98 2 t1 rm at io n Ac Te Kōhanga Reo National Trust Board In Mike Stone fo Charities Services Review R el ea se d un de rt he O ffi ci al 21 November 2014 Review report by Charities Services into Credit Card spending at Te Kōhanga Reo National Trust Board Te Kōhanga Reo National Trust Board CC11324 15 October 2013 Mike Stone 98 2 Review Registration Number Date Received Investigator 1. Executive Summary Ac t1 I have completed my review of Te Kōhanga Reo National trust Board’s (TKRNT) credit card spending from 1 January 2011 to 1 November 2013. rm at io n The review was initiated by Charities Services after the review into TKRNT’S subsidiary company Te Pataka Ohanga (TPO) discovered credit card spending by staff members unrelated to its function. The purpose of the review was to ensure that inappropriate credit card spending that had occurred within TPO was not also occurring within TKRNT. fo On 12 March 2014 Ernst & Young released the report of its independent review of the Te Kōhanga Reo National Trust Board financial controls for public finding that directly addressed the issue of credit card use. ci al In During my analysis I identified several credit card purchases that I believe to be inappropriate and several more that would require more information from TKRNT to explore. de 2. Background rt he O ffi Despite this I believe that any inappropriate use of credit cards within TKRNT has been resolved when the board took note of the recommendations of the Ernst Young independent review of financial controls for public funding produced on 12 March 2014. The TKRNT board chose to cancel all credit cards on 17 October 2013 and to date has chosen not to reissue credit cards to employees. se d un There was no formal complaint made to Charities Services in regard to the credit card spending of the board of TKRNT. This was a proactive review initiated after the review into the subsidiary of TKRNT, Te Pataka Ohanga (TPO) was completed by Charities Services. ea I was directed by the Manager of Investigations Liam Beashel to review the Credit Card activity of the TKRNT board to ensure that the issues of personal spending that were identified within TPO were not also occurring within TKRNT. R el 1 January 2011 to 1 November 2013 was agreed upon as the timeframe for the Credit Card analysis. 3. Actions Taken To initiate this review a formal Charities Act 2005 Section 51 notice was sent to TKRNT on 30 June 2014 requesting the following information: 1 Ac t1 That Section 51 notice required the information requested to be supplied to Charities Services by 28 July 2014. 98 2 1. The particulars of all the credit cards operated by the trust. 2. The corresponding bank statements for each of those credit cards for the period 1 January 2011 to 1 November 2013. 3. Corresponding receipts for purchases made on those credit cards for the same time period along with any supporting documentation detailing the purpose and nature of each purchase. rm at io n TKRNT acting Chief Executive Angus Hartley replied to that notice on 17 July 2014 requesting an extension to the 28 July 2014 deadline. fo His reasons for that extension request were that TKRNT were actively locating the physical and electronic records requested but they needed the assistance of vendors to provide receipts and invoices. They claimed that the need to seek this information was due to upheavals within the trust over the last 18 months and the departure of the former Chief Executive Titoki Black. al In Investigation Manager Liam Beashel approved the extension request so that the information was then due to be provided to Charities Services by 29 August 2014. ffi ci On 1 September 2014 Investigations Manager Liam Beashel and I met with acting Chief Executive Angus Hartley and members of his team at the offices of TKRNT. he O At that meeting they provided three large folders containing banking and receipt information pertaining to the credit cards used by TKRNT employees. rt They also provided a compact disc containing electronic copies of that same information. un de They also provided a Policies and Procedures document dated 18 August 2014 that specifically addressed the use of credit cards at policy point 8.9. se d Within the covering letter accompanying that information Mr Hartley raised two significant issues regarding the quality