General governance

As a method of meeting governance obligations and facilitating accountability, many councils maintain governance schedules for key dates throughout the year such as interest return deadlines, mayoral election periods, budgets, annual reports and delegation reviews, amongst a host of other relevant time-critical legislative requirements.

Council confirmed that it does not maintain a formal governance schedule that captures the statutory obligations placed upon the council. Despite best efforts, legislative requirements have historically been treated in an ad-hoc manner, resulting in a number of requirements not being met.

What are the key issues or challenges?

• Council did not have any form of governance schedule to ensure key statutory requirements are met.
• Council failed to meet time-critical statutory obligations such as reviewing delegations and local laws.
• Inexperienced and unskilled staff are not provided with an appropriate level of guidance to undertake their duties.
• Resourcing is inadequate to ensure that staff deliver successful governance outcomes.

The failure to develop an adequate schedule has led to staff not completing critical tasks, senior management not having clear oversight of what tasks had or hadn’t been undertaken, and no structured follow up process in place that promotes accountability.

As a result, it was identified that important, time-critical governance tasks had not been completed within legislated timeframes. These included the Meeting Procedure local law which had been out of date for more than two years and the review of officer and special committee instruments of delegations. Failure to review these documents in accordance with the legislation may have resulted in persons acting under a delegation that was not current, presenting a significant risk to council.

Along with not maintaining a governance schedule, failure to document key governance processes was also identified as a major legal and financial risk to council. The council is heavily reliant on individuals to carry out tasks based on knowledge/ experience, as opposed to following a well-documented process that is readily available to relevant persons within the organisation. Should the council lose key staff at short notice, it is likely to result in time-critical tasks not being completed as required by legislation.

A copy of a recently-developed governance schedule by Hobsons Bay City Council was made available to governance staff to assist in the development of a Yarriambiack-specific template.

Recommendations

• Develop a whole of organisation governance schedule that captures each of the council’s statutory obligations and that clearly details the responsible staff member and function to be carried out.
• Information on progress against governance schedule milestones provided to management and council.

Every council requires up to date policies and procedures to function efficiently and effectively. They are particularly important for a local government as they facilitate consistency and transparency across the organisation.

A register containing 66 policies was examined by the Inspectorate and it was identified that only 22 of the policies listed were current (as of June 2019).

What are the key issues or challenges?

• Lack of a comprehensive up to date policy framework is a significant failing of council.
• Process for updating policies is now better managed, however staff are still failing to accept responsibility to review and amend policies within due dates.
• Approximately two thirds of existing policies were out of date, which potentially exposed the council to the risk of fraud and/or corruption.

Council staff confirmed that ensuring that all council policies were up to date was problematic. Despite being requested to, policy owners had historically not displayed a willingness to review them, even when approaching expiry.

The leadership team was routinely notified as to which policies were outstanding, however no remedial action was taken to rectify the situation and no consequences were placed upon staff not meeting their obligations.

Examples of expired policies included the procurement policy, which had not been reviewed since 2014. When queried, it was advised that despite constant reminders, a lack of accountability in the procurement department was the reason for non-compliance with section 186A of the Act that requires the policy to be reviewed annually.

Recommendations

• Ensure updated policies are in place for key operational issues.
• Policy review should form part of the governance schedule.
• Senior management and council need to be accountable for the policy review process.

Accurate record keeping at local government level is a fundamental aspect of council business. The keeping, handling, storing and eventual disposal of council records is governed by the Public Records Act 1973.

The Public Records Act requires the proper maintenance of records. Delivering record keeping practices that meet legislative requirements ensures that 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.

A Public Record is all information created, sent and received by a Victorian public sector employee in the course of carrying out the business of the agency including electronic documents, emails, websites, audio-visual records, databases and system-generated records, as well as physical documents and files.

Yarriambiack Shire Council receives, creates, handles and stores thousands of records annually and as such is required to ensure they are stored and documented in the correct manner.

The council does not currently operate an electronic document storage system, as all government and local government entities should. The council uses a manual record filing system which requires staff members to store records in a designated area consisting of two rooms with compactuses at the council’s Warracknabeal offices. Staff also store records within cupboards, drawers and on desks in their work areas.

The examination found a number of staff have developed their own databases or programs to record their work but it is not widespread and is not accessible by all parts of council and not accountable in any manner.

