenario is unacceptable.

The Director General of Health, Chai Chuah, said the Health Ministry’s corporate finance team made a mistake in its forecasts, TVNZ reported.

It was forced to ask for the funding boost at the last budget.

TVNZ reported Treasury was very concerned about the funding miscalculation, citing papers describing it as “serious financial mismanagement”.

In a letter to Ministry of Health Director General of Health Chai Chuah, Treasury chief executive Gabriel Makhlouf said the “the new bid for funding brings into question the governance and financial management practices of the Ministry”.

PwC was bought in by Chuah to investigate.

Labour health spokeswoman Annette King has called for Chuah’s resignation, while Chuah said he accepted the ministry made a mistake.

I’m not sure Chuah should resign, but someone at senior management should.

Health Minister Jonathan Coleman said he made it clear to Chuah the project management was unacceptable. He confirmed changes had been made, including “in finance personnel”.

It is unclear what change means. Maybe they have been promoted?