RNZ’s $11.8m deficit: ‘Error after error after error’

Yesterday, RNZ posted an $11.8m deficit. The outgoing chief executive has taken responsibility, the board has ordered an independent review, and its own presenter has interviewed the chair about how nobody noticed, Henry Oliver writes in today’s excerpt from The Bulletin.

RNZ had budgeted for a $470,000 loss in the year to June. It recorded $11.8 million, The Herald’s Shayne Currie reported yesterday, and is forecasting a further $7.8m deficit this financial year.

The causes are a parade of errors. Two million dollars from land sales was wrongly counted as revenue. Personnel expenses ran $3.2m over budget, including $1.4m in redundancy payments. Operating expenses were $6.4m over, much of it tied to the shift of RNZ’s Auckland office into the TVNZ building.

“Internal financial reporting during the year did not accurately reflect RNZ’s underlying position,” Thompson told staff. “As a result, corrective action was not taken during the financial year, and we did not reduce our cost base as we needed to. This explains the result, but it does not excuse it... as chief executive, I take responsibility for the result.”

The shortfall only became clear in October, around the time chief financial officer Hilary Parker resigned unexpectedly and left the broadcaster on the same day. Her departure forced an emergency board meeting, with director Richard Dellabarca stepping into the role in the interim.

The cuts

RNZ announced in August it would cut up to 30 roles. Stuff reports the number is now 58 – from 347 staff to 289, roughly one in six. Thompson said the cuts would “affect roles across every business unit at every level.”

Board chair Brent Impey told The Post’s Stewart Sowman-Lund, the situation was “incomprehensible” and that responsibility ran through senior management, the chief executive, the audit and risk committee and ultimately the board. “I’ve never come across anything like this before, where there is just sort of error after error after error.”

The interview

The Spinoff’s Veronica Schmidt writes that RNZ’s only ray of light was that one of its own journalists, Checkpoint host Lisa Owen, “showed the kind of interviewing a public broadcaster should offer – no fear, no favour.”

In an interview that has to be heard – the tones of the two voices adding texture to the story – Owen asked Impey whether the board’s failure made it incompetent. He said responsibility sat at various levels. She pressed on why Thompson remained in the building: “That's $80,000 more in salary if he sticks around. Why. Is. He. Here?” 

Impey: “He's got a job to do over the next six weeks.”

“How is the organisation so dumb, Brent, to not see $12m of money going down the gurgler?” 

Impey: “I couldn't agree more, in fact it's almost indescribable, incomprehensible to have got to this position.” 

“Yet you're all sitting here with your jobs?” 

Impey: “Yes, someone's got to run the place, don't they? What do you suggest?”

‘A real weakness in forecasting and budgeting’

Stephen Walker, formerly an executive director at Audit New Zealand, told RNZ’s Mary Argue the size of the loss and the time taken to find it were both surprising. “Probably more of a concern is that they had seemingly been unaware that they were running up a significant deficit until they were in the preparation stage of their annual report in October.”

Public entities produce monthly reports and face an interim audit, he said, so a miss of more than 10% of total funding suggested “a real weakness in forecasting and budgeting” – and by the time it surfaced, “there’s no opportunity... to take any corrective action because the year has effectively been completed.”

Auckland University’s Norman Wong said recognising land sales as income was “a basic error that one would have expected to have been caught and corrected well before it got to this point.”