Auditor-General releases 'scathing' report into Auckland University's $5m house purchase

The house was the most expensive on the shortlist of three.
The house was the most expensive on the shortlist of three. Photo credit: RNZ/Checkpoint

The University of Auckland has been slammed by the Auditor-General for the controversial purchase of a $5 million house for its Vice-Chancellor.

The university bought the house in the inner-city suburb of Parnell as a home for incoming vice-chancellor Dawn Freshwater in November 2019, and would also be used for "business-related operations, and functions".

The purchase of the four-bedroom, 338 square metres property was criticised as "absolutely disgusting" by NZ Union of Student Associations president Isabella Lenihan-Ikin, who compared it to the houses students are known to rent.

"I think there's a difference between buying a house for Vice-Chancellor and buying $5 million mansions," she told Checkpoint.

The Auditor General's office launched an investigation into the "unusual purchase", the results of which were released in a report on Wednesday.

It found that the purchase clearly involved "sensitive expenditure", meaning they ran the risk of being seen to give "disproportionate" benefit to Freshwater above the business needs of the university.

"The University has not been able to show that this sensitive expenditure was appropriate in all respects," the report said.

"This is because the University has not been able to demonstrate that it has met key principles of managing sensitive expenditure well."

The report also revealed the house was not the first purchased for a Vice-Chancellor, with a property in Remuera previously being used as a residence including "facilities for University entertainment purposes".

The house had weathertightness issues, the university told the Auditor General, and was no longer fit for purchase so it was sold for $2,965,000 in July 2020.

The Parnell house was instead purchased for Freshwater last year and took into account her preferences including it be within walking distance of the university, and have easy access to the bays, cafes, and restaurants. 

The property was narrowed down from 20 and was bought for $5.062 million with Freshwater's rent set at 52 percent of the market rental value.

The report found that the university could not prove the purchase was "moderate and conservative" and did not consider if it could have effectively achieved the purposes it says it bought the house for - accommodation and hosting - for less cost. 

"It is hard to accept that purchasing a house to provide accommodation for the incoming Vice-Chancellor, and to host an anticipated 14 events in two years, justifies the $5 million expenditure. Nor does that level of hosting, in my view, justify an almost 50 percent reduction in the property's rent."

The Auditor General's office said the University of Auckland had been provided a copy of the draft report and was taking steps to review the situation.

"The Vice-Chancellor also told us that she has recommended to the University Council that the Parnell house be sold to assist with the University's overall financial position."

In a statement, the university said they accepted the report's findings and acknowledged there were shortcomings in the handling of the purchase process.

"As is noted in the report, we have already commenced work to rectify those issues. We have commissioned independent advisors to undertake detailed reviews of the University's policies and processes relating to sensitive expenditure. Once completed, any changes the University makes in response to those reviews to its policies and processes will be made publicly available.

"The University of Auckland takes its responsibilities regarding the use of public resources very seriously. We will use the OAG's report, and the outcomes of the independent reviews, to further strengthen our policies, governance and decision-making processes."

In a statement, the spokesperson for the New Zealand Taxpayers' Union Louis Houlbrooke called the report "scathing".

"This purchase always looked like a rort, and now we know it was one. By charging the Dawn Freshwater half the market rent, the University effectively topped up her $755,000 salary in a way that wouldn't be transparent to observers," he said.

"The victims here are fee-paying students and taxpayers, who expected their hard-earned money to be spent on education, not luxury housing for a public sector bigwig.

"It's not enough for the University to just sell the mansion. Dawn Freshwater needs to back pay the University for the real value of her discounted rent. If she can't show this basic respect to taxpayers and students, she is unfit for the top job."