Part 5: Inquiries in 2007/08

Local government: Results of the 2007/08 audits.

The Auditor-General has a mandate to inquire into a public entity's use of its resources, at his discretion. An inquiry usually involves looking into financial, accountability, governance, or conduct issues. During 2007/08, we carried out 99 inquiries relating to local authorities.1

In this Part, we discuss:

Decisions made after the 2007 elections

We received several complaints about local authorities deciding to change or reverse existing policies soon after the local government elections in October 2007. Most of these complaints were about a lack of consultation with the community and compliance with the Act. In our view, these complaints raised important issues about the relationship between the Act's decision-making requirements and the democratic and political context of local authority decision-making.

Councillors and mayors will have opinions, will have campaigned on those opinions, and will wish to implement decisions consistent with their opinions and campaign messages. They will take office with publicly stated views on a wide variety of policy issues, and may have a sense of obligation to honour what they may see as commitments made to voters. In practice, the ability of any individual to implement their policies and commitments will depend on their ability to influence the collective decision-making of the local authority, and on the status of any existing decisions or commitments by the local authority.

We inquired into three decisions made by local authorities soon after the October 2007 elections:

  • Auckland City Council's community housing budget;
  • North Shore City Council's support for developing Whenuapai Airbase; and
  • Far North District Council's relocation of its consent office.

Auckland City Council's community housing budget

Auckland City Council decided to reduce the budget for an affordable housing programme. The original programme had been consulted on (as part of the 2006-16 Long-Term Council Community Plan, or LTCCP). We received a complaint that the community was not consulted about the change to the budget for that programme.

The LTCCP stated the Council's intentions to investigate affordable housing. In December 2007, after the local authority elections, a decision was made to reduce the funding to a particular provider of affordable housing from $9 million to about $2.5 million.

In our view, the Council acted in keeping with the decision-making requirements in the Act. It was not, under its own policy on significance, required to consult with the community before deciding to reduce the amount of funding it provided. This decision was also consistent with the LTCCP, which had scope for the Council to change its funding for particular organisations.

We noted that the decision-making process could have been strengthened if, for example, summary information specifically about the community's views had been presented to the Council as it made its decision. We also suggested that the Council consider and adopt a clear policy on affordable housing.

North Shore City Council's support for developing Whenuapai Airbase

We looked into the North Shore City Council's decision about its support for Waitakere City Council's proposal to develop Whenuapai Airbase, following a complaint about a lack of consultation.

In 2002, the Government announced that the New Zealand Defence Force would reduce its presence at Whenuapai Airbase. In 2006, the Council decided to support Waitakere City Council's proposal to develop a commercial airport at Whenuapai. At their first meeting in October 2007, the new mayor and Council rescinded the Council's 2006 decision. The Council did not consider either the 2006 decision or the 2007 decision to be significant or to require formal consultation.

Essentially, the information that was before the Council in October 2007 was the same as the information considered in 2006. The overall policy issue was the same and little had changed in the intervening year to alter the factual or analytical context for the decision.

In our view, the Council operated consistently in making the two decisions, and its process was adequate to meet the requirements of the Act. Given the clear direction in section 79 of the Act to give local authorities much discretion, we saw no basis for questioning the adequacy of the Council's actions.

The Council's documentation supporting the decisions was not prepared in a way that made it easy to understand the reasons for the decisions, or to see how the requirements of the Act were being met. We told the Council that it might want to consider whether the principles of transparent decision-making and accountability would be better served if the community could more easily see what the Council was basing its decisions on.

Far North District Council's relocation of its consents office

We inquired into the Far North District Council's decision in December 2007 to relocate consents staff from Kaikohe to Kerikeri. People thought that the consultation was inadequate and the decision-making requirements of the Act might have been breached.

During the election campaign in October 2007, a mayoral candidate (who was elected) indicated his intention to shift consents staff to provide better services to developers with projects on the eastern side of the district. After he was elected as mayor, the Council began to consider how such a shift could proceed. Staff prepared a report to the Council and assessed the matter as being of moderate significance under the Council's policy on determining significance.

In our review, we emphasised the importance of focusing on "the right question". We considered that the important decision was the initial decision to move the staff from Kaikohe to Kerikeri. Any implementation decisions were effectively incidental.

In our view, the Council's processes met the requirements of the Act because the moderate significance assessment meant that there was no legal requirement to formally consult the community. We encouraged the Council to consider further procedural steps to promote transparent decision-making and community understanding of issues.

Compliance with the Local Government Act 2002

We often receive complaints from members of the public that a local authority has not complied with the decision-making process set out in the Act. Only a court can rule on whether an authority has complied with the legislation. Our concern is with the more practical question of whether we can see sound administrative and decision-making processes operating, and whether we have any doubts about compliance with the legislative requirements.

The Act, as a whole, creates a structure of representative democracy for local authorities and requires them to take a participatory and disciplined approach to making decisions.

