Last Decisions 

 

Legal Eagle's submissions to the Auditor-General (here)

Letter from Bruce Rogan to Councillors 20 August 2012 (here)

Letter from Clive Boonham to Councillors 20 August 2012 (here)

Letter from Clive Boonham to Councillors 22 August 2012 (here)

____________________________________________________

 

TO: THE AUDITOR-GENERAL

FROM: CLIVE BOONHAM

27 August 2012

18 REASONS WHY YOU SHOULD NOT SIGN OFF THE AUDIT ON THE KAIPARA DISTRICT COUNCIL LTP FOR 2012/22 AND THE ANNUAL REPORT FOR 2010/11

1. Audit NZ should have been replaced
I have stated on many occasions that Audit NZ should have been removed as the auditor of the KDC as soon as the OAG acknowledged that there were widespread concerns about the audit performance of its subsidiary.

When a party is under serious investigation for its auditing competence then that party should be immediately suspended from any subsequent involvement in that matter until the results of the investigation are available.

That principle relates to all normal situations but where the investigation involves an inquiry into the competence of an agent of the Auditor General then it is quite unbelievable that the OAG would ignore that fundamental principle and allow that agent to continue in its auditing role.

2. OAG code of ethics
The code of ethics of the OAG makes it very clear that the integrity and reputation of the OAG must be vigorously protected. The Auditor-General is obliged to take swift and appropriate action where there is a situation, including critical media reports, and the possibility of litigation, that could affect the integrity and reputation of her Office.

The criticism of Audit NZ's audit performance and the universal acknowledgement by ratepayers, and many others throughout NZ, that Audit NZ has played a pivotal role in the illegalities and failures of the KDC has immeasurably damaged the reputation of the OAG.

However, so far there has been very little action or comment from the A-G to remedy the situation or to reassure ratepayers and others with concern that the A-G takes the matter seriously and will take steps to resolve that concern.

3. Startlingly sudden assurances of competence and no concerns about financial viability and financial prudence
Bruce Robertson's letter to Council of 13 August 2012 sets out clearly what Council had to achieve to be in a position to adopt the LTP. That was a summary of Audit NZ's letter of the same date.

In his letter Bruce Robertson stated his concerns "that the Council relies on too few appropriately skilled staff to be in a position to resolve these issues in time to adopt the 2011 annual report and the 2012-22 LTP on 29 August."

Somehow, just a week or so later the Council confirmed that all those concerns were irrelevant and that Council had satisfied itself that all of the very serious outstanding considerations were no longer an issue.

Does the OAG take such statements at face value?

Does it sign off an audit when it knows that the assurances of Councillors have no basis in fact?

4. Failure to comply with statutory time-frame - LTP
The letters that I have mentioned above make a lot of various considerations such as the illegality of previous rates and other historical matters. However there are recent matters of major significance that have made little impact on the auditor and appear to have been summarily dismissed as irrelevant.

The first issue is that the Council has breached its banking covenants. The first covenant breached was the failure to adopt the 2010/11 annual plan, which is now nearly ten months late and still not adopted. Added to that is the failure to adopt the LTP by 30 June as required by the LTP.

The OAG and Audit NZ dismiss these failures to comply with statutory deadlines as trivial as if they have the power to waive the obligatory requirements of the LGA on the basis of political or practical expediency.

Section 93 LGA states that a local authority must have an LTP at all times. It also states that an LTP must be adopted before the commencement of the first year to which it relates. In other words it must be adopted by 30 June.

The KDC has failed to comply with both of these requirements.

The OAG appears to have treated these obligatory requirements as optional and used its assumed powers of waiver.

With respect, I believe that the OAG is underestimating the significance of these matters. Local authorities' powers are created by statute and it is clear that a local authority may only exercise its powers within the framework, and within the timescale, that is set out in the LGA. Those are the limits of a council's powers.

We have already seen how Simpson Grierson has stated that all the EcoCare rates to date are invalid because Council did not comply with the requirements of the LGA and the LGRA when setting and assessing those rates.

In that instance there is no suggestion that those requirements are not obligatory and can be ignored, or that the OAG has the power to waive the strict requirements of the legislation.

It is only a small step away to argue that for that very same reason that the KDC is now operating outside the LGA because it has failed to adopt its annual report and the LTP within the statutory time-frame. There is no provision in the Act for later adoption, and there is no granting of powers of waiver to the Auditor General.

This matter has not been the subject of litigation but I suspect that the courts would interpret the statutory requirements very strictly, and the banking creditors of the Council might find that they are dealing with a local authority that was operating outside the law.

Given ratepayers frustrations with the Minister's handling of this whole matter, and the perception that Audit NZ has been less than competent, there is a very real possibility that ratepayers will institute legal proceedings to challenge the validity of the LTP and annual report.

If they are successful then Council will simply fold. That is a real factor that MUST be taken into account when auditing the annual report and the LTP.

5. Failure to comply with statutory time-frame - annual report
There is another matter that concerns me about the failure to adopt the annual report for 2010/11. The reason why a deadline date for the report being adopted (four months after the end of the financial year covered in the report) is because it is part of the planning and consultation process under the LGA.

Ratepayers are entitled to have the information from the prior annual report when they are consulted on a draft new annual plan or LTP

That process of consultation is so important that the A-G herself wrote only last year a discussion paper: Improving the usefulness of annual reports. The A-G makes the following comment about the importance of the annual report:

Local authorities prepare annual reports to discharge their public accountability responsibilities. A local authority’s annual report serves as a communication tool for providing wider information on activities carried out and services provided, and for comparing actual service delivery with forecast service delivery. The information in annual reports and summary annual reports should allow ratepayers, the community, and the wider public to assess how local authorities have performed in relation to stewardship of community assets, and the efficiency, effectiveness, and cost-effectiveness of operations.

She then goes on to say:

The annual report should link forecast performance and actual performance. The annual report should compare forecast expectations to actual results, should “feed into” the next year’s forecast, and should signal any intended changes in direction, services, or actions based on an analysis of the current year’s performance.

The communication tool that the A-G talks about is the annual report itself but there is also the summary which must be made available to ratepayers one month after the adoption of the report.

Ratepayers in Kaipara have been denied both the report and the summary. They have not been able to assess the performance of Council or consider all the other information in the annual report.

In addition, and this is the crux of the matter, when considering the information in the recent draft LTP, they had no idea what was in the previous annual plan so there was no information on which to base an assessment of the forecasts and direction for the future. There was no "feed in".

That is why you have annual reports and that is why there is a statutory deadline.

