IBAC investigations uncover significant corruption risks in council procurement

| October 2, 2019

Local councils need to consider the way they manage procurement to reduce risks of corruption, according to IBAC, the state’s anti-corruption commission.

IBAC has tabled a special report to Victorian Parliament yesterday that warns there are corruptions risks and vulnerabilities in local government procurement practices.

“Allegations of corruption associated with council procurement practices and processes are a recurring theme in the complaints received and investigated by IBAC,” IBAC Commissioner The Honourable Robert Redlich QC said.

“This report highlights a range of procurement-related corruption risks and vulnerabilities which, while they were found in two councils, are likely to be faced by most if not all councils in Victoria,” Commissioner Redlich said.

“There is an opportunity now for all Victorian councils to consider these findings and assess how robust their own processes and controls are.”

This special report focuses on two IBAC investigations, Operations Dorset and Royston, which concerned allegations that council employees subverted procurement processes for their own benefit and the benefit of associates.

In Operation Dorset, IBAC concluded a former project manager at the Darebin City Council had assisted an associate’s company to win more than $16 million in contracts. These contracts were awarded in circumstances where the project manager was receiving cash, gifts and other benefits from the company.

In Operation Royston, IBAC concluded a former manager at the City of Ballarat Council had enabled associates and family to win contracts, in exchange for financial ‘kickbacks’. In 2017, the manager was convicted of a range of offences and sentenced to three years’ jail and ordered to repay $31,200. Three other people, including his wife, pleaded guilty to other charges.

Victorian councils provide important public services and programs and maintain significant public infrastructure, collectively managing approximately $84 billion in public assets and spending around $7 billion on providing services each year.

“Considerable power is vested in council employees to source suppliers, manage contracts and authorise payment for goods, services and works – spending millions of dollars of public money,” Commissioner Redlich said.

“Public sector corruption it is not a victimless crime. It wastes taxes and rates that should be used to operate and maintain Victoria’s schools, hospitals, roads and other vital public services and projects. And it damages the reputation of organisations and undermines community’s confidence in the public sector.”

IBAC has specifically recommended that Darebin City Council and City of Ballarat Council review and strengthen their procurement policies, systems and practices to address the identified vulnerabilities.

IBAC has also recommended Local Government Victoria consider developing a code of conduct for local government suppliers, which would outline the standards expected of suppliers including in relation to reporting suspected misconduct or corrupt conduct on the part of council employees and other suppliers.

Read the report: Corruption risks associated with procurement in local government