Asset and resource management

Allegations were raised in an anonymous complaint and separately during the Inspectorate’s visit to council that private works were being undertaken by council staff using council equipment.

The following allegations were also raised in the initial complaint:

• private works were being done during work hours with staff receiving cash payments or payments in kind for the work such as slabs of beer.
• and equipment such as graders and rollers were seen working on farm properties, with cash in hand or gifts being given to operator of equipment or depot manager.
• and equipment being used on weekends for private use by staff to clean up blocks of land or transport privately-owned goods.

Depot employees interviewed in August 2019 confirmed private works had been regularly conducted for many years and any payments or gifts received were donated to the depot social club for social functions. The Inspectorate requested records or financial statements from the social club. The social club was not formally constructed, had no constitution and no records were provided to the Inspectorate, however the Inspectorate is still in the process of pursuing bank records to confirm relevant transactions.

The Inspectorate can confirm an unknown number of private works were conducted and cash or in-kind payment was received for the works. This appears to be an accepted and long-running practice by depot staff. Limited members of the community benefit from these private works, while the wider community subsidised the practice. Several staff also confirmed that, ahead of their interview by the Inspectorate, they had been told not to accept any more payments for private works.

According to the Public Administration Act 2004, misconduct in public office includes ‘an employee making improper use of his or her position for personal gain’. Staff accepting cash or other forms of payment, all of which went to the depot social club, for conducting private works using council equipment is an unacceptable practice. More generally, misconduct in public office can be conduct by a public sector employee which is not just unlawful but that fails to meet the ethical or professional standards required in the performance or exercise of duties.

Recommendations

• Private works by council staff should cease immediately, noting this has been implemented as of September 2019.
• Council must draft and implement a policy in relation to any works outside of council’s normal scope of operations.
• Council must provide guidance to staff about why such works are not appropriate.

Councils purchase resources and consumables to deliver best value services to their residents. The purpose is to provide services for whole community, not to just benefit individuals.

An allegation was made that a large amount of gravel from a depot stockpile had been sold by council employees to three local residents. Council also delivered the gravel and provided grading services to at least two residents. A review of the documents provided indicate that residents were invoiced for the work undertaken at their properties and that they paid for the works that were undertaken by council and for the gravel supplied.

Further allegations were made that staff had sold consumables such as fuel to local residents. The investigation substantiated that on a number of occasions, resources and consumables such as fuel and gravel were on-sold to some residents but no offences were established as the sales were conducted at or near market rate and proceeds went to council.

The Inspectorate also found that council had no policy or guidelines governing such sales and therefore the staff involved did not breach any internal rules.

The question remains whether council should be involved in the business of selling consumables or resources. If a council on-sells consumables, this may leave it open to corruption or equipment being unavailable for use when required. It may also leave council in the position where it is competing against local private businesses.

Recommendations

• Council to create and enforce guidelines on the sale of consumables.
• Council to ensure tight controls are in place to ensure any sales undertaken do not prove anti-competitive for local businesses.

Chemical supplies at a council depot

The following allegations were raised with the Inspectorate and/or raised in interviews with council staff:

• Plant and equipment such as tractors or chainsaws were being used on weekends for private use by staff to clean up blocks of land and for doing other work that was not council related.
• Depot stock, plant and equipment is never audited and according to the responsible director, this was not required.
• A general manager stated that staff regularly use council equipment for private work and this appears to have been a systemic practice.

The Inspectorate substantiated that prior to July 2017, staff regularly used council equipment but it was unregulated and not recorded. At Warracknabeal depot in July 2017 and Hopetoun depot in March 2018, a register for use of plant and equipment was instigated to ensure staff paid for equipment used. There was a process to recoup these amounts but record keeping was poorly maintained.

Evidence from workers indicate the equipment usage book started earlier in Hopetoun than the records provided to the Inspectorate. It appears that staff using council equipment after hours was a long-standing and ongoing cultural practice.

A number of questions must be answered by the council including: is this an effective use of council assets; is this an appropriate use of assets by staff to do private works; whether council or the individual staff member should pay for the insurance, consumables, depreciation, damage and maintenance of plant and equipment. Contemporary public organisations do not permit this type of activity.

