New Plymouth rates blunder caused by lack of financial reporting knowledge
Photo:
Taupō District Council / Supplied
An external review following a
New Plymouth District Council rates GST blunder
- which could've cost it $20 million in lost revenue - indicates key managers may not have a sufficiently sophisticated understanding of the rating process and its impacts.
The Simpson Grierson review found the council lacked financial reporting and modelling capability which "strongly suggests a need for training, and possibly recruitment/restructure and training".
Council chief executive Gareth Green conceded an earlier restructure - which saved the district council $10 million - played a part in the error.
"That necessitated some significant pressure being applied through the business.
"I think that pressure along with other pressure points in the local government sector has contributed to this [mistake] occurring, so certainly the pressure that restructure has applied has had an impact, most definitely."
He was instigating another restructure designed to bring more financial and local government experience to council staff.
Green said this would result in a "small number of job losses" due to new positions being created.
He wasn't thinking about falling on his sword.
"I do take full responsibility for this, but I am not tendering my resignation at the current time.
"My total focus at this point is leading this organisation through this situation and making sure we can resolve it in the best possible way."
The Simpson Grierson review also
uncovered two further bungles
.
It revealed the council hiked average residential rates 12.8 percent rather than 9.9 percent as advertised.
The gaffe equated to $102 per ratepayer or $3.1 million.
The review also identified an annual plan wording error relating to industrial water use which could've cost council a further $1.4 million in lost revenue.
In his report, consultant Jonathan Salter said sophisticated knowledge and understanding of the rating process and rating impacts tended to be the domain of specialist officers with a long-standing understanding of the rating function.
These staff were usually intimately familiar with the council's financial reporting and modelling systems, the valuation and rating information database and the district itself, he said.
"There appears to have been a lack of capability in these two areas. This strongly suggests a need for training, and possibly recruitment/restructure and training."
New Plymouth Mayor Neil Holdom.
Photo:
RNZ / Robin Martin
Mayor Neil Holdom said one reason why he called for an independent review when the GST error was discovered was so council could learn from its mistakes.
"I just want to make it clear the councillors - the governance team - made decisions based on information that was incorrect.
"Our long-term plan was audited by Audit NZ and they also didn't pick up this error in our rating calculation model."
Holdom said the proposed restructure would bolster the financial capability and bring people onboard council with local government experience.
The Simpson Grierson report also recommended an independent legal review be a component of the annual rate setting process, and that council not rely on the Audit NZ review alone.
Holdom said an extra-ordinary meeting on 22 July would consider a proposal for future annual-plan and long-term plan calculations to be externally peer reviewed as part of a parcel of steps to address the recent errors.
Salter also wanted the council to review how it handled documents.
"It appears that document management may have been an issue ... the restricted water supply targeted rate issue appears to have arisen from an incorrect 'cut and paste' from another document."
Holdom earlier described the GST blunder as a "typo" and a "cut and paste" error.
The Simpson Grierson consultant also thought council should consider moving away from an average residential rates model to an overall rates model.
"This would be a more transparent and certain disclosure. If there is reference to the 'average' rather than 'overall' rates increase, this concept should be defined."
At the extraordinary council meeting on 22 July, the mayor would recommend councillors approve a one-off rates refund to all residential property owners to ensure the average residential rates increase equalled 9.9 percent.
That would require council to find $3.1 million in savings elsewhere.
Councillors would also vote on amending the rates resolution wording regarding properties on a restricted water flow - usually industrial users - to ensure council was able to charge $418 for each cubic metre of water as intended.
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