Health Commissioner Professor Lester Levy has been accused of “cooking the books” at Health NZ-Te Whatu Ora to justify cuts to health services.

The claim was part of a heated exchange at Parliament which led to Levy asking for MPs to apologise for what were described as “inflammatory” remarks.

It came after Health NZ revised its deficit for the 2023/24 year down from nearly $1 billion in October to $722 million in its annual report yesterday.

Newsroom reported this morning that Levy attempted to include anticipated redundancy payments and Holidays Act payment remediations which were happening in the 2024/25 year in the previous year’s accounts.

Health NZ Commissioner Lester Levy appeared before the health committee at Parliament this morning. Photo / Mark Mitchell

That would have the effect of making the former Health NZ leadership’s deficits look larger while the deficit under his watch would appear smaller.

It was also reported that former chief financial officer Rosalie Hughes, who resigned during a restructure, “blew this whistle” on the commissioner’s accounting approach with the Auditor-General.

The Auditor-General disagreed with Health NZ’s approach and the costs of around $212m were included in the 2024/25 year’s accounts.

Levy and Health NZ executives appeared before the health committee today as part of Parliament’s Scrutiny Week.

'We have to face some very strong medicine as an organisation' ...

Labour’s health spokeswoman Dr Ayesha Verrall asked whether they had attempted to produce a deficit that looked worse than it was. She said they had employed “creative accounting” to attempt to place costs that had not yet occurred in the previous year’s budget.

Verrall highlighted Levy’s past record at three district health boards, where she claimed that he produced surpluses which turned to deficits when he left. Levy had a “reputation for cooking the books”, she said.

Labour health spokeswoman Ayesha Verrall during the health committee hearing. Photo / Mark Mitchell

Government MPs and Levy objected strongly to her claim.

“I resent that comment,” said Levy. He asked for an apology from Verrall, saying that her claims were “totally untrue”.

“There is no reason for us to want to cook the books,” Levy said. “The books are not good. There is serious financial underperformance.”

He reiterated that the main problem with Health NZ’s financial position was ongoing overspending. He also said that Health NZ believed its position on the redundancy and holiday pay was correct.

Deputy commissioner Roger Jarrold added that they agreed to withdraw those costs from the 2023/24 year after discussing them with Auditor-General John Ryan.

Committee chair Sam Uffindell said Verrall’s accusations were “highly inflammatory” and implied criminal wrongdoing.

Verrall responded, saying that the state of Health NZ’s books had been used to justify cuts to the health service.

“That is why it is of great public concern to find out that you [Levy] have been taking such creative approaches to have a very unusual [annual] report, where you have to have a letter of comfort and the Auditor General has had to make you turn around two major accounting provisions.”

Verrall questioned whether changing the scope of Hughes’ job while it was completing its budget account amounted to constructive dismissal.

Levy said it was common to have a disagreement about accounting before a final report was produced. He also rejected the suggestion that services were being cut.

“There are no cuts,” he said, to loud jeers from Opposition MPs. “I think there is a line being drawn between reducing staff and a cut. We are right-sizing because especially in management … this organisation has grown by the thousands.”

The annual report produced yesterday showed that Health NZ would produce a deficit of $1.1 billion in the 2024/25 year - the first year under Levy’s watch. While that was lower than the $1.76b forecast, Newsroom reported that the commissioners had intended for the deficit to be under $1b.

Ministers have now agreed to provide the commissioners with a “letter of comfort” guaranteeing a $1b bailout if needed.

Levy and chief executive Margie Apa are leading a “reset” of Health NZ to ensure it is spending within budget, after it was found in July to be spending $130m more than its budget each month.

This cost-cutting drive was originally scheduled to run until 2026 but has now been extended until 2027 because Apa said the original goal was not realistic.

Isaac Davison is an Auckland-based reporter who covers health issues. He joined the Herald in 2008 and has previously covered the environment, politics and social issues.