LGNZ: OAG report on Kaipara

Updated Post 7.12.13

Link received.
Saturday, December 07, 2013 4:29 PM

Anonymous says:
[An acquaintance] has been very involved with uncovering the Kaipara scandal. We’ve decided it is a genetic fiesty gene. You may be interested in putting up the following Youtube link… There are very similar parallels with the DCC!
See what you think.

Published on 22 Nov 2013. Ecocare Bear.

Mangawhai, Kaipara: When Government Goes Bad!!
Mangawhai Ratepayers and Residents Association (MRRA) goes to court in 2014. Please make donations now at http://www.MRRA.org.nz. We need your support to challenge Kaipara Council’s illegal contracts, illegal loans, 100% rates increases and abuse of law. If successful, our court ruling will help all Kiwis stop out-of-control spending by Councils around New Zealand

****

[via Far North email copy to Whatif? Dunedin]

OAG report on Kaipara
3 December 2013

Dear Mayors, Chairs and Chief Executives

This afternoon, The Office of the Auditor General released its report on the Kaipara District Council’s delivery of its wastewater project at Mangawhai and very shortly will be briefing media. The 400 plus page report (and summary report) is a sobering read. Media coverage is likely to be severe and we need to be ready for that. We would ask that you pass this communication on to all members of your council.

In summary, the Council’s management exhibited a lack of basic financial and project management expertise and little acknowledgement of relevant risks. Kaipara’s councillors also failed to assume governance responsibility for the project, assess its risks and ask the appropriate questions.

It would appear that the only positives [sic] outcomes are that Mangawhai now has a wastewater system that works and has capacity to cater for future growth. Although governance failures are not new in private, public or local government sectors, the report has highlighted significant management and governance failures and successive poor performance with Kaipara District Council’s delivery of its wastewater project.

This performance is not acceptable for local government, whether in the past, present or in the future. As all of us are acutely aware, it reflects very poorly on the sector. However, the issues have occurred – we now need to learn the lessons and take ownership of the broader governance concerns that the OAG has raised.

OAG’s report outlined areas for public sector entities to be aware of based on lessons learnt – these are outlined below. Without doubt there are many strongly governed councils in New Zealand but, as with any organisation, we can always improve. If a focus on governance ensures that a Kaipara is not repeated then the entire sector will gain from that, just as the reputation of the sector is tarnished when things go wrong on such a scale.

As we’ve discussed previously, LGNZ is introducing initiatives to lift the bar. The success of these initiatives will depend on member buy-in. In this regard, the Kaipara episode provides a powerful incentive for the membership to come together to support one another in ensuring that collectively we will strive to ensure that poor performance on this scale is never repeated.

Post-elections training for elected members is now complete. In early 2014, we will launch governance training in conjunction with the Institute of Directors to assess and improve current governance practices in councils. Councils will need to fund this training. In the light of Kaipara, I encourage you to think of such training as an investment in good outcomes and not as an unjustifiable cost.

LGNZ is also soon to introduce its centre for advice and best practice, and has articulated a strong future focus for the sector on financial effectiveness and value. Indeed, a soft launch is already underway with some councils already accessing LGNZ for advice on matters that will form a key focus of the Centre of Excellence.

Governance will be a core focus in the coming triennium. I recommend that you and your council review the report – the 40-page summary may assist here – and consider the relevance of the messages for your council. LGNZ will shortly issue a media release and I will front media as required – we need to acknowledge where there have been failings and show what we are doing to lift performance.

I will continue to write on this subject – including an article which may feature in national media in coming days and in IoD’s [Institute of Directors] Boardroom magazine later this month. It is important that our stakeholders and the public know we are strongly committed to good governance. The video clip on our recent major issues seminar held in Wellington on 21 November – “Why good governance matters in local government” – is available here on our website – this is useful viewing.

I have also provided my speech here. Michael Stiassny, Vice-President of IoD, has made several pertinent points for the sector to consider. We will continue the dialogue, and if you have any feedback for Malcolm [malcolm.alexander @ lgnz.co.nz] or myself [lawrence.yule @ hdc.govt.nz] on this subject, or any other, then please email us.

