Q & A with Hort Innovation on managing the marketing levy

APAL and its state partner associations wanted to know more about what happened and more about what will be done to prevent misappropriation of fruit growers’ levies at Hort Innovation. APAL quizzed Warwick Scherf, Hort Innovation’s General Manager of Stakeholder Engagement, to get some more information:

What processes will Hort Innovation put in place to ensure this type of misappropriation is avoided in the future?

There’s no process that can really be a 100 per cent guarantee against misappropriation if you still want to remain as a reasonably functional business. In this case, the Supreme Court did find that the method that was used for the misappropriation was largely the falsification of invoices. It’s quite difficult to overcome that, but in the future at Hort Innovation we’ll separate the receipt of invoices and the approval processes of invoices into separate procurement departments.

Is there a cap within Hort Innovation regarding how much one person has authority to approve, was it $300,000?

It was $300,000. However, the cap is irrelevant to the matter as the misappropriations ranged from between $5,000 to $50,000 in each instance.

Are there any of the other checks and balances beyond that separation of receipts and approval of invoices that you now have in place?

The other checks and balances that are in place are the implementation of a procurement process whereby there is a separation of duties between the design of work, the commissioning of work, the contracting of that work, and the oversight in terms of the work being done, and thereby the payments being made. A forensic software program will also be implemented to detect anomalies. Staff processes will also be subject to spot audits.

Why did it take so long to discover the problem?

The problem was uncovered by a highly experienced employee early in July who reported the anomalies observed directly to management, and we took action that very day. We took action as soon as we were made aware of it, but in terms of the length of time and the series of events that took place over time, they were small incidents of deception, so it was difficult to pick that up as a consequence of those smaller values.

Hort Innovation has said that programs won’t be affected, but we’ve seen some poor performance in the Aussie Apples marketing campaign – is there a connection?

It really appears that the deception was over and above what was called ‘normal expenditure’.  So the premise of the campaign was not directly related to the financial character of this particular matter.

The performance of the campaign should be evaluated in isolation of this particular issue. There will be a range of factors as to why the campaign hasn’t performed, and from what I understand that’s under review, and that’s being looked at in terms of learnings going forward as to how to get the best performance out of any campaign, in particular the apple campaign.

What commitment is there from Hort Innovation to improve transparency so there can be external scrutiny of your programs?

This is my direct area of responsibility moving forward, and I can say categorically that greater transparency around what’s going on in all programs and in all projects is what we’re driving towards. That needs to be supported by the right sort of systems in place internally.  But we believe we’re taking those steps at the moment to provide additional transparency and have an absolute intention to be more transparent around expenditure. It’s just unfortunate the timing of this coincides with what may be perceived to be a lack of transparency over the most recent period due to the disruptive nature of the review, and the transitioning from HAL to Hort Innovation. All projects, costs and suppliers will be published on our website.

Will this transparency be retrospective so we can see the expenditure in the marketing project over the last financial year?

I can’t answer that right now, that will be something we will take on advice, and we’d have to look into what the challenges might be around that. But in principle, as I said, we don’t have any problem with being transparent about expenditure.

All the R&D levy-funded projects are going out to that competitive tender, will marketing levy-funded projects go the same way?

This is consistent with our new procurement policy on all major component parts of marketing programs. These will be subject to the competitive procurement process, a la tenders, but the matter of management of any marketing program is really for our Board to make a decision about. But we need to recognise also that Hort Innovation must fulfil its supervisory and governance obligations as well. Noting that Recommendation 6 from the ACIL Allen review [that Hort Innovation should to engage in marketing on a fee for service basis, and only on the request of the body representing the industry that contributes marketing levy funds] was specifically rejected by government.

What happens if you don’t recoup the monies via the court case?

We have recouped the monies.

Many thanks to Warwick for helping take the time to answer all these questions. Warwick can be contacted on warwick.scherf@horticulture.com.au or 02 8295 2323.


By |September 16th, 2015|Hort Innovation, News|

About the Author:

APAL is an industry representative body and not-for-profit membership organisation that supports Australia’s commercial apple and pear growers.