Methodology
In our major review of personal interests returns under the 1989 Act, we obtained copies of the primary and ordinary returns completed between November 2016 and February 2020 from 78 councils. We also obtained the annual rates notices for all councillors who served during the 2016–20 council term.
We excluded the City of Whittlesea from our broad-ranging review as we had commenced a standalone review of the councillors’ personal interests returns a few months prior.
We conducted a high-level review of the personal interests returns for 61 councils. We randomly chose 17 councils – including a selection of metropolitan, interface (or outer suburban), regional, large shire, and small shire councils – for a detailed review.20
Both reviews considered whether the returns had been submitted within the required timeframe, in the prescribed format, signed, and witnessed. Disclosed land interests were compared with rates notices to identify possible non-disclosures.21 All other disclosed interests were also compared period to period, to identify possible non-disclosures.
The detailed review built on this, with checks conducted of the Victorian land titles register, Australian Securities and Investments Commission (ASIC) register, Australian Business Register, and internet searches of the councillors and their spouses, to identify relevant interests. The search results were compared with the disclosed interests to identify possible anomalies.
Where possible non-disclosures were identified in the reviews, we wrote to the councillor concerned seeking an explanation for the possible non-disclosures. We took any responses into account when issuing an outcome to each councillor. The outcomes included:
- a reminder of the councillor’s obligations under the Act
- a written warning for breaching the Act
- consideration of commencing a prosecution.
A total of 4,600 interests returns for 650 councillors were examined with 149 councillors included in the detailed review and 501 in the high-level review.
Overall, the review found high rates of non-compliance, with 51% of councillors not completing at least one interests return in strict compliance with the requirements of section 81 of the Act. These ranged from one-off non-disclosures of an interest to multiple omissions of more than one interest. Other issues included not signing a return or not having it witnessed.
Land interests were the most readily tested as councils had supplied us with all the rates notices of councillors. We found 5% of councillors failed to disclose a land interest in all returns while 13% disclosed a land interest in some returns but failed to disclose it in others.
The detailed review identified higher levels of non-compliance with the 1989 Act because we ran more detailed searches, such as a search of ASIC registers, which revealed interests that would have otherwise not been known.
For example, 13% of councillors in the detailed review failed to disclose an office position in one or more, but not all, returns. The same metric for the high-level review was only 2% of councillors. This indicates that there was likely a high level of non-compliance which remained undetected in the high-level review.
What our survey told us
With the high rate of errors and misunderstandings of the Act in mind, we wanted to know what issues councillors and officers involved in the process are facing. In addition to seeking feedback from over 120 councillors who submitted late returns or omitted interests, we conducted a survey among council officers and councillors who we had contacted for non-compliance during our review. We received survey responses from 35 councillors and 56 councils around Victoria. Council responses were mostly completed by council officers involved in the administrative process of collecting councillor and staff interests returns.
Overall, the 5 main themes that came up repeatedly about why returns were not completed accurately were:
- attitude of councillors
- a lack of education
- the manual process of completing and submitting the forms
- a lack of checks and balances
- a lack of plain English instructions that councillors (and council officers) could easily understand.
“It’s not so much about the process but about the councillor’s willingness to comply.”
- Council officer
Of the councillors and council officers who responded, 90% agreed that it is important to collect accurate information about councillor interests, with the remaining 10% stating it was somewhat important. Councillors saw the main value of interests returns in helping them identify and be mindful of potential conflicts of interest, with only one councillor being of the view that interests returns were a duplication because of the requirement to declare conflicts of interest at council meetings. Council staff agreed that interests returns helped with managing conflicts of interest but also pointed out that it increased transparency and integrity of council decisions.
There were differing opinions regarding what council officers should be responsible for in managing the returns process. Most council officers said they should be responsible for sending out the forms, reminders of when they are due, and storing the collected returns (86%), while 21% said they should also assume some responsibility for providing training or guidance to councillors.
Councillors agreed that officers should be responsible for the administrative process (42%), while a third mentioned that officers should provide training or guidance and answer their questions. There was a clear expectation gap between councillors and council officers, as more than a quarter of councillors thought that officers should also check their returns (for example, comparing them to previous returns). Officers, however, were clear that they had no responsibility for the accuracy of the disclosures.
‘‘The onus is on the councillor to submit and provide accurate information, as officers have no way of verifying the information.”
– Council officer
The 1989 Act and 2020 Act both assign full responsibility to the councillor for completing and submitting their return.
The process of collecting interests returns was very similar across councils, with officers sending out forms via email or handing them out in person, sending reminders about the due date, and safely storing the collected returns.
Some councils also regularly provided a LGV guidance document and/or previous interests returns to councillors each time the returns were due.
