RNZ board members signed off on a $5 million overdraft facility on June 9, without the required ministerial approval, breaching sections 160 and 162 of the Crown Entities Act 2004, according to the broadcaster’s annual audit and reported by 1News.
The disclosure emerged on Monday as the public broadcaster revealed a budget deficit of $11.8 million for the year to June, far exceeding the $470,000 loss it had budgeted for. Chief Executive Paul Thompson announced his resignation earlier this year and is scheduled to leave in December, taking responsibility for financial reports that gave an inaccurate picture of the organisation’s books until October.
Associate Finance Minister David Seymour described the deficit as a shock and said that an illusion of calm was maintained by poor financial reporting. Media Minister Paul Goldsmith ruled out financial aid, calling the budget blowout “pretty shocking” and stating that they “obviously haven’t been paying attention properly to their money,” according to RNZ reporting.
The unauthorized $5 million temporary standby liquidity facility was set up with Westpac for up to 90 days as a safety net in case the settlement of the Henderson land sale was delayed while managing one-off costs, as The Post reported. By law, RNZ requires sign-off from two ministers to borrow money, a threshold last cleared in 2006 for up to $3.5 million.
Board Responsibility Questioned
“Now, how did that happen? That's very difficult to explain. That there was a loan with Westpac and again, the Crown Entities Act was breached,” RNZ board chair Brent Impey said during an interview on Checkpoint, acknowledging the legal breach and stating that he did not know the law had been broken until auditors began examining the books in October. Impey told The Spinoff that the oversight was almost incomprehensible.
“I couldn’t agree more, in fact it’s almost indescribable, incomprehensible to have got to this position,” Impey told The Spinoff.
“You've got people in highly paid positions who don't seem to understand that they're a Crown entity, they're subject to the Crown Entities Act” public law expert and barrister Mai Chen said, and she added it was concerning that the board appeared to be unaware of the breach and more broadly in the dark about RNZ's financial position, according to 1News.
The Taxpayers’ Union called for the resignation of the directors who approved the loan. Tory Relf questioned whether anyone read the policy or asked if the borrowing was lawful, according to reporting by The Post.
Staff cuts follow funding cuts and budget overruns
The broadcaster’s financial strain compounded during a year when government funding was cut by 7%. Personnel expenses exceeded budget targets by $3.2 million, which included $1.4 million in redundancy payments, according to figures reported by The Post. The organisation employed 347.6 full-time-equivalent staff at the end of June.
Management is now cutting the equivalent of 58 jobs, affecting about one in six staff members, with reductions scheduled to be completed by March. Former chief financial officer Hilary Parker resigned unexpectedly in early October, coinciding with the period when the true scale of the deficit became apparent during annual audit preparations.
Questions about the overdraft facility and deficit
Why was the $5 million overdraft facility created?
RNZ said that the facility served as a temporary safety net to manage significant one-off costs and cover operational expenses in the event that land sales were delayed.
Was any money borrowed through the unauthorized overdraft?
The temporary facility with Westpac was never used, and the annual report said that RNZ intended to exit the debt facility on or before receiving the land-sale proceeds.
What specific financial errors contributed to the $11.8 million deficit?
The shortfall stemmed from inaccurate internal reporting, personnel expenses running over budget by $3.2 million, and $2 million from land sales being incorrectly counted as revenue, alongside a 7% reduction in government funding.
Keep reading