Theft and corruption in local council depots

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Local council works depots are vulnerable to corruption due to “significant deficiencies” in the management of small plants and equipment, according a report by the Victorian Independent Broad-based Anti-corruption Commission.

Depots are full of small items “particularly vulnerable to theft”, the report noted, recommending that councils ensure equipment is appropriately marked as council property and stored securely, maintaining up-to-date registers and conducting random and regular audits.

One council even allowed for private use of plant and equipment by staff, though it has since discontinued the practice. Similarly, one council CEO had as recently as 2013 stopped a practice of permitting staff to sell scrap metal from council projects to fund depot social club functions.

The review followed allegations of corrupt conduct involving council works depot employees in Mitchell Shire Council in outer metropolitan Melbourne — an investigation cleared Mitchell Shire Council workers of wrongdoing in April last year, but IBAC identified broader issues affecting councils that warranted further exploration.

The initial investigation found a number of practices “that had the potential to allow corrupt practices to go unchecked” including “poor record-keeping, a lack of registers for managing physical assets, inappropriate relationships with external contractors, and inadequate controls in areas such as audits, segregation of duties, and management of conflicts of interest.”

Realising other councils may have similar issues, IBAC decided to carry outer a longer review, examining the practices of six councils: Benalla, Central Goldfields, Corangamite, Glenelg, Greater Dandenong and Whitehorse.

“We now know that these corruption risks are not isolated to Mitchell Shire Council,” IBAC CEO Alistair Maclean said.

“Procurement, management of small plant and equipment and bulk consumables, leadership and culture are common issues that leave depots vulnerable to corruption.”

While procurement procedures were mostly fine, a few holes created opportunities for problems, says the report:

“…some policies allowed council employees or work units to bid for council tenders which could give rise to significant conflicts of interest. Accordingly, IBAC strongly suggests that councils amend their policies to remove such provisions.”

Some councils acknowledged purchase orders are sometimes completed “after receipt of invoices”, which is “contrary to good practice”. Procurement risk management policies appear to be inconsistent between councils:

“Procurement-related risks did not consistently appear in council risk registers and where such risks did appear, controls tended to lack sufficient detail. Another area for possible improvement was procurement training which, in its present form, tended to focus on procedural requirements with little, if any, consideration of probity issues (such as conflict of interest) or corruption risks (such as over-ordering or fraudulent purchases).”

To minimise procurement risks, the commission recommends all policies, procedures and systems should be reviewed regularly to incorporate current procurement risk mitigation strategies.

IBAC also found “significant room for improvement” on management of and accountability for bulk consumables such as sand and concrete. Although misuse of such goods may appear to have low potential impacts, “when aggregated over time, the cost to council and ratepayers may be considerable.”

The commission emphasised the importance of leadership pace-setting in building “a positive organisational culture in which corruption is not tolerated”.

And it was not all negative — in a statement, IBAC said:

“While the review found areas for improvement across the six works depots, IBAC also observed many good practices throughout the project. More importantly, councils are acting on the issues raised during the course of the review, to work towards a more corruption-resistant workforce.”