The University of Auckland's controversial purchase of a $5 million Parnell mansion for its boss has been slammed by the Government's financial watchdog.
The university bought the four-bedroom pad in November last year as a home for incoming Vice-Chancellor Dawn Freshwater.
Boasting manicured gardens, 338sq m of floorspace across three storeys and a spa and lap pool, the purchase was subsequently labelled "frivolous" and a "slap in the face" by student unions.
Having recently joined the university on a $755,000 annual salary, Freshwater paid $1100 per week to rent the home, despite a valuation noting it could command $2000 on the open market.
Now investigators from the Auditor-General's Office say the purchase clearly involved "sensitive expenditure".
That meant the partly taxpayer-funded organisation ran the risk of being seen to give "disproportionate" benefit to Freshwater above its own business needs, the Auditor-General said in a report released today.
"In my view, the university has not been able to show a justifiable business purpose for purchasing the house."
"The university has also been unable to show that the expenditure was moderate and conservative."
Education Minister Chris Hipkins labelled the university's failures "very disappointing".
National tertiary education spokeswoman Penny Simmonds also expected the university to be "very mindful of any expenditure that isn't core to their business of education".
The university said it accepted the Auditor-General's findings and had taken steps to improve its internal processes.
Its decision to snap up the boutique home was exclusively uncovered by the Herald in January.
It paid $5.06m for the house, located near Sir John Key's St Stephens Ave home - that was $1.5m above the council valuation.
The university then immediately spent between $160,000-$170,000 repairing the home's roof and swimming pool.
However, concerns about the expensive purchase had only grown since the Covid-19 pandemic hit.
The university now forecast a $48m drop in revenue by 2023 as it faced an unknown period without its lucrative overseas students.
That had left staff fearing job cuts and students expressing concern about reduced teaching services.
Alerted by media reports, the Auditor-General's Office also took note, launching an investigation into the Parnell purchase.
It was critical public organisations carefully managed "sensitive expenditure" to ensure ordinary Kiwis maintained trust in the country's institutions, it said.
It requested copies of the home's sale and purchase agreements, rental valuations and various internal emails, an Official Information Act response revealed.
It also reviewed Freshwater's employment contract and interviewed staff at the university about how they made the purchase.
The university had earlier said the mansion was intended both a rental for Freshwater and a venue to host university-related events.
But the Auditor-General noted the university's vice-chancellor was the fourth highest paid person in the public service in 2019 and rejected the idea Freshwater needed help finding a place to live.
"It is hard to accept that purchasing a house to provide accommodation for the incoming vice-chancellor, and to host an anticipated 14 events in two years, justifies the $5 million expenditure," the Auditor-General said today.
"Nor does that level of hosting, in my view, justify an almost 50 per cent reduction in the property's rent."
Documents released to the Herald under the Official Information Act showed the university planned to host eight "donor dinners" in 2020/21 at the Parnell residence.
The donors' names were redacted from the documents.
It also planned to host six "stakeholder dinners".
Attendees at the planned stakeholder dinners included politicians and representatives of foreign universities.
However, none of the dinners ever took place due to social gathering restrictions brought in as a result of the Covid-19 pandemic.
Former Vice-Chancellor Stuart McCutcheon also rented a university-owned home in Remuera from 2004 until recently, yet no university-related events had taken place at his rental in the last two years either, the Auditor-General said.
It said it knew of only two other New Zealand universities with vice-chancellor residences.
They included the University of Otago in Dunedin, which was gifted a residence in 1950, and Massey University's Palmerston North depot where a residence was gifted in 1928 as part of a 21 acre estate.
However, Massey's house had not been used as a residence since 2008.
Hipkins said he had a strong interest in how public money was spent and expected this to be done "wisely and appropriately".
"We would expect Auckland University, and all publicly funded tertiary institutions, to be very mindful of any expenditure that isn't core to their business of education, and particularly during these difficult Covid recovery times," National spokeswoman Simmonds said.
In October, Freshwater told staff in a group email that she had recommended the university's board consider selling the controversial Parnell home to help pay down debt.
Due to restrictions on social gatherings during the Covid-19 pandemic, the home had not been able to be used for fundraising and other university events, she said.
A university spokeswoman denied Freshwater's decision was linked to the Auditor-General's review.
"It is the right thing to do, not something the university has to do," she said.
The Auditor-General said the university had taken steps to review the home's purchase after it was provided with a draft of today's report.
This included a review of its sensitive expenditure policy and processes.
"The Vice-Chancellor also told us that she has recommended to the University Council that the Parnell house be sold to assist with the University's overall financial position," she said.
The university said it accepted the Auditor-General's findings and acknowledged its shortcomings in its "handling of the purchase process".
"As is noted in the report, we have already commenced work to rectify those issues," it said.
This included commissioning independent advisers to review the university's policies related to sensitive expenditure.
"The University of Auckland takes its responsibilities regarding the use of public resources very seriously," it said.