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Auditor finds questionable payments, poorly justified land purchases

Auditor-General Maxine Cooper has highlighted questionable payments to a consulting firm, poorly justified land purchases and a "manipulated" document released under Freedom of Information, in a damning report into the activities of the Land Development Agency.

The agency's purchases of land in Glebe Park and two lakeside businesses lacked transparency, accountability and rigour, and their integrity and probity could not be demonstrated, she said.

The agency had manipulated a document after receiving a freedom of information request for valuations on the Glebe Park purchase in late 2015. A senior manager of the agency, now an executive, had provided a document created only after the FOI request. The document's title had been changed by the principal of Colliers International from "discussion paper" to "valuation advice", and was used as justification for the payment of $3.8 million plus GST to developers Barry Morris and Graham Potts for their land in Glebe Park.

In a report released on Friday, Dr Cooper also questioned $2.66 million in payments to consultants Elleven, payments made without competitive quotes. She pointed to one payment of $90,000 for a month's work, at a rate of $165 an hour. That equated to about 545 hours of work, impossible for one person to do in a month, she said.

Elleven is associated with former City to the Lake project director Tim Xirakis. Dr Cooper's report said Elleven was approached by the agency and asked to employ two former executives, who have not been named, so they could continue working for the agency, albeit in a new role as consultants – a process described by one as "body-shopping" and the other as "a marriage of convenience". Agency chief executive David Dawes denies facilitating the arrangement.

When Elleven's contract was terminated in September 2015, one of the former executives went back to the agency, and is now with Griffin Brooks consulting, still working on agency projects.

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Dr Cooper highlighted a payment to Pat Seears, who owned the head lease of the lakeside paddle boat business operated by his brother.

Mr Seears was paid $1 million for his lease, in the face of two valuations in early 2015 of $50,000 and $100,000. In November that year, Colliers provided a third valuation, at $900,000 to $1 million.

Dr Cooper sought advice from Capital Valuers, which said the Colliers report had a number of anomalies and could not be relied on, and the figure lacked evidence and methodology and was not justified.

The Glebe Park land purchase had relied on informal, unpaid advice from Colliers.

An early valuation by Opteon in 2014 had valued the land at $950,000 to $1.05 million. But Dr Cooper said the agency's instructions to value the land "as is" rather than for "highest and best use" were not appropriate.

In April 2015, Colliers had provided a two-page document suggesting values of $3.75 million if the land was used for serviced apartments, which the zoning allowed, and $4.2 million if it was used for residential units, which the zoning did not allow. A week later, Colliers' wrote a new discussion paper recommending $3.6-$3.8 million on the basis of residential development. The agency paid $3.8 million.

Both documents were provided free by Colliers. The auditor said advice to her was that both were unsupported opinions and neither could be considered a valuation. Nevertheless, the Colliers figure was closer to market value than the Opteon figure.

Dr Cooper said the Colliers principal had also arranged a negotiation between the agency and the Glebe Park land owner.

"It is not clear to the Audit Office why the principal of Colliers International, a valuations and real estate marketing company, should have arranged a negotiation meeting on their premises," she said.

The payments for Glebe Park and for the boat and bike hire businesses were made without approval by the board, despite rules saying all purchases under $5 million must have board approval. After the purchases, the board passed a resolution exempting some purchases from requiring its approval, but Dr Cooper said it did not have the authority to do so.

The ACT chief executive of Colliers is Paul Powderly. The deputy chief executive of the Land Development Agency until mid 2015 was Dan Stewart.

Liberal deputy leader Alistair Coe said "cowboys" were running the agency. Leader Jeremy Hanson said Mr Barr must resign.

"There are anomalies involving millions of taxpayers' dollars, we have manipulated information being submitted to MLAs through doctored FOI requests. This has all happened under Andrew Barr … He was either aware of what was going on and was complicit, or he was negligent. Either way, it is unacceptable and Andrew Barr is unfit to be chief minister."

Mr Barr said he had been aware of the negotiations, but not involved. They were commercial negotiations done by the agency. He had now stripped the agency of responsibility for the City to the Lake and urban renewal projects.

He had written to the chairman of the board "seeking an explanation" for its actions.

Mr Dawes had not offered his resignation but had apologised and acknowledged the errors, Mr Barr said.

In light of the findings, it was appropriate that "other individuals" no longer worked for the agency, he said.

On the payments to Elleven consultants, he said it would be "preferable" for consultants to be employed after competitive bids.

The manipulation of documents was "very concerning" and it was entirely appropriate that the officer involved had been counselled, he said.

Mr Dawes maintained the amounts paid for the businesses were "reasonable, appropriate and necessary", but conceded "the processes used to facilitate these purchases were in need of improvement".

The agency had restructured the City to the Lake team, centralised the processes for valuations, re-established in-house corporate and governance services, and held procurement training for all staff.

Dr Cooper foreshadowed a wider audit into the agency.