Article 6: The Auditor-General's inquiry role

Our primary function is to audit all public entities in the public sector – of which there are about 4000. We have some discretionary capacity to examine in more detail issues of concern that are raised with us, but there are limits to that capacity. We receive a large number of requests for inquiries each year. We receive more requests to inquire into matters in the local government sector than in other parts of the public sector. We received 188 inquiry requests related to local government in 2009/10, and have received a further 59 requests from 1 July 2010 to date.

The requests we receive show that many people do not understand our role and its limits. For example, we get a wide range of requests asking us to:

• intervene in decision-making by local authorities and halt or reverse decisions;
• make a judgement about the legality of actions; or
• review individual decisions with which the correspondent disagrees.

In many of those cases, we explained that we do not have the authority to do what was sought and suggested that the complainant raise the concern directly with the local authority to allow the authority the opportunity to respond.

Our general inquiries workload spans many parts of local government activity. Common topics of complaint include application of rating policies, procurement, expenditure on large community facilities such as events centres, and decision-making processes for changing the way core services are delivered – for example, solid waste collection.

Although the concerns with the decision and the process may be genuine, in practical terms, people often hope that asking us to inquire may stall or stop the process. We cannot do this, as the Auditor-General has the power only to inquire and report – not to intervene.

We are working to improve the information we make available about our role and approach to requests for inquiries, so that it is easier for people to understand when we can usefully get involved and why.

In 2009/10, our significant local government inquiries were into the loss of money by the Auckland Regional Council for the LA Galaxy football match at Mt Smart Stadium, and Auckland City Council footpath contracts. More recently, we inquired into the termination payments for the chief executives of the Auckland local authorities that dissolved on 1 November 2010. We summarise this inquiry below.

Inquiry into payments to chief executives of dissolving local authorities in Auckland

We inquired into the termination payments for the chief executives of the eight Auckland local authorities that were dissolved on 1 November 2010 as part of the transition to the new Auckland Council.¹¹ We did this inquiry at the request of the Minister of Local Government. The inquiry was done in "real time". We looked at the payments before they were made, rather than after.

Our expectations included that:

• 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 Auckland Transition Agency 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 the cost of payments in lieu of notice.

Our expectations were largely met. Of the total payments, almost all were made under contractual arrangements and in keeping with the Auckland transitional legislation. However, we considered that payments with a total cost of $42,000 were not authorised and did not need to be made. These were payments for untaken professional development and to assist with career transition.

We also considered that the total cost of payments in lieu of notice to chief executives of $263,722 was significant. In our view, the Auckland Transitional Authority 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.

Other inquiry requests

We were asked to inquire into the decision by the Queenstown Airport Corporation to issue shares to Auckland International Airport Limited. The decision had led to significant public debate in the Queenstown district. Particular concerns raised include a lack of consultation with the Queenstown community and whether the transaction represents the best value for ratepayers.

We have an ongoing interest in governance and accountability arrangements between councils and CCOs, and an interest in commercial decisions made in a local government context. These matters raise questions of interest for the local government sector as a whole.

We decided to inquire into the Queenstown airport matter. However, we put our inquiry on hold because the opponents have challenged the relevant decisions in the High Court. The sector will no doubt watch the legal proceedings with interest.

Case law

The case law on the decision-making provisions in the Act is now more settled after the Court of Appeal decision in the Whakatane District Council v Environment Bay of Plenty litigation. The Court took a strict approach to interpreting the decision-making provisions in Part 6 of the Act. It found that Environment Bay of Plenty could not produce evidence to show that it had properly considered community views at all stages of the decision-making process, as required by section 78(2) of the Act. Since the Court of Appeal case, section 78(2) has been repealed as part of the TAFM reforms. However, our understanding is that the Court of Appeal’s approach to assessing compliance remains relevant despite the repeal of section 78(2).

Councils need to take care to document their decision-making processes and how they exercise their discretion about the nature and extent of consultation.

11: The inquiry report is available on our website: www.oag.govt.nz/2010/auckland-ceos-payments.