Appendix 1: Local Government Act 2002 – sections 44-46

Kaipara District Council: The Auditor-General’s decision on requests to make a report under section 44 of the Local Government Act 2002.

44 Report by Auditor-General on loss incurred by local authority

(1) For the purposes of this section and sections 45 and 46, a local authority is to be regarded as having incurred a loss to the extent that any of the following actions and omissions has occurred and the local authority has not been fully compensated for the action or omission concerned:

  • (a) money belonging to, or administrable by, a local authority has been unlawfully expended; or
  • (b) an asset has been unlawfully sold or otherwise disposed of by the local authority; or
  • (c) a liability has been unlawfully incurred by the local authority; or
  • (d) a local authority has intentionally or negligently failed to enforce the collection of money it is lawfully entitled to receive.

(2) If the Auditor-General is satisfied that a local authority has incurred a loss, the Auditor-General may make a report on the loss to the local authority, and may include in the report any recommendations in relation to the recovery of the loss or the prevention of further loss that the Auditor-General thinks fit.

(3) The Auditor-General must send copies of the report to the Minister and every member of the local authority.

45 Local authority to respond to Auditor-General

(1) On receipt of a report from the Auditor-General, the local authority must, within 28 days, respond in writing to the Auditor-General, and send a copy of the response to the Minister.

(2) The local authority's response must—

  • (a) respond to each of the Auditor-General's recommendations; and
  • (b) include a statement as to what action, if any, the local authority intends to take in respect of the loss.

(3) The Minister may extend the period of time within which the local authority must forward its response.

(4) An individual member of the local authority may respond to the Auditor-General—

  • (a) by making a separate response to the Auditor-General, and sending a copy to the local authority and the Minister, within the time required for the local authority's response; or
  • (b) with the consent of the local authority, by incorporating that member's response in the local authority's response.

(5) The local authority must, as soon as practicable after the expiry of the time for forwarding its response, table in a meeting of the local authority that is open to the public a copy of the Auditor-General's report, the local authority's response, and any response of an individual member of the local authority not incorporated in the local authority's response.

46 Members of local authority liable for loss

(1) If the Auditor-General has made a report on a loss to a local authority under section 44, then, without limiting any other person's liability for the loss, the loss is recoverable as a debt due to the Crown from each member of the local authority jointly and severally.

(2) If the members of the local authority or any other person or persons do not pay the amount of the loss to the Crown or the local authority within a reasonable time, the Crown may commence proceedings to recover the loss from any or all of those members.

(3) Any amount recovered by the Crown under subsection (2), less all costs incurred by the Crown in respect of the recovery, must be paid by the Crown to the local authority concerned.

(4) It is a defence to any proceedings under subsection (2) if the defendant proves that the act or failure to act resulting in the loss occurred—

  • (a) without the defendant's knowledge; or
  • (b) with the defendant's knowledge but against the defendant's protest made at or before the time when the loss occurred; or
  • (c) contrary to the manner in which the defendant voted on the issue at a meeting of the local authority; or
  • (d) in circumstances where, although being a party to the act or failure to act, the defendant acted in good faith and in reliance on reports, statements, financial data, or other information prepared or supplied, or on professional or expert advice given, by any of the following persons:
    • (i) an employee of the local authority whom the defendant believed on reasonable grounds to be reliable and competent in relation to the matters concerned:
    • (ii) a professional adviser or expert in relation to matters that the defendant believed on reasonable grounds to be within the person's professional or expert competence.