Kind regards

Lawrence Yule
President

Local Government New Zealand

OAG’s advice to public entities on lesson learnt:

Accountability
● Public entities should be meticulous about legality
● Good record-keeping is the foundation of effective accountability
● Workshops can supplement formal Council meetings, but not replace them
● Contractors need to be tied into public sector accountability mechanisms

Governance
● Understand the role and stick to it
● Common sense is a legitimate governance tool
● Understand what you need assurance on and where you will get it from
● Audit committees can provide useful support

Management
● There are limits to contracting out
● It is important to maintain appropriate financial management capacity and capability and to stick to your sphere of competence
● Project governance and management is important

PPP arrangements
● Do not underestimate what is involved in a PPP arrangement
● Accounting should not drive the decision to enter into a PPP
● Transfer of risk is not an end in itself
● PPPs are unlikely to succeed fully if the contract is not for “the complete package”

Feedback [info @ lgnz.co.nz]

——————————————————————-

[via scoop.co.nz]

Kaipara review shows a need to lift governance performance
Tuesday, 3 December 2013, 2:33 pm
Press Release: Local Government NZ
http://www.scoop.co.nz/stories/PO1312/S00024/kaipara-review-shows-a-need-to-lift-governance-performance.htm

Related Posts and Comments:
12.11.13 Northland council amalgamation
29.6.13 Audit NZ and OAG clean bill of health —Suspicious!
21.4.13 Councils “in stchook” —finance & policy analyst Larry.N.Mitchell
19.3.12 Local government reform
21.2.12 Kaipara this time

Posted by Elizabeth Kerr

25 Comments

Filed under Business, DCC, Democracy, Economics, Media, Name, New Zealand, People, Politics, Project management, What stadium

25 responses to “LGNZ: OAG report on Kaipara

  1. The points listed under “OAG’s advice to public entities on lesson learnt” will come as a shock to Dunedin’s councillors, past and those present ones who aren’t brand new in the position, those ones still deserve the benefit of the doubt.
    “Public entities should be meticulous about legality” and “It is important to maintain appropriate financial management capacity and capability and to stick to your sphere of competence” – open your window, you’ll hear the incredulous cries: “What’s that about? Where’s the respect for tradition?”

  2. @Hype O’Thermia

    December 3, 2013 at 7:26 pm

    ‘The points listed under “OAG’s advice to public entities on lesson learnt” will come as a shock to Dunedin’s councillors, past and those present ones who aren’t brand new in the position, those ones still deserve the benefit of the doubt……’

    A significant ’takeaway’ in this for me was this:

    ‘Responsibility cannot be contracted out

    Many public entities contract out parts of their work to other providers. That has always been the case, and it will continue. It is often efficient. However, the responsibility for the work still rests with the public entity. Any public entity that is contracting out work must ensure that it retains enough oversight and control to enable it to give effect to that responsibility. Whether that has been done is usually tested when something has gone wrong and the responsible entity is not ready or able to respond quickly and appropriately. It can be a painful and expensive lesson.’

    For some considerable time I have noticed that lack of appropriate expertise retained within the council on its staff. The lessons from the Kaipara example should be read, learned and understood here in Dunedin.

  3. Much as I dislike the “fact-finding” junkets and “sister-city” excuses for even more of them, I would heartily support Dunedin’s forming a sibling relationship with Kaipara.
    Kaipara has had the advantage of being put under the microscope, belatedly though it was. Despite our efforts (like the Kaipara people’s) to get this done before damage escalated to catastrophe, our decision-makers may be able to learn something. And given the financial state that town is in they shouldn’t find too much of their time taken up with being wined and dined on the civic credit card. One or two of the locals might show undeserved goodwill and turn up with a plate of scones……

  4. Russell Garbutt

    Believe me – I don’t think for a moment that the majority of the past crop of DCC Councillors nor the existing lot have learned one jot from Kaipara. The LGNZ organisation and more importantly, the OAG are all firm believers in the religion of borrowing up large. The fact that Delta was able to buy residential sections from a person that was part of Delta governance by incurring unmanageable debt resulting in vast losses of ratepayer funds should be enough in itself to warrant immediate action. The OAG are staffed by people disinterested in fulfilling their role, but interested in keeping their inflated salaries. Almost as bad as their counterparts at the DIA.

