Investigation finds Treasury Secretary's handling of Budget saga a 'clumsy response to a serious issue'

Treasury Secretary Gabriel Makhlouf’s handling of the Budget saga was "a clumsy response to a serious issue", the State Services Commission (SSC) investigation found, but he acted in good faith in his advice to the Finance Minister and referring the matter to the police. 

Mr Makhlouf “considers that he acted at all times in good faith, reasonably and in a politically neutral manner”, the investigation said. 

Questions were raised into Treasury Secretary Mr Makhlouf's actions and statements around Budget material that was released early by the National Party last month. 

Treasury said in a statement on May 28 its systems had been "deliberately and systematically hacked". It referred the matter to police.

The SSC investigation found Mr Makhlouf “acted in good faith, reasonably and without political bias in relation to the advice he gave Finance Minister Grant Robertson”. 

His decision to refer the issue to the police was also “made in good faith, was reasonable and showed no evidence of political influence”. 

Despite this, it found Mr Maklouf did not act reasonably when he used the phrase, “deliberate and systematically hacked”, his use of the ‘bolt’ analogy, and his media statement on May 30, where he continued to focus on the conduct of those searching the Treasury website rather than Treasury’s failure to make the Budget material remain confidential. 

Mr Makhlouf described the situation initially as a bolted room persistently being attacked. 

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The statement said Mr Hughes’ expectations of chief executives “when things go wrong is very clear, they need to own it, fix it and learn from it, and stand up and be accountable”.

Mr Hughes was “disappointed” by Mr Makhlouf’s actions, that he described as falling short of those expectations. 

“The breach of security around the Budget documents should have never happened, under any circumstances. 

“In my view it was not managed well by Mr Makhlouf. It was a clumsy response to a serious issue and is not what I expect of an experienced chief executive.”

“Mr Makhlouf failed to take personal responsibility for the Treasury security failure and his subsequent handling of the situation fell well short of my expectations.”

“I’m calling it out.”

The investigation stated Mr Makhlouf disagreed with the findings that “his actions and statements were unreasonable in some respects, as he considers that he acted at all times in good faith, reasonably and in a politically neutral manner”. 

Today is Mr Makhlouf’s last day as Secretary before moving to Ireland.

Mr Makhlouf responded to the investigation in a statement this afternoon. 

"Mr Ombler’s investigation was conducted thoroughly and fairly. I have read the report carefully and encourage others to do so. I apologise that Budget information was not kept secure. The inquiry that I asked the SSC Commissioner to undertake will help us understand exactly how that happened and how to stop it happening again.

"The report confirms I acted at all times in good faith and with political neutrality. It also confirms that I acted reasonably, other than in my descriptions of the incident. I am pleased that my honesty and integrity are not in question."

The new Secretary to the Treasury Caralee McLiesh, New South Wales' managing director at Technical and Further Education, will step into the role on September 16.

How it happened

Treasury said in a statement on May 28 it had gathered enough evidence that its systems had been "deliberately and systematically hacked", after National released parts of the Budget that day. 

Finance Minister Grant Robertson then released a statement saying the release of the material was extremely serious and is now a matter for the police", as well as urging the National Party to not release any more of the information.

On May 31, the day of the official Budget release, Treasury confirmed a feature in its website search tool was exploited by an unknown person or persons, and police concluded this did not break the law.

National Party leader Simon Bridges today told RNZ the situation was either "bungling incompetence, and I think we can all believe that could well be the situation, or you have some broad form of deceit and... dirty politics". 

Mr Robertson said Mr Makhlouf told him on Tuesday night (May 28) he had already referred the matter to the police and "described it in a way that has been publicly reported, so I certainly reject the latter part of Mr Bridges' accusations".

Earlier this month, the investigation was launched by SSC, led by deputy State Services Commissioner John Ombler.

"Mr Makhlouf believes that at all times he acted in good faith," Mr Hughes said at the time.   

"Nonetheless, he and I agree that it is in everyone’s interests that the facts are established before he leaves his role on June 27 if possible."