and quantity of the information provided. R el ea Firstly, TKRNT claimed that the dismissal of the former CEO Ms Titoki Black left a significant gap in the availability of her credit card receipts and that many of her credit card receipts were missing. I do not know why this occurred given the level of accountability expected of an organisation such as TKRNT. Secondly, TKRNT claimed that credit card receipts and statements from January 2013 to June 2013 were lost when they were couriered to a trustee in Whangarei who was required to review and approve them. I do not know why TKRNT required that trustee to retrospectively review and approve credit card purchases for that time period other than that they had not been reviewed prior. 2 4. Analysis My review consisted of analysing the credit card transaction details and any associated receipts provided by TKRNT. 98 2 I reviewed all the credit card spending by the trust board members from 1 January 2011 to 1 November 2013 based on the information provided to me by TKRNT. n Ac t1 TKRNT provided an excel spreadsheet of the credit card transactions categorised by user and separated into 2011, 2012 and 2013 respectively. Those spreadsheets detailed the cardholder, date of transaction, transaction details, purpose of expense and whether a receipt was attached. rm at io They also provided bank statements, visa statement declaration forms and original receipts. TKRNT indicated within their spreadsheet which information was missing and which information had been lost. In fo The process of analysis was at times difficult as some transactions were not accompanied by any receipts and some transactions despite being shown by TKRNT as having a receipt were not accompanied by one. ffi O he Food/Hospitality Koha Cash Withdrawals Accommodation/Travel Other rt • • • • • ci al For the purpose of the analysis and presentation of information I assigned each of the purchases into one of the following 5 categories: un 5. Results de I chose not to further categorise the ‘other’ category for ease of analysis. se d During the period of analysis there were six individual ANZ Bank credit cards in use by the members of the TKRNT board. ea They were: R el 0005473430090395589 – Mr Timoti Karetu 0005473430090647641 – Ms Tina Ratana 0005473430090947348 – Ms Harata (Charlotte) Gibson 0005473430090308046 – Mr Angus Hartley 0005473430090429107 – Ms Heke Huata 0005473430090548062 – Ms Tetoki Black I have provided a summary of the analysis below according to each user. 3 4.1 – Mr Timoti Karetu t1 Of the 6 purchases made, all were receipted ranking Mr Karetu first in terms of receipt compliance of the six users. 98 2 Mr Karetu was the most infrequent user of his TKRNT credit card. During the time period analysed there were a total of 12 separate transactions on his credit card of which only 6 were purchases. Those purchases totalled $4734.06 but that total amount is distorted by one solitary purchase of travel for $3413.86 that occurred in February 2013. Ac There were no transactions within Mr Karetu’s records identified by TKRNT as having missing or lost receipts. rm at io n Mr Karetu’s largest purchase was receipted and totalled $3,413.86. This occurred on 5 February 2013 and was for International Travel. This was the only significant transaction made by Mr Karetu and grossly distorts his average spend per transaction making comparison against his colleagues in this are irrelevant. In fo 2 transactions or 33% of his total purchases were food/hospitality related at an average of $206.60 per purchase. The total amount spent on food /hospitality for the time period was $413.20. ci al Mr Karetu had no Koha related transactions or cash withdrawals. O ffi 4 transactions or 66% of the total purchases were related to Accommodation/Travel. 