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.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Inequality: Top 10% Of Housholds Have Half Of Total Net Worth

The average New Zealand household was worth $289,000 in the year to June 2015, Statistics New Zealand said today. However wealth was not evenly distributed, with the top 10 percent accounting for around half of total wealth. In contrast, the bottom 40 percent held 3 percent of total wealth. More>>

ALSO:

What Winter? Temperature Records Set For June 20-22

The days around the winter soltice produced a number of notably warm tempertaures. More>>

Conservation Deal: New Kākāpō Recovery Partnership Welcomed

Conservation Minister Maggie Barry says the new kakapo recovery partnership between DOC and Meridian Energy is great news for efforts to save one of New Zealand’s most beloved birds. More>>

ALSO:

Tech Sector Report: Joyce Warns Asian Tech Investors View NZ As Hobbits And Food

Speaking in Wellington at the launch of a report showcasing the value of the technology sector to the New Zealand economy, Joyce said more had to be done to tell the country's technology stories overseas. More>>

ALSO:

Mediaglommeration: APN Gets OIO Approval For Demerger Plan

APN News & Media has received Overseas Investment Office approval for its plan to split out its NZME unit ahead of a potential merger with rival Fairfax Media's New Zealand operations. More>>

New Paper: Ninety-Day Trial Period Has No Impact On Firms' Hiring

The introduction of a 90-day trial period has had no impact on hiring by New Zealand companies although they are now in widespread use, according to researchers at Motu Economic and Public Policy Research. More>>

ALSO:

Corrections: Serco Exits Equity Stake, Remains As Operator

Serco has sold its equity stake in the company that holds the contract to design, build and run Wiri Prison in South Auckland but continues as sub-contractor to operate the facility. More>>

GDP: NZ Economy Grows Faster-Than-Forecast 0.7%

New Zealand's economy grew at a faster pace than expected in the first quarter of 2016 as construction expanded at the quickest rate in two years. The kiwi dollar jumped after the data was released. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news