The Dunedin City Council has been required to write a "letter of comfort" to Dunedin Venues Management Ltd, the company set up to run the Forsyth Barr Stadium.
The letter, to the directors of the council-controlled organisation, has been called for by Audit New Zealand.
Both Audit NZ and council acting chief executive Athol Stephens said yesterday the requirement was not uncommon, and Mr Stephens described it as a "formality".
He said in a report to next Monday's full council meeting Audit NZ had advised that where a shareholder's advance, equivalent to a loan, had been made, it required a supporting statement from the council to the directors of the company.
The advances made to DVML in the year to June 30, 2010, were as planned, and made so the company could "establish itself on a sound business footing prior to receiving the key to the stadium on August 2, 2011".
The letter of comfort imposed no greater financial obligation on the council than it already had. Once it was provided, Audit NZ would release the city's audited financial statements for the financial year.
The letter said the council supported DVML's operation and did not intend to require repayment of the advance within the next 12 months.
The advance, at June 30, 2010, amounted to $1 million.
Asked if the money was a loan, Mr Stephens said yesterday in an accounting sense it was, and "should the day emerge, and one hopes it will" that debt had been paid and the company made a surplus, he expected the money to be repaid.
Audit NZ audit director Bede Kearney said such letters were not uncommon for start-up companies, where shareholders had invested "quite heavily" and the company was not yet viable.
He could not comment specifically, as he was not involved in that audit, and for confidentiality reasons.
