The Auditor-General's $5.38 million payment to the Kaipara council sets an important precedent, a local government analyst says.
The Auditor-General apologised two years ago for the failure of government auditors to spot unauthorised borrowing by the council that contributed to its $80m debt blowout.
After mediation, the council and Auditor-General have agreed on the $5m payment.
A local government analyst, Larry Mitchell, said this is the first settlement of this kind that he knew of, and it was great the precedent had been set.
"It's on the records now, and hurray for that," he said.
Auditors in both the private and public sectors needed to be more careful, he said.
Mr Mitchell said he would have expected a higher payment since the loans the auditors missed were worth about $35m.