Damning report canes Transport Agency team for 'weak' and 'lax' financial management

Wednesday, 10 July 2019

Financial fallout from sorting issues at the NZ Transport Agency problems is mounting. A recent Deloitte report into problems at the agency's high tech team cost $246,465.

A damning audit of the Transport Agency's high tech team found serious concerns with 'weak' and 'lax' financial management.

Deloitte was called in to audit current and historical issues around activities of the agency's Connected Journeys Solutions (CJS) unit which was established in October 2016 to come up innovative transport technology.

A report released on Wednesday found 'extensive disregard' of proper processes within the group, largely as a result of the leadership of the former unit director, Martin McMullan, and his relationship with former agency chief executive Fergus Gammie.

It also described 'weak' and 'lax' financial management, and a 'haphazard' and 'flawed' delivery of projects.

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NZ Transport agency interim chief executive Mark Ratcliffe said the agency had moved to ensure mistakes made by the Connected Journeys team would not be repeated, and praised the courage of staff who tried to raise concerns about the group before he took over.

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Interim agency chief executive Mark Ratcliffe, who took over from Gammie this year, said encouraging innovation had to be balanced by strong systems to ensure accountability, and the Deloitte report made it very clear that was not the case within CJS.

'The group was allowed to ignore many of the Transport Agency's own processes and rules.

'That is not acceptable, and we have moved to address these issues to ensure that these mistakes are never repeated.

Ratcliffe said McMullan appeared to have been in a 'privileged' and 'protected' position,' but the problems with the CJS were not symptomatic of widespread issues across the organisation.

'The agency staff are the sort of compliant public servants you would want them to be and this is an anomaly … I've not seen anything else like it anywhere else in the agency, so there must have been some kind of protection going on. It's highly unusual.'

Ratcliffe said the board was disappointed senior staff had not alerted it to problems with CJS, despite mechanisms to do so, and he acknowledged the 'courage and integrity' of many individual staff who tried to raise concerns about the unit.

The Transport Agency spent $246,465 on a report by Deloitte into its Connected Journeys high tech innovation team.

According to Official Information Act releases the CJS unit spent $6.7m on IT projects and $776,966 on domestic and international travel before a reorganisation saw it absorbed into a new agency operations group.

Ratcliffe also confirmed that allegations of bullying within CJS had been dealt with by way of a separate independent report but declined to give any further details.

'There are people who are quite vulnerable and I have a duty protect them.

'I'm satisfied the investigations were thoroughly worked through and we have reached a point where the people involved in making a complaint are satisfied where we got to.'

Do you know more? Contact Amanda.Cropp@stuff.co.nz

McMullan quit the agency in March telling Stuff he had done so for personal reasons, and because the agency had changed direction following Gammie's departure.

The Deloitte audit said the CJS unit had rapidly expanded from a team of eight to more than 80 in two years, and McMullan had close prior professional relationships with at least two of the staff he hired into leadership roles, something he made no secret of.

Standard processes for monitoring projects, recruitment and procurement were not followed, conflicts of interest were not always proactively declared or managed appropriately, or intellectual property protected.

'In some instances, funds from one project have been transferred to another project, rather than investment approval being sought for additional funding.'

The report also raised issues around cyber security, pointing out that use of personal email accounts and devices left CJS open to 'malicious action', and the possibility of confidential information finding its way to 'unfavourable third parties' and the wider general public.

'NZTA data and IP (intellectual property) is freely transferable to the private sphere, and is susceptible to loss or illegal transfer.'

Deloitte is still working on another investigation into probity and conflict of interest issues around a safety app developed by a friend of McMullan's.

An internal investigation found that McMullan did not make a formal declaration of his friendship with Martin Riding who headed two associated companies awarded $250,000 worth of contracts to develop a health and safety app.