Opportunities to mitigate multi-million-dollar RNZ budget blowout likely missed - experts

David Seymour is speaking to RNZ shortly. Listen live on the player above, the RNZ app or your local RNZ frequencyMultiple opportunities to identify and mitigate a multi-million-dollar budget blowout at RNZ appear to have been missed, according to the former executive director at Audit New Zealand.The public broadcaster on Monday revealed a near $12 million shock financial loss after a litany of financial blunders, which will now lead to sweeping job cuts.The $11.8m loss is more than 25 times the $470,000 RNZ had expected to lose over the year to June.CEO Paul Thompson took responsibility for the result, and said internal reports gave an inaccurate picture of the finances, meaning the scale of the loss only became clear in October.RNZ's former chief financial officer Hilary Parker resigned unexpectedly in early October.The board said it would commission an independent review into what went wrong.Independent contractor Stephen Walker, who left the Audit Office earlier this year, said the size of the loss was surprising, as was the length of time it took to identify it - months after the financial year ended."Probably more of a concern is that they had seemingly been unaware that they were running up a significant deficit until they were in the preparation stage of their annual report in October."Walker said public entities typically produced monthly financial reports.An interim audit also took place before the end of the financial year, he said, but if the organisation hadn't identified significant losses at that stage, the auditor could also be in the dark."It seems that there's a real weakness in forecasting and budgeting that's occurred here and that the monthly accounts, when they're produced, either haven't identified these significant variances against budget or the magnitude of them really hasn't come to light until right towards the end of the financial year," Walker said."And really at that point, there's no opportunity for the chief executive, the leadership team to take, and the board to take, any corrective action because the year has effectively been completed."Walker said the "significant miss" was difficult to account for given it was more than 10 percent of RNZ's total funding.He said based on RNZ's annual report, financial complexity didn't appear to be a factor."This $11.8m loss isn't made up of one particular item ... it seems to have been contributed to by a number of separate expense lines running over budget. So I don't think it's necessarily to do with complexity."Among the errors, RNZ wrongly counted $2m from land sales as income in its budget. Staff costs also came in $3.2m over budget, including $1.4m in redundancy payments.Professor at Auckland University's business school Norman Wong said based on media reports the issues identified were "significant and troubling"."But recognising the sale of land as income in their budget is a basic error that one would have expected to have been caught and corrected well before it got to this point."With funding reductions at RNZ over the past two years, Walker expected greater scrutiny of financial results."Virtually every public entity has had their annual budget reduced. And so you would expect ... the leadership team on a monthly basis and board - I'm not sure how frequently the board will consider the information - but you would expect them to be interrogating the results on a regular basis throughout the year," he said.Walker said initiating an independent review was the correct course of action and that he'd want to understand what information the leadership team and the board were regularly receiving.He said he'd "love to say" surprising financial results were rare, but conceded they occured on a semi-frequent basis during his time leading the Audit Office."The benefit of independent scrutiny by the Audit Office - and the auditors providing that support to the Auditor General - [is] that the reporting is fairly presented at the end of the year, whether it's good, bad or ugly."