The OAG has treated the failure to comply with this compulsory provision as insignificant. It appears to be one of those matters that is dealt with as part of the OAG's assumed power of waiver.

I have absolutely no doubt that the courts will see it very differently. Why would the LGA have a step by step planning process with a set timetable to enable proper and appropriate consultation with ratepayers, and then allow local authorities, at will, to miss out vital steps in the process and deny ratepayers their full right to information and consultation?

I would surmise that not only is that annual report invalid because the statutory deadline has not been met, but the LTP is also invalid because the planning and consultation chain envisaged by the Act has broken down.

6. Breach of banking covenant - appointment of commissioners
The other major banking covenant that the Council has run foul of is the appointment of commissioners by the Minister. This is a biggie for any bank. It means effectively that the Council is out of control from a financial and legal point of view and cannot effectively be allowed to continue in office.

Breaching minor covenants (but with substantial legal ramifications) is one thing but the replacement of a council by commissioners is about as big as it gets. The banks in question will be in an absolute lather worrying about the security for their debt and the possibility of a substantial default on the loans.

Once commissioners are appointed the whole essence of a council changes. It necessarily means that the council is at risk financially and that draconian steps have to be taken to try and salvage the ship. This fundamental change does not appear to have registered with Audit NZ or the OAG who seem to treat the appointment of commissioners as a insignificant matter.

I understand that the banks have given assurances to support the Council in the interim. They have no choice. But that decision is not to support the LTP. It is to support the government and the commissioners provided that they get rid of the LTP and introduce immediate measures to stop the carnage.

Council's future is very rocky and the breaching of banking covenants is going to have a serious impact on the nature of Council's operations. All of this must be factored into the audit of the LTP and given its due weight.

7. Statement of compliance
Ratepayers understand that the Chief Executive is refusing to sign the statement of compliance. This is an essential part of the annual report, and clause 34 of Schedule 10 of the LGA states that it must be signed by the Mayor and the Chief Executive.

The OAG has no power to amend or waive that requirement. If it does then the annual report will be non-compliant with the Act and therefore invalid.

8. Which of the set of facts is correct?
The review team appointed by the Minister reported to the Minister that the Council was is such a dreadful situation that it had to be replaced with commissioners. From what I understand every facet of the Council's operations including past, present and future is blighted.

We do not know the full facts because the Minister has not yet released the review team's report. The extent of the administrative carnage is, however, illustrated by the comments of the review team's leader Greg Gent when he addressed a meeting at Mangawhai recently. According to the Northern Advocate (here) he likened the Council to a "burning deck".

The Minister has had the report for a week and it is of concern that he has not released it. Many are adopting the view that it is a deliberate ploy to underplay the magnitude of Council's situation so that the auditor and the OAG do not have access to the report, and the true facts, before signing off the audit opinion. That means that the Minister can achieve his principle aim of having the LTP adopted on Wednesday.

However, what we do know with absolute certainty is that the problems that Council has were so great that it could no longer be allowed to continue.

Both the Auditor-General and Audit NZ are fully aware of the problems facing Council. The two letters of 13 August 2012 to Council expressed those concerns and questioned the ability of Council to satisfy those concerns in time to adopt the LTP.

Surprisingly, in a complete about-face, following the Council meeting of 23 August, Council has now assured the auditor that all those concerns no longer exist.

The Councillors are now stating, to use the words of Bruce Robertson in his letter of 13 August, that Council:

• is financially viable;

• has an appropriate and prudent financial strategy;

• is basing its long-term planning decisions on the right information; and

• has the capability to deal with the complex and compounding nature of the issues at hand.

Can we accept that as a true statement?

I know that it is untrue. The ratepayers know that it is untrue. The Councillors know that it is untrue. Greg Gent and his review team know that it is untrue. The Minister knows that it is untrue. And the OAG and Audit NZ know that it is untrue.

Certainly the hard evidence is hidden away in the secret report that the Minister is withholding, but we all know enough about the situation to know where the truth lies.

That being the case, I believe that the Auditor-General has an obligation to provide the ratepayers of Kaipara with the answers to three very simple questions:

1. If the Council can satisfy all the concerns expressed by your Office and satisfy you that it is a going concern and financial viable for the foreseeable future; if its financial strategy is appropriate and prudent; if its long-term planning decisions are based on the right decisions: and that it has the capability to deal with the complex and compounding nature of the issues at hand; then why on earth did the Minster's men force what sounds like the perfect Council to effectively terminate its own existence?

2. Which set of facts is correct: (a) The assurances that you have received from the KDC Councillors that all the concerns above have been satisfied and that Council can launch into the next ten years with confidence, or (b) The dire report of the Minister's review team and the Council being " a burning deck", and the fact that Council has been sacked for incompetence and its inability to resolve and fix the issues?

3. Which set of facts are you going to adopt as the truth for the purposes of the audit of the annual report and the LTP?

9. Relationship between Audit NZ and KDC
Councillors were under considerable pressure to tick the appropriate boxes and endorse the plan.

Some of that pressures came from Audit NZ. The audit process should be cold, clinical, removed and aloof. It is the systematic assessment of facts and figures against a set standard. Empathy, sharing goals, and political consequences have no role to play in that process.

The relationship between the Council and Audit NZ goes far beyond the relationship of council and auditor. It appears to be more like a partnership, or perhaps even more extreme.

Audit NZ behaved in the way that a guardian would act in urging and coaxing a subordinate and reliant child, struggling for competence and direction, to reach the goals that have been set.

Audit NZ has then changed its hat and become the judge and awarded its own child the gold medal for its performance.

That may be fine for a parent or guardian but not for a professional independent assessor whose role is to bring a laser-light scrutiny to the affairs of a council.

Helping out partners, achieving goals and complying with political ends are not part of the job. The whole purpose of the auditing process is to protect the best interests of the ratepayers whose monies are being used by the Council.

Audit NZ has lost sight of that. Its relationship with the KDC appears to me to be a perfect example of the phenomenon of regulatory capture. Regulatory capture is where those who are meant to scrutinise and act as watchdogs actually end up supporting those who they are meant to audit, to the disadvantage of the very people that they are supposed to protect.

10. Invalidity of draft LTP
Many ratepayers made submissions on the draft LTP to the effect that it did not comply with the requirements of the LGA in respect of decision-making and consultation.

The LTP included a complete revamp of the rating base for Kaipara but completely failed to comply with the substantial provisions in the Act relating to decision-making and the assessment of options and outcomes. Because there was insufficient information ratepayers were unable to consult appropriately.

The LTP was simply an accounting exercise based on supporting the massive debt and did not include any consideration of the four well-beings.

