Leaked report blasts former Daylesford CEO for bungled redevelopment

A secret report into a botched council redevelopment of a heritage theatre in Daylesford found the shire’s former chief executive underestimated the project cost by $5 million while disregarding expert advice.

In a document leaked online at the weekend, Victoria’s Local Government Inspectorate found former Hepburn Shire Council chief executive Aaron van Egmond failed to respect governance practices when he led the purchase and planned overhaul of The Rex building in 2016.

A leaked report from the Local Government Inspectorate has criticised ex-Hepburn Shire CEO Aaron van Egmond for his management of The Rex redevelopment in Daylesford.Credit: Jason South/Supplied

The cost blowouts for The Rex redevelopment were discovered only after van Egmond left in 2018 to lead Hobsons Bay Council, where he remained until his abrupt suspension in January amid allegations of “unacceptable workplace behaviour” towards staff under his watch.

The consecutive scandals and the council watchdog’s refusal to release its Hepburn Shire report have prompted calls for more transparency.

However, the Local Government Inspectorate on Tuesday declined to officially release its report despite the leak, and a state government spokesperson stressed the agency was independent and could not be directed to publish an investigation.

“The unauthorised disclosure has been referred to the Department of Justice and Community Safety by the LGI for investigation,” they said.

The leaked inspectorate report, drafted in June 2022, said van Egmond had embarked on the biggest construction project in the history of Hepburn Shire when he sought to redevelop The Rex into a multipurpose facility that included new shire offices and a library.

But the report found van Egmond committed the council to buying the building for about $6 million without an independent valuation. The price was $1.6 million more than it had sold for six months earlier.

At the time, the council was informed the construction budget would be less than $1 million, which meant no planning permit was needed. “However, the construction cost was massively underestimated,” the report said.

Instead, it was a $5.14 million expense, a miscalculation the inspectorate attributed to van Egmond’s “apparent disregard for expert advice” that burdened future ratepayers with debt.

The Rex Shopping Arcade on Vincent Street in Daylesford in 2018.Credit: Dylan Burns

In an interview with investigators, van Egmond reportedly said he was “not sure” why a quantitative surveyor was not used to determine construction costs.

The inspectorate report noted that councillors at the time had failed to hold the former chief executive to account, but said: “Our investigation found that the major issue of The Rex can be attributed to the way Mr van Egmond managed the project.”

The Rex is among the largest buildings on Daylesford’s main street and opened in 1929. However, its cinema stopped operating in 2017 as the redevelopment got under way before costs blew out.

Daylesford Cinema Group president Jules McDonald was disappointed the inspectorate had failed to release the report. She said the community had lost out badly and had the right to know about the investigation’s outcome.

“Why on earth should we not be privy to such information?” she said. “It’s just an appalling situation that through mismanagement, they’ve ended up costing the community a lot of money.”

In September last year, the Local Government Inspectorate said the chief municipal inspector had determined there was insufficient evidence to prove any Local Government Act breaches and the council had taken remedial action to avoid similar future complaints.

“Accordingly, the LGI will not be taking any further action in respect of the investigation. Nor will the LGI be publishing any report,” a statement said.

On Monday, the Hepburn Shire Council said the “apparently unauthorised” draft report release meant the community “will be feeling a range of emotions”, including anger and sadness.

Artwork inside The Rex.Credit: Jason South

In a statement, the council said the Hepburn Hub project’s financial loss reached $5.65 million, which included selling The Rex for $3.74 million in 2022.

The council said it had been calling for the report’s release for years to bring closure, but added: “The way the confidential draft report has been made public is concerning and council has formally written to the LGI to request a thorough review of the situation.”

Municipal Association of Victoria president Jennifer Anderson backed the Hepburn Shire’s call for the inspectorate to officially release its report.

“Transparency and good governance are essential in local government,” she said.

Activist group Council Watch published the leaked report on Facebook and said it “beggars’ belief” that van Egmond had remained Hobsons Bay CEO after the findings in 2022.

But a Hobsons Bay Council spokesperson said it “was not otherwise made aware of the report or anything in it” because the Local Government Inspectorate had not published it.

Van Egmond was suspended from Hobsons Bay earlier this year in an unscheduled council meeting. Mayor Daria Kellander said at the time: “Councillors became aware of concerns about safety in the workplace and the CEO’s fulfilment of his duties more broadly.”

The Australian Services Union previously said it had received “complaints regarding the behaviour of certain managers” at Hobsons Bay that had raised mental health concerns.

On Tuesday, ASU secretary Tash Wark called for reform to executive appointments at Victorian councils.

“The ASU is aware of a number of examples where executive leaders known to have performed poorly are appointed and reappointed to senior roles across the industry,” she said.

“We are highly supportive of reform in this area that would create better accountability and more positive impacts for local government workers and our communities. There is no place in local government workplaces for bullying and harassment.”

Van Egmond was contacted but declined to comment.

Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.