Dunedin's council missed chance to detect $1.5m car fleet fraud

By Chris Morris

The Dunedin City Council has confirmed it's investigating what's happened to cars in its fleet. Photo / DCC webcam
The Dunedin City Council has confirmed it's investigating what's happened to cars in its fleet. Photo / DCC webcam

Dunedin Mayor Dave Cull concedes a chance to detect the alleged $1.5 million Citifleet fraud may have been missed, after the council twice overlooked advice from Audit New Zealand.

The revelation came in Audit New Zealand's annual reports to the council, obtained by the Otago Daily Times, which highlighted gaps in council processes dating back to 2003.

They showed Audit NZ twice suggested the council consider creating a new audit and risk subcommittee, in 2007 and 2010, prompting the council to insist its processes were sound.

That was despite the council detecting another suspected fraud in 2008, between the two recommendations, the reports showed.

The suspected fraud -- which was not made public -- involved less than $3000, but resulted in a recently-appointed staff member losing their job, the ODT was told yesterday.

Despite that, the audit and risk subcommittee -- designed to improve the management of risks, including fraud, within the council -- was not created until last year.

Contacted yesterday, Mr Cull conceded Audit New Zealand's advice should have been followed sooner.

"I think we should have had a risk and audit committee earlier than we did."

And, asked if it might have helped detect the alleged Citifleet fraud, Mr Cull said: "Quite possibly, yes".

"It could very well have helped."

His comments came after the council on Friday confirmed it had called in police, and notified the Serious Fraud Office, following Deloitte's three-month investigation into the alleged fraud.

The probe revealed the alleged decade-long fraud involved the sale of 152 vehicles and more than $1.5 million in pocketed proceeds.

The findings have triggered finger-pointing between past and present council staff, councillors and Audit NZ, but council chief executive Dr Sue Bidrose said responsibility for failing to detect the alleged fraud rested with the council.

As a result, up to five council staff were involved in "employment processes", with some facing the prospect of losing their jobs, the ODT understands.

Local Government New Zealand president Lawrence Yule yesterday told the ODT the "mind-boggling" alleged fraud was the biggest involving a local authority he could recall.

There were likely to be lessons from it for councils across New Zealand, "to make sure this type of thing can't happen again", he said.

"It is pretty mind-boggling to think such a thing could happen over the sort of length of time it did."

He was also concerned the DCC had overlooked Audit NZ's recommendations for a new audit and risk subcommittee, which was now considered "best practice", he said.

It was not clear the subcommittee would have detected the alleged Citifleet fraud, but "you would have hoped it may have".

The Audit NZ annual reports, covering the period from 2003-12, largely confirmed the council's management controls were in order, while noting areas for improvement.

- Otago Daily Times

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