Ministry accused of hiding contractor spending

The Government's super-ministry has been accused of misleading Parliament after admitting its claim to be spending less on high-priced contractors lacked "clarity" and such spending had actually substantially increased.

The about-turn came at Parliament's economic development select committee where the Ministry for Business, Innovation and Employment told MPs it had launched a "review" into how it reported its spending on contractors and consultants and would no longer exclude spending on Information and Communication Technology (ICT) projects.

ACT Party MP David Seymour slammed the about-face and said it appeared to show the ministry had misled Parliament.

"I don't think any sensible person would say a consultant is not a consultant if they work on computers: Which is effectively the argument they've made here," he said.

MBIE declined to make any officials available to the Herald for interview, but in a written statement their chief financial officer Stewart McRobie denied misleading anyone and said their new answers to select committee followed new questions being asked.

"This presented an opportunity for MBIE to look at how all costs were reported and we took the decision that for greater clarity we would also itemise contractor expenditure for ICT projects separately," the statement said.

David Parker, Minister for Economic Development, declined to comment on the accounting fracas with a spokesman describing it as a "operational matter" best answered by the ministry.

Excluding ICT projects had seen MBIE previously report spending on contractors and consultants had declined by 20 per cent between 2013 and 2016. However, the fresh inclusion of these projects showed such spending during the period had actually increased by 22 per cent.

The review followed a leak to the Herald late last year of a huge internal MBIE spreadsheet containing contractor and consultant payment data that appeared to show the ministry's spending was far higher than was being publicly reported.

At the time ministry claimed the spreadsheet was misleading and contained unspecified "discrepancies" and said the leaking of it was a "serious issue" that was being investigated.

Seymour laid partial blame for the matter at the feet of the former MBIE minister, whose policy capping the public service appeared to have resulted in creative work-arounds.

"You can also blame the Steven Joyce approach of capping the number of direct employees. They've been forced to invest a whole new form of accounting to make this work - and appear to have misled Parliament in the process," Seymour said.

MBIE, with 3500 staff, is the third-biggest government department behind Inland Revenue and Justice, and was formed in 2012 in a merger of the housing, labour, science and economic development departments.

MBIE recently acknowledged a sharp 25 per cent increase in contract and consulting spending in the year to June 2017 (to $73.7m, $49.3m without ICT) and said it had taken steps since the election to trim such spending.

The leaked spreadsheet revealed the ICT spending in question included payments for more than 80 fulltime contractors who each made more than $200,000 a year.

Classifying these staff as contractors instead of employees also meant MBIE did not have to disclose these high-earners. Their most recent annual report saw the entire Ministry claim to have only 55 people earning more than that figure.

Seymour said he would be taking up the matter with MBIE's chief executive Carolyn Tremain.

"The fact the their chief executive has attempted to discredit that [leaked] spreadsheet, while their own reporting was so suspect, is something that questions need to be asked about," he said.

The statement from MBIE's McRobie said the investigation as to who leaked the spreadsheet was progressing, and 19 individuals had been identified who had access to the information in question.

"MBIE is currently working through an employment process and is unable to comment further," the statement said.