The archives for council records are held in 3 shipping containers that are located at one of the council depots. They are secured by padlock but are not compliant with the storage guidelines as set out by the Public Records Office.

This current system is totally inadequate for a council to run its business.

The Inspectorate found there were no back-ups of council computer records prior to March 2019.

This highlighted that digital records prior to that date may be unavailable. In an emergency, records may be lost if the servers are damaged or destroyed. It was confirmed that from March 2019 all digital records were safely secured and a back-up process is in place.

Recommendations

• Records are to be kept in accordance with the Public Records Act.
• All records should be converted to electronic format.
• Training should be provided to staff on record storage and their responsibilities under the Public Records Act as a high priority.

One of the key legislative requirements is that council establish an effective audit committee to assist in ensuring the integrity of council operations and provide a safeguard for the community.

In the context of local government, the audit committee acts in an advisory capacity that typically:

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

While the audit committee is fulfilling its requirements currently, throughout 2014 and 2015, there was only one independent member of the committee, which did not meet the requirements of its charter and was in breach of the Act. Given the elected councillors have direct representation on the audit committee, the elected council should have been well aware that the lack of a properly-constituted audit committee is a breach of the Act. The failure to fill the vacancies occurring in these two years would have effectively inhibited the audit committee from holding a properly-convened meeting.

An ineffective audit committee exposed the council to significant risk due to the failure to have independent oversight of the council’s financial reporting, internal control framework, risk management systems, compliance and internal audit activities.

What are the key issues or challenges?

• The failure to have a functioning Audit Committee reflects council’s inadequacy in meeting its governance obligations
• Council must ensure ongoing audit committee viability

While not prescribed by legislation, it is good practice for councils to adopt and regularly review the audit committee charter by which the committee are governed. As part of this examination, council provided their audit committee charter, however the document was significantly out of date, having most recently been adopted by council on 4 October 2007.

An independent gap analysis undertaken in July 2014 by internal auditors of the audit committee made reference to the need for periodic reviews of the charter, however this recommendation, along with a number of others, were never acted upon.

The current committee is made up of three independent members and two councillors, which equates with industry standard and best practice. The independent members are considered to be well qualified to perform their role, having accounting and government agency backgrounds. The members are considered to be proactive in terms of seeking/ clarifying information, and work in a cohesive manner.

Minutes were provided for the previous 12 month period to June 2019, which confirmed adherence to the requirement of meeting on a quarterly basis and a uniform, structured approach to carrying out meetings.

It was identified that the tenure of the current independent members is to expire on the same date. Council should give consideration to staggering the expiry dates to ensure that the combined experience and knowledge of members does not depart the organisation simultaneously, which would leave a significant governance gap.

Recommendations

• Conduct an immediate review of the charter, referencing Audit Committees – A guide to good practice for local government and the July 2014 gap analysis in conjunction with publicly available charters of similar councils.
• Restructure the expiry dates for each of the independent members.
• Develop a set of performance objectives for the committee and have them conduct an annual self-assessment against the objectives.
• Ensure that at all times the quota and membership of independent members are in accordance with the requirements set out in the charter.

Councils establish section 86 special committees to assist in the management of specific projects, initiatives and select municipality 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.

Special committees play a specific role in the management of community assets on behalf of council but the council retains an important governance oversight role of their activities and reporting to ensure their ongoing value to the community.

What are the key issues or challenges?

• Failure to review delegations of all committees in accordance with the Act.
• Failure to manage interest returns of committee members in accordance with the Act.
• Inadequate oversight of the special committees.

Council currently has four special committees overseeing Hopetoun Swimming Pool, Tempy Swimming Pool, Murtoa Housing Units and Woomelang Community Units. Responsibility for managing the committees is split between the Infrastructure Services Manager and the General Manager Community Development. It was confirmed that there is no structured internal oversight of the committee management.

Each of the special committees were reviewed and the following key issues were identified:

• No interest returns were submitted and no instruments of delegation were reviewed in the 12 month period post 2016 election.
• For the Murtoa and Woomelang committees, the meeting minutes from 12 June 2013 did not provide sufficient authority to execute the instrument of delegation.
• For Woomelang, the number of committee members could not be established.

Issues identified

The examination found that each of the committees are reliant on expired instruments of delegation, representing a risk to council of decisions made under delegation being subject to challenge.

