“Good culture and proper governance cannot be implemented by passing a law. Culture and governance are affected by rules, systems and practices but in the end, they depend upon people applying the right standards and doing their jobs properly”. (The Banking Royal Commission , 2018)
Public Expectations: Good Governance & Social Responsibility is the new black
The Banking Royal Commission Interim report has shown poor conduct in financial services sector is a breakdown of good governance, of which the consequences are unethical and corrupt decisions and practices and the failure of taking social responsibility of the negative impacts on communities.
As good governance is reliant on conduct and practice, misconduct, not necessary the lack of due process in practices, can significantly result in unethical decision making, fraudulent and corrupt practices.
The Commission said, “When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done”. This quote also exposes that external regulatory agencies are also part of the cause of good governance failing.
Conduct Risk Implications in Australian Local Government
These two key interim findings of the Banking Royal Commission are very applicable to the Local Government (LG) sector in Australia.
It is common knowledge that the Australian LG sector has high exposure to conduct risk. Misconduct and biased and transparency lacking decision making are normalised cultures in many councils. Deregulated and autonomous councils are their self-regulators of their own conduct and practice failings; LG Ministers and state/territory integrity agencies have limited powers and/or man power to intervene to deal with persistent misconduct and biased and transparency lacking decision making, unless there is hard evidence of fraud and corruption when damage has been done; and poor risk management practices do not guarantee future exposures would be effectively prevented. Councillor or staff whistle blowers, with greater evidence, are legally blocked by legislated confidentiality obligations, poor whistleblowing protection, internal group-think and self-regulation barriers, and at greater risk of losing their positions or be internally and implicitly punished when they tell.
The tell-tale signs are reflected in the latest Sep 2018 VAGO report, assessing whether selected councils effectively plan for and deliver cost-efficient services that meet community needs, obliged to comply with the Victorian LG Act (1989)’s
- Section 3C(2)(b), which requires that councils use their resources efficiently and effectively, and that they ensure their services meet community needs.
- Section 208B which sets out the Best Value Principles that councils must apply to the services they provide.
The VAGO report concluded that:
“Each council we audited has some good elements of service planning, review and evaluation. But none are sufficiently comprehensive or systematic to be assured that their service mix and costs meet the needs of their community.
More needs to be done to better understand and attribute full costs to frontline services—in particular, the indirect costs or overheads necessarily incurred in supporting service delivery. These are often invisible in internal and external reporting, so councils do not adequately consider them when deciding on their service mix.
The lack of a comprehensive approach to service planning and review is evident in how councils manage their corporate services. Although all the audited councils can provide some examples of projects that have resulted in efficiencies, none has holistically sought to improve its corporate services’ efficiency. As a result, councils miss opportunities to achieve cost savings that could be redirected to improving or expanding frontline service delivery, or to constraining rate increases.
Benchmarking is an essential part of planning and reviewing corporate services and driving efficiencies. DELWP—which holds a detailed dataset about councils—has missed an opportunity to assist councils to do this effectively by not ensuring the reliability of its data. Better benchmarking would increase transparency about council costs and allow councils, and the wider community, to compare efficiency over time.”
From this VAGO report, it is obvious ratepayers are still paying for higher rates, because of the lack of councils’ resolve and capacities to improve their operating efficiencies and service management. Unless we have more community responsible leadership culture in councils, their work culture will be as is and together with lacking good practice, these factors normalise good practice. LG reforms being developed or rolled out in several states/territories are aiming to improve the transparency of councils’ performance reporting. But without reforms in current conformance management, effective good governance realisation remains a dream, unless an equivalent of a Banking Royal Commission inquiry can occur.
New Advocacy Action Opportunity
Today’s Banking Royal Commission Interim report and the Sep 2018 VAGO report set the precedents and terms of reference that ratepayer advocates, as individuals or groups, can apply to measure and assess how well their councils have behaved and functioned in effectively planning for and delivering cost-efficient services that meet community needs. The information is in most councils’ public records and forensic analysis can enable the assessment.