The new Ministry of Disabled People Whaikaha has been told the way it administers funding is illegal.

A letter sent to the heads of Whaikaha and Te Whatu Ora as well as the relevant ministers outlines a number of potential flaws with the Individualised Funding (IF) system.

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Individualised funding provides money to about 10,000 disabled people, based on a needs assessment, which they can use for a range of services. Primarily this is used to pay for homecare support.

But unlike other government funding, the money does not go straight to the client and instead can only be accessed via a private “host agency”, contracted by the ministry to manage the money. 

The letter’s author, lawyer Mark Jeffries, said IF was contrary to the Government’s Enabling Good Lives (EGL) policy, and unlawful.

“IF support funding is not controlled by the disabled people assessed as needing it. Instead, the ministries use private corporate money managers to control and pre-approve all IF disability clients’ support purchases. If the money manager approves an intended purchase only then will support funding be released for the disabled persons’ daily living supports.

“This structure uniquely removes access, control and choice from disabled persons.”

He said the practice likely breached the Human Rights Act, Bill of Rights Act, the United Nations Convention on the Rights of Persons with Disabilities and tikanga.

“IF is unlawful because disability clients are treated differently from, are not equal to, others and are subjected to discriminating processes, unlike other state funding and support recipients.

“Other recipients of state funding for everyday living needs are not subjected to ongoing verification of purchases, pre-approvals, restrictive payments, and cross-selling practices … IF is a unique instance of structural discrimination on a group of disabled persons.”

Costs involved

The government pays the agencies a set-up fee for each new disability client, as well as an annual fee to manage their funds.

In the past the fee was a percentage of a client’s overall funding allowance, but was changed after a review in 2017 to be a set fee for all.

Jeffries said when that change was made the Ministry of Health knew, in thousands of cases, the fee would be more than the budget itself or a very high percentage of it.   

Figures in the letter show that thousands of disabled clients qualifying for the lowest amount of funding (up to $40 a week) were paid a total of $4.7 million in the past five years.

Money managers were paid $6.6m in fees to control that $4.7m. The financial services fee being nearly 150 percent of funds managed. 

“The ministries apparently pay the money managers’ fees out of funds appropriated to support disabled people. This practice, labelled in 2017 as ‘top slicing’ by the ministries, requires review under the Public Finance Act,” Jeffries said. 

“In the year ending June 2022 the ministries paid money managers an estimated $12m. The fee structure is absurd, the money should be going to disabled persons.”  

“Ministers must step in. This is a human rights class action for systemic discrimination and conflicts of interest waiting to happen.” – Mark Jeffries, lawyer

In 2021 the Ministry of Health extended all host agency contracts to 2025. These were then transferred to Whaikaha. 

Jeffries said a lot of money and red tape could be saved if disabled clients were simply paid their support funds directly.

He said the Ministry of Social Development (MSD) would be best placed to do this.

“It makes practical sense for MSD to be the Crown’s payer. The majority of IF clients’ financial supports are well below levels MSD already pays to thousands of other MSD clients.  

“65 percent of all IF clients in the year to June 2022 received under $20,000 per annum, and because vast numbers of those IF budgets are very low, the average for that group was just $128 per week. High-valued IF payments are the exception, not the rule.” 

Conflicts of interest 

Jeffries said agencies also sold financial services to disability clients, such as payroll services, insurance and other “add-ons”. 

“Thousands of disability clients and their whanau are influenced or required to assume employer obligations, risks and costs in order to receive disability support funding. To achieve this, the Ministries’ own agent money managers cross sell a range of ‘extra’ financial services including employer services to vulnerable disability consumers.  

“They pay themselves for those extra services out of the IF disability support funding they control for each disabled client.   

“Imagine if Work and Income offices upsold extra services and deducted payment for them out of people’s jobseeker or superannuation payments? That is exactly what is happening here. The conflicts of interest are obvious.” 

“This government took positive steps with some really good structural changes in disability so it is disappointing to see at an operational level Whaikaha still promoting an expensive, second hand, discriminatory disability payment regime which is riddled with conflicts of interest. 

Jeffries said something had to change,

“Ministers must step in. This is a human rights class action for systemic discrimination and conflicts of interest waiting to happen.” 

Whaikaha and minister respond

Whaikaha Operational Design and Delivery deputy chief executive Amanda Bleckmann said the agency was carefully considering the claims, but could not confirm if it was seeking its own legal advice.

“For reasons of legal professional privilege, whether we have sought or intend to seek legal advice is not something we can comment on.”

She said there were policies in place to ensure responsible use of public finances and accountability of spending and defended extending the contracts through to 2025.

“IF Host Providers play an important role in administering funds and supporting IF recipients to use their funding to best meet their individual circumstances.

“We continue to refine and develop our policy direction. As this work continues we will have a better picture of which policies and practices require review or change.”

Minister for Disability Issues Priyanca Radhakrishnan said her office was seeking advice from officials on the claims.

She said Whaikaha was established last year to work in partnership with the disability community, Māori and across government to lead and influence changes around the rights of disabled people.

“I understand that Whaikaha is continuing to prioritise its responsibilities for service delivery continuity during this period of change. New Zealanders want to be assured that the right processes are in place to make the change the community expects from this transformation, including considerations about ongoing and flexible support for disabled people.

“The Enabling Good Lives approach, its Ti Tiriti o Waitangi obligations, and the United Nations Convention on the Rights of Persons with Disabilities will underpin all this work.”

Emma Hatton is a business reporter based in Wellington.

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