Protecting integrity: West Wimmera Shire Council examination

Governance arrangements are the necessary procedures and monitoring systems in place to ensure that council is performing all of its functions to the required standard and in accordance with its legal obligations. Good decision making processes and therefore good governance share several characteristics. All have a positive effect on various aspects of local government including consultation, policies and practices, meeting procedures, service quality protocols, councillor and officer conduct, role clarification, leadership and good working relationships.

As part of the review, the Inspectorate identified seven governance areas where improvement is recommended. At the outset of the examination, council acknowledged that improvements are required in engaging staff at all levels to ensure they are aware of their legislative requirements and responsibilities. It was accepted that the executive leadership team needs to drive these improvements.

Governance schedule

As part of meeting governance obligations, many councils maintain governance schedules to facilitate accountability for key dates throughout the year such as interest return deadlines, mayoral election periods and other relevant time-critical legislative requirements.

Council does not have a current governance schedule. The governance officer is the key person responsible for meeting legislative requirements, however a number of governance functions are handled by the Corporate Support and OH&S officer based at the Kaniva office. It was identified that neither the governance officer or the corporate support officer have been provided with clearly defined and documented roles and responsibilities. This could lead to key legislative obligations being overlooked.

The governance officer maintains a series of self-created hard copy folders to act as guidance for that particular role, however the Corporate Support officer does not apply the same system. The documenting of key governance responsibilities requires a whole of organisation approach, particularly where key tasks are split between staff at different locations.

Recommendations

• A whole of organisation governance schedule should be developed that clearly outlines all legislative requirements and designated roles and responsibilities.
• The roles undertaken by the governance officer and the corporate support officer should be reviewed to ensure there is clarity of responsibilities for all governance requirements and tasks.
• The roles must be closely aligned to ensure any advice provided to councillors is clear, direct and consistent, irrespective of which officer provides the advice.
• Council is advised to review better practice examples of governance schedules, such as the statutory obligations template provided by Hobsons Bay Council.

Policy framework

Every organisation requires up to date policies and procedures to function efficiently and effectively. They are particularly important for local government, as they promote consistency across the organisation and maintain transparency for council officers, councillors and residents. Sound policies mitigate the risk to council, and provide a framework that promotes accountability across the organisation.

It was confirmed that an organisational policy review was commenced in early 2017 to ensure that all policies were up to date, and incorporated any relevant legislative amendments that had come into effect in the previous two years. A template was also created for new policies to ensure consistency and uniformity across the organisation. Previous reviews had only been conducted in an ad-hoc manner, lacking a thorough and structured approach.

The majority of the policies available on the council website were current, however very few carried the ‘next review date’ on the actual policy, creating the risk of a lack of accountability, and that the policy may be overlooked during future reviews. Councils often use a ‘master list’ to ensure policies are checked and updated on specific dates, and this mitigates the risk of policies not reflecting current legislation.

Recommendations

Council should continue to update council policies, and include a ‘next review date’ on each policy subject to review, to provide accountability and assist in ensuring they are appropriately reviewed within legislative timeframes.

Record keeping

The Public Records Act requires the effective management of records made or received by a public officer – which includes council staff - in the course of their duties. Record keeping practices that meet legislative requirements ensures records are kept secure and allows for them to be made readily available to the public and other government entities, which is an important function of councils.

The importance of these issues was highlighted in 2017, when an Inspectorate investigation revealed that record keeping at Central Goldfields Shire Council had a major impact on the council’s ability to function effectively for the community.

The review of record keeping at West Wimmera found that:

• council has a record management system RecFind, which has been in place since 2009. Any staff member is required to input information into the system if their document requires further action.
• there is no specific training provided in relation to using the system effectively. Staff are provided with a ‘cheat sheet’ that provides them with limited advice on the use of the system.
• council provides continual reminders for staff to use RecFind.
• the Inspectorate was advised that less than 25 percent of staff were using RecFind, with approximately 15 per cent of those staff actually being fully compliant with its use.
• staff stated there were very few records/documents for contracts, tenders or contract awarding in the records management system.
• though documents are generally considered to be secure on council premises, there are limited cabinets or storage spaces that can be locked.
• most staff members keep their emails and attachments saved as email records. If a staff member leaves council their email record is deleted after three months. If none of those emails records are saved to RecFind all of those records are permanently lost.

