Ouch, as reports go, that is gonna leave a mark. Health New Zealand (Health NZ) has been found using a single Excel spreadsheet to track its finances, managing a staggering $28 billion of public money. An independent report by Deloitte, published on Health NZ’s website, has outlined ‘significant concerns’ regarding this practice. But before people rush in and ask where the hell was the CFO, and what was the rest of the senior leadership team doing, I would offer the following context from my experience with One Network Wellington Live.
Having worked around the traps, I can absolutely say Health NZ are not the only governmental or quasi-public sector organization heavily reliant on Excel for forecasting and reporting. Sometimes mistakes happen; things get added rather than subtracted. An intern might hard code some numbers, or a link might fail to update to the new month’s data. This is where competent staff are worth their weight as they will have a sense about what they should or should not be seeing and when something doesn’t look right. As a CFO, I have at different clients challenged the numbers and sent my team back to investigate or refresh the whole forecast. I won’t ever put out something I am not confident in or could explain.
That said, any system, no matter how well recommended, is only as good as the data in it. If the data isn’t up to date, clean, and being rigorously reviewed, you are on a hiding to nothing. The rub being that while finance counts the beans and reports them, they actually have limited control over the forecast, which is often owned by others in the business or based heavily on their input.
I have seen at various times managers short-sheeting the bed, telling suppliers or contractors to hold back on invoicing so it looks like there aren’t cost overruns. Or managers constantly pushing out forecast expenditure despite not having a commitment, contract, or procurement plan in place to spend it, but afraid if they flag an underspend the money will be taken off them, then spending or trying to spend 70% of their annual budget in the last two months of the financial year and getting suppliers to pre-invoice for work they haven’t even started. And finally, my favorite, the manager or director waits till after the cut-off for the month-end and the monthly reports have been issued to then significantly update the forecast and then sit in the monthly review and say they don’t recognize any of the figures and the data is wrong. So instead of talking about how they are going to fix the overspend, the conversation becomes about the data and competence of the team, i.e., nothing to see here, my figures aren’t that bad, finance is not on top of things.
So while it may be that the financial leadership was weak, it is equally possible that they have ended up under the bus, but have had to work with imperfect, incomplete, or old data they were supplied with, while juggling a large and complicated operating model with different drivers drawn from numerous disparate data sources, any of which could be 10-50% wrong. Just saying, be weary when they start blaming the poor sod who is no longer there to defend themselves.
The Deloitte report highlighted that Health NZ’s reliance on a single Excel file was a “major issue” for managing such a vast amount of taxpayer dollars. It pointed out a lack of control around expenditure and revenue, with ineffective savings plans intended to balance the gap. Budgets at the agency were not consistent with expected revenue. The spreadsheet was the primary data file used to manage financial performance and produce several financial reports. “The use of an Excel spreadsheet file to track and report financial performance for a $28 billion expenditure organisation raises significant concerns, particularly when other more appropriate systems are present on the IT landscape,” the report stated.
The report found the health agency was flawed in using the Excel file, as the source of uploaded information was often hard to trace. Errors were not immediately picked up, and there was “limited tracking” to source information. The sheet was highly prone to human error, such as accidentally typing a number or forgetting an extra zero at the end. On average, financial reporting took 12 to 15 days, and five days to analyze.
Minister of Health Simeon Brown today announced plans to reinstate the governing board of the agency, which was sacked and replaced with commissioner Lester Levy in July last year, under the former Health Minister. Brown today thanked the commissioners for their work, also signalling a move to team up with the private sector in a bid to reduce waiting times for elective surgeries.
The agency’s response to the report shows it implemented a solution around the Excel sheet in June — and it is now being run in parallel with automated reporting. Health NZ has admitted the issues and agreed with all the report’s recommendations. The agency said there were “many factors at play” concerning a loss of financial control to distinguish the disconnect between expenditure and revenue. Ineffective savings plans were also highlighted, as plans of more than $500 million intended to balance the expenditure and revenue gap were deemed “ineffective”.
In a statement, commissioner Levy said there had been several years of uncertainty, but with the release of the Health Delivery Plan, the agency was “on a path to increased stability”. Interim chief executive Dale Bramley said the agency would work to its health plan to ensure it was in the best possible shape. “The delivery plan sets clear milestones to achieve our objectives by the end of the 2026 financial year and to drive better patient outcomes,” he said.
Deloitte’s report also found a savings plan from the 2023/24 financial year failed, as Health NZ continued to spend $130m each month beyond its income. The agency’s board was sacked as former Minister of Health Dr Shane Reti expressed concerns around its financial management and performance. Reti’s move, in July, was the strongest ministerial intervention available to the Health Minister. He called for Levy to implement $1.4b worth of cost savings at the agency, at the time.
Note: This article by One Network Wellington Live aims to provide a balanced view on the financial management issues at Health NZ, highlighting the complexities of public sector finance in Wellington and urging caution in assigning blame without full context.