    The DCC Councillors have, to my certain knowledge, been offered, expert governance financial advice and have consistently turned it down. Why? Because they know better? Or because they collectively are too ignorant to know they are ignorant?

    The major issues in Dunedin have not gone away. DVML is about to melt down, and the full sordid story of Farry’s CST bunch of manipulators is yet to be made public along with the details of where the money really went – but never mind – accountability is never on the DCC horizon.

    • Russell says:
      The DCC Councillors have, to my certain knowledge, been offered, expert governance financial advice and have consistently turned it down. Why? Because they know better? Or because they collectively are too ignorant to know they are ignorant?

      Why? My interpretation is DCC (past and present) is one big protection racket, just like any other.

      Kaipara shows that concerned and powerful citizens can rally to expose but not necessarily obtain redress… while OAG slaps the back of hands. As OAG will do with Delta. OAG are pious seeming – and fully support white collar crime by inaction and incompetence bordering on fraudulent blindness, contrary to all public good.

  5. Post updated with YouTube video [Mangawhai, Kaipara]

    ****

    [the video below was originally posted at another thread]

    ### 3news.co.nz Mon, 05 Nov 2012 7:00p.m.
    Source: Campbell Live
    Civil disobedience after Mangawhai rate increase
    What is happening in Mangawhai is unprecedented. It’s part of the Kaipara district – a tiny population with some big problems. The district council allowed a local wastewater scheme to double in cost to $60 million, and then kept that secret from ratepayers. It ran up $80 million worth of debt for just 20,000 residents. It has proved so dysfunctional that a team of commissioners now act as government appointed babysitters. Understandably, residents are furious. For the first time in their lives some of them are engaging in civil disobedience. Almost 600 properties are refusing to pay their rates, and they have a warning for the rest of the country: pay close attention to your elected representatives, because their mistakes could cost you your home.

    Watch the video to see Lachlan Forsyth’s report:
    http://www.3news.co.nz/Civil-disobedience-after-Mangawhai-rate-increase/tabid/817/articleID/275502/Default.aspx

  6. As if the womanising wasn’t enough (which rooms at SkyCity Hotel, Len?), Auckland ratepayers are still having to write open cheques…

    “Oh hai, Len… meet Daaave-at-Dunedin.”

    ### scoop.co.nz Sunday, 8 December 2013, 10:31 am
    Press Release: Cameron Brewer
    Expect more ‘Monaco’ trips as Mayor refuses to get tough
    “Auckland Mayor Len Brown has promised ratepayers greater financial prudence since I revealed six months ago that Auckland Council spent over $10.5m on travel in its first two years. However when push comes to shove the Mayor is refusing to send that same message to the Council-Controlled Organisations,” says Auckland Councillor for Orakei Cameron Brewer.
    “Keeping in mind Mr Brown’s promise of putting more focus on budgetary issues, most people will be disappointed to learn that 18 people were funded to be in San Francisco for the America’s Cup and two flew business-class to the Monaco Boat Show.”
    Mr Brewer says the Mayor has the perfect opportunity to really put the squeeze on the CCOs including the likes of ATEED [Auckland Tourism, Events and Economic Development] by demanding greater financial prudence in his annual letters of expectation for 2014/15 which were debated at last week’s CCO Governance and Monitoring Committee meeting.
    “I suggested just last week that these letters needed to be stronger and greater financial prudence and accountability should be written into our expectations for ATEED but I was told that it would limit their ability to do their job and only ‘curb their creativity’. Sadly the public needs to get used to fact that under this Mayor trips to the likes of Monaco are not only sanctioned but encouraged.”
    Read more

