Sector profile

Key corruption risks for councillors

• Poorly managed conflicts of interest:
  • kickbacks to local businesses owned by associates
  • decisions related to grants and planning
  • difficulties in appropriately managing conflicts of interest in smaller communities.
• Misuse of position. Section 123 of the Local Government Act 2020 (Vic) defines misuse of position by a councillor or member of a delegated committee. This section also creates an offence for this conduct. Misuse of position includes directing or improperly influencing, or seeking to direct or improperly influence, a member of Council staff, as well as disclosing information that is confidential information. IBAC also sees a heightened risk around unauthorised disclosures of information to further political status, campaigns or personal interests. 
• Increased bias with councillor voting blocs on issues raised, with limited oversight and means to prevent this conduct. While this behaviour may be in contravention of the Local Government Act 2020, it will not always constitute corruption.
• Electoral donations and political fundraisers connected to councillors’ political parties, particularly in metropolitan and interface councils.
• While council staff are reporting that culture and integrity have been improved, they also perceive councillor conduct to be an area of increasing concern. While the alleged conduct is often in contravention of the Local Government Act 2020, it often would not reach the threshold required for corruption. The alleged conduct could, however, create the conditions for corruption to occur or could be used obscure or cover up corruption if it has occurred, or was occurring.  
• Limited councillor preparedness, capacity and skills to deal with emergency situations can increase the risk of corruption and misconduct, particularly in relation to grants or emergency relief and response.
  

Key corruption risks for council staff

• Fraudulent procurement – contract or purchase order variations as well as misuse of contingency funds.
• Misuse of council assets – cars, machinery and technology.
• Misuse of grant funding – emergency relief and recovery funding.
• Improper influence – receiving gifts and hospitality.
• Favouritism – recruitment; issuing of licenses, permits of approvals; or procurement.

Key general corruption risks for local government

• Organised crime groups cultivating relationships with council staff and councillors to gain access to information, systems or commodities. Local councils hold valuable personal identifying information (such as addresses, phone numbers etc) and decisions by council can have monetary impacts on businesses and individuals.
• Increased risk of information misuse due to work from home arrangements. The opportunities to disclose information without detection are greater than before, and there is an increased risk of cyber security threats due to remote working.
• Increased risk of improper influence in land/planning decisions within regional/rural councils experiencing population growth due to COVID-19.
• Misuse of funding for personal gain or manipulation of reporting against funded services or programs.

Key insights from allegations

Approximately 11% of all allegations received by IBAC relate to local government. IBAC classifies all allegations it receives against its Behaviours and Activities Model. Some of the most common types of allegations in local government are often not about corruption:

• inaction in relation to local council’s official capacity or powers. Often this is a failure by the council to take sufficient or appropriate action in response to licensing or zoning requests, complaints or reports made by residents.
• favouritism (including mismanaged conflicts of interest) in procurement and purchasing, recruitment activities, and planning decisions
• breach of professional boundaries (including bullying and harassment as well as the exceeding of delegated powers), particularly between councillors and in relation to how councillors and other decision makers at council interact with staff and the community.

Key prevention and detection strategies

• Clear and universally understood policies, in line with the Local Government Act 2020 (Vic), for identifying, reporting and managing conflict of interest policies
• Separation of duties for designing and applying the planning scheme. For example, IBAC’s recommendations for reform arising from Operation Sandon.
• Separation of duties and approvals for employees involved in procurement
• Regular audits to check compliance with policies and procedures
• Secure information management systems and a positive information security culture
• Practices to encourage and support councillors and staff to speak up and report suspected corruption and misconduct
• Conducting regular audits to look for trends and patterns in the awarding of funds, such as community grants
• Mandatory regular training and awareness raising to be conducted for employees and contractors.

Local government sector in Victoria

• 79 local councils, each comprising council employees, contractors and councillors. Of note, panels of administrators (rather than councillors) are currently appointed to oversee three councils, being Casey and Whittlesea (with elections scheduled for October 2024) as well as Moira (with elections scheduled for October 2028).
• Local Government Victoria divides local councils into five categories: metropolitan, interface (those bordering metropolitan and regional areas), regional city, large shire and small shire.
• Employees and contractors manage the administrative and business side of local councils.
• Councillors (including the mayor) make decisions as elected representatives of their communities.
• Local council employees and councillors are both subject to codes of conduct mandated by the Local Government Act 2020 (Vic).

Complaints about local government

There are multiple agencies that can receive complaints about local councils including the Victorian Ombudsman, Local Government Inspectorate, IBAC and the Victorian Electoral Commission. If one agency receives a complaint best suited to another agency, they will pass it on. 

Local government employees’ perceptions of corruption 2022

• Most (90%) Victorian local government employees agree that they know what behaviour constitutes corruption.
• The majority (62%) of Victorian local government employees agree that 'corruption is a problem in Victoria'.
  • Six in 10 employees (62%) agree that corruption is a problem in Victoria, fewer (17%) agree that it is a problem in their workplace. This increases to 23% among those who work in depot operations where significantly more agree that corruption is a problem in their workplace.
• The behaviours considered to be a high risk of occurring are favouritism and breach of professional boundaries.
• Most Victorian local government employees believe a report of corruption would definitely (45% agree) or probably (24%) be taken seriously.
• There is strong agreement among Victorian local government employees (63%) that ‘my direct supervisor would be supportive if I chose to report corruption or misconduct’.
• Victorian local government employees typically describe the ethical culture of their organisation as ‘strong’ (46%) or ‘moderate’ (42%).

