Oranga Tamariki taken to task over lack of controls, understanding of spending

Documents show Oranga Tamariki has been stumbling towards budget blowouts with loose and patchy financial controls.

Its shortcomings in protecting children have been the subject of more than a dozen inquiries, the most recent last week finding five gaps had contributed to the brutal death of five-year-old Malachi Subecz.

But at the same time, a series of unheralded but also scathing financial reviews of the agency have been unmasking - internally at least - many major basic failings.

"As has been articulated in previous internal OT papers, there is a lack of understanding of the drivers of children's costs and the services required at different levels of need," independent reviewer KPMG said earlier this year.

There was "an apparent lack of an accountability culture for spending decisions and staying within budget at all levels of the organisation".

"OT does not have a framework for determining the extent to which initiatives represent value for money," the reviewer said.

KPMG was called in as OT headed towards a blowout of up to $50 million on its 2021-22 budget, and following Treasury's finding last year of OT's "loose fiscal controls" around $1.1 billion of spending in the 2019-20 Budget.

At stake was delivery of half a billion dollars of contracts a year to care for at least 5000 children.

KPMG found not only were social workers without financial training making many budget calls, but the actual experts in the finance section faced a gaping hole.

"The funding and performance team has limited understanding of the core business in OT such as services for children and families," it said in May after interviewing staff.

Read the full KPMG report (PDF 1.6MB)

"We heard disappointment at the lack of modelling and forecasting from the budget holders' survey."

KPMG said without a clear understanding of OT's cost base and the key drivers for the cost of children in care, it was difficult for finance to:

• Accurately forecast expenditure
• Provide insights into spending patterns and trends
• Identify opportunities for cost savings

One staffer was quoted saying: "The message about doing whatever the tamariki and whānau need has been taken very literally and has led to sloppy financial decisions".

KPMG recommended a series of overhauls. It remains unclear where OT has got up to with those; RNZ asked for the latest briefing of the minister - and briefings are due every six months - but was provided with one from October 2021.

The KPMG findings in March and May 2022 have come to light after Children's Minister Kelvin Davis told RNZ in September that its reviews were among the measures taken to fix OT's problems, following Treasury's 2021 findings.

RNZ got them under the OIA.

Davis promised in September last year to bulldoze through a five-year transformation of OT, stating: "The time for talk and the time for reviews, and everything, has ended. And it's now time to make these changes happen."

Since then, there have been several financial reviews, as well as those into Malachi Subecz's death.

The former have revealed myriad, major and often very basic shortcomings.

"Currently, there is no active finance strategy in place," KPMG said.

"Budget holders have little clarity around what their budget is and how they are tracking against it," it said at another point.

"Processes need to be refined to include appropriate controls over expenditure."

Central to OT's overspending was that the numbers of children in care had been dropping, but the cost per child has been escalating - doubling since 2019 to $300,000 a year for each of the 210 most complex cases.

However, beyond stating that fact, OT had not analysed why this was nor revised its forecasts of what demands it faced, several reports repeatedly stated.

"OT does not have a good understanding of what are the demand drivers for children's cost," KPMG said.

When RNZ asked to see what recent work it had done on forecasting, OT referred to two reports from last year that were not specific.

OT had been trying to make savings in the 2021-22 year, KPMG said, mostly focused on contracts for child services. However, it was unclear who was in charge or if the savings were actually being made.

"We are not aware of any significant changes being planned so far to ensure 2022/23 does not develop similar issues to the current year," it said in March.

By July, the child protection agency had identified almost $6m in savings from changing contracts with 129 of its 605 providers, it told RNZ.

Yet, there was "a strong view that contracts are not tightly managed, with OT paying for capacity that is not ultimately used and clawback provisions that are not adequately utilised", KPMG found.

"Currently, it is hard to ascertain if OT 'got what we paid for' from service providers."

Problems threaten devolvement plans

The weaknesses were a threat to the agency's so-called Future Direction Plan, or FDP.

This envisages devolvement of more decision making to the regions and iwi, but feedback from regional and site managers to KPMG was that they had little say and this "often results in budgets that may not reflect reality and therefore are seen as unachievable".

At the same time, about 250 staff were involved in budget calls, though few had enough training and some took budgets seriously and some did not.

The problems were exacerbated by a large expansion in the scope of services on offer and a lot of people being hired.

"I would like to see us all manage within our allocated budgets and not have to have cuts to accommodate those who have exceeded their allocations," a staff member was quoted by KPMG.

"I would like to see those who have created or exacerbated this financial crisis be held accountable."