My Account
The release of a report on the Araparera Forestry Joint Venture on May 24 has delivered little insight into how the troubled scheme was managed.
Rodney Councillor Penny Webster promised northern Rodney ratepayers an independent audit of the joint venture to put to rest concerns about the poor return on investment ratepayers would receive.
But the eight-page report produced by Auckland accounting firm Accru Smith Chilcott falls well short of the mark. As expected, it concludes that Auckland Council will receive 69 per cent or $2.4 million of the proceeds, which is just $900,000 more than they contributed over the 28 years of paying the targeted rate. Maori Trustees will receive the remaining 31 per cent or $1.1 million.
But the report also identifies a gross lack of documentation on the joint venture, particularly in the years when it was under the control of Rodney District Council.
It looked specifically at the contributions that each of the joint venture parties made to the scheme because the dividend was calculated according to those contributions. However, Council could furnish supporting documents for only 17 per cent of its contributions over the entire life of the joint venture.
Panuku Development, which manages the scheme on behalf of Council, says it is not reasonable to expect the audit firm to go through nearly 30 years of documentation and there is no legal or taxation requirement to keep source documentation for more than seven years. Retired auditor and finance and policy analyst (local government), Larry Mitchell, says the report is a disgrace and a scandal.
“The so-termed ‘ review’ was commissioned by Council, with no independent oversight of its terms of reference and is, thus, not worth the paper it is written on,” he says.
“It is full of holes. The fact that it points out periods when records of the venture were either not kept or are missing is a very serious matter.”
Mr Mitchell says Cr Webster has played the major role throughout this affair and she must now take the rap and resign. “She has failed abjectly to do her job.”
Cr Webster, who had yet to read the Accru report when Mahurangi Matters contacted her the day after its release, said she knew there were documents missing.
“I just wonder what people think I could have done?” she said. “The joint venture was set-up well before I joined Rodney Council. I relied on the advice of the staff and the experts we employed to give us forestry advice. It was not my job to decide when the trees should be harvested or to determine what they were worth. When you employ someone, you expect them to do the job.”
Cr Webster said the way the joint venture had been handled since it went into Auckland Council had been a disaster. (Read Cr Webster’s further comments here)
On the issue of the terms of reference for the report, Panuku said the auditors were to undertake those procedures they considered necessary in order to obtain reasonable assurance that the terms of the joint venture agreement had been followed.
“In particular they were to investigate the yearly contributions of each party, determine whether the CPI and IRR calculation had been properly performed, and whether the division of forestry returns and supporting calculations had been properly performed.”
Incensed
Like Mr Mitchell, Tomarata landholder Brian Mason is equally incensed by the lack of information in the report.
“After waiting years for this piece of information and after our involvement in compiling a 90-page dossier questioning the venture, we now are reluctantly furnished with a brief eight page ‘ summary’ ,” Mr Mason says.
“The document is insufficient and misleading, and it raises questions which no doubt need a more qualified opinion than mine. It doesn’ t even show us the gross returns and working expenses.”
The Accru report also questioned the reasonableness of charges by Council for management fees and overheads. In the five years from 2007 to 2011, the fee was $7800. This figure jumped to $76,748 in the following four years when the scheme was fully under Auckland Council.
Panuku said this was because forest harvesting required significantly more ongoing management oversight then a forest that was still in the growth stage.
While the report did not audit how the harvest contract was awarded or how the harvest was managed, it did state that the payments made by the harvest manager, Harvestpro, to Council were a net amount after deducting logging, cartage, administration and management fees. This appears to be in conflict with the terms of the harvesting agreement, which required HarvestPro to deposit all monies from sales directly into a Council bank account. Expenses were to be paid on presentation of a monthly invoice. Asked about this, Panuku said there was no particular reason for doing this.
“However, netting off expenses was a much simpler approach, saving the need for two separate physical transactions, and with the monitoring of wood sold and market price received, the same outcomes of traceability of expenditure is achieved,” a spokesperson said.
The report also identified a discrepancy in rental payments to the Maori Trustee. Up until June 2007, Council had included the rent as part of its contribution as per the joint venture agreement. But, this arrangement ceased from July 2007 and Accru could find no evidence that this variation had been agreed to by the joint venture parties.
The Maori Trustees were asked to comment on the Araparera outcome, but said their involvement was of a commercial nature and they would not be making a comment on the matter of any investments or returns.
On the question of the Forestry Right and the $64,525 per annum rental that ratepayers were continuing to pay on the Araparera land, Panuku said Council had the right to surrender the grant upon payment of a premium of one year’s rental.
“We are currently waiting on legal confirmation that registration on the Araparera Certificates of Title has been completed.”
The Accru report took 11 months to produce. Asked about the cost of the report, Panuku said it did not have exact figures at this stage, but the cost was capped at 80 hours, at a market-related hourly rate for auditing services.
Roading on Board agenda
Panuku Development Auckland director portfolio manager Ian Wheeler says that with interest, Rodney’ s northern rural ratepayers will receive $2.7 million from the 30-year investment. In a prepared statement, the Rodney Local Board said it is working with Auckland Transport on the best way to prioritise the proceeds from the Araparera funds in accordance with the original Council resolutions. The Board is developing an initial prioritisation framework and schedule for the end of August. If smaller projects are adopted, then the ground work could start in the latter part of the 2016/17 financial year.
