Councillors challenge Mayor and CEO over spending "story"

Analysis/Editorial

Further disclosures under official information legislation show how Queenstown Lakes District Council managers tried to hide elected councillors’ concerns over multiple breaches of spending rules from publication by Crux.

New emails also show how Mayor Jim Boult and CEO Mike Theelen worked together to create a public “story” around how QLDC broke its own procurement rules over a five-year period. In one email Mayor Boult replies "Let it cook?" in response to a request for strategic advice from CEO Mike Theelen on how to handle a series of questions from Councillor Niki Gladding. 

Mayor Jim Boult. Involved in multiple emails on how to handle the QLDC spending crisis "story"

Crux now has also seen emails that reveal a failed battle by council managers to take control of public spending rules away from councillors and a paper trail that shows who is formulating public statements from QLDC behind the front of the council’s media spokesperson.

The information is revealed in an information request from Crux that centred on how senior council staff communicated with elected councillors over the long-term breach of spending/procurement rules and how the problem was covered up for more than a year with Crux being blamed for “inaccurate and misleading” coverage.

In January 2021 QLDC finally admitted the rules had been broken since 2016 with the problem so serious it had the potential to bring the council’s day to day operations to a standstill.

It turned out that ZQN7 and other spending on consultants were only the tip of the iceberg.

Councillors’ emails hidden – but they fight back.

Elected councillors started to ask serious questions of council managers within a couple of months of Crux revealing in early 2020 what appeared to be a systemic breach of the rules designed to avoid “jobs for mates” and the overspending of ratepayer’s money.

The first stories focussed on ZQN7 and the payment of $600,000 through that company to Ruth Stokes and Jendi Paterson – two former QLDC staff hired to review three by-laws.

Councillor Niki Gladding was one of the first to confront QLDC managers, but she is told by infrastructure boss Peter Hansby that Crux reporting was “inaccurate and misleading” as well as saying that everything was basically in good order. 

Councillor Niki Gladding. Started asking questions in mid 2020 - but was told that Crux reporting was the problem, not council breaches of spending rules.

This was in July 2020 at the same time as council managers were pushing to remove the involvement of elected councillors in deciding and monitoring how public money is spent. You can read the email thread here.

The problems with QLDC procurement breaches continued in spite of regular Crux stories presenting more and more evidence.

Eventually in January 2021 QLDC launched an internal review that found at least 300 payments a month were in breach of the spending rules and CEO Mike Theelen was forced to report to Mayor Jim Boult, with “intense disappointment”, that Crux had been right all along and that QLDC had been spending money on contractors and consultants (including former council staff) in breach of the council’s own financial rules.

The new emails this week now show how QLDC managers continue to try to cover up the backlash from elected members over the council’s refusal to admit they were at fault.

The councillors are asked for their comments on the mayor’s early 2021 review of ZQN7 that admits mistakes but claims that nothing was done deliberately or for personal gain.

Firstly, one of the few emails that council managers did not hide from Crux is from Penny Clark, a relatively conservative councillor who usually supports the Mayor and CEO.

Councillor Penny Clark. "We made a mistake. Own up, take it on the chin."

“I do not think it’s necessary to delve into the dirty washing. We made a mistake. Own up take it on the chin and let’s move forward,” her email says.

Then comments from councillors Gladding, Shaw and Copland are supplied to Crux completely redacted. Councillor Shaw then contacted Crux saying that she wanted her views made public.

“I’d like my email to be public,” Councillor Shaw told Crux after being given a copy of the QLDC official information response as part of the council’s standard process.  

“We need our views to be seen by ratepayers. I wanted the whole procurement situation to be handled differently – in a more open manner.

“My view is that the community has lost trust in QLDC because we are not being fully transparent about these situations.

“If we make mistakes or do things wrong, then we need to own up to that. 

“I have formally asked that my email be made available to Crux – in its entirety.”

Councillor Gladding takes a similar position.

“For me the key take-away from the procurement failure is that ‘trust’ is no basis for good governance. 

