Auditor-General's overview
I have considered the employment termination arrangements for the chief executives of the eight local authorities that were dissolved on 1 November 2010 as part of the Auckland local government reforms, and the payments made under those arrangements.
The cost of the payments made under the termination arrangements is currently $1,405,315. This is the gross cost to the local authorities, but excludes payments that would ordinarily arise at the end of employment such as accrued annual leave entitlements. This cost may rise to $1,655,844 next year if one of the chief executives with a temporary role in the Auckland Council group does not become a permanent employee.
In deciding to inquire into the termination arrangements, I expected that:
- each local authority would have acted fairly towards its chief executive, in keeping with good employer requirements in the Local Government Act 2002;
- the Auckland Transition Agency (the ATA) would similarly have acted fairly towards the chief executives when exercising its employment-related responsibilities under the Auckland transitional legislation;
- payments would be made in keeping with contractual entitlements and with the Auckland transitional legislation, and be properly authorised;
- where possible, the local authorities and the ATA would work together to minimise the costs of termination arrangements to ratepayers; and
- chief executives and other employees would be given notice in a timely way, to avoid or limit costs of payments in lieu of notice.
My expectations were largely met. Of the total payments, almost all were made under contractual arrangements and in accordance with the Auckland transitional legislation. However, I consider that two payments with a total cost of $42,000 were not authorised and did not need to be made.
I also consider that the total cost of payments in lieu of notice to chief executives of $263,722 is significant and that the ATA and the local authorities could have done more to reduce or avoid these costs. The need to reduce or avoid these payments should be considered in any future restructuring of this kind.
I thank the chief executives and staff of the dissolving local authorities and of the ATA who assisted with this inquiry.
Lyn Provost
Controller and Auditor-General
3 November 2010