Newly released documents on the Novopay debacle show the testy nature of the relationship between Novopay developer Talent2 and the Ministry of Education.

Ministry of Education correspondence revealed under the Official Information Act shows Talent2 was told last April it was in contractual default for failing to meet targets in rolling out the system.

A breach notice was threatened, however Talent2 argued defects were acceptable for the state of the project and it did not think the Ministry could issue a breach of contract notice.

Talent2 told the Ministry to refrain from what it called excessive reviews and attempts to manage it on contract matters.


Thew information also reveals that the Ministry of Education still owes teachers and school support staff nearly $12 million in non-payments or underpayments due to the flawed Novopay pay roll system, according to information

The information showed that as part of pay cycle 21, dated January 9, school staff were still waiting to be properly paid by the ministry after assurances problems would be patched up by Christmas.

The information also revealed the ministry received 225 invoices from schools and school support staff for extra costs they incurred from administering payment errors in relation to Novopay to the value of $1.197 million.

Last year Associate Education Minister Craig Foss assured schools they would receive compensation for the time spent administering mistakes with Novopay.

Yesterday the Government announced its planned to carry out a technical audit of the flawed system to see if it can be fixed. This would happen alongside a ministerial inquiry into how the problems with Novopay were allowed to occur.

The Government paid $30 million to Australian company Talent2 to develop Novopay over a two-year period.

Meanwhile, the taxpayer will foot the bill for a ministerial inquiry into Novopay and a technical audit of the flawed education payroll system, at least in the short term.

Minister in charge of Novopay Steven Joyce said the audit would be carried out by Deloitte and incorporate the results of the audit being undertaken by Ernst & Young on behalf of the Ministry of Education.


The ministerial inquiry will start in March or April and run for up to four months.

Speaking to TV3's Firstline this morning Mr Joyce said the issue of who would pay for the investigations would be "put aside at the moment".

"The taxpayer's going to step up and pay for it in the short term and I've said we're not going to have the big arguments now about who should pay what and who's fault is what.

"... We'll get on with fixing it ... and then we will sit down and work out who pays what," he said.

Alternative plans include scrapping the system, but in the meantime the Government would stick with it, Mr Joyce said.

He and acting Education Secretary Peter Hughes had begun talks with Datacom, the previous payroll provider.

"We're basically investigating setting up a contingency - I want to stress that would not be a simple solution."

He said that would not be a decision taken lightly.

Mr Joyce said the Datacom system also had problems and that was part of the reason the Government pushed for an alternative.

He also confirmed ministers Bill English, Hekia Parata and Craig Foss had signed off the Novopay system even though it had "bugs" in it.

Mr Joyce is to propose terms of reference for the ministerial inquiry to Cabinet on Monday.

Briefing for CEO about meeting with Talent2 Board Chair April 18, 2012
Briefing for Lesley Longstone meeting with Talent 2 September 18, 2012
Communications plan responding to feedback on Novopay letter Oct 29, 2012
Email from Andrew Banks to Craig Foss November 15, 2012
Email: Followup to call with Andrew Banks Nov 2012
Letters from Ministry to Talent2 August 2007
Letter to Talent2 on Ministry's concerns Nov 14, 2012
Letter from Ministry to Andrew Banks of Talent2 Jan 15, 2013
Letter to Talent2 interim KPIs and defect remediation: part one Nov 5, 2012
Letter to Talent2 re failure to meet KPI Nov 20, 2012
Letter to Talent2 on media queries Nov 20, 2012
Letter from the Ministry to Brian Ashton Nov 20, 2012
Memo: Custom and practice issues in schools' payroll August 17, 2012
Memo: Ensuring the Novopay bank file is accuate August 17, 2012
Memo: Novopay briefing to Lesley Longstone Nov 22, 2012
Memo: Recommendations on the outcome of warning letter to Talent 2 April 19, 2012
Novopay project board meeting Nov 1, 2012