“We need to ensure we have good processes in place and sufficient oversight of all aspects of Council’s work. 

“It benefits staff and it benefits the ratepayers. 

“Unfortunately, there’s still some resistance to stronger governance.

“Elected members rely on officers to be frank and objective and timely with their when it comes to sharing information; we can’t do our job properly if staff are carefully ‘managing’ the flow of information.

Councillor Niamh Shaw. “My view is that the community has lost trust in QLDC because we are not being fully transparent about these situations."

“After the internal report on procurement was released, staff tried to take control of the Procurement Guidelines, which at the time contained the procurement thresholds.

“A decision was made by the Audit Finance and Risk Committee (AFRC) but was later rescinded. 

“My understanding is that the AFRC didn’t have the power to make the decision. 

“I left a workshop understanding that the AFRC would consider an independent investigation into procurement; somehow that became a request for a peer review of QLDC’s internal report. 

“There was a push for an independent review from some councillors but somehow that option never made it to the AFRC Report.”

Staff reveal Councillor Heath Copland’s email –  but then redact another copy.

In a somewhat ironic twist, Arrowtown councillor Heath Copland told Crux that he trusted council staff to edit and redact emails and that he had no wish for his views to be made public.

Heath Copland's February 17 2021 email. 100% redacted by council managers - then revealed in another file.

But in the same batch of official information releases where this email is 100 percent blacked out, council staff give Crux a clear copy of the same email.

“I agree with Niki that the first paragraph should specifically reference QZN7 (sic) not refer to a full review of the procurement policies, and I don’t think we should include the sentence reading “completed absolutely within the policy”. When reading the policy literally the range from $0 - $50k includes any minor expenditure and we can’t say the policy was followed when minor expenditure is non-compliant, even if the policy is not fit for purpose.

“I think along with the actual report the message is reasonably clear, there were breaches identified, there was no deception or gaming of the system for personal gain, we need to do better, and we will do better (we are already doing much better).

“In my opinion Crux deserve no thank you or apology.”

We can now see why Mr Copland did not want his email made public. The suggestion for a thank you and apology to Crux came from Councillor Gladding who told Mayor Boult in her email (also redacted – then revealed elsewhere):

“There is no basis for saying that “generally procurement is completed absolutely within the policy”. We don’t know that to be a correct statement. You will be eaten alive because the report states: “It is clear, however, that a procurement practice has existed for some time that believes projects under $50,000 can be negotiated with a sole supplier without a formal procurement plan.”

You can read the full email thread from Councillor Gladding (and Heath Copland) here. 

So – what does this all mean?

All of these emails reveal a lot about how the council’s spin machine works. Mayor Jim Boult is consulted on almost everything, CEO Mike Theelen is at the top of the management tree but he’s being advised by the Head of Corporate Services, Meaghan Miller.

Senior QLDC manager Meaghan Miller. Long thought by Crux to have a big influence on council communications - a view now confirmed by the latest batch of emails.

We see Crux requests for information being shuffled between Ms Miller, Mayor Boult and Mr Theelen and then handed down via QLDC Governance boss Niall Crosby-Roe to council media frontman Sam White and, before him, Jack Barlow.

The mayor’s review of the ZQN7 procurement saga paints a picture of mistakes being made but then the standard corporate playbook of “nobody acted deliberately” is trotted out while all the evidence obtained by Crux seems to point in the opposite direction. This was “business as usual” for senior council staff. 

The new emails make it clear to Crux that the inquiry by the Office of the Auditor General was fed the same carefully rehearsed party lines: ‘Nothing was done on purpose’ and ‘There’s nothing to see here’.

One line from an email from CEO Mike Theelen on February 10, 2021 to all of his senior council managers says it all:

“Attached is a bit of a bullet pointed agenda about what and how we need to tell the ZQN7 story.”

Needless to say, that meeting was a workshop with no minutes kept.

The development now is that some councillors are starting to break ranks, not wanting to be buried by Mr Theelen and Mayor Boult’s “story.”