The OAG is aware of these submissions so I will not go into further detail.

Audit NZ made the following comments about this matter:

We are aware that the Council’s LTP SOP attracted a high number of submissions from the public and that, although not unexpected, this put a lot of pressure on Council’s processes. Not surprisingly, Council staff have found it difficult despite their best efforts to follow the detailed procedures set out in the Act in every respect. As a result, there are some shortcomings in the procedures followed by Council (for example, acknowledgement of submissions received).

Whether the LTP complied with the legislation is ultimately a decision for the courts. However there appears to be sufficient weight to the argument that the draft LTP failed to meet the requirements of the LGA.

11. Invalidity of the final LTP
The LGA is silent on whether local authorities are obliged to reconsult with ratepayers when significant changes are made to a draft LTP following initial consultation.

The auditor makes this comment:

Also, as noted above, the Council’s draft LTP is quite different to the Council’s LTP SOP, which the Council adopted on 27 April 2012 for the purpose of consulting with the community. We need to consider the Council’s legal advice on this matter to ensure that the Council has not inadvertently breached the requirements of the Act by changing the proposals that they have consulted their communities on.

With respect, the OAG's deference to legal advice obtained by local authorities is simply not acceptable. The Auditor-General is very aware that lawyers are hired guns and act on their clients' instructions.

The history of the KDC over the past years is littered with illegalities because its solicitors either failed to give the correct advice or because that advice was misrepresented.

The Auditor-General is aware of the illegal rates issue involving the KDC. The OAG abdicated all responsibility for that issue because the KDC simply advised that it had a legal opinion supporting its action. No viewing or assessment of that opinion, just a quick retreat from the watchdog role, and washing the hands of the whole affair. As a result ratepayers in Kaipara were illegally pillaged of millions of dollars for four years.

There is no point in having a watchdog if it is going to be so easily dissuaded from any involvement in such cases. In this instance the OAG is almost inviting Council to provide a legal opinion with the wording already suggested by the OAG, so that the OAG does not have to consider the matter any more.

The comments on the OAG's website are far more robust.

Dealing with significant changes after issuing a proposal

Issue

4.35

The process of consultation, a change in circumstances, or an unexpected opportunity can lead to changes to a proposal. If a proposal has been revised, it can be difficult to determine whether further consultation is needed.

Legislative requirement

4.36

The Act does not specifically address this circumstance, and there is no case law to date to provide guidance.

Discussion

4.37

The main point is whether the matter is entirely new or whether it is consistent with a local authority’s overall strategy. If the alteration changes the proposal to such an extent that the altered proposal would have attracted additional or different submissions to those received, the local authority should consider its consultation options and should consider not confirming the proposal immediately. The principles of consultation require that relevant information be provided for consultation. This requirement will not be met if a revised proposal includes relevant information not previously provided to the public.

4.38

In those cases where a revised proposal is consistent with existing adopted strategies or policies, but perhaps differs in timing or cost, some local authorities have decided not to do more consultation. It is a difficult matter that requires judgement that takes account of the particular situation. In our view, additional consultation is more likely to be required if the matter is completely new or has a significant effect on matters directly affecting the community, such as levels of service or rating levels.

It is clear that the final LTP is a very different document to the draft LTP that was consulted on. There were many substantial changes and matters that were not originally consulted on. Although the level of rates dropped in some circumstances there are instances where there are rate increases that had not been contemplated in the original.

It is also interesting that Audit NZ has expressed some concerns about consultation with ratepayers of information in the amended plan:

The Council’s series of reviews of underlying information to the LTP, including asset management plans, that may lead to increased renewals and/or other capital expenditure above that forecast in the LTP (see below).

In our view, the Council needs to tell the community about those initiatives because they have the potential to change the levels of service received by the community, and/or the forecast costs of delivering those services. It also means that this LTP, setting out the Council’s current intentions, could be subject to significant change in a relatively short time frame. We expect to see the Council’s intentions more prominently disclosed within the LTP

In our view, there are a number of assumptions that may be less certain than previously presented and that need reconfirmation by the Council, including assumptions about:

• growth;

• the level of development contribution revenue; and

• lower interest rates on debt, based on a presumption of being able to refinance debt with the Local Government Funding Agency.

Also, in our view, the Council needs to enhance its disclosure about the risks associated with its assumptions, including demonstrating the sensitivity of the assumptions to alternative scenarios, as required by schedule 10, clause 17 of the Act. This should help the community and other interested stakeholders assess the level of uncertainty within the forecast financial information in the LTP.

The Council needs to be satisfied that the assumptions that underpin the LTP are reasonable and supportable, and that areas of significant uncertainty are appropriately disclosed within the LTP. This will enable the community and other interested stakeholders to gain a proper appreciation of the risks facing the Council during the period of the LTP.

What Audit NZ fails to say is that disclosure on its own is insufficient. What is the point in having the information in a document that has already been adopted?

What Audit NZ should have said is that the information should have been made available and ratepayers should have been given the opportunity to consult on it.

Council failed to do that.

There is little doubt that the Council was obliged to reconsult but did not have sufficient time to do so. This may be understandable but the courts will only be interested in strict compliance with the Act. Local authorities know what the requirements of the Act are, and the deadlines that apply. They should ensure that they meet those requirements.

12. LTP not financially prudent
In its letter to the Council of 13 August 2012 Audit NZ expressed its concern as to whether Council's financial strategy was prudent. The comments below are taken from that letter. I have added my comments in blue.

Although the Council has set out its financial strategy, in our view, it is an open question whether or not the LTP is financially prudent. The Council is facing a complex and challenging set of factors, which combine to threaten the financial prudence of the LTP, including:

High Council debt of $87 million at the start of the 10-year period of the LTP;

The real debt is over $100 million if you add in the illegal rates collected, and may be more once independent investigators gain access to the financial accounts.

• the Council’s reliance on the continued support of its bankers, with at least one possible breach of its banking covenants;

There have now been several breaches of covenants including the appointment of commissioners. With the appointment of commissioners and having breached banking covenants the LTP becomes a charade and will be consigned to history within a few weeks.

