The Office of the Auditor-General is to pay the Kaipara District Council more than $5 million, to settle a claim over its role in the council's debt crisis.
After a 2013 inquiry, the Auditor-General apologised to the council for the failure of government auditors to spot errors related to the council's borrowing for the Mangawhai wastewater scheme.
Ratepayers weren't told the cost of the scheme had soared from about $20m to $60m, and the subsequent rates revolt led to the sacking of the council by the government.
Commissioners now running the district alleged some of the council's poor decisions could have been averted if the Auditor-General's office had done its job, but the Auditor-General disputed a claim for damages.
After mediation, the parties have agreed to settle the dispute, without admission of liability, for $5,375,000.
The Kaipara District Council said it was happy to have settled the long-running case.
The chair of the council's commissioners, John Robertson, said $5m would take its debt down to below $70m.
"The funds will be applied to pay down debt, and so that debt will therefore require a lower amount of servicing.
"We intend at this stage to take it off the district-wide debt and so it will have an impact on the rating system - a small impact, but an impact nevertheless."
Mr Robertson said the Kaipara District Council was also seeking reparations from its former chief executive, Jack McKerchar.