Autumn 2019 - Local government integrity matters

The Inspectorate has completed its investigation into the alleged fraudulent submission of ballot papers for the Melbourne Lord Mayor by-election in 2018.

The investigation focused on allegations that real estate agents and property managers filled out ballot papers on behalf of interstate and overseas landlords contrary to the law. The investigation found that 41 ballot papers were marked by a person other than the registered voter. The property owners, who in all cases were found to be international owners, had authorised property agents to manage all aspects of their property, however, this cannot include casting a vote under Victorian electoral laws.

Importantly, the investigation found that the 41 ballot papers were detected by VEC processes and excluded from the ballot count and therefore not affecting the outcome.

While an offence against the electoral provisions of the Act was substantiated, the Inspectorate opted not to pursue prosecution and instead has issued formal warnings to five people and also provided guidance to ensure property managers understand and follow relevant electoral rules. In addition, the Inspectorate will work with the Victorian Electoral Commission to provide clarity for property managers and agents for future elections where similar circumstances exist.

A new integrity act that broadens the powers and responsibility of the Inspectorate has passed through Parliament and received Royal Assent on 5 March.

The Integrity and Accountability Legislation Amendment (Public Interest Disclosures, Oversight and Independence) Act 2019 will make considerable amendments to section 223 of the Local Government Act, increasing the Chief Municipal Inspector’s responsibilities and creating additional powers to receive and investigate public interest disclosures from the Independent Broad-based Anti-corruption Commission. The legislation further improves the integrity system by reducing potential crossover with integrity agencies and ensuring local government matters are dealt with by the dedicated agency.

The Act is available here.

Appearing in Maryborough Magistrates' Court on Wednesday 12 December, former Central Goldfields Shire Council CEO Mark Johnston was convicted on five charges of dishonestly obtaining for himself a financial advantage by deception, contrary to section 82 of the Crimes Act 1958.

Mr Johnston was fined $26,000 and also ordered to pay $10,000 towards prosecution legal costs. The charges were brought by the Local Government Inspectorate as the lead integrity agency for local government in Victoria.

The court heard that, over a four year period between 2009 and 2013, Mr Johnston used his council-issued credit card for 112 transactions on expenses unrelated to council business. The total amount he dishonestly obtained for himself was $9,415.71.

Chief Municipal Inspector David Wolf said: “Local communities have the right to expect the highest levels of integrity from their council’s senior administration. In this case, the former CEO deceived the community to his own advantage and the courts have applied an appropriate penalty. This closes out a difficult chapter for Central Goldfields Shire Council and the council can continue to rebuild trust with the community.”

The Inspectorate has published a new report, Protecting integrity: leading the way – Managing the employment cycle of a council CEO, which includes views from across the sector and recommendations for improvements to legislation and policies or processes that would enhance future management of the CEO employment cycle.

In case studies reviewed for the report, there were either adverse outcomes for the CEO, adverse outcomes for the councillors, or significant challenges for the council as an organisation.

Chief Municipal Inspector David Wolf said the common factor in those cases was the cost of the outcome, which was ultimately borne by the community.

"With the cost to community in mind, the purpose of this review was to seek views from across the sector to assist in defining the issues and then identify where improvements to legislation, policies or processes could reduce the instances of adverse outcomes," Mr Wolf said.

The report is now available on the Inspectorate website.

With a rise in public reports of breakdowns in the relationship between councillors and the administration, the VLGA FastTrack Leadership program held on Friday 1 March presented a timely opportunity to explore these challenges and identify what contributes to an effective relationship.

In a session attended by 20 mayors and deputy mayors, David Wolf facilitated a panel of experienced council CEOs and a sector executive recruitment expert that examined how councillors and the administration can work collectively for their municipality.

The panel discussion and question and answer session produced several themes of what can foster an optimal relationship. Some of these included:

• Respect – the best environments have two-way respect and create a place where people want to work.
• Information flow – ensuring that councillors are furnished with the information they need to make sound judgements/decisions and perform their legislated duties and functions.
• Responsiveness – it is equally important that information is provided and decisions are implemented without undue delay. When there are delays or requests are denied, councillors should be given swift and clear advice about the reasons.
• Structure – having a documented structure and process around the way information is requested by and provided to councillors. Setting clear ground rules for both parties not only promotes equity and transparency, but also protects the individuals involved.
• Reputation – when both parties are focussed on delivering good strategic outcomes for the municipality and enhancing council's reputation as an effective entity — not on building individual professional or political profiles.

VLGA President Kathryn Arndt said: “The panel discussion and subsequent question and answer session brought out some interesting points on successful working relationships between councillors and the administration. This supported our view that those robust relationships, built on mutual trust and respect, are vital to the effective delivery of services and reputation of councils.

"The VLGA is committed to the ongoing optimal governance of councils and looks forward to partnering with our stakeholders including the Local Government Inspectorate in undertaking this important work for the benefit of the community”.

In late 2018 the Inspectorate examined West Wimmera Shire Council's governance arrangements to ensure they met the expectations of the community and the legislated framework. The resulting report made recommendations on ways to improve managing various governance functions within the council.

West Wimmera made the decision to put the Inspectorate's examination report and its response on its website. This is an example of best practice in responding to a governance examination.

In an November 2011 article, we discussed the varied approaches by councils in establishing special committees and ensuring they were accountable to the community. In the two years (as of 2011) since the Inspectorate’s inception, compliance audits had been conducted at more than 40 councils and a common theme was identified was the need for improvement in the management of special committees, ‘with some councils unsure of just how many they actually have.’

At the time, an Inspectorate team member said, “We have seen examples of councils with over 40 special committees and others with none, which has highlighted the vast differences in the way councils use special committees.”

Councils create special committees under section 86 of the Act to assist in the management of specific projects, initiatives and the municipality’s assets. When a council delegates powers, functions or duties to a special committee, it hands over the power to make decisions on behalf of the council. But with that autonomy comes legislated responsibilities.

During three recent governance examinations, many concerning findings were made which included:

• delegations for special committees had not been reviewed or updates for many years
• the majority of special committees had not provided financial statements on an annual basis to council
• the majority of primary and ordinary returns were not submitted by special committee members in accordance with legislative requirements
• most of the councils’ special committees did not hold the minimum number of meetings required or submitted minutes or held annual general meetings.

After the Inspectorate’s examinations, each council has reviewed the need for each of the special committees exist and then established improved governance structures for those remaining.

Noting the ‘set and forget’ nature of many special committees and the governance risks posed, it is encouraging to see councils reviewing and consolidating their special committees based on necessity and need.

A revised bulletin on Special Committees is also available.