More questions about RNZ’s $11.8m deficit, an unlawful loan and a possible law suit

RNZ’s financial crisis has widened on multiple fronts this week – a former host is understood to be considering legal action and a former board member says she flagged the need for ministerial approval on an unlawful $5m overdraft, Henry Oliver writes in today’s excerpt from The Bulletin.

On Monday, RNZ revealed an $11.8 million deficit for the year to June – against a budgeted loss of $470,000 – and confirmed it will cut 58 roles by March, rather than the 25 to 30 it projected in August. It is also forecasting a further $7.8m loss this year. 

The damage includes $2m of land sale proceeds wrongly booked as revenue, personnel costs $3.2m over budget (including $1.4m in redundancy), and operating costs $6.4m over, much of it tied to the shift into the TVNZ building. Basic management information, including monthly reports on staff numbers and costs, was allegedly not reaching senior decision-makers. One source, quoted by the Herald’s Shayne Currie this morning, described an organisation “completely asleep at the wheel.”

The timeline

RNZ had previously indicated it became aware of the full scale of the problems in October. The Herald’s investigation establishes a longer sequence.

The Audit Office confirmed to the Herald that EY auditors began identifying issues during on-site work in September. EY met chief financial officer Hilary Parker on September 29, where, RNZ says, “substantive issues were raised by the audit partner EY for the first time.” Wider management learned of them on October 2; Parker resigned that day. An emergency board meeting that weekend appointed board member Richard Dellabarca as interim CFO to establish the full picture.

The unlawful overdraft

RNZ’s annual report discloses a breach of the Crown Entities Act: a $5m overdraft facility with Westpac, approved by the board on June 9, without the sign-off of the minister of finance and the minister for media and communications. RNZ last obtained borrowing approval in 2006, for up to $3.5m. The facility was never drawn on.

Board chair Brent Impey told RNZ’s Checkpoint a director had queried in writing whether approval was needed, and was assured by Parker that it was not. "That there was a loan with Westpac and again, the Crown Entities Act was breached," he said. "How did that happen? That's very difficult to explain."

But Jane Wrightson, who chaired the audit and risk committee until June, told The Post she raised the requirement at the June 9 meeting herself. “I stipulated at the meeting that Treasury (ie minister) would need to agree and I see this was not captured in the meeting minutes,” she said. Asked why approval was not then sought: “I don't know why approval was not sought. It should have been.”

What happens next

RNZ has commissioned an independent review but has not settled terms of reference or a timeframe. Stephen Walker, a former executive director at Audit New Zealand, told RNZ’s Mary Argue most of the questions could be answered before Christmas if a reviewer is appointed within weeks. “It will be tight to get it done before everybody shuts up for the end of the year. But that makes it even more important to get it underway.”

Impey has said the review will examine RNZ’s culture, why internal reporting failed to surface the errors, and whether senior leaders were deliberately misled.

But there may be legal troubles beyond the review. Shayne Currie reports former Saturday Morning host Susie Ferguson may be considering legal action, unhappy she lost the weekend role on the basis that RNZ wanted an Auckland-based presenter only for the broadcaster to hire Wellington-based Patrick Gower, who will commute to Auckland. Neither Gower nor RNZ has commented on whether RNZ will cover the cost of that travel. Ferguson declined to comment.