Councils warned on processes after IT worker rips $1.5m off City of Melton through sham contracts

Victorian councils have been put on notice after a City of Melton IT worker funnelled $1.6m of ratepayers’ money into his own firms through sham contracts.

City of Melton has been subject to a damning Ombudsman’s report. Picture: AAP

Councils have been warned to check their internal processes after a computer worker ripped off $1.6m of ratepayers’ money through sham contracts.

A Victorian Ombudsman report has found that the contractor managed to dupe Melton Council for two years by preparing tender submissions from his own companies and then evaluating them as a council officer.

“The sham was so childlike at times, Mr M even sent responses for quotes to himself under the guise of fake identities,” said the report tabled in state parliament on Wednesday.

“The charade that he was not connected with the company was maintained to the end – when the company thanked him for working with them and asked for a reference.”

Ombudsman Deborah Glass said that lax oversight allowed him to manipulate councils processes for so long.

“There was a worrying lack of due diligence in the tender and procurement processes. The subject controlled the tender process for a major contract,” she said.

“It is staggering that proper checks and balances were not followed and he was able to deceive the council for as long as he did.”

“Other councils and agencies be warned, making these mistakes not only exposes you to huge and avoidable risk, you might also become the Ombudsman’s next headline.”

The contractor, called Mr M, no longer works at Melton, but Ms Glass has recommended that the issues be raised with Victoria Police and the Australian Securities and Investments Commission (ASIC).

The Ombudsman’s investigation focused on the link between Mr M and IT firm MK Datanet Pty Ltd.

Mr M failed to disclose any conflicts of interest in the procurement process when his company MK Datanet won a major council contract.

“How could this happen in a modern, apparently well-run agency?” said Ms Glass’s report.

“First, he was engaged by the council through several layers of contractual arrangements, which helped to mask his associations.”

“Second, there was a lack of effective oversight.”

The report found that Mr M’s various supervisors had limited oversight of his work due to its technical nature, and “left him to get on with things”.

One council official said he “couldn’t make heads or tails” of “what the actual work was”.

Melton CEO Kelvin Tori said the matter had prompted a review of procedures.

“And as an organisation we have since introduced stricter contractor recruitment processes to help avoid any future breaches of this nature,” he said.

“Contractors must go through a mandatory induction process, suppliers are engaged under a panel, and there is more oversight of tender processes.”

Mr Tori said the matter would be referred to police and ASIC.

“An audit is underway to review the work undertaken by MK Datanet and confirm the value that council received from the contract. These findings will be reported back to the Ombudsman,” he said.

“Of the $1.6 million contract, we can account for $600,000 in equipment and software provided by software suppliers.”

“The amount in question is $1 million in professional software development services from MK Datanet.

“As an organisation we’re following all avenues available to recover the money owed.”

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