Fresh probe begins into debt-ridden council

By Andrew Laxon

Northland National Party MP Mike Sabin. Photo / John Stone
Northland National Party MP Mike Sabin. Photo / John Stone

The commissioners of debt-ridden Kaipara District Council have begun a new inquiry into its past financial decisions, including the advice it received from former chief executive Jack McKerchar.

The tiny Northland council is struggling under an $80 million debt, a long-running rates strike and court action by its own ratepayers over more than $17 million of illegally set rates dating back to 2006.

Its former councillors stepped down last year in response to a damning report, making way for Government-appointed commissioners.

Three inquiries are under way into what went wrong. They consist of

An Auditor-General's investigation into how the cost of a sewerage scheme at Mangawhai blew out from $11 million in 1999 to $62 million, creating most of the council's debt.

An independent inquiry into how the Audit Office failed to notice the excessive debt and repeatedly gave the council a clean bill of health.

The commissioners' investigation into other financial transactions they have discovered since taking over last September and see as questionable.

Northland MP Mike Sabin told Parliament ratepayers had been woefully let down by the council's "mismanagement, incompetence, carelessness and dysfunctional governance".

Mr Sabin, who is sponsoring a local bill to retrospectively validate the illegal rates, said the bill was necessary to keep the council functioning but it would not allow anyone responsible for poor decisions to duck the consequences.

He said serious questions had to be asked over how Audit New Zealand had approved the expensive sewerage scheme when the council's own long-term plan failed to show how it would pay for the costs.

Speaking at the bill's first reading this month, he told MPs: "Huge questions also need answering as to the operating relationship between the former chief executive officer, Jack McKerchar, and the elected members of this council, the due diligence processes, and the relationship between Mr McKerchar and consultants and contractors.

"I want to assure ratepayers that, as a former detective, I share your concerns and no stone will be left unturned by me in seeking justice and accountability for those ratepayers."

Chief commissioner John Robertson announced last month that the commissioners were keeping their options open over possible legal action against those involved in the Mangawhai scheme.

"If by taking legal action, we are able to recover costs and reduce the financial impact of the Mangawhai Wastewater Scheme on ratepayers, then it is likely we will do that."

The statement was dismissed as a smokescreen by the Mangawhai Ratepayers and Residents Association, which has gone to the High Court to have the council's rating decisions declared illegal.

Association chairman Bruce Rogan said the council just wanted to get rid of the legal challenge and had no incentive to take any legal action - a claim rejected by Mr Sabin.

"I can put my hand on my heart and say that the commissioners, where they can find accountability and make it stick, they will," he said.

Mr Robertson said the commissioners' inquiry involved following up past transactions by the council which raised questions and required further investigation. "The decisions of council were advised by the CEO, so as part of general matters we're looking into that."

A spokeswoman for the Auditor-General's office said the draft report on the Mangawhai sewerage scheme had been sent to affected parties, whose responses would influence the final version.

She said the separate inquiry into the Audit Office's actions, undertaken by Auditing and Assurance Standards Board chairman Neil Cherry, was also not finished. It would be made public with the Mangawhai report.

Mr McKerchar resigned as chief executive in August 2011 citing health and personal reasons. He received a $240,000 payment for leaving a year before the end of his contract, which was initially confidential but made public in January.

Mr McKerchar said he did not want to comment on the commissioner's inquiry or Mr Sabin's speech.

- NZ Herald

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