Evidence emerged last night of potentially serious breaches of contract between the television production company of National Party list MP Melissa Lee and funder NZ on Air which could cost the company at least $100,000 in repayments.
The funding organisation's chief financial officer, Wayne Verhoeven, sent the MP a letter on June 12 outlining what it considered to be breaches of its funding contract through inflating company profits from the contingency fund.
The contract between Asia Vision Ltd and NZ on Air explicitly prohibits the producer making any changes to the agreed contingency budget or the agreed company markup (production company overhead) without the consent of NZ on Air.
Mr Verhoeven's letter accuses Ms Lee of using money from the contingency budget to increase the markup from 8 per cent to 10 per cent over five series of Asia Downunder.
He said NZ on Air had been advised by the former production manager Dianne Dean that the practice had been going on since the 2004 series.
"It seems that since 2004 Asia Vision Ltd has applied unspent contingency to increasing the PCO [markup] to the maximum amount."
The five years of contingencies total $100,126.
Last night, Ms Lee described it as "an innocent error".
She said she had replied to NZ on Air in June but had not yet had a response.
"I have been waiting for them to let me know the outcome."
Ms Lee told the Herald she had not been aware that the errors had been happening as the finances were handled by the production manager and accountant.
"At a time when there was no increase in funding, the company reduced its profit margins so it could continue making quality television and prudently maintain a contingency fund," she said.
"This has come as a total surprise. The company wasn't aware that the money set aside in the contingency was technically expected to be refunded.
"I'm not deeply involved in the day-to-day accounting, but the company's moved quickly to rectify the problem and will pay back any money deemed to be outstanding."
The company had amended processes to ensure such an error could not happen again, she said.
"I'd also urge other production companies to seek advice and make sure they comply."
Labour released the NZ on Air letter last night.
It had previously complained about Ms Lee's company while she was National's candidate in the Mt Albert byelection. NZ on Air cleared her in May of misleading the agency.
The Labour Party says Broadcasting Minister Jonathan Coleman must have known about the letter.
"Unless he fronts up and tells the public what he knows, he could be accused of a cover-up," Labour deputy leader Annette King told TV3.
Dr Coleman said he had known about it since August 18.
NZ on Air could not be contacted last night.By Audrey Young Email Audrey