Treasury welcomes Guarantee Scheme findings by Auditor General

The Treasury has welcomed the recommendations in the Auditor General's performance audit of the Retail Deposit Guarantee Scheme.

Treasury Secretary Gabriel Makhlouf today said: "The report by Auditor-General Lyn Provost is a good account of the retail deposit guarantee scheme. She recognised that the scheme achieved its objectives and that Treasury responded well when setting up and running the scheme during a very difficult time."

"Ms Provost's recommendations are welcome. The Retail Deposit Guarantee Scheme was put in place very rapidly and during a very difficult time. The introduction of the scheme and the Treasury's management of it were good but not perfect, so there are valuable lessons to learn," Mr Makhlouf said.

The Auditor General's report was tabled in Parliament today. It contains four main recommendations for the Treasury. They are:

1. Prepare a project planning framework to use when implementing large and complex initiatives.
2. Put in place a monitoring, escalation and reporting framework agreed with the Minister of Finance.
3. Conduct formal post-project reviews after implementing significant policy initiatives.
4. Document the analysis and thinking around South Canterbury Finance so that the information can be used to create a framework for dealing with distressed institutions.

"The audit identified some areas for improvement, which is to be expected in any audit scrutiny. We've learnt lessons and the Treasury has put in place initiatives that address the need to improve our project planning, and our reporting and escalation.

"We've applied a more focussed project management approach to initiatives such as the Better Administrative and Support Services programme, establishing the NZ Productivity Commission, and of course our response to the Canterbury earthquakes," Mr Makhlouf said.

Mr Makhlouf said the Treasury disagrees with the assertion that more intervention in finance companies may have reduced the fiscal risks that were an inevitable consequence of the scheme.

"The guarantee scheme was already a very significant, but necessary, intervention in New Zealand's financial system. The Treasury considered a range of further interventions but couldn't find a case where intervention was more likely to create a better outcome. All interventions carry a degree of risk and we don't believe that the Auditor General's report gives sufficient weight to the risks that further interventions would have created," Mr Makhlouf said.

"I'm pleased to have this independent external view of how the Retail Deposit Guarantee Scheme worked and pleased that the report finds that the Treasury generally ran the scheme well. The report will be a key resource in ensuring that we learn as much as possible from that experience," Mr Makhlouf said.

The Auditor General's report of the performance audit of the Retail Deposit Guarantee Scheme is published online here: http://www.oag.govt.nz/2011/treasury.

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