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Provision of billboard for Len Brown's Mayoral Campaign

22 February 2011
In December 2010, the Minister of Local Government asked the Auditor-General to consider the legality and appropriateness of the Counties Manukau Pacific Trust’s contribution of free billboard space to Mr Len Brown’s Mayoral campaign. The text of the Assistant Auditor-General Legal's letter to the Chairman of the Trust is reproduced below.

17 February 2011

Sir Noel Robinson
Chairman
Counties Manukau Pacific Trust
P O Box 76-596
Manukau City

Dear Sir Noel

We have completed our inquiry into the Trust providing free advertising space on a billboard near its events centre to Len Brown during the Auckland mayoral campaign in 2010.

Summary

We do not regard the matter as showing a significant lapse of judgement or lack of probity by the Trust. The financial benefit to Mr Brown’s campaign was provided as part of the Trust’s normal procedures for community organisations using the billboard. There was no cost to the Trust or to Manukau City Council ratepayers. However, the fact that the Trust has been criticised for entering the political domain by supporting one candidate is not surprising. This was a risk that the Trust could have thought about more when making its decision.

Background

In December 2010, the Minister of Local Government asked the Auditor-General to consider the legality and appropriateness of the Trust’s contribution of free billboard space to Mr Brown’s campaign. He also noted that concerns had been raised about Trust staff being involved in Mr Brown’s campaign, and was concerned that Manukau ratepayers’ funds might have been inappropriately used to promote a particular candidate.

This request was made shortly after Mayor Brown had disclosed his campaign expenses, including donations. He listed the Trust as having donated billboard space worth $3,375. Mr Brown had used a billboard near the Trust’s events centre for five weeks during his mayoral campaign and the Trust had not charged him for that.

As the Trust’s auditor, we were interested in how the Trust decided on the contribution and how it managed conflicts of interest and other risks.

The Trust sent us some material commenting on the concerns raised, and we met with the Trust in February 2011 to discuss the concerns.

The Trust

The Trust is a charitable organisation, and is registered with the Charities Commission. The Trust was formed in 2000 to construct and operate a multipurpose events centre in Manukau to provide for the cultural, community, and recreational needs of the community and the public. The events centre opened in 2005 and is known as TelstraClear Pacific. The Trust operates the events centre. Manukau City Council owned the land that the events centre is on, and ownership of the land has now transferred to the Auckland Council as part of the Auckland local government reform. However, the Trust is not a council-controlled organisation.

There is a large billboard on land near the events centre, overlooking the southern motorway. The Trust does not own the structure of the billboard but manages its use. The billboard was constructed by a company that makes billboard banners. Organisations that use the billboard must use this company to make the banners, and the company pays the Trust a small fee for each banner produced.

The Trust’s decision-making process

The Trust’s policy is that organisations running events at the events centre have first priority for using the billboard. People willing to pay rent for the billboard have second priority. Community groups have third priority, and can use the billboard for free if it is not being used to promote an event at the events centre or by a commercial user. For the Trust, this is a way of supporting the community and fulfilling its charitable purposes.

The Trust’s chief executive, Richard Jeffery, was actively involved in Len Brown’s mayoral campaign in his personal capacity. You, as Trust chairman, were aware of this and comfortable with Mr Jeffery’s involvement provided it did not interfere with his role as chief executive or have any adverse effect on the Trust.

Mr Brown’s campaign team asked for ideas about low-cost or free promotional opportunities for Mr Brown. Mr Jeffery told the campaign team that the Trust managed a billboard and had made it available to community organisations for free.

Mr Jeffery had authority to manage how the billboard was used. However, because of his involvement in Mr Brown’s mayoral campaign, he referred the request from the campaign team to the trustees for them to consider. The Trust received legal advice in April 2010, which said that it could make a donation to a political campaign if satisfied that making a donation would meet the objectives of the Trust.

The trustees considered the matter at a meeting in June 2010. The two trustees that were involved in Mr Brown’s campaign were not present at the meeting and no conflicts of interest were declared. You told us that the trustees are well aware of the need to manage conflicts of interests.

You also told us that there was some debate about the request at the meeting. The trustees resolved to make the billboard available without charge to any mayoral candidate that made an approach for such use. This was subject to the billboard’s availability, and the Trust incurring no cost.

We asked the Trust whether it made this opportunity known to other candidates or their campaign teams as well as Mr Brown’s team. Mr Jeffery told us that the Trust did not formally do so.

Mr Brown was the only candidate to use the billboard, and did so when the billboard was available – which was for about five weeks of the campaign period.