Local government councillors’ perceptions of corruption 2023

• Most Councillors (94%) agree that they ‘know what behaviour constitutes corruption’.
• Almost three in four Councillors (73%) agree that corruption is a problem in Victoria. A slightly lower proportion (59%) agree corruption is a problem among elected officials (including Councillors).
• Three in four Councillors (76%) agree that some elected officials behave inappropriately or in an unethical way, but this does not necessarily extend to corrupt behaviour.
• Half (51%) agree it is difficult to find definite guidance when seeking advice on corruption.  
• A breach of professional boundaries (43%) and favouritism or nepotism (39%) are the behaviours considered to be a ‘high risk’ of occurring.
• Close to three in 10 (28%) claim to have personally observed a breach of professional boundaries in the last 12 months. A similar proportion (30%) have observed an instance of favouritism or nepotism.
• In the main, Councillors rate the ethical culture of their individual Council as ‘strong’ (42%) or ‘moderate’ (36%). The remainder (21%) rate the ethical culture as ‘weak’.
• The majority of Councillors (88%) claim to know how to report corruption. Similar proportions would report to IBAC (69%) and the Local Government Inspectorate (LGI) (68%).
• Most agree that ‘if I personally observed corruption, I would definitely report it’ (94%) and many agree that ‘my elected colleagues would be supportive if I chose to report corruption’ (69%).

One of IBAC’s core functions is to receive and assess complaints (from the public) and notifications (from departments and agencies) alleging public sector corruption or police personnel misconduct. IBAC also receives complaints about a range of other conduct it cannot investigate because it is not alleged corruption or misconduct. 

IBAC considers complaints made about corruption and misconduct (including improper conduct under the Public Interest Disclosure Act 2012 (Vic) (PID Act) concerning a public officer or a member of Victoria Police personnel. IBAC also receives mandatory notifications from principal officers of public sector departments and agencies and Victoria Police. A single complaint or notification may contain several separate allegations that are individually assessed to determine an appropriate outcome. Possible outcomes of our assessment of each allegation are:

• investigate
• refer the allegations to another agency
• dismiss, generally because they did not involve corrupt conduct or police misconduct; were outside the scope of who we investigate; lacked substance or credibility, or were frivolous or vexatious; or have otherwise already been dealt with by IBAC or another agency
• for PID notifications, return the allegations to the notifying agency if IBAC assesses the original complaint as not being a public interest complaint
• take no further action.

This profile includes data about allegations received by IBAC. There are limitations with the use of this data, including:

• allegations are unsubstantiated at the time of receipt
• allegations can be incomplete, lack detail, be from an anonymous source or may not individually name the subject person of the allegation
• allegation data is not a comprehensive or reliable indicator of the actual prevalence of particular activities, or the risk mitigation practices and compliance activities already in place.

Despite these limitations, analysis of allegations can assist in identifying trends or patterns and provide practical examples of identified trends.

The following data includes allegations received and assessed by IBAC between 1 July 2018 and 31 December 2022. It does not contain the outcomes of any investigations undertaken as a result of these allegations.

• IBAC Special report on corruptions risks associated with procurement in local councils
• IBAC case studies and investigation summaries
  • Operation Sandon (2023)
  • Operation Geary (2021)
  • Operation Fraser (2017)
  • Operation Charnley (2017)
  • Operation Continent (2017)
  • Operation Clarence (2017)
  • Operation Severn (2015)
  • Operation Blackwood (2015)
  • Operation Rubicon (2015)

Investigations

• Victorian Ombudsman – Investigation into allegations of collusion with property developers at Kingston City Council (2021)
• Victorian Ombudsman – Investigation into corporate credit card misuse at Warrnambool City Council (2020)
• Victorian Ombudsman – Investigation of alleged improper conduct by Executive Officers at Ballarat City Council (2020)
• Victorian Ombudsman – Investigation into improper conduct by a Council employee at the Mildura Cemetery Trust (2019)
• Queensland Crime and Corruption Commission – Operation Belcarra (2017)
• New South Wales Independent Commission Against Corruption – Operation Dasha (2021)

Guidance, information and research

• Insights Report from the Local Government Culture Project (2022)
• Local Government Victoria – Procurement Best Practice Guidelines (update coming soon)
• Local Government Inspectorate – Resources for councils
• Municipal Association of Victoria
• Victorian Local Governance Association – Good Governance Guide
• Local Government Professionals (LGPro)
• Victorian Ombudsman – Councils and complaints, a good practice guide  
• Local Government Inspectorate – Conflict of interest for councillors fact sheet
• Local Government Victoria – In the Public Interest: A conflict of interest guide for councillors, delegated committee members and council staff (2020)
• Office of the Victorian Information Commissioner – Framework for releasing council information proactively and informally under the Local Government Act 2020 (Vic) and the Freedom of Information Act 1982 (Vic)