The Inspectorate raises additional concerns with these practices including: the possibility that council equipment could be used for secondary employment; fringe benefit and insurance issues; legal risk; and the possibility that equipment may not be available during emergencies. Some members of the community may benefit from these practices but the balance of ratepayers are ultimately worse off.

Recommendations

• The practice of allowing depot employees to utilise plant and equipment for personal use or private works should cease immediately.
• Make it mandatory for all depot staff to be familiar with the policies and have each depot staff member sign off to confirm reading and understanding on a regular basis.
• Council should provide training and guidance on why the use of public resources after hours is not appropriate.

Allegations were raised in the initial complaint to the Inspectorate that council staff at the Hopetoun Depot were encouraged to personally purchase plant and equipment and then hire that equipment back to council. This would allow them to draw a salary from the council as well as receive a rental payment for the use of the plant and equipment.

What are the key issues or challenges?

• Equipment owned by council employees hired back to council without a tender process.
• No policy or guidelines were created to dictate correct procedures for renting or hiring staff-owned equipment.

It was confirmed that Employee A hired out their privately-owned truck and trailer to the council on an ongoing monthly basis between November 2011 and September 2013. During this period, payments totalling approximately $174,500 were made to Employee A.

It was also confirmed that Employee B had hired a water truck to the council on an ongoing monthly basis from August 2011 until the time of the examination (April 2019). Payments varied according to the usage of the vehicle. During this period, payments totalling approximately $457,000 were made to Employee B.

While the Inspectorate requested details of the respective formal contractual arrangements, it was advised that formal contracts did not exist in either case. It was also confirmed that no formal tender process had been entered into to ensure that best value was achieved.

Despite allowing the practice to continue for an extended period of time, council did not develop and implement a policy to provide the necessary guidelines to staff. It appears the practice was considered to be business as usual, as opposed to a practice that required special consideration and formal senior management approval.

The General Manager of Infrastructure and Services explained that he was not really aware of these types of hiring arrangements as they typically emanated directly from the Hopetoun depot. The general manager did not have a clear explanation for why this practice occurred but conceded the “perception was poor”.

Whilst the payments to Employee B were over a period of eight years, the council did not have any systems in place to identify that the payments were of such regularity and scale that the arrangement should have been facilitated by an open tender process.

It was confirmed that following this examination, the ongoing arrangement with Employee B has ceased.

Allowing council to lease plant and equipment from staff is considered by the Inspectorate to be poor practice due to the various risks it presents. These include contractual, financial and legal risks and acting contrary to the Local Government Act procurement requirements. A primary consideration ought also be the perception of a conflict of interest.

Recommendations

• Council should cease leasing private assets from staff.

Allegations were raised that staff at the Hopetoun Depot had sold plant equipment to unknown people without the authorisation or knowledge of council.

In one allegation, it was claimed that a council-owned cherry picker had been sold and the proceeds distributed to depot staff.

The Investigation substantiated that council owned a cherry picker in the mid-1990s and also that this cherry picker is not presently in the possession of council. What is not clear is how this equipment was disposed of.

Up until recently, the council had continued paying registration and insurance for the same cherry picker.

There were similar allegations (discussed earlier in this report) that depot staff may have kept or distributed chemicals, fuel and gravel from the depot but this was unable to be substantiated due to poor record keeping and lack of evidence.

In discussions with senior staff and depot workers, issues that emerged included:

• an asset register existed, it was poorly-maintained
• and condition of plant and equipment were not regularly recorded and there were no restrictions on staff accessing and altering equipment records

Recommendations

• Develop and implement a policy for recording of assets, their purchase, locations, status and disposal and provide this policy to the Inspectorate.
• Undertake a thorough reconciliation of all council equipment and other assets and record in a register that is updated each time plant and equipment is purchased or sold.
• Asset register must be updated regularly and access to the register restricted to appropriate staff.

Compliance with the respective 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.

When the Inspectorate examined the council in 2012, it was substantiated that a parcel of land had been sold. It was found at the time no public notices had been published, no current valuation had been obtained, and the sale occurred without authorisation by a formal resolution of council. These were all breaches of legislative requirements. An action plan drafted by the Inspectorate and agreed to by the council made recommendations to correct land sale procedures at the time.