0% Food/Hospitality 33% Koha un de rt he Types of purchases - Mr Timoti Karetu Cash Withdrawals 67% se d 0% R el ea 0% 4 Accommodation/Travel Other 4.2 – Ms Tina Ratana 98 2 Ms Ratana was the second most infrequent user of her TKRNT credit card. During the time period analysed there were a total of 93 separate transactions on her credit card of which 67 were purchases. Those purchases totalled $8,649.18. t1 On average Ms Ratana used her credit card twice per month and averaged a monthly total purchasing amount of $254.39. Ac Of the 67 purchases made, 63 or 94% of them were receipted ranking Ms Ratana second in terms of receipt compliance of the six users. rm at io n Purchases where TKRNT were unable to provide purchase receipts totalled 4 or 6% of total purchases. There were no transactions within Ms Ratana’s records identified by TKRNT as having missing or lost receipts. fo Ms Ratana’s largest purchase was receipted and totalled $1,841.00. This occurred on 26 September 2011 and was for an I-pad and accessories from Dick Smith Electronics. In 15 or 22% of her total purchases were food/hospitality related at an average of $86.35 per purchase. The total amount spent on food /hospitality for the time period was $1295.30. ffi ci al Ms Ratana had no Koha related transactions or cash withdrawals. 12 transactions or 18% of the total purchases were related to Accommodation/Travel. de rt he O 40 transactions appeared to be for routine operating associated expenses or supplies and fell outside of the previously defined categories. 24 or 36% of these transactions related to the purchase of monthly online ‘cloud’ based computer storage to a total value of $642.22. The purchase of the computer storage formed the majority of the ‘other’ catergory transactions. 0% 22% 0% 18% 60% Food/Hospitality Koha Cash Withdrawals Accomodation/Travel el ea se d un Types of purchases - Ms Tina Ratana R Other 5 4.3 – Ms Charlotte Gibson 98 2 Ms Gibson was the third most infrequent user of her TKRNT credit card. During the time period analysed there were a total of 162 separate transactions on her credit card of which 118 were purchases. Those purchases totalled $10,607.75. t1 On average Ms Gibson used her credit card 3 times per month and averaged a monthly total purchasing amount of $311.99. Ac Of the 118 purchases made, 84 or 71% of them were receipted ranking Ms Gibson fifth in terms of receipt compliance of the six users. rm at io n Purchases where TKRNT were unable to provide receipts for purchases totalled 34 or 29% of total purchases. fo Of those 34 purchases, 11 were identified as ones where accompanying receipts were lost during the Whangarei courier process. There were no transactions within Ms Gibson’s records as identified by TKRNT as having missing receipts. In Ms Gibson’s largest purchase was receipted and totalled $879.50. This occurred on 15 August 2011 and was made at Ticketek (Arohanui). ffi ci al 44 or 37% of her total purchases were food/hospitality related at an average of $84.57 per purchase. The total amount spent on food /hospitality for the time period was $3721.25. he O Ms Ratana claimed 4 cash withdrawal transactions as Koha and they were categorised accordingly. 35 transactions or 30% of the total purchases were related to Accommodation/Travel. de rt 35 transactions appeared to be for routine operating associated expenses or supplies and fell outside of the previously defined categories. They were defined as ‘other’ purchases. R el ea se d un Types of purchases - Ms Charlotte Gibson 30% Food/Hospitality 37% Koha Cash Withdrawals Accomodation/Travel 30% 0% 6 3% Other 4.4 – Mr Angus Hartley 98 2 Mr Hartley was the third most frequent user of his TKRNT credit card. During the time period analysed there were a total of 250 separate transactions on his credit card of which 203 were purchases. Those purchases totalled the second highest amount spent of the six users at $35,218.87. t1 On average Mr Hartley used his credit card 6 times per month and averaged a monthly total purchasing amount of $1,035.85. Ac Of the 203 purchases made, 179 or 88% of them were receipted ranking Mr Hartley third in terms of receipt compliance of the six users. rm at io n Purchases where TKRNT were unable to provide receipts totalled 24 or 12% of total purchases. Of those 24 purchases 18 were identified as ones where accompanying receipts were lost during the Whangarei courier process. There were no transactions within Mr Hartley’s records that had missing receipts. In fo Mr Hartley’s largest purchase was receipted and totalled $2,559.70. This occurred on 13 February 2013 and was for Te Matatini Tickets (Biennial cultural festival). ci al 70 or 34% of his total purchases were food/hospitality related at an average of $151.52 per purchase. The total amount spent on food /hospitality for the time period was $10,606.27. O ffi Mr Hartley claimed 3 cash withdrawal transactions as Koha and they were categorised accordingly. rt he 77 transactions or 38% of the total purchases were related to Accommodation/Travel but a large number of those transactions were car parking expenses. un de 52 transactions appeared to be for routine operating associated expenses or supplies and fell outside of the previously defined categories. They were defined as ‘other’ purchases. 