The irony is that the support of bankers will depend on dumping the LTP as soon as possible and introducing a far more rigorous regime.

the Council’s reliance on a significant level of revenue from development contributions during the 10-year period of the LTP;

This is not going to happen. Developers have left Kaipara in general and Mangawhai in particular. Developers are not foolish enough to keep dipping their hands into the pockets to cover Council's incompetence and its exorbitant charges.

the Council’s forecast cash flows within the LTP depending on timely collection of rates;

The rate strike will not only continue but will broaden across Kaipara. Ratepayers are resolute that rates will not be paid until the Council and those responsible are made accountable for the illegal debts, and that those in charge of Council act in the best interests of ratepayers.

the Council’s reliance on not being required to repay any rates that may be found to have been invalidly set before the 2012-22 LTP;

It is a certainty that If the illegal rates are not refunded then ratepayers will apply to the courts for a judicial review and an order for repayment of the rates. The chances of Council validating the rates through legislation is minimal. The view of ratepayers is that Council should repay the rates and then re-bill them if it happens to validate them.

In spite of the assurances of Councillors the evidence speaks for itself.

13. The LTP does not comply with the LGA
Section 93 LGA sets out the requirements for an LTP. The essence is that it is a detailed plan for ten years.

The LTP being adopted by Council does not meet those requirements. Council's financial situation is so fragile, and the information available to it so unreliable, that it cannot project ahead for more than a few months.

The LTP may include references to ten years and give the appearance of an LTP, but Council makes it perfectly clear that the LTP is an interim measure only and will be replaced by a substantial amendment or amendments in a short space of time.

The LTP is therefore a sham. It is not a long-term plan in terms of the Act.

There is no provision in the LGA for an interim plan in the form proposed by Council

14. Bankers and Government's attitude to plan
Even if the Council had stayed in office the LTP was only an interim measure.

However, with the appointment of commissioners and the breach of an important banking covenant, it is clear that the LTP's life will be even shorter than envisaged by Council. Council's bankers will be insisting on immediate draconian measures to try and rescue the Council from insolvency.

The Minister of Local Government has made his intentions clear. In the Q & A issued when the appointment of commissioners was announced, the Minister stated:

If adopted by the Council, the Long Term Plan would be an interim measure that would enable the Council to maintain essential services. It would be a priority for the commissioners to amend the Plan to provide the Council with a sustainable and equitable funding base.

The long term plan is that in name only. The whole purpose is not to plan for the next ten years but to serve as an interim measure so that essential services (such as rates) can be maintained.

Whilst that is an important consideration for the government and the commissioners it appears that they have run foul of the requirements of the LGA in trying to pass off what is an emergency and interim measure in the guise of a long term plan.

To do such a thing may be politically expedient but I suggest that the courts would view the matter very differently. They are not going to be impressed with an LTP that is adopted beyond the statutory deadline date and does not meet the statutory requirements of an LTP.

15. Minister's view of financial viability and financial prudence
As I pointed out earlier, neither ratepayers nor the Auditor-General have access to the report from the Minister's review team that triggered the appointment of commissioners. Only the Minister has seen it. It is therefore very relevant to note the Minister's comments about Council's situation based on that information in that report. I refer to the quote from the Q & A in the paragraph above.

Note that LTP is an interim measure only and is going to be scrapped very quickly. Note also that the changes will:

provide the Council with a sustainable and equitable funding base.

That comment suggests that the Minister does not believe that the funding base in the LTP is either sustainable or equitable. Which effectively means, in the Minister's informed view, that Council under the LTP is not financially viable or a going concern, and that its financial policies are not prudent.

16. Relevance of Council's assurances 1
If the Minister believes that Council is not financially viable and its LTP policies are not financially prudent, and all the evidence supports that view, then what weight is to be put on the completely opposite assurances of Councillors?

Does the auditor take at face value the assurances of Councillors even though it is absolutely clear that those assurances are completely false and do not accord with the facts?

Surely it is the auditor's job to base all findings on uncontroverted facts. Opinions, promises and assurances from those who are being audited are worth nothing.

17. Relevance of Council's assurances 2
One of the farcical things about this whole process is that the auditor is basing the whole audit report for what is supposed to be a ten year plan on the assurances of Councillors that the Council is viable for the foreseeable future and that the financial policies are prudent for the next ten years. Yet the Council will cease to operate in a week or so and the Councillors will have absolutely nothing to do with the implementation of the plan.

What is the value of those assurances? Councillors don't know what is going to happen, and they certainly don't care.

The person in de facto control of the Council at the moment is the Minister and it is his view of the situation that should be considered by the auditor.

The Minister has made it clear that by appointing commissioners and making the comments that he did (Q & A above) that Council is not financially viable and the financial policies in the LTP are not prudent.

That is the end of the matter, and that should be the end of the LTP.

18. Political considerations
It is clear to ratepayers that he whole process of adopting this LTP is driven by practical and political motivation and compliance with the law has been an irrelevant concern.

The Minister has left the Council in office for a short while with the strict intention of the Council adopting the LTP. This is no doubt done on the basis that it will give the commissioners some basis for running Council and providing basic services, including setting rates.

It also has been suggested that the government wants the Councillors to bear the brunt of negative sentiments from the community about this very unpopular LTP, so that the commissioners can be seen as moving in squeaky-clean with a new broom.

That is all very well and very pragmatic, but there is still the question of the audit report and the question of whether the LTP complies with the LGA.

Ratepayers have very strong views on both matters but as usual, they are ignored in the short term. (They have access to the courts in the long term)

The burden of protecting the best interests of ratepayers therefore falls on the watchdog of local government, the OAG.

The ratepayers of Kaipara are expecting the A-G, as auditor for the Council, to ensure that the audit reports for both the annual report and the LTP are both based on a clinical, professional, and independent assessment of the audit criteria, taking into account all the relevant facts, and ignoring any outside influences or political pressure.

The fact that the failure to issue the audit reports may result in legal complications for Council and the commissioners and may be unpopular with the government are considerations that should be absolutely ignored.

Both the OAG and Audit NZ must ensure that these audits are handled with the highest competence and integrity and without fear or favour.

____

Clive Boonham 27 August 2012

_____________________________________________________________

Letter from Bruce Rogan (MRRA) to Councillors  22 August 2012

Leonie,

I would be grateful if you would ensure that a copy of this email is placed before every member of council before the meeting commences on Thursday 23 August.

I have been instructed to write to you by the executive committee of the Mangawhai Residents and Ratepayers Association as follows:

We request council to decline to debate the proposed Long Term Plan and to take no steps in the direction of giving effect to it. The council has been unfrocked and no longer has any standing in the eyes of the community, and we are by no means clear that it can any longer have standing in the eyes of the law. In any case it would be an act of moral and ethical turpitude to pass a plan that would provide a funding stream for a completely different body to administer when it cannot possibly be known what the priorities and intentions of that body will be. Mr Clive Boonham has written to every councillor setting out the legal risks of proceeding along a path to ratification of this plan, and we wholly endorse his advice to you and confirm that if you proceed against this advice we will provide support both material and financial to Mr Boonham to place your decision before the courts and have it judicially reviewed.

