Defunct agency in gun again

Staff at the Labour Department's now-defunct Community Employment Group (CEG) had serious doubts about the ability of a Kaitaia Maori group run by activist Hone Harawira to start a television station.

But the $115,000 grant to Te Reo Irirangi o Te Hiku o Te Ika to set up Te Hiku TV still went ahead in 2003.

A damning internal Labour Department audit released four days before Christmas has found big deficiencies in the management and monitoring of the grant. The final $15,000 payment was canned.

Papers obtained by the Herald under the Official Information Act - after a nine-month delay - show that not only did the grant's purpose appear to have been rewritten after public criticism, but some staff had little confidence that the station would succeed.

The audit would probably never have been ordered had National MP Katherine Rich not discovered and publicly slammed the grant last March in the fertile political environment following National leader Don Brash's Orewa race relations speech.

So sensitive was the Government that it changed the original official answer to Mrs Rich to a parliamentary question about the grant's purpose.

It was originally called a project to "establish a Maori TV station in the Far North", but the Government then said the CEG database had recorded the purpose incorrectly and it was simply for a regional community station.

The grant to Te Reo Irirangi o Te Hiku o Te Ika, run by Mr Harawira, son of veteran Maori activist Titewhai Harawira, was authorised by then CEG general manager Charlie Moore in 2003.

Mr Harawira, now touted as a possible Maori Party candidate for Te Tai Tokerau at this year's election, has also denied that the grant was for a Maori station and pointed to the business plan showing a wider purpose.

Yet the papers released to the Herald show CEG staff were calling it a Maori TV station, were questioning its viability and were worried how it might look given that the Government was ploughing millions into the Maori Television Service.

A March 2002 file note from CEG worker Colleen Kautai said: "One would have to question why CEG should invest a large amount of money in this sort of proposal at a time when the Government is investing a large amount of money in a Maori Television Service."

She concluded that the channel's business plan was not viable and not suited as a Community Employment Organisation (CEO) initiative - the scheme under which the grant was approved.

Another paper, a March 2002 head office memo, expressed the same doubts, despite a field adviser suggesting that the project "is a timely one in terms of Maori television development".

The memo said the financial details did not suggest the station would be sustainable without a "considerable" amount of Government money - particularly from CEG and Maori broadcasting agency Te Mangai Paho.

Labour Department chief executive James Buwalda denies any of this shows the department deliberately obfuscated the grant's purpose in the audit, which said it was for a regional TV station. He maintains there were sloppy processes in recording information in the database.

The audit also showed:

* The grant's risks were not well-supported for the recommendation to approve the grant.

* CEG's national office failed to complete its responsibilities - including ensuring the grant funds fitted the scheme's criteria. The agency also failed to monitor the grant properly and allowed reporting deadlines to slip.

The audit also considered but found no conflicts of interest. It probed whether there was a close relationship between any of the CEG staff involved in processing the grant and the recipients, noting that Mr Harawira was a CEG employee until 1995.

But the internal papers show staff were raising the issue because Mr Harawira was chairman of the Maori Television Service Electoral College.

One memo from March 2002 from CEG's head office raised concern about "potential conflict of interest" relating to Mr Harawira.

The memo said: "I note that he was chair of the Electoral College that elected the interim members of the Maori Television Service Board. I wouldn't want to claim that there was any impropriety involved, but there is certainly scope for people to ask questions."

Mr Harawira rejects any claims of a conflict of interest.

"That CEG discussed it amongst themselves is meaningless, because they neither raised it with me, nor referenced it in any of the documentation between us."

Although CEG has been disbanded, Mrs Rich says its staff and reason for existence remain.

"You even have some of the staff answering the phone as Community Employment Group."

She says questions remain unanswered, such as why $18,174 was reallocated from leasing equipment to paying administration wages following a request from Mr Harawira on November 22 - just days before the audit was finalised.

"It's just very odd that you give a grant for something specific and they don't spend it on that, and then after the fact you agree that they can count that as another cost."

The Te Hiku TV grant was far from the first to put CEG in hot water.

Fur flew when the Auditor-General's report into loans of nearly $2 million of state funds to organisations associated with former Act MP Donna Awatere Huata was released in October 2003.

Much of the public focus was on the MP and her husband, Wi, who had allegedly resorted to bullying officials to get cash for their organisations.

But the report also revealed significant lapses by three Government entities - the Ministry of Education, Te Puni Kokiri and CEG - which collectively funded most of the nearly $2 million.

Then there was the $26,000 grant so that two Christchurch women, Fuarosa Tamati and daughter Saralia, could go on a 70-day world trip studying hip-hop.

That audit, released in September, also found serious management deficiencies.

Mr Harawira is still pushing ahead with his plans for the station despite the final $15,000 tranche of the grant being cancelled.

He says Te Hiku TV completed a test transmission in November and an independent report has gone to the Ministry of Economic Development on whether there is any interference to other services.

If the ministry confirms a lack of interference, Te Hiku TV will be offered a longer-term licence.

Mr Harawira says a start date is dependent on the ministry's report and signing an agreement with it and the Ministry of Culture and Heritage.

He points out that CEG actually approached him asking if there was an initiative it could assist with.

"I said 'Yes, Te Hiku TV'," he says.

"Withdrawal of the grant was actually the result of ... a review into CEG's monitoring practices rather than what it is that we are doing."

Meanwhile, for the 94 remaining CEG staff - out of 106 a year ago - the future is uncertain.

Dr Buwalda says the transfer of most of CEG's $23 million in grant money to the Ministry of Social Development should be completed by March 31.

Mr Moore - who signed off on the grant - lost his job in June in departmental restructuring.

Decisions on the future of remaining staff and how many would be transferred are still being made, but no CEG functions will remain within the department after March.

Why the timing:

If ever there was a report dumped before Christmas in an apparent attempt to bury it, the audit of the $115,000 Government grant to Te Hiku TV is it.

The Herald complained to the Ombudsman about the December 21 release of the audit and official papers requested nine months earlier by the newspaper.

The Labour Department release also came after Parliament had finished for the year, prompting National MP Katherine Rich to label the timing a scandal.

But department chief executive James Buwalda denied claims that the timing was an attempt to bury the audit, and said he even considered releasing it this month.

"At the time we were very concerned about the risk of this exact conclusion," he said.

Dr Buwalda said the audit took much longer than expected after being ordered by Acting Social Development and Employment Minister Ruth Dyson in March last year.

Nobody was aware at the time of just how much work the audit - and others ordered by Ms Dyson such as the one into CEG's $26,000 hip-hop grant - would take.

The audit was actually finished on November 26 but, Dr Buwalda said, issues of natural justice arose. Time was needed to consult with the grant recipient, Hone Harawira, and to decide the action to take in response.

Ombudsman Mel Smith concurred, ruling that the delay was not unreasonable given the genuine need to properly consult.