26% 34% Food/Hospitality Koha R el ea se d Types of purchases - Mr Angus Hartley Cash Withdrawals Accomodation/Travel 38% 0% 1% 7 Other 4.5 - Ms Heke Huata. 98 2 Ms Huata was the second most frequent user of her TKRNT credit card. During the time period analysed there were a total of 378 separate transactions on her credit card of which 268 were purchases. Those purchases totalled $33,830.64. t1 On average Ms Huata used her credit card 8 times per month and averaged a monthly total purchasing amount of $995.02. Ac Of the 268 purchases made, 204 or 76% of them were receipted ranking Ms Huata fourth in terms of receipt compliance of the six users. rm at io n Purchases where TKRNT were unable to provide receipts totalled 64 or 24% of total purchases. Of those 64 purchases, 14 were identified as ones where accompanying receipts were lost during the Whangarei courier process. There were no transactions within Ms Huata’s records identified by TKRNT as having missing receipts. In fo Ms Huata’s largest purchase totalled $800.00 and was claimed to be receipted although an original receipt or copy was not provided. This expense occurred most recently on 23 September 2012 and was for the Air New Zealand Starfish discount programme. ci al 89 or 33% of her total purchases were food/hospitality related at an average of $77.54 per purchase. The total amount spent on food /hospitality for the time period was $6900.62. O ffi 10 or 4% of transactions were directly related to Koha and averaged $170.00. Total Koha transactions amounted to $1,700.00 de rt he 21 or 18% of purchases were cash withdrawals with an average of $183.81. The total amount of cash withdrawn by Ms Huata was $3,860.00. Of concern was that no purpose was listed by TKRNT for 6 of those cash withdrawals and 4 of those withdrawals had no accompanying receipts. The 6 cash withdrawals without a listed purpose totalled $980.00 and the 4 transactions without a listed purpose or receipt totalled $680.00. un 99 transactions or 37% of the total purchases were related to Accommodation/Travel. R el ea se d 49 transactions or 18% appeared to be for routine operating associated expenses or supplies and fell outside of the previously defined categories. They were defined as ‘other’ purchases. 8 Types of purchases - Ms Heke Huata 33% Food/Hospitality 98 2 18% Cash Withdrawals 8% Accomodation/Travel Other rm at io n 4% Ac 37% t1 Koha 4.6 - Ms Titoki Black. In fo Ms Black was the most frequent user of her TKRNT credit card. During the time period analysed there were a total of 431 separate transactions on her credit card of which 337 were purchases. Those purchases totalled $50,105.48. ci al Ms Black used her credit card 69 more times that the second most frequent user Ms Huata and Ms Black spent $14,886.61 more than the next highest spender Mr Hartley. O ffi On average Ms Black used her credit card 10 times per month and averaged a monthly total purchasing amount of $1,473.69. he Of her 337 purchases, TKRNT records showed that 138 or only 41% of them were receipted ranking Ms Black as the worst in terms of receipt compliance of the six users. un de rt Purchases where a receipt was not provided by TKRNT totalled 199 or 59% of total purchases. 27 of those purchases were identified by TKRNT as ones where accompanying receipts were lost during the Whangarei courier process. R el ea se d Of concern is that 172 of those non-receipted transactions were identified by TKRNT as having ‘missing’ receipts. TKRNT attribute this missing information to the dismissal of Ms Black from the trust leading to a ‘significant gap’ in the availability of her credit card information. By including the number of transactions where TKRNT claim a receipt was originally provided but then went ‘missing’, there is an increase in the number of transactions to 210. This means that $26,910.74 or 54% of Ms Black’s spending cannot be verified due to missing information. Ms Black’s largest purchase was receipted and totalled $3,804.40. This occurred on 14 November 2011 and was for a CD Writer and Printer. 