The trustees resolved to make the billboard available to mayoral candidates “to encourage the democratic process”. We asked the Trust how this was part of its role. The Trust explained that it had an annual service contract with the Manukau City Council, which partly involved it supporting one of the Council’s community outcomes of “Strong and Vibrant Communities”. One of the Council’s targets towards achieving that community outcome was to increase voter turnout in all voting age groups in Manukau.

The Trust had previously hosted a mayoral debate in 2007 to assist the Council’s goal of increasing voter turnout. The Trust told us that it made the billboard available in 2010 in the same spirit. The Trust also told us that the billboard had previously been used for free by a parliamentary candidate, so Mr Brown’s use of the billboard was not the first time the Trust had made it available to a political candidate. The Trust saw this as part of its practice of making the billboard available for community purposes when the space was not being used commercially.

Charitable organisations and support for political candidates

The Trust’s legal advice did not refer to the fact that the Trust is a charitable organisation or the law on donations to political parties or candidates by charities. The legal advice noted that trustees can do things that support their objects and purposes as contained in the trust deed, and said that if the trustees believed that support for a candidate was likely to assist in the achievement of the Trust’s purpose then they could do this.

However, political parties and candidates generally advocate a range of policies and objectives, so a charity’s donation to a particular party or candidate is likely to be beyond the scope of a charity’s charitable objectives, set out in its trust deed. In the United Kingdom and Canada, there are clear rules that charities cannot make donations to political candidates. In New Zealand, the Charities Commission’s information sheet Political activities and registration under the Charities Act 2005, available on its website, says that:

Difficulty arises where a charity’s political activity is not aimed at achieving its purposes - for example where it is focussed on supporting an individual political party or candidate, rather than on how that party or candidate can promote the charity’s purposes.

It also says:

As with any area of charitable activity, when considering whether to take part in political campaigning or other political activities a charity should be satisfied on reasonable grounds that the activities are permitted by its rules.

The Charities Commission could deregister a charity if it was engaging in political activities beyond what was permitted by its own rules, and if it was not acting in accordance with achieving its main charitable purposes.

In this instance, the trustees agreed to a request from Len Brown’s campaign team to use the billboard, but in approving that request they decided to make the billboard available to any mayoral candidate that asked to use it. Their stated purpose was to encourage participation in the democratic process. The Trust referred us to its service contract with Manukau City Council as justification for this, rather than something directly covered by its charitable objectives. After concerns were raised, the Trust was reported as defending its decision by saying that other candidates could have used the billboard had they asked.

We do not consider there is evidence that the Trust was intending to support a particular candidate or take a political role in making the billboard available to mayoral candidates.

Use of ratepayer funds

The Minister of Local Government raised a concern about whether any financial connection between the Trust and Manukau City Council meant that ratepayer monies or assets had been inappropriately used to fund or promote a mayoral candidate.

Manukau City Council had been a significant supporter of the Trust since it was established, mainly in providing the land for the events centre site for a token rental. The Council also paid the Trust about $385,000 each year under a service contract. However, this payment was in return for services provided. The Trust told us that the value of the services was greater than the income, and that in effect it regards this arrangement as a contribution to the Council’s community objectives rather than as a significant source of financial support. The Council also guaranteed an overdraft facility for the Trust, although we understand that this is no longer needed.  Although the Trust had a close relationship with the Council, it earned enough revenue from sponsorship, grants, and trading activities and did not depend on the Council for its financial viability.

We note as well that the Trust incurred no cost by making the billboard available, and in fact received a small amount of income from its commission on the banner. We are satisfied that there was no inappropriate use of ratepayer funds.

Our comment

The Trust regarded the billboard decision as ordinary business, and did not see the matter as particularly significant at the time. Mr Jeffery referred the matter to the trustees to decide, because of his personal involvement in the campaign, and the trustees broadened the approval to any candidate that approached the Trust. There is no pattern of partisan political support for one person and the billboard has been used by another political candidate in the past.

The Trust could have better explained its decision when concerns were raised, including that it had previously made the billboard available to a candidate for free. However, it should not be surprised to be criticised because other candidates did not know of the opportunity. In hindsight, the Trust could have thought more about the risk of being criticised for entering the political domain by supporting only one candidate in the event that only Mr Brown used the billboard.

Overall, we do not regard the matter as showing a significant lapse of judgement or lack of probity by Mr Jeffery or the trustees. We consider that Mr Jeffery’s conflict of interest was adequately managed, and the decision to make the billboard available did not use any ratepayer funds. The financial benefit to Mr Brown’s campaign was provided as part of the Trust’s normal procedures for community organisations using the billboard and at no cost to the Trust.

Thank you for your assistance with this inquiry.

Yours sincerely

Nicola White
Assistant Auditor-General - Legal

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