Editorial: Serious Fraud Office right to be vigilant over Provincial Growth Fund corruption risk

Julie Read, director of the Serious Fraud Office. Photo / Greg Bowker

EDITORIAL:

The Serious Fraud Office is right to be wary about someone ripping off Shane Jones' regional growth fund.

Fraudsters follow the money - and by the next election, $3 billion will have been invested as part of Jones' scheme to boost economic activity outside New Zealand's main centres.

Many Kiwis pride themselves on living in a nation free of corruption, but with so much money involved in the Provincial Growth Fund (PGF) there's a high chance someone will be tempted to enrich themselves at the expense of the New Zealand taxpayer.

And as Serious Fraud Office (SFO) chief executive Julie Read told the Herald, public organisations around the world have become a prime target of crooks.

Using an international yardstick, Read estimates that anywhere between
$500 million and $5b of New Zealand government spending could be victim to fraud each year.

It's naive to think that corruption is something that happens only in developing countries or in places reeling from war, disaster or widespread economic precarity.

New Zealand is not immune to the greed that encourages public malfeasance.

More spending on big infrastructure projects and other public schemes - like the provincial growth fund - only serves to amplify the risks.

"Preventing fraud in the public sector is really important because it diverts money away from critical public service and disproportionately disadvantages those who are the most vulnerable because they are people that rely on public services the most," Read said.

But perhaps even more important than the financial cost is the damage public sector fraud would do to New Zealand's reputation.

This country is ranked by Transparency International as being the least corrupt in the world and any scandal with the PGF would threaten that enviable position.

Our corruption-free reputation means New Zealand is an attractive place for people to come to do business and equally means Kiwi firms are trusted when doing deals around the world.

It's vital for the sake of our economy that New Zealand holds on to this good character so we can continue to take advantage of that positive perception.

The SFO has long been wary of the risk of fraud around public sector projects; it allocated significant resources in 2012 to protect Christchurch from being ripped off in the wake of the region's earthquakes.

Despite those initial fears, the $40b rebuild has so far avoided a corruption scandal – although the SFO has an ongoing inquiry into allegations two former Canterbury Earthquake Recovery Authority employees had conflicts of interests while working there.

Jones will be hoping his PGF spend-up remains similarly clean and taxpayers should take some reassurance that both the SFO and the Government appear to be taking the risk of fraud seriously.