Around 60% of council staff and 30% of councillors thought the current process at their council worked well. When asked about what did not work well and what the perceived causes of this were, a number of themes were identified by councillors. These themes were:
- legislation and forms are hard to understand (27%)
- interests returns are not given the attention they require (lack of understanding the importance) (25%)
- lack of training/guidance and support by council officers (17%)
- forms are paper-based rather than electronic (17%)
- no consequences for non-compliance (3%).
Overall, 94% of councillors agreed that the available guidance on interests returns was insufficient and could be improved.
“Many councillors are not legal professionals so don’t understand the terminology used. The consequences are great, so it would offer comfort and confidence if further guidance is offered and there is someone to speak to if unsure. You’re a bit on your own and don’t want to mislead.”
– Councillor
In addition, 40% of council officers stated the main issue was that councillors did not understand the importance of their obligations under the Local Government Act.
“The major challenges are councillor apathy or indifference, and a tendency to see the requirement to submit an ordinary return as being an organisational requirement (as opposed to an individual obligation)”
- Council officer
“I think it is essential for councillors to have training/ guidance on the importance of interests returns – and ensure it is not seen as a box-ticking exercise”
- Councillor
The themes mentioned by council officers were similar to those raised by councillors:
- lack of education and guidance, with legal terms hard to understand (21%)
- manual, paper-based process (9%)
- councillors are usually busy (9%)
- lack of consequences/enforcement of legislation (7%).
When it came to improving the system, the following suggestions were made by councillors and council officers:
- Implement an online portal or electronic system for lodgement, for example a state-wide app (22% of councillors and 13% of council officers).
- Improve resources such as forms and guidance in plain English, with detailed instructions and examples (19% of councillors and 18% of council officers). An advice hotline and video training modules were also on councillors wish lists.
- Introduce compulsory training, for example through an online training module (14% of councillors and 18% of council officers).
- Implement better enforcement – for example through random audits, introducing a requirement to report non-compliance to the Inspectorate (14% of council officers).
Introduce a centralised system for submission, for example directly to the Inspectorate or the Minister (11% of council officers).
Require council officers to provide previous returns and perform cross-checks between returns (11% of councillors).
“An online portal that councillors could complete the returns electronically with a declaration at the end would be great. This could also highlight what key fields would be included in the summary that would be published online”.
- Council officer
“Perhaps more detailed guidance around what does and doesn’t need to be included on a return given we have some councillors that own lots of property and shares and others who own very little, some councillors skilled in interpreting information, others are easily confused by this”
- Council officer
“A process for councillors to be able to discuss their personal circumstances and seek specific advice would be useful (and governance officers are not necessarily equipped to provide that advice.”
- Council officer
Another suggestion made by one councillor and a council officer was to move to a system where interests returns are only completed once per year and updated only when circumstances change.
Safety concerns were raised by some of the councillors and council staff, with the main concern being their residential address being made available to the public if it is disclosed in the return.
“There is a good deal of concern that the transparency merits of the register of interests comes at a significant cost to personal privacy and security. It is not unheard of for councillors and staff to be threatened and having a process which exposes staff and councillor private addresses is of concern in this regard.”
- Council officer
We also asked for suggestions on how to improve transparency. Both cohorts suggested to publish information on interests online to achieve greater transparency (16% of council officers and 11% of councillors). A small number of councillors (5%) were supportive of an increase in the types of interests that need to be disclosed, for example including interests of family members.
More detail about the survey responses is listed in Appendix 1.
What our review told us
High rates of non-compliance
In our audit of personal interests returns, we reviewed 4,600 interests returns for 650 councillors from 78 councils for the period between November 2016 and February 2020.
Overall, our review identified high rates of non-compliance, with more than half of the 650 councillors not completing their returns as required under section 81 of the 1989 Act.
Issues ranged from interests being omitted from returns and returns not being submitted to missing signatures or returns not being witnessed.
| Compliance submissions of returns | Number |
|---|---|
| Number of councillors | 650 |
| Number of councillors who did not complete their returns in compliance with section 81 of the 1989 Act* | 332 (51%) |
| Number of returns reviewed | 4,600 |
When we focused on the issues that we consider to be more serious, there was still a high level of non-compliance, with 42% of councillors failing to disclose interests in one or more return, and 184 returns either not submitted or submitted late.
| Timely submission of returns | Number | Percentage |
|---|---|---|
| Number of returns not submitted | 41 | 1% |
| Number of returns not submitted on time (out of 4,600) | 143 | 3% |
| Total not submitted or submitted late | 184 | 4% |
When we reviewed the personal interests returns against other available information, we identified the following omissions.