In general, the Inspectorate found that staff are willing to support change, to ensure that all council records are in accordance with council policy and the Public Records Act.

However, the examination revealed a lack of staff awareness about how to use the RecFind system and a general reluctance to use it.

This continues to make it difficult for staff to locate records that should be stored electronically and can also impact on external document requests such as audits or Freedom of Information.

Recommendations

• Council should facilitate an independent assessment of current record keeping practices, and ensure the findings are promptly implemented.
• Council officers should be made aware of their obligations under the Public Records Act in relation to the keeping and storing of council records, and that they are required to record all council related correspondence in the records management system.
• Mandatory staff training should be carried out on a regular basis to ensure staff are familiar with the document management system. Staff should also be educated about the relevant record management policies and legislation.

Audit Committee

An independent Audit Committee is a vital component of a good corporate governance structure.

In the context of local government, the committee is an advisory body that typically:

• focuses on issues relevant to the integrity of financial reporting
• monitors risk management systems, the internal control framework, compliance and audit activities
• liaises between internal and external auditors and management.

The objectives of the Audit Committee were clearly set out in the charter. To provide clarity, it also contained an explanation of the relationship between the committee, the council and the internal/external auditors. The current independent members of the committee are suitably qualified, and include a staff member from neighbouring Hindmarsh Shire Council providing local government expertise.

The committee has held the required number of meetings per year, covering various topics including the draft annual budget, rate capping variation report, financial performance report, strategic resource plan and fraud and corruption control policy and procedures. The committee also conducts a self-assessment against the requirements of the charter.

While the committee had wide ranging oversight of risk issues, the minutes reviewed appeared to lack suitable detail of any actions taken or to be taken from the meeting.

Recommendations

• The minutes of each audit committee meeting should contain sufficient detail in terms of what has been reviewed and clearly outline any subsequent actions to be taken.

Special committees

Councils create special committees to assist in the management of specific projects, initiatives and selected municipal assets. Special committees are required to have current, authorised Instruments of Delegation to ensure they act within their regulated powers, are properly constituted and limited to their purpose.

Council currently has two special committees: an internal Economic Development committee, and the Kaniva Museum and Historical Collection committee. A review is to take place to determine the ongoing requirement for the latter to remain a special committee.

The examination revealed that the Instruments of Delegation for both committees do not carry a signing/common seal date to confirm commencement. The committees are authorised by a resolution of council on 19 September 2013, which does not meet the requirement of section 86(6).

Both committees have met the minimum meeting requirements as per the existing delegation. Two of the four sets of minutes provided to the council for the Kaniva Museum contain a current bank balance, however it does not appear that the requirement for an Annual General Meeting to be held, that provides an annual report, and annual financial report, according to the delegation, has been met.

Recommendations

Kaniva Museum and Historical Collection Special Committee

• Conduct a review to determine whether there is a need for the committee to remain as a section 86 committee.
• If it is to continue,
  • Council must have the Instrument of Delegation authorised by a resolution of council to ensure it complies with section 86(6) of the Act.
  • Provide appropriate training to the committee members in regard to their roles and responsibilities as committee members.

Economic Development Special Committee

• Council must have the Instrument of Delegation authorised by a resolution of council to ensure it complies with section 86(6) of the Act.

Complaints management

An effective complaints management system provides council with a consistent and uniform approach, assuring complainants that all allegations are dealt with in a suitable manner.

Well-handled complaints can restore trust with residents when things go wrong and lead to better services, decisions and outcomes for the community.

It was alleged that there is a reluctance by council to deal with complaints relating to councillors and council staff made by private persons, particularly anonymous complaints. There is no capacity in the online complaints system to accept anonymous complaints.

The online complaint system allows for complaints about council assets or services such as roads and footpaths but provides no indication if the complaint form can be used to make a complaint against a staff member or councillor.

