Page 2880 - Week 09 - Tuesday, 19 September 2006
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .
raises serious concerns around hospitality expenses and some sponsorship arrangements, including arrangements where there was no apparent benefit to Rhodium to justify the costs.
The report also identifies concerns around the processes used for employing several close relatives of the former CEO in the company. The Auditor-General finds that serious deficiencies in these areas suggest that Rhodium’s senior management did not consistently meet, in the Auditor-General’s words, “community expectations regarding due care and integrity”.
The government greatly appreciates the efforts of the independent board members over many months in responding to the management failures of Rhodium. The report clearly shows that the board was misled, or not adequately informed, by senior management about a range of matters.
With the benefit of hindsight, it is possible that the board might have recognised some of the problems at Rhodium earlier or put in place stronger policies and procedures. However, in its response to the report the board points out that it could reasonably have expected that the existing policies and practices would have been adequate, at least in the short to medium term, assuming that senior management acted appropriately.
Unfortunately, the board was badly let down by senior management, particularly the former CEO. The board’s response to the audit report at page 12 makes that clear. The Rhodium board was misled over a long period. It made decisions in good faith but, as it now appreciates, based on faulty advice and information. It believes its trust was misplaced and abused.
The Auditor-General also recognised this in her report by stating at paragraph 5.91 that in the initial establishment phase of the company, “it was the expectation of the Board that Rhodium management, in particular the CEO, would demonstrate leadership and skills in managing the internal governance and accountability framework prudently and effectively. Such expectations … were not fulfilled.”
While the board was clearly served very badly by former senior management, it acted decisively when the deficiencies in the management of the company were drawn to its attention, keeping the Auditor-General and the government advised throughout. Indeed, the Auditor-General specifically finds that the board acted promptly to address the management deficiencies as soon as they became known to the board.
The matters reviewed by the Auditor-General clearly raise very serious concerns about the actions and behaviour of certain individuals, most particularly the former CEO. For this reason, the government has been very mindful of the need for due process and natural justice to be followed, including throughout the Auditor-General’s review. The government therefore refrained from prejudicing this process by making extensive statements before the review was completed.
The government and the board generally support the recommendations contained in the performance audit. However, in view of the prospective sale of Rhodium, it may not be cost effective to fully implement some of the recommendations prior to the sale. Final decisions on these recommendations will be made following the completion of the
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .