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Hamilton V8 Supercars

V8 case study

Management of major events is an issue for local authorities.

Local authorities would benefit from managing all major events as dedicated projects. They would also gain from having real time and independent business case reviews, and by sharing key assumptions around major events risks and opportunities more widely - both internally and externally, says Peter Davies, Audit New Zealand’s Director Specialist Audit and Assurances Services.

These conclusions follow from Audit New Zealand’s review of the Hamilton V8 Supercar race series. Peter led the review team. In this feature, he reflects on the review, and its wider lessons for major event management.

In February 2011, Audit New Zealand was engaged by Hamilton City Council to carry out a review of the V8 super car racing series.

Hamilton secured hosting rights to the V8 event in 2006. Three races took place up to 2010 and four more were scheduled. However, during 2009-10, local concern about the real costs of the race event grew. These costs were an issue during the 2010 Hamilton City mayoral contest. A new mayor was elected, pledging to report on the real costs of the race series.

“Audit New Zealand was asked to do the review because of our reputation for independence and integrity, and our ability to deal with highly sensitive issues in an impartial manner”, Peter Davies said.

“The findings were likely to be controversial. So we were very thorough. The investigation took eight months. Present and former councillors, along with many staff, were interviewed. We also reviewed large amounts of documentation from the six years since the event was first considered”.

Audit New Zealand reported on the soundness of the decision-making processes relating to the V8 event. And on how well the Hamilton City Council was informed on the matters on which it had to make decisions.

“First off, and contrary to some reports, we found some positives. The sub-project to build the racetrack was well managed, as was obtaining the resource consents. This showed that staff could, and did, produce good results for their elected representatives and their community.”

By contrast, the review’s other findings are well-known.

“No overall project proposal, business case, or overall assessment of the event’s risks and opportunities was ever prepared. The event’s total costs were not properly reported to council members for two years. And, because of the way these costs were split internally between different budgets, it was hard for anyone to work out the total. No due diligence was done on the promoter.

“Nor was it known, even by many within the council, that payments had been made to the failed promoter’s creditors. The extensive use of publicly excluded, as well as informal, meetings around the race contract, and its costs, lacked transparency – and was, therefore, a major contributant to the considerable public disquiet around the event,” Peter said.

Peter thinks that Audit New Zealand's report on the V8 event could be a good guide for local authorities for managing major events.

“In most cities in New Zealand, local government is big business. Many local authorities are aware that their major event will be controversial – even before it starts. This could be because of its size, or its community impact, or the amount of funding involved,” Peter said.

“Local authorities should manage all major events on project principles especially around cost, completion times and value. This is particularly important if the event is likely to be costly, or controversial, or both. This, and the regular real-time review of actual performance against the initial business case for the event, is the main lesson from our report.

“All major events projects should have a project plan with an agreed business case. The business case should support the events assumptions around total cost, list the expected outputs, and contain a risk management strategy, along with key completion times. The business case needs to contain a clear rationale for the project along with clear objectives, and a cost-benefit analysis. It also needs to clearly define the project’s management and governance arrangements. If all this is done, the local authority governance group can make a well-informed decision on the event’s merits and whether or not they want to commit ratepayers' money to its support”, Peter said.

“Real-time review, as opposed to retrospective review, of major event project plans and their supporting business cases is essential. Real-time review ensures that event cost and benefit assumptions remain valid, and that new risks are being managed. Such reviews can check that project governance structures are operating effectively, and that local communities are being appropriately informed. Real-time review also provides assurance that all commercial and contracting activities are happening in a fair and transparent manner, and that all project decisions are based on good practice”, Peter said.

“Lastly, where major events are likely to be highly controversial, a local authority may benefit from an independent review of its project plan and business case, or by seeking assurance for particular processes associated with its project plan or business case”.

Peter is well aware that not everyone has accepted Audit New Zealand’s findings on the supercar event.

“Local authorities need appropriate management and governance processes around major events to account to ratepayers for their expenditure. But proper processes also protect councillors and officials from accusations of bias or improper conduct. These accusations flew in Hamilton and similar ones are all too frequent throughout New Zealand local body politics.

“Audit New Zealand would like to see all local authorities have workable project planning and real-time review processes for all major events and activities. I think that the V8 supercar report is an important illustration as to the value of having such processes. And for that reason, it was important that we did it”, Peter concluded.

You can contact Peter Davies if you wish to discuss how Audit New Zealand’s independent and highly qualified and experienced Specialist Audit and Assurance Services (SAAS) Team can assist your contracting, governance, reporting or risk management practices.

Page last updated: 27 August 2012

Good practice guides

Good practice guides are available on the Auditor-General's website, oag.govt.nz

Peter Davies, Director, Specialist Audit and Assurance Services

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