Council’s three waters unit had $6.5m blowout on unapproved hiring of staff

Friday, 24 November 2023

Poor documentation and financial management within the city council’s three waters unit led to a $6.5 million staffing blowout, an external investigation has found.

Twenty-six staff were hired over four years either without proper approval, against the wishes of the council, or outside approved budgets, according to an independent review commissioned by outgoing chief executive Dawn Baxendale.

The KPMG report, released to The Press under official information laws, points to failures not just within Christchurch City Council’s three waters department but across the executive leadership, human resources and finance teams.

“Decisions around the creation of roles that are ultimately funded through rates should have been better documented,” the report said.

Of the 11 controls the council has in place to ensure the correct process and approvals are gained when hiring staff, only one was deemed effective by KPMG.

“A lack of preventative controls, poor advice from finance and human resources, and poor record keeping are all issues that council can address,” it said.

However, the report makes clear that there is no obvious evidence to suggest staff were being employed into positions that appeared to be unnecessary.

The report was commissioned on February 22 after an internal review into three waters staffing levels found 44 people were hired without the appropriate approvals. However, this was downgraded to 26 in the KPMG report.

A day after the report was commissioned, news broke that three waters head Helen Beaumont and her boss Jane Davis, general manager of infrastructure, planning and regulatory services, were off work.

Beaumont and Davis never returned to the council, both resigning in July, although Davis’s resignation took effect on September 1.

Parts of the report are heavily redacted, and the only name not disguised is Baxendale’s.

Baxendale, whose resignation was announced this week, has repeatedly refused to answer questions all year about why Beaumont and Davis left, and instead chose to drip-feed information to The Press in response to requests under the Local Government Official Information and Meetings Act (LGOIMA).

Baxendale is now on annual leave until her resignation takes effect on November 30.

The KPMG report was completed in June. It cost the council $302,485 including GST, and the council spent an additional $253,574 in relation to the review process - a total of $556,059.

The report found sufficient evidence for the council to conclude that actual full-time equivalent staff numbers did not match those approved.

Across four years, from the year ending June 2020 to June 2023, the personnel costs in the three waters unit was over budget by a total of $6.5m. The actual budget was $63m, but $70m was spent.

“What is most concerning to us is that although monthly reporting is issued, these large overspends do not appear to have been addressed.”

The report said the overspend in the staff budget was “another example of poor documentation and financial management of the three waters unit”.

In January this year the three waters unit was budgeted to employ 167 staff, but it actually had 192 - some 25 over budget.

“We have sought explanation from various council staff as to firstly, how these discrepancies could occur, and secondly, how they could occur and not be identified, but we have not been provided with a conclusive answer.”

In a response to the draft report, a staff member whose name is redacted took issue with parts of the report. They said poor quality three waters financial reports were similar to those provided to other council departments.

KPMG said that might be the case, but it did not make the standard of reporting acceptable.

The staff member also pointed out three waters had been affected by a series of external challenges over recent years, which have had an “enormous impact”.

The trickling filters at the wastewater treatment plant were destroyed by fire in November 2021. The Government also brought in new stricter drinking water rules, leading to massive upgrades and chlorine being added to the water.

The staffing budget had not kept pace with the requirements of the unit, the person said.

The Public Records Act requires councils to ensure full and accurate records of its affairs are created and maintained, and a failure to record those decisions was a failure of the three waters management, the report said.

The executive leadership team, which was led by Baxendale, was also criticised for its lack of robust minute-taking to ensure all discussions, motions, and decisions were clearly documented and communicated.

In one instance, an unidentified staff member stated that Baxendale gave approval to create 11 new positions, but no notes were taken of the meeting and no written confirmation was received.

Baxendale told KPMG she did not approve the positions.

KPMG made six recommendations, including that the council reviews the effectiveness of its hiring controls and strengthens them where possible.

The council has formulated a 31-point plan to address the concerns in the report.

When asked how the council could be sure similar staffing irregularities do not exist across other departments, acting chief executive Mary Richardson said the action plan had been developed to ensure irregularities did not exist in the future.

She said similar reports would not be done in other areas, because the council-wide action plan would address the core issues identified in the report.

Staff charged with making sure most of the changes in the action plan are made include the heads of finance and people and culture, and the chief executive.

However, chief financial officer Leah Scales is on sick leave, due back December 6.

People and culture head Peter Keegan is also on leave, and Baxendale has resigned.