    • ### NZ Herald Online Updated 2:38 PM Friday Dec 13, 2013
      Len Brown’s calls, texts and hotel stays revealed
      By Cassandra Mason
      Auckland mayor Len Brown used his council phone to make more than 1300 personal calls and texts to his mistress Bevan Chuang. He also failed to declare more than $39,000 in free hotel rooms and upgrades.
      A report into the pair’s affair, released this afternoon, said Mr Brown used his council phone to make 1373 calls and texts to Ms Chuang between November 19, 2010 and October 21, 2013. Ms Chuang said all of the calls and texts were of a personal nature.
      The mayor also received nine free hotel rooms which he didn’t declare, valued at $6130. He also failed to declare 54 hotel upgrades valued at $32,888.50.
      Read more (read the full EY report at this link)

      Key findings (via NZ Herald)
      * The mayor used his council phone to make 1375 calls and texts to Ms Chuang between 19 November 2010 and 21 October 2013
      * The calls and texts made up 10 per cent of his total phone use
      * Mr Brown advised two-thirds of those were of a “personal nature”
      * He made one reimbursement of $263 on October 25 2012
      * Ms Chuang attended several functions as the mayor’s “translator”. She is not on the council’s list of official translators
      * The mayoral vehicle and driver were used to take Ms Chuang home after a number of functions
      * Mr Brown received nine free hotel rooms not registered as gifts, valued at $6130
      * He received free upgrades to hotels not registered as gifts valued at $32,888.50
      * Other gifts not registered included an NRL Grand Final ticket and an iPad
      * Council paid for Mr Brown’s dinner with a personal friend in Shanghai
      * The report’s authors were “unable to identify” the security guard who interrupted the mayor and Ms Chuang having sex

      Auditor-General keeps check on scrutiny of mayor’s possible use of council resources during two-year affair.

      Linked Comment:
      What a shame it has taken the Auditors massive embarrassment at Kaipara for Provost to finally show some interest in Auckland Council.
      I resigned as a senior manager of Auckland Council in disgust at the blatant cronyism that prevails there, despite making a futile complaints to Provosts office
      Patrick Starr – North Shore – 10:17 AM Wednesday, 11 Dec 2013

  7. What Auckland really needs is more Twin Cities.

  8. Dunedin City Council has high exposure to interest rate swaps in the global derivatives market. Can anyone at DCC/DCTL adequately explain how this happened and who by name [individuals, entities] was responsible —and, how does the council and its Treasury exit this mess safely. Rhetorical, or is it? One CFO gone, hastily. Why the cover-up (do not panic the punters/ratepayers).

    ### stuff.co.nz Last updated 05:00 08/12/2013
    Debt worsened by rate swap
    By Rob Stock – Sunday Star-Times
    A report into the massive indebtedness of a North Island council found that its woes were exacerbated by an interest rate swap sold to it by Dutch investment bank ABN Amro.
    Until last year, when the Commerce Commission started investigating the sale of interest-rate swaps to farmers, claims of mis-sold swaps seemed to be a European and US phenomenon.
    Across Europe and the US, the Global Financial Crisis revealed many local authorities had entered interest-rate swap deals under advice from investment banks, visiting large losses on local ratepayers and leading to high-profile court cases and compensation.
    But though many larger councils and corporates here use interest-rate swaps, they are not suited for smaller councils which lack sophisticated in-house treasury departments.
    The Auditor-General’s report into the Kaipara District Council’s (KDC) massive debt blowout in building a wastewater scheme at Mangawhai, north of Auckland, claims explanations to the council on how the swap worked were inadequate. The swap had not matched the council’s borrowing circumstances and it had needed to borrow an extra $840,000 to break the contract, adding to its spiralling debts – now at $63.3 million. In February 2006, the cost was expected to be $35.6m.
    The council’s borrowings were complex, and the use of a swap breached the council’s treasury management policies, the Auditor-General found.
    Read more

    *The last summary paragraph of the news item is worth reading (plain English).

  9. Rob Hamlin

    Interesting article in Mc.P. today about the DCC’s credit rating. http://www.odt.co.nz/news/dunedin/284751/dccs-credit-rating.

