Former Horowhenua District Council chief executive officer David Clapperton.
Horowhenua District Council didn’t follow its own procurement policy when spending almost $1 million of ratepayers’ money on consultancy fees relating to the Levin landfill, and there is no sign of any written agreement.
The report from the Office of the Auditor-General (OAG) was in response to a complaint received last year raising concern about the terms of engagement of external consultants by former chief executive David Clapperton, and the costs incurred.
Over a two-year period, Morrison Solutions was paid a total of $895,172 to deliver consultancy work based only on verbal agreement with Clapperton. Many of the monthly invoices ended up being for more than $50,000.
The future of the landfill was uncertain and HDC — tasked with a tough decision — had received conflicting reports. A 2020 report had recommended the landfill remain open, while an earlier 2017 report recommended it close.
The OAG report says Clapperton had considered an independent report necessary because councillors needed clear financial assumptions to make an informed decision. He engaged Morrison Solutions after consulting other councils that had used its services.
The initial agreement was for an estimated $7500 work — no more than $20,000 — however, at that stage the full scope of the work could not be determined.
Morrison Solutions then recommended a business case be prepared to provide a more transparent and robust report to better inform councillors of the options for refuse disposal, taking into account social, environmental and cultural aspects, and cost.
It soon became apparent that a significant amount of additional work would be needed.
The OAG report says there was no record of written agreements for either the initial review work, or subsequent work. Council’s own policy for any procurement valued at $100,000 or more required a procurement plan, approved upon review, with progress updates.
“Council had a procurement policy but it was not followed in this case. Many of the disciplines of good procurement practice were missing, including consideration of the overall potential costs of the work, a procurement plan or business case to demonstrate the need for procurement, documentation supporting the selection and engagement process that was followed, and written contracts for the work that was carried out,” the report says.
“We would expect to see all of these in a procurement process where ratepayer money is being spent. Many were also requirements of council’s own policies.”
There was no business case put forward to justify the activity and evaluate the costs, benefits and risks of alternative options, or a recommendation of a preferred approach, it says.
“In this case, this analysis might have helped the council better predict the complete cost of engaging Morrison Solutions and therefore what processes needed to be followed,” the report said.
“In the end, nearly $900,000 of public money was spent. Although services have been provided for that money, the absence of a written and clear rationale for the work and selection of the provider, and a contract, means there is less confidence that the money has been well spent than if those steps had been taken.”
“It is also important that senior leaders in an organisation lead by example in following those processes. This sets the tone that complying with policies and processes is important and that those policies apply to everyone.”
The OAG considered potential conflicts of interest and found there were none.
Horowhenua district councillor Sam Jennings was concerned about the procurement process and laid a complaint to the OAG in February last year.
He said the findings vindicated his concerns.
“It’s bittersweet. It was a last resort. But it did need a review to say this is not right,” he said.
Newly appointed council CEO Monique Davidson said she accepted the findings of the report. HDC had since adopted a Procurement Policy that clearly outlined correct process, and had recently appointed a procurement officer, and a Procurement Policy Review Group would regularly report to council.
“It’s a disappointing position to be in because we have to focus on the future. We understand the community will feel let down,” she said.
“We have to move on. We have moved on, and are confident as an organisation in our approach to procurement, confident about the checks and balances, to make sure this doesn’t happen again.”
“We are focused on the future. We have to focus on the future. We have still yet to make a decision on the future of the landfill. We are working hard to make sure it is a robust, rigorous and genuine process where we have a decision on behalf of the community.”
Jennings praised CEO Davidson for her handling of the issue in a short time.
“She has moved so quickly to fix it with a new framework and there is real confidence that lessons have been taken and processes understood,” he said.
“This is a huge stride forward. There is trust in process and the decisions being made.”
Horowhenua District Mayor Bernie Wanden said the decision highlighted the need for policy and the need to adhere to policy.
“The reality is that when we were going through this process we had to contend with many different views and issues. Decisions at the time that were thought to be in the best interests of the district, but in hindsight were not as complete and as thorough as they should have been,” he said.
“Lessons have been learnt and now we are moving on to make decisions which will reflect the best interests of the district. It’s still on the table. It’s an ongoing issue and a complex and contentious issue that has divided the community.”
Mayor Wanden said a decision on the landfill would have to be made soon.
“It’s a complicated and complex issue. Nobody in council or our community wants to make a knee-jerk decision around the future of the landfill and wants to ensure that all the information is there and that the community is well aware of all the issues.”