21 Aug 2015

No further investigation into Mangawhai wastewater scheme

2:32 pm on 21 August 2015

Auditor General Lyn Provost has decided not to carry out another investigation into the Mangawhai wastewater scheme .

Mangawhai, Northland

Mangawhai, Northland Photo: 123RF

The scheme was the subject of the largest inquiry ever undertaken by the Auditor General two years ago, after the Kaipara District Council borrowed heavily to fund it without telling ratepayers.

After months of protest by outraged Mangawhai residents, the government sacked the council and the High Court subsequently found the council's decisions and the borrowing had been unlawful.

Mangawhai ratepayers and the Commissioners now running the council asked the Auditor General for a report under section 44 of the Local Government Act, to investigate if former councillors could be held liable for part of the debt.

The act allows the Crown to recover losses caused by people who commit unlawful acts.

But Lyn Provost said she would not be making a Section 44 report.

She said the wastewater scheme had been built and ran effectively and even if it had been funded and built lawfully, there could have been cost over-runs.

"It would be extremely difficult to identify and quantify a particular financial loss, flowing from acts that the High Court found to be unlawful, and for which elected members ought to be made personally liable," she said.

Ms Provost said it was doubtful that a section 44 report could lead to any recovery from elected members because the two-year limitation period provided for in the Public Audit Act might apply.

She said councillors who approved the scheme could also defend their actions on the basis that they relied on professional advisers.

The Kaipara council is suing its former chief executive, Jack McKerchar, in a bid to recover some of its losses and it is also seeking damages from the Auditor General, for losses caused by the alleged failure of her auditors to spot the council's errors in approving the scheme.

The Auditor General said the council had placed in her in an awkward position, by asking her to investigate whether others should be held liable for the council's losses, while at the same time suing her office.

But she said she had made her decision as conscientiously as possible.

Ms Provost said she had already carried out a thorough investigation into the council's management of the Mangawhai wastewater scheme and issued a public report, including a chapter on lessons leaned.

"I do not think there is any useful purpose in duplicating or restating that work, or attempting to further add to it in a section 44 report. That would be an inefficient use of public money," she said.