Scathing Treasury review of Oranga Tamariki's $1.1b budget spend-up

One Treasury paper said the per child cost of putting a child into Oranga Tamariki was increasing without any appreciable improvement in outcomes. Photo / Jason Oxenham

Treasury gave the Government a scathing review of its $1.1 billion investment in Oranga Tamariki in the 2019 Budget, calling the spend a "disparate collection of ideas" that was "not governed by a clear organisational strategy".

One Treasury paper warned that the agency had "loose fiscal controls" and that the per child cost of putting a child into Oranga Tamariki was increasing without any appreciable improvement in outcomes.

Overall, analysts said Oranga Tamariki had a "[w]eak organisational strategy and direction".

In the first Wellbeing Budget, the Government invested $1.1 billion over four years into Oranga Tamariki to transform the organisation.

As part of that funding, Children's Minister Kelvin Davis was meant to report back to Cabinet on whether any transformation had taken place every six months.

The first report was back in April 2021, but the papers released under the Official Information Act say that "from... Treasury's perspective" the report itself "did not meet the expectations Cabinet set".

The next report was due at the end of the year. Once again, Treasury felt the report itself was sub par, and underplayed issues at the agency.

Treasury papers and correspondence show the agency was scathing about the lack of progress.

"This will be the second report back Cabinet receives, and while it is a significant improvement on the first, some key issues remain," the papers say.

They add that Treasury had to second short-term staff to the chief executive of Oranga Tamariki to "provide financial expertise".

Treasury was concerned Davis' original Cabinet paper had "not adequately addressed" the "key issues" of Oranga Tamariki's lacklustre performance.

These were "[l]imited evidence of effective and consistent fiscal controls", the fact that the "cost per child has increased significantly in the past two years with no clear explanation", and that Oranga Tamariki had not revised down their "demand forecasts" of the number of children in care, despite having lower demand.

The analyst then turned to the organisational structure of Oranga Tamariki, saying that an "absence of appropriate strategic thinking and framework limits OT's ability to prioritise and sequence decisions effectively".

Davis told the Herald that some "of the financial management and processes within Oranga Tamariki have not been adequate and I made it clear to the organisation that I expect better, when I was informed".

He said that overall the organisation was being improved.

Children's Minister Kelvin Davis is unimpressed by reports of fiscal mismanagement at Oranga Tamariki. Photo / Peter de Graaf

"While new chief executive Chappie Te Kani and his team have inherited some of these issues, that is the reality and they have owned it and have given me a guarantee it has, or is, being fixed," Davis said.

"This has included an external review, plus internal reviews of its various financial systems and frameworks.

"While auditors have given assurances that funding is being spent appropriately, I am demanding significant change within this organisation, and its finances need to be in order to undertake this," Davis said.

National's children spokeswoman Harete Hipango said Labour had "made big promises and campaigned heavily on improving vulnerable children's lives, yet have failed to deliver better outcomes".

"Strong leadership and oversight is desperately needed, but Oranga Tamariki lacks a minister and Government with the ability to sort out the dysfunction, and achieve improved outcomes for our tamariki," she said.

Poor fiscal controls

One report from Treasury highlighted that Oranga Tamariki did not have "effective fiscal controls" - controls on how money was spent effectively.

The report said Oranga Tamariki did not have the "necessary reporting and accountability systems in place, to ensure spending is high value and within budget".

It said that "[s]ignificant decisions are frequently made before funding is in place, such as raising expectations with partners regarding contracts for services, or hiring permanent staff without ongoing funding for those staff".

Treasury gave the example of Oranga Tamariki's leadership deciding to reprioritise $42 million in underspent funding without Cabinet approval.

Because of the way that funding was reprioritised, Oranga Tamariki created an ongoing cost pressure of $20 million each year that would need to be funded in subsequent Budgets.

"OT have not sought Cabinet or joint ministerial approval to re-prioritise this $42 million, and have created an ongoing cost pressure of $20 million into subsequent years directly attributable to these decisions," the paper said.

Treasury warned that this financial mismanagement created significant "uncertainty" about what Oranga Tamariki could afford to do - this would mean that "either services need to be stopped, or the Government needs to step in and provide additional funding".

Cost per child increasing

The paper also warned that the cost per child of Oranga Tamariki services had increased.

Oranga Tamariki divides children into four categories: "General Support, Additional Support, Greater Support, High Support".

Across all categories, the cost of care had increased.

Oranga Tamariki defended this increase, saying that there was an "increase in complexity of the cases they are dealing with". However Treasury was less convinced.

"While these may be the drivers of increased cost, OT are unable to quantify them in any meaningful way, and are unable to provide a view on whether this increased spend in interventions for children is leading to better outcomes," it said.

Treasury put its foot down, suggesting a "thorough" re-forecasting of demand for Oranga Tamariki's services.

"This will allow OT to set up appropriate capacity to respond to demand and re-prioritise or return funding that is no longer required," the report said.

In another paper, Treasury warned Finance Minister Grant Robertson not to invite Oranga Tamariki to submit initiatives for Budget 2022 funding because its "financial management capability is weak".

Oranga Tamariki was able to have initiatives funded in Budget 2022, but they were worth a relatively small $35m.