Gumboot Friday funding process ‘unusual’, not transparent – watchdog

Key points:

A Government watchdog has vowed to keep a close eye on taxpayer-funded youth mental health programme Gumboot Friday after raising concerns “several aspects” of its procurement were “unusual and inconsistent with good practice”.

In a letter sent and published today, the Auditor-General John Ryan wrote to the Director-General of Health Diana Sarfati laying out his concerns.

It follows the Government’s announcement in May that it would fund comedian Mike King’s I Am Hope Foundation, which runs Gumboot Friday, to the tune of $24 million over four years.

The funding is part of the National-New Zealand First coalition agreement.

At the time of the announcement, NZ First leader Winston Peters said the money would contract the I Am Hope Foundation to provide young people aged between 5 and 25 with free mental health counselling through the Gumboot Friday initiative.

In today’s letter, Ryan said there were five main reasons for his concern and commitment to continue oversight.

The first was that the selection of I Am Hope as a Government supplier and the amount of funding was “decided without an open and transparent process”.

That process would include assessing the type of service best suited to meeting what the policy was supposed to achieve, other providers who might be able to deliver that service and the appropriate amount to pay for it.

The Auditor-General also said there was “no opportunity for a fair, open, or competitive procurement process” and that the funding was to a specific supplier, rather than for a “broad policy initiative” or to achieve a specific policy outcome.

Reacting to his letter, the Ministry of Health accepted the process was done at pace and “could have been improved”, while Mental Health Minister Matt Doocey’s office said he had been assured the procurement rules had been followed throughout the process.

But Labour accused the Government of, while claiming to be tough on the spending of taxpayers’ money, having already decided before coming into office that Gumboot Friday was an organisation they wanted to fund and so using a “loophole” to push it through.

Ryan said there was limited analysis on whether it was appropriate to directly contract I Am Hope. Whether the organisation was “best placed” to deliver the policy objective was also done “only after the decision to provide funding… had been made”.

He said Sarfati’s decision to exempt the procurement process from open advertising – under New Zealand Government Procurement Rules – was also made after the decision to engage I Am Hope and “without clear justification of why an opt-out was appropriate” in that case.

Departure from the usual rules

Ryan said he understood the Ministry of Health considered it had been directed to engage directly with I Am Hope by virtue of the coalition agreement, but noted he would have expected to see the Ministry make it clear to Ministers this was a departure from the usual rules, and to spell out the risks associated with that.

“It is for Ministers to make overarching policy decisions (such as an intention to fund counselling services for young people), but it is for the public service to ensure robust, fair, and transparent spending of public money – including selecting a supplier and ensuring value for money.

“Although the Budget bid discussed some risks, the documents I have seen do not reassure me that the full range of risks associated with the procurement were communicated to Ministers.

“In my view, it would also have been transparent, and promoted confidence in the process, had the Ministry sought a written direction on how the Minister wished to proceed in light of advice that noted the risks associated with the intended procurement process.”

He said the Ministry had advised him it considered the Minister’s expectations were clear and further clarification of those expectations about the contracting decision were unnecessary.

Ryan said while there were “unusual elements” to the process, he noted the Ministry had included terms in the contract to help ensure value for money, such as time-limiting the contract for one year and the Ministry retaining discretion to renew annually.

Further, it only funds specified counselling services and not expenses or daily allowances, and sets requirements for how counselling services would be delivered.

It also required I Am Hope to report on its deliverables at regular intervals and allowed Health New Zealand to conduct regular, random and risk-based audits of its services.

Ryan said he recognised the expenditure was “relatively modest” in the context of the Health budget, and that “officials were in a difficult position”, given the coalition agreement, and that the Ministry of Health “did not have a chance to advise on that commitment before it was made”.

He said public spending required an “open, transparent, and competitive” procurement process to support trust and confidence in the decisions made and the reputation of integrity in the public service, and he did not consider that the process in the case of I Am Hope was “consistent” with those principles.

“I also have concerns that this situation created challenges for public officials, and for transparency, value for money, and accountability for public spending more generally.”

He said he intended to “monitor the progress of this initiative, including whether the contract is appropriately managed and delivers value for money”.

Hindsight

In a statement, Ministry of Health clinical community and mental health deputy director-general Geoff Short said the Ministry accepted “that documenting of the decision; identification of risks and timing of decisions were done at pace and with hindsight could have been improved”.

“The Ministry notes that Gumboot Friday/I am Hope was in a strong position to quickly scale up its operation – and also notes that the organisation is currently meeting its contractual requirements.

He said the Ministry would ensure the Auditor-General’s findings were used to “strengthen future procurement processes for both the Ministry and other government agencies”.

A spokesperson for Mental Health Minister Matt Doocey said in a statement the funding meant an estimated 15,000 young people a year will be able to access free mental health counselling services through I Am Hope/Gumboot Friday.

“Strengthening the focus on prevention and early intervention is one of the Minister’s key priorities. Gumboot Friday helps youth with mild to moderate mental health needs access counselling services earlier.  

“While the decision to fund Gumboot Friday was a decision made by the Government, how this commitment was implemented was a decision for the Ministry of Health.

“Throughout the process, the Minister has sought, and received assurance from officials that the implementation option chosen by the Ministry of Health is compliant with government procurement rules.”

‘Outrageous’ Govt used ‘loophole’ – Labour

Labour mental health spokesperson Ingrid Leary said the Government talked a “big game” about spending public money wisely, yet used a “loophole” to get Gumboot Friday funding across the line “without a fair and transparent process”.

“They did this because they had already decided before coming into government that Gumboot Friday was an organisation they wanted to fund.”

Quoting the letter, she said it was “outrageous that the loophole was used to ‘retrospectively justify an outcome that had already been decided’ which flies in the face of good procurement”.

‘Deeply grateful’ for funding – Mike King

In a statement, I Am Hope said it acknowledged the Auditor-General’s letter.

“As an organisation, I Am Hope is not involved in governmental procurement procedures, and this remains a procedural matter for the Ministry to review and address.

“I Am Hope is fully committed to transparency and accountability, ensuring compliance with all Ministry requirements. The charity will continue to work closely with the Ministry of Health to meet its obligations and demonstrate value for every dollar spent.”

The statement also contained comment from I Am Hope founder Mike King, and said he was “deeply grateful” for the funding, which allowed it to provide essential support to young people who needed it most.

“Our focus is on ensuring that every dollar goes towards making a real difference, and we are committed to doing whatever is required to achieve that.”