Independent report scathing about Wellington Water’s $51 million error

By Nick James of RNZ

An independent report reveals Wellington Water staff took four months to tell the region’s councils about an error in budgeting advice that has left the councils with a bill of $51 million over three years.

The report was scathing about the organisation, saying it was immature, with inadequate systems and processes and a dysfunctional culture.

It compared the accounting mistake to the fluoride scandal two years earlier.

In May, the water company apologised for not including corporate costs of $51m in advice it had provided to councils for their long-term plan.

The review started in June. Forty-two people were interviewed and 450 documents analysed.

It found workers at Wellington Water first raised concerns about the corporate cost calculations in November, but it did not receive significant attention until February.

It concluded the error occurred due to a lack of understanding and ownership of problems when they arose, and poor information flows.

The review said information was omitted with widespread consequences and there were no controls in place to pick it up.

The reviewers said they were struck by how much the recommendations in their report aligned with those in the 2022 inquiry into the fluoride scandal that found fluoridating water was “not a priority” for Wellington Water after it was inconsistently added to the water supply for six years.

Communications

The report found the communication of the accounting error was inadequate, and its implications were not understood at the highest levels of the organisation until at least May 1.

When informed of the mistake, Wellington Water chief executive Tonia Haskell escalated it to the company’s board chairman, Nick Leggett, on May 1, but then downplayed it two days later and stated the company could potentially manage the situation within budgets.

“Downplaying the error gave the chair the impression that there was no urgency.”

The report says he thought the issue would be dealt with at a board meeting on May 9, but papers from that meeting did not address the problem and it was treated as a business-as-usual fix.

The reviewers said because it was not raised with the board at that time, it was a “serious misjudgment by management”.

When the error was communicated to councils it was mismanaged, with Wellington Water telling one council before others on May 17, and that led to all six shareholding councils passing and sharing information among one another.

The review says this form of communication breached councils’ trust in Wellington Water management from the outset.

Culture

The review found there was a culture at Wellington Water of “not wanting to hear or present bad news” that contributed to the error.

It said there was a tendency to manage bad news before informing stakeholders “to try to shape their perceptions and reaction to the problem in order to minimise it”.

The review found people had described Wellington Water as a “reactive” entity that had a “she’ll be right” attitude.

Reaction

Wellington Water Board chairman Nick Leggett said the report did not pull any punches.

Leggett said at least once on every page of the report, there were insights from employees about how the organisation could do better and these issues now must be addressed as a matter of course.

“It became more and more obvious as I read on that most of the answer lies in a dysfunctional culture with insufficient checks and balances in processes that made errors of the kind that prompted the report inevitable.

“I agree with the reviewers that unless we turn that culture and ways of working around, similar errors are bound to occur in future, as they have in the past with the failure over fluoride.”

He said the anticipation of imminent water reforms may have made Wellington Water too timid in addressing much-needed change in its organisation.

Leggett said the board would be discussing the recommendations with shareholding councils and would announce detailed next steps over the coming few weeks.

Recommendations

The recommendations were built on six broad categories:

Wellington Water had planned to start work immediately on dealing with objectives such as building its internal culture, improving board oversight in all matters and undertaking a forensic review of the updated calculations for the corporate cost to ensure councils and their communities could have certainty.

Longer-term actions included reviewing the Wellington Water structure, improvements that would strengthen data integrity and strengthening resources in financing and risk.

The report says Wellington Water was not as mature an organisation as would be expected and had not evolved in step with the evolution of its functions, and as an organisation had not kept pace with increased demand.