Inquiry into decisions by Delta Utility Services Limited to invest in residential development at Luggate, near Wanaka, and at Jacks Point, Queenstown

14 November 2012

The Auditor-General has decided to carry out an inquiry into decisions in 2008 and 2009 by Delta Utility Services Limited to invest in residential development at Luggate, near Wanaka, and at Jacks Point, Queenstown.

This document sets out the terms of reference for the inquiry.

Background

In 2008, Delta Utility Services Limited (Delta),1 a council-controlled trading organisation of Dunedin City Council, acquired a 50% interest in a joint venture for residential property development at Luggate. In 2009, Delta acquired 9.4 hectares of land at Jacks Point, for the same purpose. The combined cost to Delta was $14.12 million (comprising Luggate joint venture at $5.3 million and Jacks Point land at $8.82 million). Delta had not previously been involved in property development, but the company expected to expand its core business activities in the Central Otago region by providing infrastructure services as the land was being developed

There has been less demand for the residential sections than expected. In 2012, Delta reduced the value of the land in its financial statements by $7.5 million.

The Mayor of Dunedin City Council wrote to the Auditor-General on 19 October 2012 to ask for an investigation into Delta’s decisions to invest in the residential developments.

The inquiry

The inquiry will examine:

  • how and why Delta made decisions to acquire an interest in the joint venture at Luggate and to purchase the land at Jacks Point, including its consideration of risks;
  • compliance with legislation, including the Local Government Act 2002 and Companies Act 1993;
  • the identification and management of any conflicts of interests;
  • any consultation with or involvement by Dunedin City Council in the transactions; and
  • any other matters the Auditor-General considers it desirable to report on.

The inquiry is being carried out under sections 16 and 18(1) of the Public Audit Act 2001. We will not comment while the inquiry is under way, but will publish a report when the inquiry is completed.

Background information on the inquiry process

The role of the Auditor-General
Under the Public Audit Act 2001, the Auditor-General is responsible for annual audits, performance audits, and inquiries into how public entities use their resources.

The Auditor-General is an Officer of Parliament and, as such, is independent of the central and local government entities that we audit. The Auditor-General is responsible for determining the nature and scope of any inquiry she decides to conduct. The Auditor-General cannot be ordered to conduct an inquiry.

The Auditor-General has broad powers under the Public Audit Act 2001 to require public entities and other persons to provide information and to give evidence under oath. The Auditor-General has a general discretion to decide what information to disclose or include in a report.

The stages of an inquiry
Every inquiry has four broad phases:

  • Gathering information: We review relevant documentation held by the public entity concerned and other relevant individuals and organisations, and meet with or interview people who have been involved in the issues we are looking into.
  • Analysis: We analyse the information we have gathered and form our preliminary views.
  • Preparing a draft report and consultation: Once we have prepared a draft report, we consult as necessary on its contents to ensure that it is factually accurate and that the rights of any affected parties are properly protected.
  • Publication: We then finalise and publish the report.

General policy on comment during inquiries
Once the Auditor-General has begun an inquiry, the Office will not normally make any public comment on the substance or progress of the inquiry until we release a report. This policy protects the rights of those involved in the inquiry and our ability to carry out the work effectively and efficiently.

It is hard to predict what might emerge or transpire as we carry out an inquiry so it is equally hard to predict when we might be ready to report our findings. In general terms, relatively contained inquiries usually take 2-3 months. Larger and more complex inquiries can take 6-12 months.

Further information

More information on the Auditor-General’s inquiry function is available at www.oag.govt.nz/our-work/inquiries.

1: A subsidiary of Delta, Newtons Coachways (1993) Limited, was involved in the transactions. That company was re-named Delta Investments Limited in July 2011.

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