Before a local government organisation enacts an annual plan it must satisfy itself that it meets the going concern test, and that test requires it to attest that it will be able to meet all its out-goings with the income that it would raise via rates and other sources for at least the prospective 12 month period ahead. It is well known and has been admitted by the Chief Executive that even the first iteration of the draft plan was going to result in a worse financial state of affairs at the expiration of the first year than at the beginning, and the changes made since can only exacerbate that position. This means that the council is not a going concern (nor has it been for several years, by the mayor’s own public admission on many occasions) and it is not therefore lawful for it to adopt an annual (Long Term) Plan.

We advise also that the changes that have been made to the document that was placed in front of the public (the draft LTP), and which was strenuously objected to by thousands of ratepayers, are extensive, and cannot be described as other than significant. Council will be aware, we hope, that where any document that is subject to the special consultative procedure is significantly altered after the consultation phase, the document must be re-presented as a new proposal and the entire consultation process recommenced. If the council proceeds with the what we understand to be the proposed course, the process will be illegal and will therefore be null and void.

It has come to our attention that an approach was made to one or more banks to ascertain whether they would continue to lend money to the council. We understand that this approach was made as a mechanism to ascertain whether the council could deem itself to be a going concern. Banks are aware that money they lend to council’s is protected by provisions of the Local Government Act of which the general public has been largely unaware, until recently, and which are draconian and undemocratic in the extreme. In the present case the vicious provisions of the Act will not serve the interests of the lenders, because, as we have repeatedly pointed out, the ability to pay is not there. The population that you propose to subject to these usurious financial burdens simply does not have enough money to meet them, and you are obliged, under law, to take that into account along with everything else when you are contemplating the imposition of a rate.

It has further come to our attention that the Office of the Auditor General has recently placed before you a series of letters that you were instructed to make public and did not, in which grave matters touching upon your several and collective responsibility for your actions are set out. Our perusal of these letters tells us that were we as individuals in your shoes we would recognise how far from lawful our position is, and we would do nothing to make matters even worse, especially given the possibility of personal liability for the consequences of any further illegal actions.

You are aware that a large number of ratepayers have ceased to pay rates. It is our belief that a decision to proceed with the LTP in whatever form it now takes will greatly extend and intensify the withholding of rates. Our organisation would like nothing better than to resolve the many problems facing the council and its ratepayers, and to return to a stable situation in which economic activity could resume and people could go about their lives with certainty and confidence. Nothing that either the council, the government, or its advisers have done over the past year gives us any comfort that we are headed in that direction, and we sincerely hope that you will choose, at this late hour, to act in the interests of the district’s ratepayers who elected you to office, and by so doing leave it with some of your individual and collective integrity intact.

Bruce Rogan

Chair, MRRA.

_______________________________________________________________________________

TO: THE COUNCILLORS, KAIPARA DISTRICT COUNCIL

FROM: CLIVE BOONHAM 22 AUGUST 2012

Council wisely refused to endorse the 2010/11 annual plan and the 2012/22 LTP at yesterday's meeting. All but two Councillors (Tiller and Blackwell) voted to allow the decisions to lie on the table until they had met with the review team and discussed the matter.

As I understand it Council will meet with Greg Gent tomorrow, and then vote on whether to endorse the two documents.

One can only presume that the Councillors are seeking guidance and advice from Greg Gent and his men.

This situation concerns me for the following reasons:

Chief Executive's responsibilities

Councillors are facing one of the most important decisions that they have been presented with. Council has failed to meet several compulsory deadlines in the LGA and is now effectively operating outside the law. Council has been told that the planning and rating process cannot proceed unless Council decides that the KDC meets the going concern assumption, and endorses both the report and the plan.

The going concern assumption is that Council has adequate resources to continue operations at the current level for the foreseeable future.

The person confirming this has to state:

I have reached this conclusion after making enquiries and having regard to circumstances that I consider likely to affect the KDC during the period one year from the date of signing of the financial statements, and to circumstances that I know will occur after that date which could affect the validity of the going concern assumption.

The date of signing the financial statements is when the report is adopted, so all the irregular matters that have been revealed in the last 6 months have to be considered.

The letter of compliance which includes the confirmation of the going concern assumption has to be signed by the Mayor and the Chief Executive.

Steve Ruru is refusing to sign and his senior staff are refusing to endorse the going concern assumption. The reason given is that none of the staff were employed by Council at the relevant time.

Councillors are being asked by the Chief Executive to endorse the assumption based on their own knowledge of events, and he suggests that they should contact ex employees.

This is quite unbelievable given that Councillors have very little knowledge of what went on during the relevant period covered by the report, and they only information that they have about the financial problems that Council is facing in the future comes from the Chief Executive and his staff.

The report from the Chief Executive which supposedly seeks to establish that the Council is a going concern is complicated, difficult to follow, and, at times, hardly credible.

One cannot help wondering why the Chief Executive and his staff, who are experts in this area, and who have the knowledge and the ability to put this information together, could not use it to confirm the going concern assumption THEMSELVES.

It appears to me that the Chief Executive has his eyes fixed on the future. His job survives the appointment of the commissioners. It is the clear wish of the Minister that the LTP should be in place when the commissioners take office. However, Steve Ruru is not silly enough to sign the letter of compliance himself because he knows that to do so would be dishonest. He knows that the Council is not a going concern.

He may also have taken legal advice on the matter to ensure that he does nothing to breach his duty of care to his employer.

I have no doubt that the plan is to set the Councillors up as stooges so that the LTP can be put in place ready for the commissioners, and when things go wrong further down the track, as they surely will, the Councillors will then bear the responsibility.

The LGA makes it quite clear that the Chief Executive is responsible for providing advice to the elected members. In this instance the Councillors are being left in the lurch to make major decisions on matters that are highly significant, and outside the scope of their knowledge, without any proper guidance from the Chief Executive - except for a wad of dodgy statistics and figures.

In addition, these matters involve complicated legal considerations, as I have pointed out in my previous letter. Where is the advice from the Chief Executive on the incredibly important legal aspects? Where is the legal opinion, or perhaps a solicitor in attendance to advise?

There is nothing.

There is not enough time. This has to be rushed through so that everything is in place for the commissioners. No time for proper consideration and no time for legal niceties.

And perhaps a legal opinion might enlighten Councillors as to the risks they are taking and ruin the plan to have the LTP in place in time for the commissioners entry from right stage.

