Prime Minister John Key has defended his ministers who signed off the Novopay system, despite them knowing there were nearly 150 software defects.

Official documents released today reveal Education Minister Hekia Parata, Finance Minister Bill English and Associate Education Minister Craig Foss all signed off on the system, despite 5913 payslip errors during testing.

Mr Key said his ministers received expert advice to go live with the Novopay system despite the flaws.

"Most big systems of this magnitude will have some warning bells attached to them so of itself it's not unusual,'' he said.


However, he admitted the ministers did not receive the best advice.

He said it wasn't the ranking of the system that mattered but how it performed.

"I think we would say now that the system hasn't performed as well as we would expect - it's unacceptable to teachers and everybody that's involved.''

Mr Key said there was no need to bring in further experts to deal with the system troubles.

The idea of using the Novopay had been a long thought-out process that started under Labour in 2005.

The reason for the ministerial inquiry was to understand how risks were assessed and problems with the system occurred.

"As the Prime Minster I want to understand exactly what went wrong, who was accountable and why.''

Mr Key said his main focus was to make sure teachers get paid and that some confidence in the system was rebuilt.


A report last June by Ministry of Education chief information officer Leanne Gibson revealed 147 defects, with most at a medium to serious level, but said they were not "showstoppers''.

Four independent advisors, PWC, Ministry of Social Development, Ministry for Primary Industries and NZ Transport Agency, assessed Novopay and gave it the go-ahead.

"On balance, while they noted some matters still need to be addressed, they recommended that the programme should continue,'' Ms Gibson said.

Two months before that, the developer Talent2, was told 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.

Ms Parata, Mr English and Mr Foss were advised that despite 5913 payslip errors during testing, those figures were expected to be reduced by just over 773 before the system was rolled out.

"Of the 773 differences outstanding, the large majority fall within the range of $25 over or under payment,'' Ms Gibson said.

Novopay went live in August. As of January 9, education staff were owed almost $12 million.

The information also revealed the ministry received 255 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 staff any banks fees or charges due to missed payments would be covered by the ministry.

Schools began invoicing the ministry for extra administrative time spent working on Novopay.

Yesterday the Government announced it will 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.

The company was awarded the contract in 2005, but five years later, education deputy secretary Anne Jackson requested an urgent meeting with Talent2`s chief executive Joah Rawlinson over significant delays in implementing the system.

By last April Ms Jackson said the company had missed four major deadlines, and she believed the company were in default.

She also said there were 65 faults in system, and there was a need to run a total of 270 test scripts.

The ministry issued a breach of notice in April 18 to Talent2, prior to roll out of contract, but Mr Rawlinson argued that ongoing defects were "part of the normal project life''.

Yesterday, Steven Joyce, the minister tasked with finding a solution to the ongoing problems, said an audit would be carried out by Deloitte, which would incorporate the results of the audit being undertaken by Ernst & Young on behalf of the Ministry of Education.

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

Novopay documents release facts

* The Ministry of Education botched the release of official documents about Novopay by allowing people to view some information it was trying to keep secret.

* The ministry this morning made documents about the troubled school payroll system available through its website but some blacking out of information was reversible.

* Access was blocked for two hours before the documents could be viewed online again.

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