"Apparent irregularities" with invoices charging the Otago District Health Board large amounts for IT-related services for several years led the Otago and Southland health boards' chief financial officer, Robert Mackway-Jones, to look at where the money was going and what it was buying, a Dunedin High Court jury heard yesterday.
Mr Mackway-Jones was at the Southland board when he began working with the two boards in 2003 on possible shared systems.
He had previously had some interaction with Michael Swann, the Otago board's chief information officer, and once seconded to Otago in 2006 began looking at its IT department expenditure in "a bit more detail".
Part of his brief was to identify savings opportunities through collaborations and to understand how the department was working, Mr Mackway-Jones told Justice Stevens and the jury on the sixth day of the trial of Swann and a business associate on multimillion-dollar fraud allegations.
Swann (47) and Kerry Harford (48) deny three charges of dishonestly and with intent to defraud using 198 invoices to obtain $16.9 million from the board.
The invoices, in the name of a Harford-owned company, Sonnford Solutions Ltd, charged the board for various computer-related services which the Crown says were never provided.
It was after Mr Mackway-Jones started looking at the Otago IT department's high expenditure and found the costs were "proportionally skewed" towards outsourced charges, as opposed to the cost of wages, that he began "drilling down further".
He found the largest payments were to a company not known to him, Sonnford Solutions.
He asked around his contacts in the IT industry but nobody knew who Sonnford was.
When he identified the level of the payments during six financial years and found a similar pattern, that most were to Sonnford, he examined some of the invoices from the company to see what type of services were being described.
"They didn't make a great deal of sense," Mr Mackway-Jones said.
And the amounts were so large he failed to see what the value was to the board.
Given those apparent irregularities, he made further inquiries of finance department staff to see if anyone had any background or information about the particular expenditure.
Their responses did not give him a great deal of confidence so he extended his inquiries further, without success.
He subsequently asked Swann about Sonnford and its background and was told it was a continuation of a previous contractual arrangement through Computer Associates, which had been entered into in the late 1990s.
Swann told him Sonnford director Harford was a former director of Computer Associates and that Sonnfords was a broker and re-seller.
Asked whether it had sufficient resources and the capability to deliver, Swann said it did.
Mr Mackway-Jones said he then went looking for related contracts but could find none.
He had previously mentioned his concerns to the board's chief executive officer, Brian Rousseau, who told him that if more Sonnford invoices came in he should ask for the relevant contracts.
When Swann tendered two Sonnford invoices on Friday, September 8, 2006, as he was about to go on leave, the invoices were referred to him and to Mr Rousseau, Mr Mackway-Jones said.
Swann was asked for the contracts and at first provided a generic one, but supplied actual contracts a few days later.
What was described in those contracts and what the invoices were charging for did not match, Mr Mackway-Jones said.
A clause for access to engineers - "opening the gate" - caused him some concerns.
Software was being charged for which, according to IBM, the original provider of the hospital's three servers, was part of the original cost of setting up the servers.
Timothy Cleminson, previously a database administrator with the board, said he had never heard of Sonnford until October 2006 and had never seen any invoices associated with the company.