The Act sets out requirements designed to ensure a measure of rigour and transparency in local authority decision-making processes. In particular, sections 77 and 78 require local authorities to identify options for achieving an objective and to assess those options against specified factors. Local authorities are also required to consider the views of those likely to be affected by, or interested in, the matter at various points in the process.

The Act does not specify standards for how those views should be obtained, the depth or detail that is required, or what evidence is needed to show that a local authority has complied. However, section 79 makes it clear that a local authority can change the way it meets those requirements to match the significance of the issue. The local authority decides, at its discretion, on the appropriate extent, detail, and nature of what it does to meet those requirements.

The discretion allowed by the Act specifically covers the extent to which options are assessed and relative benefits and costs are quantified, the extent and detail of information to be considered, and the extent and nature of any written record that is kept of compliance. The Act also makes it clear that assessing significance in any given case is a subjective judgement for the local authority to make.

Our inquiry into the process the Christchurch City Council used for a decision in July 2008 is an example of an inquiry to assess compliance. The Council decided to purchase properties in and around central Christchurch at a cost of about $17 million.2 There was much public interest in this decision and we received many requests to inquire.

Overall, the process the Council followed was sound and complied with the decision-making principles set out in the Act. We acknowledged that the Council's decision was made under time pressure and that the Council considered relevant factors, including its policy on determining significance. However, we noted some areas that could be improved in the Council's decision-making processes.

The extent to which a local authority considers, or is seen to consider, the views of the community often causes concern for ratepayers. It is important that local authorities take a transparent and well-documented approach to considering the views of the people they serve.

Funding arrangements for a proposed cuisine school

We were asked to inquire into a proposed international cuisine school in the Wairarapa. The international cuisine school was to be established by the Universal College of Learning (UCOL), as part of a wider Wairarapa Cuisine and Fine Wine programme funded by New Zealand Trade and Enterprise (NZTE). However, UCOL later indicated that it would not be proceeding with a cuisine school at Martinborough in the Wairarapa.

The business plan for the cuisine and wine programme was prepared by Go Wairarapa, which was then the economic development agency for the three Wairarapa district councils. The business plan was prepared after consultation with leaders from the wine and food industries in the Wairarapa and with the support of the three councils. Part of the funding arrangement with NZTE required the three councils to provide $300,000 towards establishing the infrastructure component of the programme.

Go Wairarapa, and subsequently its successor Grow Wellington, was responsible for administering the programme contract with NZTE, with the cuisine school component sub-contracted to UCOL.

There was no suggestion that the councils' funds were used for purposes other than the purposes for which they were contributed. However, the councils might not have realised that their funding was specifically for the infrastructure component of the food and wine programme, and only indirectly for the cuisine school and wine strategy components. Comments from the three councils suggested that the structure of the funding arrangement administered by Go Wairarapa was not clear to them.

UCOL had the authority to decide to change the location of the cuisine school. UCOL was the entity responsible for building the school facilities and obtaining the funding to do so. However, its decision not to proceed with the Martinborough location could have been more collaborative. We also noted that there was an "at risk" element to the funding and its success. While the parties intended for there to be a cuisine school operating in the Wairarapa, there was no guarantee that this would be the outcome.

As a result of our enquiries, we decided that there were no grounds to take this matter further.

Governance issues on the West Coast

We inquired into the West Coast Development Trust (the Trust), after receiving information about how it was operating, and allegations of conflicts of interest.3 The Trust, now operating as Development West Coast, was established in 2001 to administer the $92 million given by the Crown to help the West Coast economy to adjust to the Government's policies to end the logging of indigenous forests.

We looked at the role of the Trust, its external and internal relationships, how it managed conflicts of interest, its systems for disclosing information and the consequences of unauthorised disclosure, and the authority for making decisions.

Important relationships within the Trust had broken down, and behaviour had emerged that was less than satisfactory in a public entity. We made one recommendation – that the trustees urgently find a way to work together so that they could take effective collective responsibility for the governance of the Trust. If the trustees are unable to do so, they should consider stepping down. We were unable to provide assurance that the Trust was able to operate effectively in the interests of the West Coast region.

Generally, the Trust had appropriate systems for managing conflicts of interest, and there was good awareness of the systems and principles required. We encouraged the Trust to further amend its systems so that conflicts of interest could be identified before meetings, and the appropriate response could be agreed. We noted that it was important that trustees take individual and collective responsibility for managing conflicts of interest, to protect the integrity of the Trust's decision-making systems.

1: We classify inquiries into three categories – "routine", "sensitive", and "major" – depending on the seriousness of the issues raised. For details, see pages 56-58 of our Annual Report 2007/08, available on our website at In 2007/08, 97 of the inquiries were routine and two were sensitive.

2: Our report on the outcome of this inquiry is available on our website at

3: Our report on the outcome of this inquiry is available on our website at

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