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Deputy Auditor-General Phillipa Smith says she has seen "no evidence to suggest that the final decision to negotiate with SkyCity was influenced by any inappropriate considerations".
"However, we found a range of deficiencies in the advice that the ministry (Ministry of Economic Development) provided and the steps that officials and ministers took leading up to that decision. The quality of support that was provided fell short of what we would have expected from the lead government agency on commercial and procurement matters," it said.
"However, we found a range of deficiencies in the advice that the ministry provided and the steps that officials and ministers took leading up to that decision," Ms Smith said.
"The quality of support that was provided fell short of what we would have expected from the lead government agency on commercial and procurement matters."
Ms Smith said those "procedural problems reflect some of the challenges of applying general procurement expectations to complex matters requiring political and policy decisions".
"In our view, better planning at the outset would have helped to identify and manage the risks."
Ms Smith said the "inappropriate considerations" the inquiry looked for included "connections between political and business leaders".
SkyCity submitted a proposal to the Government some time after Mr Key had dinner with the casino company's board where the convention centre and possible changes to the Gambling Act were discussed.
Ms Smith said she and her colleagues concluded that feasibility and exploratory work in the first stage of the process of seeking expressions of interest were carried out "reasonably".
"However by the time it was expected that SkyCity would put a firm proposal to the Government for support , officials should have been working to understand and advise on the procedural obligations and principles that would need to govern the next steps. We found no evidence that officials were doing so at this stage."
Economic Development Minister Steven Joyce said the reported cleared the Government of claims SkyCity was given an unfair advantage in the bidding process.
"The OAG makes it clear it has seen nothing to suggest the final decision to negotiate with SkyCity was influenced by any inappropriate considerations.
"Labour's accusation the Government misled the public on the costs of the negotiations is also without substance as the report states it is inevitable that there will be costs involved in properly negotiating a complex commercial arrangement of this kind."
Mr Joyce said the report accepted that a great deal of careful work was carried out by officials to understand the market, and that officials were acting in good faith.
The report stressed that the issues were procedural rather than about the substance of what was being considered.
"An international convention centre in Auckland would be a major asset for New Zealand and will generate significant spin-off benefits including a $90 million annual injection into the economy; an estimated 1000 jobs during construction; and 800 jobs once it is up and running," he said.
He said officials are working hard to conclude negotiations with SkyCity and would ensure any deal was in the best interests of New Zealanders.