A leaked report alleges Queenstown Lakes District Council was done like a dinner by a contractor it still employs.
The secret document – penned by former council chief executive Debra Lawson and mailed anonymously to Mountain Scene last week – lifts the lid on a major financial scandal within the council. The report, a closely-guarded civic secret, details Lawson’s eye-watering list of allegations, claiming United overcharged up to $1.125 million in two years.
Lawson’s leaked litany from 2010 accuses United of:
“Potentially acting in a fraudulent manner” by wrongly charging GST on non-GST items
“Financial negligence and at best a careless disregard in claiming costs not related to the contract”
Charging “excessively high” costs for training United’s local staff then putting those staff on work for other parties
A “culture of excess or inefficiency”
Letting subbies get away with uncompetitive prices, costing QLDC “an unknown dollar value”
Double-charging council for a month’s depot rent
“Inappropriate operational costs” such as vehicle leases and staff relocations
“Excessively high management costs”
“A lack of focus on price efficiency and a lack of financial accuracy at a local management level”.
Mayor Vanessa van Uden this week endorses the authenticity and accuracy of Lawson’s seven-page report, recalling it being adopted during a closed-door council meeting in October 2010.
However, Van Uden maintains United was “inept” rather than exploitative and says council officials were equally to blame.
As reported last year, contractor United Water – now Veolia – refunded hundreds of thousands of dollars in November 2010 after Lawson conducted claw-back negotiations.
The newly-leaked Lawson report reveals that after she confronted United, the contractor immediately offered a $342,000 refund, acknowledging “process errors which led to the overcharging”.
That wasn’t enough, Lawson told her council: “QLDC should be seeking a target reimbursement of $1.125m.”
Under the contract’s unwieldy ‘pain-gain sharing’ formula, a $1.125m settlement would see half that sum repaid to the council, she said.
Lawson also maintained that doing legal battle with United would be risky – many disputed matters were “not adequately defined”.
After more jawboning, the $562,500 refund was agreed.
Lawson alleged United wanted to make their refund conditional on the contract continuing but this was rejected.
Instead, “unencumbered negotiations” would determine whether a new, improved contract could be hammered out – and it has been, Van Uden says.
Mountain Scene conveyed the allegations in Lawson’s report to Veolia and twice invited the firm to comment.
However, a spokesperson said Veolia had to decline because of being bound by a confidentiality agreement with the council.
In 2011, United/Veolia’s Australian arm refunded $25m to the South Australian government to settle a state l
lawsuit alleging overcharging.
All OK now – mayor
Queenstown mayor Vanessa van Uden (right) says water services contractor United/Veolia has mended its ways.
Van Uden’s been a pivotal figure in the contract scandal.
As an outspoken councillor before becoming mayor, Van Uden first blew the whistle in 2008: “I was uncomfortable with this contract from the beginning.”
Van Uden says she was also the catalyst for Lawson’s involvement in 2010: “I was constantly banging on about it [because of] never-ending overspends.”
While the mayor endorses the accuracy of Lawson’s report with its hard-hitting allegations, she believes United was “inept” and “not good enough at their job” rather than exploitative.
Council officials were equally to blame by being “naive” in not tightly checking the contractor’s performance and billing.
Van Uden’s initial reaction was to dump United/Veolia – “Because we didn’t trust them.”
Then pragmatism took over – a simpler contract with “significant” changes, beefed-up monitoring from council officials and a management cleanout at United/Veolia convinced her to give the contractor another go.
The scandal has shaken up the council, Van Uden says: “This bad experience with United/Veolia has acted as a learning curve.”