During the current investigation, it was established that neither a policy nor a process document had been adopted for the sale of council-owned land. Not having a policy or documented process leaves the council at risk of breaching the Act and being at heightened risk of fraud and corruption.

What are the key issues or challenges?

• Confusion surrounded the sale of Lot 1, 158 Lascelles St, Hopetoun in regard to the prospective and eventual purchaser and the arranged sale price.
• Council failed to document the end-to-end sales process.
• Lack of detail in the sale file opens up the council to scrutiny and hinders transparency and accountability.

To examine recent council land sales, the Inspectorate requested supporting documentation. Details were provided for the sales of Lots 2 and 3 at 158 Lascelles St Hopetoun. Lots 2 and 3 were both sold in 2018 for $16,500 each and both sites were independently valued before the sales at $15,000 each. The review of the documents identified that the council had acted appropriately by advertising that both lots were to be sold by private treaty, by commissioning current valuations and having the sales approved by council.

The Inspectorate then requested details for the sale of Lot 1, 158 Lascelles St.

The land at 158 Lascelles St, Hopetoun was originally bought in February 2014 for $5400 with the council planning to subdivide it into four lots at a cost of $194,000. The council received a grant from the State Government for $81,400 but no details on the particulars of this grant, or limitations on its use, were available. An agreement had been made prior to the council purchasing the land for Lot 1 of the sub division to be on-sold to a local panel beater at the valuation price for the purpose of stimulating local business growth. Despite the council engaging with a potential purchaser throughout the subdivision process, and council approving the sale on 11 December 2013, the sale did not proceed and the property was sold to a development corporation.

Council minutes from 28 October 2015 indicate that a valuation for Lot 1 was obtained, valuing the property at $35,000, however council passed a motion to accept only $16,500. One explanation offered was that the motion was passed after relying on a valuation from October 2013 that valued the property at $14,000. This explanation is contrary to the legislative requirements. The property was settled on 25 November 2015.

Council staff were unable to provide clarity as to why the council did not fulfil its obligation to sell the land to the panel beater and whether council met its obligation of achieving best value through the land sale.

Recommendations

• Develop a sale of land policy and formally document the sale of land process to assist with adherence to the Act, promote uniformity across the organisation, and mitigate key person risk.
• Maintain all relevant sale of land correspondence and documentation on file.
• Maintain a written record of all key decision making rationale.

A council must ensure that the budget contains, amongst other things, a description of the services and initiatives to be funded in the budget. In the course of the investigation the issue of the Capital Works Program in the Budget was raised. In the 2017/18 budget document in the capital works section, allocations were adopted for resheet, reseal, road to recovery categories.

There was no list of what road works were to be carried out specifically. A reseal program was adopted by Council later in September with the specific road list. This occurred again in the 2018/19 Budget document and subsequent September adoption of the works program.

This meant that the community was effectively denied adequate transparency, in the roads program, for appropriate consultation to take place. One of the key objectives of a council is to ensure transparency and accountability in council decision making.

It is noted that the current CEO required that the full costed program be adopted with the budget for 2019/20, to allow for public consultation to be undertaken on a full transparent list of roadworks.

A council must ensure that the budget contains, amongst other things, a description of the services and initiatives to be funded in the budget. In the course of the investigation the issue of the Capital Works Program in the Budget was raised. In the 2017/18 budget document in the capital works section, allocations were adopted for resheet, reseal, road to recovery categories.

There was no list of what road works were to be carried out specifically. A reseal program was adopted by Council later in September with the specific road list. This occurred again in the 2018/19 Budget document and subsequent September adoption of the works program.

This meant that the community was effectively denied adequate transparency, in the roads program, for appropriate consultation to take place. One of the key objectives of a council is to ensure transparency and accountability in council decision making.

It is noted that the current CEO required that the full costed program be adopted with the budget for 2019/20, to allow for public consultation to be undertaken on a full transparent list of roadworks.

Recommendation

• A full program of works should be adopted for the capital works program in the annual budget.