Councillors cashed up as watchdog report slams practice

Victorian councillors are handing out thousands of ratepayer dollars with little or no accountability, according to a local government watchdog report.

The Local Government Investigations and Compliance Inspectorate released its Review of Councillor Discretionary Funds last week (November 7).

The review revealed 32 of the 79 Victorian councils had some form of Councillor Discretionary Fund (CDF), which allows councillors to allocate money as they see fit.

 The report said CDFs lacked accountability, transparency and created a situation that “may allow” corrupt practices.

“Generally, feedback received confirmed that councillors are protective of discretionary fund practices, almost to a point of treating available funds as being for their own personal distribution, without the need for adherence to stringent allocation/approval guidelines,” the review said.

“The process lacks a suitable level of accountability as councillors are approving applications without considering the merits of individual applications … Allegations of ‘rubber stamp’ approvals for CDF payments in council meetings were common in the course of the Inspectorate’s review.”

Twenty-seven of the 32 councils recorded an annual combined CDF budget of $2 million. The remaining five advised the Inspectorate their CDF budget “varied annually”.

The report states the average funding amount allocated by councillors through CDFs was $62,500. Allocations ranged from $3000 to $500,000.

The review prompted the Inspectorate to investigate the actions of two councils, not named in the report, including one council where three councillors committed expenditure without proper authorisation, and another council where complaints have been made relating to their CDF.

Meanwhile, three metropolitan councils are using “risky” practices when it comes to their CDF including Hobsons Bay, which was flagged as having “poor CDF practices” with a mayoral discretionary fund of $44,000 that required no accountability on the part of the mayor, had no recorded costings, timeframe, transparency or assessment criteria. 

Several instances were also identified in which “serious breaches” of the Local Government Act may have occurred, including:

– Knox City councillors allocating more than $10,000 of their CDF on 24 September 2012 – the day before the council election period began. 

– Mooney Valley City councillors authorising spending $72,000 through its CDF at its last meeting before the 2012 election period. This money was spent on computer equipment, a cover for a bocce court, donations to sporting groups and a dinner, according to the report.

– Whittlesea City councillors allegedly making payments through its CDF in September last year to an organisation of which a councillor was a board member.

Of the 32 councils with CDF schemes in place, the Inspectorate identified four with transparent and “accountable” practices. Those included Greater Dandenong, Maribyrnong,South Gippsland and Greater Geelong City Council. 

Hume, Macedon and Yarra Ranges Shire Council showed good practice in “some areas”.

However, the Inspectorate questioned the need for CDFs to exist at all, highlighting council community grants programs as better alternatives.

“One could therefore question the value of a CDF program at all, when the only difference between the stated objectives of each program is whether or not an individual councillor, or group of councillors, is publicly seen to be giving money to certain persons or groups,” the report said.

Since the review, four councils have ceased or suspended their existing programs, while seven have continued with amended or updated CDF practices.

The Inspectorate recommended all Victorian councils incorporate CDF schemes into other grant programs voluntarily to avoid breaching the Local Government Act.

Such breaches could relate to fraudulent or corrupt practices, council’s duty to remain transparent and accountable, and “misuse of position”.

The report puts the ball squarely in the court of Local Government Minister Janette Powell to safeguard councils from CDFs that “may act to advance a councillor’s political aspirations or allow for funds to be awarded by corrupt or fraudulent means”.

The report says the minister “may consider” commencing legislative reform to either abolish CDFs or mandate their requirements.

“Legislation can mandate what is required in the exercise of discretionary spending and provide options for dealing with wrongdoers,” the report said.

During the course of the review, the Inspectorate received requests from councils to “approve” their CDF policy reviews or to provide a guide for formulating a policy. However, the Inspectorate report stated:

“This would be a matter for the Minister for Local Government or Local Government Victoria.”

Municipal Association of Victoria president Bill McArthur said there was no need for CDF legislation or “heavy handedness” and called on all councils to acknowledge the Inspectorate’s review.

“It is ratepayers’ funds and as long as councils are transparent and accountable, there is little problem with CDF schemes,” Mr McArthur said.

“It is not every council that has CDF practices in place, in fact it is not even half and good practices were found in a number of councils.

“But yes, councils should understand the report, the risks of CDFs and be more transparent and accountable.”

Local Government Minister Jeanette Powell said she would consider the Inspectorate’s recommendations.

“Council expenditure should be properly authorised by decisions of the full council or special council committees, or by officers exercising clearly documented delegations in accordance with council policies,” Ms Powell said.

“I will now consider the Inspectorate’s recommendations including the proposal to amend legislation to abolish or place tighter controls on councillor discretionary funds.”