Risky rush to hand out Provincial Growth funds

One of the big new policies quickly kicked into gear was a billion dollar a year fund for projects in the regions. The rush to hand out money was always going to be risky, and so it proved.

RNZ: Officials failed to do background checks on energy scheme

A review has found government officials failed to do background checks on the people behind a proposed waste-to-energy scheme that was to be given hundreds of thousands of dollars in taxpayer money.

The funding for the feasibility study was put on hold by the Regional Development Minister Shane Jonesafter RNZ told him the scheme’s chief executive, Gerard Gallagher, had been referred to the Serious Fraud Office.

The internal review found officials working on Provincial Growth Fund projects failed to carry out due diligence on Renew Energy’s directors and shareholders.

If basic due diligence had been carried out then Gerard Gallagher’s referral to the Serious Fraud Office would have quickly been detected, it found.

The head of the Provincial Development Unit Nigel Bickle apologised.

“We fell below prudent standards of due diligence and we have apologised to the Minister for not getting this right,” Mr Bickle said.

“The public quite rightly expects government agencies to run a robust process before awarding contracts or approving funding – in this case we made a mistake by not completing appropriate checks on personnel associated with the Waste to Energy project.”

Mr Bickle said changes had been made and the unit would now carry out due diligence before applications were considered by ministers and announcements were made.

The implication here is alarming – that funds were announced before due diligence had been done.

The internal report, by the Business Ministry’s director of legal services, Chris Mathieson, also shows that two days after RNZ ran the story linking the new funding with Mr Gallagher’s referral to the Serious Fraud Office – he quit.

“On 2 March 2018, (Renew Energy director and West Coast Economic Development Manager ) Kevin Stratful advised MBIE, that following an emergency board meeting Mr Gallagher has resigned as CEO of Renew Energy and would be selling his shares in Renew Energy. That has now occurred,” the report reads.

Mr Mathieson said it was now up to the Provincial Development Unit to do due diligence on Renew Energy’s other owners before deciding whether the feasibility study should go ahead.

They are still considering the scheme for feasibility funding? RNZ revealed the Environment Ministry had advised the government that the project was a lemon.

Mr Jones said he just plain forgot about that advice.

Jones’ excuses sounded dodgy. Perhaps due diligence should have been done on him before giving him so much money to dish out.

RNZ: National says internal review of Renew Energy fiasco ‘alarming’

The National Party has accused the government of forcing officials working on the $3 billion Provincial Growth Fund to cut corners to meet unrealistic deadlines.

Its regional development spokesman Paul Goldsmith said an internal review released late yesterday on the Renew Energy fiasco was “alarming”.

Mr Goldsmith said officials were under pressure from a government wanting “quick wins” for political gain.

“It’s not hard to spend $3 billion but it’s quite hard to spend $3 billion effectively, and to do that you have to have proper systems in place and clear procedures.

“And what we’re seeing doesn’t fill us with confidence at all.”

Goldsmith will have a busy time holding to account the many handouts from the fund over the course of the term.

Mr Jones said he was “disappointed by the lack of checks and balances” but he had confidence in the Provincial Development Unit.

“The scaling up process was a steep learning curve and I thank Nigel [Bickle, the head of the unit] and his team for their thorough review.”

Due diligence should have been done on the systems for deciding who benefits from the fund.

NZ First stands to benefit from generous handouts to regions given they also target provincial voters, but if the fund makes too many poor choices it could backfire.

It will also be a test for Jones, especially if he has ambitions to take over NZ First leadership from Winston Peters.

If Jones makes a big success of redistributing Government Provincial Growth funds he could have a crack at being Minister of Finance, but a bit more due diligence may be required.