Investigation summaries

Operation Lockhart

In August 2018, IBAC commenced an investigation into allegations a former Murrindindi Shire Council employee used their position to purchase goods for the Council from their private company during disaster recovery following the 2009 Black Saturday bushfires.

In August 2018, IBAC commenced an investigation into allegations that a former Murrindindi Shire Council employee engaged in corrupt conduct by using their position to purchase goods for the Council from their private company. It was alleged the employee engaged in deceptive conduct to ensure the purchase of goods appeared legitimate. The alleged conduct occurred while the Council was engaged in disaster recovery in the aftermath of the 2009 Black Saturday bushfires.

  • IBAC did not substantiate the allegations relating to the employee purchasing goods from their private company. However IBAC found the employee failed to declare conflicts of interest when using their position to contract work to entities associated with a relative and associate.

  • IBAC identified opportunities for the Murrindindi Shire Council to strengthen its policies, procedures and practices to address the corruption vulnerabilities identified in this investigation.

    These included reviewing policies, procedures and practices in relation to disaster recovery and conflicts of interest, and to ensure employees understand their obligations.

    In August 2020, the Council provided a response to IBAC, outlining actions it had taken to address the vulnerabilities identified in Operation Lockhart.  

    The Council's response outlined the organisational and policy changes that were in progress at the time of the investigation, and those that have been subsequently implemented.

    IBAC publishes responses to our investigations to inform the community about actions agencies advise they are taking, and to share learnings that may help other agencies improve their systems and practices to prevent corruption and misconduct.

    Murrindindi Shire Council's response is as follows:

    Organisational Restructure

    A restructure of the Corporate Services Directorate was undertaken during late 2018 and early 2019 to separate the Directorate’s corporate operations and service delivery functions (under a new Business Services Department) from the corporate risk management and governance oversight functions (under a new Governance and Risk Department).

    This separation was aimed at strengthening policy controls, compliance oversight and reporting in relation to key corporate and organisational practices, including those specifically highlighted by Operation Lockhart; namely procurement and contract management, human resource management (including recruitment screening), emergency management, and fraud and corruption prevention.

    As part of this restructure a new Integrity and Governance Coordinator position was created. This position reports to the Manager Governance and Risk and has key responsibilities to support the embedding of appropriate governance and integrity practices into corporate processes, including monitoring compliance.

    Fraud Prevention and Disclosures of Interest

    Following the creation of the Governance and Risk Department and the appointment of the Integrity and Governance Coordinator, the Council has prioritised several initiatives to address the corruption vulnerabilities raised in Operation Lockhart including:

    • Establishment of a new organisational fraud and corruption control framework, incorporating the following elements:
      • Preparation of a new Fraud and Corruption Control Policy, which was formally adopted by Council in December 2019, with responsibilities and accountabilities for fraud prevention established across all levels of the organisation
      • Fraud and corruption awareness training has been undertaken for all employees across the organisation
      • A fraud incident register has been established to capture and monitor instances of suspected fraud and corruption across the organisation
      • Fraud risk assessment training, including actual fraud risk assessments, have been conducted across several areas of Council’s operations in priority of fraud risk; this work is ongoing
      • Self-assessment of Council’s fraud control environment against the findings of the Victorian Auditor General’s Office 2019 investigation into Fraud Prevention and Control in Local Government
      • Council’s Public Interest Disclosure Policy and associated procedures have been reviewed and updated, with Council adopting a revised policy in January 2020
      • Council adopted a revised Audit and Risk Committee Charter in August 2020 to include a heightened focus for the Committee on monitoring and evaluating Council’s fraud control framework.
    • Full review and rewrite of Council’s Employee Code of Conduct, with a renewed emphasis on employee obligations to disclose real or potential conflicts of interest, particularly in relation to procurement, recruitment, additional employment and the disclosure of related party and private business interests. The Code was adopted by Council’s Executive in July 2020 and employee training on the Code is scheduled to occur in September and October this year.
    • Development of a new Related Party Disclosure Policy and associated procedures adopted by Council’s Executive in June 2019 including:
      • Regular and more exact capture of related party relationships with Council’s key management personnel
      • Requirement for key management personnel to disclosure related party transactions with Council
      • Data analytics to identify or confirm the existence of financial transactions (other than payroll) between key management personnel (or their related parties) and Council.
    • Development of a new Gifts and Hospitality Policy which was adopted by Council’s Executive in June 2020. Whilst not specifically raised in the Operation Lockhart, the Council recognised that the inappropriate acceptance of gifts and hospitality by Council employees could lead to corrupt employee conduct and was therefore considered a corruption risk or vulnerability. Staff training on this policy will occur as part of the Code of Conduct training.

