MSD under pressure to announce prosecutions under wage subsidy scheme amid criticism of ‘audits’

The Ministry of Social Development is yet to begin any prosecutions for abuse of the $14 billion wage subsidy scheme, as it comes under fire for its work to establish the extent of misuse.

A report by the Auditor-General on the scheme, set up to support employers to retain staff during Covid-19 lockdowns, praised the speed with which the scheme was set up and how quickly it got money out to employers.

But the report was critical of the steps MSD had taken to evaluate whether the information provided by employers when claiming the subsidy was accurate.

Under the scheme, employers could claim up to $580 a week for every full-time employee and $350 a week for all part-time employees, if they met certain requirements about loss of revenue.

The scheme was initially for eight weeks and capped at $150,000 for each employer, but the cap was quickly lifted and the subsidy length extended to 12 weeks.

The Government has subsequently approved three more shorter subsidy periods during later lockdowns, the latest of which was in February.

Hundreds of officials worked to set up the scheme and begin processing applications, with the Auditor-General finding money was generally paid within the Government’s target timeframes.

The task was helped by the goodwill of public officials across several departments working “extraordinary” hours in sometimes difficult conditions, dealing with employers who feared they were losing their businesses.

While the Government described the scheme as a “high trust” model, it found that the checks undertaken by MSD may not have met Cabinet’s expectations when ministers noted there would be post-payment audits.

Auditor-General John Ryan said the ministry was misleading to describe its checks as “audits” because in many cases MSD had simply asked employers to confirm that the information provided to it was accurate, rather than verify any accounts.

“In our view, an audit should, as a minimum, include verifying the main eligibility criteria against relevant documentary evidence,” Ryan said.

“I am not persuaded that MSD has identified all applications that might need further investigating.”

He also found that a requirement for businesses to give assurances that they had taken steps to mitigate the effect of Covid-19 was so vague as to be difficult to assess.

Ryan’s recommendations included that MSD test some of its post-payment assurance work, requiring documentary evidence. The Auditor-General also urged MSD to prioritise its enforcement work, including prosecutions, not only to recover money, but also hold businesses to account “for potentially unlawful behaviour”.

In a statement, MSD spokesman George Van Ooyen said the ministry was “committed to prosecutions where that action is appropriate”.

Van Ooyen would not say how many cases were being considered. “Decisions will be made in the weeks and months ahead.”

MSD accepted the Auditor-General’s findings about the use of the term “audit” and had stopped using the term.

Van Ooyen’s statement did not make it clear whether MSD was requiring employers to provide documents to check the accuracy of claims made to access the subsidy.

Partway through the scheme, MSD began publishing a list of the businesses which had accessed the subsidy, which the report found probably had a significant contribution to the more than $700 million being voluntarily returned. A further $23m was compulsorily returned.

While there was considerable public scrutiny around some of the claimants, which in some cases included large private companies which continued to pay dividends to shareholders, the Auditor-General said it was not its role to audit private companies.

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