137 or 41% of her total purchases were food/hospitality related at an average of $99.07 per purchase. The total amount spent on food /hospitality for the time period was $13,572.64. 9 Q3) Transactions directly attributed to Koha within Ms Black?s records numbered 11, totalled $2,502.00 and averaged $227.45. Transactions attributed to travel and accommodation numbered 52, totalled $6,341.73 and averaged $121.96. Cash Withdrawals cg? Ms Black used her credit card on 53 separate occasions to make cash withdrawals totalling $10,630.00 at an average withdrawal of $200.57. 0? were not able to provide receipts for 37 of those 53 cash withdrawals totalv? $7,370.00. 20 of the 54 cash transactions or $3920.00 had no purpose listed by 15 of the 54 cash transactions totalling $2820.00 had no receipt, related to records that are claimed by to be missing or Ii I consider th 0 Types of purchases - be) 0 3% outside tgcceptable use of her credit card. Ma? 0 I Food/ Hospitality I Koha ki Black oses listed or were I Cash Withdrawals I Accomodation/Travel I Other ing purchases made by Ms Black to be inappropriate and obviously Clo ?6 Date Amount Details Pu se Receipt mo Provided Coat paid for via 08/04/2011 $289.00 DESIGNERS OF TARADAL Mastercard - scarf paid NAPIER . for Vla cash 10/06/2011 $1,120.00 KILCALDIE STAINS Jane Pan'e's Des'gner clothing KIMBERLEYS FASHIONS 01/08/2011 $225.00 HAMILTON 2 dresses 10 17/12/2012 $169.90 BLUE ILLUSION CHCH volunteer awards 2 18/12/2012 $179.00 AFFINITY CHRISTCHURCH CHCH volunteer awards 2 Despite the information provided by a receipt was not provided for any of the transactions listed above except for the purchase of 2 dresses at Kimberley?s Fashion in Hamilton. All these purchases occurred at Women?s fashion stores and were for women?s fashion clothing. There is no information provided by as to whether these purchases were justified by Ms Black as legitimate expenses associated to the trust or whether they were paid back to the trust. Purchases whilst on leave Date Amount Details Rec?ipt Provuded 11/07/2012 $165.00 CENTREPORT ON COLOMBO On Leave 12/07/2012 $63.90 WGTN COMBINED TAXI On Leave 13/07/2012 $385.00 THE EDGE TICKET On Leave These three purchases have a listed purpose of ?On Leave? There is no information provided by as to whether these purchases were justified by Ms Black as legitimate expenses associated to the trust or whether they were paid back to the trust. Given that Ms Black was dismissed from the trust, all the trust credit cards were cancelled and strict policies and procedures are now in place, see no value in taking any action against the trust in specific reference to these transactions. Summag Information Receipts Accompanying Purchases Timoti Karetu I Tina Ratana Angus Hartley . Heke Huata . Charlotte Gibson Titoki Black I . 0% 20% 40% 60% 80% 100% I Receipted Non Receipted 11 337 350 250 203 Ac 200 118 150 50 n 67 100 6 0 Tina Ratana Charlotte Gibson Angus Hartley Heke Huata Titoki Black Heke Huata Titoki Black al In fo Timoti Karetu rm at io No of Purchases t1 268 300 ffi ci Credit Card Usage - Total $ he $50,000.00 O $60,000.00 rt $40,000.00 de Total spent $30,000 00 un $20,000.00 Timoti Karetu Tina Ratana Charlotte Gibson R el ea se d $10,000.00 $0.00 12 98 2 Credit Card Usage - Purchases Angus Hartley Credit Card Usage -Average $ 98 2 $800.00 $700.00 t1 $600.00 Ac $500.00 $200.00 $100.00 Tina Ratana Charlotte Gibson Angus Hartley fo Timoti Karetu Heke Huata Titoki Black In $0.00 rm at io n Average amount $400.00 per transaction $300.00 O ffi ci al NB: Mr Karetu’s average amount is distorted by one large travel purchase and is not useful for comparison Food 45% he 41% 37% 34% 33% Charlotte Angus Gibson Hartley Heke Huata 33% rt 40% 35% 22% 20% 15% 10% 5% 0% Timoti Karetu Tina Ratana R el ea se d un de % of individuals 30% spending 25% 13 Titoki Black Koha 4% 4% 3% 3% 3% Ac t1 3% % of individuals 2% spending 2% 1% Timoti Karetu 0% Tina Ratana Charlotte Gibson n 0% Angus Hartley Heke Huata Titoki Black In fo 0% 0% rm at io 1% al Cash Withdrawals ci he 10% 8% 8% rt % of individuals spending O 12% 16% ffi 16% 14% de 6% 0% 0% Timoti Karetu 0% Tina Ratana 