The knowledge gap
Our review of personal interests returns and the subsequent survey highlighted that there were impediments to achieving full compliance across the sector. Although we did not review all personal interests returns in the same level of detail across the whole sector, we found higher levels of non compliance than anticipated.
Some of our findings point to a knowledge gap which could be addressed through better education. For example, councillors we wrote to did not adequately understand the purpose or importance of disclosing interests in an honest and transparent manner. They also did not understand the relationship between completing their interests returns and the disclosure of a conflict of interest in a matter before council for consideration. Council officers surveyed agreed that many councillors lacked the understanding of why the completion of returns was important.
“As a newly elected councillor l do not recall being provided with any information or education during the two days of induction or thereafter on disclosure requirements for primary and ordinary returns... I have no legal background. When l did not receive any feedback from my first completed documents, l believed l was compliant.”
Councillors and council officers also stated that both the legislation requiring the personal interests returns and the guidance material provided by LGV contained legal terms which are complex and difficult to understand.
Another recurring theme in the surveys of councillors and council staff was a lack of adequate guidance and training available across the sector. A massive 94% of councillors who responded to our survey said the guidance that was currently available was insufficient to enable them to meet their legislative requirements.
The councillors interviewed generally displayed a willingness to comply and to undertake educational opportunities but felt the existing system did not support them and it was unnecessarily confusing.
There was a clear demonstration of a ‘gap’ across the sector. Councillors felt they were not sufficiently supported or assisted to adequately fill out their returns. In addition, council staff indicated that they were reluctant to provide definitive advice for fear that it may be incorrect or create an issue for the councillor and or the staff member.
The high levels of non-compliance indicated that all local government stakeholders must work together to improve personal interests return outcomes across the sector.
The role of Local Government Victoria in improving guidance and education
As the owner of the legislation, LGV publishes guidance material that helps both councillors and relevant council staff to comply with the personal interest legislation and regulations.
There are no qualifications or criteria that must be met to nominate as a candidate and so there is a broad range of people who nominate and are elected as councillors. All councillors must submit personal interests returns so the guidance material and training should be able to be understood by people from all walks of life and different backgrounds, including culturally and linguistically diverse backgrounds and those with disabilities. Councillors should not be expected to seek and pay for independent legal advice to comply with these obligations.
Councillors also told us they were concerned that they did not have a forum or platform to seek guidance or raise queries regarding their personal circumstances, external to their councils.
Guidance on the 2020 scheme
In preparation for the introduction of the 2020 Act, LGV sought feedback from the local government sector on the personal interests returns requirements of the new Act. This was done through the Engage Victoria website.
Once the 2020 Act was enacted, LGV published draft guidance to the sector, ‘Quick Guide on Personal Interests Returns’. We welcomed the publication of the guidance material to provide direction to the local government sector on the new personal interests returns requirements. The publication of a frequently asked questions section was a particularly welcome addition as they can be added to and provide more guidance as requested by the sector.
However, as of 31 August 2021, this guidance is still in draft on the LGV website and has not been finalised.
We have received recent feedback from councils who are concerned that the LGV guidance is yet to be finalised and some sections are not in alignment with the 2020 Act and Regulations.25
Our review of councils’ summaries of personal interests returns found that:
- councils were confused about how to provide the summary information
- there was no consistency about how the summary was presented
- some councils’ summaries were not compliant.
Several councils had not included any disclosures under ‘other interests’ in their summary, as it is not highlighted in the LGV guide. In addition, there are different approaches to disclosing land interests, with some failing to state the town in which a land interest is held, which is not improving transparency.
Clear guidance is vital to ensure that councils are transparent and accountable and understand their obligations under the new Act. A consistent approach regarding the summary of interests would make it easier to assess council compliance with the legislation.
In addition, the term 'personal interests returns' is used interchangeably with 'conflict of interest' on the website. They are different obligations under the Act and set out in different sections but this is not clear on the website.26 At the time of writing in early September 2021, the guidance for personal interests returns was still in draft and was located under consultation pages for the new Local Government Act 2020. We understand LGV is in the process of finalising and moving these pages to the main LGV website.
We have raised these concerns with LGV and will continue to work with them and the local government sector to improve the quality of guidance provided.
Improving the guidance
Our discussions with the local government sector about the 2020 requirements and issues uncovered during the review of personal interests returns under the 1989 requirements highlighted several solutions to the key issues.
