Wellington City Council could save ratepayers between $21 million and $42m with improved contract management, Deloitte has found. Photo / Mark Mitchell
Wellington City Council could save ratepayers between $21 million and $42m with improved contract management, Deloitte has found. Photo / Mark Mitchell
Poor oversight of contracts at Wellington City Council could be costing ratepayers tens of millions of dollars, but the council doesn’t know how much money it has wasted and won’t say if it plans to find out.
The revelation has been labelled “bitterly disappointing” by councillors and has prompted theLocal Government Minister to call for action.
Findings of poor bookkeeping were among failings identified in a troubling independent report released last week, revealing the council was not tracking a majority of its contracts and was signing up to non-competitive agreements.
The Deloitte probe into the council’s operations said the council was overstaffed to the tune of 330 roles, and found widespread “non-compliance with procurement and contract management processes”.
Only 20% of contracts with external providers are tracked in the council’s contract management system, and correct processes for procurement are often bypassed, it stated.
“Contracts are often rolled over or directly appointed based on past performance, which may miss competitive opportunities that offer better value for money”, the $435,000 “Future Fit Pōneke” report said.
It suggested $21 million to $42m could be saved through strengthening financial oversight.
Deloitte was paid $435,000 for the report, which found the council is overstaffed and doesn't manage its contracts properly. Photo / Supplied
Speaking to media at the report’s release last week, chief executive Matt Prosser said it was difficult to analyse the amount of money lost due to the poor contract management, but admitted it was “not best practice”.
Mayor Andrew Little said it is “good that we know that now”, and that it proves change is needed.
A council spokesman said there was nothing more to say in response to further questions about next steps and whether there were plans to establish how much money had been wasted.
It echoes a similar finding at the capital’s water provider Wellington Water, which was accused of ripping off ratepayers after a report found its poorly managed contracts resulted in it being charged up to three times as much as other councils.
Asked about the Deloitte report’s findings, Local Government Minister Simon Watts said he expects all councils to “follow best-practice contract management and procurement processes to ensure value for money for ratepayers”.
Local Government Minister Simon Watts is calling for Wellington City Council to improve its contract management system following the troubling report. Photo / Mark Mitchell
“This includes taking action where there is evidence that they could improve their processes in order to deliver better value for ratepayers’ money,” he said.
“Wellington City Council now has a report that identifies a number of issues and I expect them to act on this.”
Watts said the Government has been clear in instructing councils to live within their means, and said recent policy announcements like rates capping will support this.
Councillors say findings disappointing but not surprising
Deputy Mayor Ben McNulty said he did not want to guess how much ratepayer money the council had potentially wasted, but the council’s new Revenue and Financial Value Review sub-committee, which he chairs, will “try to quantify that as best as we can”.
McNulty said it is not necessarily a case of being fleeced by contractors but rather failing to test the market and not following good process.
Wellington Deputy Mayor Ben McNulty said the findings are "bitterly disappointing". Photo / Mark Mitchell
He pointed to the council spending $560,000 to install a two-storey bike rack near its headquarters as an example of an overspend due to a lack of process.
“What you’re seeing is a story of [a] council that has not professionalised its contract management, it is bitterly disappointing and it’s another example of this council having not applied fiscal discipline when it should have,” he said.
Councillor Diane Calvert, who chairs the Council Planning and Finance Committee, said given the council spends hundreds of millions of dollars on contracts, “we could be talking a considerable amount of money” being wasted.
Calvert said while disappointing, the findings were not surprising, also noting the bike rack overspend and a recent case of the council not going to market for contracts on Christmas events.
She wanted the council to quantify the level of squandered funds: “Obviously it’s widespread but until we understand the true scale of it, it’s hard to be able to comment.”
Ethan Manera is a Wellington-based journalist covering Wellington issues, local politics and business in the capital. He can be emailed at ethan.manera@nzme.co.nz.