Review Team

My other concern is the involvement of the review team.

The review team was appointed by the Minister with strict terms of reference to report to the Minister and to assist in analysing issues.

That work has been completed. The report from the review team to the Minister was so damning that Councillors were pressured into resigning immediately.

However, out of the blue the Councillors are now seeking the advice of the review team to help them with the difficult decision that is facing them.

I consider that to be totally inappropriate for the following reasons:

• The review team has no authority to advise Councillors on the issues that are before them, in particular whether the Council is a going concern. In addition, none of the review team has knowledge of Council's financial situation during the relevant period (2010/11) or adequate information concerning the financial circumstances facing Council in the future which could affect the going concern assumption.

• The review team has no legal background and is not able to offer Councillors advice on the complicated legal situation that they are placed in.

• The review team was appointed by the Minister and acts on behalf of the Minister. It is clear that the Minister would like to see the LTP in place for the commissioners and that this has become a major consideration for the review team. With respect, this means that the review team has a vested interest in the matter and should not be offering any advice to Council on this matter.

Matters for Councillors to consider

• Councillors need to look at the clear facts. They are being replaced because of the financial mess that Council is in. If Council is a going concern, and the financial policies in the LTP are prudent, and if it can meet its commitments in the foreseeable future, then why are commissioners being appointed?

• The reality is, as every one knows that there are so many problem areas that Council has very little chance of surviving in its present state more than a few weeks. The rate strike is going to broaden and Council will be deprived of a major part of its income. But perhaps the most telling circumstance is the fact that the Council has breached its banking covenants. The banks will obviously support Council for a short time but as the true situation unfolds then the banks will be stepping in and forcing Council into a receivership type situation. That is virtually inevitable and it is only a matter of time before the banks make their move.

• Even the Minister acknowledges that the Council is not a going concern. When announcing the decision to appoint commissioners, The Minister indicated that the LTP is only an interim measure and is to be replaced with a "sustainable and equitable funding base". Which of course suggests that the proposed funding base in the LTP is neither sustainable nor equitable, which means that the going concern test and the prudent test cannot be met.

• There is an incredible amount of pressure for Councillors to endorse the two documents and it is quite appalling that this pressure should come from government and the auditor. Councillors must be staunch and resist. They need to remember the two ex Ministers of Justice Doug Graham and Bill Jefferies both appeared in court recently as company directors charged with misleading investors by providing false information. That information had been provided by staff but they did not research it thoroughly

There is no difference between that situation and this. It is clear that Council is not a going concern, that its financial plans are not prudent, and yet Councillors are being asked to state that they are, so that ratepayers can be charged rates based on that misleading information.

• Council is in a financial and legal mess that is going to take the experts some time to unravel. Adopting two further illegal documents is not going to help the situation. It just adds to the chaos. Better to stop now and allow the experts in to sort the mess out without complicating matters further.

• The correspondence from the OAG, which Council failed to make public, highlights the OAG's concern that Council does not have the skill base to offer advice on the matter:

We remain concerned that the Council relies on too few appropriately skilled staff to be in a position to resolve these issues in time to adopt the 2011 annual report and the 2012-22 LTP on 29 August 2012 as planned.

Even the OAG can see the writing on the wall.

 

Clive Boonham

 __________________________________________________________________________________

 TO: THE COUNCILLORS OF THE KAIPARA DISTRICT COUNCIL

FROM: CLIVE BOONHAM

Dated: 20 August 2012

This document is written as a guide to the Councillors who are being asked to endorse the annual report for 2010/11 and adopt the LTP for 2012/22 at the Council meeting of 21 August 2012.

My comments are based on the agenda and business papers for the meeting which can be viewed here.

_______________________

ANNUAL REPORT FOR 2010/11

Matters included in the 2010/11 annual report
When Council was preparing this report last year there were a raft of issues that prevented the report from getting the audit tick and being adopted. These included the omission of the EcoCare scheme from the report (and earlier reports), the question of illegalities, and the question mark hanging over the financial situation of Council and whether it could meet the going concern assumption.

With the delay in adopting the report the problems have grown. The difficulty that Council has is that although the report is for the 2010/11 year, any statements in the report must include all the information that is available to Council up to the date of adoption of the report. It must therefore include all of the information that has come to light in the last six months or so.

This includes all the information about the failure to comply with the LGA when undertaking the EcoCare project and incurring the EcoCare debt, the OAG inquiry and the effect its report might have, the possibility that the court could declare the debt to be ultra vires, the $20 million or so in additional debt because of the illegal rates, and the acknowledgement that Council's affairs and finances are in a dreadful state.

The annual report also has to take note of the rate strike and the effect that it is having on the cash flow. The rate strike is a direct result of the illegalities and poor financial decisions of Council and must be taken into account in the report.

The situation is so bad that the Minister's review team has persuaded the Councillors to resign and seek the appointment of commissioners.

The review team's report will make clear how bad the situation is when it is made public, but even without the report it is perfectly clear that Council cannot meet the going concern test. The truth is that Council is swamped with its debts, has insufficient income to meet its obligations, and will "go under" in the next few months.

The deliberations over the going concern issue are an exercise in futility.

Advice from Chief Executive and his staff
The comments re senior staff not being employed during the relevant period, and therefore not being able to give guidance to the Councillors, are absolutely ridiculous.

If staff cannot work out what happened to ratepayers monies during that year and decide whether the annual report reflects this then they should not be in their jobs.

The truth is that the Chief Executive and senior staff know that the annual report is a complete botch-up and reflects a Council that did not know, and does not know what it is doing. The Chief Executive and no one on his staff is prepared to endorse the report. They know that the report is a fantasy and bears no relation to the reality of the Council's situation. Sooner or later there will be independent forensic scrutiny of the past and Council staff are sensibly distancing themselves from the report.

Councillors are being asked to rely on their own judgments in deciding whether to endorse the going concern assumption. The suggestion that Councillors should consult with previously employed staff is farcical, but not as bad as the suggestion that Councillors should have regard to their own knowledge of events that occurred during the year.

Councillors have no knowledge of what went on during that time. They trusted Jack McKerchar and abandoned all responsibility for Council's affairs. There were no proper accounts and no reporting to Councillors. They received no information and they sought no information. Even the so-called portfolio holder, Julie Geange, had absolutely no idea of what was going on.

Mayor Tiller sums it all up with his comment when Councillors resigned last week:

"It hasn't been easy - these issues have been compounding and council was never made aware of the enormity."

In other words, someone, presumably the Chief Executive, never made the Council aware of the reality and the seriousness of the situation.