The main suggestions for improving written guidance on the 2020 requirements were:
- seeking detailed input and feedback from councillors and council staff when developing the guidance
- writing in plain English with clear explanations of any legal terms
- using examples of interests to be disclosed, such as self-managed superannuation funds and family trusts.
“Plain English on the form and guidance is critical. Consideration could be given to an e-learning platform and/or video to assist those who are unable to clearly understand the requirements from a document.”
The local government sector also told us that real-life examples were an excellent way to help understand legislative requirements.
“Perhaps give examples on the return about the sort of information that is requested/required. That then helps reduce the chance of Councillors inadvertently answering incorrectly or leaving out relevant information.”
We recommend using case studies or examples of issues which lead to high levels of non-compliance, including:
- disclosure of relevant offices held
- clarification of thresholds for declaring beneficial interests
- disclosure of relevant shareholdings
- disclosure of relevant self-managed superannuation funds
- examples of the types of interests to be disclosed under ‘other’.
Councillors and councils should also be given information to provide more clarity and detailed explanations about the relationship between the Conflict of Interest provisions (sections 126-131 of the Act) and the Interests Returns submissions (sections 132-136 of the Act.).
LGV should also consider providing a detailed explanation as to how disclosures made on interests returns may impact on a councillor’s decision-making capability on matters before council.
Councillors and council staff also asked for training to help councillors and council staff better understand their obligations for submitting personal interests returns, and their practical skills at filling out the return.
“Needs to be included in the induction training, an individual appointment booked for each councillor with the governance officer when completing the first return and each time the previous return is provided to councillors so they can see what they’ve previously declared.”
When first elected, councillors must complete mandatory induction training. This training is often outsourced to specialist training providers and is a new requirement under the 2020 Act. However, the mandatory training does not cover personal interests returns and is only done soon after election and no refresher courses are required.
To improve the number of councillors submitting compliant personal interests returns, all specified persons who need to submit returns should have access to regular training on how to complete returns and why the process is important. Governance staff tasked with collecting the information should also be supported with training.
Training for councillors should be:
- consistent across the sector
- delivered as an induction and regular refresher courses
- delivered face-to-face or online.
Mandatory training should be offered to councillors at induction and annually afterwards. This would ensure councillors are aware of their obligations under the Act. Standardised training would ensure all councillors receive identical information and guidance. It would also be useful to align the timing of the training with the submission deadlines for personal interests returns. Creating training for councillors would also reduce the onus on council staff to advise councillors about their obligations under the 2020 Act. Specified persons under the Act, such as nominated officers and delegated committee members, should have access to the same training and support.
Governance staff would also benefit from training tailored to their role and responsibilities and to build their knowledge base generally regarding interests returns processes.
LGV could provide other support and guidance to councillors to submit compliant personal interests returns, as required under the 2020 Act.
The guidance may include:
- online content, including videos, to explain the rules in plain English
- a plain English communication campaign to remind councillors of their obligations ahead of return periods
- creating online submission software so that the process could be done online, rather than relying on a paper-based system
- creating a ‘help desk’ or email address so that councillors can submit queries about their personal interests returns
- providing best-practice examples – allowing councils to share knowledge across the sector
- providing regular updates to remind councillors of their obligations and keep them informed of legislative amendments
- mandating the use of a prescribed form to promote uniformity and confidence across the sector.
Peak bodies’ role in guidance and education
Victoria has 3 main peak bodies that provide support, training and leadership to the local government sector: the Victorian Local Governance Association (VLGA), Municipal Association of Victoria (MAV) and Local Government Professionals (LGPro). These bodies could also have a role in helping coordinate and helping the sector collaborate to share best practice.
LGV should develop guidance to the sector on interests returns in collaboration with these peak bodies. During our review of the summaries, we found a lot of variation in the way summaries were presented. We are concerned there is a lot of variation in the presentation of personal interests returns, making oversight more difficult. It also means that each council is essentially re-inventing the wheel.
A senior governance officer from a council told us that there is a “willingness and a hunger for partnership in the sector”. The officer said the peak bodies would be keen to work with LGV to provide practical guidance to councils. “We need guidance which is practical not theoretical in nature,” they said.
Councils’ role in guidance and education
Our review of personal interests returns under the 1989 scheme did not include a detailed assessment of the guidance councils provided to councillors. However, our survey did reveal that there was a lot of variation in the amount of guidance councils provided to their councillors.