Records also indicate that the majority of complaints are not followed up or actioned. Some complaints are closed after a period of time with no justification or details as to the reason why complaints were closed. There is also no central register for complaints to ensure monitoring and accountability.

The Customer Service Policy outlines the process for lodging a complaint but does not provide advice about how to make a complaint against a councillor and also provides no information about making anonymous complaints.

Recommendations

• Council should maintain a register of complaints.
• Council should update the complaint section within the Customer Service Policy to include the process for making a complaint against a councillor, and also the process for making a complaint anonymously, as well as including details of how the council will deal with the complaint.
• Council must review its internal policies for the recording, handling and finalisation of complaints to ensure complaints are actioned and finalised with justification.
• Council should review the Ombudsman Victoria report on complaint handling to ensure that the practices at council comply with best practice.

Delegations

Under the Local Government Act and a wide range of other Acts and Regulations, council, the CEO and the municipal building surveyor can delegate powers, duties and functions to special committees and council staff. The delegation process is essential to ensure actions and functions are lawfully exercised.

The examination revealed that a review was undertaken of the delegation to the CEO from the council, having been authorised via a resolution of council on 19 April 2017 in accordance with the requirements of the Act. While not legislated, the sub-delegation from the CEO to council staff was also done via resolution of council on 19 April 2017.

It was also confirmed that the council subscribes to the industry standard practice for maintaining delegations.

There are no recommendations for this component.

Conduct issues and councillor/staff interactions

Good conduct is essential to good governance and understanding how to promote good behaviour and good conduct in local government is vital for councillors and officers.

It is particularly significant in local government because it relies on councillors and officers working together to make decisions for the good of the community.

Councils such as West Wimmera have protocols in place which help councillors and staff understand who they can communicate with and what sort of communication is appropriate. Within the limits of legislation, the council makes its own decisions about the protocols around staff and councillor communication. However, once in place, these protocols must be followed.

Concerns were raised that councillors had inappropriately directed or influenced staff. It was identified that despite clear guidelines being in place in regard to councillor interactions with administration staff, unauthorised approaches of councillors to staff were reported.

It was also identified that council had provided councillor unrestricted access to the Edenhope and Kaniva offices. It is not common for councillors to have an equivalent level of access to council administration areas, staff and documents. This poses a risk for councillors in perceived or real allegations of conflict of interest or misuse of position.

In the course of this examination, the Inspectorate was satisfied there were adequate protocols in place in relation to councillor-staff contact, however, it was evident the protocols were routinely not followed.

A review of the Councillor Code of Conduct was also undertaken, along with interviews of relevant staff members and councillors. The code of conduct, reviewed and adopted on 15

December 2016, contains only the necessary sections of legislation but does not reflect some of the better practice codes of conduct identified across the sector.

In the course of the examination, instances were raised relating to conduct amongst councillors, and between councillors and council staff, that appeared not to align with the councillor conduct principles. Councillors must support and promote the principles under the Act and behave in a way that secures and preserves public confidence in the office of councillor.

It is important that, as the leaders of the organisation, the CEO and the Mayor ensure that codes of conduct are adhered to.

Recommendations

• Council review and improve the Councillor Code of Conduct. Council may wish to review code of conduct material from Wyndham and Ballarat councils as a guide.
• Ensure all staff and councillors are meeting the requirements of the relevant polices including the Councillor Staff Contact Protocols – October 2016, the Employee Code of Conduct & Ethical Behaviour Handbook Policy, and the Councillor Code of Conduct.
• Council should assess whether there are valid reasons for councillors to have ongoing unrestricted access to council offices. If it is determined that councillors are to continue being given unrestricted access to council offices, then protocols must be developed to ensure that confidential information and officers exercising delegated authority are not compromised.

Conflicts of interest (COI)

Councils are entrusted with a range of decision making powers in order for them to govern in the best interests of the community. Councillors are expected to act with integrity and transparency in ensuring their private interests do not affect their public duties, and that they do not manipulate council decisions for their own benefit.

