Auditor-General's overview

Auckland City Council: Management of footpaths contracts.

My predecessor, Kevin Brady, was asked by Auckland City Council (the Council) in May 2009 to carry out an inquiry into the Council's management of its footpaths contracts. He agreed to do so because of the nature of the concerns being raised and because of the scale of the Council's footpaths work.

We were aware of various allegations that the Council had mismanaged contracts for its footpaths work and that the topic had been of high public interest for some time. We were concerned that a large public entity, with responsibility for footpaths contracts worth millions of dollars, was continually attracting public criticism and that the allegations persisted.

Our inquiry aimed to understand the wider context of the Council's footpaths work, and to address several specific concerns. My staff looked in depth at the Council's management of footpaths contracts during the past eight years to see how the Council has developed its approach to footpaths work and whether there were any fundamental flaws in the systems and processes for current or historical contracts.

Overall conclusions

I am pleased to report that the Council's processes and procedures for managing footpaths work – while still evolving – are reasonable and have been applied adequately. We are satisfied that the Council has protected the interests of ratepayers throughout its management of footpaths contracts.

My staff found no fundamental flaws or gaps in the Council's contract management processes, no apparent evidence of corruption at any level, and no waste. However, in keeping with most large and complex asset management systems, we did find some areas where the Council can tidy up its administrative processes and have made a number of comments and suggestions and four recommendations for improvement.

Each of the concerns raised publicly had some basis in fact. However, the issues were not as serious as they appeared and all were dealt with appropriately. For example, the isolated instance of an individual accepting a gift did not compromise the 2009 footpaths contract tendering process. The matter was dealt with appropriately as a personnel issue and we are satisfied that the Council has the necessary controls and procedures in place to mitigate the potential for this type of situation to happen, and to mitigate any effect if it does happen.

The Council's response to the various allegations was adequate and reasonable and, in some instances, involved extensive investigation. However, the Council could have communicated better when addressing the public's and the news media's concerns.

Scale of Auckland's footpaths asset

Auckland's 2200km of footpaths represent a significant asset, with a replacement value of $300 million. Since 2003, the Council's footpaths programme has changed from minor local renewals to area-based renewals. In 2006, the Council began a significant renewal programme requiring investment of more than $50 million a year in 2006/07 and 2007/08. The Council has approved budgets of $22.5 million each year on footpaths work from 2009/10 to 2011/12.

Renewing and maintaining an asset of this size effectively and continuously is a large and complex job. For the Council to get value for money and to protect the investment of its ratepayers, we expected footpaths work to be well planned and guided by a strategic approach in keeping with wider asset management practices. We also expected the Council and its staff to have high standards of contract management practices and personal conduct, supported by an integrated system, robust processes and procedures, and sufficient resources to do the job properly.

Reasonable processes and procedures were applied

The Council generally managed its footpaths work consistently with its wider strategic approach. It has reasonable and sensible processes and procedures that were applied during the eight-year period covered by our inquiry. These processes and procedures have been refined during the past eight years and are still evolving, but they are soundly based and heading in the right direction. We were also pleased that the Council was able to provide us with substantial evidence and documentation of those procedures being applied.

There was one occasion when the Council stopped using the colour red for footpaths work in certain areas, which was not envisaged by its Footpaths Policy at the time, and the Council did not amend the policy until 21 months later. The Council has acknowledged that this delay in changing the policy was not good practice, but the change from red to black footpath surfaces did have benefits.

There was some uncertainty, and different views, about what procedures should have applied to expenditure and payments at different times during the period my inquiry looked at. My staff also found some mixed practice in applying procedures, and their documentation. This is not surprising, because we looked at a long period, and the Council's procedures and personnel have changed during that time.

Mixed views about measurements of footpaths work

It is clear from our inquiry that there have been mixed views about the measurement of physical work completed and paid for under the Council's footpaths contracts. In response to allegations that it had paid too much for footpaths work in 2005/06, the Council remeasured the work that had been claimed for payment by the contractor. The work was later measured again and showed that the original measurements were correct within acceptable tolerances.

Overall, we are satisfied that the Council had a reasonable basis for the measurements it used to make payments under the 2004-09 footpaths contracts.

However, in our view, the Council should keep under review the level of resources that it needs to confirm measures effectively. This has been a theme running through the public concerns that have arisen, and also through the findings of other reviews of the Council's footpaths work. We note that the Council has recently employed a quantity surveyor to help with technical matters, including procurement and the review of contractor claims for footpaths work.

Reasonable response to allegations

The Council's own investigation of various allegations about its footpaths work has been extensive, and a reasonable response in the circumstances. Some of these allegations involved matters of probity. We consider that the Council's response to the individual matters of probity was reasonable. We encourage the Council to continue reinforcing the importance of appropriate standards of probity and conduct, to help reduce the likelihood of such issues arising in the future.

A number of people interviewed during our inquiry expressed concern about the lack of integration and consistency between the various ways issues get raised, investigated, and dealt with by the various parts of the Council. This included how the Council dealt with the public's and the news media's concerns. We encourage the Council to consider how it can resolve the lack of integration and consistency.


I appreciate the time and effort of all those who provided information to my staff, including employees past and present, and other parties.

Signature - LP

Lyn Provost
Controller and Auditor-General

12 February 2010

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