Procurement report rings alarm bell on risks

Victoria’s anti-corruption commission has called for the state’s council body to consider a code of conduct underlining the need for local government suppliers to report misconduct after it found a risk of corruption in procurement processes.

The report also calls for councils to clean up their act and review the way they manage procurement after it found managers at two councils got kickbacks and gifts and did favours for associates and family.

Victoria’s Independent Broad-based Anti-corruption Commission says the state’s councils manage $90 billion worth of community infrastructure and deliver $7 million in public services each year, spending up to 60 per cent of their budgets on procurement.

Despite local government’s responsibilities to the community to act with integrity, allegations of corruption associated with procurement have been a recurring feature of IBAC complaints and allegations, the watchdog says.

The report focuses on investigations at two Victorian councils, Darebin City Council and City of Ballarat.

Both investigations related to allegations that council employees used procurement processes for the benefit of themselves and associates.

“IBAC’s Operations Dorset and Royston provide a snapshot of a range of procurement-related corruption risks and vulnerabilities which are likely to be faced by most if not all councils in Victoria,” the report says.

In operation Dorset, launched in 2015, IBAC found a project manager at Darebin helped an associate’s company, which gave him gifts and benefits, win more than $16 million in contracts.

The gifts included cash payments, alcohol, grand prix tickets and a $1500 GPS.

The second investigation, Operation Royston, launched in 2016, found former City of Ballarat Council manager Lukas Carey, who in 2017 was sentenced to three years jail and ordered to repay council $31,000, had helped associates and family win contracts in exchange for financial kickbacks.

IBAC found that over two years Mr Carey unlawfully authorised payments worth more than $184,000 and obtained $103,630 in benefits. Three of his associates including his wife Jasmine Carey also pleaded guilty in relation to the matter.

A ‘recurring theme’

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

The report stresses the need for leaders to cultivate a culture where procurement activities are consistent with best practice.

“Senior managers and supervisors must lead by example and act in a manner that reflects the values of their organisation. Failure to ‘walk the talk’ can undermine efforts to promote integrity by suggesting management is not genuinely committed to those principles,” it says.

IBAC recommends that both councils review and strengthen their procurement policies, and that Local Government Victoria consider a code of conduct for local government suppliers outline requirements for suppliers to report suspected misconduct.

Comment has been sought from the Victorian Local Governance Association.

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