Since we completed our review, the 2020 scheme took effect which has fundamentally changed what and how personal interests returns are to be reported. However, we have had contact from councils seeking guidance from LGV on the best way to submit compliant personal interests returns for councillors and staff and guidance on how to prepare and publish the summary of personal interests.
One issue highlighted in our survey is that councillors were often asked to complete their personal interests return shortly before the start of a council meeting. Councillors were often in a rush and did not have a previous return on hand to compare it to.
It is our belief that councils would be open to:
- working with Local Government Victoria to improve the current guidance
- implementing recommended guidance
- changing processes to promote better compliance
- providing support to councillors and staff where required.
Suggestions to improve council processes
To improve accountability and transparency, some councils review personal interests return summaries from councillors and council staff alongside council agenda items to identify potential conflicts of interest. This is a practice other councils could consider.
Councils also have a key role to provide information and education to councillors and council staff who are obliged to submit personal interests returns.
Councils could also have a role in supporting their governance staff and better equip them to monitor the submission of personal interests returns and provide advice for those who must submit a return. Our survey found that governance staff who did not have to submit a return often lacked confidence about the requirements. Councils could support their governance staff by encouraging them to complete annual training in personal interests returns if it is developed.
“We have a great Governance Manager, but her responsibilities are increasingly onerous and expanding. I am concerned they may be too much for one person to handle. Councillors are part-time and many work full-time or part-time in other occupations.”
There is lot of variation in the governance resources amongst councils. Smaller councils may have the governance task sitting with an executive assistant while larger metropolitan council would have a team of governance staff.
We believe council staff who collect personal interests returns would welcome practical guidance on the process from those who are familiar with the process. Consequently, we have sought advice from the governance team at Melbourne City Council who have shared documentation for their personal interests returns process to help other councils. We are sharing the sample checklist in Appendix 2 in the hope it will help the sector as it adjusts to the new legislation. Sample emails provided by Melbourne City Council, along with the checklist, are also available to download on our website.
Independent accountants and lawyers
“When busy, [the returns] are the least thing I want or need to do. The system needs to be overhauled and instruction clear. What is expected, what is applicable and what is not. As a Councillor, I have had to just ‘wing it’ and hope that I have included all the right information with no assistance. I have to pay a legal person to oversee it, to make sure I’m completing the forms correctly”
Clearer guidance from LGV would allow more councillors to complete their own personal interests returns without hiring an accountant or lawyer. Without guidance written in plain English with an explanation of legal terms, councillors with more complex financial interests currently seek and pay for independent legal or accounting advice. However, councillors may be reluctant to seek the advice of lawyers or accountants because of the cost.
Improved guidance from LGV would also benefit independent accountants and lawyers as it would clearly set expectations of what personal interests returns should contain, meaning they do not have to interpret the Act.
4. The Local Government Act 2020 and Local Government (Governance and Integrity) Regulations 2020 should be amended to make it mandatory for people required to submit personal interests returns to use a form in a Schedule to the Regulations to ensure consistency of personal interests return submissions across the local government sector.
5. LGV should finalise its draft guidance material. The final guidance material should:
- be written in plain English with all legal terms explained
- include information about how the accurate completion of their interests returns can assist them to identify possible conflicts of interest
- include real-life examples of interests to be disclosed
- be easily accessible on the LGV website
- be promoted through its communication channels.
6. LGV should communicate to councils and councillors:
- the importance of their obligation of completing accurate, complete, and timely personal interests returns for the integrity of local government processes
- that the personal interests returns will be relied upon by IBAC and other integrity bodies in the event of an investigation.
7. The Local Government (Governance and Integrity) Regulations 2020 be amended to include the topic of personal interests returns in the induction training for councillors.
8. The Local Government (Governance and Integrity) Regulations 2020 be amended to introduce annual refresher training in personal interests returns for councillors.
9. Councils should introduce annual training for their nominated officers and delegated committee members to increase their knowledge of the personal interests returns process.
10. LGV should provide regular updates to councillors to remind them of their obligations and to keep them informed about legislative amendments in relation to personal interests returns.
25 The LGV template that can be used by councils to collate the summary of personal interests does not advise councils to include certain information in the summary which is required by the Act and Regulations. This information is: the name of the councillor, name of the council, position held, and the date the person lodge the preceding personal interests return.
26 The obligation for personal interests returns is set out in Part 6 Division 3 sections 132-136 of the 2020 Act while conflict of interest requirements is set out in Part 6 Division 2 sections 126-131.