The announcement by the Victorian Local Government Inspectorate (VLGI) that it will not release a report into its investigation into the Hepburn Hub at The Rex project has prompted derision and anger from Councillors, Council officers and the broader community.

The VLGI investigation was prompted by an internal audit of the project conducted by the Hepburn Shire Audit and Risk Committee and a subsequent forensic audit by Ballarat-based Crowe Horwath in August 2018. On the basis of these confidential reports, Council self-reported to IBAC and the VLGI. For Council to self-report indicates that they had serious concerns about wrongdoing.

The Audit and Risk report and the Crowe Horwath report have been withheld by Council because of restrictions imposed by the ongoing VLGI investigation.

The VLGI has now concluded there is “insufficient evidence to prove to the requisite standard of proof the commission of any disciplinary breaches or criminal offences contrary to the 1989 Act.” That may be the case, but the LGI has an obligation to at least report on the scope of their investigation, their conclusions in relation to the issues self-reported to the Inspectorate, the institutional flaws that contributed to the errors that were made and their recommendations to improve governance so that, despite the financial losses suffered by the community, we can count on improved governance in future.

The Inspectorate has denied our community the explanation it is owed. Their statement is the antithesis of their fundamental objective of encouraging transparency and accountability in local government.

Council Watch is a Victorian organisation which monitors local government decisions and advocates on behalf of ratepayers. Council Watch President, Dean Hurlston, has called for the immediate resignation of Chief Municipal Inspector, Michael Stefanovic, for the failure of his organisation to provide any explanation of the fiasco. Summing up the feeling of many in the community, he said, “What we have here is a signal to Councillors, Candidates and Ratepayers, that public money simply does not matter. Now $5.5 Million is lost resulting in Hepburn Shire cutting services and no one cares.”

According to Council Watch, the VLGI has admitted that, despite hundreds of legitimate complaints, it has not issued a single fine in four years and that it does not have the required authority to do so.

The VLGI prepared a draft report in 2020 and circulated it for comment to key stakeholders, including parties named in the report. The list would have included past and present councillors and past and present council officers. Recipients were allowed a few weeks to respond. A leaked copy of the draft report was sent to Donna Kelly, editor of “The Local” in October 2023.

The VLGI has imposed onerous confidentiality restrictions on anyone who has a copy of the draft report threatening significant fines and/or jail if they disclose any of the contents. The Local did not publish the report leaked to them following intervention by the VLGI.

The four year delay between circulation of the draft report, the burden placed on people who have received the Draft Report and the terse statement this week have probably been a result of legal actions initiated by one or more people named in the report. In the VLGI Annual Report for 2020/21, they stated, “a major investigation – completed by late 2020 – has required the engagement of legal counsel to assist with concerns over the publication of the investigation outcomes.” Unlike other Victorian integrity agencies, their reports are not covered by parliamentary privilege. The statement probably relates to the Draft Report on The Rex investigation.

The VLGI is clearly an organisation which is not properly constituted to do its job. The Minister responsible, Attorney General Jaclyn Symes, needs to rebuild the Inspectorate from the ground up and furnish it with enabling legislation to carry out its role.

Council has for the past five years deflected questions about the Rex fiasco pending the outcome of the VLGI report. Although that will not now be forthcoming, Council still has a responsibility to explain to the community what happened.

A council media release published earlier this week outlined the steps that Council had taken to ensure that there can be no repeat of the Rex fiasco. These include creation of a major projects team, a project management framework, a risk management framework, a Governance and Risk unit, Audit and Risk committee oversight, a new procurement policy, a land disposal and acquisition policy.

What is implied in the Council media release is that these policies, frameworks and oversight mechanisms did not exist ten years ago when the foundations were laid for the Rex fiasco.

It is normal practice to have a formal project implementation review after a major project, particularly when one goes wrong. In fact, the VLGI report, if released, would only cover the period up to the temporary halt on the project in 2018. Between that time and the decision to abandon the project in November 2021, there were further budget blow-outs which should also be investigated.

Council needs to take responsibility for a review of the entire Rex project to consider the following:

  • Were Councillors properly informed by officers when the initial decision was taken?
  • Were appropriate procedures followed in establishing a valuation for the initial purchase?
  • Was there a business case for the project?
  • Was there an independent cost estimate of the works?
  • Was there an appropriate project management structure and process in the initial “owner builder phase”?
  • Was there an independent project evaluation and costing prior to the tender and contract negotiations?
  • Have responsible staff been held accountable for errors that were made or policies and procedures that were abused?

If a formal project implementation review has been completed, it should be published. If a review has not been completed, an independent review should be commissioned. There are no legal impediments to publication of a report now that the VLGI has completed its own investigation.

Crowe Horwath started a forensic audit of the project up to the time that it was halted in 2018 and would be in a position to extend their investigation. At the very least, the initial Crowe Horwath report which triggered the VLGI investigation should be released.

The Mayor, Cr Brian Hood, said in a Council media release, that although the statement from the VLGI was extremely disappointing, we can now endeavour to draw a line in the sand and move forward as an organisation and community.

We beg to differ. Accountability and transparency in local government demands that the community is provided with a complete and frank report about The Rex fiasco. We will continue to seek disclosure and  comprehensive answers from the Attorney General, Jaclyn Symes, from the Minister for Local Government, Melissa Horne, from local member Mary Anne Thomas and from Hepburn Shire Council.

The Wombat Post

 

Related stories:

Inspectorate Buries Rex Report