Delta thwarted proper scrutiny, breached Acts

Dunedin Mayor Dave Cull
Dunedin Mayor Dave Cull
The Dunedin City Council must share the blame for multimillion-dollar losses incurred by Delta from its failed property investments at Jacks Point and Luggate, Mayor Dave Cull says.

Mr Cull was commenting on the findings of the Office of the Auditor-general, which yesterday released its report into Delta's property investments, after more than a year's work.

Delta spent $14.17 million on the properties in 2008 and 2009. It now expected a loss of between $6.4 million and $8.7 million, with the amount to be confirmed by the end of the year, the report said.

Auditor-general Lyn Provost gave Delta credit for approaching the investments cautiously and carefully, and for avoiding conflicts of interest, but detailed a list of failings that contributed to the losses.

That included Delta's failure to adequately assess risks associated with the investments, or take appropriate advice, even when asked to, and breaches of the Local Government Act and Companies Act.

It was also criticised for its involvement in creating a new company designed to thwart proper public scrutiny of its Luggate investment.

Delta's parent company Dunedin City Holdings Ltd failed to provide proper oversight, due to the shared membership of both companies' boards at the time.

The council's inadequate governance role was criticised for pushing its companies to maximise dividends to help pay for Forsyth Barr Stadium, which led to riskier investment decisions.

The investment in Luggate had proven to be ''a mistake'', while that in Jacks Point was flawed in hindsight, and both proved to be ''expensive lessons'', Ms Provost said.

''We consider that there are lessons to be learned for all involved,'' Ms Provost said.

The report cleared Delta and its directors of any impropriety or conflicts of interest, and made no recommendations for changes to any party.

That was largely due to the work already undertaken by the council to restructure the governance arrangements of its companies since the completion of an independent review by Warren Larsen in 2011.

That included separating the membership of the DCHL board from its subsidiary companies, and appointing a new council group chief financial officer, Grant McKenzie, to improve oversight.

Mr Cull, addressing media yesterday, said the Auditor-general's report - and lack of recommendations - showed the changes had been effective.

However, the council ''clearly'' had to share the blame for what had transpired, which was ''a very unsatisfactory state of affairs''.

''The council demanded dividends but wasn't prepared to take responsibility for the risk entailed in achieving them,'' Mr Cull said.

Council chief executive Dr Sue Bidrose insisted the council had turned a corner since then, but Delta's losses had nevertheless fuelled the need for cost-cutting within the council.

''It has contributed to our requirement for belt-tightening which has gone on over the last three years. It's certainly not made it any easier,'' Dr Bidrose said.

DCHL chairman Graham Crombie said it was ''pleasing'' many of Delta's processes had been deemed appropriate ''and some of the rumours out there were not true''.

Those steps included removing director Mike Coburn from the investment process because of a perceived conflict of interest, which robbed the company of much-needed experience in property investment, Ms Provost's report said.

Mr Crombie said Delta now had a better understanding of the need to focus on less risky business that did not tie up cash, as property investments did.

''The delightful thing for me is it's very rare for an Auditor-general's report to have no recommendations, and this one has no recommendations.''

It had been made clear to the company the days of creating new companies to avoid transparency were over, Mr Crombie said.

Dr Bidrose said she had attended DCHL's last board meeting, and reiterated a need for transparency and clear communication with the council and ratepayers.

''We are making stern efforts, right across the board, to be open and transparent with the people that pay the bills.''

The report was welcomed by Delta chairman Dr Ian Parton, who said in a statement he was ''pleased'' the findings included that directors approached the investments ''cautiously'' and made ''careful, well-supported decisions with appropriate governance and oversight''.

Cr Lee Vandervis - who, separately from Mr Cull, also complained to the Auditor-general about the investments - criticised the report.

He said it identified those responsible for the flawed investments, and some of their questionable practices, ''but then fails to deliver the necessary basket of rolled heads''.


Auditor-general's key points
- Delta cleared of impropriety or conflicts, but failed to adequately assess risks, or take appropriate advice, in some cases.
- Also breached Local Government Act and Companies Act.
- Dunedin City Holdings Ltd failed to provide proper oversight.
- Dunedin City Council pushed companies for more dividends; failed in governance on investment risks.
- Deals to cost Delta between $6.4 million and $8.7 million.
- No recommendations made, but ''lessons to be learned for all''.


Cleared of impropriety

Scott791 you are not the only one who has got problems with reconciling the conclusions and breaches. How this kind of happening is now a regular event in Dunedin is beyond me. 

Goose and Gander

Trev, you are absolutely correct, but the right person to bring a complaint against Directors is the DCC in this instance on behalf of the ratepayers who have had to bear the cost of the failings of the Directors concerned.  There is the problem as there is absolutely no appetite for such action by the Councillors.  In particular we have all been urged by the "inner circle" of the Council to "move on" and "let it all go".  Well it will only be let go if the ratepayers accept that stance.  I'm sure we would all see a different stance taken by those Directors if they knew that they would be held accountable.  


Poor Director quality

NZ company directors have no protection under the law from being charged for negligence or mis-statements. It seems that judging by the Delta outcome, the quality of NZ Directors is generally abysmal. We have seen, and are still seeing in Dunedin some shocking decision-making by company directors who seem very adept at accumulating paid directorships, while failing miserably to offer high quality advice. Recent large DCC projects are obvious examples. Directors ARE accountable.

How can anybody have faith in this system

The conclusion one can only come to is that council elections are not worth the effort of voting in.

The ratepayer being represented, having a say or being consulted over any major project cost outside the councils core responciblity is just an increasingly painful  joke under the current system.

It is now well established in Dunedin that the powerfull and influential have far more say as to how rates dollar are spent than ratepayers at large.

The contract Mr Cull and his council has with the ORFU over its bail out is a case in point. 

The vote % turn out for local bodies drops with every passing term and they wonder why.

Why pretend ratepayers have any say over these unaccountable people.

When are the public and ratepayers going to get accountiblity?


Yet again, no accountability

I doubt there will be many that are surprised with this outcome given past demands for accountability have come to nought.

This is how and why revolutions start. If the system won't make things right, I guess the citizens will have to step up and ensure our money is not continually wasted. Time to lock and load.

Where is the accountability?

It would have been helpful if the ODT could have supplied a reference to the entire report which can be accessed on the OAG website.  Then readers can see for themselves the full tortured story of this dabbling in business that Delta had no business getting into and the equally tortured explanations that some individuals made on their lack of governance.  It would also have been helpful if, for example, the ODT could have supplied readers with the total fees that were paid to people who have now been exposed in this report.  Dunedin ratepayers have now a long record of simply being sucked dry by a succession of people with absolutely no fear of being held accountable for their abject failure to perform basic governance functions.


Delta thwarted property scrutiny

Thanks Ms Provost from the Auditors Generals Office.  Two years of investigation and pondering and this is the result!

Dunedin ratepayers have a right to have council owned companies run in a fit and proper manner. Delta is a Utility Services company, not a property speculator. 

Clearly ratepayers have been seriously let down in a governance sense at Delta, yet there is no accountability.

Given the pathetic outcome from the Auditor Generals Office investigation, ratepayers can look forward to directors of council owned entities having no real checks or bounds on loony decision making. Don't be surprised if Delta now buys the Highlanders franchise or becomes a shareholder in the Dunedin Casino.


No one ever is to blame....

Simply unbelievable......


I'm having trouble reconciling the conclusions "cleared of impropriety" and "breached Local Government Act and Companies Act".


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