Melissa Lee

Wellington, Oct 13 NZPA - Prime Minister John Key accepts an accounting error was to blame for MP Melissa Lee's television production company needing to pay back taxpayer money, but Labour say there has been a cover-up.

Last night it was revealed that Ms Lee had been asked by funding body NZ On Air to explain why her company, Asia Vision Ltd, failed to return up to $100,000 of unspent contingency funds.

The letter from NZ On Air said the company seemed to have acted in a way that was in breach of its funding contract.

Mr Key said an innocent mistake appeared to have been made and NZ On Air did not think it was deliberate.

The contingency accounting sounded confusing, he said.

"I accept her at her word and I've got no reason to dispute that."

He did not think the problem would affect Ms Lee as an MP.

"I don't think this is going to damage her political career... mistakes do happen. I would expect her to rectify the mistake, if that's the case, and I am sure she will do that."

Ms Lee, a list MP, was National's candidate in the June 13 Mt Albert by-election and during the campaign faced allegations that her company had misused taxpayer funds for political purposes.

NZ On Air cleared her of those allegations, but the contingency issue came up as a result, Broadcasting Minister Jonathan Coleman said.

Labour deputy leader Annette King said the public should have been told about the problem sooner.

"Would we have ever known about it if it had not been leaked to the media?" Ms King said.

"Why hasn't Mr Key told the public of New Zealand that a second audit took place and they found discrepancies. We would not have known and to me that almost smacks of a cover-up".

Ms King said Dr Coleman had known about the issue at least since August, she said.

"This has been covered up since at least June this year."

Ms Lee said she was informed of the problem when a business partner forwarded her a letter last night.

"But yes there seems to be some money that I need to pay back ... less than what was reported," she said.

"The bottom line is NZ On Air does not believe that it was actually deliberate ... the company acted in good faith."

Ms Lee said she would tell the public how much had to be paid back once she had talked to business partners.

Dr Coleman said he was told on August 18 by NZ On Air bosses.

"Quite frankly I'd forgotten all about that, it was just made in passing until this surfaced now.

"There was no mention of money at all at that time ... the gist of it was there was a technical issue around accounting practices which they just had to sort out. It didn't sound like any big deal -- if I had felt it was I would have actually followed that up at the time."

The accounting problem may have been repeated every year for the past five years.

"If there's public money that needs to be paid back it needs to be paid back but that's a matter between her and NZ On Air and I am sure she will make good on that."