0% Charlotte Gibson R el ea se d un 4% 2% 98 2 4% 14 1% Angus Hartley Heke Huata Titoki Black Accommodation/Travel 98 2 67% 70% 50% 38% % of Individuals 40% spending 30% t1 60% 37% Ac 30% 18% 15% n 20% 0% Timoti Karetu Tina Ratana rm at io 10% Charlotte Gibson Angus Hartley Heke Huata Titoki Black al In fo NB: Mr Karetu’s % spent is distorted by one large travel purchase and is not useful for comparison ci Other ffi 60% 30% rt 40% he 50% O 60% % of Individuals 30% spending 26% de 18% un 20% 0% 0% Timoti Karetu Tina Ratana Charlotte Gibson Angus Hartley Heke Huata Titoki Black NB: Ms Ratana’s % spent is distorted by the regular monthly purchase of cloud based data storage and is not useful for comparison R el ea se d 10% 25% 15 6. Policy Document In addition to the credit card statements and receipts provided by TKRNT they also provided their Policies and Procedures document current as at 18 August 2014. t1 98 2 The policy addresses the need for transparency and accountability within TKRNT’s financial processes and specifically addresses several matters relevant to this analysis including authorisation of payments, Koha, financial assistance, and storage of information. Ac The policy simply and specifically addresses credit cards by stating: 8.9 Credit Cards rm at io n 8.9.1 Credit Cards are not permitted. A copy of the policy is attached as Appendix 1 for your reference. fo 7. Conclusion In On 17 October 2013 ANZ Bank confirmed to TKRNT that they had cancelled all the credit cards associated to the trust. ffi ci al It was Ernst Young’s view in their March 2014 report that the trust’s existing policy was set up to provide adequate control over the use of the cards but the controls had not been operating in line with policy. un de rt he O My analysis showed that there appeared to be ineffective compliance to policy and process to ensure receipts were provided for each purchase or there were ineffective processes in place for the storage of that receipt information once provided. It is concerning that the systems and processes used by the Trust did not identify the inappropriate personal spending of Ms Titoki. That said the responsibility to use the Trust credit card lawfully and in accordance with Trust policy lay with Ms Titoki. As my analysis shows and consequently in my view, Ms Titoki’s credit card use is not reflective of the trust board members as a whole and TKRNT should not collectively be held responsible for the actions of one person. se d Ernst Young made several recommendations to ensure correct use of credit cards but as previously stated, TKRNT decided to take the strong position and cancel all credit cards. R el ea To date the board has not reissued credit cards and acting CEO Angus Hartley indicated to me personally that they have no intention of reintroducing the use of credit cards. 8. Recommendations I do not think that a warning needs to be issues to TKRNT board in regard to this analysis. A formal warning was served on the TKRNT subsidiary TPO and I believe that the importance and content of that warning has filtered its way to the top of TKRNT. I have prepared a letter to be sent to the TKRNT board containing the following: 16 A summary of the concerning transactions resulting from the analysis. 0 An explanation that Ms Black?s inappropriate credit card spending was isolated and was not reflective of all the trust board members spending. 0 Acknowledging that Ms Black is no longer employed by the trust. 0 Advising that if the trust believes that Ms Black?s spending amounted to an offence of using a document or similar under the Crimes Act 1961 then they should make a formal complaint with supporting evidence directly to Police. 0 Charities Services supports their decisive action in cancelling all credit cards, initiating training and updating their policies to ensure credit cards cannot be issued in the future. END OF REPORT Approved course of action A Comments by I agree with Mike's conclusions and recommendations. File can be Investigations Manager closed and closure letter sent to the entity. File closure Task (k Date received Resolution category Type Issue details Status All relevant documentation in CRM Source category Q?Eetter?to?complainant?in?CRM Information source mammal?CRM Investigation category Letter sent to entity and in CRM Resolution action