MBIE says sorry to Shane Jones over lack of checks on businessman

Launch of the Prvincial Growth Fun in Gisborne Regional Development Minister Shane Jones NZME still from Local Focus Video 23 February 2018 RGP 24Feb18 - ANNOUNCEMENT: Minister Shane Jon

The Ministry of Business, Innovation and Employment has apologised to Regional Development Minister Shane Jones after $350,000 of Provincial Growth Fund money was approved for a West Coast waste-to-energy project with connections to a businessman who had been referred to the Serious Fraud Office.

The waste-to-energy project in Buller, to be delivered by Renew Energy Ltd, had been approved for funding but that funding was put on hold as soon as issues arose.

It later emerged that REL chief executive Gerard Gallagher had been referred to the Serious Fraud Office by the State Services Commission in April last year for alleged conflicts of interest while an employee of the Canterbury Earthquake Recovery Authority.

Gallagher resigned as chief executive and sold all his shares in REL in early March.

The internal review report released by the Provincial Development Unit (PDU) today and provided to Jones outlines the background to the issues and the process followed up until his announcement of the funding on February 23.

The PDU, which administers the Provincial Growth Fund (PGF), said it accepted the findings of the review that due diligence on personnel associated with the waste-to-energy project should have been undertaken prior to approval of PGF funding for the project and a ministerial announcement.

"We also accept the recommendations made in the review. We fell below prudent standards of due diligence and we have apologised to the Minister for not getting this right," said PDU head Nigel Bickle.

"The public quite rightly expects government agencies to run a robust process before awarding contracts or approving funding. In this case we made a mistake by not completing appropriate checks on personnel associated with the waste-to-energy project.

Bickle said there would have been enough time to complete the checks prior to any funding being approved and the subsequent ministerial announcement.

"The fact that these issues would most likely have been picked up in the contract negotiations process, post-announcement and before any PGF funding was actually handed over, is no excuse," he said.

The PDU would be strengthening its systems and processes for assessing and approving requests for funding.

In a statement, Jones said he was disappointed by the lack of checks and balances in place ahead of officials recommending the PGF support the project.

But he welcomed the review.

"I have confidence in our Provincial Development Unit. The scaling-up process was a steep learning curve and I thank Nigel and his team for their thorough review."