    It went up apparently. As they didn’t mention it in their release, it’s perhaps just as well that S&P apparently don’t look at contingent stuff like unpaid capital commitments and derivatives like interest rate swaps. Although as ‘Inside Job’ showed in the events leading up to the derivative driven crash of 2008 you could just acquire an upgrade to credit rating like you could get an upgrade to an airline seat if your relationships with the providers of same were good enough.

    As far as I am aware there has been no significant reform either to the use of derivatives or to the manufacture, sale and distribution of these related ‘professional opinions’ on credit worthiness, so I can’t see why one would attach any particular value to them now. In my eyes they now have the same fiscal credibility as ‘Dear One’ Nigerian spam e-mails.

    Paul Orders seemed to be a very even tempered man. You’d have to be given Dave Cull’s credit acquisition exercise outlined in the article. The following is a direct quote from the be-ermined one:

    ”I think he [Mr Orders] can take a fair bit of credit, but he was working under the direction of the last council, who not only reformed DCHL governance, but set quite tough targets for rates rises, debt containment and acceleration [of repayments].”

    Yuk!

    • This ratshit briefly via RNZ News:

      Updated at 6:12 am today
      Dunedin council’s credit rating now stable
      A credit ratings agency has lifted its warning about the Dunedin City Council’s finances.
      In 2012, Standard & Poor’s analysts put the South Island council on a potentially costly negative outlook, warning it might not meet its financial targets because it is carrying debts of more than $600 million.
      The agency also warned its rating was threatened by an Auditor-General’s investigation of land purchases by council-owned company Delta.
      Standard & Poor’s has now revised the council’s outlook to stable.
      The agency says Dunedin’s financial management is very positive and its budgeting has improved significantly since last year.
      It says it does not expect the Auditor-General’s report to be significantly negative.
      http://www.radionz.co.nz/news/regional/230306/dunedin-council%27s-credit-rating-now-stable

  10. You know what got my back up instantly? The photo accompanying this goodnews story was of Cull not Orders.
    They might as well put a Reliability Alert: “caution, written material contains unchallenged spin.”

  11. Councillor Richard Thomson’s praising staff (with a little of his guidance and financial nous) for the “extraordinary turnaround” brought ‘quiet’ whoops of delight and applause. This was largely disingenuous, as despite the fact that the city’s consolidated $623 million debt still sits firmly on the city’s books, it is an indisputable fact that Dave Cull and the previous council increased the DCC debt from $105.535m in 2007/08 to $387.444m (inc $146m stadium) in 2012/13. That truly is the “testament” to the good work of the previous council and council staff as claimed by Dave Cull.
    It is worth mentioning the true value of S&P ratings when one remembers that the famous Lehman Bros enjoyed an “A” rating right up until the eve of their demise.

  12. ### dunedintv.co.nz December 13, 2013 – 6:31pm
    Councils spend more than they earn
    New Zealand’s local authorities spent more than they earned in the September quarter. The nation’s councils had increases in both income and spending. Operating income was up $6m from the June quarter to $2b, while operating expenditure was up $15m to $2.1b. Statistics New Zealand says, overall, spending exceeded income by $39m.
    Ch39 Link [no video available]

  13. Star-Times understands there is serious discontent with Brown and the EY report across party lines.

    ### stuff.co.nz Last updated 05:00 15/12/2013
    Councillors in talks over mayor
    By Tony Wall – Sunday Star-Times
    Secret talks are being held this weekend among Auckland councillors who say the city has been “humiliated” by the Len Brown affair and want the wayward mayor censured and his powers reined in. The Sunday Star-Times understands a cross-party group of councillors has taken legal advice over what measures can be taken to censure Brown and to bring greater oversight to the mayoral office.

    Unlike other mayors around the country, [Len Brown] has executive powers that extend to control of the council’s budget and governance, introduced with the Super City. “There’s no oversight there at all – it’s gone from the sublime to the ridiculous.”

    A motion expressing councillors’ disgust in Brown’s behaviour is expected to be tabled tomorrow or Tuesday. And moves are afoot to establish an oversight committee to conduct a regular overview of issues involving the mayor and councillors.
    Read more

    • NZ Herald: Mayor Len Brown booed at meeting to decide fate
      Updated 11:39 AM Thursday Dec 19, 2013
      http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11174750

      A senior Government minister [Judith Collins] says Mayor Len Brown has to question whether he has the moral authority to stay on as mayor.