In the course of this examination, the Inspectorate reviewed the process by which conflicts are identified, declared and recorded, and the general understanding of the COI framework. This included interviews with relevant council staff and councillors.

One of the most concerning issues was the lack of a formal mechanism to record a COI declaration and the lack of a COI register.

After interviews with staff, the Inspectorate considers that opportunities should be provided for councillors to improve their knowledge through training on the COI provisions of the Act and how the perception of COIs by the local community can affect council’s reputation.

As part of the examination, the Inspectorate reviewed a specific matter related to the Kaniva Aerodrome and found that there was no offence committed under the Act.

Recommendations

• Provide external, independent training in relation to the COI provisions to improve councillor knowledge and understanding of COIs.
• Create a COI register.
• Create and enforce the use of a COI declaration form.
• Council may also wish to liaise with Ballarat Council regarding their application dealing with conflicts and the reporting of gifts and benefits.

Interest returns

Councillors, members of the audit committee and special committees, senior officers and nominated officers are required to submit interest returns twice yearly to the CEO. The submission of interest returns is the responsibility of the individual and they are liable for any breaches of the legislation.

Adequately meeting legislative requirements, ensures that persons responsible for submitting returns, can participate in council decision making, free from concern of having bias or having a perceived or real conflict of interest.

The Inspectorate was advised that the interest return process is currently managed by the Corporate Support and OH&S Officer. Upon questioning, it was established that the end to end return process had not been documented. This creates an unnecessary risk to persons required to submit a return should the responsible officer be absent from the role during the return period.

It is to be noted that in an audit undertaken in July 2011, the Inspectorate identified that a number of interest returns had been submitted outside of the legislative return period. At the time, council acknowledged that the end to end process was not formally documented, and indicated through an action plan that an education refresher would be undertaken, as well as the implementation of a check listed administrative process, and a reminder system to be established. The risk identified in the previous audit appears not to have been heeded.

The three most recently submitted returns for each councillor were reviewed: one was submitted late and one was not witnessed. In to the case of the late submission, it was advised that the original return was identified as having not been completed correctly and was returned to the councillor.

Ten nominated officer returns were also reviewed (23 returns in total). In this review, one newly appointed staff member submitted two Primary returns and no Ordinary return, a recently appointed director had not yet submitted a Primary return, and one other return was submitted late.

Upon reviewing the above matters, there were no reasons provided to explain the non- compliance by the officers. Of most concern was the Primary return to be submitted by a director within 30 days of the appointment to their current role, which was on 16 June 2018. Emails dated 2 July 2018, 31 July 2018 and 20 August 2018 requested the director to complete and submit their return, however as at 12 November 2018, the return had yet to be submitted.

Of the Audit Committee members, two of the members had adequately submitted returns, however the third member had submitted one return late, and not submitted another return at all. It was identified that efforts had been made by the council to request the return as required, however they were not submitted by the committee member.

It is not acceptable for an audit committee member and a senior council officer, who ought be setting the example for council to have not complied with a legislative requirement. The Inspectorate will communicate directly with the individuals who have not met their legislative responsibilities.

Recommendations

• The interest return process should be formally documented to assist in ensuring that legislative requirements are met, irrespective of who has or is given responsibility for managing the process.
• The documented process should include the nomination of a secondary responsible officer who is aware of the process and the legislative requirements.
• Councillors, Officers and Committee members should be routinely reminded of their obligations to submit returns, that they are on time and appropriately witnessed.
• Returns are checked for statutory compliance, with non-compliant submissions followed up, and appropriate actions taken.

A fundamental role of councils governing for the present day and the future is the responsible management of public assets. By planning for the long term and taking into consideration the cumulative effects of all decisions made regarding public assets, responsible asset management by council is essential in ensuring the best outcomes for the community.

Sale of land

Compliance with the legislation is mandatory and a failure to meet these requirements may be sufficient to invalidate a sale. Transparency to the community is an essential part of the advertising and sale process.