In addition, the examination found in the minutes dated 12 June 2013 and 12 February 2014 that exemptions to members of each committee from submitting interest returns were made specifically to the committee members of the day as opposed to providing a blanket exemption for all members current and future, until the next review, as per section 81(2A) of the Act. This has resulted in a large number of existing committee members being in breach of the interest return requirements of section 81(2) and 81(5)of the Act.

It was identified that at the time of their most recent financial statements, the committees were responsible for managing funds totalling approximately $480,000. Given the significant value of the funds, combined with the lack of structured oversight, the security of the funds is considered to present a significant financial risk to the council.

The council was rated as not compliant in the Inspectorate’s 2012 examination in regard to special committees. Despite assurances from the council to the Inspectorate at the time, it is evident that these issues were never adequately addressed.

Recommendations

• Immediate review of committee instruments of delegations to ensure compliance with the Act.
• Review of interest return exemptions for current committee members.
• Appropriate and effective management oversight of all special committees to ensure financial accountability and compliance with legislation.

Under the Local Government Act and a wide range of other Acts and Regulations, council, the CEO and other council employees 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 and council is not exposed to risk.

The examination found that until recently, responsible officers were unfamiliar with the proper delegations process, including the manner with which delegations are reviewed and the powers provided to them. Council has subsequently adopted and accepted a delegation model to ensure the council remains up to date with legislative requirements and any legislative amendments.

Section 98(6) of the Act states that a council must, within the period of 12 months after a general election, review all delegations which are in force and have been made by the council. It was identified that the required reviews were not undertaken in that period. As the CEO delegation was not adopted by council until 22 August 2018, any decisions made by the CEO under delegation between the period of October 2017 and August 2018 are at risk of being invalid. There are similar concerns with the delegations to council staff.

What are the key issues or challenges?

• Failure by senior staff to adhere to key legislative requirements.
• Failure to review delegations to the CEO and council staff between October 2016 and October 2017 exposed the council to significant risk.

During the previous Inspectorate examination in August 2012, delegations were assessed as non-compliant and despite assurances this would be addressed, recommended changes to follow legislative requirements and best practice procedures were not followed.

This examination confirmed that the delegations from council to the CEO and from the council to council staff are currently in accordance with legislative requirements. The delegation to the CEO was most recently adopted at the 22 August 2018 meeting. The delegation to council staff was most recently adopted at the 27 February 2019 meeting.

Recommendations

• Ensure that all delegations made by council are reviewed within the period of 12 months after a general election in accordance with section 98(6) of the Act.
• Ensure that all staff holding a delegated authority are trained in regard to their obligations under the delegations.

Councils use local laws to respond to issues and community needs within a municipality. These local laws complement council’s powers and responsibilities under both state and federal laws. The local law, once passed, has up to a ten year lifespan unless revoked sooner or renewed to remain valid. This ensures that local laws remain current and suitable for the purpose for which they were made.

As part of the examination, the Inspectorate reviewed local laws and assessed two as being compliant, however the existing Meeting Procedure Local Law expired in March 2017. The Inspectorate was advised that an updated draft version was completed in mid-2018 and presented to a councillor briefing session. Due to the expected introduction of the Local Government Bill, formal adoption of the revised Local Law was not undertaken.

What are the key issues or challenges?

• The correct implementation of local laws is a legislated responsibility of a council.
• Council’s decision not to remake the meeting procedure local law due to the potential introduction of a new Local Government Act is a breach of the legislation.
• An expired local law being enforced for more than two years exposes the council to potential challenge in respect of relevant decisions made at council meetings during that time.
• Senior management, who are ultimately accountable, did not query the decision to let the local law remain expired.

Council has committed to ensuring the updated version proceeds to adoption. The former CEO noted that the Meeting Procedure Local Law expiration had not been brought to his attention. He believed that it may have been an oversight as “other areas required attention” and he “didn’t like to overload the staff”.

Council’s failure to review the meeting procedure local law since March 2017 has resulted in subsequent council meetings being administered under an expired local law, leaving council decisions vulnerable to challenge. The elected councillors were clearly not aware of their responsibilities and exposed the council to legal and financial risk.

It is noted that following the identification of this issue, council adopted the new local law on 4 October 2019.

Recommendations

• Develop a process whereby local laws reviews commence at least 12 months prior to the expiry date and are adopted before local law sunset dates.
• Include the local laws review as part of the governance schedule.
• Publish all local laws on the council website.