| Type of interests | Number of councillors | Percentage |
|---|---|---|
| Failure to disclose office held - all returns* | 18 | 3% |
| Failure to disclose office held - some returns** | 28 | 4% |
| Failure to disclose beneficial interest in company - all returns | 35 | 5% |
| Failure to disclose beneficial interest in company - come returns | 33 | 5% |
| Failure to disclose land interest - all returns | 30 | 5% |
| Failure to disclose land interest - some returns | 86 | 13% |
| Failure to disclose trust interest - all returns | 11 | 2% |
| Failure to disclose trust interest - some returns | 12 | 2% |
It is noteworthy that a significant number of councillors disclosed their interests inconsistently, for example, declaring an interest in land in one return, then leaving it off the next, but declaring it again in the following return. Councillors that we contacted about these omissions mainly said that it was a simple oversight, as they had not had their previous return at hand to compare to, or they were rushed when completing a return (for example, being given the paperwork at a council meeting shortly before the due date).
“I failed to include my residence in one return. A year later I copied from that return and didn’t realise the mistake.”
- Councillor
“My failure to disclose a concise description of the super fund again was an oversight made on the assumption that it had been declared prior and there was no change to the nature of the interest”’
- Councillor
“I do not recall getting legal advice from council about this return and as most of the form was not applicable to me, I often filled it during meetings, not realising its importance.”
- Councillor
We detected higher numbers of non-disclosure in our detailed review of 147 councillors at 17 councils, because we performed more thorough background checks, such as obtaining extracts from the ASIC company register and the land titles office (refer to Table 3 – Number and type of private interests not disclosed).
In the high-level review, we only detected one councillor not declaring an office they held in a company, compared to 17 councillors in the detailed review where we conducted ASIC checks. However, given the high rate of non-disclosures for the detailed review, we believe that we would have found a much greater rate of non-disclosures overall if we had conducted a detailed review for all 650 councillors.
| Non-disclosure of interests |
Detailed review22 (147 councillors) |
High-level review (503 councillors) |
|---|---|---|
| Failure to disclose office held - all returns | 17 (12%) | 1 (0%) |
| Failure to disclose beneficial interest in company - all returns | 29 (20%) | 6 (1%) |
| Failure to disclose land interest - all returns | 9 (6%) | 21 (4%) |
| Failure to disclose trust interest - all returns | 10 (7%) | 1 (0%) |
We limited our checks to certain categories, with a particular focus on officeholdings in registered companies and landholdings. We did not perform targeted checks for gifts, trusts, employment, or spousal interests. It is therefore highly likely that we have not detected all omissions in our detailed review.
The likelihood that the true level of non-disclosure remained undetected for the larger group is also supported by the fact that for various categories, close to or more than 50% of councillors did not disclose any interests during the full council term.
While some councillors may genuinely not have any disclosable interests, it seems unlikely that such high proportions of them would have none, especially in the ‘other interests’ category. The level of non-disclosure of the various interests, as set out in the table below, supports our finding that there is a widespread lack of understanding of what needed to be or should be disclosed.
| Type of interest not disclosed | Number of councillors | Percentage |
|---|---|---|
| Councillors not declaring any office positions, such as directorships, during term | 157 | 24% |
| Councillors not declaring any beneficial interests during term | 306 | 47% |
| Councillors not declaring any property interests during term | 56 | 9% |
| Councillors not declaring any during term trust interest | 427 | 66% |
| Councillors not declaring any other interests during term | 374 | 58% |
Some of the interests that were not disclosed were unlikely to lead to a conflict of interest, for example where a company was not actively trading and did not hold assets. However, the legislation requires all interests in the prescribed categories to be disclosed, and in the interest of transparency it should not be up to the councillor to determine whether an interest is likely or unlikely to lead to a conflict with council business.
When looking at the different cohorts (testing the theory that small shire councils may have a higher level of non-compliance due to fewer resources or less support available), the differences are minimal. This suggests that the size or resources of the council do not make a significant difference to the level of compliance.
| Cohort | Number of councils in cohort | Councillors with no issues identified | Returns not submitted or submitted late | Failure to disclose interests in some or all returns |
|---|---|---|---|---|
| Metropolitan | 22 | 52% | 4% | 42% |
| Interface* | 8 | 46% | 1% | 38% |
| Regional | 10 | 45% | 5% | 36% |
| Large shire | 19 | 52% | 4% | 39% |
| Small shire | 19 | 44% | 5% | 52% |
As a result of the review:
- letters were sent to 123 councillors with details of the alleged breaches of the 1989 Act, offering an opportunity for councillors to provide explanations for their identified breaches
- 7 councillors were interviewed
- 35 warnings and 85 reminders of obligations were issued
- 1 case is still pending further enforcement action.