A sale that occurred in February 2015, for Lots 16 and 17 in Kaniva Industrial Estate, was examined. The combined sale price of the properties was $29,000. It was identified that a public notice published at least four weeks prior to the sale was not undertaken. The sale details were published on the council website, however this is not sufficient to meet legislative requirements. A valuation of $29,000, dated September 2013, was provided, however there was no evidence that a valuation was completed within six months of the sale in accordance with the legislation.

Council has recently introduced an Asset Disposal Policy, which details that the sale process must be in accordance with the Act, but the Inspectorate was not informed of any relevant policy in place at the time of the sale.

Recommendations

• Council must ensure that relevant staff understand the requirements of section 189 of the Act and council’s Asset Disposal Policy and adhere to them.
• Council must ensure that sale of land transactions are at all times transparent to the community, in accordance with Local Government Best Practice Guideline for the Sale, Exchange and Transfer of Land.

Lease of land

When leasing council-owned land, there is a clear obligation to obtain the best overall value for the community.

The Inspectorate reviewed one example of a lease and use of council land and a potential conflict of interest and/or misuse of position by the successful tenderer who is a current councillor.

A council-owned property, the Kaniva Aerodrome, was identified by council as no longer required for its previous purpose. During the financial years 2016 to 2018, the property was being used to graze sheep, despite no formal lease being in place. Other than an annual fire levy payment, no rental payments or compensation was paid on the land. This exposes council to potential liability risk. While tenders were called for in December 2016 and two submissions were received, no formal lease was entered into.

In October 2017, expressions of interest were called for and a lease was formally entered into for a rental return of $300 per annum. Council could not demonstrate that the rental value agreed upon was market tested and provided best value.

Based on the rental agreement in place and yearly rental return, there was no requirement in accordance with the Act for the council to publish a public notice at least four weeks prior to the proposed lease.

While a breach of the Act was not identified, it appears that council knowingly provided access to the property to a current councillor and their family, without having a formal lease arrangement in place for that period of time. The community is entitled to rightly question the inappropriate advantage provided to the councillor.

Recommendations

• In all circumstances where council land is being utilised by a body/entity other than the council, there should be a formal lease agreement in place and the value of the rental/lease payments must meet public expectations.
• Council should develop a policy, or include in an existing policy, guidelines that outline the process in relation to the lease of council land.

Councils are responsible for the management of public funds, which includes federal and state government grants and ratepayer contributions. The Act requires a council to ensure that resources are used efficiently and effectively and services are provided in accordance with best value principles to meet the needs of the community. The importance of responsible administration by local government of public finances cannot be overstated.

Procurement

Procurement is an important function for council in expending public funds and obtaining best value for the community. Council has an appropriate procurement policy, adopted in March 2018. This review looked at the policy and processes in place and noted gaps where staff did not adhere to the policy.

Issues with general procurement practices were identified, including:

• confusion surrounding the conflict of interest declaration process
• no management level sign-off was required when setting weightings for set evaluation criteria
• no formal training or guidelines provided to new or returning tender evaluation panel members
• council does not have a clearly documented complaints process specific to procurement
• lack of formal contracts entered into.

From a probity perspective, there was a concern that directors were responsible for maintaining procedural integrity but were also routinely part of the evaluation panel. Random reviews should be undertaken by another director to ensure the integrity of the process.

Grass Maintenance, Kaniva

• A contract was extended on several occasions between July 2015 and July 2017, without a formal agreement or evaluation process.
• No signed conflict of interest declarations were provided.

Town Maintenance Services, Kaniva

• No signed conflict of interest declarations were provided.

Street Cleaning and Pit Cleaning Services, Kaniva

• Some concerns about the initial tender process in 2014.
• Subsequent tender process in August 2017 clearly outlined the process and provided adequate justification for the outcome.
• No signed conflict of interest declarations were provided.

Recommendations

• Council must follow its procurement policy.
• All tender evaluation panel members must be aware of their roles and responsibilities and have clear guidelines in regard to the disclosure and management of conflicts of interest.
• All documents must be maintained in the records management system.
• The credentials of each of the panel members be included in the evaluation report to demonstrate knowledge/expertise.
• Where a scoring matrix is completed, include the matrix with the evaluation report, and ensure all tender evaluation panel members sign the matrix to attest that they were part of the process, and support the final ratings.
• Independent members of staff review completed files from a probity perspective, even if only on a random basis, to reinforce the integrity of the process.
• Council develops a defined procurement complaints process to ensure consistency and uniformity when managing complaints about procurement.
• Council should ensure, where appropriate, formal contracts are entered into.

