An employee of Team New Zealand created three different accounts to justify why a taxpayer backed company should pay the syndicate a $3 million design fee for the yachts used in next year's regatta before the board of the company accepted the fee.
On Tuesday the Ministry of Business, Innovation and Employment (MBIE) revealed more details of its audit of America's Cup Event ACE, a company headed by Grant Dalton and backed by $40m of taxpayer funding.
ACE was set up to deliver the 36th running of the international sailing regatta and operates from the same building as Team New Zealand.
Under the host agreement with the Government and Auckland Council, none of the money provided by taxpayers is meant to be used by Team New Zealand, the defender of the Auld Mug.
Beattie Varley was brought in to examine whether Team New Zealand was complying with the terms of the host agreement.
Earlier, when a short summary was released in August, Team New Zealand claimed the report was total vindication, despite a summary of the report saying the lack of record keeping warranted criticism at both a management and governance level.
It also revealed that Team New Zealand and MBIE were at odds on the nature of the $3m design fee for the unique foiling yachts and were headed for arbitration.
The probe by Beattie Varley contains long sections which are blacked out for legal reasons, but reveals more detail of what the Herald has previously been unable to publish after Team New Zealand rushed to court to stop publication.
New parts of the Beattie Varley report detail how Team New Zealand had several attempts to justify the $3m fee to the board of ACE, which is headed by Tina Symmans.
Beattie Varley's report does make it clear that "it is by no means inevitable that a backdated invoice is dishonest".
This was done through the creation of three different schedules detailing when different staff were working on the foil cant system, which is at the core of the design of the boats to be used in the upcoming regatta.
All of the accounts were created more than 12 months after ACE had settled on the $3m figure, Beattie Varley stated.
The document suppresses which employee was involved in the creation of the different schedules.
"The current [employee of Team New Zealand] had three attempts at creating the schedule before his third was accepted by the ACE board," Beattie Varley's report states.
"Each version was created well after ACE had settled on the $3.0m amount. Each version had significant differences in composition. Even [a different staff member] who had decided on the $3.0m recharge over a year earlier, had to ask who had been included in the schedule when it was being discussed at the December 2019 board meeting."
The report suggests that ACE initially provided the final version of the report to Beattie Varley.
"As we now know, the breakdown schedule initially provided to us … was a convenient selection of staff and associated amounts needed to reach a total of $3.0m," Beattie Varley said.
"It gave the impression that there was some precision or science to the calculation. The one-page board-paper excerpt also provided to us included the comment 'The breakdown of what makes up this invoice is in the table below'. But the breakdown provided did not actually determine how ACE/ETNZ settled on the $3.0M amount and in that sense, its provision without proper explanation was unhelpful."
A different staff member blamed work pressure for the failure to create contemporaneous invoices.
In the end, Beattie Varley's report appears to sidestep questions about the appropriateness of the documentation, but because it argues that, legally, Team New Zealand may well have been entitled to charge for staff time over a longer period than it had attempted to.
While Team New Zealand had claimed staff time for designing the foil cant system from March to June 2018, Beattie Varley's report says that Team New Zealand may have been able to charge staff time for designing the boat as far back as July 2017.
After Team New Zealand won the 2017 America's Cup, the Government provided $5m, and while Team New Zealand seemed concerned about whether charging for the design of the boat when the $5m was being spent could amount to "double dipping", Beattie Varley saw no reason why money could not be charged from an earlier date.
"In our view, any combination of relevant ETNZ costs in the July 2017 to June 2018 period amounting to $3.0M or more could sustain the recharge."
Beattie Varley said using this approach "ignores the ethical and reputational issues that [a Team New Zealand staff member] likely took into account when he decided not to charge all or even a majority of the total costs (i.e. his not double-dipping)" but added that "ethical and reputational issues are not necessarily determinative when it comes to deciding legal rights".
However the $3m fee was determined, the report makes it clear that MBIE and Team New Zealand are sharply at odds about whether it should be covered by ACE.
Team New Zealand says the creation of the concept of a "radical new yacht ... is a legitimate cost for delivery of the events".
But MBIE says the design fee "was not contemplated as being within the management and delivery of the Event" when it signed the host venue agreement.
The $3m payment was not communicated to MBIE "and was not accurately referenced in the event investment dashboards".
While Beattie Varley does not express an opinion either way about whether the fee should be covered as an event expense, the report said that it had not seen any documentation about cost of the design or that the parties had ever discussed it.
"If, as ACE submits, the yacht and the class rule were at the crux of the events, then one might expect ACE and ETNZ to have engaged the Hosts in that issue."