    Emergency and Disaster Management and Business Continuity

    The Council’s Business Continuity Plan provides for the oversight of business recovery actions by a business impact assessment team. The team comprises Council’s management and executive teams, including the Manager Governance and Risk. All operational decisions during business interruption, including those relating to the functions highlighted by Operation Lockhart (eg. procurement and temporary staff recruitment or deployment) are made or overseen by this team, thereby reducing the risk of poor oversight, and inappropriate or possible corrupt practices during a crisis.

    This has been demonstrated recently with the current COVID-19 pandemic which triggered Council’s business continuity arrangements. A Business Impact Assessment Team chaired by the CEO meets three times a week to review the status of the pandemic and the organisation’s response and recovery efforts. The team makes or reviews all decisions on staffing and operational matters, ensuring appropriate governance oversight and compliance with Council’s Policy framework.

    In order to strengthen governance oversight during significant emergencies and disasters, and in response to Operational Lockhart, the Council has combined the functions of emergency (and disaster) preparedness planning and business continuity planning under a single coordination role.

    In the event of a major external disaster, the business continuity arrangements will be enacted (irrespective of whether business has been interrupted by the event) and will operate alongside the Council’s municipal emergency management arrangements, to provide executive and management oversight of organisational responses to the emergency.

    Procurement and Recruitment Practices

    The Council has reviewed its Procurement Policy and associated guidelines several times following Operation Lockhart. The most recent policy review was adopted by Council in May 2020.  The adopted policy is consistent with best practice guidelines issued by Victorian State Government and provides a number of controls at various procurement value thresholds to minimise the risk of fraud and corruption in the procurement process. These controls include:

    • Requirement for conflict of interest declarations from all participants in the procurement decision making process
    • Independent approval of the procurement methodology, prior to the procurement commencement
    • Independent approval of the procurement evaluation prior to the awarding of the procurement arrangement
    • For complex procurements, the appointment of a probity advisor to oversee the conduct of the procurement process
    • Exemptions from procurement threshold arrangements or controls requiring approval at minimum Director level.

    Compliance with Council’s procurement process is monitored by a Procurement Officer within the Governance and Risk Department with quarterly compliance reporting to the Executive and Management teams.

    The Council has also developed a new Employee Recruitment, Screening and Induction Policy to address the potential corruption vulnerabilities associated with recruitment and screening processes highlighted by Operation Lockhart. The policy was developed and signed off by Council’s Executive Team in June 2020. The Policy has strengthened controls around pre-employment screening to safeguard Council against employing people based on false or fraudulent information, and to ensure integrity standards are met. This includes screening for the following purposes:

    • Validate Qualifications – sight and verify true copies
    • Validate Licences – vehicle and where required heavy licence
    • Validate work rights - supply passport ID/visa
    • Validate Work history – referee checks
    • Complete a security/police check – mandatory for all positions
    • Pre-employment medicals – guidelines to determine where required
    • Working With Children Check – mandatory for certain roles
    • Test for computer literacy/skill level – for administrative roles

    The Policy also reinforces the requirements for the disclosure of conflict of interest by all participants in the recruitment and selection process. The Council’s management team has been briefed on the requirements of the policy. The Council’s Human Resource Coordinator facilitates compliance with this Policy across the management team.