Main allegations and concerns and previous audits of the council.
As part of this investigation, the Inspectorate looked at the council's governance practices and need for improvements, the specifics of allegations about wrongdoing, and previous audits conducted at the council.
Main areas of investigation
Good governance is important for several reasons. It not only gives the local community confidence in its council but it improves the faith that elected members and officers have in their own local government, and its decision making processes. It also leads to better decisions, helps local government meet its legislative responsibilities and importantly provides an ethical basis for governing.
Councillors, under the Victorian local government system, are elected to serve the community in positions clearly defined under the Act. They have, amongst other responsibilities, the objective of ensuring the best outcomes for the community, demonstrating transparency in their decision making, providing leadership for the good governance of the municipality and ensuring council facilities and services are used fairly and equitably. They also need to ensure that resources are used efficiently and effectively and that services are provided in accordance with best value principles. In order for council to achieve that goal, they employ a CEO and are responsible for ensuring CEO performance, and thus that of senior management employed by the CEO, meets community expectations.
The greatest enablers of the poor practices identified in this report were staff in senior management positions. The former CEO and senior managers allowed poor behaviours and practices to go unchallenged and did not commit to implementing performance development strategies for themselves or their staff. The examination identified that the council had not improved its governance capability or expertise since the previous Inspectorate examination in August 2012 despite assurances these matters would be addressed.
Council depots are repositories of a considerable amount of plant, equipment and consumables which are used by employees to undertake civil works, parks and recreation works and other duties. Poor management of physical resources held by councils presents a risk of fraud and corruption.
A number of allegations were raised with the Inspectorate in relation to the use and procurement of resources at the Hopetoun depot. The allegations include private works, inappropriate use of council equipment, unauthorised sale of plant equipment and consumables and leasing of staff vehicles by council.
The integrity of local government and protection of community interests are key aspects in determining the importance and veracity of these allegations. To achieve this, the Inspectorate investigated the allegations and conducted an examination of risk issues related to council operations. It should be noted in undertaking this work, the Inspectorate received willing cooperation from council staff.
Hopetoun council depot
The Inspectorate conducted a governance examination at the shire in 2012. The outcome of that examination was that a significant percentage of items reviewed were considered not to be compliant with the legislation and the council fell well short of meeting accepted best practice through its operational policies and procedures. A report was provided at the conclusion of the examination and council committed to implementing the action plan provided at the time. In a follow-up visit, the council confirmed that actions to improve their procedures and policies were underway.
As part of the current examination, the Inspectorate requested recent audits undertaken on behalf of the council. Fifteen reports were provided to the Inspectorate and a sample of relevant findings are included below. The types of issues identified by the various audits are consistent with those identified during this governance examination and the previous review undertaken by the Inspectorate in 2012.
A records management audit in 2017 indicated that there was significant scope for improvement to ensure compliance with legislative and Public Records Office Victoria requirements. A disaster recovery and business continuity review in 2017 identified that the business continuity plans and IT disaster recovery plan would not have been effective in the event of a significant disruption or outage. The plans were considered generic and not adequately specific to the council’s needs. Significantly, it was identified that the plans had not been tested and that there was minimal staff training or staff awareness.
A contract management audit in 2017 identified areas of improvement as being the implementation of a centralised approach to monitoring and managing individual contracts, the retention of quotes, creation of a standard contract file checklist and the monitoring of aggregate supplier spend.
A depot site review in 2014 identified a number of issues in regard to the management of the sites. These included a lack of signage, inadequate chemical management, lack of work orders and outdated policies. A follow up review conducted in 2019 highlighted that less than half of the recommendations made were considered to have been satisfactorily addressed. The key register, chemical storage, plant and equipment management policies and procedures and reporting obligations all remained as outstanding matters four years after the original review.
A human resource audit in 2014 concluded that council had a significant wage spend increase without sufficient control, demonstrable efficiency savings, increased service levels or an ultimate demonstration of value to ratepayers. It also listed deficiencies such as: new employee request approval forms not being completed (no oversight of new employees), non-inclusion of key performance indicators in staff performance plans, no formal HR framework, and the accumulation of excessive leave not being managed by senior staff.
An audit into risk management in 2013 recorded that council fell well short of aligning to best practice. Issues highlighted included failure to implement a risk framework, failure to review the risk policy since 2007 and failure to record potential fraud risks as opposed to only recording events that have occurred.
A further risk management review was completed in 2015 and most recently a follow up review was completed in 2019. Of the 12 recommendations previously made, only one was considered to have been addressed satisfactorily. A key recommendation for a software solution for managing policy reviews and other tasks had not been implemented.
The review in 2018 of enforcement of Local Laws highlighted there were no documented procedures for issuing and managing notices and infringement notices, not meeting reporting obligations, no tracking of infringement notices, a lack of audit trail, inefficient monitoring of paid/ unpaid infringements and customer requests bypassing the customer request management system.
A grants management audit in 2019 identified that there was no policy in place, no centrally managed grants register and no reporting on aggregate co-contributions, leading to a general lack of consistency across the organisation.
The VAGO final management letters from 2016-2018 highlighted deficiencies in the design and implementation of controls and significant matters relevant to the financial reporting and employment processes. These included policies not being in place for EFT transactions or invoicing, five employees terminated by council remaining on the payroll system; purchase orders not showing prices or quantities, and inflating or discounting of long service leave liability.