Community grant programs

Councils are responsible for the management of public funds, which include federal and state government grants and ratepayer contributions. The importance of responsible administration of council grants cannot be overstated.

It was confirmed that the council provides two funding opportunities to the community per year, with approximately $40,000 made available. The programs are managed by the Economic Development Manager (EDM), with a grants administration team consisting of the EDM, the Tourism and Communications Manager, and more broadly the Community Strengthening Grants Committee comprising the five councillors.

It was identified that a grants program review was requested by the council and undertaken by Crowe Horwath in 2016. A number of recommendations were made following the review, including the need to improve the advertising/awareness of grant opportunities, provision of information/training sessions, responsibilities and structure of the grants committee, conflict of interest management, acquittal requirements, and the introduction of a formal scoring system.

This review did not seek to confirm that all improvement opportunities had been implemented, however it was advised through discussion that council had made every effort to follow through on its audit commitments, and a review of the external Council Grants Policy most recently reviewed in July 2017. This policy sets out clear guidelines for eligibility, application, assessment and accountability. Application and acquittal forms are available on the council website.

However, it was identified that in recent times the council had experienced difficulties exhausting available grant monies. To increase the opportunity for applicants to access the funds, the communications officer often engaged with prospective applicants, and assisted them to complete their applications. While this is a proactive action that creates greater opportunity within the community, it was advised that the communications officer also acts in an application assessment capacity, thereby creating a clear conflict of interest, and providing an integrity issue for the council.

Recommendation

• Council must ensure that a separation of duty exists where the officer responsible for assisting applicants complete their applications, is not responsible for assessing applications and determining which are to progress to the funding stage.

Councillor expenses/reimbursement

The Councillor Expense Entitlement and Support Policy and the supporting procedural document outlines the support that each councillor will be provided with, and the type of expenses that can be claimed. It also outlines what is required to make a claim, and the authorisation process.

A review of claims made across the 2017 and 2018 periods did not identify any anomalies, either in terms of the value of claims, or the nature of claims, noting that a large percentage of claims were for travel expenses.

There are no recommendations for this component.

Corporate credit cards

The misuse of corporate credit cards can expose councils to potential financial and reputational risks therefore it is important hat internal controls are in place to mitigate this risk.

The review found West Wimmera’s corporate credit card policy provides clear guidelines in terms of credit card usage. Each cardholder is required to sign a cardholder agreement form prior to receiving a card, and the consequences of misuse are clearly set out.

The reconciliation process is comprehensive for the cardholder along with the approval process, where the next level manager must sign off on monthly statements. However, it was noted there were no guidelines in regard to managing disputed transactions.

A review of statements for the period October 2017 to March 2018 revealed that all transactions appeared to be in accordance with the policy/procedural requirements.

Recommendation

• Council may consider including a director in the approval process of CEO expenditure, in addition to the Mayor, to ensure there is sufficient knowledge in regard to what reasonably constitutes council business expenditure.

Human resource management at council is about managing and maximising the performance and efficiency of the workforce. Effective systems lead to strong recruitment practices that promote development and productivity of council staff.

CEO/Senior Officer contract and performance reviews

The successful management of human resources is one of the key pillars of councils supporting a harmonious and productive workforce. A key element is the provision of consistent and timely staff performance reviews.

Council currently has three senior officers. Each has been employed on a fixed term contract for a period not exceeding five years, with council advertising the roles in accordance with requirements.

A review of each contract identified that the performance criteria was correctly included in schedule 2 for the most recently contracted employee, however one of the contracts did not include schedule 2 in the contract. The other contract stated that the performance criteria was ‘to be developed’.

Recommendations

• Council should ensure that all future Senior Officer contracts, under the current legislation, must have specific performance criteria at the point of execution, otherwise it may void the contract.