Failings identified through the review
We found that councillors failed to comply or disclose private interests for a range of reasons however there were several themes that were common, including that they:
- struggled to understand the legislation and technical terms
- completed their returns in haste, with little thought put into the interests that needed to be disclosed, indicating that the returns were not a priority and their importance not fully understood
- copied returns from previous years without considering if their circumstances had changed
- did not understand that returns cover the whole period, not just interests held at the time of the declaration.
We also observed that councillors with lots of interests may have benefitted from consulting their accountant or lawyer for independent advice regarding which interests require disclosure.
During our review, we wrote to councillors who had breached the Act and asked them for more information about why they did not disclose interests. Examples of some of the breaches we reviewed and the responses were:
A councillor failed to disclose a self-managed superannuation fund as they were well under retirement age and unlikely to gain any benefit from the fund. They did not consider it an interest requiring disclosure.
A councillor failed to disclose an interest in their family home after governance staff advised the councillor that only interests in investment properties had to be disclosed.
A councillor failed to disclose an interest in a home they owned with their wife and mother-in-law. The councillor did not think they were required to disclose the property because they were not the sole owner and the house was mortgaged.
A councillor failed to disclose an office position as they were appointed only months prior to completing their return and had minimal involvement during the period. They said it was an honest, foolish and unfathomable omission.
A councillor failed to disclose three properties on one return. They said the return process was rushed and properties were overlooked on that occasion, submitting an apology and commitment to taking greater care in the future.
A councillor submitted their return three days late because they waited to submit it at a council meeting.
During our review, we wrote to councillors who had breached the Act and asked them for more information about why they did not disclose interests. Examples of some of the breaches we reviewed and the responses were:
- A councillor failed to disclose a self-managed superannuation fund as they were well under retirement age and unlikely to gain any benefit from the fund. They did not consider it an interest requiring disclosure.
- A councillor failed to disclose an interest in their family home after governance staff advised the councillor that only interests in investment properties had to be disclosed.
- A councillor failed to disclose an interest in a home they owned with their wife and mother-in-law. The councillor did not think they were required to disclose the property because they were not the sole owner and the house was mortgaged.
- A councillor failed to disclose an office position as they were appointed only months prior to completing their return and had minimal involvement during the period. They said it was an honest, foolish and unfathomable omission.
- A councillor failed to disclose three properties on one return. They said the return process was rushed and properties were overlooked on that occasion, submitting an apology and commitment to taking greater care in the future.
- A councillor submitted their return three days late because they waited to submit it at a council meeting.
The following table summarises our findings for the different categories of interests that were required to be disclosed.
| Category | Common findings |
|---|---|
| Offices in company bodies |
Most councillors did not declare council appointments to outside organisations or offices in not-for-profit organisations Offices were not disclosed where the company was not a typical trading entity (such as a trustee company for a family trust or superannuation trust) |
| Beneficial interests in companies or bodies |
Councillors lacked an understanding of what a ‘beneficial interest’ is or how to apply the disclosure threshold Many councillors did not understand that they needed to disclose ownership of their own small proprietary companies, especially when they had already disclosed their office in those companies in the previous section |
| Land |
Councillors did not disclose their primary residence because they thought it was exempt or because they had concerns for their personal safety Councillors misunderstood the legislation and did not declare properties that were subject to a bank loan or held through controlled companies |
| Trusts |
There was a lack of understanding the requirements – almost none of the disclosed trusts included a ‘concise description’ of their purpose Self-managed superannuation funds (a form of trust) were often omitted, again pointing to a lack of understanding |
| Gifts |
Few gifts were disclosed (which may have been due to gifts not reaching the $500 threshold) Disclosed gifts often lacked the required details or reference was made to the declaration in the gift register, which is insufficient |
| Other interests |
Few interests were disclosed in this category – most likely because it is open to judgement of the councillor whether other interests may create a potential conflict of interest A lot of councillors believed that their employment or the interests their spouse held were unlikely to result in a conflict |
Footnotes
20 The interface councils are 9 councils which form a ring around metropolitan Melbourne. They are Wyndham City Council, Melton City Council, Hume City Council, City of Whittlesea, Nillumbik Shire Council, Yarra Ranges Shire Council, Cardinia Shire Council, City of Casey and Mornington Peninsula Shire Council.
21 While personal interests returns must take into account the property interests in neighbouring municipalities, our review only cross-referenced the declaration with councillors’ property interests from their own municipality.
22 The difference between the detailed review and high-level review is explained in Methodology.
Updated