Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Auditor-General wings Dunedin Council in Jacks Point report

Auditor-General wings Dunedin Council in report on Jacks Point debacle

By Pattrick Smellie

March 13 (BusinessDesk) – The Auditor-General holds the Dunedin City Council partly to blame for pre-tax losses totalling $8.7 million on Central Otago property developments in the late 2000s by its wholly-owned electricity network company, Delta.

Delta lost $5.9 million on property investments at Luggate and was reported by NBR in 2009 as “rescuing” failing finance company Hanover Finance over its exposure to the failing Jacks Point development, near Queenstown, by buying 98 plots in the 700 plot development.

Delta went on to lose $2.8 million at Jacks Point. Total losses of $8.7 million may be reduced to a net $6.4 million after $1.5 million of available tax losses are applied.

The report published today by the Office of the Auditor-General found “no evidence of impropriety or of poorly managed conflicts of interest in relation to either investment.”

“However, they did identify some breaches of the Local Government Act 2002 and the Companies Act 1993 and instances of Delta using artificial business structures to avoid public accountability.”

Potential conflicts of interest involving South Island business identity and Delta director Mike Coburn, who was also a Jacks Point director, had “caused me to pause and think,” said Auditor-General Lyn Provost.

They had also concerned members of the public and her staff, she said.

Coburn was a director of Dunedin City Holdings, which controlled Delta. He resigned in 2011 rather than be sacked by Dunedin mayor Dave Cull along with the rest of the board of DCH, a wholly-owned subsidiary of the Dunedin City Council, whose directors were also the directors of Delta.

Cull sought the Auditor-General’s inquiry.

However, the report criticises the Dunedin City Council itself for placing pressure on DCH to make up for forecasts of plunging dividends from the council-owned assets in 2006, without giving the company any guidance on the risks the city council was willing to bear.

“I consider that the Council and Dunedin City Holdings Limited bear some responsibility for the investments,” said Provost.

“The council had given no direction about how much risk it was willing to take on. Because most of the directors of Delta were also the directors of Dunedin City Holdings Limited, the governance regime that the council had in place did not provide Delta with adequate oversight of, or guidance about, the investments.”

On alleged conflicts of interest involving Coburn, Provost said disclosure processes were “largely adequate.”

“We identified some instances where there should have been earlier or fuller disclosure for better transparency, and one instance where the director's involvement in both sides of a venture would have been problematic had the venture proceeded.”

“In public office, having multiple roles and interests requires careful management,” the Auditor-General said. “People with such interests need to behave with the utmost integrity and transparency to avoid real or perceived conflicts and risks to the public entities they serve.”

“Although Delta carried out a careful process before investing in Luggate, it is difficult, because of the size of the loss, to avoid concluding that the investment was a mistake,” said Provost.

There had been too much focus on potential profit and too little assessment of downside risk.

She would issue a separate report later this year with recommendations relating to the council control of commercial investment entities.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Housing: English On Housing Affordability And The Economy

"Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle. And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash..." More>>


Sweet Health: Sugary Drinks Banned From Hospitals And Health Boards

All hospitals and DHBs are expected to kick sugary drinks out of their premises. University of Auckland researcher, Dr Gerhard Sundborn who also heads public health advocacy group “FIZZ”, says he welcomes the initiative. More>>


NASA: Evidence Of Liquid Water On Today's Mars

Using an imaging spectrometer on MRO, researchers detected signatures of hydrated minerals on slopes where mysterious streaks are seen on the Red Planet. These darkish streaks appear to ebb and flow over time. More>>


Bird Brains: Robins Can Just Be Generally Clever

Research from Victoria University of Wellington has revealed that birds may possess a ‘general intelligence’ similar to humans, with some individuals able to excel in multiple cognitive tests. More>>


Psa-V: Positive Result On Whangarei Kiwifruit Orchard

Kiwifruit Vine Health (KVH) has received a Psa-V positive test result on Hort16A and male vines on a kiwifruit orchard in Whangarei. This is the first confirmed case of Psa-V on an orchard in the Whangarei region. More>>

Regional Accents: Are Microbes The Key To Geographical Differences In Wine?

A new study of six of New Zealand’s major wine-growing regions has found that differences in flavour and aroma of wine from different areas may depend more on microbes than was previously thought. More>>


Science: AgResearch To Cut Science Staff In Areas Of 'Reduced Demand'

“We are therefore consulting with our staff from today on a proposal to reduce science staff in areas of shrinking demand. Combined with recruitment planned in areas of growing demand, this would mean a net reduction of 15 scientists and 41 technicians at AgResearch in the 2015/16 year." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news