Council that dumped asbestos to ‘make CEO look good’ among worst examples of dysfunction

A swimming pool attendant with no tertiary qualifications appointed to an almost $300,000-a-year corporate affairs job was just one example of dysfunction, fraud or corruption being looked at by a parliamentary inquiry into local government.

Commissioners appointed to investigate local councils have called for tougher penalties for those who breach governance laws, while detailing some of the worst examples they have looked at in recent Victorian history.

Credit: Peter Braig

The examples also included a chief executive who secured a $170,000 payout by arranging for a subordinate to sign off on it and a rural council that illegally dumped asbestos to save money and “make the CEO look good”.

A parliamentary inquiry into fraud and corruption in local government began on Monday after two Victorian auditor-general reports on local government performance in 2019 and 2022 found gaps in control of the issues at multiple Victorian councils.

The inquiry heard from commissioners whose inquiries led to councils being dismissed, including those in Casey, Geelong, Ararat and Moira.

The hearing was told that, often, corruption happened because senior council staff operated in an environment where checks on their decisions were inadequate, or in some cases breaches of the relevant legislation carried “no consequences whatsoever”.

Credit: Wayne Hawkins

Frances O’Brien, KC, told the inquiry that when she investigated Moira Shire Council in 2022, she found multiple examples of public money being used in breach of the rules, including a staff member who was given a pay rise within two months of starting and then had their contract extended “without any reference to a KPI whatsoever”.

“It was an undoubted breach,” O’Brien said. “So you’ve got the Act being blatantly, outrageously and very financially disadvantageously to the shire, being breached in every respect, and certain councils go on their merry way, no consequences whatsoever.”

The culture of impunity had enabled significant cases of fraud totalling hundreds of thousands of dollars, which were never identified by the council’s risk and audit committee.

Moira Shire Council, in Victoria’s north, was sacked last year and is being run by administrators after the inquiry commissioners reported instances of corruption including the deliberate dumping of asbestos.

O’Brien said a system of key performance indicators, independently assessed and with penalties for breaches, could guard against such instances of internal local government corruption.

The Independent Broad-based Anti-corruption Commission attended the hearing, and said its corruption prevention initiatives were also targeted at seemingly less consequential behaviours that could develop into corrupt conduct if left unchecked.

“Things like inaction, favouritism and breach of professional boundaries might not in and of themselves be corrupt conduct, but it creates an environment where corruption can thrive or go undetected,” IBAC chief executive Alison Byrne said.

Kathryn Arndt, chief executive of the Victorian Local Governance Association, told the hearing that it was challenging to ensure that all council candidates understood the governance responsibilities that came with being elected.

“A lot of candidates do stand not really understanding the full extent of governance responsibilities that come with being a councillor, and also the people who vote for them don’t really understand that either,” Arndt said.

“So any sort of training that can happen at that candidacy stage will be absolutely integral to preventing and providing early intervention to potential fraud and corruption.”

John Watson, who investigated South Gippsland Shire Council before its dismissal in 2019, said local government corruption was relatively rare.

The inquiry continues.

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