Specifics revealed in CODC's sacked contractor incident

The incident has been brought to light because the contractor has been elected to the council based on provisional results.

Vincent ward councillor-elect Dave McKenzie has been the subject of social media posts alleging he had altered an invoice for personal gain when working as a council contractor in 2018.

McKenzie issued a long statement following the posts, saying he was not solely responsible for the issues that arose.

Crux’s request for an internal report into the matter is being processed as an official information request but the council has released copies of legal advice it received about the matter in 2018.

According to legal advice in June 2018, McKenzie, trading as DM Property Solutions Limited, was contracted to complete building warrant of fitness inspections and unplanned maintenance work for the council from 2011.

In early 2018 a quote of $5635 was provided and accepted for planned maintenance work. McKenzie used a sub-contractor to perform the work before submitting an invoice for $5635.

This was queried on advice from the sub-contractor that the works were less involved than expected and McKenzie provided an amended invoice for $3068.37. The council requested McKenzie provide a copy of the sub-contractor’s invoice and this showed the work totalled $1968.15.

Council staff were advised by the subcontractor that his invoice was for $961.

When queried, McKenzie said was there was an input error in the system when entering the subcontractor’s invoice. He re-sent an invoice of $1372.95 made up of $961 plus a project management fee. A credit was issued as the council had already paid the $3068.37 invoice.

In a subsequent meeting to discuss invoice discrepancies, McKenzie “admitted modifying the subcontractor’s invoice to match the amount on their own invoice”. The contract with DM Property Solutions Limited was terminated with one month notice.

The council sought further legal advice in October 2018 after further investigation of invoices from the company “revealed further discrepancies involving a number of sub-contractor invoices on-charged to CODC”. The council asked if this was a breach of contract.

In that legal advice, it says it is possible McKenzie believed his contract entitled the company to charge CODC what had been agreed. Lawyers told the council engaging a forensic accountant to look further into the issue “would unlikely be an efficient use of ratepayer money in the absence of clear evidence of a breach of contract”.

Crux has also been provided with a confidential report to the council’s Audit and Risk Committee from March 2019 which outlines what further investigations discovered.

It says council staff audited 51 service requests received in February 2018 – 14 undertaken by DM Properties and 37 by subcontractors. The council obtained 17 subcontractor invoices as part of the audit and 14 had amounts added ranging from $30 to $300. Across the invoices the council had been charged an additional $1709.98 representing a 36 per cent markup.

“Only a small sample was checked and it isn’t known for how long this behaviour has existed or to what extent there have been financial implications,” the report says.

In his previous statement, McKenzie said the claims of multiple unapproved margins were incorrect.

“The costs in question were legitimate charges related to travel and urgent work, both permitted under the contract.”