Warn­ing – when it hits the fan

Central Leader - - OPINION -

Think back to any tax prob­lem you’ve had – claim­ing for car run­ning ex­penses, entertainment claims they turned down.

Imag­ine the plight of Kaipara ratepay­ers with $80 mil­lion in debts hang­ing over them that just won’t go away.

Don’t turn this page and mut­ter that ‘‘Kaipara is a long way away … some­one must have fouled up the coun­cil books … the law will fix up the prob­lem.’’

It won’t. And there are lessons for ratepay­ers any­where – par­tic­u­larly in Auck­land – about closed doors.

Kaipara ratepay­ers didn’t know be­cause the coun­cil de­lib­er­ately okayed the loans in se­cret.

Some peo­ple could find it com­i­cal that the Kaipara com­mu­nity has got it­self into (you know what) over a sew­er­age sys­tem at Man­gawhai. But it’s far from funny.

When one elected coun­cil­lor raised alarms, they shut him out of dis­cus­sions. They ‘‘ knew what they were do­ing …’’

Cer­tainly the peo­ple who’d elected them didn’t know what the coun­cil was do­ing.

Not un­til it hit the fan, they didn’t.

By that time, the coun­cil was in it up to its ears.

Coun­cil­lors were sacked and com­mis­sion­ers were ap­pointed.

Au­di­tor-gen­eral’s in­ves­ti­ga­tors found that the Man­gawhai sew­er­age sys­tem cost was up from a first to­tal of $17 mil­lion, then $35m to $63m.

The re­port high­lighted ‘‘poor gov­er­nance, poor de­ci­sion-mak­ing, bad record-keep­ing, lack of at­ten­tion to de­tail, lack of clar­ity about who was re­spon­si­ble for par­tic­u­lar de­ci­sions, us­ing work­shops in­stead of coun­cil meet­ings to make im­por­tant de­ci­sions’’.

Ex­am­ple: The cost of ef­flu­ent dis­posal rose from $361,000 in 2005 to $14m.

Au­dit­ing and As­sur­ance Stan­dards Board chair­man Neil Cherry found the au­di­tor used by Au­dit New Zealand was ‘‘sub­stan­dard’’ be­tween 2006 and 2009.

His re­port said the au­di­tor re­lied on the coun­cil staff as the pri­mary source of au­dit ev­i­dence and did not in­de­pen­dently cor­rob­o­rate the in­for­ma­tion pro­vided. The er­rors af­fected four an­nual au­dits and long term plan au­dits.

When the shock­ing sit­u­a­tion was de­tected, two things hap­pened.

Kaipara ratepay­ers planned to ask for a ju­di­cial re­view of the coun­cil’s de­ci­sions – a hear­ing be­fore a judge.

But the Govern­ment did some le­gal sleight of hand.

In a rush be­fore last Christ­mas, it re­vised the act in­volved to get rid of clauses al­low­ing for ju­di­cial hear­ings to be sought ret­ro­spec­tively.

The Kaipara ratepay­ers’ re­quest for a judge’s re­view of the coun­cil bor­row­ing was dead in the wa­ter. And the to­tal of money they were said to owe was up to $80m and count­ing.

As one vic­tim put it: ‘‘Jus­tice Paul Heath has cre­ated an alarm­ing and dra­co­nian prece­dent that has huge ram­i­fi­ca­tions for every­one who pays rates in New Zealand.

‘‘Un­der the law as it stood un­til this judg­ment, coun­cils were sup­posed to con­sult their ratepay­ers be­fore they bor­rowed sig­nif­i­cant amounts of money.

‘‘In 2005/6, Kaipara coun­cil bor­rowed more than $60m in se­cret and undis­closed deals with var­i­ous bank­ing in­sti­tu­tions like the Royal Bank of Scot­land and oth­ers which have since gone up in smoke.

‘‘A draft judg­ment on May 28 found that the ac­tions of the coun­cil were il­le­gal (un­law­ful).

‘‘Now the fi­nal judg­ment makes it clear that if Par­lia­ment had not acted (in fla­grant vi­o­la­tion of all con­sti­tu­tional prin­ci­ples and ethics) the ratepay­ers’ case for a re­view would have been wholly suc­cess­ful.

‘‘But be­cause of what Par­lia­ment did, the court’s hands were tied. It could not make find­ings and dec­la­ra­tions in line with what was sought.’’

And Kaipara’s debts keep on mount­ing. So do the rates.

And a scheme promised to cater for 4200 con­nec­tions is just cop­ing with 1500.

Ques­tions: Who is go­ing to pay for shonky de­ci­sions like Man­gawhai’s – made when ratepay­ers were shut out?

Why did the Govern­ment change the law to pro­tect in­com­pe­tent coun­cil­lors?

Con­tro­ver­sial: A rates re­volt at Man­gawhai has po­larised por­tions of the com­mu­nity.

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