The following is from the Commissioner of Inland Revenue and Nicola Willis MP about matters relating to the Cost of Living Payment (COLP):

After the first payment was made on 1 August 2022, we became aware of reports that payments had been made to people who did not meet the eligibility criteria. Ms Willis also wrote to us raising concerns, including whether payments made to people who do not meet the criteria are outside the scope of the appropriation.

The payments made to ineligible people do not constitute unappropriated expenditure. However, in our view, good stewardship of public money required greater care when designing and implementing the COLP – ensuring that the criteria were clear and that the data used was adequate. We have concerns about these matters.

Letter to Ms Nicola Willis MP

29 August 2022

Ms Nicola Willis MP
Parliament Buildings

Tēnā koe Ms Willis

COST OF LIVING PAYMENTS

Thank you for your letters of 3 and 26 August 2022.

The Government announced an $800 million Cost of Living Payment (COLP) as part of Budget 2022 to support low- to medium-income people facing increased cost of living pressures due to inflation. After the first payment was made on 1 August 2022, my Office became aware of reports that payments had been made to people who did not meet the eligibility criteria, as they were either overseas or deceased. You wrote to me raising concerns about the cost of living payments and asked me to investigate to:

• identify the scale of the mispayments;
• consider whether payments to people who do not meet the criteria are outside the appropriation;
• consider the legality of the Government’s position on recovery of mispayments; and
• consider the adequacy of the policy process.

As Controller and Auditor-General, I am interested in ensuring good stewardship of public money. I also assess whether public spending is within the scope and amount of appropriations (spending authority) set by Parliament.

Staff from my Office have met with Inland Revenue and the Treasury to talk about the scheme and the payments. We have also reviewed relevant briefings, the Cabinet papers and related material. As a result of that work, I have written to the Commissioner of Inland Revenue about what I have seen and my views, and I intend to publish that letter on our website at 2 pm. I have briefly summarised below what my letter to the Commissioner says about the issues you asked me to look into.

Scale of mispayments

I am concerned that the Government does not know how many payments might have been made to ineligible people. While I am unable to direct Inland Revenue to take any specific action, I have suggested that Inland Revenue consider what steps it can take to identify how many ineligible people have already received payments. I have also suggested Inland Revenue to focus on future payment tranches to ensure that the payments are reaching only the people the Government intended the payment go to. Inland Revenue told me it is considering changes to better align subsequent payments with the eligibility criteria, but does not know, and may never know, how many ineligible people might have received the payment.

Payments were made for the purpose of the appropriation

I have concluded that the payments made to ineligible people do not constitute unappropriated expenditure. I have reached that conclusion on the basis that there is no evidence that Inland Revenue made the payments for any other purpose than to discharge its statutory duty to administer the COLP scheme in accordance with Cabinet’s decision. It applied the criteria despite the data it used being inadequate to evidence whether individuals were “present in New Zealand”. The payments were therefore within the scope of the appropriation.

In reaching this view, however, I have also expressed concerns about the lack of clarity in the criterion used (being “present in New Zealand’), and the inadequacy of the evidence to establish whether the payments were being made only to individuals who met that criterion. In my view, good stewardship of public money required greater care when designing and implementing the COLP – ensuring that the criteria were clear and that the data used by Inland Revenue was adequate.

Repayment

Cabinet agreed that the Commissioner of Inland Revenue would not actively pursue repayment of any mispayments unless fraudulent or wilfully misleading information was provided. However, I note that section 7AAA of the Tax Administration Act requires that ineligible people who receive the payment immediately repay it. In my letter, I have suggested that Inland Revenue consider whether to communicate this message and its expectation for repayment by ineligible people more proactively.

Inland Revenue told me that it is assessing what system refinements it can make for the subsequent payments and has updated its website and letters to make it clear that ineligible recipients are required to immediately return the payments.

Legality and adequacy of the policy process

You asked me to investigate the legality of the Government’s decision not to recover mispayments, and to look into the adequacy of the policy process. It is not my role to express a view on the policy intent or the scope of the COLP, or to form a view on the legality of the Government’s decisions about recovering any mispayments.

Thank you for writing to me.

Nāku noa, nā

John Ryan
Controller and Auditor-General

By Office of the Auditor-General