Part 1: Introduction

1.1
Mangawhai is a small harbour on the east coast of Kaipara district, south of Whangarei. It has a small community of permanent residents. However, because it is a popular holiday destination, its population grows significantly during the summer. As the local authority for the area, the Kaipara District Council (KDC)¹ has had to consider wastewater disposal for Mangawhai.

1.2
Since 1996, the need to construct a community wastewater scheme for Mangawhai has been a significant issue for KDC. It has also caused significant community concern. A wastewater scheme was eventually built between 2007 and 2010, using a public private partnership (PPP) approach.

1.3
By the end of 2011, KDC was carrying out several reviews of the wastewater scheme, including legal and financial reviews. In February 2012, it asked the Auditor-General to carry out an inquiry into its decision-making, financial, and contract management processes for the scheme. By this stage, it was apparent that there were probably widespread problems with the project and possibly with KDC's more general financial and management systems.

1.4
We have looked at all 16 years of the project – from 1996 to 2012 – including:

• KDC's planning and decision-making;
• the governance, management, and contracting arrangements;
• KDC's financial management, monitoring, and reporting;
• the funding for the wastewater scheme; and
• the overall suitability and cost-effectiveness of the scheme that has been constructed.

1.5
The problems with the wastewater project raised other questions, so the inquiry also considered the roles played by KDC's auditor and by other relevant agencies.

1.6
The inquiry has not considered questions of legality in any detail. One of the reasons KDC asked us to inquire was its recognition that it had probably not complied with relevant legislation in setting several rates over the years. It needed to resolve those questions about the basis for its actions itself, without waiting for this inquiry to conclude. In any event, the Auditor-General cannot provide a definitive view on legal questions. Ultimately, these are questions for the courts.

1.7
During our work, two other processes began to assess legal questions:

• KDC has initiated a Local Bill seeking to validate a wide range of its decisions and actions. This Bill would put an end to debates about the status of those decisions and actions.
• The Mangawhai Ratepayers and Residents Association (MRRA) filed judicial review proceedings in the High Court seeking declarations on the legality of many of KDC's actions during the project.

1.8
When we wrote this report, these issues were in the process of coming before the High Court and the House of Representatives for consideration. It is not appropriate for us to comment on legal questions that these other processes are examining.

1 In this report, we refer to the organisation as a whole as "KDC". We use "the Council" to refer to the formal body made up of elected members.