So if the Councillors did not know what was going on then how they now rely on their knowledge of events during the relevant period?

Going concern test
The report from the Chief Executive about the annual report makes it sound as if the adoption of the going concern assumption is an option. It is not. Both the law and accountancy practice require that the Mayor and the Chief Executive give a categorical statement in the letter of compliance that the Council complies with the going concern assumption. That statement does not have to be given if the entity is to cease operation or be liquidated. Those are the only exceptions.

The report mentions special provisions relating to local authorities and provides detailed accounts of other matter that it suggests may be taken into account in assessing the going concern situation.

There is a mention of further capacity of the sewerage system and the possibility of connecting more properties and therefore increasing income. The reality is, and Council has acknowledged this, that the scheme cannot take any more connections without further capital outlay.

The report talks of rates being affordable and no more than 5% of the median household income. For Mangawhai that means a maximum rate for residents of $2,023.43. Amazingly the report then goes on to state that the rates proposed in the draft LTP met this 5% benchmark. It then goes on to add:

As a result it would appear that there is some scope for Council to further increase its average rating levels to a moderate degree in the next few years.

Hello? Do you know anyone in Mangawhai whose proposed rates under the LTP are anywhere near the figure of $2,023.43. This is fantasy land

The report also discusses the $19 million dollars of illegal rates that have been levied and talks of ways of working with the community to address the problem.

I believe that I can speak for the community and state quite clearly that if the Council does not refund the monies illegally collected then ratepayers will take the matter to court and seek repayment of the illegally charged monies. Not only that but ratepayers will not pay another dollar in rates until the whole mess has been resolved.

The consideration of such matters is completely pointless. The fact is that the true debt of the Council is so large that it can not be met by rates that are set at a realistic level. Not only that, Council has already breached its banking covenants because of the failure to adopt the annual report, the failure to adopt the LTP, and because commissioners are being appointed.

Council has already started on its slippery slide into receivership and whilst the banks might offer some support in the short-term, because they have no choice (that will be known this week), they will be only too aware that it is only a matter time before Council folds completely.

The simple fact that has to be accepted by Councillors is that, in spite of all the figures and the projections that the Chief Executive and his staff have provided, the simple truth is that the Council cannot satisfy the going concern assumption. It is broke.

Letter of representation
This is the crux of the matter.

This letter has to be signed by both the Mayor and the Chief Executive. Steve Ruru is sensibly refusing to sign it. The reason given is that he was not employed by the Council at that time.

Steve Ruru knows more about the annual report in question than all the Councillors together. He will not sign the letter of representation because he knows that the annual report is inaccurate and does not reflect the reality of the situation. In short, he is not prepared to lie.

However, the Chief Executive is leaving it up to Councillors to endorse the contents of the letter of representation including the assumption that the Council is a going concern.

This is an absolute farce. The letter of representation legally must be signed by both the Mayor and the Chief Executive. If it is not signed by both then it does not comply with the law.

Audit NZ has no power to waive the strict requirements of the law. (Given the laxity of the audit of the KDC it needs to be restated that it is an auditor's task to enforce such requirements, not to bend the rules to allow non-compliance.)

Further, letting the Councillors endorse the representations in the letter of representation when they know nothing about the situation, and when the only person who does - the Chief Executive - refuses to endorse them, illustrates the depths to which this Council and local government in NZ local has sunk.

Audit NZ has apparently, according to the report, indicated that it will give a tick to the annual report and the letter of representation as long as Councillors are prepared to support the sole signature of the Mayor.

That is nothing short of disgraceful. Audit NZ is effectively encouraging Councillors to endorse statements that everyone knows to be false. It is also condoning non-compliance with the law.

I trust that in one of the last acts that this Council will undertake that all Councillors retain their integrity, reject the pressure from central government and the auditor, acknowledge that Council is no longer a going concern, and refuse to endorse the letter of representation.

Such a decision will may cause a few hiccups but nothing that competent commissioners and a willing government will not be able to fix.

LONG TERM PLAN

Local Government Act 2002 (LGA)
Council does not have the legal power under the LGA to adopt the LTP after 30 June 2012.

Section 93 of the Act contains two fundamental principles in relation to LTPs:

A local authority must, at all times, have a long-term plan under this section.

A long-term plan must be adopted before the commencement of the first year to which it relates.

Note that these requirements are compulsory and set the limits of a local authority's powers. A local authority can only carry out its statutory powers in the manner set out in the LGA.

In respect of the KDC situation:

• The KDC does not currently have an LTP. It is therefore in breach of the LGA.

• The KDC has failed to adopt the LTP prior to 1 July 2012. It has no power under the LGA to adopt the LTP at a later date.

This means quite simply that the KDC is operating outside the provisions of the LGA.

If it wishes to adopt the LTP after 30 June 2012 then the only way that it can do this is through special legislation by parliament granting the power to adopt the LTP after that date.

If the Council adopts an LTP after 30 June without that special legislation then it is acting outside the scope of its powers (ultra vires) and the decision can be challenged in court.

The Minister, Audit NZ, and the OAG have taken a very low key approach to this fundamental legal issue. They appear to take the view that all the compulsory provisions of the LGA can be ignored if they cannot be complied with for some reason or other. In a recent letter to me the Minister advised that the failure to adopt the LTP by the statutory deadline may have been "unavoidable in the circumstances".

With the greatest of respect those views are largely erroneous. A local authority's powers are limited to those set out in statutes. In NZ that is the LGA.

The LGA states quite clearly that the power to adopt an LTP must be exercised before the commencement of the first year of the plan. That is a clear statement of the limit of the power of the local authority. No one has the power to waive or ignore that requirement. The only way that can be done is to grant additional powers through special legislation.

Such a situation may be inconvenient but it is the law.

It is alarming to see the readiness with which the watchdogs and the government ignore simple legal principles when in fact their role should be to uphold them.

Any blame for non-compliance with the law, and the complicated and expensive process that is necessary to remedy the situation, is directly a result of the government and the watchdogs ignoring basic legal principles and promoting a culture where the compulsory provisions of the LGA could be treated as optional, and the limitations on a local authority's powers could be ignored.

No prior annual report
It is a fundamental breach of the LGA to adopt an LTP when the prior annual report had not been completed and adopted. The A-G issued a discussion paper last year - Improving the usefulness of annual reports (here).