      “”Because ultimately, he’s the one who knows what else might come out, and really I think he can see when his biggest supporter, the New Zealand Herald, has a go at him, as they did yesterday – they didn’t just have a go at him, they completely decided that they were not going to support him any more – I think he really has to think about that. They’ve been his biggest supporter for the last four years, and really, when they’ve gone like that, that tells me something. There’s more coming.”

      Read the Herald editorial calling on Mr Brown to go.
      Yesterday the Herald ran an editorial calling for Mr Brown to resign. The overwhelming majority of hundreds of responses to the editorial have backed the Herald, which is believed to be the first time the newspaper has called on a city mayor to resign.

      Reader reaction to the editorial.

      Facebook

  14. Does all this not remind us that we have on our council one as equally tainted -in the moral and decency arena- albeit not financially, who is equally in denial of his past indiscretions. He too should be gone before he besmirches the office of elected councillor. His name springs to mind every time I fill up my car with petrol. Seems we are destined to have this aberration on council, if not a crooked lawyer.

  15. Hype O'Thermia

    The upgraded hotel rooms, where there were spare rooms, came at no extra cost to the hotel and no particular advantage to Brown, when he simply wanted a place to stay overnight between late meetings and the morning rush hour trip back for work the next morning. It’s not like it was “we’re offering you a move up from a mattress and sheets with strange stains, the all-night company of bedbugs and cockroaches, and a long walk down the corridor to a shared bathroom that was definitely cleaned last week according to the roster.”

    I smell essence of witch-burning, the normal accompaniment of a moral panic.

  16. Hype; do they still burn witches? I didn’t know that. But I do know that ‘bestiality’ and ‘deviance’ is still in vogue at a place near you. Just beside the remains of Carisbrook I believe. In fact the location takes its name from Carisbrook.

  17. Councillors vote to censure Mayor Len Brown
    Updated 2:13 PM Thursday Dec 19, 2013
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11174750

    Auckland’s council has passed a vote to censure Mayor Len Brown but continue to work with him, and will not carry out a vote of no confidence.

    Brown is expected to speak to the media at 3.30pm this afternoon.

    http://www.odt.co.nz/news/national/285927/auckland-mayor-censured

    • Link received.
      Tuesday, 14 January 2014 11:57 a.m.

      ### nz.news.yahoo.com January 14, 2014, 11:00 am
      NZ Newswire
      Brown to answer corruption allegations
      Former accountant Graham McCready will file a private prosecution on Wednesday alleging corruption by Auckland Mayor Len Brown. Mr McCready says he believes Mr Brown has a case to answer over hotel room benefits he received from Sky City.
      Read more

  18. ### radionz.co.nz Updated at 8:34 pm on 20 December 2013
    RNZ News
    Council remits penalties for rates rebels
    Kaipara District Council is offering an olive branch to people who refused to pay their rates in protest at its previous mismanagement.
    Nearly 1000 ratepayers in the district have been withholding their rates for more than a year, after the council tried to impose big increases to cover cost blow-outs in the Mangawhai sewerage scheme.
    Commissioners now running the council have agreed to remit penalties charged to rate accounts in March and July this year.
    Chairman John Robertson said the move is intended to encourage those with rate arrears to pay up.
    Now that Parliament has passed a bill to validate past rating errors, he said there was no reason for people not to pay.
    RNZ Link

  19. Editorial: Spotlight on Brown catches critic in glare
    The way that a spotlight on the transgressions of one person reveals other offenders suggests another shortcoming. Not enough emphasis is placed on ensuring the likes of the Auckland Council’s code of conduct is followed. Transgressors are not pursued with sufficient vigour by the council bureaucracy. How else could 11 of 20 councillors get away without filing a declaration of interests for a year? That failing, in turn, can only reinforce a belief that such returns can be treated with disdain.
    http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=11176087

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