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Westland council's governance slammed

By Chris Hutching

Friday 29th August 2003

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An official audit report has strongly criticised Westland District Council's governance over the way it has given out loans to various businesses, notably an untried plastics manufacturing company, FT Manufacturing, that appears to have foundered after spending $545,171 of ratepayers' money.

Westland mayor John Drylie and other promoters of the scheme are resisting calls from ratepayers to resign in the wake of the scandal (NBR, Aug 8).

Audit New Zealand said Westland District Council loans and monitoring processes fell short of best proactive. The loans were arranged via the council's economic development unit called Westland's Working.

Audit NZ said there was the potential for difficult governance dynamics because the unit's board was comprised of 12 councillors and community representatives, many of whom were and are involved in personal and business dealings within the small community.

The formal application for a loan from FT Manufacturing was dated February 15, 2002, for $1.5 million and in other discussions it was agreed the full quantum of loans would be $6.5 million, the same amount that had been applied from (and declined by) the West Coast Development Trust.

FT Manufacturing's application of $1.5 million represented half of the original Westland's Working allocation of $3 million for what were supposed to be small-to-medium-sized loans for economic development projects.

"In our opinion, the effectiveness of the due diligence process was compromised," the report says.

"The chair's paper to the committee ... hints that the company has other 'possible' offshore investors that would mean establishment of the facility overseas.

"Further, the same paper notes [promoter Soren Kiekegaard] 'has stated that unless he can secure sufficient funding by mid-March he will be unable to meet targets and the whole enterprise is at risk.'

"We did not sight any documentary evidence to substantiate this view.

Indeed, from an impartial observer's hindsight view, it appears the committee was being persuaded into making a rushed decision."

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