The following points are emphasised by the A-G:

1. Local authorities prepare annual reports to discharge their public accountability responsibilities.:

"2.1 Local authorities prepare annual reports to discharge their public accountability responsibilities. A local authority’s annual report serves as a communication tool for providing wider information on activities carried out and services provided, and for comparing actual service delivery with forecast service delivery. The information in annual reports and summary annual reports should allow ratepayers, the community, and the wider public to assess how local authorities have performed in relation to stewardship of community assets, and the efficiency, effectiveness, and cost-effectiveness of operations."

2. It is a legal requirement under the LGA for local authorities to adopt an annual report within four months of the end of the year being reported.

3. The information in the annual report should "feed in" to subsequent plans.

If the information in an annual report is not made available to ratepayers then they have no basis on which to assess the information contained in the subsequent LTP.

How can ratepayers assess the ten year plan when they are denied access to the results from previous years and the current status of Council's finances and undertakings?

The adopting of the annual report is a vital link in the planning chain both legally and from an accountability point of view. If that link is missing then the whole planning process fails to comply with the statutory requirements.

Financial strategy must be financially prudent
No reliability can be placed on the financial information contained in the LTP. The prior annual report has not been adopted because the financial information in that report has raised many concerns that have not been resolved. There is therefore no proper "feed in" to the LTP.

It is also clear Council does not meet the going concern assumption. None of the staff , who ironically prepared the LTP, are prepared to state categorically that the Council is a going concern for the purposes of the annual report. It follows that the Council cannot be a going concern for the purposes of the LTP.

The indebtedness of Council is effectively in excess of $100 million. The illegal charging of rates is a debt that has to be factored in, irrespective of the spin that the Chief Executive puts on it.

No matter what figures or statistics the Chief Executive and his staff present to Councillors, the reality is that the debt is too large to be met by ratepayers.

The rates affordability figures included in the Chief Executive's report are absolute nonsense. The suggestion that the maximum rate in Mangawhai will be no more that $2,023 has absolutely no basis in fact. And that calculation does not include the rates for capital expenditure.

Councillors are being misled again.

If the LTP is financially prudent, why is Council being replaced? And why has the Minister indicated that the LTP is a temporary measure only (see below) and that it is to be replaced with "a sustainable and equitable funding base"? That means that the funding base as proposed in the LTP is neither sustainable or equitable.

And if it is not sustainable or equitable, as acknowledged by the Minister, then it certainly is not prudent.

LTP is for ten years
By law the LTP must be a detailed plan for the following ten years. The LTP before Council is a complete sham. Council knows that there is insufficient financial information to plan ahead for one year, never mind ten, and that, given the current circumstances of Council, it is impossible to plan ahead for ten years.

The LGA does not allow for interim LTPs. The statutory requirements for a bona fide detailed LTP for ten years cannot be changed.

Certainly an LTP can be amended at any time but only for the purposes of taking into account information that was not available at the time the plan was adopted.

In this instance it is widely acknowledged that the LTP is only that in name. In fact it is an interim plan and the clear intention is that it will only be in place for a few months. The Q & A provided by the Minister re the appointment of commissioners makes the following statement:

If adopted by the Council, the Long Term Plan would be an interim measure that would enable the Council to maintain essential services. It would be a priority for the commissioners to amend the Plan to provide the Council with a sustainable and equitable funding base.

That makes it clear that the LTP before Council is not in fact an LTP as envisaged by the LGA but a temporary measure that is totally outside the Act. It has no meaning under the Act and Council has no power to adopt an interim plan which has no status under the LGA.

Again, if Council proceeds to adopt the interim plan then the court would have no hesitation in declaring the decision to be ultra vires.

Council is now operating outside the requirements of the LGA and, as mentioned above, its powers to act in such circumstance can only be created by special legislation.

Special consultative procedure
Councillors are being asked to confirm that the consideration of the draft LTP complied with the special consultative procedure. I do not intend to go into too much detail here as my own submissions on the draft plan, and those of many others, made it clear that Council failed to comply with the requirements of the LGA in respect of the special consultative procedure.

I make the following brief points:

• The whole draft LTP was an accounting exercise to balance the books and totally ignored the principles of the legislation and the requirements of the Act. The four well-beings were completely ignored.

• The whole rating base was changed without any proper decision-making as required by the Act under sections 76-81, section 82 and 90. No options, figures or outcomes were considered. Ratepayers were therefore denied the opportunity to make considered submissions.

• The statutory procedures required for the special consultative procedure were not followed. This includes appropriate notices to those who made submissions.

• Council failed to reconsult with ratepayers after making amendments to the plan. Although there is no specific provision to this effect in the LGA the OAG offers the following guidance in a guide for local authorities on decision-making and consultation (here):

4.37 The main point is whether the matter is entirely new or whether it is consistent with a local authority’s overall strategy. If the alteration changes the proposal to such an extent that the altered proposal would have attracted additional or different submissions to those received, the local authority should consider its consultation options and should consider not confirming the proposal immediately. The principles of consultation require that relevant information be provided for consultation. This requirement will not be met if a revised proposal includes relevant information not previously provided to the public.

The guide goes on to say:

In our view, additional consultation is more likely to be required if the matter is completely new or has a significant effect on matters directly affecting the community, such as levels of service or rating levels.

The amended LTP which is before Council contains fundamental amendments that were not anticipated in the original plan. It also includes a different rating base and higher rating levels for some properties to those set out in the original plan. It is clear that ratepayers would have made additional submissions had that information been available to them.

It is therefore submitted that Council has failed to comply with the decision-making and consultation process under the LGA, and that the amended LTP should not be adopted.

SUMMARY

Given all the problems relating to the annual plan and the LTP outlined in this document, it would be appropriate for Councillors to decline to endorse the annual plan and to decline to adopt the LTP. They should leave it to the commissioners to take legal advice on the matters raised and to ensure that the legislation is fully complied with before the decisions are made.

Councillors have made many incorrect decisions in the last few years, based on advice offered to them by the previous Chief Executive. I trust that this has made them more wary as they make the final decisions that they will make during their tenure in office.

I also hope that they have noted that the current Chief Executive with his wealth of experience and his detailed knowledge of the Council's finances is not prepared to sign the letter of compliance in respect of the annual report.

That in itself offers the only guidance that Councillors need in deciding their own course of action.

As for the LTP, it is so fraught with illegalities that Councillors should defer any adoption until full legal advice has been obtained. In the circumstances it would be advisable to simply hand consideration of the matter to the commissioners who are to be appointed.

Whatever Councillors decide to do they should resist any pressure, from the Minister or elsewhere, to endorse the annual report and adopt the LTP simply to make the pending handover administratively easier. That will not be the case. Founding the new regime on even more illegalities is not going to help any one in the long term.

Clive Boonham