Court Challenge To Auditor-General Over Ignoring Billions Of Dollars That Should Be Repaid By Businesses

The Auditor-General is being challenged over his decision to not take any action over the need for businesses to be asked to either provide evidence that they are entitled to keep wage subsidy money they received or to make a repayment.

Grant and Marilyn Nelson, trustees of The Gama Foundation, say the Auditor-General is aware that billions of dollars should be repaid but has done nothing about this. If the money is not repaid, each taxpayer will have to contribute thousands of dollars through their taxes to help repay the debt that has been incurred.

The Nelsons will have their case against the Auditor-General heard at the Wellington High Court on March 11 and 12, just over a year after they filed an application for a Judicial Review.

Mr Nelson has been researching the wage subsidy scheme since 2020 and is concerned that the Auditor-General has failed to do all within his power to help retrieve an estimated $5 billion that was overpaid and a further $5 billion that was wrongly obtained or retained by businesses.

The Auditor-General has stated numerous times on his office website and elsewhere that he has to act as the watchdog and guardian of public money and that he is very concerned about the good stewardship of public money. “This has not extended to the $18.8 billion paid out under the wage subsidy,” said Mr Nelson

The Auditor-General was aware of reports and data indicating widespread abuse of the wage subsidy so he and Audit NZ recommended to the Ministry of Social Development that they write to all recipients regarding the need for them to comply with their obligations. Consultants, Deloitte, also twice made similar recommendations but the MSD did not accept any of these recommendations.

One of the bases on which The Gama Foundation is challenging the Auditor-General is that he failed to carry out his statutory duties by unlawfully changing and deleting some of his recommendations following pressure from the MSD.

The Auditor-General also recommended that the MSD carry out two reviews and told Parliament that these would help determine the next steps to be taken regarding repayments. The MSD arranged reviews that indicated that billions of dollars should be repaid but they decided in late 2022 to take no further action. The Auditor-General has gone along with this and has done nothing further.

A retired performance auditor with 25 years of experience in the Office of the Auditor-General has provided the Court with over 60 pages of evidence regarding the failure of the Auditor-General to do his job properly when dealing with the wage subsidy.

The court is being asked to rule that the Auditor-General should consider recommending to the Ministry of Social Development that they promptly write to all recipients to request that ‘wrongly retained or obtained money be repaid and verifying evidence be provided for money not repaid’.

“The Auditor-General has said that this is good practice and should happen, so it is difficult to understand why he is now resisting making the recommendation,” said Mr Nelson.

The couple, who have over the past 28 years donated more than $50 million to charity, say the wage subsidy scheme was built on a high-trust model, leaving it wide open to abuse. Reserve Bank data shows that in October 2020 businesses had $22.7 billion or 24% more in the bank than in October 2019. Economists said that this was mainly due to the wage subsidy.

“The fact that over $790 million has voluntarily been repaid is a good indication that many times more would be repaid if recipients were asked to make repayments,” says Mr Nelson.

In August 2022 the Auditor-General took a much stronger stance over the cost of living payments – within weeks of the first payment of $116 being made he had written to the IRD, recommending it "consider what steps it can take to identify how many ineligible people have received payments". He also advised IRD to make its expectation clear to ineligible people who got the payment that they should repay it immediately. While he said that it was unacceptable that the IRD did not know the total that should be repaid, he and the MSD have never made their own calculation of the total of wage subsidy money that should be repaid.

“We’re really just wanting him to take the same action with the wage subsidy payments that he took with the cost of living payments as vastly more money is involved,” says Mr Nelson.

“Taxpayers are totally reliant on the Auditor-General to ensure the good stewardship of public money so if he is allowed to ignore his statutory duties, a dangerous precedent will be set.”

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